Holding

The restrictions imposed by the Ministry of Railways are within the lawful power of Section 27A, are reasonable, and do not violate Articles 14 or 19(1)(g) of the Constitution.

Summary

The petitioners, coal merchants, challenged a series of orders issued by the Ministry of Railways—including the addition of the abbreviation 'GX' to station codes and a Preferential Traffic Schedule under Section 27A of the Indian Railways Act—that restricted the outward booking of coal in wagon‑loads from way‑side stations. They alleged that these measures violated Article 14 by granting undue preference to government‑sponsored coal transporters and infringed Article 19(1)(g) by imposing an unreasonable restriction on their freedom to carry on trade. The Court examined whether Section 27A was ultra vires the Act and whether the orders contravened Section 28, which prohibits undue preference. It held that the railway is a state monopoly and that the statutory power under Section 27A authorises the government to give preferential treatment in the public interest, making the restrictions reasonable. Consequently, the orders were not found to be violative of Articles 14 or 19(1)(g), and the writ petitions were dismissed.

Issues considered

The validity of the Ministry of Railways' orders (including the 'GX' abbreviation and Preferential Traffic Schedule) under Article 14 of the Constitution.
Whether the orders constitute an unreasonable restriction on the petitioners' freedom to carry on trade under Article 19(1)(g).
Whether Section 27A of the Indian Railways Act is ultra vires the Act and the Constitution.
Whether the orders violate Section 28 of the Indian Railways Act which prohibits undue preference.

Legislation cited

Indian Railways Act, 1890s. 27, s. 27A, s. 28

Subjects

Article 14Article 19(1)(g)Indian Railways ActSection 27ASection 28Preferential Traffic ScheduleState monopolyCoal transportReasonable restrictionEquality

Judgment

657

VIKLAI) COAL MERCHANT, PATIALA, ETC. ETC.
A
v.

UNION OF INDIA & ORS.

October 28, 1983. B
[D.A. DesA1 ANDO. CmNNAPPA REDDY, JJ.]

Conslit1ltion of India Art. 19(1) (g)-Freedom to carry on trade or
•. busines!-To exanzine whether restriction imposed 1easonable-:-Court to find out
trade affected and keep in· view direct impact of r'estriction on trade and not
ancilfary or indirect "e.ffec't.
c
Indian Railways Act, 1890-Sec. 27A-Interpretation of-rVhether v;W/ativc
of Art. 19(/)(g) of Con~titurion. ·preferential Traffic Schedule laying dolt'n priorities
for movement of drfferent J:Oods issued by the Ministry OJ Railways under
sec. 27A-Validi/y of-Wheth~r ultra Vire~ sec. 27A-Whether ultra Vires Arts. 14
and 19(1) (g) of tire Conslitulion. · · D

Indian Railways Act,• 1890, section 28-lnterpretation of-Ministry of
Railwa)'S order dated April _I, 1972-U?/iether violative of sec. 28 and A1 t. 19( I) (g)
of th~ .Constitution.

Section 27 of the Indian Railways Act, 1890 cast a duty on the railway E
administration to arrange for -receiving and forwarding traffic without 1:1nreason·

-
able delay and without partiality; Sectiqn 28 prohibited the railway
administration from giving undue or u.nreasonable preference or advantage to
ally particular person or railw~·adrninistration or any particular description of
traffic. Section 27A was inserted in the Act after 1950 to give power to the_
Central Governrr.ent to issue directions for giving speci3.1 facilities or preferen-
ti3.1 treatment in transport of goods or class of goods consigned to the Central F
Government or the Government of any State-or of such other goods or clasS of
goods as may b~ specified in the order.

The GovCtnment of India, Ministry of Railways issued aa order dated
April 1, 1972 containing its decision to add an abbreviation 'GX' below the
abbreviation 'G' in the list of abbreviations at page 14, Chapter VI of the IRCA G
Alphabetical list of Railway·Stations in India and asking the railway administ-
ration to decide and notify the-names of stations to which this new provisions
would apply. Putting abbreviation 'GX' against a station meant that the station
was not open for outward booking of coa1, coal shale etc. in wagon loads.
Pursuant to this order; the abbreviation •a·X• was appended to all· way-side
stations in the coat.belt. Thereafter- Qovernment of India, ·Ministry of Railways H
. by its order dB.ted April 27, 1972 revised ru.les J and 2 of the Eastern Railway
Coal Traffic Part L T\1.,;; r~Yi$~d rules provided inter a!ia that all ttatfi~ i9 coal
' ' '
•
658 SUPREME COURT R.EPORTS [1984) 1 s.c.R.
etc. in. wagon loads will. be loaded only fr;~ colliery sidings, coke oven .plant8
A _and washeries ~on the Eastern Railway, ·bui coal in wagons will not be permitted·
'at the stations serving these colliery washeries. A further restdctiOn followed
_with effect from December 4, t979 when the .Divisional Operating Superinten-
dent, Bilaspur for apparent reasQnS stopped booking of coal in smalls includina
clubbing at all stations of North Eastern Railway. On February 11, . J980, a
telegraphtc commup.ication was issued explaining that coal in wagon-loads can
be booked from colliery sidings by the collierJcS concern_ed. ~coking of slack •
B · coal was wholly stopped as per a phone <all dated April 9, 1981. In exercise of ..l
the power conferred by sec. 27A ofthe Act, Union of India, the Ministry_ of
Railways·issued Preferential Traffic Schedule. The schedufe pre~cribed five
priorities 'A' to 'E' With inter se priorities amongst• A' to 'E' to .be accorded by
the railways fo~ transport of certain· .goods or class. of g<?ods specified under
each category. Different kinds of coal falls- under priority •C' (iii) which pro·
c vides for movement of coal 'froin cOIJieries -in acc~rdance with programmes and
_movements -sponsored .or recommended by the Coal Controller and/or any
Cot11i1ittee appointed by him and/or the State Government• and/or other
recommending authorities and accepted by the Railway AdministratiOn·s -and/or
Director, Movement (Railways),. Calcutta, and in·acccirdance with the Zon_al
Scheme applicable to each field and the principles of transport rationalisation
in f0rce fr0m tin1e to time. Priority 'E', a residu~y clause again involves coal
D fron1 collieries.

The petitione~ who· were coal mer~hants: alleged that. sum. total of
various rd'strictions including one dated Aprll 1, 1972 introducing "abbreviation
'GX' and the PrefeMntial.Traffi.c Schedulc•specifying priorities under sec. 27A
. (1) o'f the Act in their cumulative effect imposed a total ban on transport of
E coal by the RailwaYs, at their instance and this action·was violative., of Art. ,14
and 19(1) (g) of the Constitution. The petitioners contended : (1) that the
Railway Admini~tration's action Of giving priority to some transporters o(. coal
denying use of its transport facilities to the petitioners whO were similarly
situated was disci'imlDatory in ch.aracter arid hence violative of Art.· 14 of the
Constitution; (2) the orders dated April 1, 1972, December 31, 1980 and April
11 1981 imposed unre~sonabie restrictions on the' the freedom Or the petitioners
F to.carry on their trade guaranteed by Art. 19(1) (g); (3) that sec. 27A is violative
of Art. 19', l)°(g); ( 4) that para (iii) of priority 'C' of the Preferential Traffic
·Schedule in so far 3.s it permits special facility or ·preference to individuals or
groups of pe~ons selected by the sponsoring authority or recommending body "
for transport of coat is ultrn Yireiz Sec. 27 A of the Act; · (5) order dated April
11 · 1972 was violative of sec. 28 of the Act and was also violative of Art. 19(1) (g)
of the Constitution. ·

Di~missing the writ.petitions,

HELD·: Railway is a mon!)polistic undettaking in the matter of.-tran.sport
of cOat by' railways. Barring some tiny dots which may become visible only by
H a magnifying glass, ihe e~tire railway net work. is nationalistd and -ihe railway
is a departmeJ;J.t of the Uni~n of Jndia. · It is therefore, indispµtably a State
,JDonopoly. A monopoly unless kePt withi~ l::Qun~s may prove to be a menac~.
YlkLAi> coAL MERCl!A~T ii. UNION 659
Therefore, regulatory measures are necessary to prevent the abuse of mono-...
polisti~ power. But there is a constitutional check on ihe State monoply, A
namely, it being State within the meaning of Art .. 12. of the Constitution, all its
actions Will have to conform to the fundamental rights enshrined Part III in of .
·.J__,,. . the Constitution. Sec. 28 of the Indian Railways Act seeks to achieve the same
~ result which on the advent of the Constitution, Art. 14 woul~ achieve. But Sec~
28 is subject to sec. 27A. If while giving effect to the orders of the Central
Government issued under sec. 27A, priority iS accorded in the matter of trans·
J ·port of goods consigned to Central or Si ate G ovCrnment or ·cl3.ss of goods B
'specified in the .general or special order ·issued in thiS behalf, the action
of the· railway administration ib complying with such special or general order
could not be said as tentamountiog to gi".ing undue or unreasonable preference
or advantage to in favour of any 'particul'ar ·person or railway administration
and therefore violative of sec. 28. What sec. 28 fOrbids is discrimination in the
matter of transport of goods against a class but this is subject to the permissible
classification that would be introduced bY a special or gener~r orde.r issued by c
the Central Government in .e;xercise of the power conferred by sec. 27A .
. It may be recalled that the Prefereritial Traffic Schedule according Priorit)'. •c•
to transport of coal by those rneiltiOned therein has been issued in exercise· of
. the power conferred by sec. 27 A. Therefore, the ·s~bmission· that petitioners in
the matter of transport of coal are similafly sitt ated with the Central or State
Govern1nent ·or transporters given priOrity by general ot. special order issued D
under sec. 27 A cannot be entertained. This· is all the more so because the'
petitioners are coal merchants who want to transport their coal by railway for
carrying on business ill coal and they may sell the coal to any intendin8:...-pur-
chaser while those accorded preferential treatment under Priority • C' of the
Preferential Traffic SchCdule are transporters of coal who have been recognised
One year in advance under Zonal Distribution Scl1eme as rersOns who would be
transporting the-coal to satiSfy fixed goals which subserve needs of the public E
«t l~rge. Classification of those cowred by Priority ·re' and the present petiti ..
o~crs is founded on intellieible differentia which distin8uiShes pers:ons or things
that are grouped together from others left out of the group and the differentta
has a rational relation to the object sought to be _acpiev~d by the impugned
orders .. Those fa1ling within Priority •c• (iii) Would 'from a class by themselves
and the petitioners. clearly stand out of tile group. (679 A-H; 680 A-El
F
Nav Rattanmal and Ors. v. The State of 11,ajasthan, (1962] 2 S.C.R. 324
referred to. ~

