Seervai FreedomTradeCommerce 1963

The Freedom of Trade and Commerce in the Indian Constitution: The Atiabari Case and
after
Author(s): H. M. Seervai
Source: The Cambridge Law Journal , Apr., 1963, Vol. 21, No. 1 (Apr., 1963), pp. 54-84
Published by: Cambridge University Press on behalf of Editorial Committee of the
Cambridge Law Journal
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THE FREEDOM OF TRADE AND COMMERCE
IN THE INDIAN CONSTITUTION
The Atiabari Case and after
H. M. SEERVAI *
INTRODUCTORY
Now that the Supreme Court of India has reconsidered its earlier
judgment in Atiabari Tea Co., Ltd. v. The State of Assam 1 in
Automobile Transport (Rajasthan), Ltd. v. State of Rajasthan 2
it would not be inappropriate to attempt a brief critical and ana-
lytical account of the two judgments and of the problem of the
freedom of trade, commerce and intercourse within the territory of
India with which they deal. As will presently appear the task is
not easy, first, because the drafting of the articles in Part XIII of
the Constitution leaves much to be desired and, secondly, because
the wide diversity of judicial opinion disclosed in the Atiabari and
the Rajasthan cases does not make the task of the commentator
any easier.
Before considering the two judgments it is necessary to say that
the basic scheme of federal government in the Constitution of India
has been taken over from the Government of India Act, 1935, so
much so that the Supreme Court has held that " the provisions of
the Constitution must accordingly be read in the light of the provi-
sions of the Government of India Act." 3 Now the Government of
India Act had no legislative entry relating to inter-state 4 trade a
commerce in any of the legislative lists of the Seventh Schedule
However, the freedom of trade and commerce between the Pro-
vinces 4 of British India was secured by enacting section 297 whic
prohibited certain restrictions on internal trade, and was as follow
* Advocate-General of Bombay. A book by Mr. Seervai entitled Constitution

Law of India is to be published by N. M. Tripathi, Ltd. next year [Ed.].
1(1961) 1 S.C.R. 809.
2 A.I.R. 1962 S.C. 1406.
a M. P. V. Sundararamier v. The State of Andhra Pradesh, 1958 S.C.R. 1422 at
p. 1478.
4 The student should bear in mind the different senses of the word " state."
Before independence it was used chiefly to denote the Native or Princ
States (subsequently termed Indian States or Part B States), to which the t
Provinces of India were contrasted. After independence it refers to the c
stituent parts of the Union of India, which correspond in status with
abolished Provinces. [Ed.]
54

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C.L.J. Freedom of Trade in the Indian Constitution 55
Prohibition of certain restrictions on internal trade

297 (1) No Provincial Legislature or Government shall
(a) by virtue of the entry in the Provincial legislative list relating to
trade and commerce within the Province, or the entry in that list
relating to the production, supply and distribution of commodities,
have power to pass any law or take any executive action prohibit-
ing or restricting the entry into, or export from, the Province of
goods of any class or description; or
(b) by virtue of anything in this Act have power to impose any tax,
cess, toll, or due which, as between goods manufactured or pro-
duced in the Province and similar goods not so manufactured or
produced, discriminates in favour of the former, or which, in the
case of goods manufactured or produced outside the Province,
discriminates between goods manufactured or produced in one
locality and similar goods nlanufactured or produced in another
locality.
(2) Any law passed in contravention of this section shall, to the extent
of the contravention, be invalid.5
In the Constitution of India " Inter-State Trade and com-

merce " became a topic of legislation in the Union List (En
List 1, Seventh Sched.). When it came to the freedom of t
commerce one would have thought that section 297 was re
hand and could be adapted with necessary alterations. U
nately the framers of the Constitution turned to section 9
Australian Constitution and used words which appeared to
language, or rather the emotional appeal of the slogan emb
it.6 This desire to retain the emotional appeal of section 9
hand in hand with a desire to alter the substance of section 92
beyond recognition, with the result that articles 801 to 306 ha
given rise to problems as intractable as those under section 92
to a similar diversity of judicial opinion.
It is now necessary to set out the provisions of articles 301
806 which were considered in the Atiabari and the Rajasthan ca
Freedom of trade, commerce and intercourse
301. Subject to the other provisions of this Part trade, commerce an
intercourse throughout the territory of India shall be free.
Power of Parliament to impose restrictions on trade, commerce and

intercourse
302. Parliament may by law impose such restrictions on the freedom

of trade, commerce or intercourse between one State and another or within
any part of the territory of India as may be required in the public
interest.
5 For the interpretation put upon s. 297 by the Federal Court see p. 74, post,
note 77.
6 The first paragraph of s. 92 " reads more like a slogan than as part of a legal
document, and as a slogan it was defended against an attempt in 1937 to alter
the Constitution. . . . No section in the Constitution has given rise to so
many and such persistent differences of judicial opinion. No other section is
so obviously in need of alteration ": Nicholas, The Australian Constitution,
3rd ed. at p. 250.

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56 The Cambridge Law Journal [1968]
Restriction of legislative powers of the Union and States with regard to

trade and commerce
303. (1) Notwithstanding anything in article 302, neither Parliam

nor the Legislature of a State shall have power to make any law gi
or authorising the giving of, any preference to one State over anoth
making, or authorising the making of, any discrimination betwee
State and another by virtue of any entry relating to trade and comm
in any of the Lists in the Seventh Schedule.
(2) Nothing in clause (1) shall prevent Parliament from makin
any law giving, or authorising the giving of, any preference or maki
authorising the making of, any discrimination if it is declared by
law that it is necessary to do so for the purpose of dealing with a si
tion arising from scarcity of goods in any part of the territory of
Restrictions on trade, commerce and intercourse among States

304. Notwithstanding anything in article 301 or article 303, the L
lature of a State may by law-
(a) impose on goods imported from other States (or the Union t
tories) any tax to which similar goods manufactured or prod
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, com-
merce 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 (b)
shall be introduced or moved in the Legislature of a State without the
previous sanction of the President.
Effect of articles 301 and 303 on existing laws

305. Nothing in articles 301 and 303 shall affect the provisions of any
existing law except in so far as the President may by order otherwise
direct; and nothing in article 801 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 Legis-
lature of a State from making any law relating to any such matter as is
referred to in sub-clause (ii) of clause (6) of article 19.
Power of certain States in Part B of the First Schedule to impose restric-

tions on trade and commerce
306. Notwithstanding anything in the foregoing provisions of

Constitution, any State specified in Part B of the First Schedule whi
before the commencement of this Constitution was levying any tax o
on the import of goods into the State from other States or on the e
of goods froIn the State to other States may, if an agreement in that
behalf has been entered into between the Government of India and the
Government of that State, continue to levy and collect such tax or du
subject to the terms of such agreement and for such period not excee
ten years from the commencement of this Constitution as may be spec
in the agreement:
Provided that the President may at any time after the expiration
five years from such commencement terminate or modify any such ag
ment if, after consideration of the report of the Finance Commis
constituted under article 280, he thinks it necessary to do so.7
Art. 306 was repealed by the Constitution (Seventh Amendment) Act, 1956.

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THE ATIABARI CASE
In the Atiabari case two of the appellants carried on the trade of

growing tea in Assam and the third appellant carried it on in
Bengal. The appellants carried their goods to Calcutta for sale in
the Calcutta market. A substantial quantity of tea had to go by
road or inland waterways and as such it became liable to pay the
tax leviable under the Assam Taxation (on Goods carried by Roads
and Inland Waterways) Act, 1954. The appellants challenged the
validity of the Act on the ground that it violated article 301 and
was not saved by article 304 (b) of the Constitution. By a
majority of four to one the challenge was upheld and the Act was
declared to be void. Sinha C.J., who dissented, held that taxation
simpliciter, as opposed to discriminatory taxation, was not within
article 301. This view was rejected in the Rajasthan case; but in
the opinion of the present writer the conclusion of Sinha C.J. is
correct. It is not proposed to consider his judgment further,
because, with great respect, its conclusion cannot be supported by
the principal line of reasoning there adopted,8 although it can be
supported on very different grounds.
General Considerations in the Majority Judgment

Gajendragadkar J. delivered the majority judgment for himself,
Das Gupta and Wanchoo JJ. He said that the problem raised by
the rival contentions before the court could be solved by adopting
a reasonable construction of the articles in Part XIII; but before
attempting that task it was necessary to advert to certain general
considerations. These fall into three parts: first, the political and
constitutional background; secondly, the economic background and,
lastly, the impact which the court's decision may have on the
legislative powers of the states.
As regards the political and constitutional background Gajen-
dragadkar J. referred to the customs barriers which the Indian
States had erected between themselves and the rest of India. After
observing in passing that " in the matter of such barriers British
India was governed by the provisions of section 297 of the Govern-
ment of India Act, 1935," 9 he said:
8 The chief argument of the judgment is that Part XII (which broadly speaking
contains provisions relating to the finances of the Union and of the states and
their inter-relation and adjustments), like Part XII, is also not subject to
the other provisions of the Constitution. Therefore, both Parts are meant to
be self-contained in their respective fields. Since Part XII contains art. 265,
which prohibits the levy or collection of a tax without the authority of law, all
that is required is a law authorising taxation. The judgment, however, over-
looks the fact that art. 265 must be read with art. 245, as pointed out by
Gajendragadkar J. in the same case. See p. 68, post. Whether on an
interpretation of art. 301 a tax is included in art. 301 is a different matter.
9 (1961) 1 S.C.R. 809 at p. 843.

