CONSTITUTION

AND BUSINESS IN INDIA

IIM Ranchi | LAB

Angshuman Hazarika

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 Definition of Law
Idealistic the standard of what is just and unjust

Command of Sovereign - the aggregate of rules set

Positivistic by man as politically superior, or sovereign, to men
as political subject - Austin
Law is a matter of unconscious and organic growth.
Types of
Historical Law is not universal in its nature. Custom not only
definitions precedes legislation but it is superior to it. Legislation
is the last stage of law making - Savigny
Sociological Law is a social institution to satisfy social wants –
Roscoe Pound

Rule of conduct so established as to justify a prediction

Realistic with reasonable certainty that it will be enforced by the
courts if its authority is changed. - Cardozo
 SOURCES OF LAW

Customs or
customary Law

Judicial Decisions High Courts

or precedents (Art.
141 Constitution)
through Art.
Principal sources of 215 and 227
Law
Statutes or
Legislation

Sources of Law
Personal Laws

Secondary Sources Justice, Equity and

of Law Good Conscience

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Meaning of law- Art. 13(3)(a), Constitution of India-
“law” includes any Ordinance, order, bye-law, rule, regulation, notification, custom or
usage having in the territory of India the force of law;

Rules

Order Regulations

Act Delegated
Legislation

Ordinances
(in
Notifications
Educational
Institutions)

Bye-laws
 Concepts

• Traditionally the concepts have been mixed up

• In recent years, the concept has shifted to:

 “Rules” being made by the Government
 “Regulations” being made the local or implementing authority
 “Orders” issued to communicate decisions
 “Ordinances” issued either by the Governments or by educational institutions

• Exact meaning not set in law

• Meaning of a “rule” present in General Clauses Act, 1897:

“rule” shall mean a rule made in exercise of a power conferred by any enactment, and shall include a Regulation
made as a rule under any enactment
• Section 21 of the General Clauses Act: Power to issue, to include power to add to, amend, vary or rescind
notifications, orders, rules or bye-laws.—If a power to issue orders, rules or bye-laws is conferred, then
that power includes a power, exercisable in the like manner and subject to the like sanction and conditions
(if any), to add to, amend, vary or rescind any notifications, orders, rules or bye-laws
 Background

• Acts frequently talk about the broad aspects of the welfare of people and the legislature
sets the broad provisions and principles

• The legislature gives out powers to the executive to implement the legislation based on
the actual ground scenario.

• The powers are provided to two primary authorities:

a) The Government (State or Central)
b) The implementing authorities

• Purpose of delegated legislation is to provide procedural recommendations for

implementing the legislation

• As of now, delegated legislation has emerged as a prominent mode for governance,

particularly because of the COVD19 crisis.
 Key points to note
• Provision to be provided under an act
• Section of the Parent Act under which the delegated
legislation is made is generally provided before the first
provision
• Generally published through a notification in the Government
Gazette.
• Explanatory notes are also provided under many
rules/regulations. They explain the object of the
rule/notification
• A delegated legislation of a particular type can be issued
only by the organization which has been authorized to do so
under the Parent Act.
 IDEA OF CONSTITUTION
 Why do we need Constitution?
 Can Parliament Function without Constitution? The Parliamentary sovereignty
 Is it a Contract?
 Sovereign Republic
 Democratic
Our Constitution as appears from the Preamble, derives its
authority from the people of India, and learned counsel conceded
that it was open to the people to confer on the legislatures
established by the Constitution, which they framed through
their representatives, power to make laws having operation in
relation to periods prior to the commencement of the
Constitution.
-Union of India v. Madan Gopal, (1954) SCR 541 (655).
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 IDEOLOGY OF CONSTITUTION
 I own Myself.

 No Grass Root Level Participation till 1993 (73rd and 74th Amendment-
Panchayati Raj and Nagar Palika)

 Socialist, Secular (42nd Amendment) and Fundamental Duties.

 Egalitarian Society
 Individual Freedoms
 Social Justice
A Constitution is meant to govern people’s lives, and as people’s
lives keep evolving and changing with the times, so does the
interpretation of the Constitution to keep pace with such
changes.
- Justice K. S. Puttaswamy (Retd.) and Anr. V. Union Of India
And Ors. (2017) 10 SCC 1.

