TMI Blog1997 (7) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... ely K.N. Oil Industries and M.P. Oil Extraction Ltd. have been subjected to hostile discrimination in the matter of grant of largesse so far as sal distribution of sal seeds is concerned by favourably treating the said Baster Oil Mills and Industries Ltd. and M/s. Sal Udyog (Pvt.) Ltd. thereby affecting the economic viability of the writ petitioners. It may be indicated here that before the said writ petitions were filed in the Madhya Pradesh High Court, a series of litigations were fought between the parties to these appeals both in the Madhya Pradesh High Court and in this Court. In 1981, the appellants M.P. Oil Extraction Limited and K.N. Oil Industries filed writ petitions numbered as M.P. No. 559 and 1404 of 1981, in the Madhya Pradesh High Court challenging the agreements between Bastar Oil Mills and Industries Ltd. and Sal Udyog (Pvt.) Ltd. and State government of Madhya Pradesh for distribution of specified amount of Sal seeds to the said concerns annually by alleging hostile discrimination against the said writ petitioners in the matter of distribution of sal seeds. Such writ petitions were dismissed by the Division Bench of the High Court by order dated 21.8.1981. The sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt by order dated 10.4.1986 reported in AIR (1986) SC 1927. By the said order, this Court upheld allotment and reservation of sal seeds in favour of Bastar Oil Mills and M/s. Sal Udyog (Pvt.) Ltd. and M/s. Allied Oil Industries (Pvt.) Ltd. and M/s. M.P. Glychem Industries being the four units selected by the State Government of Madhya Pradesh under the 1977 Industrial Policy. It appears that after all such futile attempts, the appellants did not give up their pursuits to get allotment of sal seeds from the Government. In 1986, both the appellants filed two separate but identical writ petitions being M.P. No. 645 and 644 of 1996 challenging the reservation and allotment of 10,000 M.T. of sal seeds in favour of M/s. M.P. Glychem Industries which was also selected under 1977 Industrial Policy. Such writ petitions were also dismissed by the High Court by order dated 6.5.1986. Thereafter, the writ petitions were again filed by both the appellants challenging the renewal of lease in favour of the respondents M/s. Bastar Oil Mills and M/s. Sal Udyog Pvt. Ltd. by treating such renewals as new leases and also challenging the determination of royalty to be paid for the sal seeds to be suppli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the State Government's estimate is around 60,000 M.T. After meeting the commitments of the State Government, the available surplus was only in the region of 37,000 M.T. of sal seeds. Inspite of the fact that annual yield of sal seeds in the State of M.P. for the year 1990 and 1991 was 4768 M.T. and 190809 M.T. respectively, the State Government treated Bastar Oil Mills and Sal Udyog (Pvt.) Limited as most favoured industrial concerns and executed fresh agreements for a further period of 12 years with effect from 1991. The agreements contain provisions for further renewal. In the case of Baster Oil Mills the quantity was increased to 20,000 M.T. while in the case of Sal Udyog (Pvt.) Ltd. the quantity was fixed at 10,000 M.T. Mr. Sanghi has contended that as a result of such fresh agreements with Bastar Oil Mills and Sal Udyog, the State Government is now committed to supply annually sal seeds grown in the State of M.P. in the following manner : (i) Baster Oil Mills - 20,000 M.T. (ii) Sal Udyog - 10,000 M.T. (iii) Allied Oil Mills 10,000 M.T. (iv) M.P. Glychem 10,000 M.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen the old policy of 1981 was revised it was indicated that after meeting the annual allotments of 10,000 M.T. of sal seeds to Bastar Oil Mills and Sal Udyog (Pvt.) Ltd., the surplus should be allotted to the old units. On the face of actual availability of sal seeds in the State, and after recognition of the need of sal seeds by old units and accepting such need in the industrial policy of 1981, fresh agreements in favour of Bastar Oil Mills and Sal Udyog (P) Ltd. in 1991 are wholly unjustified and mala fide and illegal being vitiated with arbitrariness and abuse of power by discriminatory action in the matter of distribution of sal seeds to other industrial units operating in the State. Mr. Sanghi has further submitted that Bastar Oil Mills and Sal Udyog (P) Ltd. got preferential treatment ever since 1979 onwards for a period of 12 years by way of assured supply of sal seeds by the State Government on the footing that the said concerns were new units and deserved special protection by the State for some time. But after 12 years, both the said units can no longer be treated as new units for the purpose of receiving preferential treatment. Hence, at the present moment, all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der and excluding the appellant from obtaining any allotment of sal seeds from the government even though the appellant badly requires sal seeds for its productive activity and it had set up extraction plant long back after examining economic viability with reference to availability of sal seeds in the State of Madhya Pradesh as assured by the State Government. Mr. Kale has submitted that the appellant has been using sal seeds ever since the extraction plant of the appellant was commissioned in 1974. Mr. Kale has submitted that sal seeds is a seasonal natural forest produce grown in the Government forests in M.P. The production of sal seeds varies from year to year. According to the Government's calculation, the average yield of sal seeds for the last seven years from 1985 to 1991 is 36950 M.T. If the average production of sal seeds from 1974 to 1990 i.e. a period of 18 years is taken into consideration, it works out to be 40600 M.T. Sal seeds as a forest produce was brought under the monopoly of the State Government with effect from May 5, 1975 udner M.P. Vanopaj (Vyapar Viniyaman) Adhiniyam,l969. After 1975, the plant of the appellant and other existing plants were tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was justified. The