TMI Blog1981 (1) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... y this common judgment. The basic question being common, it will suffice to state the facts giving rise to Writ Petitions 2222 to 2252 of 1977, filed by the New Bihar Bidi Leaves Co. The petitioners in all these writ petitions are either firms or individuals carrying on trade in Kendu leaves in the State of Bihar. However, petitioner No. 31 is an association of traders in Kendu leaves, of which the other petitioners are members. Kendu leaves are grown as forest produce in several States, including the States of Bihar, Orissa, Andhra Pradesh, Maharashtra, Gujarat, Madhya Pradesh and a part of Uttar Pradesh. Under the old system in Bihar, the right to pluck and extract Kendu leaves from a forest coupe carved out by the Forest Department, was auctioned by the State Government. On March 10, 1972, while the State of Bihar was under the President s rule, the Governor of Bihar issued the Bihar Kendu Leaves (Control of Trade) Ordinance, 1972. The provisions of this Ordinance were continued under successive Ordinances and ultimately replaced by the aforesaid Act of 1973. This Act created State monopoly in the matter of sale of Kendu leaves to the manufacturers of bidis. Its purpose is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... get himself registered within such period on payment of such fee and in such manner as may be prescribed. (2) Every manufacturer of bidis within the State registered under sub-section (1) shall furnish a declaration in such form by such date and in such manner as may be prescribed. Section 12 provides that Kendu leaves purchased by the State Government or by its authorised officer or agent, shall be disposed of in such manner as the State Government may direct. Section 20 of the Act gives the State Government the power to make rules subject to the conditions of previous publication, to carry out all or any of the purposes of this Act. Sub-section (2) of that Section provides that such rules may provide for all or any of the following matters, namely:- (a) procedure to be followed in making appointment of agents; (b) to (d) ..............; (e) the manner of registration under Section 10; (f) the manner of registration, the period within which such registration shall be made and the fee payable thereof under sub-section (1) of Section 11; (g) form of declaration, authority to whom, date by which and the manner in which the declaration shall be furnished und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall execute an agreement in Form C within fifteen days of the receipt of the order of appointment, failing which the appointment shall be liable to be cancelled and upon such cancellation, the security deposit shall be forfeited; and the agent shall be liable to pay the loss, if any, incurred by the State Government as a result of such cancellation of the appointment. Then, a formula has been provided as to how such loss on cancellation of the appointment shall be calculated. The loss so determined shall be recoverable from the agent or surety as arrears of land revenue. Sub-rule (10) requires the agent so appointed for a particular unit to deposit security before signing the Agreement. It also provides how the amount to be deposited should be calculated. Sub-rule (11) provides that the agent shall purchase Kendu leaves from growers and from such labourers who pluck Kendu leaves from the Government forests and other lands at the depot opened by him or ordered to be opened by the Divisional Forest Officer. Clause (ii) of sub-rule (11) lays down that unless ordered by the Divisional Forest Officer or an officer authorised by him in writing, the agent shall not slacken or stop th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u leaves collected or likely to be collected by it or by its officers or agents by auction on such terms and conditions as may be decided by it. Sub-rule (9) reads as under: The successful tenderer or successful bidder, as the case may be, shall be appointed as purchaser for the particular unit, and the entire quantity of Kendu leaves collected or likely to be collected from such unit or such lesser quantity out of it may be offered to him by the State, its officer or agent in such unit, shall be purchased by him in such manner and on such terms and conditions as may be specified in the agreement to be executed by such purchaser under subrule (10). Sub-rule (10) requires the purchaser to execute an Agreement in Form M within 15 days of the receipt of the order of appointment. Sub-rule (11) requires such purchaser before signing the agreement to deposit the security calculated as provided in that sub-rule. Sub-rule (13) provides that the purchaser, if he desires to consume the leaves within the unit or to remove the leaves delivered to him outside the unit immediately or at any time before the 30th June, shall pay the purchase price in full for the quantity of leaves deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on the petitioners fundamental freedom to carry on trade or business in Kendu leaves; guaranteed under Article 19(1)(g) of the Constitution; that the impugned provisions are not within the protection of sub-clause (ii) in the second part of clause (6) of Article 19 because the impugned provisions are not integrally and essentially connected with the creation of the monopoly in favour of the State, but are only incidental or subsidiary to the operation of the monopoly. In support of this proposition, learned counsel has referred to the decisions of this Court in Akadesi Padhan v. State of Orissa and Rashbihari Panda etc. v. State of Orissa. The second proposition propounded by Mr. Nariman is that the impugned provisions violate the fundamental rights of the petitioners guaranteed under Article 14 of the Constitution, because in their immediate operation and effect, they are harsh, unconscionable, arbitrary unfair and oppressive; that even where the quantity offered to the purchaser is far less than 75% of the notified estimated yield, or the leaves offered are not of merchantable quality, the impugned provisions unreasonably obligate the purchaser to pay royalty for 75 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the State of Andhra Pradesh, which, according to him, have a reasonable basis. Mr. K. S. Sinha, appearing for the appellant in Criminal Appeal 300 of 1974, submitted that the validity of the impugned provisions was indirectly involved in this appeal, though in a different context. It is pointed out that the permit to remove the leaves was refused to the appellant on the ground that he had