CHAPTER ll

FREEDOM OF INTERSTATE TRADE AND COMMERCE IN INDIA AND

WHAT IT MEANS

Art~cle 301 of the lnd~an Constltut~on states that "subject

to the other prov~sions of this Part (Part XI11) trade, commerce

and tntercourse throughout the terr~tary of Indta shatl be free "

T h ~ s artrcle does not use either the phrase "interstate" or the

phrase "rnirastate" to ~ndrcate spec~f~cal ly as to what types of

trade and commercial actrvlt~es that are contemplated In this

article The marg~nal note ment~ons "freedom of trade,

commerce and ~ntercourse" T h ~ s also does not help much to

understand the commer~cal a c t ~ v l t ~ e s comprehended 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 Intended to

cover both intrastate trade and Interstate trade. But such

speculation seems to be of doubtful val ld~ty because of the

fact that Prov~srons In Part Xlll of the Const~ tu t~on have been

made to ensure economlc un~ty of federal l n d ~ a by break~ng

the tarrff walls at the borders of the constituent States.

Further the fact that the focal provlsron re lat~ng to freedom of

trade and commerce was removed from the part

deal~ng with fundamental r~gh ts and 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 n Const~ tu t~on, Consequently

what we get in Article 301 i s freedom of Interstate trade,

commerce and ~ntercourse that IS free flow of all ac t t v~ t~es

k n o w n as trade, commerce and ~ntercourse throughout the

territory of Ind~a.

Three terms of great s~gn~f tcance In this artlcle are

trade, commerce and intercourse They are not terms o f art

They are practrcal and hard terms of the bus~ness world. 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 based very much on the

prov~sfons of Amencan and AustralIan Constltut~ons relating to

~nterstate Trade and commerce Therefore ~t I S necessary to

br~ef ly examine 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 t on the terms, trade

and commerce and ~ntercourse In Art~cle 301 of the

Const~tution of tnd~a

1 Sir Ivor Jennings, Some Charactetistics of the Indian Constitution",

(Uxiord U n i v r r s ~ t v P r r * \ , IL)5.1) at 1) 50

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

Tribes " Since we are concerned with ~nterstate trade and

commerce, the more important phrase for the purpose of this

thews I S "among the several States " That is to say, the

Congress has been entrusted with the power to regulate

commerce "among the several States " It is Important to note

here that the Amer~can Constitut~on does not speak in terms of

freedom of trade and commerce On the other hand, the

commerce clause spells out regulatory power of the Congress

Bes~des , i t uses the word "commerce" alone. Therefore, the

commerce clause in the Amencan Constrtut~on naturally gave

rlse to three important questions They are

1 To what commerce does t h ~ s power extend?,

2 To what extent may that commerce be regulated?; and

3 Whether the regulatory power be exerc~sad by the

States In the absence of congressional regulation?

Freedom of interstate trade and commerce has to be

understood In the Itght of answers to the aforesaid question.

A s a matter of f a c t the commerce clause In the

Amencan Const~tutron remalned for 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 exclusive rlght to navlgate NewYork waters wlth the

Steamboats. This was done under a statute enacted by the

NewYork State Legislature In 1797 L~vlngston and Fulton sold

t h ~ s rlght to Ogden. 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 coasting trade and

f~sheries, and for regulatrng the sale," which prov~ded that

vessels enrolled 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 ~ m stopped, The NewYork

court decided for Ogden and ordered G ~ b b o n s to cease his

boat trips.

