Rashid Ahmed vs The Municipal Board, Kairana

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Petition No. X of 1950

Decision Date: 19 May 1950

Coram: Hiralal J. Kania, Saiyid Fazal Ali, Mehr Chand Mahajan, B.K. Mukherjea

The case titled Rashid Ahmed versus The Municipal Board, Kairana was decided by the Supreme Court of India on 19 May 1950. The judgment was delivered by a bench that included Chief Justice Hiralal J. Kania, Justice Saiyid Fazal Ali, Justice Mehr Chand Mahajan, Justice B. K. Mukherjea and, as recorded, Justices Das and Sudhi Ranjan. The official citation of the decision is 1950 AIR 163 and 1950 SCR 566, and it is also reported in a series of subsequent law reports. The petition was filed by Rashid Ahmed seeking relief against The Municipal Board, Kairana, with the Union of India and the State also indicated as respondents. The substantive issue concerned the constitutionality of certain municipal by-laws enacted under the Uttar Pradesh Municipalities Act, 1916, specifically section 241(2)(a), in relation to the fundamental rights guaranteed by the Constitution of India, namely Articles 19 (1), 19 (6) and 32.

By-law No 2, which came into force on 1 January 1950, stipulated that no person could establish a new market or place for wholesale transactions without prior permission from the municipal board, and that no one could sell or display for sale any vegetable, fruit or similar articles at any location other than the place fixed by the board for that purpose. By-law No 4 authorized the board to grant a monopoly to a contractor for dealing in wholesale transactions at the designated market. In anticipation of these by-laws, the municipal board conducted an auction for the exclusive right to carry on the wholesale vegetable trade for a period of three years; the right was awarded to the highest bidder and a specific place was earmarked as the market for such trade.

Rashid Ahmed had been operating a wholesale vegetable business from a rented shop within the municipality for two years before the by-laws became effective. He applied to the board for a licence to continue his business at the same location, but the board rejected his application on the ground that the by-laws contained no provision for issuing such a licence. Consequently, Ahmed was prosecuted for violating the by-law. He then invoked Article 32 of the Constitution, seeking enforcement of his fundamental right to carry on his trade, a right guaranteed by Article 19 (1). The Court held that, because the by-law did not contain any clause authorising the issuance of a licence, the prohibition in by-law No 2 became absolute. Moreover, by granting a monopoly, the board had removed its own authority to issue a licence to the petitioner. Accordingly, the restrictions imposed were not reasonable within the meaning of Article 19 (6), rendering the by-laws invalid and the prosecution illegal.

In its decision, the Court held that the municipal by-laws were void because they lacked any provision permitting the grant of a licence and because the Board had effectively created a monopoly, thereby rendering the restrictions unreasonable under article 19 (6) of the Constitution. Consequently, the prosecution of the petitioner under those by-laws was declared illegal. The Court further observed that the later commencement of the Constitution did not diminish the petitioner’s entitlement to pursue his business, even though the by-laws had been enacted before the Constitution came into force. Moreover, the Court found that an appeal filed under section 318 of the Uttar Pradesh Municipalities Act did not constitute an adequate legal remedy in the circumstances, and the existence of such an appeal could not deprive the petitioner of the right to maintain the present application for enforcement of his fundamental rights.

The matter arose as an original jurisdiction petition numbered X of 1950, filed under article 32 (1) of the Constitution for the enforcement of the petitioner’s fundamental right guaranteed by article 19 (1). The petition was presented on behalf of Rashid Ahmed, an Aratia or commission agent engaged in the wholesale trade of vegetables and fruits in Kairana, a town in Muzaffarnagar district of Uttar Pradesh. Counsel Nur-ud-din represented the petitioner, while counsel Radhelal Agarwala appeared for the opposing party. The Union of India was represented by M.C. Setalvad, Attorney-General, assisted by S.M. Sikri, and the State of Uttar Pradesh was represented by Advocate-General Pearylal Banerji, assisted by Shri Ram. The judgment was delivered by Justice Das on 19 May 1950. The petitioner had been operating his business from a rented shop in Bazar Jama Masjid for two years prior to the enactment of the municipal by-laws. In March 1949, the Municipal Board of Kairana published draft by-laws under section 298 of the Uttar Pradesh Municipalities Act, 1916, which were formally adopted on 19 April 1949 and, after the Commissioner’s confirmation, came into force on 1 January 1950. Anticipating the new regulations, the Board auctioned on 21 May 1949 the contract for wholesale vegetable trade, effectively creating a monopoly. The contract was awarded to Habib Ahmad, the highest bidder, for a term of three years at a total price of Rs 72,750 payable in equal quarterly instalments in advance. On 31 December 1949, the Board notified a location near Police Post Imam as the designated market for wholesale purchase and sale of vegetables and fruits. The petitioner applied for a licence to continue his wholesale Aratia business at his shop, but his application was rejected by the Board’s resolution No 188 dated about 22 December 1949, a decision that was communicated to the petitioner subsequently.

