CHAPTER ll
FREEDOM OF INTERSTATE TRADE AND COMMERCE IN INDIA AND
WHAT IT MEANS
Art~cle 301 of the l n d ~ a nConstltut~onstates that "subject
to the other prov~sionsof this Part (Part XI11) trade, commerce
and tntercourse throughout the terr~tary of Indta shatl be free
"
T h ~ sartrcle does not use either the phrase "interstate" or the
phrase "rnirastate" to ~ndrcate spec~f~cally
as to what types of
trade and commercial actrvlt~es that are contemplated In this
article
The
marg~nal note
m e n t ~ o n s "freedom of
trade,
commerce and ~ntercourse" T h ~ salso does not help much to
understand the commer~cal a c t ~ v l t ~ ecomprehended
s
by Article
301 of the Constrtut~on
However, there
IS
one arnb~guous
phrase, namely, "throughout the terrftory of India" whlch has
given rise to the speculation that Art~cte 301
IS
cover both intrastate trade and Interstate trade.
Intended to
But such
speculation seems to be of doubtful valld~ty because of the
fact that Prov~sronsIn Part Xlll of the C o n s t ~ t u t ~ ohave
n
been
made to ensure economlc u n ~ t y of federal l n d ~ aby b r e a k ~ n g
the
tarrff
walls at the borders of the constituent States.
Further the fact that the focal provlsron relat~ngto freedom of
trade
and
commerce
was
removed
from
the
part
deal~ngwith fundamental r ~ g h t sa n d was piaced In Part Xlll of
the Constitution would show that Idea of guaranteeing freedom
of trade and commerce as fundamental right was given up by
the Foundlng Fathers of the l n d ~ a nC o n s t ~ t u t ~ o n ,Consequently
what we get in Article 301
is
commerce and ~ntercourse that
freedom of Interstate trade,
free flow of all a c t t v ~ t ~ e s
IS
k n o w n as trade, commerce and ~ntercourse throughout the
territory of Ind~a.
Three terms of great s ~ g n ~ f t c a n c eIn this artlcle are
trade, commerce and intercourse
They are not terms o f art
They are practrcal and hard terms of the bus~nessworld.
Sir
lvor Jenn~ngs sald that all Constrtut~ons are heirs of the past
as well as the testator of the future
Provisions of Article
301 fully confirms to the descr~ptrons of Sir lvor Jennings
statement
because
they
are
very
based
much
on
the
prov~sfonsof Amencan and AustralIan Constltut~ons relating to
~nterstate Trade and commerce
Therefore ~t
IS
necessary to
br~eflyexamine the tenor of the interstate trade and commerce
as
expla~ned and
expounded
by
the
judic~ary in
those
countrres, which w ~ l l help to throw l ~ g h ton the terms, trade
and
commerce
and
~ n t e r c o u r s e In
Art~cle 301
of
the
Const~tutionof tnd~a
1
Sir Ivor Jennings, Some Charactetistics of
(Uxiord U n i v r r s ~ t vP r r * \ , IL)5.1)at 1) 5 0
the Indian Constitution",
2.1: The Concept of Inter-State Trade and Commerce
In the United States
In the Constitution of Unrted States Sec.8, Clause ( 3 ) of
Article I empowers the Congress "to regulate commerce wlth
forelgn natrons and among the several States and with Indian
Since we are concerned with ~nterstate trade and
Tribes "
commerce, the more important phrase for the purpose of this
thews
IS
"among the several States
That is to say, the
"
Congress has been entrusted with the
commerce "among the several States "
power to
regulate
It is Important to note
here that the Amer~canConstitut~on does not speak in terms of
On the other hand, the
freedom of trade and commerce
commerce clause spells out regulatory power of the Congress
B e s ~ d e s ,i t uses the word "commerce" alone.
Therefore, the
commerce clause in the Amencan Constrtut~on naturally gave
They are
rlse to three important questions
1
To what commerce does t h ~ spower extend?,
2
To what extent may that commerce be regulated?; and
3
Whether
States
Freedom
of
the
regulatory
power
be
e x e r c ~ s a d by
the
In the absence of congressional regulation?
interstate
trade
and
commerce
has
to
be
understood In the Itght of answers to the aforesaid question.
As
a
matter
of
fact
the
commerce
clause
In the
Amencan Const~tutron remalned f o r several decades In almost
a dormant stage.
The first important case on the subject that
came before the Supreme-Court In the year 1824 was Gibbons
V. ~ g d e n . ~ The NewYork State Legislature gave Robert
L~v~ngston
and Robert Fulton, the inventors of the Steamboat,
the
rlght to
exclusive
Steamboats.
navlgate
NewYork
waters wlth the
This was done under a statute enacted by the
NewYork State Legislature In 1797
t h ~ s rlght to Ogden.
L~vlngston and Fulton sold
But rn 1793 the Congress enacted a
statute ent~tled, "An Act for the enroll~ng and licensing shlps
and
vessels
to
be employed
In the
f~sheries, and for regulatrng the sale,"
vessels enrolled
coasting
trade
and
which prov~ded that
rn pursuance of the Act and having a license
in force, "shall be deemed s h ~ p s or vessels of United States,
ent~tled to the privileges of sh~ps of vessels employed in the
coasting trade or fisheries,"
G~bbons, whose
boats were
licensed under 1793 Act of Congress, ran Steamboats between
NewYork and New Jersey Ports
Consequently Ogden sued
Gibbons in State courts to have h ~ mstopped,
The NewYork
court decided for Ogden and ordered G ~ b b o n s to cease his
boat trips.
G~bbonsappealed to Supreme Court and won his case
But the importance of the Gibbons Case lies in the fact that
~t answered certain important quest~ons.
The first question
related to the meaning of the word "Commerce." The counsel
for the appellee (Respondent) t r ~ e dto l~rnitthe meaning of the
word "Commerce" "to traffic, to buying and selling, or the
Interchange of cornmod~tiss", and he would not admit that it
Rejecting the restrrcted definition, Chief
Includes navigation.
Justice Marshall said:
applicable
to
"this would restrict a general term,
many objects,
to
one
of
significations
its
Commerce, undoubtedly, is traffic, but ~t is something more;
1s
intercourse.
It
describes
the
commercial
it
lntercourse
between nations, and parts of nations, in all its branches, and
IS
regulated by Congress prescrlblng rules for carrying on that
lntercourse."
Proceeding
further
Chlef
Justice
assert~vety stated that "the mind can scarcely
Marshall
conceive a
system for regulating commerce between nations which shall
exclude all taws concerning nav~gat~on,
wh~chshall be silent on
the admission of the vessels of one natlon tnto the ports of
the other and be conflned l o prescrib~ngrules for the conduct
of indiv~duals in the actual employment of buying and selling,
or of barter"
The next questlon of Glbbons case
subject to which the power
IS
IS
on what i s the
a p p l ~ e d Referr~ngto the word
"among" in the phrase commerce "among the several States"
Chief Justice
Marshall sald that the word "among" means
" ~ n t e r m ~ n g l ewith":
d
and commerce among the States cannot
stop at the external boundary Irne of each State, but may be
Introduced into the interlor
Further he sald that the word
"among" may very properly be restricted to that commerce
which concerns more States than one
Coming to the next questlon - what
IS
this power?,
Chef Justice Marshall observed in Glbbons case that "it is the
power to regulate,
that I S , to prescribe the rules by whlch
commerce i s to be governed.
vested
in
Congress, is complete
T h ~ s power, like all others
in ~ t s e l f ,may be
exercised to
its utmost extent, and acknowledges no limitations other than
those are prescribed in the Constitution."
the congressional pow&
Having explained
to regulate interstate commerce as
power complete in itself, Chief Justice Marshall tried to answer
the question whether the States possessed concurrent r ~ g h t
w ~ t hCongress to regulate commerce amongst the States, thus:
"since, however, in exercis~ngthe power of regulating their own
purely Internal affairs, whether of tradlng or police, the States
may sometimes enact laws, the valrdlty of which depends on
t h e ~ r rnterferrng
with,
and
b e ~ n g contrary
to,
an
act
of
Congress passed in pursuance of the Constitution, the court
will enter upon the inqulry, whether the laws of NewYork, as
expounded by the highest
tribunal of that State, have, in thelr
appltcatlon to this case, come into collislon with an act of
Congress, and deprived a cltlzen of a rlght to which that act
ent~tles him.
Should this collislon exlst, it will be immaterial
whether those laws were passed In virtue of a concurrent
power to regulate commerce with foreign nations and among
the several States or rn vrrtue of a power to regulate their
domestic trade and pollce.