contention of the appellant that no sal seeds would be left for allotment to the other existing plants was repelled on the ground that the estimated production of sal seeds in the State was to the tune of one lac M.T. according to the report of the committee on the Industrial Policy. The appellant filed special leave petition against the said decision of the High Court before this Court and obtained interim orders from this Court to get supply of 5000 M.Ts. of sal seeds in May, 1982 at the royalty rate of ₹ 630 per mt. During the pendency of the proceedings, the State Government of M.P. formulated another policy on May 9,1983. Under the said policy, the estimated surplus of 20000 M.T. of sal seeds was to be distributed among the existing plants in proportion of their consumption of sal seeds during the last five years. In accordance with the said policy, an agreement was entered between the State Government and the appellant in December, 1983 for supply of 7500 M.T. of sal seeds to the appellant at the royalty rate of ₹ 750 per M.T. for a period of 12 years. Such agreement was, however, challenged by M/s. General Foods Pvt. Ltd. of Indore on the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale has contended that by fixing such a low rate of royalty, the State Exchequer has incurred a loss of crores of rupees. Such fixation of rate of royalty itself is arbitrary as the rate of royalty will depend on the rate of demand and supply in the market of sal seeds. Mr. Kale has also submitted that the impugned agreement dated September 7, 1991 has resulted in a hostile discrimination against the existing plants. The State Government has raised the quantity of sal seeds from 10000 M.T. to 20000 M.T. in favour of Bastar Oil Mills and by similar agreement the State Government has agreed to supply sal seeds of 10000 M.T. to Sal Udyog. The said Sal Udyog is not situated in any backward area. It is situated in the industrial estate at Raipur and the unit of the appellant is also situated very close to that of Sal Udyog. Mr. Kale has supported the contention made by Mr. Sanghi that after meeting the demands in favour of Baster Oil Industries, M/s. Allied Oil Industries, M/s. M.P. Glychem, no sal seeds would be left for being sold to the existing plants. Mr. Kale has submitted that therefore the impugned agreements have resulted in monopoly of getting sal seeds by the said responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and the provision of concessional rate for such units during the first four years of agreement. Dr. Singhvi has also contended that since such agreements in question in the present case were also the subject matter of challenge in the earlier proceedings and fell for scrutiny and adjudication by the Courts in the earlier proceedings which ultimately upheld the entire contract including the renewal clauses, there is no occasion for the appellants to challenge the said contract and the renewal clauses collaterally. By the impugned decision, such challenge has been rightly rejected by the High Court. Dr. Singhvi has also contended that all contentions regarding the impugned agreement and the clauses in the agreement have been upheld. Therefore repeated challenges to different clauses of the agreement are precluded. Dr. Singhvi has also submitted that even if it is assumed that particular argument regarding the validity of any clause of the agreement was not specifically raised or specifically considered, such a plea at a subsequent stage is precluded and barred by principles akin to res judicata and constructive res judicata. In support of such contention, reliance has been plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the act of renewal itself and (ii) the actual terms and conditions upon which the renewal is granted. The latter follows only upon the prior and threshold decision regarding the former. Dr. Singhvi has contended that not only the agreements in favour of the four units including the respondents M/s. Sal Udyog Pvt. Ltd. and M/s. Bastar Oil Mills under the Industrial Policy of the State have been upheld in the earlier proceedings but equally the agreements dated November 16, 1983 and December 12, 1983 purported to be entered into by the State of M.P. with both the appellant namely K.N. Oil and M.P. Oil Extraction Ltd. respectively have been struck down and held to be constitutionally invalid. The decision of the Division Bench in M.P. No. 1364 of 1984 has been upheld by this Court in M/s K.N. Oil Industries and Anr. v. State of M.P. Ors., AIR (1986) SC 1929. Dr. Singhvi has also submitted that it is sig-nificant to note that the agreement with the appellants since struck down contained an identical renewal clause and the appellants gladly accepted such renewal clause in the agreement in their favour though such agree-ments being illegal for different reasons were struck down b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enewal. Dr. Singhvi has further submitted that non renewal by the State of M.P. should fully justify and sustain an action by the respon-dents for mandamus to effectuate renewal of agreements. The legitimate expectations of the respondents as persons having agreement with specific renewal clauses which constitute both a representation and established past practice by the State of M.P. cannot be denied or thwarted unless overwhelming and specific higher public interest is shown to override those legitimate expectations. According to Dr. Singhvi, this doctrine of 'legitimate expectations' operates in the domain of public law, and is not merely a procedural right subsumed within the requirement of natural justice or elementary cannons of fair play. It constitutes a substantive, enforceable and protectible interest as a facet of Article 14 itself. The doctrine applies a fortiori and proprio vigore to cases of contract and renewals thereof. Dr. Singhvi has submitted that this doctrine has been specifically recognised, asserted and reiterated by this Court in the decision FCI v. Kamadhenu, JT (1992) Vol. 6 SC 259; Nav Jyoti Cooperative Society, JT (1992) 5 SC 621 and Union of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses the following significant