On 9 February 1950 the Municipal Board sent a written communication to the petitioner informing him of the Board’s decision. The communication reproduced the order of the Chairman of the Board, which read: “According to resolution No. 188 dated 22-12-49 the application of Mr. Rashid Ahmed is rejected and he be informed accordingly.” No explanatory remark accompanied the resolution, and the Board did not give any reason for refusing the petitioner’s application for a wholesale licence. The learned counsel for the Board later explained that the application was turned down because, according to the Board, there existed no by-law that permitted the Board to entertain such an application or to grant the licence that the petitioner had prayed for. The counsel further observed that the Board’s earlier auction of the wholesale-vegetable contract to Mr. Habib Ahmad could plausibly have influenced the decision to refuse a licence to the petitioner. Subsequently, on 28 January 1950 the Board served a second notice on the petitioner. The notice contained the following detailed statement: “You are hereby informed that the Municipal Board, Kairana, have given the contract of wholesale purchase and sale of the vegetables, which is in force from the 1st day of January, 1950. It has been repeatedly promulgated, in the city by the beat of drum, through a Khakrob (sweeper) that excepting the contractor of vegetables the Municipal Board, Kairana, nobody shall deal in wholesale purchase and sale of vegetables at a place other than the one approved by the Municipal Board aforesaid (i.e. the place near Police Post Imam). As against this, you in the first place kept selling vegetables by wholesale, at the house near Jama Masjid otherwise known as Qaziwala, despite occasional verbal warnings requiring you to desist therefrom, which were conveyed through an employee of the Board. On your failure to comply, you were warned by a notice in writing, dated the 3rd January, 1950. That notice was duly served on you. But still you paid no heed. Accordingly a complaint was lodged against you, under the bye-laws, quoted above, in the Court of Pargana Officer, Tahsil Kairana. The complaint is still pending. Now you are selling wholesale by auction, vegetable at another place in Jama Masjid Bazar, which is a thoroughfare. Your above conduct is unlawful and in contravention of the Municipal Board's Bye-law 2 pertaining to vegetable contract. Moreover, highly prejudicial as it is to the interests of both the contractor and the Board, you are warned that after this notice has been served on you, you should cease to sell any more vegetable in breach of the bye-laws above mentioned. Herein fail not.”

The notice, however, was characterized by the learned counsel for the Board as disingenuous because, although it suggested that any person could engage in wholesale purchase and sale of vegetables at the place approved by the Board – namely the site near Police Post Imam – the factual position disclosed by the Board’s counsel was that only the appointed contractor, Mr. Habib Ahmad, possessed the authority to conduct wholesale transactions at that location. Consequently, the petitioner was effectively barred from carrying on any wholesale activity either at the designated market or at his own shop, where he had previously been engaged in wholesale trade for two years before the new by-laws became operative. This interpretation meant that the petitioner’s entire wholesale business was stopped and that he faced prosecution for alleged violations of the by-law, despite the notice’s outward implication that the market was open to all traders.

