A) ABSTRACT / HEADNOTE

The case of Messrs. Dwarka Prasad Laxmi Narain v. The State of Uttar Pradesh and Others (1954 SCR 803) epitomizes the tension between state control for public welfare and fundamental rights of citizens under the Indian Constitution. It arose from the Uttar Pradesh Government’s promulgation of the Coal Control Order, 1953, framed under the Essential Supplies (Temporary Powers) Act, 1946, to regulate the coal trade in the state. The petitioners challenged the constitutionality of the Order under Article 32 for infringing their fundamental rights under Article 14 (right to equality) and Article 19(1)(g) (freedom to practice any profession or to carry on any occupation, trade, or business). The Supreme Court held that Clause 4(3) of the Order, which gave absolute discretion to licensing authorities to grant, revoke, or cancel licenses without any procedural safeguards, was unconstitutional. The Court, however, upheld other parts of the Order, including price regulation under Clause 8. The decision reinforced judicial oversight over executive discretion, maintaining that arbitrary delegation without checks violates the constitutional mandate of fairness and reasonableness.

Keywords: Article 19(1)(g), Coal Control Order 1953, licensing discretion, arbitrary executive power, Article 14, price regulation, constitutional validity, trade restrictions, reasonable restrictions.

B) CASE DETAILS

i) Judgement Cause Title
Messrs. Dwarka Prasad Laxmi Narain v. The State of Uttar Pradesh and Two Others

ii) Case Number
Petition No. 326 of 1953

iii) Judgement Date
11 January 1954

iv) Court
Supreme Court of India

v) Quorum
Mehr Chand Mahajan (C.J.), B.K. Mukherjea, Vivian Bose, Ghulam Hasan, and Jagannadhadas, JJ.

vi) Author
Justice B.K. Mukherjea

vii) Citation
(1954) SCR 803

viii) Legal Provisions Involved

• Article 14 of the Constitution of India

• Article 19(1)(g) of the Constitution of India

• Article 19(6) of the Constitution of India

• Article 32 of the Constitution of India

• Essential Supplies (Temporary Powers) Act, 1946, Sections 3 and 4

ix) Judgments Overruled by the Case (if any)
None mentioned

x) Case is Related to which Law Subjects

• Constitutional Law

• Administrative Law

• Trade and Commerce Regulations

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The case emerged in a post-Independence regulatory environment, where state intervention in trade was intensifying under wartime laws like the Essential Supplies (Temporary Powers) Act, 1946. The Coal Control Order, 1953, was notified by the Uttar Pradesh Government to control distribution, pricing, and licensing of coal businesses. This order granted unchecked discretionary powers to licensing authorities to issue or cancel licenses, fix prices, and impose trade conditions without a statutory framework guiding the discretion. The petitioners, prominent coal traders in Kanpur, contested these powers under Article 32, claiming infringement of their rights under Articles 14 and 19(1)(g). The challenge was primarily against Clause 4(3), which empowered licensing authorities with sweeping and unreviewable discretion. This case tested the limits of permissible state control under Article 19(6) and clarified that even regulatory statutes must conform to constitutional guarantees.

D) FACTS OF THE CASE

The petitioners, a trading firm in Kanpur, were engaged in the retail sale of coal. They were originally operating under executive orders until the Uttar Pradesh Government promulgated the Coal Control Order, 1953 on 10 July 1953 under Section 3(2) of the Essential Supplies Act, 1946. The order made licensing mandatory for stocking or selling coal and empowered authorities to fix prices and cancel licenses at will.

On 14 February 1953, authorities issued a directive reducing the allowable profit margins and incidental cost allowances, making it commercially unviable for traders. Traders challenged the directive. The government withdrew it after facing legal pressure but then reissued similar provisions through statutory means via the 1953 Control Order.

Later, on 13 October 1953, the authorities cancelled the petitioners’ license on allegations of overcharging and holding depots in others’ names. The petitioners claimed the cancellation was vague, arbitrary, and based on mala fide intent to exclude them from the business. They also alleged that the fixed pricing under Clause 8 rendered their business economically unsustainable. Hence, they filed the writ petition seeking a declaration of unconstitutionality and enforcement of fundamental rights.

E) LEGAL ISSUES RAISED

i) Whether Clause 4(3) of the Coal Control Order, 1953, providing unrestricted powers to cancel, grant, or modify licenses, was unconstitutional under Articles 14 and 19(1)(g).

ii) Whether the pricing formula under Clause 8 and Schedule III imposed unreasonable restrictions on trade.

iii) Whether the cancellation of license violated the principles of natural justice and due process under constitutional norms.