In one case and the other, the
acts of New York must yield to the laws of Congress."
One remarkable feature of the landmark decision in
Glbbonn Case is the comprehensive definition given by Chief
Just~ce Marshall t o the word "Commerce".
By virtue of this
s
decision "commerce" means not merely the age old a c t ~ v ~ t i eof
buying and selling, or the Interchange of commod~tiesor mere
barter system or trafflc In the restricted sense and ~t is
somethrng
more than
all
these
act~vrtles and it
includes
commerc~al lntercourss of all types and descriptions including
n a v ~ g a t ~ o n But for the pragmatic approach of Chief Justice
Marshall In givtng a comprehensive definition to the
word
"commerce" in the American Constitution, the interstate trade
and commerce would have been c o n f ~ n e dto very narrow area
jeopardising free flow of goods and free transactions across
The second Important proposition laid down
the State Borders.
b y Chlef Justice Marshall
ArtlcleI
comprehends
IS
that Section 8 Clause (3) of
~nterstate trade,
that
is
to
say,
it
comprehends that "commerce whlch concerns more States than
one "
The third propositron that the power of Congress to
regulate interstate commerce is a plenary power and it is
complete in itself, i s undoubtedly a formidable concept.
But
h ~ s fourth p r o p o s i t i ~ n in Gibbons C a s e has thrown some
shadow
on the
third
proposlt~on
His
statement that
In
exercrslng the power regard~ngpurely ~ n t e r n a laffairs, whether
of trading or potice, if the State enacts laws, the validity of
which depends on the ~ n t e r f e r ~ nw
g ~ t hand being contrary to an
act of Congress, the court w ~ l lenter upon the enquiry whether
the laws of the State has, In t h e ~ r applrcation to the given
case, come to collision with the act of Congress, and deprive
a c ~ t ~ z e of
n a right to w h ~ c h the congressional enactment
entitles him, has failed to clear the doubt whether power to
regulate commerce among the States i s a concurrent power or
not
a
The ambiguous language used In this connection caused
doubt
not only
the
type
of
the
power,
concurrent
or
exclusive, contemplated In S e c t ~ o n 8 Clause (3) of Article I
and also on the plenary nature of the congressional power
over the subject matter
The equivocation in the language used in Glbbonn Case
seemed to have given rise subsequently to "Cooley doctrine"
enunc~ated in Cooley V. Board of Wardens of the Port of
~ h i l a d e l p h l a . ~The question before the Supreme Court
in this
c a s e was that if Congress had not enacted a law, would the
States then be free to regulate commerce as they see fit?
State of Pennsylvania enacted a law w h ~ c h required boats
comlng from and going to Ports outs~dethe State to take on a
p ~ l o t from
Ph~ladelphia to
n a v ~ g a t e while
Cooley challenged ~t saying that
the
In the harbours
the commerce
Clause denied
any power to regulate commerce, and that a
States
regulation concerning ships w h ~ c htravel between States is the
regulations of interstate commerce.
The Court upheld the
Pennsylvania award, and s a ~ dthat though a regulation of ships
15
a regulation of interstate commerce, the States were free to
act In the absence of congress~onal tegislat~on on the subject.
Thrs
proposition came
to
be
known
as
Cooley
Doctrine.
Explarning this further the Court s a ~ d , "whatever subjects of
this (commerce) power are rn t h e ~ r nature national, or admit
only of one uniform system or plan of regulation,
may
justly be
said to be of such a nature as to require exclusive legislation
by Congress
national
.. (but the pilotage system)
i s local and not
it is likely to be best provided for, not by one
system, or plan of regulations, but by as many as the
legislative
discretion
of
the
several
States
should
deem
applicable to the local pecullarlties of the ports within their
I ~ r n ~ t s . "Thus the Cooley Doctrine virtually gave power to the
States to regulate all local matters even if these regulations
have Impact on the rnterstate commerce ~n the absence of
leglstat~onmade by Congress coverlng the field.
2 . l . c : Theory of Congress's Domlnant Role over Inter-
t a t e commerce
Another important case in thls connection is Hourten,
East & West Texas Rly-Co. V.
U.S. (Shreveport Rate
the Issue in this case related to the power of Congress and
11s agent, Inter-State Commerce Commission, to control rail
road rates between Shreveport rn Louisiana and certain points
In eastern Texas for which Shreveport was the
centre
In
order
to
keep
Texas
trade
natural trade
for
Texans,
the
government of Texas fixed the rates between eastern Texas
p o ~ n t s and
such Texas c ~ t ~ eas
s Dallas and Houston so low
that these eastern p o ~ n t swould have cheaper access to the
Texas cities eventhough they were farther away than was
Shreveport.
At
this
p o ~ n t , the
Inter-State
Commerce
Commrssion ordered that the ~ntra-Texasrates be raised to the
same level as the interstate Texas-Louisiana rat1 road rates.
This order was challenged
The Supreme Court upheld the
val~drty of the action of the federal government.
It declared
that power to regulate interstate trade and commerce confided
4
234 U S 342 (1914), r r p o r t r d a150 In N T L)owlrng. Carer on Conmtltutional Law, r i f t h Edn ,1954, 11 2 8 0
to Congress was complete and paramount.
It opined that "by
vlrtue of the comprehensive terms of the grant, the authority
of Congress is at all times adequate to meet the varying
ex~gencies that arise and to protect the natlonal interest by
securing the freedom of interstate commercial intercourse from
local c o n t r o ~ . " ~Further the Court said "wherever the interstate
and Intrastate transsctions of carrrers are so related that the
government of the one involves the control of the other, it i s
Congress, and not the State, that
IS
entitled to prescr~be the
f ~ n a l and dominant rule, for otherwise Congress would
defiled the
and
State,
exercise of ~ t s c o n s t ~ t u t ~ o n aauthority,
l
be
and the
not the nation, would be supreme within
the
national f i e ~ d . " ~ As po~nted out by an eminent writer, "the
court in this case spoke about the paramount character of the
power to regulate interstate commerce and laid stress on the
national interest in order to stretch the boundaries of this
over new and wider areas
power
"7
2 . l . d : Commerce Enters Employer-Employee Relatfonshlp
Another area to w h ~ c h the commerce clause has been
extended i s
enacted
Labour and
National
Labour
Employer relationship.
Relations
Act
of
Congress
1935
which
guaranteed to workers the right to self-organisation, collective
7
Ur K P Krishna S t ~ ~ t t The
y,
Law
Federalism p l h l
of Union-State Relations and Indian
bargaming
through
representatives
of
thelr
choosing
and
engage in concerted activities for the purpose of collective
bargalnlng or other mutual aid or protection.
declared
that
any
interference
by
an
The law also
employer
with
the
exerclse of the rights guaranteed to workers would be an
unfalr labour practice.
Besldes, ~t authorised the National
Labour Relations Board to prevent any person from engaging
In any unfair labour p r a c t ~ c e . ~This legislation was challenged
In National Labour Relations Board V. Jones Laughlln Steel
~ o r p o r a t l o n . ~ The company w a s the country's fourth largest
producer of iron and steel.
It had subsidiaries in several
States and sales agencies all over the United States.
The
Labour Relations Board found that rt had discriminated against
union members and had ~ntimjdated employees to keep them
out of the Union.
The central constltut~onatissue in this case
was whether, under the commerce power, Congress could make
The company
that conduct unlawful in such an enterprise.
vigorously contended that the Act was not a true regulation of
Interstate commerce or of matters whrch directly affected it but
on the contrary had the fundamental object of placing under
the
compulsory
supervision of
the
federal
industrial labour relations within the nation.
to accept
the
contention of
government
all
The court refused
the company.
Upholding the
valrdity of the law the Court declared that "although activities
may be intrastate in character when separately considered, if
H
Srr 10(a) of the National Lal~uurRclations Act of 1935
I)
:iO1 U , S I (1937)
p 316
D o w l ~ r ~ gCases
,
on Conutitutional Law, 5th Ed.LlCB,
they have such a close and substantla1 relatlon to interstate
commerce that their control
protect
that
Congress
commerce
IS
from
e s s e n t ~ a i or appropriate to
and
obstructions,
power to
exercise that
burdens
cannot be denled the
c o n t r ~ l . " ' ~Proceeding further the Court observed:
"We think
that ~t presents in a most striking way the close and intimate
relatron which a manufacturing ~ndustrymay have to interstate
commerce
we
and
have
no
doubt
that
Congress
had
c o n s t ~ t u t ~ o n aauthority
l
to safe-guard the right of respondent's
employees to self-organisation and freedom In the choice of
representatives for collective bargalning.""