G~bbons appealed 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~ed to l~rnit the meaning of the

word "Commerce" "to traffic, to buying and selling, or the

Interchange of cornmod~tiss", and he would not admit that it

Includes navigation. Rejecting the restrrcted definition, Chief

Justice Marshall said: "this would restrict a general term,

applicable to many objects, to one of i ts significations

Commerce, undoubtedly, i s traffic, but ~t is something more; it

1s intercourse. I t describes the commercial lntercourse

between nations, and parts of nations, in all i ts branches, and

IS regulated by Congress prescrlblng rules for carrying on that

lntercourse." Proceeding further Chlef Justice Marshall

assert~vety stated that "the mind can scarcely conceive a

system for regulating commerce between nations which shall

exclude all taws concerning nav~gat~on, wh~ch shall be silent on

the admission of the vessels of one natlon tnto the ports of

the other and be conflned l o prescrib~ng rules for the conduct

of indiv~duals in the actual employment of buying and selling,

or of barter"

The next questlon of Glbbons case IS on what i s the

subject to which the power IS app l~ed Referr~ng to the word

"among" in the phrase commerce "among the several States"

Chief Justice Marshall sald that the word "among" means

"~nterm~ng led with": 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. T h ~ s power, like all others

vested in Congress, is complete in ~tsel f , may be exercised to

its utmost extent, and acknowledges no limitations other than

those are prescribed in the Constitution." Having explained

the congressional pow& to regulate interstate commerce as

power complete in itself, Chief Justice Marshall tried to answer

the question whether the States possessed concurrent r~ght

w ~ t h Congress to regulate commerce amongst the States, thus:

"since, however, in exercis~ng the 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~t les him. Should this collislon exlst, i t wi l l 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 to the word "Commerce". By virtue of this

decision "commerce" means not merely the age old act~v~t ies of

buying and selling, or the Interchange of commod~ties or 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

nav~ga t~on 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 conf~ned to very narrow area

jeopardising free flow of goods and free transactions across

the State Borders. The second Important proposition laid down

by Chlef Justice Marshall I S that Section 8 Clause (3) of

Art lc leI comprehends ~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 proposi t i~n in Gibbons Case has thrown some

shadow on the third proposlt~on His statement that In

exercrslng the power regard~ng purely ~nternal affairs, whether

of trading or potice, if the State enacts laws, the validity of

which depends on the ~nterfer~ng w ~ t h and being contrary to an

act of Congress, the court w ~ l l enter 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 n of a right to wh~ch 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 The ambiguous language used In this connection caused

a doubt not only the type of the power, concurrent or

exclusive, contemplated In Sect~on 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

case 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 wh~ch required boats

comlng from and going to Ports outs~de the State to take on a

p ~ l o t from Ph~ladelphia to nav~gate while In the harbours

Cooley challenged ~t saying that the commerce Clause denied

the States any power to regulate commerce, and that a

regulation concerning ships wh~ch travel between States is the

regulations of interstate commerce. The Court upheld the

Pennsylvania award, and s a ~ d that though a regulation of ships

1 5 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 a s 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 .. (but the pilotage system) is local and not

national 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~ rn~ts . " 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~on made by Congress coverlng the field.

2 . l . c : Theory of Congress's Domlnant Role over Inter-

tate 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 natural trade

centre In order to keep Texas trade for Texans, the

government of Texas fixed the rates between eastern Texas

p o ~ n t s and such Texas c ~ t ~ e s as Dallas and Houston so low

that these eastern po~n ts would have cheaper access to the

Texas cities eventhough they were farther away than was

Shreveport. At this po~n t , the Inter-State Commerce

Commrssion ordered that the ~ntra-Texas rates 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 Conmtltu- tional Law, r i f th Edn ,1954, 11 280

to Congress was complete and paramount. It opined that "by

vl r tue 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 be

defiled the exercise of ~ t s const~tut~onal authority, and the

State, and 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

power over new and wider areas "7

2 . l . d : Commerce Enters Employer-Employee Relatfonshlp

Another area to wh~ch the commerce clause has been

extended i s Labour and Employer relationship. Congress

enacted National Labour Relations Act of 1935 which

guaranteed to workers the right to self-organisation, collective

7 Ur K P Krishna S t ~ ~ t t y , The Law of Union-State Relations and Indian Federalism p l h l

bargaming through representatives of thelr choosing and

engage in concerted activities for the purpose of collective

bargalnlng or other mutual aid or protection. The law also

declared that any interference by an 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 was 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~onat issue in this case

was whether, under the commerce power, Congress could make

that conduct unlawful in such an enterprise. The company

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 government all

industrial labour relations within the nation. The court refused

to accept the contention of 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~uur Rclations Act of 1935