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 PREAMBLE OF CONSTITUTION
 We, the people of India, ……………
 To constitute India into a …………..
 Sovereign, Socialist, Democratic, Republic
 Give to ourselves ………….
It is this declaration that makes our Constitution sublime and it
is the guarantees mentioned in the chapter on Fundamental
Rights that make it one of the greatest charters of liberty and of
which the people, of this country 'may well be proud. This
charter has not been forced out of unwilling hands of a
sovereign like the Magna Carta but it has been given to
themselves by the people of the country through their
Constituent Assembly.
-A.K Gopalan v. State of Madras, AIR 1950 SC 27
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 CONCEPT OF RIGHTS
 Prof. Laski asserts that the “state does not create rights, it only recognizes rights.”

 ICCPR AND ICESCR – 27 March 1979

 Article 32 (Supreme Court) and Article 226 (High Courts) – Writ Jurisdiction. Soul of the Constitution!- Habeas
Corpus, Mandamus, Certiorari, Prohibition and Quo- Warranto.

 Waiver of Fundamental Rights. Can FRs be waived? Basheshar Nath v. Commissioner of Income Tax AIR 1959
SC 149

 Article 13(2) - The State shall not make any law which takes away or abridges the rights conferred by this Part and
any law made in contravention of this clause shall, to the extent of the contravention, be void

 Article 13(4) - Nothing in this article shall apply to any amendment of this Constitution made under Article 368

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 ARCHITECTURE OF CONSTITUTION
448 Articles, 12 schedules and 5 appendices with 104 amendments

Territory

Citizenship

Fundamental Rights

Directive Principles of State Policy

Three wings of Federal Government [Center & State] – Executive, Legislature and Judiciary

Distribution of powers – Legislative, Adminsitrative and Financial powers

Other provisions

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 CONSTITUTIONAL
DOCTRINES
Doctrine of Harmonious Construction
 State of Bihar v Kameshwar Singh 1952 (1) SCR 889
 Article 367(1) – Application of General Clauses Act, 1897

Doctrine of Basic Structure

 Keshvananda Bharati vs State of Kerala, AIR 1973 SC 1461

Doctrine of Pith and Substance

 State of Maharashtra vs F N Balsara AIR 1951 SC 318

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 CONSTITUTIONAL
DOCTRINES
Doctrine of Colorable Legislation
 Balaji vs State of Mysore, [1963] Suppl. 1 S.C.R. 439

Doctrine of Prospective Overruling

 Golaknath vs State of Punjab 1967 AIR 1643

Doctrine of Waiver
 Basheshar Nath v Commissioner of Income Tax, AIR 1959 SC 149

Doctrine of Eclipse
 Bhikaji v/s State of MP 1955 AIR 781

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 Fundamental Rights – Part III – Art. 12 – 35

In Minerva Mills Ltd. v. Union of India, EQUALITY T.R. Kothandaraman v. T.N.

(1980) 3 SCC 625, Chandrachud, C.J., as
he then was, observed:
“ Three Articles of our Constitution, and
only three, stand between the heaven of
freedom into which Tagore wanted his
country to awake and the abyss of
unrestrained power. They are Articles 14,
19 and 21.”
GOLDEN TRIANGLE
Water Supply & Drainage Board,
(1994) 6 SCC 282
“The golden triangle of our
Constitution is composed of
Articles 14, 19 and 21.
Arts. 14, 15, Incorporation of such a trinity in
our paramount parchment is for
16, 17 & 18 the purpose of paving such a path
for the people of India which may
see them close to the trinity of
liberty, equality and fraternity.”