Art. 19(1) (g).g.uarantees to the citi:Zen the fundamental freedon1 to carry
on any occupation, trade or business. This fundamental freedom is ·subject to G
/ reasonable reStri~tions that can be imposed by law. relating to the carryin-g. on
by the ·state, or by a corpOration owned or controlled by the State, of any
trade._ business, -industry or service, wh~ther to the exclusion complete or
partial, of citizens or otherwise. Whenever the Court iS called upon to examine
the complaint that restrictions imposed on the freedom to carry on trade are
unreasonable, it is necessary to find out what is the trade or bllsiness of the
complainant-petitioner and to what extent the restriction, if any, is imposed H
upon· the _freedom tci carry on trade or business and then to determine
whether the restriction is reasonable or otherwise. It ~s th('. ~irect impact of the
660 SUPREME COURT REPORTS [198411 s.c.!l.

restriCtion on the freedom to carry on trade·that has to be kept in view and not
'A the ancillary or inciden'tal effect of the KQverntnental action on the freedom to -
carry on tiade. [682 C-D; F-H]

. \
In the instant case, if the law of den1and and supply and non--avaihibility
~\..
of facility for loading Coal in smalls at wayside stations result in not making
available 'wagons to the petitioners because of pre-planning and priority it can-
not be said that there has been a total. ban oi;i the transport of coat offered by
B the petitioners by railways, which would violate the fundamental .freedom to
carrY on their trade guaranteed to the petitioners under Art. 19(1) (g). Jf the
impugned orders constitute a restricticn on the·freedo . . 1 of carrying on trade,
-though it is n.ot considered to be so, the san1e is reasonable and imposed in
larger pUblic interest. Priffiafacie it appears lhaf the petitioners' businCss or
t~ade as coal merchants is no way interfered with bf the railways by not beiilg
c able to provide transport facility. Let it not be forgotten that the railway is not
the only means of transport. There are.other means of transport by which the
coal can be transported by the petitioners to their respective place where they
carry on their business as the coal merchants. Even assuming that the direct'
impact of the policy laid down by the railway admi.(listration purSuant to the
orders of the central Govern~ent under sec. 27 A results in denial of allotn1ent
of wagon to the. petitioners, the restriction Will none·the-less be r·e.isonable
D becaUse petitioners are not wholly denied the a11ot1nent of Wagons.
[681 H; 682 A·B; 683 .A·CJ

A developing ~oun~y with 'mixed economy and econ~n1ic planrling l1ave
certain targets. to achieve. The~e targets are plann~d in advance and the econo-
mic activity is geared tO the achieverpilnt of these targets. If the required
E ·resources ne·cessary for achieving targets were readily available, no difficulty
would arise .. But a j:le, eloping country has to so distribute its sca.rce resou~es
to a,chieve and accorilPlish desired targetS: This situation is bound to lead to
a gap between the demand an~ supply of various facilities. Transport is one
such. Once there is a gap between the deman,d for transport service offered by
the railway and the supply of the service, the resources being not sufficient to
meet With all existing demands, the !tcarce resources will have to be equitably
F distributed keeping in view the planned target. Thh equitable · distribution
would necessitate. impJ)osing of reasonabl& restrict!ons and according of
priorities: [683 J?-F]

In the instant case, coal falls in Priodty 'C' (iii) in the Preferential Traffic ,
Schedule being the· Primary source of energy, Planned regulated movement of
coal to meet priority needs if it results in denial of that· facility to non..priority
·G sector could not be rejected as placing an unreasonable restriction· on the. funda~
mental freedom to carry on trade or business. And that is the object underlying
sec. 27A. Jt is therefore, idle to ~ontend that the section being violative of ~-
Art. 19(1) (g) is unconstitutional. [684 A-BJ

H Annexure •B· to Prefefential Traffic Schedule sets out the list of sponsoring
auth~rities. The list shows that ths Central 'and State Governn1ents as well as
highly placed Central and StatC Government Officers ,have been appointed as
sponsOring authority in respect ·of coS;l,required by diffe~ent area and ind~stries.
ViELAD COAL MERCHANT v. UNION 66i
• ;t· · Again in various States various sponsoring outhorities have been set up by State
. Government. Power is conferred on these sponsoring authorities to sponsor A
persons who would be accorded priority in transport of coal. These respo:Ilsible
persons and bodies set up in each ~tate as spon~oring authority are expected to·
act in a· responsible manner keeping in yiew the demands of the area and the ·
industry, for cOal in each State. It is, therefore, idle to contend that" setting up
. of sponsoring or recommending authority in Priority 'C' (iii) of the Preferential
Traffic Schedule is ultra v/rrs sec. 27A of the Act. [684,C-F]
B
The tr·ansport of coal is according to a plan drawn up a year in advance.
~ Further this plan is subject to the decision of the Standing-Linkage ·Committee.
Every meticulous detail is Worked out in advance. A daily loading of maximum
number of wagons is pre-planned. Loading _of the wagons.with coal at a tar-
geted nilmber daily requires rotational movement also according to ·plan.
A w3.gon once loaded with coal when it moves out to the destination has a
certain average return time stipulated and worked out in advance. Jn order to
c
giv' effect to this planned moveµient abbreviation 'GX' is devised and appended
to all the railway stations informing the transporters that the station _is not
open for transport of coal in wagon loads. Coal in smalls can be· offered. for
transport that is what tbe pet.itioners do not desire. All the regulatory measure
clearly indicate that tranaport of coal is scientifi.Cally planned and devised in
advance. All the impugned orders a.fe made for effective implemeniation of the D
planned movement of coal. If consistent with this planning, the railways have
stoj)ped booking of c()a1 in wagon·load from wayside station, it cannd't 6e said
that this reSulatory arrangement violateS sec. 28 of the Act and also that this•
action has imposed such an unreasonable restriction 'on the fundamental freedom
of the petitioners to carry on their trade aS'tO be violative of Art. 19(1) (g).
(685 A-B; F·H]
E
ORIGINAL JURISDICTION : W.P.Nos. 6822,7350,7351,7457-58,
7461, 7609-18, 7625, 7637, 7638, 7945, 7966-68, 8003-04, 8007-08,
8068, 8078, 8088, 8196-t!220, 8358-60, 8361-63, 8378; 8505, 8832-33,
8912, 8917, 8918,,19, 9083, 9110, 9135-36/81, 13, 36, 112, 159, 969,.
2163, 2641, 7089, 7685,. 8004, 8119, 8187-88, 9186 & 9187/82, F
7462 63/82, 7765~67/81, 160, 180, 1503/82, 1919/8.1, 1/82, 868, 1270,
1358, 2256, 2272, 4051-4052, 5123-26, 7147/82. • .

·• (Under article 32 of the Constitution of India)

Advocates for the Appearing Parties : G

SS. Ray, N.R. Choudhary, K.K. Mohan, S.K. Sinha, R.C. Kohii,
· R.S. Sharma, S. Mitter, N.S. Das Bahl, E.C. Agarwa/a, A.K. Mitra,
H.K. Puri & K. Chatterjee, B. Datra, Rish; Kesh & M. Chopra.,
S.C. Gupta'& M. N. Shroff, S.K. Ghosh, D. Goburdhan, P. Mo/uinty, H
Abdul Khader, C. V. Subba Rao & Dal,_er Bhandari,
I

662 SUPREME COURT REPoRTs (1984) I S,C.R,

The Judgment of the Court was delivered by
A •
DESAI, J. When the hearing in this group of petitions concluded
we pronounced the following order : ·

"All the Writ Petitions are. disinissed ·and any interim
order in each matter is hereby . vacated. Jn the inatters
which are listed as ready, the petitioner shall pay cost to
·the respondents in ·one set in each petition and there will
· be no order to costs in the matters w4ich are shown as
unready.

.C Reasons will follow."