I) :iO1 U , S I (1937) D o w l ~ r ~ g , Cases on Conutitutional Law, 5th Ed.LlCB, p 316

they have such a close and substantla1 relatlon to interstate

commerce that their control IS essent~ai or appropriate to

protect that commerce from burdens and obstructions,

Congress cannot be denled the power to exercise that

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 ~ndustry may have to interstate

commerce and we have no doubt that Congress had

const~tut~onal authority 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 s fold even intrastate actrvttes whrch have telling impact on

Interstate commerce activlttes has been reiterated further in a

few other important cases In t h ~ s connection ~t IS necessary

to rnentton U.S. V. Darby Lumber co.lZ In this case Fair

Labour Standards Act enacted by Congress in 7930 was

challenged. The Ac t set up a leg~statrve scheme for

preventing the shipment 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 I t l ~ d , Dowling, op c l t 1) ?%.'1

1 1 Ihid, l)owlir~g, op r ~ t :I25

12 .'312 11s 100; Dowling. ~ 1 1 ) t 11 1 ) 327

over-time rate for extra hours worked. The respondent

company manufactured timber and f~ntshed lumber, much of

wh~ch was supplied outside the State. One important issue in

this case was, whether Congress had power to prohibit the

employment of workmen in the production of goods "for

Interstate commerce at other than prescribed wages and

hours." Answering the question in the affirmative, Mr.Justice

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, I t extends to those

activities ~ntrastate which so affect interstate commerce or the

exercise of the power of Congress over it as to make

regulat~on of them approprrate means to the attainment of

leg~timate end, 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 . I ~ The 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

particular level. In this connect~on the federal government

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 of 1938. 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 Act , 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. He was

penalized for violating the Act . So, he questioned the

constitutional power of Congress to regulate crops destined

never to leave the farm. His argument was that the Act was

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 interstate commerce

were atmost indirect." The Court rejected the contention and

upheld the validity of the Act. Mr.Justice Jackson, who spoke

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 "production", uconsumption", or

"marketing1' was 'not 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 as 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 S t ~ m u l a t ~ o n of commerce was a use

17 Ihid, p 3 4 2

18 Ihid

of the regulatory function under the commerce power, and.

therefore, Congress might have properly considered that "wheel

consumed on the farm when grown, r f wholly outside the

scheme of regulation, would have a substantial effect in

defeating and obstructing the purpose to stimulate trade

therein at increased prices.lg It is in this connection

Mr.Justice Jackson remarked that even if it is assumed that

the excess wheat raised at the farm was never marketed, ' i t

supplles a need of the man who grew it which would otherwise

be reflected by purchases in the open market. Home-grown

wheat ~n t h ~ s sense competes with wheat in achieve

commerce u20

2.1.f: Omnlbus Commerce Power to achleve soclal

objectives

The apex Court I ~ I Untted States by various decisions

brought several activites and transactions which stretched

across State borders with~n the a m b ~ t of 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 w a s whether fire insurance transactions, which

stretched across the State borders, constituted, 'commerce

among the Sev0ral States" so as to make them subject to

19 lhid, pp 343-344

2 1 322 U.S. 533,

regulat~on by Congress under the commerce clause? Mr.Justice

Black, who spoke for the court, Stated that the modern

Insurance business, which was b u ~ l t upon the sale of contracts

of ~ndemnrty, had become one of the largest and most

Important branches of commerce Therefore, no modern

commercial enterprise directly affects so many persons in all

walks of l ~ f e as did the insurance business. So, he came to

the conclusion that 'a nationwide bus~ness I S not deprived of

i t s Interstate character merely because ~t I S b u ~ l t upon sales

contracts which are local in nature. 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 proh~b~t the transportatlon of woman in ~nterstale