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"It is with the knowledge of the trade barriers which had been raised
by the Indian States in exercise of their legislative powers that the Con-
stitution makers framed the articles in Part XIII. The main object of
article 301 obviously was to allow the free flow of the stream of trade,
commerce and intercourse." 10
As regards the economic background, he observed that th

framers of the Constitution were aware that economic unity was
absolutely essential to the stability of the Indian Federation, and
that political freedom and unity must be strengthened by economi
unity. The object of Part XIII was to avoid local pulls and pres
sures leading to the adoption of economic measures for the benefi
of regional interests without regard to the interests of the whole
country. Free movement and exchange of goods throughout India
was essential for the economy of the nation and for sustaining and
improving the living standards of the country. Article 301
enshrined the paramount principle that the economic unity of India
would sustain the stability and progress of the political and cultural
unity of India."
As regards the impact of the court's decision on the legislative
powers of the states, it had been argued that if the words of article
301 received the widest interpretation contended for by the appel-
lants it would obviously mean that the State legislatures would not
be able to legislate on several entries in the State List without
adopting the procedure prescribed by article 804 (b) and such a
limitation of the states' power must be considered unreasonable.
On this argument Gajendragadkar J. said:
"... it may be assumed that in interpreting the provisions of article
301 and determining the scope and effect of Part XIII we should bear in
mind the effect of our decision on the legislative power of the States and
also of Parliament." 12
Interpretation of Part XIII in the Majority Judgment

Gajendragadkar J. then rejected the argument that tax laws were
wholly outside Part XIII and were not subject to judicial review.'8
He held that the power of taxation was not per se outside the pu
view of constitutional limitations 14 because, though article 2
required the authority of law for the imposition and levy of taxes
such law could only be enacted by virtue of the power to mak
laws conferred by article 245, which opened with the words " su
ject to the provisions of this Constitution," and as article 801 was
10 Ibid. p. 843.
n Ibid. pp. 843-844.
12 Ibid. p. 845.
is This argument had been urged by the Attorney-General who appeared for t
Union of India (which had intervened) and the State of Assam.
14 Ibid. p. 846.

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one such provision tax laws were subject to it. He rejected the
contention that in substance the content of article 801 was the same
as that of section 297 of the Government of India Act, 1935,
observing:
". .. we feel considerable hesitation in accepting the view that the
makers of the Constitution did not want to enrich and widen the content
of freedom guaranteed by section 297. They knew that the Constitution
would herald a new and inspiring era in the history of India and they
were fully conscious of the importance of maintaining the economic unity
of the Union of India in order that the federal form of government
adopted by the Constitution should progress in a smooth and harmonious
manner. That is why we are inclined to hold that the broad and unam-
biguous words used in article 301 are intended to emphasise that the free-
dom of trade, commerce and intcrcourse guaranteed was richer and wider
in content than was the case under section 297; . . " 1
Gajendragadkar J. observed that in interpreting the articles

Part XIII it was necessary to examine the Scheme of Part XI
It was clear that article 301 dealt not only with inter-state trad
commerce and intercourse but with intra-state trade, commerce a
intercourse-articles 302 and 804 (b) supported that constructi
As the case before the court was concerned with " trade " it was
unnecessary to consider " commerce and intercourse." Further
was unnecessary to consider the ambit of " trade," for whethe
was widely or narrowly construed " movement from place to p
is the very soul of trade." 16 When article 301 referred to freed
of trade the question naturally arose " freedom from what? "
the answer had to be " freedom from all restrictions except th
which are provided by the several articles in Part XIII." 17 Art
302 was held to be an exception to article 301 for it enabled Pa
ment to impose restrictions on the freedom of trade both intr
state and inter-state. Article 803 (1) was an exception to ar
302.18 Article 301 was not limited to the entries in the legislat
lists relating to trade and commerce to which article 803 (1) expr
refers.19 As regards article 304 it was held that while artic
15 Ibid. p. 852. The words " the broad and unambiguous provisions of art.
in the above passage may be contrasted with the description of those words
" very wide, and in a sense vague and indefinite " at p. 859 in dealing w
the interpretation of art. 301; and with the description of art. 301 as " a
stitutional provision which is none-too-clear or lucid" at p. 868 in justify
the discussion of Australian cases on s. 92 of the Australian Constitution.
16 Ibid. p. 853.
17 Ibid. p. 853.
1i "It is obvious that the reference to the Legislature of the State in this clause
cannot be reconciled with the non obstante clause; but the object of including
the Legislature of a State appears to be to emphasise that like Parliament
even the Legislature of a State cannot give any preference or make any
discrimination ": ibid. p. 854.
19 " There is some force in this contention; but on the whole we are not prepared
to hold that the reference to the said entries should govern the construction of
art. 301. The setting in which the said entries are referred to would of course
determine the scope and extent of the prohibition prescribed by art. 303 (1);

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804 (a) assumed that non-discriminatory taxes could be levied by

the states, article 804 (b) indicated how they were to be levied.
"The non obstante clause referring to article 801 could go with
article 804 (a), and that indicates that tax on goods would not
have been permissible but for article 804 (a) with the non obstante
clause." 20 As regards article 804 (b) " The reference to article 803
in the non obstante clause has presumably been made as a matter
of abundant caution as the legislature of a state has been included
in article 803 (1)." 21 Article 806 which was repealed in 1956
supported the view that tax laws were included in article 801.22
On examining the provisions of Part XIII as a whole, and the
principle of economic unity they were intended to safeguard, Gajen-
dragadkar J. held that the freedom guaranteed by article 801 was
larger than the freedom contemplated by section 297 of the Govern-
ment of India Act. Article 801 had in mind the movement or
transport part of trade. If the transport or movement of good
taxed solely because the goods were so moved or transported,
a tax directly affected the freedom of trade; and if such a tax
be imposed without complying with article 304 (b) the freedo
trade guaranteed by article 801 would be illusory.23
Having stated that there was intrinsic evidence in some of
articles in Part XIII to show that tax laws were included in article
801 he observed that this did not mean that all tax laws would
attract the provisions of Part XIII. A realistic approach m
adopted in interpreting article 801 which was part of a federa
stitution. Article 801 enacted a constitutional limitation but for
which taxation would be presumed to be for the public good. B
though taxes may and do amount to restrictions, it is only
taxes as directly and immediately restrict trade that fall with
article 801.24
The Decision in the Atiabari Case
Applying this test to the impugned Act, Gajendragadkar J. held

that:
but that cannot be pressed into service in determining the scope of art. 301
itself. It is significant that art. 303 (1) does not refer to intercourse and in
that sense intercourse is outside its sphere. It is likely that having authorised
Parliament to impose restrictions by art. 302 it was thought expedient to
prohibit expressly the said power of imposing restrictions from being used for
the purpose of giving any preference in sB far as the relevant entries are
concerned. It may also be that the primary object of confining the operation
of art. 303 (1) to the said entries was to introduce a corresponding limitation
on the power of Parliament to discriminate under art. 302 ": ibid. p. 865.
20 Ibid. p. 856.
21 Ibid. p. 857.
22 Ibid. p. 858.
23 Ibid. pp. 858-859.
24 Ibid. p. 860.

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"... the restriction placed by the Act on the free movement of goods
is writ large on its face. ... it may be that one of the objects in passing
the Act was to enable the State Government to raise money to keep its
roads and waterways in repairs; but ... if the said object is intended to
be achieved by levying a tax on the carriage of goods it can be so done
only by satisfying the requirements of article 304 (b)." 25
As the Act did not comply with article 804 (b), nor with article 255,
it was held void.26 The majority judgment found its conclusions
supported by two judgments of the Privy Council 27 on section 92
of the Australian Constitution.
The " Widest View " in the Atiabari Case
In his concurring judgment Shah J. expressed the view that the

freedom contemplated by article 801 was freedom of trade, com-
merce and intercourse in all their varied aspects inclusive of all
activities which constitute commercial intercourse and not merely
restrictions on the movement aspect:
"What is guaranteed is freedom in its widest amplitude-freedom
from prohibition, control, burden or impediment in commercial inter-
Course." 28
This view, which has been described as the widest view of article
301, was rejected by all the judgments in the Rajasthan case, and
it is respectfully submitted, rightly rejected. It is not proposed to
deal further with this view except to the extent that it is the
subject of comment and criticism in the judgments in the Rajasthan
case.
THE RAJASTHAN CASE
The impact of the Atiabari case on the taxing powers of the states
was so grave that when three appeals from Rajasthan, which were
pending before the Supreme Court, and which would have been
concluded against the state by the Atiabari judgments, came before
a Constitution Bench of the Supreme Court, the matter was referred
to a larger bench of seven judges so that the Atiabari case could be
reconsidered. The Rajasthan case was accordingly heard by a
25 Ibid. p. 863.
28 Art. 255 provides in effect that if the previous sanction required by the Con-
stitution is not given subsequent assent by the authority whose previous
sanction was required is sufficient.
27 1. James v. The Commonwealth of Australia [1936] A.C. 578 at p. 613 showed
that the imposition of tolls, railway rates and so forth might impede the
freedom of trade contemplated by s. 92, " which in other words supports our
conclusion that a tax may amount to a restriction under art. 301." (Ibid.
p. 869.)
2. Commonwealth of Australia v. Bank of New South Wales [1950] A.C.
235 at p. 313. The test laid down by Lord Porter at p. 313 justifies the
conclusion we have reached about the scope and effect of art. 301." (Ibid.
p. 870.)
28 (1961) 1 S.C.R, 809 at p. 874.