The concept that the commerce clause would take into
~ t sfold even intrastate actrvttes whrch have telling impact on
Interstate commerce activlttes has been reiterated further in a
few other important cases
to rnentton U.S.
V. Darby Lumber co.lZ
Labour Standards Act
challenged.
In t h ~ sconnection ~t
The
enacted
Act
set
preventing the shipment
up
by
a
IS
necessary
In this case Fair
Congress
in 7930 was
leg~statrve scheme
for
In interstate commerce of certain
products and commodities produced In United States under
labour conditions regardlng wages and hours which fail to
confirm the standards set up by the Act
The complaint
against Darby company was that ~t pard less than the minimum
wage required by the federal Act and did not pay the statutory
10
Itl~d,
11
Ihid, l)owlir~g,o p r ~ t :I25
12
.'312 11s 100; Dowling.
Dowling, op
clt
1) ?%.'1
~ 1 1 )t
11 1)
327
over-time rate for
hours worked.
extra
The
respondent
company manufactured timber and f~ntshed lumber, much of
w h ~ c hwas supplied outside the State.
One important issue in
this case was, whether Congress had power to prohibit the
employment
of
workmen
Interstate commerce
at
in the
other
production of
than
goods "for
prescribed wages
and
Answering the question in the affirmative, Mr.Justice
hours."
Stone, who delivered a judgement of the Court, said:
"The
power of Congress over interstate commerce is not confined to
regulation of commerce among the States,
It extends to those
activities ~ntrastatewhich so affect interstate commerce or the
exercise
the power of
of
Congress over
regulat~on of them approprrate means to the
it
as to make
attainment of
leg~timateend, the exercise o f the granted power of Congress
to regulate interstate ~ o r n r n e r c s . " ' ~ Further, he stated that
Congress 'may choose the means reasonably adopted to the
attainment
of the
perm~tted end, eventhough they involve
control of intrastate activit~es Such legislation has often been
sustained with respect to powers, other than the commerce
power granted to the national
government, when the means
chosen, although not themselves within the granted power,
were
nevertheless
deemed
appropriate
aids
to
the
accomplishment of some purpose within an admitted power of
the national government ."14
1.7
Dowling op cit p 333
14
Ihid, p.334
2.1.e: When Home-grown wheat competed wlth
wheat
In commerce?
Another landmark case, which followed the similar line
of reasoning, was Wlckard V. ~ i 1 b u r n . The
I ~ fact of the matter
1s that In the thirties of this century there w a s economic
depression which hit the United States sending the prices to
the rock bottom.
Consequently efforts had been made by the
federal government
to stop further
economic deterioration,
regulate production and raise prices of commodities to a
In this connect~on the federal government
particular level.
introduced number of measures towards this end under the
famous New Deal Programmes
An important measure brought
tn the field of agriculture was Agricultural Adjustment Act
1938.
of
It was intended to control the volume of wheat moving
In Interstate commerce
in
order to
avoid
surpluses
or
shortages and the consequent abnormally IQW or high wheat
prices and obstructions to commerce.
The Act was challenged
rn this case.
Under the
above said A c t ,
Filburn was
allotted
a
spec~fic number of acres for wheat, but he sowed several
acres over his quota and raised an excess crop of wheat.
He
planned to use a substantla1 part of this 'excess wheat" to
feed his own stock and for other domestic purposes.
penalized for
violating the Act.
So,
He was
he questioned the
constitutional power of Congress to regulate crops destined
never to
leave the farm.
His argument was that the Act w a s
des~gned to regulate production and consumption of wheat,,
and such activities
were beyond the reach of congressional
power under the commerce clause, because they were purely
local In character and their effects upon
were atmost indirect."
interstate commerce
The Court rejected the contention and
Mr.Justice Jackson, who spoke
upheld the validity of the Act.
for the court, said that in earlier cases this Court recognised
the relevance of the economlc effects in the application of the
commerce clause,f6 and therefore, whether the subject of the
regulation
in question was
"marketing1' was 'not
"production", uconsumption", or
material for purposes of deciding the
question of federal power before us.
That an activity is of
local character may help in doubtful case to determine whether
Congress
intended
to
reach
it
"I7
Proceeding
further
Mr Justice Jackson observed that even if an "activity be local
and though it may not be regarded a s
commerce,
it
may still,
whatever its nature, be reached by Congress if it exerts a
substantial economic effect on Interstate commerce and this
irrespective of whether such effect is what might at some
earlier time have been defined a s "direct" or
He
also observed that the primary purpose of the Act was to
rncrease the market
prlce
of
wheat,
and to
achieve that
purpose the Congress had to l i m ~ t the volume of wheat that
could effect the market
17
Ihid, p 3 4 2
18
Ihid
S t ~ m u l a t ~ oof
n commerce was a use
regulatory function under the commerce power, and.
of the
that "wheel
therefore, Congress might have properly considered
consumed on the farm when grown, rf
outside the
wholly
of regulation, would have a substantial effect in
scheme
defeating and
at increased
therein
purpose
obstructing the
prices.lg
It
is
to
stimulate trade
in this
Mr.Justice Jackson remarked that even if it is
connection
assumed that
the excess wheat raised at the farm was never marketed, ' i t
supplles a need of the man
be reflected by purchases
~n t h ~ s sense
wheat
who grew
it which would otherwise
in the open market.
competes
with
wheat
Home-grown
in
achieve
commerce u20
Omnlbus
2.1.f:
Commerce
Power
to
achleve
soclal
objectives
The apex Court
brought
several
I ~ I Untted
activites
States by
various decisions
and transactions which
stretched
across State borders w i t h ~ nthe a m b ~ tof commerce clause and
also within the regulatory power of the Congress.
In Unlted
States V. South Eastern Underwriters ~ s s o c l a l l o n , ~ ' the
questton
was
whether
fire
stretched across the State
insurance
transactions,
which
borders, constituted, 'commerce
among the Sev0ral States" so as to make them subject to
19
lhid, pp 343-344
21
322 U.S.533,
regulat~onby Congress under the commerce clause? Mr.Justice
Black,
who spoke for the
court, Stated that the modern
Insurance business, which was b u ~ l tupon the sale of contracts
of
~ndemnrty, had become
Important
branches
of
one
of
commerce
commercial enterprise directly
largest
the
Therefore,
and
no
most
modern
affects so many persons in all
So, he came to
walks of l ~ f ea s did the insurance business.
the conclusion that 'a nationwide b u s ~ n e s s I S not deprived of
i t s Interstate character merely because ~t
contracts which are local in nature.
IS
b u ~ l t upon sales
Were the rule otherwise,
few busmess could be said to be engaged in interstate
commerce.22
That apart, Congress used the commerce clause even
to prohibit certain interstate transact~ons to achieve social
objectives.
Legislation made In t h ~ s connection by Congress
were duly upheld by the Supreme Court as legitimate exercise
of
commerce power.
A
Congressional
enactment,
which
prohibited the interstate sh~prnent of lottery t~ckets,was upheld
by the Court in Champion V. ~ r n e s on
~ ~the
reasoning that
Congress was the only authority capable of destroying this
"widespread pestilence", and the Court "should hesitate long
before adjudging that an evrl of such appalling character,
carried on through interstate commerce, cannot be met and
crushed by the
only
power competent to that end."
In
Camlnetti V. Unlted statesz4 the Court held that Congress
Ilht
p r o h ~ b ~ tthe
mmerce
purposes.
for
the
woman
transportatlon
of
purposes
debauchery
of
In Hoka V. Unlted
in
~nterstale
and
ktnd~ed
the Supreme
Court
sustained the constitutional~ty of the "Whrte Slave Traffic Act"
whereby transportation of a women rn interstate commerce for
the purpose of prostitution was forbidden
The Supreme Court
also approved the Pure Food and Drug Act, which made rt a
crime to send impure food or drugs across State lines.26
Further, the Supreme Court oplned that Congress could validly
assume power under the commerce clause to regulate the right
to carry across a State line In a private automobile five quarts
of whisky intended for personal c o n s u m p t i ~ n ,to
~ ~ prevent
the
taking of stoten automob~les from one State to another,2e to
control diseased cattle running between Georgia and Florida
Commenting on several of these decisions, Mr
29
Justice Day
s a ~ dIn Hammer V. ~ a g e n h a r t ~(The
'
Chlld Labour case) that
"although the
power
over
Interstate transportation
was
to
regulate, that could only be accornpl~shed by prohibiting the
use of facilities of Interstate commerce to effect
Intended."