In this case the petitioner was barred from continuing his wholesale vegetable business both at the market that the Municipal Board had designated and at his own shop, where he had openly carried on wholesale operations for two years before the municipal bye-laws became effective. As a result, the petitioner’s entire trade was halted and he faced prosecution for an alleged violation of the bye-laws. The notice that initiated the prosecution was titled “Notice under bye-law 2 of the bye-laws pertaining to contract of vegetables.” Bye-law 2 states: “No person shall establish any new market or place for wholesale transaction without obtaining the previous permission of the Board and no person shall sell or expose for sale any vegetable, fruit, etc., at any place other than that fixed by the Board for the purpose.” The latter clause of the provision appears to allow every individual to conduct business at the location fixed by the Board; however, the Board’s acceptance of a monopoly in favour of the contractor Habib Ahmad, as acknowledged by the respondent Board’s counsel, effectively prevents anyone else from operating at that place. The former clause of the same bye-law expressly forbids the creation of any new wholesale market or shop without the Board’s prior permission, which indicates that the Board retains the authority to sanction new wholesale venues. The petitioner applied for such permission but his request was denied. Although Bye-law 2 remains operative, if the rule requires a licence then, under section 241 (2)(a) of the relevant municipal act, the Board may not refuse a licence except on the ground that the proposed market or shop does not satisfy a condition prescribed by, or under, the Act. It was conceded that the Board’s refusal was not based on any such condition but solely on the absence of any bye-law that authorises the issuance of a licence. Article 19 (1) of the Constitution guarantees every citizen the right to engage in trade or business, subject only to reasonable restrictions enumerated in clause (6). Here, while Bye-law 2 bars the establishment of a wholesale market without Board approval, it contains no provision empowering the Board to grant a licence; consequently, the prohibition imposed by the bye-law becomes absolute in the absence of a licensing mechanism. Moreover, Bye-law 4 creates a monopoly for a designated contractor to carry out wholesale transactions at the market fixed by the Board. By invoking this provision, the Board awarded a monopoly to Habib Ahmad, thereby removing any power to issue a licence to the petitioner for wholesale vegetable trade either at the designated market or at any other location within the municipal limits of Kairana. This situation, the Court observed, exceeds the scope of reasonable restrictions contemplated under clause (6) of Article 19 and thus raises serious constitutional concerns.

In this case, the Court observed that the petitioner was entitled to the freedoms mentioned in clause (6) of Article 19. Consequently, the Court held that the municipal bye-laws, insofar as they restrained the petitioner’s right, would be void under Article 13(1) of the Constitution. The Court further noted that, if no bye-law required the petitioner to obtain a licence, the respondent Municipal Board could not lawfully prevent the petitioner from carrying on his business nor could it prosecute him for the same. Counsel for the respondent Board advanced a weak argument that because the bye-laws had become effective on 1 January 1950, that is, before the Constitution came into force, the petitioner had lost any right to continue his trade and therefore his case was not covered by Article 19(1)(g). The Court found no merit in that submission, observing that even if the argument were sound, Article 19(1)(g) protected only those who were already engaged in business before the Constitution became operative. The Advocate-General of Uttar Pradesh, appearing for the intervener, referred the Court to Section 318 of the Uttar Pradesh Municipalities Act, 1916, and submitted that the petitioner possessed an adequate remedy by way of an appeal, and that the Court therefore should not issue any prerogative writ such as mandamus or certiorari. While the Court acknowledged that the existence of an adequate legal remedy is a relevant consideration in granting writs, it also stressed that the powers conferred on the Court by Article 32 are far broader and are not limited to the issuance of prerogative writs alone. The respondent Board had admitted that it had placed itself out of the power to grant a licence and, given that no specific bye-law authorised the issuance of a licence, the Court concluded that an appeal under Section 318 to the local government that had sanctioned the bye-laws did not constitute an adequate remedy in the present circumstances. Accordingly, the Court was satisfied that the petitioner’s fundamental rights had been infringed and that he was entitled to redress. The appropriate order, the Court held, was to direct the respondent Municipal Board not to prohibit the petitioner from carrying on the trade of wholesale dealer and commission agent of vegetables and fruits within the municipal limits of Kairana, except in accordance with any future bye-laws framed lawfully, and to direct the Board to withdraw the pending prosecution against the petitioner. The Court ordered the respondents to pay the costs of the petitioner and allowed the petition. The agents appearing for the parties were recorded as follows: for the petitioner, Naunitlal; for the opposite party, Tarachand Brijmohanlal; for the Union of India, P A Mehta; and for the State of Uttar Pradesh, Tarachand Brijmohanlal.