Here are the reasons; i
The petitioners, in this group of petitions, under Art. · 32 of
D ' .· the Constitution are coal-.merchants, who, according . to them, have
.been denied the use of the railways for transport of coal . from vari-
ous coalfields and way-side statioo1s to their destinations by the
/
illegal and unconstitutional action of the railway administration.
·Constitutional conundrum invoked by them is the alleged violation
of Art. 14 in that w.hile certain transporters of .coal have been
E accorded priority in the matter of transport o( coal such as the
Central and the S\ate Governments and the sponsored and. recomm-
. ended transporters, the petitioners who are coal merchants were
denied equality of o.pportunity in the matter of transport of coal by
railway. Their further grievance is that total prohibition of booking
and transport of coal as requested by petitioners, by the railway
administration, an instrumentality of the ·state envisaged by. Art. 12
F imposes an unreasonable restriction on their fundamental freedom to .
carry on trade'guarnteed by Art. · 19(1) (g) of the Chnstitution and
hence impugned orders are invalid. · ·

There are different petitioners from different areas voicing
G their grievance against action of different zonal railway administra-
tions·but the running thread in the catalogue of grievances is the
sam~ and therefore a few representative facts to appreciate the con-
tention as set out in Civil Writ Petition No. 8003-04 by M/s Rani-
H ganj Coal Corporation & Ors. may be briefly enumerated. This
petition is adopted a,s represe!1tativc for the additional .reason that a
yery comprehensive counter affidavit has bee·n filed·in it on· behalf of
the respondents. '.
VIKLAD COAL MERCHANT v. UNION (Desai, J.) 66~
•
Petitioners aver.that they arc coal ·traders and undertake
· supply of coal and coke throughont India but in particular in the A
States of Punjab, Haryana and the Union Territory of Dclhj. They
carry on the additional bu'siness of supplying 'lack coal purehased
from .private collieries situated in the State of Meghalaya. In
order to move coal from the c_ollieries to consumers, petitioners have

•' to- transport coal from various stations served ·by· North-Eastern
Frontier Railways (Meter gauge) New Gauhati and Badarpur Ghat
B
in Silchar District in the State of' Assam and Meghalaya. For the
purpose of transporting coal they have to indent wagons .as they
want to transport coal in wagon-loads as the expression is under·
stood in contra-distinction to smalls and clubbing. They submit
indent for wagons according to the procedure prescribed .in the rele· c
r vant rules. Petitioners aver that prior fo April I, 19~2, there wa~ no
restriction on booking of.coal in wagon-loads. : The Govt. of India,
Ministry of Railways issued an order dated April U 972 which
reads as under : ·
n·
"Govern~ent of India (Bharat Sarkar)·
Ministry of Railways (Rail Mantralaya)
Rai\way Board
•
.No. TCR/15.10/71 New Delhi dated· Ist April 197J
I 2~b Chaitra, 1894 . .
E

The Genera) Manager
11, India Railways
.... .
.The R.ailways Board have decided that in the list of
abbreviations at page• 14 Chapter VI of the IRCA Alpha-
betical list of Railway Stations in India · (corrected .upto
31.3.79) an additional entry below the abbreviations 'G'
should be incorporated· as under :
G
OX-Open for.goods, traffic of coal descriptions .
excluding livestock, horse; large animals such as
camels; elephants. etc. carriages on their wheels and
motor cars but not open for outward booking of coal,.
coal shale; lignite, patent fuel, shoft coke and hard _ II
coke in wagon loads.' ·
S!iI'ilEME COURT REPORTII i1984) 1 S.d.ll.
•
The Railway Administrations are hereby · directed to
lA · decide and notify the riames of stations to which this new
provisions would apply and advise the General Se<:retary,
. l.R.C.A. accordingly.

The General Secretary l.R.C.A. on receipt of the
B advice from the Railway Administrations should arrange
to issue the necessary corrections, to the alphabetical list
of Railway Stations.

Sd/· P.N Kalra,
c Dy. Director, Traffic (Rates)
Rly. Board, New· Df'lhi, dated
1st April 72/12 Chaitra 64"
'
.This is one of the. impugned orde;s in these petitions. The
abbreviation IRCA used in-the impugned order means Indian Railway
D Conference Association ('.!RCA' of short). The . IRCA has com-
piled and.issued an alphabetic list of All India Railway Stations and
by a .suitable abbreviation as shown against the name of each railway
station iri4ication is given about the facilities for traffic both goods
and passenger available at different stations. As per the impugned
E orier. when abbreviation 'GX' is appended to any railway station_it
would inter·alia mean that the station is not open for outward book-
ing of coal, coal-shale' etc. in wagon-loads. It appears th~t the abbrevi-
' ation 'GX' has been appended to all way-side stations in the coal-belt,
cons~quently no rnilway station in the coal-belt would be in a posi·
· tion to book coal in wagon-loads from each such station. Conse·
F quet\t upon the issuance of the impugned notification, tbe Govt. of.
India revised Rule 302(i) of the Goods Tariff No ..33 Part I issued by
IRCA. - Further, the Chief Commercial Superintendent, Eastern
Railway by a circular dated April 15, 1972 informed- the_ station
sup_et'intendents and station-master~ of all the stations served by the
G Eestern Railway that the entry 'OX' should be appended to all the
·stations within its jurisdiction. Thereafter-Govt. of India, ministry
of Railways by its order dated April 27, 1972 issued an order revising
Rule I and 2 of the Eastern Railway Coal Traffic Part I as under :

H "All Traffic in coal, coal-shale,. lignite, patent fuel,
soft. coke and bard coke in wagon loads ·wilJ be loaded
oniy from Colliery sidings, coke oven plants and waslie·
Viki.AD COAL MFRCHANT v. UNION (Desai, J.) .. 665

ries on the Eastern Railways. Though invoices may be •
issued as from the stations serving these colliery washerfos A·
and coke oven plants, loading of coal in wagons will not
be permitted at those stations. Loading and booking of
coal is also.not permitted from any other station on the
Eastern Railway. This traffic will be booked under the
following forms of invoices :.- B
a) "Weight only" invoices showing the weight and rate
but not the calculated freight.

b) "Paid" invoices .
•
• c) "To p_ay"· invoices.
c
2. Coal will.be booked under "Paid" invoices only on
the written request of the sender despatching the coal
and provided the freight is tendered at the time of
despatclt. ,D

t wagons will be allotted only ·an availability and will
be subject to observe of priority and other Rules that are
, in force."

A further restriction followed when the Divisional operating
E
Superintendent, Bi)aspur for apparent reasons stopped booking of
. coal in smalls including clubbing at all stations of_ North-Eastern
Railway. This restriction came into force on December 4, 1979.
On February 11, 19so·a telegraphic communication was issed explain•
ing that coal in wagon-loads can be booked· from colliery sidings. by F
the coalieries concerned. In other words, the coalieries booking the
wagon must specify its hame in the indent Booking of slack coal was
wholly stopped as per a phone call dated April 9, 1981. Petitioners.
further contend that Union otindia, Ministry of Railways has issued
Preferential Traffic Schedule in exercise of power conferred by sec.
27A of the Indian Railways Act, 1890 ("Act' for short). This Prefere- G
ntial Traffic Schedule provides for preferential treatment iil transport
of good.s from various stations. ·It p(ovides five inter se prorities A
to E. Different kinds of coal falls undCr priority 'C' (Ill) which
reads as under:
H
(iii) Coal from collieries in accordance with commodity
quotas laid down from time to time for /certain types
·,
'

666. SUPREME COURT IUiPi>RTS [1984r 1 s.c;a.

· · of coal and/or in accordance. With programmes and .
movements sponsored or recommended by the Coal
Controller and/or any Committee appointed by him
. and/or.the State Governments• and/or other reco·'
mmending authorities and accepted by the/Railway
Administrations and/or Director, Movement
(Ra'ilways), Calcuita, and in accordance with . the
· Zonal Sche~e appli(!able to each field a~d the pri~ci·
pies of transport rationalisation in force from time to
time. A list of sponsoring authorities authorised to
sponsor coal movements in this item is given in
Annexure 'B'. •
c
. Note- (a) Coal in the above item C(iii) means "Coal as defined
in.Colliery Control Order."

(b) Besides the sponsoring authorities mentioned in
Annexure 'B' movem·ent of Coal may ,be sponsored
D by "any other authority who ·maybe appointed by
the Governinent from time to time."
••
(c)· Recommendatlon for allotment of wagons by a spon·
soring authority or acceptance of recommendations
or issue of sanction by the Railway Administration/
Director, Movement (Railways) does not guarantee
allotment/supply of wagons. Allotment/supply of
wagons would be regulated according .to the
·availability of Coal/transport.and according to opera' .
• tional exigencies from time to time. ;\llotmentisupplies ·
F • of wagons may be cancelled or reduced by Director,·
Movement (Railways).

(d) The period of validity of programmes/sanctions for
rakes/piece-meal movement may be laid 'down from
·G time to time by Railway Administration/Director,
Movement (Railways): The validity of programme/
sanction does not ·guarantee alfotment/supply of \
wagons ...