25
227 tl S 30R
Zh
Hippolete Egg.Co. V. U.S., 220 U S 45
27
U.S. V. Simpson, 252 LJ S 4h.5
28
Brooke V. U. S , 267 CJ S 4 3 2 a t 436-439
;."I
Thornton V U . S . , 27 1 , 1 S 4 14 a1 425
30
247US251
the evil
2.1.8: Conelurlon
The aforesaid discussion of Supreme Court decistons in
U n ~ t e d States pertaining to its commerce clause would
the
show
that
the
commerce
clause
In
the
United
States
Constltut~onhas been given a very wtde connotation to bring
wrthln rts purview trad~tionalactiv~tesof buylng and selling and
barter systems or commercial activites which concern more
than
one
substantial
State
and also
effect
on
intrastate
interstate
activites
which
Besides,
commerce
have
the
regulatory power of Congress has been extended even to
p r o h ~ b ~interstate
t
transactions which have harmful effect on the
Hence today a commerce clause and the power given
society
to Congress by it have covered very wide field which, perhaps,
was
not even dreamt of b y the founding Fathers of the
Constitution.
Commenting
upon
the
expandrng
domain
of
the
commerce clause in the Unlted States, Mr.Justice Black said:
"Not only, then, may transactions be commerce though noncommercial;
they
may
be
commerce
though
illegal
and
sporadrc, and though they do not utilize common carriers or
concern the flow of anything more tangtble than electrons and
~nformation."~' Mr.Justice Jackson summed up the cases of
the commerce power, when he Stated in 1948:
"if it is
rntrastate commerce that feels the pinch, it does not matter
how local the operation that applies the squeeze.H32 Further,
U.S. V South
Eaetern Underwriters Ae~ociation.322
U . S 539
31
See
:42
U.S. V. Women'. Sportware Manufacturer Amnociat8on. 33h I]S
I h O (1949)
Professor Frank stated the present posrtion of the commerce
clause thus
government
"Today under the commerce power the federal
regulates
the
labour
of
relations
major
all
bus~nesses;farm production; restraints of trade, the securities
market, the structure of the publlc u t ~ l ~ tIndustry;
y
the
of food and medicines; traffic in harmful drugs,
purity
firsarms and
women, and countless other of the relat~ons of life."33 Thus,
In the United States, the commerce clause has been stretched
by the judiciary to cover wide variety of fields of activities,
and the commerce power has got itself shaped in the course
of time into a formidable federal power to ensure economic
unlon and to achieve socia! objectives.
2.2: Inter-State Trade and Commerce In Australla
The
Commonwealth
Constrtut~on of
made
Australia
elaborate provisions relating to Interstate trade and commerce
probably due to the fact that the provisions of the Constitution
were influenced by the development of law ~n the United
States
Australia
Section 51Ii) of the Commonweatfh Constitution of
States:
"the
Parliament
shall,
subject
to
this
Const~tution, have power to make laws for the peace, order,
and government of the Commonwealth with respect to trade
and commerce with other countries and among the States."
This provlslon is virtually in tune wlth the provisions of Article
I Sect~on8 Clause (3) Of the American Constitution.
'
J P Frank, Caaes
on the
Constitution, 1951, p 95
Relevant
prov~sions for the
purpose of
"among the
commerce
this
States "
Undoubtedly
Interstate trade and commerce.
States
Constitution
Interstate
trade
power to
and
a d d ~ t ~ o nof
the
word,
trade
it
and
indicates
A s in the case of United
make
commerce
Commonwealth Parliament.
are
thesis
laws
has
respect
to
entrusted
to
with
been
However one difference is the
*TradeM in
Section
5t(l)
of
the
Australian Constitution.
The
Australian
Const~tution does
not
speak
with
entrustment of power t o Commonwealth Parliament to regulate
Interstate trade and commerce
states
It goes further Section 92
"On the imposition of uniform dutles of customs, trade,
commerce,
and intercourse among the States, whether by
means of internal carriage
absolutely
free".
This
or
ocean navigation,
shall be
Section introduces an element
freedom and qualifies ~t by an adjectlv9 'absolutely".
of
Further,
Sectron 92 introduces three terms, namely "trade, commerce
and intercourse".
of customs.
It a l s ~st~pulates~mposrtionof un~formduties
Besides, the phrase whether by means of internal
carriage or ocean navigation seems to have limiting effect on
the freedom contemplated there~n.
Another
provision,
w h ~ c h limlts
the
power
Commonwealth Parliament, i s Section 99 which States:
of
"the
Commonwealth shall not, by any law or regulation of trade,
commerce or revenue, glue preference to one State or any
part thereof over another State or any part thereof."
followed by Section 100 which s a y s ,
not by any law or
This is
"the Commonwealth shall
regulation of trade or commerce, a b r ~ d g e
the
r ~ g h t of
a State or of
the
res~dents therein to
the
reasonable use of the waters of rlvers for conservation or
~rrlgatron". But at the same time, Section 98 States;
"the
power of the Parliament to make laws with respect to trade
and commerce extends to navigation and shipping, and to the
property of any State railways,". Further, Section 102 amplifies
the
of
power
Commonwealth
Parliament
contemplated
In
Sectton 98 by authorising the Commonwealth to forbid State
preferences and
railways
discriminations
with
respect to
their
own
These two Sections a r e ev~dently the result of
34
American decisions in Glbbons V. Ogden and The Shreveport
Rate Care.
2.2.8: Amblt of
In
the Commerce Clause
the light of the aforesa~dprovisions of the Australian
Constitution it is necessary to dlscuss briefly the Australian
commerce
power.
The
first
case
which
mads
eignifrcant
observation is W & A McArthur V. ~ u e e n s l a n d . ~The
~ Court
34
Section 102 states: "The Parliament may by law wlth respect to trade and
commerce torbld, as to railways, any preference or discrimination by
any State, or by any authority constituted under a State, If such preference or disctimination is undue and unreasonable, or unjust to any
State; due regard being had to the financial responslbtlities Incurred by
any State in connection with the construction and maintenance of Its
But no preference or discrimination shall, within the meaning
ol this Sectlon, be taken to be undue and unreasonable, or unjust to
any state^, unless GO adjudged hy the Interstate Commission
railways
:JT)
(1920)28 C . 1 . R 530, See alqo c u l ~Howard,
~ ~
Australian Federal C,onstitutional Law, 3rd Edn
1985 a t p 285
s a ~ dthat the trade and commerce "has never been confined to
the mere act of transportation of merchand~se over the frontier.
That the words include that act IS, of course, a truism.
that they go far beyond it is a fact quite as undoubted.
But
All
the commercial arrangements of whtch transportation i s the
direct and necessary result form part of trade and commerce"
Tenor of our observation in McAtthur Case i s such that it
virtually echoes the sound views of Chief Justice Marshall
expressed in Glbbonr Case.
Nearly twelve years later the Privy Council discussed
the subject matter in James V. Cowan 36
This case arose
out of an appeal from the decision of the High Court of
Australla in an action
of
In which James,
the Plaintiff, a resident
South Australia, claimed damages from the defendants,
Cowan and others, for trespass of his goods
the producer of dried fruits.
The plaintiff is
The defendants are the then
Mtnister of Agriculture for South Australia and the members
and servants, agents of the D r ~ e dFruits Board set up by the
Dried
Fruits
Act,
1924
of
the
State
Legislature.
The
defendants justified the alieged trepass under the State Act;
the pla~ntiffdenied that the acts done were authorised by the
Act, and alleged that if they were, the authority given
acts done under the authority were
and the
invalid by reason of
Section 92 of the Constitution of Australia, which provided that
trade, commerce and intercourse among the States shall be
:Ih
{ 1932) 47
CLR 386 (P C: ) , takrn from Geoffrey Sawer, Camem on the
Conrtitution of the Commonwealth of Australia 3rd Edn p 158
absolutely free.
The appeal was concerned wtth the South
Australian Act which, conferred certsln important powers to that
Orred Fruits Boards
const~tuted under it
The Dried Fruits
Board first attended under relevant provislons of the Act to
enforce on South Australian growers a system of quotas for
export to other States.
James res~sted these measures and
ult~matelyobtained a decision of the High Court that the quota
system infringe Section 92 of the Australian Constitution in
James V. South ~ u r t r a t i r n . ~Before
~
that decision, the Board
proceeded in respect of James by the method of acquisition
under other Sect~ons of the State Act, and seized most of
James's stock.
of the
James then brought the present action.
contentions of James
IS
that
One
the orders of acquisition
made by the Minister and members of the Dried Fruits Board
are viohtive of Section 92 of the Australjan Constitution.
