Introduction
Bentham, the founder of the Analytical school of Jurisprudence, dethroned the natural law from its high pedestal and replaced it by a logical scientific working principle of Utility - the hedonistic calculus of pleasure and pain to measure every law like other measurable things. He said that at every moment, a man’s object is to seek pleasure and shun pain.
According to Bentham, the main objective of law is to attain maximum pleasure for the maximum number. In essence, Bentham’s hedonistic calculus measured every law in terms of ends or interests.
The duty of the State is to provide for the protection of the laws and bring about the feeling of pleasure for the maximum number of people.
The modern concept of State is of a welfare state which strives to fulfill the basic requirements of its people. The concept of State has shifted from patriarchal to matriarchal society and with it the State has undertaken upon itself the duty to provide the basic requirements of its people, for which it has entered into the field of business or trade especially in the field of public utility services.
Article 39 of the Constitution of India further provides for the welfare activities of the State. Clause (b) lays down that the ownership and control over the material resources of the community is so distributed as best to serve the common good.
Clause (c) provides that the State shall direct its policy towards securing that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.
Thus, the concept of the welfare State is inherent in the Indian Constitution and the State is empowered to carry on any trade or business in the interest of the public good. It is also an acceptance of the Gandhian philosophy of universal good. Though Article 39 is a non-justifiable right, it is sacrosanct as far as the framing of government policies is concerned.
Government power to carry on business or trade
Article 19(1)(g) of the Constitution of India guarantees to all citizens of India have the right to practice any profession or to carry on any occupation or trade or business. However, this freedom is not uncontrolled and Article 19(6) further lays down that the State can impose reasonable restrictions on this right in the interest of the general public and can carry on any trade or business to the exclusion of private citizens, wholly or partially. Thus, the government can, in the interest of public good, take up any business or trade, whether along with the private sector or to the exclusion of the same. The government can prohibit private enterprises from entering into certain specific fields of business and trade if it feels that the interests of the general public shall be adversely affected by the same.
State trading and monopoly
Article 19(6) authorizes the State to carry on any trade or business to the exclusion of private citizens either wholly or partially. Thus, the government can create any monopoly in its own favor in the interest of the public good. The reason for the government to exclude other parties from carrying on certain businesses or trades is that there are certain services or goods which are required for the development of the country and the upliftment of the people. These are those trades which are in the interest of the public good.
In the case of Association of Registration Plates v Union of India and others[i] it has been held by Mathur J. that “Under Article 19(6)(ii) the State is free to create a monopoly in favor of itself but while doing so the entire benefit arising there from must go to the State and it should not be used as a cloak for conferring private benefit upon a limited class of persons.”
In Saghir Ahmad v State of Uttar Pradesh[ii] , the Supreme Court observed that the clause (ii) in Article 19(6) has been introduced with a view to provide that a State can create a monopoly in its favor in respect of any trade or business.
Article 298 further provides for the power to carry on trade, etc.
It states that- “The executive power of the Union and of each State shall extend to the carrying on of any trade or business and to the acquisition, holding and disposal of property and the making of contracts for any purpose:
Provided that-
(a) the said executive power of the Union shall, in so far as such trade or business or such purpose is not one with respect to which Parliament may make laws, be subject in each State to legislation by the State; and
(b) the said executive power of each State shall, in so far as such trade or business or such purpose is not one with respect to which the State Legislature may make laws, be subject to legislation by Parliament.”
Articles 298 and 19(6) clearly indicate that the State can carry on business and can even exclude citizens completely or partially from carrying on that business[iii].
Under Article 298, State can carry on an executive function by making a law or without making it. However, the exercise of such powers and functions by State is subject to the provisions of the Constitution particularly the Preamble, the Fundamental Rights and the Directive Principles of the State Policy[iv].
In the governmental trade, business or contracts, generally a public element is involved. Wherever such element is involved they must satisfy the requirements of fairness required of public action.
Trade, commerce and intercourse within the territory of India
Part XIII of the Constitution comprising of Articles 301 to 307 relates to the provisions regarding trade, commerce and intercourse within the territory of India.
Article 301 provides for the freedom of trade, commerce and intercourse throughout the territory of India.
Article 301: “Subject to other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free.”
The object behind this was to break down the border barriers between the States and to create one unit with a view to encouraging trade and commerce in the country.
This freedom is subject to the nationalization laws referred to in Article 19(6)(ii).
Article 302 empowers the Parliament to impose restrictions on free trade and commerce in public interest.
Article 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.”
The restrictions imposed must be reasonable in order to serve the public interest.
Article 303 lays down restrictions on the law making power of the Parliament and the State Legislatures regarding the preference to one State over another.
However, Article 303(2) empowers the Parliament to make laws giving preference to states facing scarcity of goods.
Article 303: “(1) Notwithstanding anything in article 302, neither Parliament nor the Legislature of a State shall have power to make any law giving, or authorizing the giving of, any preference to one state over another, or making, or authorizing the making of, any discrimination between one State and another, by virtue of any entry relating to trade and commerce in any of the Lists in the seventh schedule.
(2) Nothing in clause (1) shall prevent Parliament from making any law giving, or authorizing the giving of, any preference or making, or authorizing the making of, any discrimination if it is declared by such law that it is necessary to do so for the purpose of dealing with a situation arising from scarcity of goods in any part of the territory of India.”