H le)., lnterse seniority. of the class of censumers would be
' · laid down ·from time to. time· by Railway Adminis·
!ration/Director, ·Movement (Railways) and may be
VIKLAD COAL MERCHANT v. u.NION (De6ai, J.) 667

-:-+ altered/modified from time to time .• Within the same
.' class or category of consumers seniority may be fixed A
• from time to iime depending upon ihe 'operational
and other considerations.• .Rai\wai Administration.I
r!- Director, Movement (Railway) may permit distress
allotmentslsupply of wagons when considered nece-
·ssary'. ·Nothing laid down herein shall be considered
l. as contrary to· notes (a) to (b) appearing under
B
Priority 'E'." -

Priority 'E' also includes coal from collieries in accordance
with targets laid down from time to time from the different fields
and in accordance with the zonal scheme applicable to each field and c
the principle of transport rationalisation already in force. Petitioners
contend that ·sum total of various · restrictions including one dated
April 1. 1972 introducing abbreviation 'OX' and the Preferential
Traffic Schedule specifying priorities under section 27 A of the Act
in their cumulative effect impose a total ban on transport of coal by D
the Railways, at their instance and this action is violative o( Art. 14
· a.nd/19(l)'(g) of the. Constitution.
/
A very detailed affidavit bas been filed on behalf of the respon:
dents·. Some ·of its highlights may be noticed. . •
E
·111dian Railway net-work serve 7000 railway staiions, scores
of divisioi{s and 9 zones. ·In such an extensive net-work, all kinds
·of factilities by their very nature cant)ot be provide<\ at all stations,
·nor can all kind.s of traffic be lifted and moved from all stations.
The Railways, have therefore to plan and rationalise movement of F
various commodities from various loading points to various destina,
tions and in various directions. It is said that till recently coal was
the primary source of energy._ It bein.g an important commodity it
bas t..o be accorded such high priority being . the primary source of .
energy, that a senior omcer called Direttor, Movement (Railways) is G
posted with headquarters at Calcutta and he controls and co•ordinates
all movements of coal by rail. As far back as 1945, the· Ocivt of
. India by its resolution No. Coal 119 (I) dated December 4, 194S
appointed a' Committee called the Indian Coalfields Committee which
submitted its report in 1946. ·Amongst various other recommen·· H
dations, the Committee suggeste<i that in view of the shortage of
transport, it is imperative that increased attention be given to zonal
668 SUPRBME COUl\T RBPORTS (19841 j S.C.R

distribution of coal. It further notices that coal is invariably trans-
A ported in full wagon-loads and at times despatched from depot-
stations in full train loads and the'refore if any general revision' of
freight is undertaken in consequence of increased cost of operation of
the railways, the preferen'tial treatment now accorded to coal should
be maintained. Statistical data relied upon in the report was
B annexed to the counter-affidavit. It ·is averred that railway has· to
rationalise movement of coal because daily on an average l 0,000
wagons are required for movement and transport of .coal all over the
country. 111 order to explain why booking of coal from way-side
stations is prohibited, it is averred that the Dir.ector, Movement
(Railways) assesses the likely availability of wagons in a coming year
c for the movement of.coal. After ascertaining the available capacity
he advises Central Govt. and various State·Govts. with a request to
sponsor coal traffic as per the requirement and policies. The whole
programme of transport of coal from coalfields and coalieries to vari-
ous points in Tndia is worked.out in advance keeping in. view the daily
despatch of loaded wagons and re_turn of enipty wagons so as to be
D available for daily requirement of empty wagons. A chart is annexed -
to this counter-affidavit in which the average loading of coal in
wagons per day iil set out. :Jn a letter dated December 21,1981 by
the Director, _Movement (Railways) to Chairman of the Railway
Board, it is stated that coal loading. the month is 1.0,478 per day
E compared to 10,121 wagons per day during October, 1981. .A
compartive breakage of loading during some months has· been set
out. showing the number of wagons indented, the number of wagons
allotted and the number of wagons loaded and the percentage of
loading against offer. It is also stated in the counter-affidavit that
F. the Department of Coal, in the Ministry of Energy bas set up a
standing linkage committee whose fuctions to assess and link the
requirements to particular sources of coal so as to provide this
primary energy material to establishments like the Railways, Thermal
Power Stations, Fertiliser Plants, Cement Plants, Steel Plants, Textile
factories, Chemical Industries and like. The Committee assesses the
G requirements of various industrial units, consumers establishments
and other consumers located in different parts of the ~ountry and
thereafter taking into account the. production programme of various
collieries, it links the requirements of various consuming units to \
· different individual coal-fields, and this linkage is reviewed frm time to
H time as the situation may necessitate. The availability of wagons
is an in.tegral part of this linkage programme.· After specifying these
facts, it is averred that this annual allotment drawn in advance
•
V!KLAD COAL MERCHANTS Y. UNION (Desai, J.) ~69

cannot be disturbed by casual indent for transporting coal. It is
further averred that the railway is a carrier which has to chop its A
own priority programmes keeping in view the public interest of,
rushing various commodities to different parts of the country. If' in
the process some individuals may not get a chance to transport their
commodities, the actio~ of the railway administration is neither
violative of Art. 14 or 19 (I) (g) of the Constitution.
B
.,
There are some averments in the counter-affidavit casting some
doubt about the trade carded on by the petitioners but we consider
. the same irrelevant for the purpose of disposing of these petitions.

A number of learned counsel addressed the Court on different C
facets of almost the same identical contentions. We would, however,
only deal
. with the
. basic contentions raised in these petitions.
At the outset, a brief reference to some of the provisions of the
Act would facilitate the examination of the· contentions canvassed
D
before us. Sec. 27 of the Act casts a duty on tb_e railway administra·
tion to arrange for receiving and forwarding Q"affic without unreason· •
able delay andwithout partiality. Sub-sec. 1 of sec. 27 reads as" under:

""27). Duty of railway administrations :10 arrange for
receiving and forwarding traffic without unreasonable E
delay and without partiality :-:

... (I) Every railway adminisration shall, according. to its
powers, afford all reasonable facilities for the
receiving, forwarding and delivering'of traffic upon
and from th.e several railways belonging to or worked F
by it and for the· return of rolling-stock."

Sec: 27 -A which was introduced by the Amending. Act No. .11 of
1950 confers power on the Central Govt. to give directions in
regard to transport of goods by railway administration. It reads
G
as under:

"27 A. Power of Centrar Government to give directions
in regard to transport of goods by railway .
administrat1on·(I) The Central Governm.mt may, if H
in its opinion it is necessary in the public interest so
to do, by general or special order, ·direct any
railway administration- ' .
670 SUPRl!MB COURT REPORTS · [1984) l s.c.ll. •

(a) to give special facilities for, or. preference to, the
A transport of ·any such goods or class of goods
consigned to the Central Government . or to the
Government of anY State or of such .other goods or
. class of goods, as may be specified in the order;

B (b) to carry any goods or class of goods by such route
or route~ and at such rates as may be specified
.
in .
the order.

(2) Any order made under sub·section (1) shall cease to
have effect after the expiry of six months from the
c d~te thereof, but it · may be renewed from time
to time.

(3) Notwithstanding anything contained in this Act, '-
every railway administration shall be bound to
D comply with any direction .given under sub-section
(I). any action taken by a railway administration
in pursuance of any such direction shall not be ,
deemed to be a contravention of Section 28."

Section -2~ prohibits giving undue preference by railway administra-
.E
tion. It reads as under :

•
"28. Prohibition of undue preference:-A railway adminis-
tration shali not make or give any undue or unrea- . ,.
sonable prefei'nce or· advantage to, or .in favour of,
F ·any particular p~rson or · railway administra.tion, or
any particular description, of traffic~ in any respect
whatsoever, or subject any particular person or
rai!~ay administration or any particular description
of traffic to any undue or unreasonable prejudice or
disadvantage in any respect whatsoever."
G
In exercise of the power conferred by Sec. 27A Central Govt.
issued Preferential Traffic Schedule directing that all railway adminis-
.. trations shall give special facilities for or preference to the transport
of goods ·or class of goods specified in the Schedule to the order.
H
Amongst Priority ~A' to 'E' there is inter se priority and when unde;
one Priority various goods or class of goods arc . clubbed together
they have inter se priority- amongst themselves. Coal falls under
VllllLAD COAL l,!EiCHANT v. UNION (Desai, J.) 671
. •·
Priority ·c•. Coal has to be moved. from collieries in accordance
with commodity quotas laid. down from time to time for certain A
types of coal and/or in accordance with programmes and movements •
sponsored or recommended by the Coal Controller and/or any
Committee appointed by him and/o.r the State Governments, and/or
other recommending authorities and· accepted by the Railway
administrations and/or Director, Movement (Railways), Calcutta and B
'in accordance with the Zonal Scheme applicable to each coal-field
from time to time. A list of sponsoring : authorities authorised to
sponsor coal movements under priority C(iii) is set out in Annexure
'B' to the Sched~le. ·The expression 'coal' has' the same meaning as
defined in the Colliery Control Order. There is a further provfoion
under Item (iii) that besiaes the sponsoring. authority mentioned in C
Annexure B, movement of coal may ·be sponsored by' 'any other
authoriiy who may 'be appointed by the Govt. from time to time."
' . .