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bench of seven judges none of whom had been a party to the

Atiabari judgments.29
The appellants in the Rajasthan case carried on the business of
plying stage carriages in Ajmer, which business was inter-state as it
involved the carriages passing through certain narrow strips
through the territory of Rajasthan. On the passing of the
Rajasthan Motor Vehicles Taxation Act, 1951, and the promulga-
tion of the rules made thereunder, the second respondents
demanded of the appellants payment of the tax due on their motor
vehicles. The appellants filed writ petitions in the High Court of
Rajasthan challenging the validity of the Act on the ground, among
others, that it violated article 301. When a Full Bench of the High
Court heard the petitions, the Atiabari case had not been decided,
and the High Court dismissed the petitions. The petitioners
appealed to the Supreme Court which by a majority of four to three
upheld the validity of the impugned Act. Das J. delivered a judg-
ment for himself, Kapur and Sarkar JJ. in what can be described
as the leading majority judgment; Subba Rao J. delivered a separ-
ate judgment concurring with Das J., Hidayatullah J. delivered a
dissenting judgment for himself, Rajagopala Ayyangar and
Mudholkar JJ.
Its Impact on the Atiabari Decisions

In the opinion of the writer, on the issue common to the Rajasthan
and the Atiabari cases, the majority judgments in the Rajasthan
case in effect overruled the view of Gajendragadkar J. that if states
wanted to raise moneys to keep their roads in repair by levying a
tax on the carriage of goods that could only be done by satisfying
the requirements of article 804 (b).30 Das J. said:
"The interpretation which was accepted by the majority in the
A tiabari Tea Co. Case (1961) 1 S.C.R. 809: (A.I.R. 1961 S.C. 232) is
correct, but subject to this clarification. Regulatory measures or mea-
sures imposing compensatory taxes for the use of trading facilities do no
come within the purview of the restriction contemplated by article 301
and such measures need not comply with the requirements of the proviso
to article 304 (b) of the Constitution." 31
The word " clarification " may be dictated by judicial courtesy

but it cannot disguise the fact that the " clarification " in effect
overrules the main position of the majority judgment in the Atia
bari case. This judicial courtesy has the unfortunate consequen
of overlooking the fact, which will appear in the course of th
20 In the opinion of the present writer the reference to an entirely new benc
constitutes a very healthy precedent. If judgments are to be reconsidered it is
desirable that fresh minds should be brought to bear on that task.
30 See p. 61, ante.
31 A.I.R. 1962 S.C. 1406 at p. 1424, para. 17; Subba Rao J, concurred.

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article, that the clarification is not limited in the manner indicated

by Das J., for the interpretation put by him (and by Subba Rao J.)
on the words used in several articles in Part XIII in effect overrules
the interpretation put on those words in the majority judgment in
the Atiabari case.32
The Leading Judgment in the Rajasthan Case: General

Considerations
In the Rajasthan case, after setting out the three views expressed
in the three Atiabari judgments, Das J. considered the historical
background of Part XIII. He said that the Constitution of India
did not start with a clean slate, for the Government of India Act,
1935, had enacted a Federal Constitution which was in force when
the Constitution was framed. The unequal economic development
of different Provinces, and the problem of the economic unity of
India confronted the Constitution makers. Besides, there were the
trade barriers erected by the Indian States which had merged into
India and some provision had to be made for them.
"... one question was how to achieve a federal economic and fiscal
integration, . . . The second question was how to foster the development
of areas which were under-developed without creating too many prefer-
ential or discriminative barriers." 33 . . . "The evolution of a federal
structure or a quasi-federal structure necessarily involved in the c
of the conditions then prevailing a distribution of powers and a b
of our Constitution relates to that distribution with the three leg
lists in the Seventh Schedule. The Constitution itself says by a
that India is a Union of States and in interpreting the Constitu
must keep in view the essential structure of a federal or a quasi-f
Constitution, namely, that the units of the Union have also certain
as has the Union itself." 34
Das J. then stated the objectives of the Constitution makers th

"It has been often stated that freedom of inter-state trade and com-
merce in a federation has been a baffling problem to constitutional expert
in Australia, in America and in other federal constitutions. In evolving
an integrated policy on this subject our constitution-makers seem to have
kept in mind three main considerations which may be broadly stated thus:
first, in the larger interests of India there must be free flow of trade
commerce and intercourse, both inter-State and intra-State; second, the
regional interests must not be ignored altogether; and third, there mus
be a power of intervention by the Union in any case of crisis to deal with
particular problems that may arise in any part of India. As we shall
presently show all these three consideration have played their part in the
32 See p. 78, post, note. 92.

83 A.I.R. 1962 S.C. at pp. 1415, 1416.
s4 Ibid. pp. 1415, 1416. In this context Das J. observed that one of the com
plaints made before them against the Atiabari judgments was that in inter-
preting Part XIII sufficient importance had not been given to the power of
the states to raise revenues by taxes under the legislative heads entrusted to
them by the Constitution. (Ibid. p. 1416.)

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series of articles which we have to consider in Part XIII of the

Constitution." 85
And he added that Part XIII must be interpreted having regard to

the scheme of the Constitution with special reference to Part III
(Fundamental Rights), Part XII (Finance, Property, etc.) and in
the context of a federal constitution in which the states have certain
legislative powers including those of taxation.
The " Widest View " of Part XIII Rejected

Das J. then considered the view of article 301 taken by Shah J. in
the Atiabari case. That view, according to Das J., was based
solely on a textual interpretation of Part XIII which was perhaps
correct as far as it went. But even in the matter of textual inter-
pretation there were difficulties. The first difficulty was created
the inappropriate use in Part XIII of the expressions " subject to
and" notwithstanding." In fact " there is such a mix up of excep
tion upon exception in the series of articles in Part XIII tha
purely textual interpretation may not disclose the true intendme
of articles." 36 This did not mean that the text of the articles was
not important; but it did mean that the text should be interpret
as forming part of a Constitution which was an integrated whole
Secondly, even textually the true meaning of " free " had to
ascertained " as the language employed in article 301 runs unqua
fied, the court bearing in mind the fact that the provision has to
applied in the working of an orderly society has necessarily to
qualifications subject to which alone that freedom may be ex
cised." 38 That qualification is that regulation of trade and comme
does not restrict that freedom nor do compensatory taxes, thou
unreasonable regulation and unreasonable taxes may do so. " I
here that the contrast between freedom (article 301) and restric
tions (articles 802 and 804) clearly appears: that which in real
facilitates trade and commerce is not a restriction, that which i
reality hampers and burdens trade and commerce is a restri
tion." 39
But the most serious objection to the widest view, namely,

that taken by Shah J. was that it would render meaningless the
85 A.I.R. 1962 S.C. at p. 1416. The above passage appears to have adopted the
views of Sir Alladi Krishnaswami Ayyar, an eminent lawyer and a member
of the drafting committee: see the Constituent Assembly Debates, Vol. IX,
p. 1141.
Bs A.I.R. 1962 S.C. at p. 1419.
87 Ibid.
38 Ibid.
39 Ibid. p. 1420. The restrictions involved in this qualification are irrespective of
the restrictions imposed by the other articles of Part XIII. (Ibid., p. 1420.)

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plenary powers of taxation and regulation conferred by the Consti-

tution on the states, and therefore Das J. rejected that view.40
The Decision in the Leading Judgment

He also rejected the narrow view of article 301, namely, " that
taxation simpliciter is not within the terms of article 801 and that
article 801 must take its colour from the provisions of article 803,
which it is said, is restricted to legislation with respect to entries
relating to trade and commerce in any of the Lists of the Seventh
Schedule." As he was in substantial agreement with the reasons
given by the majority judgment in the Atiabari case for rejecting
this narrow view he found it unnecessary to repeat them.41
Das J. stated his conclusion in the passage cited earlier in which
he accepted the majority judgment in the Atiabari case as correct
with the clarification there mentioned.42 As the provisions of the
impugned Act fell within the ambit of the clarification, the Act
was upheld although it had not complied with the requirements of
article 804 (b) or of article 255.
The decision of Das J. did not require a textual interpretation
of articles 802-304, since he held that independently of the ambit
of the restrictions expressly permitted by articles 802-304, compen-
satory taxes were not restrictions at all. But a reference to pages
1418, 1419 of the Report 43 shows that he did give such an interpre-
tation " with the result that his interpretation read with the
judgment of Subba Rao J. displaces the interpretation of several
articles in Part XIII given by Gajendragadkar J. in the majority
judgment in the Atiabari case.45
Subba Rao J. in his concurring judgment gave a careful
interpretation of the text of the articles and reference to it
will be made later. The dissenting judgment of Hidayatullah J.
gave a detailed historical background of Part XIII and a detailed
textual examination of the articles therein. He held that a tax
on vehicles was a direct impediment to the freedom of t
guaranteed by article 301, and that in any event it was not p
to look upon the taxes imposed by the impugned Act as
compensatory taxes.
40 Ibid. p. 1420.
41 Ibid. p. 1422.
42 See p. 62, ante.
43 A.I.R. 1962 S.C. 1406.
44 At a first glance it might appear that he was merely stating the inte
given by Shah J. but a comparison of the two judgments shows t
not so.
45 See p. 78, and note 92, post.
c..IJ.-3