Art.20-30 RIGHT TO
LIFE AND Art.19
PERSONAL FUNDAMENTAL
LIBERTY FREEDOMS

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 EQUALITY
Art. 14 – Equality before Law
Art. 15 – Prohibition of
discrimination on grounds of
religion, race, caste, sex or place 
of birth
Art.16 – Equality of opportunity 
in matters of Public
Employment
Art.17 – Abolition of
Untouchability
Art.18 Abolition of titles
FUNDAMENTAL FREEDOMS
Art.19 which includes
 Art.19(1)(a) -Freedom of speech and
expression
 Art. 19(1) (b) - To assemble peaceably and
without arms
 Art. 19(1) (c) - To form associations or
unions or co-operative societies
Art. 19(1) (d) - To move freely throughout
the territory of India
 Art. 19(1) (e) - To reside and settle in any
part of the territory of India and
Art. 19(1) (g) - To practice any profession
or to carry on any occupation, trade or
business
Art.32 to 35 – Right to Constitutional Remedies
LIFE AND PERSONAL LIBERTY
Arts. 20 – protection in respect of conviction for offences
 Protection against ex-post facto law
 Protection against double geopardy
 Protection against self-incrimination
Art.21 – protection of life and personal liberty
Art.21A – Right to education
Art.22 – Protection against arrest and detention in certain areas
Art.23 & 24 – Right against exploitation
 Art.23 – prohibition of traffic in human beings and forced labour
 Art.24 – Prohibition of employment of children in factories etc.,
Art.25 to 28 – Right to freedom of religion
 Art.25 – Freedom of conscience and free profession, practice and propogation of
religion
 Art.26 – Freedom to manage religious affairs
 Art.27 – Freedom as to payment of taxes for promotion of any particular religion
 Art.28 – Freedom as to attendance at religious instruction or religious workship in
certain educational institutions
Art 29 & 30 – Cultural and Educational Rights
Art. 29 – Protection of interests of minorities
Art.30 – Right of minorities to establish and administer educational institutions
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 Questions to Ponder

Whether a citizen can file Whether

a Writ Petition for violation
Corporations have
of Fundamental Rights
against Public & Private
any fundamental
Corporations? Right?

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 FUNDAMENTAL RIGHTS AGAINST? STATE

• Article 12
• The state includes
 The government and Parliament of India
 The Government and Legislature of each of the States
 All local or other authorities within the territory of India or under the
control of the Government of India

• Rajasthan State Electricity Board v. Mohanlal 1967 SCR (3) 377

 First time, the statutory body performing the commercial activity is
declared to be State under the head other authorities

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 State?
• Sukhdev v. Bhagatram AIR 1975 SC 1331
 Three statutory bodies viz., LIC, ONGC and Finance Corporation, were held to be authorities
 Mathew J., - A public authority is a body which performs public function/sovereign function

• Ramanna D. Shetty v. International Airport Authority AIR 1979 SC 1628

 A corporation which is subject to some constitutional/public law limitations as of government it is instrumentality
of state

• Ajay Hasia v. Khalid Mujib AIR 1981 SC 487

 If the entire share capital of the body is held by the government
 Where the financial assistance given by the government is so large as to meet almost entire expenditure of the
body
 if the body enjoys monopoly status which is conferred or protected by the State
 Deep and pervasive control
 Public function

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 State?
• Pradeep Kr Biswas v. Indian Institute of Chemical Biology (2002) 5 SCC 111
 Cumulative effect test
 The question in each case would be whether in the light of the cumulative facts as established, the body
is financially, functionally and administratively dominated by or under the control of the government.

Can a private company be a state? Writ jurisdiction of high court (Art. 226)may be exercised against private
companies which exercise state function. Binny Ltd. & Anr vs V. Sadasivan & Ors [2005] INSC 401

Can a company claim fundamental rights?

Tata Engineering and Locomotive Co. v. State of Bihar and others 1964 SCR (6) 885
 Associations cannot lay claim to the fundamental rights guaranteed by that Article solely on the
basis of their being an aggregation of citizens.
 Once a company or corporation is formed, the business which is carried on by the said company
or corporation is the business of the company or corporation and is not the business of the
citizens who got the company or corporation formed or incorporated.

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 FUNDAMENTAL RIGHT OF
BUSINESS
 Article 19(1)(g)

All citizens shall have right

 to practice any profession,
 or to carry on any occupation, trade or business

19(6) – Nothing in 19(1)(g) shall

 affect the operation of any existing law
 prevent the state from making any law

Imposing, in the interests of general public

 Reasonable restrictions

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Reasonable restrictions in particular to
 Professional or Technical qualifications necessary for practicing any profession or carrying on any occupation
trade or business
 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 citizens.

Kochuni v. State of Madras, 1960 AIR 1080

 In order to be reasonable the restriction must have a reasonable relation to the object which the legislation
seeks to achieve, and must not go in excess of that object.

Prohibition & Excise Supdt., A.P v Toddy Tappers Co-op. Society, AIR 2004 S.C. 658
 No citizen has got any fundamental right for the trade in liquor and it is for the government to evolve the
excise policy and implement the same in the interest of the public.