Article 304 empowers the states to make laws imposing tax on goods as well as imposing reasonable restrictions on the freedom of trade, commerce and intercourse.
Article 304: “Notwithstanding anything contained in article 301 or article 303, the Legislature of a State may by law-
(a) impose on goods imported from other States or the Union Territories any tax to which similar goods manufactured or produced in that state are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced; and
(b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that state as may be required in the public interest:
Provided that no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the Legislature of a state without the previous sanction of the President.”
Article 305 saves the existing laws providing for state monopolies.
Article 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 301 shall affect the operation of any law made before the commencement of the Constitution (Fourth Amendment) Act, 1955, in so far as it relates to, or prevent Parliament or the Legislature of a State from making any law relating to, any such matter as is referred to in sub clause (ii) of clause (b) of article 19.”
Article 307 provides for the appointment of authority for carrying out the purposes of Articles 301 to 304.
Article 307: “Parliament may by law appoint such authority as it considers appropriate for carrying out the purposes of articles 301, 302, 303 and 304, and confer on the authority so appointed such powers and such duties as it thinks necessary.”
However, till date, no action has been taken under this provision.
Growth and development of public enterprises
With a view to achieve an economic regeneration of the country, and to improve the socio economic well being of the people, the Government of India has enunciated the goal of setting up in the country a socialist pattern of society.
The Industrial Policy Resolution of 1956 laid down that all industries of basic and strategic importance, or in the nature of public utility services, should be in public sector. Other industries, which are essential and required investment on a scale which the State alone could make, must also be in the public sector.
The Industrial Licensing Policy of 1970 put greater emphasis on the development of public enterprises.
A new policy was announced on 23rd December, 1977 which also laid emphasis on the promotion of the public sector.
The air transport was nationalized in 1953, life insurance in 1956 and fourteen banks in 1969.
The government also took over a number of sick units from private hands with a view to protect the jobs of the workers keeping in view the fact that the loss of jobs due to the closure of the enterprise would on the one hand adversely affect the growth of the economy at large and at the other bring down the public morale.
The dominant purpose in starting the public enterprises has been public good, and not profit motive and in many cases, it has been observed that the public sector enterprises have turned into major burden on the exchequer.
Classification of public undertakings
Functionally, public undertakings maybe classified under four heads:
(1) Financial institutions, such as, Life Insurance Corporation of India, Reserve Bank of India, Unit Trust of India, etc
(2) Promotional and Developmental undertakings, such as, Rehabilitation Housing Corporation Limited, Food Corporation of India, National Small Industries Corporation Limited, etc
(3) Commercial and Industrial undertakings, such as, State trading Corporation, Hindustan Machine Tools Limited, Indian Airlines Corporation, Air India, etc
(4) Public utilities are those undertakings which render certain essential services to the people, like transportation, electricity, communications, energy, etc. The objective of such undertakings is to provide services to the community economically and efficiently and making profit is not the primary aim[v].
Public utility services
Section 2 (n) of the Industrial Disputes Act, 1947 lays down the definition of public utility services to mean-
“(i) any railway service or any transport service for carriage of passengers or goods by air;
(ia) any service in, or in connection with the working of, any major port or dock;
(ii) any section of an industrial establishment, on the working of which the safety of the establishment, or the workmen employed therein depends;
(iii) any postal, telegraph or telephone service;
(iv) any industry which supplies power, light or water to the public;
(v) any system of public conservancy or sanitation;
(vi) any industry specified in the First Schedule which the appropriate government may, if satisfied that the public emergency or public interest so requires by notification in the Official Gazette declare to be a utility service for the purposes of this Act, for such period as may be specified in the notification.”
The Government is authorized to issue declaration only in respect of the industries enumerated in the First Schedule and there must be proved necessity for doing so. It must be in the interest of public or there must be public emergency to do so.
Public utility services are those services which fulfill some of the basic requirements of the public. They provide for the infrastructure for the development of the country.
Reasons for government monopoly
Following the hedonistic calculus of Bentham, the State has adopted the welfare policies as its duty. The reasons for having public utility services in government sector are-
(1) The change from the patriarchal to matriarchal form lead to the State taking up welfare activities in order to provide the basic requirements to all its citizens.
(2) For the equal distribution of resources to the public at large at a reasonable price required that the government should take up those businesses.
(3) Certain industries like the railways, airlines require the investment of heavy capital and as these provide basic amenities like communication , the government alone being capable of making such investment, had to take up these activities.
(4) Sometimes in order to cut through heavy competition relating to basic goods, the government takes up the business.
The various public utility services have been undertaken by the government in the interest of the public good. Article 19(6)(ii) authorizes the government to take up any trade or business in the interest of the public good to the exclusion of the private citizens, either wholly or partially.
The railways is one such service which is held in the government hands to ensure the carriage of goods as well as passengers from one place to another at reasonable rates. Further, the establishment of railways requires heavy investment which only the government can undertake.
Conclusion
The Constitution of India has empowered the State to carry on any trade or business in the interest of the public good. The public utility services are necessary for the good of the public as they fulfill the basic requirements of the people.
The public utility services are held in the hands of the government to provide the basic requirements to all the citizens at reasonable rates.
Thus, the government has immense power to carry on any trade or business in the interest of the public good. As the interest of the public is concerned, the same has to satisfy the criteria laid down under the provisions of Articles 14 and 21.
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