components: (i) The collection charges payable which are notified by the State and which are intended to be paid to and realised by the poor tribals. Collection charges form an overwhelming and predominant component of the total price as is evident from the chart of collection charges, for example, when the royalty in 1991 was ₹ 386.25, collection charges were as high as ₹ 1675 to 1775. (ii) Royalty which is the amount of money realised by the State, apart from collection charges. This has normally upon ap-plication of weighted average varied around ₹ 300 per M.T. and is now fixed for 1993 season at ₹ 400 per M.T. (iii) Other expenses and taxes like transportation etc. Dr. Singhvi has further submitted that this Court is not required to determine the true price of sal seeds in the present proceedings. This Court should not be converted either into an appellate forum or a price fixation agency by the appellants. Once the Court is broadly satisfied with the fixation of prices for 1993 season in the context of the royalty of ₹ 300 and ₹ 294 and ₹ 386 for the earlier years and finds that this is broadly re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned agreement dated 30.4.1992 executed by the State Government in favour of M/s Sal Udyog is essentially not a new or fresh agreement. It is only a renewal of the original agreement. Dr. Singhvi has, therefore, submitted that there is no substance in the contention sought to be raised by the appellants and the appeals should, therefore, be dismissed with exemplary costs. Mr. Anil Diwan, learned Senior counsel appearing for other respon-dent, namely, M/s Bastar Oil Mills, has supported the submissions made by Dr. Singhvi. Mr. Diwan has also submitted that Bastar Oil Mills In-dustries has been established in a backward tribal area of M.P. at Jag-dalapur. The said industrial unit has opened the employment potentiality for the backward tribal people residing in the area. The State Government invited industrial units to be set up in such backward area and had assured supply of sal seeds for the plant to be operated in such backward area at concessional rate. It has been held by the High Court and by this Court in the earlier proceedings that the respondent, namely, the Bastar Oil Mills had been rightly treated on a separate footing on the basis of industrial policy of the governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sposed of in open auction by inviting tenders from all the industries. The learned counsel for the State has submitted that even after meeting such obligation, some amount of sal seeds will be placed for auction and the appellants can participate in such auction. The learned counsel for the State has also submitted that the State Government expects that in coming years, the position may further improve and the old industries are expected to get larger quantity of sal seeds from the State Government by participating in the auction to be held for the surplus quantity. The learned counsel for the State has, therefore, submitted that there is no merit in these appeals and the same should be dismissed with costs. After giving our careful consideration to the facts and circumstances of the case and to the submissions made by the learned counsel for the parties, it appears to us that the industrial policy of 1979 which was subsequently revised from time to time cannot be held arbitrary and based on no reason whatsoever but founded on mere ipsi dixit of the State Government of M.P. The executive authority of the State must be held to be within its competence to frame policy for the admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treatment which was not given to other existing old industrial units in the State, similarly circumstanced. It has been held by the High Court that the industrial units which were commissioned on the invitation of the State to undertake oil extraction operation on the assurance of supply of sal seeds by the State, stand on a separate footing. Such decision of the High Court though challenged before this Court, has not been upset. The distinctive features between the industrial units set up at the instance of the State Government and old existing units are based on objective criteria. Therefore, the said two classes of industries are not similarly circumstanced. Article 14 prohibits discrimination amongst the equals but it should be appreciated that Article 14 has inbuilt flexibility and it also permits different treatment to unequals. It may also be noted here that Bastar Oil Mills is situated at Jagdalpur which is admittedly a backward and tribal area. The special treatment given to Bastar Oil Mill by assuring supply of 20,000 M.T. of sal seeds under the impugned agreement cannot be held to be per se illegal and arbitrary. Classification on the basis of geographical situation h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to in usual manner and according to past practice unless there is any special reason not to adhere to such practice. The doctrine of 'legitimate expectation' has been judicially recognised by this Court in a number of decisions. The doctrine of legitimate expectation operates in the domain of public law and in appropriate case, constitutes a substantive and enforceable right. Although to ensure fair play and transparency in the State action, distribution of largesse by inviting open tenders or by public auction is desirable, it cannot be held that in no case distribution of such largesse by negotiation is permissible. In the instant case, as a policy decision protective measure by entering into agreements with selected industrial units for assured supply of sal seeds at concessional rate has been taken by the government. The rate of royalty has also been fixed on some accepted principle of pricing formula as will be indicated hereafter. Hence, distribution or allotment of sal seed at the determined royalty to the respondents and other units covered by the agreements cannot be assailed. It is to be appreciated that in this case, distribution by public auction or by ope ..... X X X X Extracts X X X X X X X X Extracts X X X X
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