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State of Karnataka v. Hansa Corporation. AIR 1981 SC 463
 Restriction may be imposed by any of the authorities who are included in the definition of State in Article 12 and
competent to make a law.

Pathumma v. State of Kerala, AIR 1978 SC 771

 The reasonableness of a restriction has to be determined in an objective manner and the standpoint of the interest of
the general public and not from the point of view of the person upon whom the restrictions are imposed or upon
abstract consideration.

Bank Nationalization case, R.C. Cooper v. Union of lndia, AIR 1970 SC 564
 Though a company has no fundamental right under Article 19, a share-holder and the managing director have the
right under that Article.
The state may enter into trade like any other person either for administrative reasons or with the object of mitigating the
evils in the trade, or even for the purpose of making profits in order to enrich the state exchequer.

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 RIGHTS OF SHAREHOLDER IN CORPORATION – FR?

• Bennett Coleman & Company v. UOI 1973 SCR (2) 757

 Whether a company engaged in newspaper, print media etc., can

have freedom of speech and expression
 Fundamental rights of shareholders as citizens are not lost when they
associate to form a company
 Barring relief to the violation of individual rights of freedom of speech
and expression of editors, directors and share holders, expressed
through newspapers, lead to denial of relief to the shareholders of the
company

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 PART XIII | TRADE, COMMERCE AND INTERCOURSE

Seventh Schedule (Legislative Power Lists)

Union List Entries
 41 – Trade and Commerce with Foreign Countries
 42 – Inter State Trade and Commerce
 43 –Incorporation, regulation and winding up of trading Corporations, including banking,
insurance and financial corporations but not including Co-operative Societies
 44 - Incorporation, regulation and winding up of corporations, whether trading or not,
with objects not confined to one State, but not including universities.
 82 – Taxes on income other than agricultural income
 85 - Corporation tax
 92A – Taxes on the sale purchase of goods other than newspapers in the course of inter
state trade or commerce

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 PART XIII | TRADE, COMMERCE AND INTERCOURSE

Seventh Schedule (Legislative Power Lists)

State List Entries

 26 - Trade and commerce within the State

 53 – Taxes on the consumption and sale of electricity
 54 – Taxes on the sale of petroleum crude, high speed diesel, motor spirit,
natural gas, aviation turbine fuel, and alcoholic liquor for human
consumption, but not including the sale in the course of inter state trade
and commerce (101st Amendment, 2016 - GST)

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 PART XIII | TRADE, COMMERCE AND INTERCOURSE

Seventh Schedule (Legislative Power Lists)

Concurrent List Entries
 33 - Trade and commerce in, and the production, supply and distribution of,-
(a) the products of any industry where the control of such industry by the Union is
declared by Parliament by law to be expedient in the public interest, and
imported goods of the same kind as such products
(b) foodstuffs, including edible oilseeds and oils
(c) cattle fodder, including oilcakes and other concentrates
(d) raw cotton, whether ginned or not ginned, and cotton seed;
(e) raw jute.

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 PART XIII | TRADE, COMMERCE AND INTERCOURSE

• Article 301
• Subject to other provisions of this part, trade, commerce and intercourse,
throughout the territory of India, shall be free.

• Article 302
• Parliament may by law impose such restrictions on freedom of trade,
commerce or intercourse between one state and another or within any
part of the territory of India as may be required for the public interest.

No reasonable in Art. 302.

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 PART XIII | TRADE, COMMERCE AND INTERCOURSE

State of Madras v. Nataraja Mudaliar 1968 SCR (3) 829

This judgement gave the widest flexibility to the words of Art. 302 and
observed that the power conferred on Parliament is extremely wide and the
only limitation placed on that power by Art. 302 is that the law in question
must be required in the public interest.

He further observed that the decision of Parliament is difficult to be

challenged as it is presumed to know the needs of the people, the
requirement of the time and the economic and political interest of the
country as a whole.

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 Atiabari Tea Co. v. State of Assam, AIR 1961 SC 232

 A tax levied by the State of Assam on the carriage of tea by road or inland waterways was
held bad for "the transport or movement of goods is taxed solely on the basis that the goods
are thus carried or transported, and thus "directly affects the freedom of trade as
contemplated by Art. 301.“

 The Supreme Court took the view that the freedom guaranteed by Art. 301 would become
illusory if the movement, transport, or the carrying of goods were allowed to be impeded,
obstructed or hampered by the taxation without satisfying the requirements of Art. 302 to 304.

