Constitutional Law II- Analysis of the Atiabari and Automobile case

PROJECT REPORT

Freedom of Trade & commerce- case analysis

By: Rachit Ranjan ID# 205046 4th Semester

Constitutional Law II- Rachit Ranjan, ID # 205046, 2nd Year

Constitutional Law II- Analysis of the Atiabari and Automobile case

NATIONAL UNIVERSITY OF JURIDICAL SCIENCES, KOLKATA

INTRODUCTION
The doctrine of freedom of trade, commerce and intercourse enunciated by Article 301 is not subject to other provisions of the constitution but is made subject only to the other provisions of Part XIII; that means that once the width and amplitude of the freedom enshrined in Article 301 are determined they cannot be controlled by any provision outside Part XIII.1 Over the years our constitution has had to face many problems pertaining to its drafting. Mr. H.M. Seervai has put it as defective drafting in his endeavor of critically analyzing our Indian legal system. One such part of the constitution is Part XIII, which has been a topic of considerable discussion over the years. The underlying doctrine which shadows part XIII is the doctrine of freedom of trade and commerce. The principle and its fundamentals have been laid down in two Supreme Court decisions namely Atiabari Tea Co. Ltd. V. State of Assam2, Atiabari case hereafter and in Automobile Transport Ltd. v. State of Rajasthan3, Automobile case hereafter. India was earlier governed by Government of India Act, 1935, but there was no entry relating to Trade and commerce in the act. In fact Section 297 of the Act had made internal trade totally by prohibiting fiscal and physical barriers and Section 298 consolidated on that point by prohibiting discrimination in business and trade on grounds of religion, color, place of birth etc.4 The doctrine of freedom of trade and commerce has been mentioned in Article 301 of our constitution, which becomes a governing authority for subsequent provisions in Article 302, 303(2), 304 and 305 stating any measure which restricts freedom of trade and commerce are void. It can
1 2

Majority Judgment delivered in the Atiabari Case. (1961) 1 S.C.R 809, 848. (1961) 1 S.C.R 809. 3 (1962) 2 S.C.A. 35. 4 H.M. Seervai, Constitutional Law of India, Vol.3 (Bombay: N.M. Tripathi Pvt. Ltd., 1983, 3rd edn.)

Constitutional Law II- Rachit Ranjan, ID # 205046, 2nd Year

Constitutional Law II- Analysis of the Atiabari and Automobile case be readily argued that the provisions of Articles have been derived from Section 92 of the commonwealth of Australia Act, 1901 since the language used in Article 301 is deceptively similar. One must also distinguish between Article 19(1) (g) and Article 301 as both guarantee freedom of occupation and business. The essential differences between the two are as follows: 1) Article 301 has a much wider ambit as it stretches out freedom of trade and commerce to any person whether it be a corporation or a company, whereas Article 19 (1) (g) restricts itself to be invoked by citizens only. 2) Article 19 (1) (g) being a fundamental right becomes subject to being suspended during the time of emergency, whereas Article 301 stays there to test the constitutionality of a legislation in matters relating to freedom of trade and commerce. Another point of distinction on the same line is that since Article 301 is not a fundamental right hence it cannot be enforced by a petition under Article 32. 3) Also if we talk about the subsequent provisions such as Article 304(b) which has to follow the procedure laid down in the proviso of the Article and obviously has to follow the principle of reasonability whereas Article 19 (6) just follows the principle of reasonable restrictions.5 Ever since the Constitutions inception the concept of freedom in the interpretation of Article 301 has been one of the most strenuous academic work out for jurists and scholars.6 The Atiabari case7 shocked the states by saying that tax laws are not outside the domain of Part XIII of the constitution. The proviso to Article 304(b) required the state to take prior permission from the center before they could exercise their taxing powers. The change came about only a year later in the Automobile case8 where the Apex court held that regulatory laws and compensatory taxes are outside the purview of Part XIII of the constitution. The immediate result of this decision was the floodgates of litigation and the states taxing power were reduced to that of

5 6
7 8

D.D. Basu, Shorter Constitution of India, (New Delhi: Prentice Hall India Pvt. Ltd., 1996) Mishra, Majushree, Freedom of Trade and Commerce, ( Mittal Publications, New Delhi, 1996) (1961) 1 S.C.R 809. (1962) 2 S.C.A. 35.