James succeeded In the above case.
In this connection
the Privy Council said that the r ~ g h t of interstate trade and
commerce protected from state interference is a personal right
attach~ngto the individual and not attaching to the goods. A
r personal right of trading interstate by the
former owner (James) berng interfered with?
That is a
question is how
personal right, not a property right, and it is a right which no
s~ngleState can give.
The right of passing from
one
State to
another, of transporting goods from one State to another, of
deallng with them in the Second State cannot be conferred by
either State solely.
And so Section 92 must be understood.
The right I S not an
adjunct of the goods, i t is the possession
of the Individual Australian protected from State interference by
Significance of Privy Council observation in this
Section 92
case lies in the fact that i t has declared the right to carry on
Interstate
trade
commerce
and
lndrvlduals in Australia,
as
a
personal
lnasrnuch as i t
right
of
not conferred or
IS
given by any single State to individuals in Australia, i t can not
be sought to be curtailed or interfered w ~ t hby any constituent
unlt of the Commonwealth of Australia.
which
right
Constitutronal
has
In short, i t is s
Interferences wlth the exercise of such right
any
and
prevailed,
IS
State
unconstitutional
Next Important case of reaching consequence i s James
V. C o r n m o n ~ e a l t h . ~ ~The crucial question before the Privy
Councll
in
this
appeal
is
whether
Section
92
of
the
Const~tution blnds a Commonwealth and if so whether the
Dried Fruits Act which regulates commerce by fixing a quota
for export to contravene Section 92?
Orled
Frults Act
1928
-
1935
The Commonwealth
prohlbrtsd
under
Penalty
Interstate delrvery of Dried Frurts sale by licensed persons
except Inaccordance with the terms of the license.
Under the
Act the prescribed authority was given power to forbid and
cancel a t~cense and the
Governor General was authorised to
make, and has made, regufatlons for giving effect to that Act.
The
regulations
so
made
required,
among
others,
that
llcencees should export a percentage of the Dried Fruits from
:iH
( 1 9 3 h J 55 C
L R I; See
a150
Geoffrey Sawer, op cit p
163
Australla, and authorised the Commerce M~nisterto determine
and
specify export quotas of srxty to ninety percent.
James
took a stand (appellant) that an Act and regulation and quota
determination were invalid; he refused to apply for a license or
to
undertake
to
abide
the
by
prescribed
conditions
Consequently his consignment was seized and forfeited by the
Rallway
and
authorities
shipp~ng companies
to
whom
he
tendered his Dried Fruits for carnage from the State of South
Australla to other States and refused to take them because of
the
prohibitions and
penalties imposed under the Act
by
reason of the circumstance that the appellant has no license.
In the High Court the case was allowed in favour of the
respondent, because the High Court could not hold that the
Commonwealth was bound by
from
its
earlier
opinion
Section 92 without departing
in
in
1920
McArthur's
Case.
Therefore the matter was brought before the Privy Council by
James.
The argument advanced on behalf of the respondent
w a s that trade and commerce
means the
S e c t ~ o n 51(1) and in S e c t ~ o n 92
the
Commonwealth
interstate
trade
power to
and
in
The former Sectlon gives
make
commerce,
same thing
respect t o
laws wlth
Sectron
92
enacts
that
~nterstate trade and commerce are to be absolutely free, and
"absolutely free" means absolutely free from all governmental
Interference
and control, whether
legislative
or
executive;
hence, it was argued that there would arise a direct and
complete antinomy between Section 51(1) and Section 92.
The solution propounded to get over this antinomy was that
Section 57(1) overrides Section 92 so that the Commonwealth
1s unaffected by Section 9 2 , though Section 51(1) IS prefaced
by the words "subject to the Constitution", of wbich Section 92
IS
a part, and though the provision for absolute freedom of
trade would obviously come to nothing lf the
interstate
Commonwealth were unaffected by Section 92.
The Privy
Counc~l did not accept the proposition based on McArthur'r
oplnron
Explaining the connotation of phrast "absolutely free"
In Sect~on92, the Privy Council said that the word "absolutely"
adds nothrng.
The trade is either free or it
IS
not free.
,Absolutely" m ~ g h thave been put merely to add emphasize or
~t r n ~ g h t have
been
added with the object of excluding the
rlsk of partial or veiled infringements.
Further i t said that the
word "free" In itself is vague and indeterminate and i t must
take ~ t scolour from the context
by
law as w a s pointed out
It means freedom governed
In McArthur's
case.
After
dlscuss~ng elaborately the concept of freedom in Section 92,
the P r ~ v y Council said that "freedom in Section 92 must be
somehow
limited, and the only Iimitat~onwhich emerges from
the context and which can logically and realistically be applied
to freedom is the crucial point In interstate trade, that is, at
the State barrier.38
This construction, according to the Privy
Council makes Section 51(1) consistent with Section 92, which
IS
binding on the Commonwealth as well.
Councrl pointed out that
guaranteed
Section 92
right, therefore
it
could
Further, the Privy
is a
declaration
be worthless
if
of
the
Commonwealth was Completely immune and could disregard it
by legrslative or executive act.
:49
(;~affrey Sawer, op cit a! p 177
In the result the Privy Council
o p ~ n a dthat S e c t ~ o n92 blnds, the Commonwealth
and on the
tootlng ~t held that the Orled F r u ~ t sAct 1928-1935 was Invalid
The net result was McArthurys Case was overruled.
The remarkable feature of James V. Commonwealth I S
that the Privy Council harmonized Section 51(1) and Section
92
In the process of harmonizlng the provisions of two
Sectlons the Privy Counc~l expla~ned the stretch of interstate
trade and commerce wh~ch is covered by Section 5 1 ( 1 ) , and
the stage of inter State trade and commerce where it i s free
The P r ~ v y Councll seems to
a s contemplated by S e c t ~ o n92
have conceded that conception of interstate trade, commerce
and Intercourse commencing at whatever stage in the State of
origin the operation can be sald to begin and continuing until
the moment In the other State when the operat~onof interstate
trade con be said to e n d
40
Though the freedom postulated
In Section 92 may attach to every step In the sequence of
event from first to last, the freedom envisaged In Section 92
IS
freedom as at the frontier or, to use the words of Sect~on
112, In respect of 'goods passing into or out of the State"
In
short, ~t is "freedom at what i s the c r u c ~ a lpoint in interstate
trade, that is at the State barrler
As
"4'
a matter of fact, In earher cases the judlclary
discussed the freedom of Interstate trade and commerce and
State Acts imping~ngupon ~t
In F o x V. ~ o b b i n s ~it ~ was
held that a State law requiring a hlgher l~censefee to be pald
for sell~ngwine manufactured from fruit grown ln another State
was ~ n v a l i d under Section 92
Accordrng to Griffith, Chief
Justlce, provision of Section 92 "would be quite illusory if a
State could impose disab~lities upon the sale of the products
of other States which are not Imposed upon the sale of home
products
"43
2.2.b: Motor Vehlcleti In Interstate Commerce Channel
Another interesting case w a s R. V. Vlzzard; Ex Parte
Hill
The question before the High Court in this case was
44
whether
the
contravened
State
Section
Transpart
92.
It
(Co-ordination)
was
Leg~slature of New South Wales
enacted
by
Act
1931
the
State
According to the A c t , no
p u b l ~ c motor vehicle should be operated in the State of New
South Wales unless it w a s licensed
A Board was established
wtth w ~ d e powers to grant or refuse
Ircences and also to
Impose cond~tions. A ltcense fee was to be p a ~ das per
the
The appellant's motor lorry w a s a commercial v e h ~ c l e
law
used for the conveyance of goods from Melbourne to a place
In New South Wales.
It was not licensed.
d r ~ v e r was conv~cted under the Act
Consequently the
He appealed on the
ground that the Act was invalld because ~t contravened Section
Justice Evatt who spoke for the Court, said:
92
does
"Section 92
not guarantee that, In each and every part of a
33
ti Sawer, opcit, p IhH
43
50 CLR 30; also
w e C; Sdwrt, or> r i t
p l ) 17U 17 1
transaction,
which
includes
the
interstate
carriage
of
commodities, the O W M ~ of the commodities, together with his
servant and agent and each and every independant contractor
co-operating in the delivery and marketing of the commodities,
and each of his servants and agents, possesses, until delivery
and marketing are completed, a right to ignore State transport
or marketing
regulations, and to choose how, when and where
each of them will transport and market the c o r n m o d i t i e ~ . " ~ ~
Evidently in this case the High Court conceded to the States,
power to regulate interstate carriages originating from the
concerned State and also to levy cornpensstory fee on such
The vizrrrd
transport.
proposition was
followed
by the
From the vizzard case i t is clear that
subsequent
the ~mpositionof non-discriminatory ilmitations of choice as to
the means and rule8 of land transport i s not inconsistent w ~ t h
Section 92.