 The view propounded in Atiabari was bound to have great adverse effect upon the financial
autonomy of the states. It would have rendered their taxing power under entries 56 and 57,
List II.

Accordingly, the matter came to be re-considered by the Supreme Court in Automobile Case.

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 Automobile Transport (Raj) Ltd. and ors. Vs. State of Rajasthan

1963 SCR (1) 491

S. 4 (1) of the Rajasthan 'Motor Vehicles Taxation Act, 1951, provided
: "...... No motor vehicle shall be used in any public place or kept for use in Rajasthan unless the owner thereof
has paid in respect of it, a tax at the appropriate rate specified in the schedule 5 to this Act within the time
allowed......." s (Rs. 60 on a motor car and Rs. 2000 on a goods vehicle per year)

 Art. 301 should not unduly cripple state autonomy, and that it should be consistent with an orderly society,
the Supreme Court now ruled that regulatory measures and compensatory taxes for the use of trading
facilities were not hit by Art. 301 as these did not hamper, .but rather facilitated, trade, commerce and
intercourse.

 A working test to decide whether a tax is compensatory or not would be to enquire whether the trades
people are having the use of certain facilities for the better conduct of their business and paying not
patently much more than what is required for providing the facilities? A tax does not cease to be
compensatory because the precise or specific amount collected is not actually used in providing facilities.

 The concept of compensatory tax evolved in this case was something new as in Atiabari, the court had
dismissed the argument that the money realized through the tax would be used to improve roads and
waterways

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 PART XIII | TRADE, COMMERCE AND INTERCOURSE

Article 303 Exception to Exception

Restrictions on the legislative powers of the Union and of the States with regard to
trade and commerce
(1) Notwithstanding anything in Article 302, neither Parliament nor the Legislature of
a State shall have power to make any law giving, or authorising the giving of,
any preference to one State over another, or making, or authorising the making
of, any discrimination between one State and another, by virtue of any entry
relating to trade and commerce in any of the Lists in the Seventh Schedule
(2) Nothing in clause ( 1 ) shall prevent Parliament from making any law giving, or
authorising the giving of, any preference or making, or authorising the making
of, any discrimination if it is declared by such law that it is necessary to do so for
the purpose of dealing with a situation arising from scarcity of goods in any part
of the territory of India

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 PART XIII | TRADE, COMMERCE AND INTERCOURSE

• Article 304
Restrictions on trade, commerce and intercourse among States
Notwithstanding anything in Article 301 or Article 303, the Legislature of a State may by law
a) impose on goods imported from other States or the Union territories any tax to which
similar goods manufactured or produced in that State are subject, so, however, as not
to discriminate between goods so imported and goods so manufactured or produced;
and
b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse
with or within that State as may be required in the public interest:

Provided that no Bill or amendment for the purposes of clause shall be introduced or
moved in the Legislature of a State without the previous sanction of the President.

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 Comparative Analysis of
Art 302 and Art 304 (b) and Art 301 and Art 303

Art 302 Art 304 (b)

Power of Parliament
Restriction – In Public Interest
No Previous Sanction of President
Art 301
Power of State Legislature
Restriction - Reasonable and in Public
Interest
Previous Sanction of President
required before bill or amendment
Art 303 (1)

Trade, Commerce shall be free – No discrimination between states or

General and Wide Interpretation preference to any State – Specific
Application
Restriction – In Public Interest under Restriction - Art 303 (2)
Art 302 and Reasonable also under Situation arising from scarcity of
Art 304 (b) goods
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 PART XIII | TRADE, COMMERCE AND INTERCOURSE

• Article 305

• Saving of existing laws and laws providing for State monopolies

• Nothing in Articles 301 and 303 shall affect the provisions of any existing
law except in so far as the President may be order otherwise direct; and
nothing in Article 301 shall affect the operation of any law made before
the commencement of the Constitution (Fourth Amendment) Act, 1955 ,
in so far as it relates to, or prevent Parliament or the Legislature of a State
from making any law relating to, any such matter as is referred to in Art
19(6)(ii) (State Monopoly – exclusion of citizens)

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 THANKS

• Angshuman Hazarika
• angshuman.hazarika@iimranchi.ac.in

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