mmerce for the purposes of debauchery and ktnd~ed

purposes. In Hoka V. Unlted the Supreme Cour t

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 29

Commenting on several of these decisions, Mr Justice Day

s a ~ d In 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 the evil

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 at 436-439

;."I Thornton V U . S . , 27 1 , 1 S 4 14 a1 425

30 2 4 7 U S 2 5 1

2.1.8: Conelurlon

The aforesaid discussion of Supreme Court decistons in

the Un~ted States pertaining to its commerce clause would

show that the commerce clause In the United States

Constltut~on has been given a very wtde connotation to bring

wrthln rts purview trad~tional activ~tes of buylng and selling and

barter systems or commercial activites which concern more

than one State and also intrastate activi tes which have

substantial effect on interstate commerce Besides, the

regulatory power of Congress has been extended even to

p r o h ~ b ~ t interstate transactions which have harmful effect on the

society Hence today a commerce clause and the power given

to Congress by it have covered very wide field which, perhaps,

was not even dreamt of by 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 non-

commercial; 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,

31 See U.S. V South Eaetern Underwriters Ae~ociation. 322 U . S 539

: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 "Today under the commerce power the federal

government regulates the labour relations of all major

bus~nesses; farm production; restraints of trade, the securities

market, the structure of the publlc ut~ l~ty Industry; the purity

of food and medicines; traffic in harmful drugs, 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 Australia made

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 Section 51Ii) of the Commonweatfh Constitution of

Australia 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~on 8 Clause (3) Of the American Constitution. Relevant

' J P Frank, Caaes on the Constitution, 1951, p 95

prov~sions for the purpose of this thesis are trade and

commerce "among the States " Undoubtedly it indicates

Interstate trade and commerce. As in the case of United

States Constitution power to make laws with respect to

Interstate trade and commerce has been entrusted to

Commonwealth Parliament. However one difference is the

a d d ~ t ~ o n of the word, *TradeM in Section 5 t ( l ) of the

Australian Constitution.

The Australian Const~tution does not speak with

entrustment of power to Commonwealth Parliament to regulate

Interstate trade and commerce It goes further Section 92

states "On the imposition of uniform dutles of customs, trade,

commerce, and intercourse among the States, whether by

means of internal carriage or ocean navigation, shall be

absolutely free". This Section introduces an element of

freedom and qualifies ~t by an adjectlv9 'absolutely". Further,

Sectron 92 introduces three terms, namely "trade, commerce

and intercourse". It a l s ~ st~pulates ~mposrtion of un~form duties

of customs. 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, wh~ch limlts the power of

Commonwealth Parl iament, i s Section 99 which States: "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." This is

followed by Section 100 which s a y s , "the Commonwealth shall

not by any law or regulation of trade or commerce, abr~dge

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 power of Commonwealth Parliament contemplated In

Sectton 98 by authorising the Commonwealth to forbid State

preferences and discriminations with respect to their own

rai lways 34 These two Sections are ev~dently the result of

American decisions in Glbbons V. Ogden and The Shreveport

Rate Care.