However this view did not remain for long.
The Privy
Councll adopted the different vlew In Hughes and Vale Pty.
Ltd V. New South
(Hughes and Vale Pty.Ltd No: 1).
This is an appeal from a judgment of the High Court of
Australia, which held that the State Transport (Co-ordination)
A c t 1931-1951 (hereafter referred to as the Transport Act) was
wlth~nthe powers
d ~ d not
of the Parliament of New South Wales and
infrlnge Section
Commonwealth of Australla
45
C-Sawer, op.clt. p 1 7 1
Irtj
Ihld, pp, 171 and 187
47
(1954) 93 C.L.H.I.
92
of
the
Constitution
of
the
The appellant, who carries on
businass as a motor carrier of general merchandise betwean
Sydney in the State of New South Wales and Brisbane in the
State of Queensland, brought the action claiming declarations
that the Transport Act and certain charges levied thereunder
were ~nvalid. The main question in this appeal is, whether the
licensing provisions of Transport Act, considered apart from the
provisions of Section 3(2) thereon, are invalid as contravening
Sect~on92 of the Constitution.
As far as licensing provisions
are concerned, the Board const~tutedunder the Transport Act
has been
authorired to grant licenses
The Board has also
been granted power to exempt from the requirements to be
l~censedunder this Act in respect of any Public Motor Vehicle
or Class of Motor vehicle in such cases and under such
cond~tlonsas the Board thinks f ~ t The Board may from time
or revoke any exemption.
to trme vary
of
this
question whether
the
Dealing with the part
licencing
provisions
of
the
Transport Act are invalid, the Privy Council examined a number
of earlier decisions and said.
treated as a sum of activities,
"Trade and commerce was
The interstate commercial
activities of the individual and his right to engage in them
were ignored.
Interstate commerce a s a whole was considered
and the adverse effect upon the total flow was treated as the
test or at all events a test.
Great importance was attached to
the absence from the act of d~scrimination against interstate
traden48
further, the Privy Council has drawn a clear
d~stinction between what i s merely permitted regulation and
what is a true interference with freedom of interstate trade and
In this connection ~t s a ~ d that rules which
commerce.
prescr~bethat every motor car must Carry lamp9 of a specified
k ~ n dIn front and at
the rear, it must carry a warning device, i t
must not be dr~ven at a speed or In a manner which
dangerous
to
regulations.
public,
the
etc.,are
definitely
is
permitted
It also pointed out that even the rules of the
hind mentioned earlier could be made to operate as a burden
or deterrent in a higher degree.
The Privy Council said that a
law w h ~ c h provided that e motor car should not travel on that
h~ghwayat greater speeds than thirty miles per hour within the
lrm~ts of towns and sixty m ~ t e s per hour outside towns would
not impede or interfere with the trade of persons carrying
goods for reward between two cities in different States and
their trade would remain free
But if the law says that no
person should drive a motor car between a town in a State
speed exceeding one mile per hour, such
a law certainly interferes with the freedom of interstate trade.
and its border at a
"It would operate as a burden and a deterrent to the trader by
making the journey economically impossible
"49
Then dealing
wlth the another aspect of the problem relating to the charges
for use of trading facilities, such as bridges and aerodromes,
the Privy Council mid:
"The collection of a toll for the use of
the bridge is no barrier or burden or deterrent to traders who
In its absence, would have to take a longer or less convenient
or
more expensive route
anybody's freedom
The
toll
is no
hindrance to
so long as it remains reasonable, but it
could, of course, be converted into a hindrance to the freedom
49
Ihid, p,264
of
trade.
If t h .
anybody's trade, it
bridge authority really wanted to hamper
could easily raise
the amount of the toll to
an amount wh(cfi would be prohibitive or deterrent."50
In
conclusion it said that "It is finally settled that the burdens
and restrictions against which Section 92 protects Inter State
commerce are
not only those
which are imposed differentially
upon interstate commerce or affect it
in a special manner
Interstate commerce is protected also from restrictions and
burdens which fall alike on
commerce confined to a State and
commerce crossing its borders.
from
The carriage of merchandise
one Stale to another is not a thing incidental to
interstate commerce but in the language used by Justice
Johnson of navigation, in Glbbons V. Ogden,
9 wheat, 1 at
229, it is ' the thing itself; inseparable from it as vital motion
IS
from vital
existsnc~t."~' On the basis of this rulings the
Privy Council said that licensing provrsion of the Transport Act
whrch
gave
authority
arbitrary
infringe the
discretionary
provlslons
power to
of
Section
the
92
licensing
of
the
Constitution.
The principiss that emerge from the decision of Hughes
and Vale
Cty.Ltd are {I)
the discriminatory
restrictions on
Interstate commerce are contrary to Section 92; (2) Section 92
protects interstate commerce even against restrictions and
burdens imposed squally
on interstate commerce and on
intrastate commerce; (3) the regulatory rules, not prohibitive in
charactet, imposed on interstate commerce activities dU
not
offend Section 92 and (4) a compensatory charge imposed,
that IS, a charge for
commerce activity
IS
the use of tradrng facilltles, on interstate
permissible w~thinthe ambit of Section 92.
Soon thereafter came the next case Hughes and Vale
Pty. Ltd V. New South waless2
Case No:2).
(Hughes and Vale Pty.Ltd
After the decrs~on of
Hughes and Vale Pty.Ltd Case No:l,
South
Wales
passed
Amendment Act 1954.
the
State
Privy Council in
the
Parliament of New
Transport
(Co-ordination)
Since the Pr~vy Counc~t Case No:1
d e c ~ d e d that the Itcenslng provlslons of the State Transport
(Co-ord~natron)Act 1931-1951, considered apart from Section
3(2) of the Act, were Invalid as contravening Section 92 of the
Const~tutron but that in view of Section 3(2) of the Provisions
of the Act were not invelrd In so far a s intrastate activities
are concerned, a declaration was made that the provisions of
the Act requiring application to be made for a license, and all
provlslons consequent thereon, were ~napplicableto the Plaintiff
company while operating i t s veh~cles tn the course and for the
purposes of interstate or to the vehlcles while so operated.
An object of the Amendment Act of 1954 was to introduce a
new set of provisions appl~cableto persons operating vehicles
in the course and for the purposes of interstate trade and the
vehicles while
so
operated and expressly
to
confine the
application of the former provisions to intrastate transportation.
The same plaintiff company brought the Case N0.2 before the
Court for a declaration that the new provisions are invalid.
52
(1955) 93 C
LK
127, Src alcu
(;
Sawcr op clt
p.275
So far as the facts are concerned, the Plaintiff company
~ u g h e sand Vales Pty, t t d carries on
business as a carrier of
goods by road and operates various Public motor vehicles, of
w h ~ c h ~t is the owner, on journeys from Sydney to Brisbane,
Melbourne and Adelaide, and from each of those cities to
any
one or more of the others and that it does not operate its
said vehicles for the carriage of goods on intrastate journeys
In any of such States.
S8ct10n 12 (1) of the State Transport
(Co-ordination) Act prohibits the operation of a public motor
vehicle unless licensed under the Act
By definition a motor
vehicle used for the conveyance of passengers or goods for
h ~ r eor for any considerat~onor In the course of any trade or
business
whatsoever
is
a
public
motor
vehicle.
The
Amendment Act of 1954 b e g ~ n s by l~miting the prohibition
contalnad in Section 12(1) to the operation of vehlcles "In the
course of and
for the purpose of rntrastate trade." Havrng
done this, the Amendment A c t proceeds to enact a great
number of provisions limiting their applicat~on "to or in respect
of any person operating or Intending to operate a public motor
vehicle in the course of and for the purpcrqes of Interstate
trade, and to
operated."
or
in respect of a public motor vehicle so
Section 12(l), remacns an important provision In
the effect which the teg~slatlon produces upon the operat~onof
public motor vehicles In the course and for the
purposes of
said that except for the
introduct~onof
those words it ts left almost In the same form.
It makes it an
rnterstate trade.