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THE EFFECT OF THE TWO CASES
A full account has been given of the Atiabari and Rajasthan cases
because an authoritative statement of the law on Part XIII has
to be ascertained from them. Is it possible to say what is th
relating to the freedom of trade, commerce and intercours
the Constitution of India as interpreted by the Supreme
Except to a limited extent 46 the answer must be in the neg
This is partly due to the fact that a court will not ordin
decide more than is required by the case before it and
to the mode of approach adopted in these two cases. The
of approach will be considered presently, but it can be sa
that the Rajasthan case marked a great advance over the Ati
case because it gave due weight to the plenary powers of
Legislatures, and as a consequence applied the principle
the Privy Council had applied in interpreting the Canadian
Constitution, namely, that an interpretation which would practi-
cally destroy the autonomy of the Provinces must be rejected
in favour of an interpretation which would preserve it.47
Mode of Approach in Interpreting Part XIII Criticised

However, it is respectfully submitted that the mode of approach
to the interpretation of Part XIII adopted by the majority judg-
ment in the Atiabari case and by all the judgments in the Rajasthan
case is open to serious objection. It has been held that the
Constitution is to be interpreted on well settled principles of
construction 48 and the most important of these principles is that
the " intention " of a statute is to be gathered from the words
used, and where words in their ordinary and natural meaning are
clear and unambiguous effect must be given to them unless there
are compelling reasons to the contrary.49 If, however, the words
are ambiguous, well known extrinsic aids to construction can
be invoked to ascertain the appropriate meaning. These are:
the light thrown by other parts of the enactment, the previous
state of the law and, the mischief which the new enactment was
46 The majority judgments show that regulatory laws, such as those prescri
the rule of the road, and compensatory taxes, such as taxes exacted for
maintenance of roads, the building of bridges and the like are outside art. 3
and to that extent the law is settled. But beyond that lies the great unknow
47 Att.-Gen. for Ontario v. Att.-Gen. for the Dominion [1896] A.C. 348 at
360, 361.
4 " It is therefore clear that the court should construe the language of art. 13
according to established rules of interpretation and arrive at its true meani
uninfluenced by the spirit of the Constitution ": per S. R. Das J., deliver
the majority judgment in Keshavan Madhavan Menon v. The State of Bom
(1951) S.C.R. 228 at p. 233.
49 8ee Halsbury, Vol. 36, 3rd ed., pp. 88, 892.

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intended to remedy. If the enactment to be construed is a federal

constitution the autonomy of the provinces and the plenary powers
conferred on the legislatures 0O are relevant considerations. When
history is referred to as an aid to interpretation we must be clear as
to what history includes. If by history is meant legislative history,
or the facts existing at the time a law was passed, or the mischief
disclosed by the common law or the statute law when the new
law was passed, history may be an aid to interpretation. But
if by history is meant the expectations and hopes of some persons
as to what the law would achieve or the doubts and fears of
others about the same law, such history cannot afford
to interpretation.5" It is respectfully submitted that the
invoked in the Atiabari and Rajasthan cases consists for th
part of the views formed by judges of the hopes and expe
of the framers of the Constitution 52 or the knowledge at
to them of the complicated legal problems and their appro
solutions 53 notwithstanding that the six judgments deliv
the Supreme Court agree neither about the problems n
their solutions.
The judgments under consideration depart widely from these

principles. The Atiabari judgment does not ask the question:
what is the natural and ordinary meaning of the words used in
Part XIII ? Nor does it ask the question: if the words have more
than one meaning, do extrinsic aids to construction enable the
court to determine the appropriate meaning? It asks the question:
what was the intention or objective of the framers of the Constitu-
tion in the light of which we can interpret Part XIII so as to
effectuate that intention? But if an intention is to be assumed
in the first instance it is not difficult to find it in the words to be
interpreted.
Examination and Criticism of the Concept of " Economic Unity"

It is submitted with respect that the view of Gajendragadkar J.54
that the political and constitutional background of Part XIII
is to be found in the customs barriers erected by the Indian States,
o0 It was settled by The Queen v. Burah (1878) 3 App.Cas. 889 that the
Indian legislatures, acting within the limits of their powers, were in no sense
delegates of the British Parliament but had, and were intended to have,
powers of legislation, as large, and of the same nature as Parliament itself.
Ibid. p. 904.
51 Amalgamated Society of Engineers v. The Adelaide Steamship Co. Ltd. d
others, 28 C.L.R. 129 at p. 145.
52 See pp. 57, 58, ante.
53 See the observations of Subba Rao J. in A.I.R. 1962 S.C. at p. 1426, para.
26; and of Hidayatullah J. at pp. 1450, 1451, para. 96.
54 See p. 57, ante.

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overlooks the fact that a federal constitution was in existence in

British India, that its basic scheme was adopted by the Constitu-
tion and that the constitutional background of Part XIII must
be found in section 297 of the Government of India Act, 1935,
which was designed to secure the freedom of trade and
commerce between the Provinces of British India. A com-
parison of the terms of that section with the languag
in articles 808 (1) and 804 (a) puts this beyond doubt.
regard to the provisions of section 297 it is clear that the
of the Constitution had nothing to learn about freedom o
from the fact that Indian States, which claimed to be ind
Sovereign States, had erected customs barriers. The fr
the Constitution would have assumed that when Indian States
merged in India, they would enjoy the same freedom of trade
the Constitution chose to give to the rest of India subjec
transitional provisions relating to the customs duties which
Indian States had been levying.
As regards the view that Part XIII was designed to secu
the economic unity of India, that such unity required the
flow of goods throughout the territory of India, and that
free flow was " essential for the economy of the nation and
sustaining and improving the living standards of. the country
it is submitted with respect that, heretical as it may be to say
the view is not self-evident and requires further examination
deals with two concepts (i) the economic unity of India, an
the freedom of trade as involving a free flow of goods. T
economic unity of India is not defined nor is the relation of t
unity to the freedom of trade and commerce considered.
phrase " economic unity of India" is lacking in precision
invites the inquiry, What does " unity " mean in this cont
Is the emphasis to be laid on " unity " or on " economic "
on both? The negative implications of "the economic u
of India " are clear, namely, that the states of India are not
foreign states to one another but are parts of a Union of St
But if by the economic unity of India is meant that in econom
matters India acts as one unit, in the way in which for exa
Great Britain does, then India does not possess such unity f
can be achieved only by a unitary and not a federal govern
with its division of legislative powers on economic matters betw
the Union and the states.50 Again if it is to be " economi
55 See p. 58, ante.

5s " It may be that economic life is one, but in federal countries this fact
recognised so far as the allocation of governmental powers is concerned
legal and political pluralism of federations is imposed upon the alleged u
of economic affairs ": Wheare, Federal Government, 3rd ed., p. 134.

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unity, are economic considerations and economic ends the decisive

factors or are they to be sacrificed or subordinated to the concept
of.unity? And what is the relation of economic unity to the
freedom of trade ? These questions are neither raised nor answered
by the majority judgment in the Atiabari case and yet they must
be raised and answered if the main postulate of that judgment
is to have a firm foundation.
It is submitted, with respect, that the assumptions about " th
economic unity of India " and about the free flow of goods ar
not well founded. If one lesson is to be learnt from section 92
of the Australian Constitution it is that absolute freedom of trade
is not only not conducive to economic growth and economic
welfare but may be antagonistic to it. It is well known that
all attempts at marketing schemes, even with the co-operat
of the Commonwealth and the states, and all attempts at nation
alisation of banks or air lines, for example, have failed becau
of section 92. It is no wonder that Professor Nicholas should
be led to observe that " it may be that section 92 is tot
inapplicable to an age of planning in the Commonwealth
Australia." 5T The Constitution of India was enacted in
of planning.58 An examination of the terms of Part XIII shows
that freedom of trade is not prized as an end in itself but only
in so far as it subserves the ends of economic growth and economic
welfare of the Union as well as the states. The Scheme of
Part XIII, as appearing from its terms, can best be d
" freedom if possible, restrictions, even discriminato
tions 59 where necessary." It is respectfully submitted
XIII should be interpreted on its terms without assu
economic theories which the Constitution repudiates.
Examination and Criticism of the Historical Backgro

A departure from settled principles of interpretation w
be easy to understand even if the historical, constitution
and economic background contained in the judgments w
plete and correct. But it is respectfully submitted that i
complete nor correct. In this connection the total ab
the judgments of any reference to the Draft Consti
'7 Op. cit., p. 278.

5s Entry 20 in List m of Sched. VII to the Constitution reads "
Social planning."
59 ". . . The States' power contained in art. 304 (b) is made express
the prohibition contained in art. 303 (1) because the opening wor
contain a non obstante clause both to art. 301 and art. 303 ": p
the Rajasthan Case, A.I.R. 1962 S.C. at p. 1418; the observatio
Rao J. are to the same effect. See ibid. p. 1434.