taken away the leaves without paying 75 per cent of the royalty and had contravened Rule 16. The point sought to be made out is that if the impugned Rules are not held to be valid, this appeal must, in consequence, succeed. On the other hand, Mr. L. N. Sinha, learned Attorney- General submits on behalf of the respondents that there is a paucity of skilled people who could be employed as Agents; that in actual practice the persons appointed as Agents are sponsored by the purchasers. (i) It is submitted that the terms of the Agreement, taken as a whole, are not one-sided. Whereas under the conditions of the Tender Notice and the Agreement the purchasers voluntarily bind themselves to pay the full price of the unit which is fixed according to the Rules, irrespective of any shortfall in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms and conditions of the contract which they had voluntarily made and worked out. (iv) Another point sought to be made out is that the impugned provisions are directly and essentially related to the operation of the monopoly and, as such, fall within the protection of sub-clause (ii) of clause (6) of Art. 19. (v) In the alternative, it is submitted that the impugned provisions satisfy the test of reasonableness under the first part of clause (6) of the said Article, and in applying that test the voluntary nature of the contract and the obligations willingly undertaken by the purchaser with all the risks of loss and chances of gain should not be lost sight of that a purchaser who acts on a contract voluntarily entered into by him is precluded from repudiating some of its conditions which involve risk of loss and to accept those which are advantageous to him. In support of the proposition that one who has received the benefits of statute is precluded from attacking the constitutionality of a condition attached by the statute, the learned Attorney-General has referred to these decisions of the Supreme Court of United States: Berth Fisheries Co. v. Industrial Commission o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the State, or by a Corporation owned or controlled by the State, of any trade, business, industry or service, whether to the exclusion, complete or partial, of citizens or otherwise. It will be seen that clause (6) falls into two parts. The first part commences with the phrase: Nothing in subclause (g) of the said clause (1) of the Article . Phrase to the same effect, with the addition of pre-fixed words and, in particular are repeated at the commencement of the second part, also. This indicates that the two parts of the clause are intended to be distinct and separate. Further, the words reasonable restrictions which find pivotal mention in the first part, have not been repeated in the second part, which omission makes it clear that a law covered by sub-clause (ii) is not required to satisfy the test of reasonableness under the first part of the clause and no objection to the validity of such a law is tenable on the ground that it infringes the right guaranteed under Article 19(1) (g). Subclause (ii) is thus in the nature of an exception to the main substantive provision in clause (1) of the Article. Its language therefore, which is explicitly restrictive, has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of such a commodity except on the statutory terms laid down by the seller-State. Sale of Kendu leaves for manufacture of bidis being a State monopoly, the petitioners-purchasers could, if they so desired, purchase the Kendu leaves only in the manner prescribed by the statutory rules on terms and conditions notified in the Tender Notices. Even so, these conditions leave sufficient room to the free volition of the intending purchasers, particularly in the matter of fixing the rates and the minimum price payable for the estimated yield from a particular unit in terms of standard bags. The Tender Notice and the Agreement which the purchasers enter into with the Government, although couched in statutory Forms, are not bereft of their contractual character, either. Since the impugned provisions do not, as already noticed, fall within the protection of sub-clause (ii) in the second part of clause (6), they must satisfy the test of being a reasonable restriction under the first part of that clause. The first point in this connection to be determined is, what actually is sold to the purchasers under the terms of the Tender Notice and the statutory Agreement ? Is it an estimated yield ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral public interest. Fixation of a minimum price on the basis of estimated yield from a particular unit in a particular year operates as an insurance against loss or leakage of public Revenue due to connivance or collusion between purchasers on the one hand, and the servants and agents of the seller-State on the other. This method also assures a minimum wage to the pluckers of the Kendu leaves who, as has been affirmed in the counter-affidavit of the respondent-State, are generally Adivasis or persons belonging to economically backward classes. We are unable to accept the contention of the learned counsel for the petitioners, that the impugned provisions are harsh and unreasonable inasmuch as they obligate the purchasers to pay for the undelivered shortfall of Kendu leaves even where such shortfall is due to the negligence or fraud of the Agent of the Government. The real position has been explained in the counter-affidavit filed on behalf of the State in Writ Petitions 2222 to 2252 of 1977, thus : Technically speaking the Agents were appointed by the State Government but the persons so appointed were actually sponsored by the respective purchasers. The Agents were the perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so, against the real factual background, the impugned Condition 13 cannot be said to be unreasonable. Mr. Nariman contended that if the factual position, as stated in the counter-affidavit filed on behalf of the State, is correct, then the impugned condition 13 will be hit by the ratio of this Court s decisions in Rashbihari Panda etc. v. State of Orissa (ibid) and Akadasi Padhan s case (ibid), because in that situation the conclusion would be ineluctable that the monopoly is being worked by the State not for its exclusive benefit or in the public interest but to benefit a class of profiteers comprised of the purchasers and their agents, thereby creating a monopoly within a monopoly. In order to appreciate this contention, it is necessary to notice Rashbihari Panda s case. To regulate trade in Kendu leaves and prevent exploitation of growers and