It
IS
offence for any person to operate a publlc motor vehicle in
the course
and for the
purposes of interstate trade unless
such vehicle is licensed under the A c t by the Comm~ssianer
for Motor Transport, for operation as aforesaid and unless that
person IS the holder of such a license.
Dealing with these provlstons, the High Court s a d
.-The provlslons so far described, ~f they stood alone, could
not, of course, now be considered compatible with the freedom
assured by Section 92 to interstate trade, commerce and
~ n t e r c o u r s e . " ~Further,
~
the High Court pointed
do
provisions
not
stand
alone,
for
the
out that these
exercrse
of
the
comrn~ssioner's power stipulated in the Amendment Act to
refuse
a
Ilcsnse,
and
perhaps
of
h ~ s power
to
attach
conditions to i t s grant, is not left unl~mitedand uncontrolled.
It
IS
in this
context the High Court ruled:
"It is difficult to
understand how i t could be aff~rmed that, whrle governed by
statutory provisions of such a klnd, the interstate transport by
road i s free.
Indeed the pllght of the person who desires to
transport goods, whether for hire or as an incident of his own
trade, by motor vehicle into or out of New South Wales
is, in
a practical point of view, very little, if at all, better under the
amendments than i t was before the decision of the Privy
Counctt that the State Transport (co-ordination) A c t 1931-1 951
was ~nepplicableto the interstate movement of goods by motor
vehicle
54
An attempt was, however, made to support the v a l ~ d ~ t y
of the provisions as a regulation of the Interstate carriage of
goods by motor vehicle ~ n v o l v l n g no real impairment of the
53
G.Sawer,op cit p 279
54
Ihid, p.283.
freedom of inter State movement.
Answering the argument
based on the concept of reguiat~onthe High Court said that
interstate transportation of goods by Motor
regulation of
Vehicle must be consistent with the freedom contemplated in
Section 92.
But it is not shown in this case.
A law whlch
under the guise of regulating an incident of interstate transport
by road creates
~t on does impair
a
real obstruction or impediment to carrying
the freedom which Section 92 g ~ a r a n t e e s . ~ ~
There was another contention advanced in support of
the
validity of the
impugned provisions that a licensing
system might be a mere regulation of some form of interstate
trade although it committed to an administrative officer a more
or less discretionary power to wlthhold a licence from an
applicant
on grounds which were
personal to
the
latter
Rejecting this contention, the Hlgh Court, no doubt, conceded
that it is not every conditional prohlbit~on of an operation of
Interstate trade
that impa~rs freedom.
But what is found in
this case is a conditional proh~bttion that extends over the
entire field.
condition.
It operates on everybody unless he fulfils the
The High Court pointed out that, as Stated it by
earlier, "the provisions of the Amendment Act
1954 contain
nothing which would make it possible to describe the total
effect as a mere regulation by whlch true freedom to
engage
In transportation between New South Wales and other States
is
not impaired.n56
hen in conclusion
the
High Court
observed,
"But now that it has been put beyond doubt that
the carriage of goods by
motor vehicle among the States,
whether for reward or in the course of a man's own trade or
busmess,
must be as free from
governmental
prohib~tion,
restriction, impediment or burden as any other transaction of
Inter State trade, an attempt to maintain any wide area of
discretionary control cannot be expected to ~ u c c e e d . " ~ '
As summed up by Prof. Colrn Howard the decisron In
Hughes
and
Val#.
Pty.Ltd.
No.2)
(Case
has
three
First, the licensing provisions for interstate
ramifications.
carriers were held invalid.
Secondly, road charges imposed b y
way of conditions of statutory licences for interstate carriers
were held invalid.5B
Thirdly, fees imposed on compulsory
registration of interstate vehicles were held invalid."
Similar
commerce
expansionary views wlth respect to interstate
have
been
expressed
In a
number
of
cases.
However we may mention here two important cases namely
Alrllnes care60
and the Bank Nationallzatlon case6'
The
Australian National Airlines Act, 1945 established the Australtan
58
This part of the declsion was subsequently upheld by the Prlvy Council in
Freighttines and Conrtruction Holding Ltd V. New South
Wda., (1967) 116 C L R.1,
59
This view war reaffirmed in Armrtrong V. Victoria
C.L.R. 28; taken from Colin Howard, op
c i t lllrd
(No2), (1957) 99
Edn., 1985, p 360.
hO
Australian National Aitway8 Pty .Ltd, V Commonwealth (1945) 7 1
C.F,R. 29.
61
Commonwealth V Bank of New South Waleu, (1949) 79 CLR 497
(PC)
Nat~onalAirlines Commission with power to establish, maintain
and
operate
interstate commercial
airline
The
services,
rnonopoly provisions are contained in Sections 46-49 of the
Act
Under the Statute the Comm~ssion was obliged in the
same way as anyone else to obtain a licence if i t wanted to
run an alr service, but according to Section 46 of the Act,
anyone else's licence to provide a service over any particular
Interstate route
ceased to
be
operative
as
long
an
as
adequate service was being provided by the Commission on
the same route.
Then, by Section 47 the issue of a licence
to any one other than the Commission was prohibited unless
the licensing authority was sattsfied that such a licence was
necessary to meet the needs of the publlc.
Besides, Section
49 made i t an offence to enter into a contract for interstate
alr transport with anyone not h o l d ~ n g an operative airline
I~cence. Thus, in effect the Statute virtually gave monopoly to
the Commission to operate interstate air transportation.
The
monopoly provls~onsof the Act were challenged in the Alrllnes
case and the High Court unanimously held that the monopoly
Section of the Act infringed Section 92 of the Constitution.
The Bank Nationallsation case was concerned with the
valldity of the Banking Act, 1947, which in effect nationatized
banking in Australia.
Treasurer
by
Sectron 46 of the Act
notice
continuing in business.
to
prohlb~t any
empowered the
private
Bank
from
This statute also virtually confirmed
monopoly on the State with
respect to banking business.
Therefore the question arose whether it was consistent with
provision of Section 92 of the Constltut~on The Priv
agreed with the majority o p l n ~ o n of the High Cour
power to prohibit private bank from continue in business was
an infringement of freedom of interstate trade.
However the most important part of the pronouncement
In this case related to interstate character of the banklng
business.
In this connection the Privy Council said:
"But
is
enough to say that, as common knowledge might suggest, the
material confirms i n detail what seem to be the essential
conclusions.
These are that the business of the private banks
(a) the constant ~nterstatetransmission
necessmrily includes:
of
funds
and
transfer
credit,
of
constant
(b)
communication and intercourse among t P n
busings6
States; (c) the
regular use for the purposes of inter State transactions of
rnstruments of credit and of trtle to goods and t h e ~ rinterstate
transm~ssion; (d)
the
lntegrat~on of
~nterstate banking
transactions with the entire business of the bank to form a
system spreading over the common wealth without regard to
Statelines;
(0)
the furtherance
of
commercial dealings
by
interstate traders in goods by performing an indtspensable pert
In such transact ton^".^^
2.3: Nation-wldr
Freedom
of
Trade,
Comrnetr
and
lntetcourre In lndla
It may be noted that Article 301 of the Constitution of
India States, in effect, that "Trade, Commerce and intercourse
throughout
the territory
of
lndta
shall
be free."
These
provisions, which can be described
as "lndian Commerce
Clause", are different from commerce clause provisions of the
American and Australian Constitutions.
T'
clause, unlike the Ammrican and Australian
not
does
specifically
spell
out
lndian commerce
commerce
Interstate
clauses,
matters.
This
conspicuous omission and the phrase "throughout the territory
of India" in Article 301 have given rise to an idea that the
lnd~an commerce
clause
embodied
in
Article
301
of the
Constitution comprehends both interstate trade and intrastate
That apart, important issues for consideration under
trade.
Article 301 are meaning of the words Wade, commerce and
lntercourse" and ambit of the freedom contemplated in Article
301 These issues may be discussed in the light of the judicial
decrs~ons.
2.3.a: Connotatlon of trade, commerce and Intercourse
The words trade, commerce and ~ntercourseare wide in
nature and they may take in their fields wide spectrum of acts
or activities of human beings
But the question however irr
whether these words could be given such wide meaning as to
include
activities
which
are
generally
considered
to
be
dangerous to the society. T h ~ sexactly w a s an issue in State
of Bombay V. ~ h r m a r b a u g w a l a . ~In
~ this case the impugned
leg~slation was the Bombay Lotteries and Prize Competitions
63
AIR 1957 SC 699
Control and Tax (Amendment) Act,
1952.
In this case one of
the issues was whether gambling activlt~eswould come within
the ambit of the words trade and commerce.