Sec. 27provides for smooth flow of traffic throughout. the.
length and breal!th of the country._ The expression 'traffic' is defined
to include rplling stock of every description as well as passengers, D
animals and goods. A duty is cast on every railway administration .
to afford reasonable facilities for receiving, forwarding and deli-
vering of traffic upon .and from several railways beloµging to or
worked by it and for the ret-urn of rolling stock. This is necessary
because the railway net work is divided into various railway ·such as E
Western Railway, Central Railways, meaning zonal railway adminis-
tration and prior to nationalisation of the railways different compa-
nies operated different railwnys. Sec. 27 wa~ ena,cted in the last
decade of 19th Century when different compani~s had set up the
railway net work in different parts of the country, In order to . pro-
vide for. smooth flow of'traffic thwarting the railway administrations F
creating their own preferences, throughout the length and breadth of
. the country it was made obiigatory by Sec. 27 that every railway
railway administration shall_afford reasonable facilities for receiving,
forwarding and delivering traffic and for return of the rolling stock.
Sec. 27-A was introduced in 1950 with a view to conferring power on
the Central Govt. to give directions in regard to transport of goods
G
·by railway administration .• In 1950 railways· were the primary.
carriers of passengers and goods throughout the length and breadth
. of the country. Road transport was then in its infancy and river
navigation was practically unknow.n. On the advent of the indepen- ff
dence and as a resuH of planned economy, there was a spurt in
industrial activity with the result that demand from the ~railways for·
672 S\)PRBME CO\)RT REPORTS il984] l s.c;R.
,
·roiling stock es.cafated. VarJous projects w'e;e.beirig set up in diffe· . )
A rent 'parts of the country which necessitated· un-interrupted llow ·of ' ·
goods for speedy completion of the projects, By, 1950, Constitution
became 'operative, Art. 14 loomed larged so that ilnless a specefic
. power was. taken for serving larger pubiic interest, the railways, ·an -).
instrumentality of the State would be guilty of violating Article 14 if
.it did not afford the same facility for transport of goods. by indivi-
dauls agairlst the state requirements as also . priority requiremenis.
In order to arm the Central G'ovt. with. power to give directions for
. according special facilities, or preferential tre?tment in transport of .
·goods or class of goops consigned to the Central Govt. or the Govt.
· · of any State or of such other goods or . class of goods as· may· be.
specified in. the order, Sec. 27 A was introduced in the Act. It also
conferred power on the Central Govt. to give directions for the same
purpose of carrying· goods or class of gopds by such route or routes
and at such rates as may be specified in the .order. · The life of ah
· order giving such facilities or preferential treatment was to be initially
· for a period of 6 months but it can be rel)ewed .from time to time.
D
Se~. 28 prohibited giving of undue 'or unreasonable ,advantage or·
·preference by the railway administratioll in the. matter of transport of
goods in favour <)f_ any particular person or railway administration or
particular ·description of traffic. The scheme that emerges from the ·
combined reading of Secs. 27, 27-A arid 28 is ~hat the railway
E admfoi.stration on their own shall not impede free llow of traffic and.
return of rolling stocl\ .. Power- was conferred·on·the Central Govt.
fora~cording special facilities or preferential·treatment in the -matter
of transport of goods both in respect of consignees as well as class .
of goods: if in its opinion', it is necessary in' the public interest to do
so. However, Sec. 28·in the absence of g~neral or special.. order in
.F this behalf by the Central Government under Sec. 27A denied to the
railway administration power to accor<l imy undue o~ unreasonable
preference or advantage in. favour Of any·. particular person or any
other.body. ,The preferential treatment ii:t _the matter oftran_sport of ·~
goods can be accorded n(>t by tlie railway administration on· its own
G . which it is prohibjted from doing'by Sec. 28 but it is under ail obli-
gation· to do so if the Central Govt. gives a direction by general or
special order in public, interest. "Jn •short, undue preference by \
railway administration is statutorily prohibited but preferential freat·
rrient :in respect of goods or class of goods can be accorded if . the
H c~htral Government.by.a special _or general .order in public interest
·so· directs;
V!KLAD COAL MERCHA!-iT v. UNION (Desai, J.) . 673

Armed with thq.power conferred by Sec. 27A the Central . 1 ~ ·
.Government has·issued what is.called Preferenti~l Traffic Schedule. 4
It ;Jrescribed five priorities'/\' to 'E' with inter se priorities amongst
'A' to 'E' to be accorded by the railways· fof · transport of certain
goods or class of goo.ds specified under each category. · A brief refe-
rence to various Priorities 'A'· to 'E' would at a glance show how the
priorities have been .. determined in p~blic and national foterest. The
B
Gener;tl Order No. 68 directs that in exercise of the powers eonterred
by Sec. 27 A cif the 'Act, the Central Government directs that all
Railway Administrations shall give special facilities for or preference
·to the transport of goods'class of goods specified in the schedule to
'this order. Goods included in Priority' A' cover all moves of imme-
diate and operational nature ordered by the Quarter Master Gene- c
ral's Branch through Milrail, whiclr will be · marked. 'Immediate' in
respect of Personnel, Vehicles a_nd Stores, Military Special.irains and · '
immediate Operational demands. Demands of the Military ·have been
for
accorded the highest priority. the security of the nation .. Priority
'B' includes fo6dgrains', fertilisers, edible groundnut .'cake: Iron and
Steel etc. Next to national security hunger has been given priority. D
Priority 'C' incfodes inter alia coal from collieries. Coal has till .
recently been the primary 'source <if energy and · yet it · receives its
place in Priority 'C'.. ·Energy thus gets Priority 'C'. · Priority 'D'·
-includes raw materials and finish.ed product from Asbestos Cement .
Industry, Cotton seed; foodstuffs such/pulses, fresh dates, perishable E
~ommodities subject to . quota etc. i'riorits ''E' is praqtically a
residuary clause which again involves coal from collieries ·is accor-
dance. with the targe.ts laid down from .time to time' from the different· ·
..
·fields and"in accordance' with the zonal scheme applicable tci each
field and the principle of transport rationalisation already in force-but
not falling within Priority 'C' (iii). · F

In the backdrop of this legal position, we may now turn to the
. contentions raised on behalf of I.he peti'tioners ..
t
I. Railway being a comniori carrier and by Sec: 28 of G
the Act being. statatorily prohibited from giving undue
preference by arbitrarily picking and choosing some
out of those seeking to use its service~ and facilitfos
its action of giving priority to some transporters of
coal denying_ use of its· transport facilities to the. .H
petitioners who are similarly situated i§ discrimina-
tory in characte~ an.d hence violative of Art. 14.
.' .
674 SUPREME. CQURT REPORTS (198411 &.C.R.

2. Impugned Orders such as one da!fd April I, 1972,
December 3'1, 1980 and April 11, 1981 in their cumu-
lative effect have imposed a total. ban on the trans·
port of coal offered by the petitioners by the Railway·
and thereby imposed unreasonable restrictions on the ~\.
fundamental freedom of the petitioners to carry on
their trade guaranteed by Art. 19(1)(g) and hence
• they are unconstitutional.

3. If upon its true c~nstruction, Sec, 27 A enables the
Central Government to impose a total ban on trans·
port·of coal offered by the petitioners who· are traders
c in coal, it (Sec. 27A) is violative of Art. J 9(1)(g)
and. hence unconstitutional.

4. In any view of the matter; Para. (iii) of Priority 'C'
of the Preferential Traffic Schedule issued by the.
Govermnent of India in exercise of the power confe-
D rred by Sec. 27A in so far as it permits special faci·
lily or preference to individu~ls or groups of persons
selected by the Sponsoring Authority or recommen·
ding body for transport of.coal is ultra Vires Sec. 27A. ·
of the Act.

5. Order No. TO(g) 1510/71 dated ·April J, 1972 intro·
. '
. ducing abbreviation 'GX' and appending to all
• ·railway stations denoting that each suc\l station is
riot open for outward bookiug of, coal, coal ·shale,
lignite, patent fuel soft coke and hard coke in wagon
F loads is violative Sec.- 28 because thereby the railway
' administration has subjected the petitioners as well
as the coal offerred for transport to an undue and
· unreasonable prejudice or disadvantage ip the matter
of coal transport.
G 6. At any rate, total stoppage of booking of coal ·from
wayside.stations and colliery sidings unless the collie-
ries in. their own name hook the wagons imposes a
tota I ban on transport of coal offer red by the petitio·
ners and therefore, the order dated April I, 1972
H
introducing 'GX' abbreviation ·and appending it to
all railway stations is violative of Art. 19(1)(g). · We
shall deal with these contentious s~riatim.
\"IKLAO COAL MERCHANT v. UNION (JJesai, J.) 67$