F) PETITIONER/ APPELLANT’S ARGUMENTS

i) The counsels for Petitioner submitted that the licensing clause under Clause 4(3) gave unregulated and arbitrary power to licensing authorities, violating the right to carry on trade under Article 19(1)(g). They emphasized the lack of checks, absence of rules, and absence of appellate mechanisms.

They argued that such wide discretion vested in executive officers allowed cancellation or denial of licenses without due process. They relied on the decision in Chintaman Rao v. State of Madhya Pradesh [(1950) SCR 759], which declared that restrictions on trade must not be excessive or arbitrary but proportionate to the public interest sought.

They further contended that the price control provisions were discriminatory and arbitrary. The price fixation done under Clause 8 was inconsistent across cities like Allahabad, Aligarh, and Kanpur, despite similar market conditions, violating Article 14.

They claimed that the cancellation order dated 13 October 1953 was based on vague allegations and done with mala fide intent, amounting to colourable exercise of power. It denied them the opportunity to dispose of coal stocks already held, placing them at risk of penal prosecution under the same Control Order.

G) RESPONDENT’S ARGUMENTS

i) The counsels for Respondents submitted that the Control Order was validly issued under delegated powers conferred under Section 3 and 4 of the Essential Supplies Act, 1946.

They defended Clause 4(3) by asserting that requiring “reasons to be recorded” ensured sufficient safeguard and prevented arbitrary exercise of discretion. They argued that the discretion was necessary due to localised conditions affecting coal availability and distribution.

On pricing, the respondents claimed that the price fixation under Schedule III followed a defined formula based on landed cost, reasonable incidental charges, and a 10% margin, thereby aligning with the “reasonable restrictions” standard of Article 19(6).

They denied discrimination in pricing across cities and emphasized the lack of specific data or affidavits to support petitioners’ claim. The respondents also argued that Clause 8 provided a justifiable price ceiling in public interest.

H) RELATED LEGAL PROVISIONS

i) Article 14 – Equality before law
ii) Article 19(1)(g) – Right to trade or business
iii) Article 19(6) – Reasonable restrictions
iv) Article 32 – Remedies for enforcement of rights
v) Section 3 and 4 of the Essential Supplies (Temporary Powers) Act, 1946 – Regulation of essential commodities

H) JUDGEMENT

a. RATIO DECIDENDI

i) The Supreme Court held that Clause 4(3) of the Order violated Article 19(1)(g) because it conferred unfettered discretion to executive officers without procedural safeguards. The clause failed the reasonableness test of Article 19(6). The lack of guidelines, appellate remedies, or oversight rendered the clause unconstitutional.

The Court declared that the discretion granted under Clause 4(3) was akin to “vesting unrestrained will of a single individual” without judicial or administrative control, referencing Yick Wo v. Hopkins [118 U.S. 356 (1886)].

ii) However, the Court upheld the price control provisions under Clause 8, stating that a 10% profit margin calculated over actual landed costs, as per Schedule III, did not amount to an unreasonable restriction. The formula was held to be objective, and no unfair discrimination or arbitrariness was proved.

iii) The Court also invalidated the cancellation of license as it stemmed directly from the void provision (Clause 4(3)). Thus, the cancellation order had no legal effect.

b. OBITER DICTA 

i) The Court observed that even regulatory laws with noble objectives must adhere to constitutional guarantees. No executive authority can override fundamental rights without proportional safeguards, irrespective of legislative intent or economic necessity.

c. GUIDELINES 

• Executive discretion under statutory orders must be regulated by guidelines.

• Authorities exercising licensing powers must be subject to judicial or administrative review.

• Delegation of discretion must avoid arbitrariness and ensure fair play in action.

• Legislative orders that infringe on freedom of trade must be narrowly tailored and proportionate.

I) CONCLUSION & COMMENTS

This landmark judgment remains a cornerstone in constitutional jurisprudence concerning executive discretion and administrative law. It reaffirmed that economic regulations must comply with constitutional safeguards and cannot override fundamental freedoms by arbitrary rule-making. The Court’s insistence on structured discretion, fairness, and non-arbitrariness continues to influence modern doctrines of reasonable restriction and delegated legislation. The ruling also highlighted the need for transparent regulatory mechanisms in essential commodity control. Though the pricing mechanism was upheld, the judgment decisively struck down unchecked licensing powers, protecting the autonomy of small traders against excessive state control.

J) REFERENCES

a. Important Cases Referred

[1] Chintaman Rao v. State of Madhya Pradesh, (1950) SCR 759.
[2] Yick Wo v. Hopkins, 118 U.S. 356 (1886).

b. Important Statutes Referred

[3] Constitution of India, Articles 14, 19(1)(g), 19(6), 32.
[4] Essential Supplies (Temporary Powers) Act, 1946, Sections 3 and 4.
[5] Uttar Pradesh Coal Control Order, 1953 – Clause 3, 4(3), 7, 8, Schedule III.