The Supreme
Court opined that there are certain activities which can under
no
circumstance
be regarded as trade
commerce although the usual forms
employed therein..
To exclude
or
and
those
business
instruments
or
are
activities from the
meaning of those words is not to cut down their meaning at
all but to say only that they are not within the true meaning
of those words.64
"We find
Proceeding further the Court said that,
it difficult to
accept
the
contention that
those
activities which encourage a spirit of reckless propensity for
making easy
gain by lot or chance, which lead to the loss of
the hard earned money of the undiscerning and improvident
common man and thereby lower his standard of living and
drive him into a chronic State of indebtedness and eventually
disrupt the peace and happiness of his humble home could
possibly have been intended by our constitution makers to be
raised to the status of trade, commerce or i n t e r c ~ u r s e " . ~ '
Thus the Supreme Court made clear that the words trade,
commerce and intercourse would take in lawful activities and
do not extend unlawful activities, which are extra commerelal.
Meaning of the word trade, commerce and intercourse
and the scope of the freedom contemplated in Article 301
came up for discussion once agaln rn Atiabarl Tea Co.Ltd. V.
64
Ihid, p.718
(15 Ihid, p.720.
~ m s a r n . ~ ~Impugned legislation in this case was
Assam Taxation (on goods carried by Roads or Inland
State of
Waterways) Act
of
Justice Gajendragadkar
1954.
in
his
optnion stated that the content of freedom provided for Article
301 was larger than the freedom contemplated by Sectlon 297
of
the
Constitution
Act
of
1935.
It
certainly
includes
movement of trade which is of the very essence of all trade
and is its integral part.
When Article 301 provides that trade
shall be free throughout the territory of India
primarily it is
the movement part of tho trade that it t J s in mind and the
movement or the transport
part of trade must be free subject
of course to the limitations and exceptions provided by the
other Articles of Part X I I I . ~ ~
However, Subbarao, C J ,came to a conclusion d~fferent
from that of the view expressed In Chamarbaugwala's case,
These deviation found in Krishan Kumar V. State of Jammu
and ~ a s h r n l r . ~In
~ this case Subbarao, C.J., took the stand
that i t 13 not proper to accept the proposition that dealing in
l ~ q u o r was not business or trade, as the dealing in noxious
and
dangerous
goods
llke
liquor
was
community and subversive of its morals.
dangerous
to
the
He reasoned that
acceptance of such broad argument involves the position that
the meaning of the
expression "trade or business" depends
upon and varies with the general acceptance of the standards
h6
AIR 1961 SC 232
hH
AIR 1967
SC 1368
of morality obtaining at a particular point of time in our
Such an approach, accord~ng to him, leads
country.
tcl
~ncoherencein thought and expression. Standards of morality
can afford a guidance to impose restrictions, but cannot limit
the scope of the right.69
What is more, he stated that the
~llegal~ty
of an activity does not affect the character of the
actrvlty but operates as a restr~ct~on
on i t .
If a law prohibits
dealing in liquor, the dealing does not cease to be business,
but the said law imposes a restriction on the said dealing.?'
Thls seems to be a strained argument, for it hardly helps to
understand the legal position w~threspect to such activities.
such activities
are trade, whether prohibition of such activities
is reasonable restrictions.
The prohibition of such activities
are reasonable restrictions, whether such
operate
If
activities continue to
This case does not give any proper answer to such
questions.
This
view
Chamarb8ugwrlr'u
expressed
case
by
seems
the
to
Supreme
have
an
Court
in
echo
in
Harishankar v. Deputy Exclse and Taxatlon C o r n r n t ~ s l o n ~ r ~ ~
dealing with power of the State to regulate the business of
vending intoxicating liquors, the Supreme Court said "There 1s
no fundamental right to do trade or business in intoxicants.
The State, under its regulatory
69
Ihid, p. 137 1.
70
[hid
71
AIR 1975SC 1121
powers, has the right to
absolutely
prohibit
every form
of
activity
in
relation
to
intoxicants- the manufacture, storage, export, import, sale and
In all their manifestations, these rights are vested
possession.
In the State and indeed without such vesting there can be no
effective regulation of various forms of activities in relation to
~ n t o x i c a n t s . " ~ ~Needless to s 8 y that if there is no right to
carry
on
trade
or
business
In
intoxicants,
any
activity
connected with intoxicants can hardly be construed as trade
w~thinthe meaning of Article 301
Evidently therefore trade in
lntoxlcants or movements of intoxicants from one State to
another can not claim the freedom contemplated in Article 301.
This view was subsequently reaffirmed
by the Supreme
Kaurhal V. Unlon of lndlar3
and in Satpal
Court in P.N.
and Co. V. Lt. Governor of D e l h ~ . ~In~ the latter case the
Supreme Court
made an observat~on th,
"If there
i s no
fundamental right to carry on trade or business in liquor, there
IS
no question of its abridgement by any restriction which can
be styled as ~ n r e a s o n a b l e " . ~ What
~
I S more, the Supreme
Court took the position that this power of control i s a question
of society's right to self-protection and it rests upon the right
of the State t o act for the health, moral and welfare of the
people.76
A s a matter of fact, ~f this society's well-being
73
AIR 1978 SC 1457
74
AIR 1979 SC 1550.
principle is transposed into the f~eldof the interstate trade and
commerce stipulated in Article 301, it
could be akin to
American concept of aocial welfare, under which transportation
of dangerous and hazardous food or transportation of
and
persons across the State
goods
frontiers for rilegal and immoral
purposes had been prohibited.
The nature and extent
contemplated
of freedom
in
Art~cle 301 came up for discussion in State of Madras V.
Nstaraja ~ u d a l l a r . ~There
~
the majority took the view that
Article 301 is couched in terms of the wtdest amplitude; trade,
commerce and intercourse a r e thereby declared free and
unhampered throughout the territory of India.
The freedom of
trade so declared is against the imposition of barriers or
obstructions
within
the
State
as
well
as
all
interstate
restrictions which directly and imrned~ately affect the movement
of trade are declared by Article 301 to be ineffe~tive.~'
However, interesting case is that of the cattle which go
across the Stateline for grazing purposes.
This is the case in
Lakshmrn V. State of Madhya ~ r a d e r h . ' ~ Facts revealed
that nomad gfeziers of Gujarat and Rajasthan wander from
place to place with their sheep, goats and
cattle in search of
pasture and foliage.
To them, boundaries of States do not
present any barriers.
The State of Madhya Pradesh, with a
77
AIR 1969 SC 147
79
AIR 1983 SC 656
to curb this,
cattle" higher
made certain rules imposing on "foreign
grazing rates than
in the
case
belonging to the residents of Madhya Pradesfi.
challenged in
this case.
of
cattle
This rule was
It was challenged, among others, on
the ground of violation of Article
301.
Holding the rule
unconstitutional the Court said that it is not able to see any
rational basis for the
distinction made between owners of
cattle belonging to Madhya Pradesh and owners of cattle
belonging to other States and the levy of prohibitive grazing
rates on owners of the 'foreign cattle".
Forests of Madhya
Pradesh are not grazing grounds reserved for cattle belonging
to residents of Madhya Pradesh
villages
of Medhya
only, even as the towns and
Pradesh cannot be
reserved for the
residence of the original residents of Madhya Pradesh only 8D
Proceed~ngfurther the Court said that subject to reasonable
restrictions which may be imposed in the interests of the
general public, a citizen has the rrght under our Constitution to
move freely throughout the territory of lndia to reside and
settle in any part of the territory of lndia and to practice any
profession or to carry on any occupation, trade or business.a1
Evidently in this case the freedom stipulated
Article 301 has
been construed as the freedom to pass across the Statelines
wlthout any hindrance.
rl
Besides, it has been construed as a
freedom belonging to or vested in Individuals.
It must, however, be said here that any view that the
freedom stipulated in Article 301 i s one vested in individuela
does not seem to be in conformity with the ~ntendmentof the
Framers
of
the
Constitution.
When
the
Framers of
the
Constitution removed the freedom of trade and commerce from
the Part dealing with fundamental rights, they indicated that it
would
not be treated as fundamental rights conferred on
~ndlvlduals That being the case, it would be difficult to treat
It as right vested in individuals.
A r t ~ c l e 301 is
Freedoll, contemplated in
one attached to movement aspect of trade,
commerce and ~ntercourse throughout the territory of
Indla.
Movement of ~ndividualsunconnected with trade, commerce or
intercourse IS not
one that can be said to have been covered
by Arttcle 301 of the Constitution