2.2.8: Amblt of the Commerce Clause

In the light of the aforesa~d provisions of the Australian

Constitution it is necessary to dlscuss briefly the Australian

commerce power. The first case which m a d s 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 prefer- ence 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

railways 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

:JT) (1920) 28 C.1 .R 530, See alqo c u l ~ ~ ~ Howard, Australian Federal C,on-

stitutional Law, 3rd Edn 1985 at p 285

sa~d that 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. But

that they go far beyond it is a fact quite as undoubted. 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 is 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 In which James, the Plaintiff, a resident

of South Australia, claimed damages from the defendants,

Cowan and others, for trespass of his goods The plaintiff is

the producer of dried fruits. The defendants are the then

Mtnister of Agriculture for South Australia and the members

and servants, agents of the D r ~ e d Fruits 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~ntiff denied that the acts done were authorised by the

Act, and alleged that if they were, the authority given and the

acts done under the authority were 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 f rom 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~mately obtained 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. James then brought the present action. One

of the contentions of James IS that 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~ght of interstate trade and

commerce protected from state interference is a personal right

attach~ng to the individual and not attaching to the goods. A

question is how r personal right of trading interstate by the

former owner (James) berng interfered with? That is a

personal right, not a property right, and it is a right which no

s~ngle State 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

Section 92 Significance of Privy Council observation in this

case lies in the fact that i t has declared the right to carry on

Interstate trade and commerce as a personal right of

lndrvlduals in Australia, lnasrnuch as i t I S not conferred or

given by any single State to individuals in Australia, i t can not

be sought to be curtailed or interfered w ~ t h by any constituent

unlt of the Commonwealth of Australia. In short, i t is s

Constitutronal right which has prevailed, and any State

Interferences wlth the exercise of such right IS 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? The Commonwealth

Orled Frults Act 1928 - 1935 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 (193hJ 55 C L R I ; See a150 Geoffrey Sawer, op cit p 163

Australla, and authorised the Commerce M~nister to 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 by the prescribed conditions

Consequently his consignment was seized and forfeited by the

Rallway authorities and 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 Section 92 without departing

from i ts earlier opinion in 1920 in McArthur's Case.

Therefore the matter was brought before the Privy Council by

James. The argument advanced on behalf of the respondent

was that trade and commerce means the same thing in

Sect~on 51(1) and in Sect~on 92 The former Sectlon gives

the Commonwealth power to make laws wlth respect to

interstate trade and commerce, 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 92, though Section 51(1) IS prefaced

by the words "subject to the Constitution", of wbich Section 92

I S a part, and though the provision for absolute freedom of

interstate trade would obviously come to nothing lf the

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~on 92, the Privy Council said that the word "absolutely"

adds nothrng. The trade is either free or it IS not free.

,Absolutely" m~ght have 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 s colour from the context It means freedom governed

by law as w a s pointed out In McArthur's case. After

dlscuss~ng elaborately the concept of freedom in Section 92,

the Pr~vy Council said that "freedom in Section 92 must be

somehow limited, and the only I imitat~on which 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. Further, the Privy

Councrl pointed out that Section 92 is a declaration of

guaranteed right, therefore it could be worthless if the

Commonwealth was Completely immune and could disregard it

by legrslative or executive act. In the result the Privy Council

:49 (;~affrey Sawer, op cit a! p 177

o p ~ n a d that Sect~on 92 blnds, the Commonwealth and on the

tootlng ~t held that the Orled Fru~ts Act 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

a s contemplated by Sect~on 92 The P r ~ v y Councll seems to

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~on of 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 cruc~al point in interstate

trade, that is at the State barrler "4 '

As a matter of fact, In earher cases the judlclary

discussed the freedom of Interstate trade and commerce and

State Acts imping~ng upon ~t In Fox V. ~ o b b i n s ~ ~ it was

held that a State law requiring a hlgher l~cense fee to be pald

for sell~ng wine manufactured from fruit grown ln another State

was ~nva l id 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 " 4 3

2.2.b: Motor Vehlcleti In Interstate Commerce Channel

Another interesting case w a s R. V. Vlzzard; Ex Parte

Hi l l 4 4 The question before the High Court in this case was

whether the State Transpart (Co-ordination) Act 1931

contravened Section 92. It w a s enacted by the State

Leg~slature of New South Wales According to the Act , no

publ~c motor vehicle should be operated in the State of New

South Wales unless it was 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 ~ d as per the

law The appellant's motor lorry w a s a commercial veh~cle

used for the conveyance of goods from Melbourne to a place

In New South Wales. It was not licensed. Consequently the

dr~ver was conv~cted under the Act He appealed on the

ground that the Act was invalld because ~t contravened Section

92 Justice Evatt who spoke for the Court, said: "Section 92

does not guarantee that, In each and every part of a

3 3 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

transport. The vizrrrd proposition was followed by the

subsequent From the vizzard case i t is clear that

the ~mposit ion of 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)