pluckers, the State of Orissa enacted the Orissa Kendu Leaves (Control of Trade) Act. 1961. By Section 3 of that Act, which is analogous to Section 3 of the Bihar Act, no person other than the Government, an authorised officer of the Government, or an agent appointed by the Government, is entitled to purchase or transport Kendu leaves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to purchase Kendu leaves. This new method of offering to enter into agreements for advance purchases of Kendu leaves by private offers in preference to open competition, was challenged by writ petitions in the High Court as violative of the petitioner s fundamental rights under Articles 14 and 19(1) (g). Reversing the decision of the High Court, this Court, in appeal, held, The validity of a law by which the State assumed the monopoly to trade in a given commodity has to be judged by the test whether the entire benefit arising therefrom is to enure to the State, and the monopoly is not used as a cloak for conferring private benefit upon a limited class of persons. The monopoly of purchasing Kendu leaves under Section 3 may be held to be valid if, it be administered only for the benefit of the State. Similarly, the right to sell or dispose of Kendu leaves by the State under Section 10, in such manner as the Government may direct, would be valid if it be exercised in public interest and not to serve the private interest and not to serve the private interests of any person or class of persons. The profit resulting from the sale must be for the public benefit and not for private g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the action of the Government was bona fide could not be an effective answer to that challenge. It may be noted that the decision of this Court in Rashbihari s case (ibid) was announced on January 16, 1969. The Bihar Act, with which we are concerned, was passed in 1973. The Bihar Legislature, therefore could not but be aware of the unconstitutional features pointed out by this Court in the schemes of the Orissa Act and the Rules framed thereunder. Care has been taken by the Bihar Legislature, and the Government to exercise the scheme of the Bihar Act and the Rules and Forms framed or prescribed thereunder, of the vices from which the schemes of Orissa Legislation suffered. This will be clear from a comparative study of the Orissa schemes and the Bihar scheme. Firstly, under the Orissa schemes, the monopoly was not being worked for the entire benefit of the State or in the general public interest, but was being used as a cloak for conferring private benefit upon a limited class of persons. The offers for purchasing Kendu leaves were restricted to a particular class of contractors and were not open to the general public. This vice does not exist in the Bihar scheme including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ggestion has been adopted by the scheme of the Bihar Act and the Rules and the Forms of Tender Notice and Agreement prescribed thereunder. Some other defects pointed out by this Court in the operation of the Orissa schemes, were that the Government had not estimated the crop and the prevailing prices of Kendu leaves about the time when offers were made, nor the conditions in the market, nor offers of higher prices and the likelihood of offerers of higher prices carrying out their obligations. The scheme of the Bihar Act and the Rules, and Forms including that of the impugned condition 13 is designed to remove the deficiencies, infirmities and vices pointed out by this Court in Rashbihari s case. For these reasons, we are unable to accept the contention, that in actual operation, the impugned provision (clause 13) creates a monopoly in favour of a class of middlemen consisting of Agents and pur- chasers, and enables them to earn unduly large profits at the cost of the public or pluckers and growers. The impugned Condition 13 satisfies the test of reasonableness under the first part of Article 19(6). We, therefore, repel the challenge to the validity of that condition on the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t part in fixing the rate or price payable by him. By means of his offer in the Tender Form or by bidding at the auction, the purchaser binds himself to pay this minimum royalty even if by the end of the year, the number of bags collected is less than the notified estimated yield. The purchasers form their own estimates of the expected yield from a particular unit for a particular year and then make their offers of rates in the prescribed Tender Form, or when the disposal is by public auction, the purchasers make their bids subject to the terms published in the Tender or Auction Notices. If, according to the estimate of an intending purchaser, the unit concerned is not likely to yield the quantity notified, it is open to him either not to submit any tender or offer or rates at all, or not to offer a bid or an amount higher than that which, according to his own estimate or calculation, would be a reasonable price of the bargain. In other words, if a person with his eyes open tenders the highest rates per standard bag or offers the highest bid at public auction, as the case may be, of his own accord, it will be assumed that he did so because in his own estimation the acceptance of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n No. 13, on the ground of Article 14, also, is unsustainable and is rejected. Now, we take up the impugned Condition 4(bb). It provides that no objection from the purchaser with regard to the quantity or quality of the leave in the gaddis (bundles) offered would be tenable. This condition is couched in peremptory, drastic and absolute language. It is not qualified by any words showing that the bar envisaged in it will be attracted only in cases where the purchaser has had an earlier opportunity to raise this objection but failed to do so, or, where he had on an earlier occasion raised such an objection which was heard and overruled by the competent Forest Officer. We have already noticed that Section 9(1), proviso, of the Act contains a built-in-warranty, that the Kendu leaves offered would be fit for manufacture of bidis; that is to say, the leaves would be of merchantable quality. Condition 4(bb) therefore, is inconsistent with and repugnant to Section 9(1), proviso of the Act and, as such, invalid. It is, therefore, not necessary to test its validity on the ground of Articles 19 and 14 of the Constitution. In the light of the above discussion, we would dismiss all the Wri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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