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the report of the Drafting Committee thereon), and to the debates

in the Constituent Assembly which finally resulted in Part XIII,
is most striking, particularly in the minority judgment in the
Rajasthan case which gives an elaborate historical background
from the early days of the East India Company down to the
reports of commissions and committees whose labours contributed
to the drafting of the Government of India Act, 1935. If this
ancient history is relevant surely the Draft Constitution, the report
of the Drafting Committee and the debates in the Constituent
Assembly can hardly be less relevant.
Since history plays an important part also in the Rajasthan
case it is necessary to state briefly the effect of the historical
material left out of the Supreme Court judgments. In the Draft
Constitution, article 16 (which appeared in Part III: Fundamental
Rights) declared that subject to any law made by Parliament,
and subject to article 244 trade commerce and intercourse through-
out the territory of India was to be free.6° Draft articles 243
and 244 appeared in Part IX, Chapter II, Administrative Relations
(i.e., between the Union and the States) under the subject heading
" Inter-State Trade and Commerce." Article 243 enacted a
prohibition of preference or discrimination to one state ove
by any law or regulation relating to trade or commerce
244 provided that notwithstanding articles 16 and 24
lawful for any state (1) to impose by law reasonable res
required by the public interest on the freedom of trade c
and intercourse with that state, and (2) to impose on goods
imported from other states any tax which was imposed on similar
goods manufactured or produced in that state provided that such
a tax was not discriminatory. The proviso to article 244 is not
material to the present discussion.
These articles were replaced by Part XA (now Part XIII)
and Dr. Ambedkar in moving the insertion of Part XA said that
since the provisions relating to Trade and Commerce were scattered
in different parts of the Draft Constitution a large number of
members of the House were not in a position to understand their
implications and therefore " the Drafting Committee felt that
it was much better to assemble all these different articles . . . into
one single part and to set them out seriatim, so that at one place
it would be possible to know what are the provisions with regard
to the freedom of trade and commerce throughout India." 61
o0 It need hardly be said that a fundamental right subject to the provisions of

any law made by Parliament can hardly be called fundamental.
61 Constituent Assembly Debates, Vol. IX, p. 1124.

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It is clear from a comparison of articles 16, 248, 244 and 245 02

with the articles in Part XA (now Part XIII) that they were
not merely arranged seriatim but were substantially altered. The
proceedings of the Constituent Assembly disclose no reasons for
the change.
However, the following points relevant to Part XIII emerged
from the debates. An amendment was moved to insert the word
" reasonable " before the word " restrictions " in the new Draft
article 274B (now article 302) but after discussion the amendm
was defeated.63 Secondly, an amendment was moved to d
from Draft article 274C (now article 803 (1)) the words "b
virtue of any entry relating to trade or commerce in any of
legislative lists." After discussion the amendment was defeat
It will be seen from the above account that there is no just
tion for attributing to the framers of the Constitution the
sights and the insights which have been attributed to them i
Supreme Court judgments. This involves no disrespect to
eminent men who framed the Constitution of India. The pro
they had to solve would have been formidable in any case; th
made it even more formidable by their attempt to dovetail fr
of trade, with the emotional overtones clustering round sectio
of the Australian Constitution, into the precise draftsmansh
the Government of India Act, 1935, which was adopted b
Constitution. Besides, the wide departures from the Austr
model made the legal effect of that departure an adventure i
the unknown.
If the writer has dealt with the historical background it is

not because he considers that such a background has any grea
value as an aid to construction, but because it plays so large
part in the Supreme Court judgments. In this connection he desires
62 Draft art. 245 corresponds to art. 307 of the Constitution but it is not materia
to the present discussion as it confers a power to appoint an authority to carry
out the purposes of the Part.
8s Constituent Assembly Debates, Vol. IX, pp. 1125, 1128, 1138; 1143 (amend
ment rejected). That the amendment was moved and rejected is importan
because "... while it is not proper to take into consideration the individua
opinions of Members of Parliament or Convention to construe the meaning of
a particular clause, when a question is raised whether a certain phrase or
expression was up for consideration at all or not, a reference to the debate
may be permitted ": per Kania C.J. in Gopalan's Case, 1950 S.C.R. 88 at
p. 110. To the same effect, Fazal Ali J. at p. 158 and Mukherjea J. at p. 254
64 Sir Alladi Krishnaswami Ayyar in opposing the amendment, said: "The nex
comment was there should be no reference to the power in relation to trad
and commerce. It was advisedly put in for the reason that there might be
very many powers which may be exercised by the different states in regard t
supply of goods, the internal or indigenous industry, which may trench upon
trade and commerce. It is not the intention to interfere with these powers of
the Provinces or States ": Constituent Assembly Debates, Vol. IX, pp. 1141,
1142.

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to emphasise two things: first, if history is to be appealed to,

it must be the whole history; and secondly, that it is necessary
to refer expressly to the source of the history in the judicial
determination, so that the history can be corrected, confirmed, or
confuted, and the question of the value of any historical material
as an aid to construction may be properly assessed.65
Value of Australian Cases

A reference may now be made to the citation of Australian cases
in the Atiabari and the Rajasthan cases. The judges who cite
them repeat the warning that it is not safe to interpret the pro-
visions of the Constitution by reference to decisions on other
constitutions,6" nevertheless those decisions are not only referred
to but are found to support the interpretation that a tax may
amount to a restriction under article 801.67 It would take us
too far afield to consider to what extent decisions on section 92
are helpful in interpreting Part XIII.68 But it is submitted
the decision in James v. The Commonwealth of Australia I6
a tax may amount to a restriction cannot support the conclus
that a tax is included in article 801, for article 802 refers to t
power of Parliament to impose restrictions, and this raises
question whether a power to impose " restrictions " on the fre
of trade and commerce involves a power to impose taxes, a
the Privy Council was confronted with no such problem. To a
the words of Gwyer C.J., the question is not whether theoreti
a tax might impede the freedom of trade but whether in
Indian Constitution the word "restrictions" includes a tax.70
Only in the Indian Constitution can this problem aris
must be solved by applying well settled principles of con
SUGGESTED INTERPRETATION OF PART XIII
Scheme of Government of India Act

We are now in a position to attempt an independent interpretat
of Part XIII. The above discussion has shown that the words
05 As, for example, is it permissible to refer to the speech of a mem

Drafting Committee? If it is, can one part be referred to without
to another relevant part? If it cannot be referred to can it become
the judicial verdict as furnishing an historical background? See no
64, ante.
6Q (1961) 1 S.C.R. at pp. 867, 868.
67 Ibid. p. 869, see note 27, ante.
68 Such a discussion would require a comparison between the Sche
Constitution of India and the Constitution of Australia, with p
reference to the distribution of legislative powers.
o9 f1936] A.C. 578.
o7 Re The Central Provinces and Berar Act, No. XIV of 1938 (1939
at p. 43.

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used in articles 801-806 require extrinsic aids to construction and

that the provisions of the Constitution must be read in the light
of the provisions of the Government of India Act, 1985.71 Certain
features of that Act must now be mentioned since they appear also
in the Constitution of India. That Act made a sharp distinction
between legislative entries relating to general subjects of legislation
and entries relating to taxation.72 Further the taxing powers
of the Federal and Provincial legislatures were made mutually
exclusive-the concurrent legislative list contained no tax but
provided only for certain fees. Thus the Federation and the
Provinces were given and were intended to possess adequate
independent sources of revenue to discharge the responsibilities
laid upon them. Part VII of the Act, corresponding to Part XII
of the Constitution, made elaborate provisions for the distribution
of revenue between the Federation and the Provinces. The
freedom of trade between the Provinces of British India
was secured, as stated earlier, by section 297 of the Act
the terms of which have already been set out.78 The provisions
of section 297 (1) (a) show that they removed physical barriers
to trade which can be raised by prohibiting or restricting the import
of goods from other Provinces or by prohibiting or restricting the
export of goods from a Province. But besides physical barriers there
are fiscal barriers which it is usual to describe as tariff walls.
They consist of tax burdens borne by " outside " goods not
borne by " home " goods, or not borne to the same extent. The
tax, or the difference between the higher and the lower tax
determines the height of the tariff wall. Section 297 (1) (b)
prevented such walls being raised.
The reference made in section 297 (1) (a) to certain legislative
entries must now be considered. If a distinction had not been
made by the Government of India Act between legislative en
relating to general subjects and those relating to specified tax
a power to legislate " with respect to " trade and commerce w
the Province (entry 27, Provincial List) and " with respec
the production, manufacture and supply of goods (entry
Provincial List), would have carried with it the power to f
71 1958 S.C.R. 1422 at p. 1478; see p. 54, ante.
72 1958 S.C.R. at p. 1478. The following example may be given from the
List: Entry 20. Federal Railways. Entry 58. Taxes on Railway fare
freights. Art. 248 (2) of the Constitution of India emphasises this poi
expressly providing that the residuary powers of legislation include the p
of making any law imposing a tax not mentioned in the Concurrent o
State List.
73 See p. 55, ante.