Ac t 1931-1951 (hereafter referred to as the Transport Act) was

wlth~n the powers of the Parliament of New South Wales and

d ~ d not infrlnge Section 92 of the Constitution of the

Commonwealth of Australla The appellant, who carries on

45 C-Sawer, op.clt. p 171

I r t j Ihld, pp, 171 and 187

47 (1954) 93 C.L.H.I.

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~on 92 of the Constitution. As far as licensing provisions

are concerned, the Board const~tuted under the Transport Act

has been authorired to grant licenses The Board has also

been granted power to exempt from the requirements to be

l~censed under this Act in respect of any Public Motor Vehicle

or Class of Motor vehicle in such cases and under such

cond~tlons as the Board thinks f ~ t The Board may from time

to trme vary or revoke any exemption. Dealing with the part

of this question whether the licencing provisions of the

Transport Act are invalid, the Privy Council examined a number

of earlier decisions and said. "Trade and commerce was

treated as a sum of activities, 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

commerce. In this connection ~t s a ~ d that rules which

prescr~be that every motor car must Carry lamp9 of a specified

k ~ n d In 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 is

dangerous to the public, etc.,are definitely permitted

regulations. 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 wh~ch provided that e motor car should not travel on that

h~ghway at greater speeds than thirty miles per hour within the

lrm~ts of towns and sixty m~tes 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 i f the law says that no

person should drive a motor car between a town in a State

and its border at a speed exceeding one mile per hour, such

a law certainly interferes with the freedom of interstate trade.

"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 The toll is no hindrance to

anybody's freedom 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 th . bridge authority really wanted to hamper

anybody's trade, it 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. The carriage of merchandise

from 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 arbitrary discretionary power to the licensing

authority infringe the provlslons of Section 92 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 the use of tradrng facilltles, on interstate

commerce activity IS permissible w~th in the ambit of Section 92.

Soon thereafter came the next case Hughes and Vale

Pty. Ltd V. New South waless2 (Hughes and Vale Pty.Ltd

Case No:2). After the decrs~on of the Privy Council in

Hughes and Vale Pty.Ltd Case No:l , Parliament of New

South Wales passed the State Transport (Co-ordination)

Amendment Act 1954. 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 1931-1 951, 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 as 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 ~napplicable to 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~cable to 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 L K 127, Src alcu (; Sawcr op clt p.275

So far as the facts are concerned, the Plaintiff company

~ u g h e s and Vales Pty, t td 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 i ts

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 e or for any considerat~on or In the course of any trade or

business whatsoever is a public motor vehicle. The

Amendment Act of 1954 beg~ns by l~mi t ing 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 Act 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 or in respect of a public motor vehicle so

operated." Section 12(l), remacns an important provision In

the effect which the teg~slatlon produces upon the operat~on of

public motor vehicles In the course and for the purposes of

rnterstate trade. It IS said that except for the introduct~on of

those words it ts left almost In the same form. It makes it an

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 Act 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 out that these

provisions do not stand alone, for the 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 ts grant, is not left unl~mited and uncontrolled.