Constitutional Law II- Rachit Ranjan, ID # 205046, 2nd Year

Constitutional Law II- Analysis of the Atiabari and Automobile case levying a fee. The various observations of jurists and scholars are still subject to some complicated constitutional questions.

Research Methodology
For the purpose of research the researcher has relied on secondary sources to look for information relating to the doctrine of freedom of trade and commerce. The researcher has done his research keeping in mind the frequently asked questions rising out of this topic. The researcher has referred to renowned authors on subjects relating to Indian constitution and has done a detailed study on the issues that rise out of the relation between compensatory taxation and freedom of trade. The researcher will start by looking at the nature of Article 301 of the constitution and provide a brief history of events before the Atiabari Case and Automobile Case. The researcher also intends to provide a detailed critical analysis of both the cases and at the same also give importance to the logic behind the dissenting judgments. While talking about these issues the researcher would also be analyzing the provisions formulated to deal with trade and commerce and whether there the freedom talked about comes in degrees or is absolute and at the same analyse whether the provisions call for an amendment, in order to provide a greater sense of security to the commercial field?

Hypothesis
From the initial research it appears that Part XIII is a topic of heated discussion due to its complicated nature and the constitutional questions that still bother jurists and scholars. Hence for further research the researcher can form a hypothesis that the doctrine of freedom of trade and commerce hasnt been theorized in the manner it should have as till date it bothers specialists in the field of law.

Constitutional Law II- Rachit Ranjan, ID # 205046, 2nd Year

Constitutional Law II- Analysis of the Atiabari and Automobile case

Nature and scope

The Atiabari and Automobile Cases have become the underlying spirit of the doctrine of freedom of trade and commerce enshrined in Part XIII of the Indian Constitution. The researcher intends to looks into the doctrine in a detailed by doing a thorough case study of these cases as they have laid down the fundamental principles relating to Part XIII. The researcher is going to limit his scope to case study in which the rationale behind the judgments and dissenting opinion will be analyzed in detail to comprehend the complications in Part XIII and provide conclusive views on the judgments and recent position of the doctrine.

Tentative Chapterization
1) Chapter 1: Atiabari Case- history and a study: In this chapter the researcher intends to discuss the events that led to this case and then deals with facts, issues and judgments to ascertain the complication encountered by the judges in dealing with the topic. 2) Chapter 2: Automobile Case: a study: only a year later another landmark judgment came relating to freedom of trade and commerce. The researcher intends to do a thorough case study and understand the rational behind the judgment which reversed the order given in the Atiabari case. 3) Conclusion: The question that arises from all these events is that whether the drafting of Part XIII of the Indian Constitution is defective as put forth by Mr. Seervai? And if it so, is there a solution to this problem? These are the main questions the researcher will try to answer after carrying put a thorough case analysis in the first two chapters.

Constitutional Law II- Rachit Ranjan, ID # 205046, 2nd Year

Constitutional Law II- Analysis of the Atiabari and Automobile case

Bibliography
1. M.P. Jain, Indian Constitutional Law, (Nagpur: Wadhwa and Company, 2003, 5th edition) 2. D.D. Basu, Shorter Constitution of India, (New Delhi: Prentice Hall India Pvt. Ltd., 1996) 3. H.M. Seervai, Constitutional Law of India, (Bombay: N.M. Tripathi Pvt. Ltd., 1983, 3rd edn.) 4. V.R. Krishna Iyer, A Constitutional Miscellany, (Lucknow: Eastern Book Company, 2003) 5. Bakshi, P.M., The Constitution of India, (Universal Publications ltd., Delhi, 2000). 6. Mishra, Majushree, Freedom of Trade and Commerce, ( Mittal Publications, New Delhi, 1996)

Constitutional Law II- Rachit Ranjan, ID # 205046, 2nd Year