:+ .Re Ground I : Railway is a common carrier a~d being State·owned it
is subject :10t only to the provisions of the Act hut also the fundn"
mentalrights guaranteed by Part III of the Constitution,.• However
much 'before the advent of the Constitution. when different Railways.
_J ·· were owned by incorporated companies, · Sec. 28 . of the Act
' precluded the different railway administrations from granting undue
preference to any particular person or any· particular traffic or to any B
particular raiiway administration, _or subject anyone to any undue or
unreasonable prejudice or disadvantage in the matter of transport of
goods ·or passengers. Railway being a Stale monoply, to ch~ckmate
its monopolistic·power in the larger public interest it has to be
subjected to regulatory measures. Simultaneously it became
necessary .to arm Central Government .with power to direct railway c
. 'r administrative to give preference in the matter of transport of the
goods. of the Government,, central or State or specified go·ods to meet
the demands of various regions as. we Ii as needs of Government.
Intention was to classify government ina class by. itself for ibe
purpos~ of Art. 14. To meet.the challenge of Art. 19 (I) (g) the
D
Central Government was armed with power to accord priority in
transport of goods in larger public interest. Soon after· the advent
- i of the Constitutions; to arm the Central. Government with requisite
power to direct the railway administration to give special facilities
for or preference to the transport of any such goods or class of goods
consigned to the C,entral Government or to the Government of any
State or such other goods or class of goods as may be specified in the
· order, Sec. 27A was -introduced in the Act which enabled it by a
general or special order to direct the railway administration to grant
special facilities for or preference to the transport of goods. Such a
general or special order can be issued by the Central Government if
in its opinion it is necessary in .the public interest to do so. Now
F
indisputably the goods consigned to the Central Government or to
Government of any State must obviously have a priority ove'r what
~ we may loosly describe as ·private transporters, because it is well· ·
settled that the Central or the. State Government is in a class by
itself. This view is founded on the assumption, that all activities of G
the State are in public interest in the. sense that they are· either ·
undertaken on behalf of the public or 'that the loss or gain arising
form them falls upon the public (See Nav Rattanma/ and Others v.
The State of Rajasthan.( 1) The goods consigned to the Central or the
State.Government are, unles~ shown to the cvntrary necessarily to be H

(I) [1962)2 S.C.R. 324.
67(> S,Ul>RBME COURT RBPoR ts t19S4] 1 s.c.a.

used to catry on governn{ental activity undertaken for the benefit of
. A. 'public or to subser~e some public int'erest and which may as well
' include: the' efficient adminstration of the governmental agencies.
Sec. 27A also confers power to.direct any railway administration-to
·give.special.facilities for or.preference 1.0 the transport of goods or a
class of goods as may be· specified in a general or special order that.
may be issued in this behalf. ·The Centra.1 Government is better •
·~.
equipped .to knciw what class of goods are required to b.e sent to any
· , particular area expeditiously to meet some shortage, or .for national
security or to meet an emergency or any natural· or man-made •
.catastr9phy so as to accord special treatment in the matter of trans-
port. See. 28 can be s~id to some extent to be a cor9llary to Sec. 27 A
c in as 'much as the railway administration on its own is prohibited
from giving undue or unreasonable preference or advantage to, or in
· favour of, any particular person or. railway admini'stration, or any
particular description of traffic, in any respect whatsoever, or subject
·any particular ·person or railway" admin'istratlon or any particular
description of tr~ffic to any undue or unreasonable prejudice or.
D" disadvantage in any respc.ct whatsoever. To repeat railway being a ·
. State monopoly undertaking, it had to be statutorily ·controlled from
abusing its 1Donopolistic characte,r by prohibiting it from giving any·
.- undue or unreasonable prefernce or. advantage or acting 'in any
manner which. would evidence undue.or tirireasonable prejudice or"
E disadvantage in any.respect whatsoever ..Equality guaranteed be Art.
14 is translated·· into statutory provision .in Sec. 28. A Staie
monopoly like the railway administration. cannot be trusted to' act·
fairly and that is the object underlying Sec. 28. If everyone was to
·.get.equal. facility for transport of his. goods by railway without
F;. · anyone claiming priority or anyone having power to grant preference
or special fa~ility, in an' emergency this equal opportunity· would
create a havoc. Therefore on the other hand, the Central Govc.rn-
ment io meet the needs of the couniry arisi~g in any eventuality can
, give directions for giving .sp_ecial facilities for cir preference to t)le -1
· traMport. of goods or.any class_ of goods. In the absence of power.
such as conferred by Sec. 27 A, floods, draughts; . national secu~ity
~·requirements, unscropulous hoarders, artificial shortages matefildS
·for national projects in a country of the dimensions of ·India cannot.
· be effectively and adequately tackled. This is the ·genesis of the
power conferred by Sec. 7_7A. ·
H
. . ' -,
:Armed with the power conferred by Sec. 27A the Central
Government has .issued Preferential Traffic Schedule. Priorities 'A'
VJKLAD COAL MERCHANT v. UNION (Desai, J.) 677
•
. to 'E' therein set oui in the matter of transport of goods by railway
clearly manifests 'a. public policy framed to subserve public. intrest. A
Coal the primary source of en~rgy has been Telegated below the
. military requirement '(Priority 'A'). and foodgrains and fertilisers,
Iron and Steel material for wagon b~ilding, seeds etc.· (Priority 'B')
and then comes the primary source of energy in Priority 'C' .Co11l.
Does this prior;ty manifost undue· preference prohibited by Sec. 28 or B
a general· order· issued 'by, the Central Government in· public
interest.?·

Let orie i;onfusion be 'cleared at the outset.. Submission that
·there i.s virtually a total embargo on the transport of coal by.
·railway at ihe·instance 6ft.he present petitioners or others similarly.
situated is.substantially incorrect. •Throughout the hearing of these
petitions, it was pepeated ad nauseum that cumulative effect of all
orders, includi~g the impugned order dat~d April I, 1972, is to
impose a total ban o.n the transport· of coal offered bi!: the petitioners.
As w)ll be . presently· pointed out, this statement is · unfounded in
· fa.cts and pr~sents a distorted picture in the· matter ·of transport of D
coal J?y railways.

!'riotity 'C' (iii) which deals with coal provides . for transport
of coal from collieries to various parts in fodia. It was ·subjected to
varylng constructions. · It ha~ been.extracted earlier. In order to be ·E
'eligible fpr obtaining' allotmen't of wagon under Priority 'C',. it is
necessary for the person indenting the wagon to satisfy tbe various .
conditions specified therein. . They are : (i)' that the coal is to be
loaded from .the collieries; (ii) that the coal to bb load.ed is in confor-
. mity with the commodity quotas laid down from time to. time for
certain types of coal and/or in accordance with the programmes and. F
• movements sponsored or recommended ·by the Coal ·controller
> and/or any Committee appointed by him; (iii) or it is sponsored or ·
. recommended by the State Goveinment 'rnd/or other' recoqimending
authoiities'.and accepted by the Railway Administrations; (iv) or it is
sponsored or. recommended by Director, Movement (Railways), G
Calcutta : (v) .and it must be in accordance witli the Zonal Scheme
applicable.to each field and the principles of transport rationalisation •
in force from time to time. In order to pomply with the pre-
con.ditions for eligibility under Priority 'C', a list of sponsqring
authority aut~orised to. sponsqr coal movements is drawn up and is H
set' out in Annexure '!l' to· the Preferential· Traffic Schedule. These
·general c~nditions are further subject to Notes A ·\Q E. Why such

•
678 SUPREM~ coURt REPORTS [1984] 1 s.c.il.

an exhaustive and detailed provision is made is . not difficult to
A . · answer? Coal forms 32% of the total transport of goods ha~dled by
the Railways. On an average, more than 10,000 wagons will have to
be allotted daily for transport -of 9oal. Coal being a primary .source
of energy used by heavy industries, electricity generating plants, steel
plants as also cooking fuel used in the remotest parts of the country,
it is necessary to handle its transport with scientific precision.
B
Therefore, there is a prior planning abour a year in · advance drawn
up by the Director, Movement (Railways) setting out Zonal Scheme
of distribution applicable to each coal-field ·and the principles of
transport rationalisation in force from time to time. The purpose.
underlying setting up 'of sponsoring and recommending authorities is.
c to ascertain the needs of various regions of the country who in tbi:ir
respective regions would be in clos~ and intimate contact "with the
consumers of coal both industr.ial and individual. Even though·
pbwer bas been conferred on them to spousor or recommend. indent-
ing of wagons of coal from collieries this network of sponsoring and
recommending authorities are subject to the Zonal Scheme applicable
D
to each coal field and the principles of transport rationalisation in
force from time to time. The nerve centre is the Director, Movement
(Railways) of all the activities connected with tra·nsport of coal. In·
addition to this the Government has set lip a Standing Linkage
Committee in the Department of coal in the Ministry of Energy .
E . This Committee assesses the link and requirement of particular
source of coal. The Committee keeps in view the requirements of
such major industries and, establishments using coal like the RailWays,
thermal power stations, fertiliser plants, c.emerit plants steal plants,
·textile factories, chemical industries and the like. This very narration
would show that if there is disturbance in regular supply of coal to
this priority sector resulting in their closure, there would be a ripple •
·effecting various ancillary industries creating a major dislocation in
··in the national economy and escalating haunted spectre of layoff .and
unemployment. Jhat is why planning is undertaken every year in.
• ·advance and but for any emergency it is considered inadvisable to
G disturb .the advance Planning because any such disturbance ·results in
seriou~ dislocation of this primary source of energy being distributed
•
all over' the country keeping in.view national priorities.

, With this backg~ound, it is no~ difficult to appreciate the
H. various orders issued, by the Railway Administration and the Central
•Government regulating the movement of coal.

•
•
\IIKLAb COAL MERCHANT v. UNION (lJesai, J:) . 679 .