It I S 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) Ac t 1931 -1 951

was ~nepplicable to 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 ~nvo lv lng 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~on the High Court said that

regulation of interstate transportation of goods by Motor

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 a real obstruction or impediment to carrying

~t on does impair 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. It operates on everybody unless he fulfils the

condition. 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. (Case No.2) has three

ramifications. First, the licensing provisions for interstate

carriers were held invalid. Secondly, road charges imposed by

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 expansionary views wlth respect to interstate

commerce 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 (No 2), (1957) 99

C. L.R. 28; taken from Colin Howard, op ci t lllrd 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

(P C)

Nat~onal Airlines Commission with power to establish, maintain

and operate interstate commercial airline services, The

rnonopoly provisions are contained in Sections 46-49 of the

Ac t 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 as an

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 ho ld~ng an operative airline

I~cence. Thus, in effect the Statute virtually gave monopoly to

the Commission to operate interstate air transportation. The

monopoly provls~ons of 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. Sectron 46 of the Act empowered the

Treasurer by notice to prohlb~t any private Bank from

continuing in business. 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 op ln~on 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 i s

enough to say that, as common knowledge might suggest, the

material confirms in detail what seem to be the essential

conclusions. These are that the business of the private banks

necessmrily includes: (a) the constant ~nterstate transmission

of funds and transfer of credit, (b) constant busings6

communication and intercourse among t P n States; (c) the

regular use for the purposes of inter State transactions of

rnstruments of credit and of trtle to goods and the~r interstate

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 ' lndian commerce

clause, unlike the Ammrican and Australian commerce clauses,

does not specifically spell out Interstate 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

trade. That apart, important issues for consideration under

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 ~ntercourse are 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 ~ s exactly 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~es would 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 or business or

commerce although the usual forms and instruments are

employed therein.. To exclude those 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 Proceeding further the Court said that,

"We find 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 in terc~urse" .~ '

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.

State of ~ m s a r n . ~ ~ Impugned legislation in this case was

Assam Taxation (on goods carried by Roads or Inland

Waterways) Act of 1954. Justice Gajendragadkar 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~quor was not business or trade, as the dealing in noxious

and dangerous goods llke liquor was dangerous to the

community and subversive of its morals. 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

country. Such an approach, accord~ng to him, leads tcl

~ncoherence in 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

~l legal~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~th respect to such activities. If

such activities are trade, whether prohibition of such activities

is reasonable restrictions. The prohibition of such activities

are reasonable restrictions, whether such activities continue to

operate This case does not give any proper answer to such

questions.

This view expressed by the Supreme Court in

Chamarb8ugwrlr'u case seems to have an 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 powers, has the right to

69 Ihid, p. 137 1.

70 [hid

7 1 AIR 1975SC 1121

prohibit absolutely every form of activity in relation to

intoxicants- the manufacture, storage, export, import, sale and

possession. In all their manifestations, these rights are vested

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~thin the 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

Court in P.N. Kaurhal V. Unlon of lndlar3 and in Satpal

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 IS 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 to act for the health, moral and welfare of the

people.76 As a matter of fact, ~f this society's well-being

7 3 AIR 1978 SC 1457

74 AIR 1979 SC 1550.

principle is transposed into the f~eld of 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 goods

and persons across the State frontiers for rilegal and immoral

purposes had been prohibited.

The nature and extent of freedom contemplated 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 re 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, made certain rules imposing on "foreign

cattle" higher grazing rates than in the case of cattle

belonging to the residents of Madhya Pradesfi. This rule was

challenged in this case. 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 only, even as the towns and

villages of Medhya Pradesh cannot be reserved for the

residence of the original residents of Madhya Pradesh only 8D

Proceed~ng further 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 rl Article 301 has

been construed as the freedom to pass across the Statelines

wlthout any hindrance. 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 is one vested in individuela

does not seem to be in conformity with the ~ntendment of 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

I t as right vested in individuals. Freedoll, contemplated in

Ar t~c le 301 is one attached to movement aspect of trade,

commerce and ~ntercourse throughout the territory of Indla.

Movement of ~ndividuals unconnected with trade, commerce or

intercourse IS not one that can be said to have been covered

by Arttcle 301 of the Constitution