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" home " trade and manufacture 74 by prohibiting the import into,
or export from, the Province of goods and also by imposing
discriminatory taxes.
As however such a distinction has been made section 297 (1) (b)
absolutely prohibits discriminatory taxes on "outside " goods.
The power to prohibit the entry of goods by virtue of the power to
make laws with respect to trade and manufacture was taken away
by an express prohibition. But the Government of India Act
conferred power to make laws in respect of subjects other than
trade and manufacture. Such laws might agect trade and manu-
facture but cannot be said to be laws in respect of trade and
manufacture. Thus a Province may prevent the entry of animals
suffering from infectious diseases 75 or may prohibit the entry
of intoxicating liquors 7" in implementing a policy of " prohibi-
tion." 77 The first law may affect the trade in animals but no
one would call it a law in respect of trade: it is a law for preventing
the spread of infectious diseases. Similarly, a " prohibition"
law is not a law in respect of trade: it is a law to prevent the
consumption of intoxicating liquor. Such laws do not create and
were not considered as creating trade barriers, because in their
real nature they were not laws " in respect of trade " at all.
Alteration of Scheme in Constitution

It has been said earlier that the Constitution embodies the same
scheme for the distribution of legislative powers as that contained
in the Government of India Act.78 However, internal trade and
commerce became a topic of legislation in all the three lists.
Inter-State Trade and Commerce is entry 42 in the Union List;
74 " Trade and manufacture" is used in this discussion as a compendious

description of entries 27 and 29.
75 Entry 30 (Concurrent List): The prevention of the extension from one unit to
another of infectious or contagious diseases or pests affecting men, animals or
plants.
76 Entry 31 (Provincial List): Intoxicating liquors and narcotic drugs, that is to
say ...
77 When a "prohibition " law was challenged as violative of s. 297
Bhola Prasad v. The King Emperor, 1942 F.C.R. 18, Gwyer C.J. he
was plain beyond words that the entries referred to in s. 297 (1
entries 27 and 29 of the Provincial List. If therefore a Provincial leg
could point to any other entry, such as entry 31, to justify its pr
s. 297 (1) (a) could have no application.
78 Art. 246 is practically a reproduction of s. 100 of the Act. In Subr
Chettiar v. Muttuswami Goundan, 1940 F.C.R. 188 at pp. 200, 201 Gw
observed that in drafting the Indian Act, the British Parliament ha
the provisions of the British North America Act, 1867, and that as in
by the Judicial Committee s. 91 and s. 92 of the Br. North Am
furnished a complete analogue to s. 100 of the Indian Act, and the p
laid down by the Judicial Committee in a long series of decision
accepted as a guide for interpreting similar provisions in the Indian

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Trade and Commerce within the Province subject to entry 33

List III is entry 26 in the state List; trade and commerce in
certain named items is entry 88 in the Concurrent List (List III).
Section 297 of the Government of India Act was not re-enacted,
but Part XIII took its place. Before examining the terms of
Part XIII it may be mentioned that article 803 (1) prohibited
the giving of preference or making of discrimination by virtue
of any entry relating to trade and commerce in the legislative lis
thus using language which had been judicially interpreted in
Bhola Prasad's case.79 Secondly, article 804 (a) reproduced in
substance the provisions of section 297 (1) (b).
In Sundararamier's case '8 it had been argued that the stat
had no power to impose a sales tax on goods sold in interstate
trade and commerce, that such a tax interfered with the freedo
of trade and commerce, that article 801 supported the argument
that a tax was a burden on trade 81 and that such a view was
implicit in article 804 (a). Venkatarama Aiyar J. held that
" article 804 (a) of the Constitution cannot be held as throwing
any light on the scope of article 801 with reference to taxation
because, as it merely reproduces section 297 (b) of the Government
of India Act and as there was no provision therein corresponding
to article 801, section 297 (1) (b) could not have been implied
what is now sought to be inferred from article 804 (a)." 82 In
other words since the prohibition of discriminatory taxes on " out-
side " goods did not imply in the Government of India Act that a
tax by itself was violative of the freedom of trade, neither could
such prohibition in article 304 (a) have that implication.
What was the mischief which section 297 of the Government
of India Act did not meet, or gave rise to, which Part XIII was
designed to remedy? Section 297 was addressed only to the
Provinces and not to the Federal legislatures. But if the argument
set out above is correct 83 it was unnecessary to fetter the power
of the Federal legislature since it lacked legislative competence to
make laws in respect of interstate trade and commerce and the
Provinces had exclusive power over trade and commerce within
the state. The extension of Part XIII to Parliament is a necessary
79 See note 77.

so Sundararamier's Case, 1958 S.C.R. 1422 at p. 1484.
s1 For the arguments of counsel for the Madura Mills, which Venkatarama
Aiyer J. described as striking a new path see ibid. p. 1430. The reporting of
argument in the Supreme Court Reports is not particularly full, but the judg-
ment sets out the argument fully and lucidly at pp. 1477, 1478. In support
of the argument Australian and United States cases on "the commerce
clause" had been cited ibid. p. 1430.
82 Ibid. p. 1484.
83 See pp. 73, 74, ante.

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consequence of enacting entry 42 in the Union List and entry 88

in the Concurrent List. Again section 297 did not deal with the
freedom of trade within the states.84 To that extent there is an
enlargement of freedom. However section 297 (a) in enacting
an absolute prohibition against preventing import into or export
out of a Province granted a freedom so wide that it could prevent
the development of underdeveloped Provinces, and could equally
prevent a Province from securing the welfare of its inhabitant
in times of scarcity, shortage or glut. This excess of freedom was
an evil to be curtailed as is clear from the provisions of articl
808 and article 304 (b).
Linguistic Difficulties
Turning to Part XIII, the Part is entitled "Trade, Commerce
and Intercourse," and the articles in Part XIII also use the word
"intercourse." In the opinion of the writer " intercourse " means
" commercial intercourse," and is comprised in commerce.85 Th
strongest support for this opinion is found in the fact that though
trade and commerce are heads of legislative power in all the
legislative lists, " intercourse," as a separate head of power
is not found in any of the legislative lists, and this omission could
hardly be inadvertent. Further as regards the states, a fetter
on their power to interfere with the freedom of " intercourse "
would be meaningless if " intercourse " were a separate head o
legislative power, for then the states would lack legislativ
competence in respect of " intercourse." 86
Turning to the articles, we find that the opening words of
article 801 " subject to the provisions of this Part " require all
the articles of Part XIII to be read together and a glance at them
shows that there are serious linguistic difficulties which must be
solved in the first instance. Thus, the non obstante clause with
which article 808 opens refers to article 802; but this referenc
is wholly inapplicable to the legislatures of a state, since article
302 deals only with Parliament. However, as the intention to
fetter the legislative powers of State Legislatures is quite clear
84 See art. 304 (b) and the words " with or within the state " in it.
85 The words " trade, commerce and intercourse " are taken from s. 92 of the
Australian Constitution, which in its turn took them from American decisions
on the " commerce clause." In interpreting that clause in Gibbons v. Ogden.
6 L.Ed. 1 at p. 186, Marshall C.J. in his celebrated judgment said, "Com-
merce, undoubtedly, is traffic, but it is something more; it is intercourse. I
describes the commercial intercourse between nations in ali its branches."
88 Assuming "intercourse" to be a head of power distinct from "trade and
commerce," Parliament would have power to legislate on " intercourse " under
art. 248 and entry 97, List I.

49.206.129.228 on Tue, 22 Aug 2023 01:32:42 +00:00
it cannot fail because of defective drafting 87 and effect must be

given to it by treating the fetters imposed on state legislatures as
contained in an independent provision unconnected with article
302; good draftsmanship would put it as a third sub-article.
Again article 304 opens with the words "notwithstanding
anything in article 301 and article 803." This non obstante clause
clearly governs both the clauses (a) and (b) of article 804, and
we must inquire whether any meaning can be given to the opening
words, and if so, what.88 The reference in article 804 to article
301 is, it is submitted, meaningless, for article 801 itself provides
that the freedom there referred to is subject to the provisions,
among others, of article 804. Therefore, article 804 (a) and (b)
permits nothing to be done which is forbidden by article 801,
and consequently the reference to article 801 in the non obstante
clause must be deleted as meaningless.89 As regards the reference
to article 803, this reference has a meaning as regards article
804 (b), because the non obstante clause permits something to be
done which article 308 forbids. But the reference to article 808
in its application to article 804 (a) has no meaning because
article 803 forbids discrimination or preference by virtue of any
entry relating to trade and commerce, and however widely " trade
and commerce " may be construed they will not include entries
relating to taxes. In any event, article 803 forbids discrimination
and preference and article 804 (a) does not permit them.90
87 Salmon v. Duncombe (1886) 11 App.Cas. 627; Maxwell, Interpretation

of Statutes, 11th ed., p. 221. The "inappropriateness" of the reference to
art. 302 as regards State Legislatures has been recognised. See the Atiabari
Case (1961) 1 S.C.R. 809 at p. 826 (Sinha C.J.); at p. 854 (Gajendragadkar J.).
See also the Rajasthan Case, A.I.R. 1962 S.C. 1406 at p. 1419 (Das J.); at
p. 1433 (Subba Rao J.). The contrary view expressed by Hidayatullah J.
(ibid. p. 1453) is, it is submitted, not correct; but a discussion of that view
would be more appropriate to the chapter of my forthcoming book than to this
article.
88 The observation of Das J. that a textual interpretation may not disclose the
true intendment of the articles in Part XIII because " there is such a mix up
of exception upon exception " (p. 64, ante) are, it is respectfully submitted,
a cry of despair. However, courts possess wide powers to reject or modify
provisions to which no meaning can be given. See Maxwell, op. cit., p. 221
et seq. See also 11 App.Cas. 627 and [1909] 2 K.B. 24 cited in note 2 at
p. 221.
89 In the Rajasthan case Subba Rao J. observed that the reference in the non
obstante clause of art. 304 " may have some relevance to art. 301 because it
enables the legislature of a state to impose an impediment to trade in spite
of art. 301 ": A.I.R. 1962 S.C. at p. 1434. It is respectfully submitted that
this observation is not correct for it overlooks the opening words of art. 301.
If a right is subject to the imposition of restrictions, the imposition of those
restrictions cannot be in spite of the right.
90 Subba Rao J. has adopted a similar line of reasoning. He held that the non
obstante clause of art. 304 had no relevance vis-d-vis art. 303 which only
prohibited a state legislature from making a discriminatory law, and it did
not in any way prohibit the state legislature from imposing a non-discrimina-
tory tax permitted by art. 304 (a). See the Rajasthan case, ibid. p. 1434.