Railway is a monopolistic undertaking. in the· matter of trans-
port of coal by Railways. Barring some tiny dots which may become A
v'isible only by a magnifying. glass, the entire railway network is
nationalised and the railway is a department of the Union of India.
It is therefore, indisputably a State monopoly. A monopoly unless
kept within. bounds may prove to be a menace, .Therefore, regula-
tory measur~s are necessary to preven~ the abuse of monopolistic B
power. The reasons which led to the- enactment of the Monopolies
and Restrictive Trade Practices Act may have to 'be ·kept in view
even while keeping a watch over ,the activities of a ·State· monopoly.
But there is a constitutional check on the State monopoly, nam'ely, it
being State within the meaning of Art." 12 of the Constitution, all its c
actions will have to conform to the fundamental rights ensl;frined in
Part III of the Constitution. P!trt Ill provides a .positive and healthy ·
check on the railway administration. Sec, 28. of the Act seeks to
achieve the same .result which on the advent of the Constitution,
Art. 14 would achieve. Sec. 28 undoubtedly prohibits railway D
administration from giving any undue preference by arbitr.arily pick-
ing and choosing some out of those seeking to use its serviCes and
facilities. But Sec. 28 is subject to Sec .. 27A. If the railway administ-
ration -accords priority in transport of goods by giving ·special
facilities fur orprefe~ence fo the transport of goods, in compliance
with any general or special order made by the Central Government
E
in the public interest in this behalf, compliance wJth such special or
general order could never be attacked as being violative of Sec. 28. ·
Sec. 28 forbids discrimination by ,giving undue or unreasonable prefe-
rence or advantage in respect ·of any particular traffic to any particular
person or any other railway admiilistration but' this general pr~hibi· F
tion against discrimination is subject to the ·overriding power
conferred on Central Government under Sec. 27 A. If whiie giving
effect to the orders of the Central Government i.ss.ued under · Sec.
27 A, priority is accorded in the matter of transport of goods consig•
ned to Central or l>tate government or class of goods specified in the G
general or special order issued iirthis behalf, the action of the rail-
way administration in complying with such special or general .order,
-could not be said as tentamounting to giving undue or .unreasonable ·
pooference or advantage to or in favour ofany particular person or·
railway administration. Wh_at Sec. 28 forbids is discrimination. in H
the matter of transpo_rt of goods against a class but. thi~ is subject to
•
"680 .. SliPRilME COliRt _REPORTs (1984) 1-s.c.a.

'ihe permissible classification that W·<?uld be introduced by a . special
A ar general order issued by the Central Government in exercise of the
power conferr~d by Sec. 27 A. It may be recalled that the Preferential
Traffic Schedule a"cordirig Prjo.rity '(;' to transport of coal by those
mentioned therein has beei;i issued in exercise of the power conferred . . _.,
by Sec, 27A. Therefore, the submission that petitioners in the ·matter \....
B of transport of coal are similarly situated wjth the Central or St~te
Government or. transporters give.n priGfity by" general or special order
issued under ·sec. :27 A cannot be entertained. This is all the more·
so because the petitioners are coal merchants who ·want to transport
their coal ~y'railway for carrying on business in coal and they may sell
the coal to any intending purchaser while those accorded preferential
c ·treatment.under Priority 'C' of the Preferential Traffic Sch,dule are
transporters of coal who have been recognised one· year in advance ·
tinder Zonal Distribution Scheme as Y,erson who would by· trans·
porting the ·coal to satisfy fixed goals. which subserve needs. of the
public at large. For this additional reason the contention·. of the
petitioJ1ers thar they are· similarly _situated with those set out in.
D Priority 'C' (iii) cannot , be . entertained. Classification of those
covered by Priority. 'C' and. the present petitioners is founded on
intelligible. differentia which. distinguishes persons or thi~gs . that are
grouped together from others left out of . t)le . group · and the
.,
differentia has a ·rational rela.tion·to the object sought to be .achieved
·E by the impugn'd order; .. Tbo;e falling within .Priority 'C' (iii) wonld
.form a class by themselves and the .petitioners clearly stand out of.
'the group and for re.a_sons her.ein stated petitioners could not be said·
to be similarly situated with those. grouped together in. Priority
'C' (iii)- .
•
F
Re Gr. 2 :. It was next contended that ihe impugned orders .. dated
·April l, 197l, December 31, 1980 and April 11, 1981 in their cumµ-
lative effect have imposed a total ban on the. transport of coal offered
by the petitioners by the.Railways and thereby jmposed an unreafon-
able restriction on their fundamental freedom to carry on their trade
G guaranteed by Art. J9(l)(g) of the- Constitution. It is ·.factually
incorrect to say that' . the impugned- orders have in·. their cumulative
effect imposed a total ban on the transport of coal offered by th_e
petitioners by Railway. ·Priority 'E' in Preferential Traffic Schedule
·provides for transport of coal from collieries in 'accordance with· the
H
targets laid down from time to time from the \!ifferent. fields and in
accordane with the Zonal Scheme applicable to .each· field and t]le .
principle offransport rationalisation already ·in force. Priority !C'
•

·. VIKi.All CoAt MEltCllANt v. UNION. (Desai, J.) · 681

(iii) caters to transport of certain types of coal as·recommended and
sponsored by recommending and sponsoring authorities. Priority A
"E' (ii) caters. io a situation where c6al is required to be tn~nsported
.from collieries in accordance with the targets laid down in advance.
Therefore, if the petitioners are unable to obtain any sponsorship or ·
recommendati6n for transpo~t of coaLby Railway, they may as well ·
come under Priority 'E' (ii): Assuming 1hey even ·do not. coine.
B
• within the sweep of Priority 'E' '(ii}, it is crystal clear that any avai-
\able wagon after all priorities .are satisfied can be made available to .
the petitioners.· If even then wagons are not allotted to petitioners,
they can complain of violation of Sec.,2&: But it was urged that the
Priority 'A' to '.E' have been so .exhaustively drawn up that concei-
vably not a single wagon would be available. afier all the. priorities
are met with.· That may be so but that is unavoidable when the iaw
·of demand and supply operates. There is always an yawing gap
· between the demand for the wagon and the available supply of the
same. That situation itself would justify making of orders under Sec .
. 27A. If the railways were in a positio.nto meet with everyc demand
ofthe wagon:ror transport of goods, it was absol4tely unnecessary to.
provide for priority. The very fact that. the.re is a discernible gap
between the demand for the wagons and. the supply of.the same that
led to t;he necessity of introducing Sec. .27 A and making a general
mder drawing up Preferential Traffic. Schedule in .. exercise' of the
power cMferred by Sec. 27 A.. Further it was said that.,coal can be
transported in smalls from certain wayside stations not suffixed,with
abbreviation 'GX'. But the petitioners want .to transport their. coal
in. wagon loads. The Railways may not be able to provide w~on
from the wayside stations because each . empty wagon at ·wayside
·station is accounted for in the daily §Upply.ofwagons approximately ·
10,000for tansport of coal from. colliery siding to various desti-
.
nations in the country. If may be .as the petitioners
' ' . contend thqt
loaded wagon may reaeh a wayside station and is unloaded but the
.
a

is
counter-affidavit shows that each such empty wagon acco'unted for, ·
';\ year in ad,vance towards supply pf .more than 10,000 wagons. daily.
-tR• the colliery sidings for transport of coal. .. And this . pre-planning G
cannot be disturbed by excluding such wagons fromthe calculations.
about available wagons and ha~d it over to the ·petitioners. There
is a:further difficulty .in making available wagons· to the petitioners.
· Every; small' wayside station is not equipped with necessary equipment
for loading of coal. Therefore, if the law of demand and supply, II
and non~availability of facility for loading coal in small ai wayside'
statior,is resulhn not making available_ wagons to ihe petitioners
682 SUPREME COURT REPORTS [1984] 1 s.c.I\,

because of pre-planning and priority it cannot be said that there has
A · been a total ban on the transport of coal offered by the petitioners by
the railways, which would violate the fundamental freedom to carry '
on their trade guaranteed to the petitioners under Art. 19(1)(g). If
.the impugned orders constitute a restriction on the freedom of
· carrying on trade, though we. do not consider ft to be so, the saiiie is
B reasonable and imposed in larger public interest. The contention
must accordingly be rejected.

Re Gr. 3: It was next contended· that if upon its ·true · construction
. Sec. 27A enables the Central ·Government to impose a total ban on
c .
transport of coal offered by the petitioners who are traders
.
in coal,
Sec. 27A would be violative of Art. 19(l)(g) and should be declared
unconstitutional. Art. 19(l)(g) guarantees to the citizmthe funda-
mental freedom to carry on any occuption, trade or business.. This
fundamental freedom is subject to reasonable restrictions that can be
imposed by law relating to the carrying on by the State, or by a·
.corporation owned or controlled by the State; of any trade, business,
industry or service, whether to the exclusion complete or partial, of
~ cititens or otherwise. ·

· The first question that may be posed in this context is : wtat is
the trade being carried ori bY the petitioners? Are they coal trans-
porters ? Is the transport of coal their business ? Or are they coal
mercharits who are dealers in. coal and for the purpose of carrying on
·of business at a certain place they are required to transport coal from
the colliery sidings to their place of business ? Obviously their 15usi-
ness is not transport of coal. Transport is merely incidental to their
F business, namely, trade in coal. Assuming that the Railways have
wholly banned transport of coal offered by the petitioners by wagons
coufd it be saiCI that the action of the Railways would violate Art.
19(l)(g) in relation to them. Whene~er the Court is called upon to
examine the complaint that restrictions imposed on the freeaom to
G· . carry on tr;de are unreasonable, it is necessary to find out what is ·
the trade or business of the complainant-petitioner and.to what extent 4
·the restriciion, if any, is imposed upon the freedom to carry on trade
or business and then to determine whether the. restriction is reason-
able or otherwise. It is the direct impact of the· restriction on the
H freedom to carry on tra ie that bas to be kept in view and not' the
ancillary or incidental effect of the governmental action on t~e
freedom to car·ry on trade. The petitioners are not transporters of
coal. They are coal .marchants scattered over varions. parts in
VIKLAD COAL MERCHANT v. UNION (Desai, J.) 683

India and now they complain that they ~re unable to tran,sport coal
because the Railways have so arranged its prforities in the matter A
of transport of coal that the petitioners would never .be able to obtain
a single wagon for transport. of their coal. Prima facie it appears·
1- that the 11etitioners·' business or trade as coal merchant is in no way
interfered with by the raiiways by not being able to provide transport
facility. Let it not be forgotten that the railway is· not .the·· only B
means of transport. There are other means of transport by which
. the coal can be transported by the petitioners to their respective
place where they .carry on their business as the coal merchants. Even
assuming that the direct impact of the· policy · laid down by the
railway administration }lursuant to the orders of the Central Govern-
ment under Sec. 27A results in denial ·of allotment of wagon to . the c
petioners, the restriction will none-the-less be reasonable because
petitioners are not wholly denied the allotment of wagons.

A developing country with mixed economy and economiC
planning have certain targets to achieve. These. targets are planned
D
in advance and the economic acrivity is geared . to the achievement
of these targets, If the required resources necessary for achieving
targets were readily available, no difficulty would arise. But a
developing country has to .so distribute it~ scarce resources to achieve
· and accomplish desired targets. This sitqation is bound to lead to
a gll\> between the demand and supply of various facilities. Trans· E
port is one such. Once.there is a gap between the demand for
transport service offered by the Railway arnl the supply of the service,
the resources being not sufficient to meet with all existing demands,
the scarce resources will have to be equitably distributed keeping in
view the planned targets. · •
F
This equitable distribution would necessitate imposing of
. reasonable restriction and according of priorities. Coal as pointed
out earlier being the primary source of energy, the demand for it to
keep wheels .of industry rotating is very high · and it has to be accor·
ded a fairly high priority and that is done by the Preferential Traffic
G
!•
Schedule. Only two other items have a priority over coal and 'they
are in respec!°of Personnel, .Vehicles and Stores, Military Special
trains and immediate Operational demands that. is nati,onal security.
This does not require. any explanation because national security has H
the highest priority, and it is accorded Priority 'A.'. Priority 'B'
provides for foodgrains, edible oils, goods in connection with relief
and .rehabilitation of displaced persons, seeds etc. H1:1nger has been
684 . SUPREME COURT REPORTS (198411, s.c.a.

accorded.Priority 'B'. · And coal falls in Priodty 'C' being the
primary source of energy, Planned regulated. movement of . coal to
. meet priority needs if it results in denial of tliat facility to non-prio-
•rity·sector could not be rejected as placing an unreasonable· restri~
ction on the fundamental freedom to carry on. trade or business. '·-· \
And that is the objecrunderlyirig Sec. ·27A. It is therefore, idle to
contend that the section being violative of Art .. 19(1)(g) is unconsti- · .
tutional. · ' ·
~ -
· Re Gr. 4 : . It was next contended that in so far as Priority
.C(iii) in the matter or'transport of cqal from colliery sidings permits
special facility or preference to individuals or groups of persons
c se)ected by sponsoririg aut\10rity or recommending body for trans-
port of coal, it is ultra vires Sec. 27A of the Act. One has merely to
look at the list of sponsoring and recommending authority to reject
· this submissi~n. Annexure 'B' to Preferential Traffic Sched~le sets
out the !1st of sponsoring authorities · It is a long list but a bar~
perusal of it is sufficient to sho1v at a glance that Central and_ State .
D Governments as well as highly placed _Central and State Government .
Ofi)cers have been appointed as spo_nsoring authority in respect of 1
coal required by different area and industries. Again in various
States- various sponsoring'· authorities have been set up . by _State
Government.· Power is confered on these sp0nsoring authorities , to
. sponsor persons who would be accorded priority in transport oj; coal.
E
. These responsible persons and bodies set up in each State as spon-
soring authority 'arc expected to aet in a responsible manner keeping .
in view the demands of the area and the industry,~ for coal {n each
State. It i~ therefore, idle to contend that setting up of sponsoring
or recommending .authority in Priority C(iii) of the Preferential.
F Traffic Schedule ls ultra vires Sec. 27A of the Act.·

R~ Gr. 5 : It was next contended· that the Order No ... TO (g)
1510/71 dated Ap~il 1,1972 introducing of abbreviatio.n 'GX' and
appending it to all railway stations has resulted in every such station -.\·
befog not open for outward boo~ing of ·coal, coal shale, lignite etc.
G ·.in wagon. loads and'therefore it violates Sec. 28 of the . Act because·
thereby petitioners are wholly prohibiie_d from transporting their coal
by railway and, making every empty w_agon available io those
covered by J'riority C(iii). · lt wai said that the order dated April.
!,1972 has the pernicious tendency of giving u·ndue preference-to '
H
·Priority 'C'(iii) tr~nsporters and subject~ petitfoners to undue or ·
unreasonable prejudice.or disadvantage, both situations_ being prohi-
bited by Sec. 28. As pointed out earlier, . transp~rt of . coal is
..
VIKLAD COAL MERCHAN'f v. UNIO.N (Desai: J.) 685

according to a pian drawn up a yeadn advance: Further this pfan
is subject to the decision of the Standing Linkage"Committee~ Every
· meHculous detail is. worked out in .advance. A daily loading of
maximum number' of wagons is pre-planned. Loading of t_he wagons
with coal at a targate<I number daily requires rotational movement
also according to plari. .A. wagon once.. loaded
..
with coal. it moves ,
out to its destination has a certain average return time stipulated and B
·worked oui in..advance. There may ·be dislocations. In orde.r to
meet ·this eventuality ·in the counter,affidavit it is 'stated ·that no
wagon· load of coal can be booked from wayside stations. It can
only be booked from colliery sidings and that ought to be so. To
achieve this desired end, an abbreviation '.GX' was· devised and
appended to all stations. Where a station bas an abbreviation'GX' C.
appended to it, it would J:!lean that the station is nof operi for
outward booking of coal,. coai shale, lignite, patent fuel, soft coke an<! ·
hard coke in wagon loads. We fall to see· how: this iegulatory
arrangement .violates Sec. 28. In' fact, this incidental arrangement
helps in smoothly working the Zonal Distribution Scheme arid the D
·planned movement ·of coal. And it is not disputed· that· the coal in

1· •.
·smalls, if offered and if the· space is available can be moved from
wayside stations: · Therefore, we find no meflt in' the submission.

Re· Gr. 6 : It was laStlY~r~ed". that~Y in~· ~~br~viation
affix 'GX' · ~ E
to all waysides stationsia total 1ban is· imposed on the· transport of
coal offered by the petitioners and therefore, the Order· dated April
1,1972 is violative of Art: )9(1).(g). It is the -same submission
slightly_ differently clothed. As stated ear1ier movement of coal is ·
planned and regulated and no tiqkeririg is permissible. Petitioners
are equally subject to this planning and regul_ated ·:movement.· It F
cannot be tinkered with. To give elfeci to this planned movement
) ~bbreviation 'GX' is devised and appended t~ ~U the railway stations
fofonning the transporters that the. station is not · open for transport
of coal. in wagon loads. Coal in smaUs can be offered for transport
that is what.the petitioners do not desire. All regulatory measuros
discussed in detail hereinbefore clearly indicate that transport of G
) coal is ·scientifically planned and devised in_ advance. All the
,. ,,,; · impugne4 ordets ,are made ·for effe<;tive implementation ·of the '
planned movement of coal. If consis_tent with this planning,_. the··
railways.have stopped booking Of coal in wagon load from wayside
station, it cannot be said th~t this action. has imposed such an H
unreasonable restrict{on on ihe fundamental freedom of the petitioners
to carry on their trade as to be violative of .Art. 19(1) (g).

•
[1984] 1 s.c.R.
.. 686 SUPREME COURT REPORTS

We cannot part with this judgment without recording our
A uninhibited appl'lociation of thorough study of the knotty issues,
re.search and analysis of historical background, and_ scientific and
painstaking presentation of the facts and issues of law involved in
these petitions by Shri Gupta learned counsel, who appeared for \,,.
,the various railway administrations. The intense labour put in by
B hiin in collecting the most useful ma\arial and elucidating the same
before the Court in a very able manner helped. us considerably ill
disposing of these petitions. •

These are the reasons which persuaded us to make the order
· set out at the commencemant of the judgment.
c
H.S.K. Petitions dismissed.

•

·~ .

.'
.•