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Therefore, in its application to article 804 (a) the reference in the

non obstante clause to article 803 must be deleted.
The result of the above discussion is this: (i) the restrictions
imposed by article 803 on state legislatures must be treated as
part of an independent provision; (ii) article 304 (a) must be
treated as an independent provision freed from the non obstante
clause altogether; (iii) article 804 (b) must be treated as laying
down the restrictions subject to which the freedom in article 801
is granted 91; and (iv) the restrictions which can be imposed under
article 804 (b) include restrictions which make a discrimination
or preference forbidden by article 803 (1) since the non obstante
clause in article 804 lifts the ban imposed by article 308 (1).92
If it is objected that this amounts to rewriting the articles, it
is submitted, first, that principles of interpretation justify and
require such rewriting U3; secondly, that it is better expressly
to correct insensible language than to bear the correction sub-
consciously in mind; and lastly it is much better expressly to
correct the language of an enactment rather than give up the
task of interpretation and give a meaning to the enactment not
based on or ascertainable from its terms.
Examination of Terms
1. "Subject to the Provisions "
With linguistic difficulties resolved, we are now in a position to
examine the terms of the articles in Part XIII. The opening words
of article 801 " subject to the provisions of this Part " show that
the freedom there granted is a qualified freedom. The judgments
of the Supreme Court treat the freedom granted by article 301 as
the rule and articles 801-306 by which it is qualified as the
exceptions.94 It is respectfully submitted that this view is not
correct. First, the freedom granted by article 801 is not freedom
simpliciter but freedom subject to the provisions of Part XIII.
Therefore those provisions do not permit anything which article
301 forbids; they do not take out of article 801 what otherwise
would be in it. Secondly, the words " subject to the provisions
91 This is involved in the reference to art. 801 which must be deleted, because
art. 301 itself is subject to art. 304 among other articles.
92 That the reference to art. 303 in the non obstante clause to art. 304, as regards
art. 304 (b) lifts the ban imposed by art. 303 has been held by Das J. and by
Subba Rao J. See A.I.R. 1962 S.C. at pp. 1418 and 1434. This is in conflict
with the interpretation of Gajendragadkar J. (p. 60, ante; also note 21, ante)
and overrules his interpretation.
98 See note 88, ante.
94 A.I.R. 1962 S.C. 1406 at p. 1422 (Das J.); at pp. 1432-1433 (Subba Rao J.).

49.206.129.228 on Tue, 22 Aug 2023 01:32:42 +00:00
of " have frequently been used in the Constitution,95 and they do

not carry the implication that the provisions to which a power
(or right) is subject are the exceptions and the power or right
is the rule. The correct mode of describing the situation is to
say that what is granted is a qualified or limited power or right.
Thirdly, the phaseology of rule and exception was known to the
draftsman and he has refrained from using it. And lastly, the
" exceptions " are so many and so extensive that it would be
incorrect to describe the residue as the rule. The importance of
this discussion is that the Supreme Court holds that the articles
to which article 301 is subject cannot throw a light on the rule
or modify the terms of the rule, because exceptions, or provisos
making exceptions, cannot modify or throw a light on the sub-
stantive part to which they are provisos or exceptions.96 If this
view of the articles is incorrect the whole line of reasoning based
upon it fails. It also fails if the words of article 301 are ambiguous,
as they have been held to be, for then provisos and exceptions
may throw a light on the correct meaning to be given to the
words of article 301.9T
2. " Trade and Commerce "
This leads us to the next question: " what is the meaning

to be given to trade and commerce 98 in article 301 ? " In the
opinion of the writer this question has not received from the
Supreme Court the attention which it deserves, and it is respect-
fully submitted that the almost summary dismissal of the argument
based on article 303, has shut out a whole line of inquiry which
is extremely important, namely, whether trade and commerce
throughout the territory of India in article 301 cover the same
field as is covered by the legislative entries relating to trade and
commerce, or whether they cover legislation under any entry
which affects trade and commerce. This question cannot be
answered by reference to Australian decisions,99 because there are
vital differences between the Indian and Australian Constitutions '
95 Ab for example art. 245, which relates to the extent of the law-making power
of Parliament and state legislatures, is " subject to the provisions of " the
Constitution.
90 See the Rajasthan Case, A.I.R. 1962 S.C. 1406 at p. 1422 (Das J.) and at
pp. 1432-1433 (Subba Rao J.). Even if this view of Part XIII were right,
which it is submitted it is not, it has been overlooked that if the substantive
enactment is ambiguous and has thus more than one meaning, exceptions or
provisos may throw a light on the meaning to be adopted. See Halsbury,
Vol. 36, 3rd ed., p. 399, and the caseB cited in note (q).
97 See Halsbury, Vol. 36, 3rd ed., ibid.
98 The writer haB already given his reasons for saying that 'l intercourse " means
commercial intercourse and that intercourse is comprised in "commerce."
99 James v. The Commonwealth of Australia [1936] A.C. 579 at p. 632.
i See note 68, ante.

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and because of the different circumstances under which federation

came to Australia in 1900 and to India in 1987.2 Further section
92 of the Australian Constitution does not carry within itself
language of an earlier federal constitution as articles 808
804 (a) unmistakably do. However, in view of the line whi
the Atiabari and Rajasthan cases have taken, such a discu
would require a separate article by itself. It may howeve
added that if such a discussion should disclose that the fetters
placed by Part XIII are on the general powers relating to tr
and commerce contained in entry 42 in List I, in entry 26 in List
and in entry 88 in List III (in so far as it relates to trade an
commerce) and not on powers whose exercise would afect tr
and commerce, most of the problems which now threaten to
intractable would not arise, and the problem of non-discriminato
taxation also would not arise.8
3. "Free"
The next question to be considered is the meaning to be g

the word " free " in article 801. If the ambit of trade and com-
merce is extended, as it has been by the Supreme Court, the
it becomes necessary to introduce the concept of freedom in
ordered society as has been done by Das J.4 and to say that
"freedom " means freedom in a society governed by law. Th
refinement (which requires that restrictions must be read in
the " freedom " in an orderly society, irrespective of the restri
tions which are, or can be, imposed under articles 302-806) becom
necessary if the state legislatures are not to be at the mercy
the Union executive s under the proviso to article 304 (b).
Article 302 raises several questions. First, Is the omission
the word " reasonable " before " restrictions " deliberate, and
must effect be given to it? Having regard to the rejection of the
amendment to insert " reasonable " before " restrictions " in
article 802,0 and having regard to the presence of "reason
before " restrictions " in article 804 (b), the conclusion is inev
2 The Government of India Act, 1935, was brought into force on April 1
3 If these problems have not arisen in an acute form it is due to the for
circumstance that the same political party has been in power in the U
and in the states except for short interludes in Kerala.
4 A.I.R. 1962 S.C. at pp. 1420-1421; see p. 64 and note 39, ante.
5 Ibid. Whether it is really necessary to make these refinements ca
answered only after the line of inquiry referred to in the preceding par
has been pursued, and its results obtained.
6 See p. 71 and note 63, ante.

49.206.129.228 on Tue, 22 Aug 2023 01:32:42 +00:00
that the omission was deliberate, and however much a court may
dislike it, effect must be given to it.'
4. "Restrictions"
The next important question-and the central question in t

Atiabari and the Rajasthan cases-is whether " restrictions "
article 802 include taxation. In this connection it may be observ
that the judgments of the Supreme Court do not work out
consequences of holding that " restrictions " include taxat
by reading article 802 so as to include taxes, and then consideri
whether the article so read is consistent with the scheme for the
distribution of legislative power, and with the provisions o
Part XII of the Constitution. The line of reasoning adopted
the judgments is this: a tax is a burden and therefore a rest
tion 8; article 804 (a) which permits non-discriminatory tax
implies that taxes are violative of freedom; article 806, before
repeal, implies that article 801 includes taxation. It is respectfu
submitted that this mode of approach is not correct. That a
tax may be a burden on trade, and that it has been so held
Australia and in the United States, does not solve the probl
whether in Part XIII a tax is a restriction. As regards
the implication derived from article 804 (a), the judgment of
Venkatarama Ayyar J. in Sundararamier's case 9 is in the opinion
of the writer correct and unanswerable. That judgment was cited
in the Atiabari case and in rejecting it Gajendragadkar J. observed
that the question of construing the articles in Part XIII did not
arise before Venkatarama Ayyar J. and " was not obviously argued
before the court." From what has been said above, the obser-
vation that the matter was not argued appears to be per incuriam,
for the arguments reported in the Supreme Court Reports, and
the fuller argument set out in the judgment, show that it was
argued and the argument was rejected.
Apart from the question whether three judges could, in sub-
stance, overrule a judgment of four, in the opinion of the writer
the main point of Sundararamier's case has not been fully appreci-
ated. It is that if the prohibition of discriminatory taxes in
section 297 (1) (b) of the Government of India Act, did not imply
that a tax by itself was violative of the freedom of trade, it was
difficult to read such an implication into article 801 from article
7 That restrictions can be in the public interest without being reasonable is

illustrated by Saghir Ahmed v. The State of U.P. (1955) 1 S.C.R. 707 at
pp. 726-727. All that the omission of the word reasonable means is that
the Constitution withdrew the question of reasonableness from judicial review.
8 See p. 60 and note 27, ante.
9 (1958) S.C.R. 1422 at p. 1484. See p. 75, ante.

49.206.129.228 on Tue, 22 Aug 2023 01:32:42 +00:00
804 (a) which, in substance, reproduced section 297 (1) (b). This
conclusion is reinforced by the following considerations. Article
804 (a) though positive in form is negative in effect; it prohibits
discriminatory taxes on " outside " goods. The only implication
which can arise is that discriminatory taxes are violative of the free-
dom of trade and are therefore forbidden, which is precisely the pro-
vision enacted in section 297 (1) (b). Again, article 806 continued
during a transitional period the levy of a tax or duty on the import
of goods into Part B States 10 and on the export of goods from
those States. But these are customs duties which are generally
recognised as fiscal barriers to trade. The right to levy a duty on
import of goods into a Part B State without any obligation to levy
an equal duty or tax on domestic goods involves precisely that
discriminatory taxation which is forbidden by article 804 (a).
Such internal evidence as there is in Part XIII shows that what
is forbidden is discriminatory taxation, as in article 804
what is permitted, for a limited period, is discriminatory ta
as in article 306 (before its repeal), and therefore a tax by
is not considered as violative of the freedom of trade. If so, a
power to put restrictions cannot include a non-discriminatory tax,
for the restrictions which are contemplated by Part XIII are those
which violate the freedom of trade but being expressly permitted
are not open to question.
There are certain other considerations which reinforce this
conclusion, and they may be briefly stated. Whenever any f
is laid by the Constitution on the taxing power it is laid
express reference to the taxing power in the legislative en
or in the articles of the Constitution.12 Part XIII itself contains
an express prohibition of discriminatory taxation in article
(a).13 This is a logical corollary from the scheme for the di
bution of taxing powers between the Union and the States
features of the scheme are: a sharp distinction between gen
subjects of legislation and taxation; mutually exclusive po
of taxation given to the Union and the States; elaborate provis
for the distribution of the proceeds of certain taxes between
Union and the States in Part XII. As has been said earlier even
article 248, which confers the residuary powers of legislatio
10 The former Indian States were described as Part B States.
11 Entry 50, List II, Taxes on mineral rights subject to any limitations impose
by Parliament . . ; entry 57. Taxes on vehicles whether mechanically
propelled or not . . . subject to the provisions of entry 35, List HI (which
relate, inter alia, to the principles on which taxes on such vehicles can be
levied).
12 Art. 286 (before its amendment) restricted the power to tax the sale of goods
if the sale was interstate; art. 276 put a limit to the tax on professions.
18 Art. 304 (a) has not been considered as a source of power by the Supreme
Court.

49.206.129.228 on Tue, 22 Aug 2023 01:32:42 +00:00
Parliament, expressly mentions a power to make any law imposing

a tax not included in List II and List III.14 It is submitted that
to read " restrictions " in article 302 to cover powers of legis
tion on general subjects as well as powers relating to taxation wou
cut across a distinction maintained throughout the Constitution;
it would destroy the effect of mutually exclusive taxing powers
designed to secure independent revenues to the states, for
would mean that an exclusive taxing power of the state whic
cannot be destroyed by a law made by the Central Legislatur
(Parliament) can be destroyed by the Central Executive (the
President) acting under the proviso to article 304 (b). In the
opinion of the writer there are no compelling reasons for adoptin
a construction so subversive of the basic scheme of the
Constitution.15
As regards article 303 the words in it which echo section 297
(1) (a) of the Government of India Act, namely, " by virtue of
any entry relating to trade and commerce " require interpretation,
but they are so closely connected with the inquiry which has not
been pursued in this article 1a that it is not proposed to consider
the question of interpretation in detail. The writer will only
record his opinion that these words refer only to entry 42,
List I; entry 26, List II; and entry 33, List III (in part), and
that Bhola Prasad's case 17 furnishes the right answer.
CONCLUSION
If the above discussion has shown one thing it is the need to

replace the defective draftsmanship of Part XIII by precise
language expressing the intentions of its framers. But this is a
solution on the political plane and may not be undertaken because
to use clear precise language is to focus attention on the contro-
versies easier to raise than to solve. In the absence of amendment
the duty falls on the Supreme Court to declare an authoritat
interpretation, but it is submitted with respect that the presen
position is not satisfactory and sooner or later the whole matte
will have to be reconsidered. The main points made in the ab
discussion are these: the interpretation of Part XIII must sta
with the words of articles 801-306 and the intention of the framers
14 List HI contains no tax.

15 It has been frequently asked, Why does art. 304 (a) find a place in Part
if a tax is not included in art. 301? We have seen that the non obstante
clause in art. 304 referring to art. 301 is meaningless. The answer
is, since a discriminatory tax is a well recognised barrier to the f
trade in goods, it is natural to prohibit it in a Part dealing with th
of trade.
16 See pp. 79, 80, ante.
17 1942 F.C.R. 18; note 77, ante.

49.206.129.228 on Tue, 22 Aug 2023 01:32:42 +00:00
of the Constitution must be found from the word

and not independently of them. The backgroun
the Government of India Act, 1985, and the decisio
on that Act will require greater attention. The decisions on
section 92 of the Australian Constitution are unhelpful as aids to
interpretation and are even misleading if used for that purpose.
The meaning of the word intercourse will have to be deter-
mined, and the question whether the words trade and
commerce in Part XIII cover the same field as entry 42 in List I,
entry 26 in List II, and entry 88 in List III will also have to b
determined. And lastly the special manner in which the legisl
tive powers relating to. taxation have been dealt with in the
Constitution, as compared with the Constitutions of the Unite
States, Canada and Australia, will be found to play a decisive
part in considering whether non-discriminatory taxes are within
article 801.

49.206.129.228 on Tue, 22 Aug 2023 01:32:42 +00:00

Seervai FreedomTradeCommerce 1963

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The Freedom of Trade and Commerce in the Indian Constitution: The Atiabari Case and

Stable URL: https://www.jstor.org/stable/4504845

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* Advocate-General of Bombay. A book by Mr. Seervai entitled Constitution

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Prohibition of certain restrictions on internal trade

In the Constitution of India " Inter-State Trade and com-

Power of Parliament to impose restrictions on trade, commerce and

302. Parliament may by law impose such restrictions on the freedom

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Restriction of legislative powers of the Union and States with regard to

303. (1) Notwithstanding anything in article 302, neither Parliam

Restrictions on trade, commerce and intercourse among States

Effect of articles 301 and 303 on existing laws

Power of certain States in Part B of the First Schedule to impose restric-

306. Notwithstanding anything in the foregoing provisions of

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THE ATIABARI CASE

In the Atiabari case two of the appellants carried on the trade of

General Considerations in the Majority Judgment

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As regards the economic background, he observed that th

Interpretation of Part XIII in the Majority Judgment

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Gajendragadkar J. observed that in interpreting the articles

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804 (a) assumed that non-discriminatory taxes could be levied by

The Decision in the Atiabari Case

Applying this test to the impugned Act, Gajendragadkar J. held

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The " Widest View " in the Atiabari Case

In his concurring judgment Shah J. expressed the view that the

THE RAJASTHAN CASE

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bench of seven judges none of whom had been a party to the

Its Impact on the Atiabari Decisions

The word " clarification " may be dictated by judicial courtesy

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article, that the clarification is not limited in the manner indicated

The Leading Judgment in the Rajasthan Case: General

Das J. then stated the objectives of the Constitution makers th

32 See p. 78, post, note. 92.

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series of articles which we have to consider in Part XIII of the

And he added that Part XIII must be interpreted having regard to

The " Widest View " of Part XIII Rejected

But the most serious objection to the widest view, namely,

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plenary powers of taxation and regulation conferred by the Consti-

The Decision in the Leading Judgment

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THE EFFECT OF THE TWO CASES

Mode of Approach in Interpreting Part XIII Criticised

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intended to remedy. If the enactment to be construed is a federal

The judgments under consideration depart widely from these

Examination and Criticism of the Concept of " Economic Unity"

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overlooks the fact that a federal constitution was in existence in

55 See p. 58, ante.

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unity, are economic considerations and economic ends the decisive

Examination and Criticism of the Historical Backgro