TMI Blog1962 (12) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... ade of Kendu leaves, and that has put severe restrictions on the fundamental rights of the petitioner under Articles 19(1)(f) and (g). That, in substance, is the basis of the present petition. 2. The petition alleges that, in substance, the Act creates a monopoly in favour of certain individuals described as Agents by the relevant provisions of the Act, and in that sense, it is a colourable piece of legislation. Under the relevant provisions of the Act, three notifications have been issued, and the validity of these notifications is also challenged by the petition. The first notification published on the 8th of January, 1962 under section 5 of the Act, gives a schedule of the Districts, the number of units in which the districts are divided and the local areas covered by the said units. The District of Sambalpur in which the petitioner resides has been divided into five units and the petitioner's lands fall under units 2 and 5. On January 10, 1962, applications were called from persons who desired to be appointed as Agents of the Government of Orissa for purchase of and trade in Kendu leaves, and the notification by which these applications were called for made it clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Government in 1959. Besides, it has emphasised that 75% of the Kendu leaves produced in the State of Orissa grow in Government lands, and the monopoly created by the Act affects only 25% of the total produce of Kendu leaves in the State. The affidavit filed by respondent No. 1 also shows that the price fixed in consultation with the Advisory Committee is fair and reasonable and would leave a fair margin of profit to the grower of Kendu leaves. It is on these rival contentions that the validity of the Act as well as the notifications has to be considered in the present petition. 5. Before referring to the relevant provisions of the Act, it would be relevant to refer to the legislative background in respect of Kendu leaves. In 1949, the Government of Orissa had passed an order in exercise of its powers conferred on it by sub-section (1) of s. 3 of the Orissa Essential Articles Control and Requisitioning (Temporary Powers) Act, 1947. This Order was called the Orissa Kendu Leaves (Control and Distribution) Order, 1949. The broad scheme of this Order was that the area in the State was divided into units, and licences were issued to persons who were entitled to trade in Kendu leaves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer of Government authorised in that behalf; or (c) an agent in respect of the unit in which the leaves have grown; shall purchase or transport Kendu leaves. It is thus clear that by imposing restrictions on the purchase or transport of Kendu leaves, section 3 has created a monopoly. There are two explanations to s. 3(1) and two sub-sections to the said section, but it is unnecessary to refer to them. Section 4 deals with the fixation of sale price. Section 4(1) lays down that the price at which Kendu leaves shall be purchased shall be fixed by the State Government after consultation with the Advisory committee constituted under s. 4(2). After the price is thus fixed, it has to be published in the Gazette in the manner prescribed not later than the 31st day of January, and after it is published, the price would prevail for the whole of the year and shall not be altered during that period. The proviso to s. 4(1) permits different prices to be fixed for different units, having regard to the five factors specified in clauses (a) to (e). Clause (a) has reference to the prices fixed under any law during the preceding three years in respect of the area in question; clause (b) refers to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 12 deals with delegation of powers; s. 13 confers power of entry, search and seizure; s. 14 deals with penalty; s. 15 deals with offences and s. 16 makes the offences cognizable; Section 17 makes savings in respect of acts done in good faith; by section 18, Government is given power to make rules; by section 19, the Orissa Essential Articles Control and Requisitioning (Temporary Powers) Act, 1955 is repealed in so far as it relates to Kendu leaves; and s. 20 gives the power to the State Government to remove doubts and difficulties. These are the broad features of the Act. 9. The first contention which has been raised by Mr. Pathak on behalf of the petitioner is that the creation of State monopoly in respect of the trade of purchase of Kendu leaves contravenes the petitioner's fundamental rights under Art. 19(1)(f) and (g). There has been some controversy before us as to whether the petitioner can claim any fundamental right under Art. 19(1)(g). The learned Attorney-General contended that the petitioner is merely a grower of Kendu leaves and as such, though he may be entitled to say that the restrictions imposed by the Act affect his right to dispose of his property under a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commercial and industrial monopolies, combines and trusts, so that the legislative competence of the Legislatures to create monopolies by legislation could not be questioned. But the validity of such legislation came to be challenged on the ground that it contravened the citizen's rights under Art. 19(1)(f) and (g). As a typical case on the point, we may refer to the decision of the Allahabad High Court in Moti Lal v. The Government of the State of Uttar Pradesh I.L.R. (1951) All. 269. The result of this decision was that a monopoly of transport sought to be created by the U.P. Government in favour of the State operated Bus Service, known as the Government Roadways, was struck down as unconstitutional, because it was held that such a monopoly totally deprived the citizens of their rights under Art. 19(1)(g). As a result of this decision it was realised by the Legislature that the legislative competence to create monopolies would not necessarily make monopoly laws valid if they contravened Art. 19(1). That is why Art. 19(6) came to be amended. Incidentally, it may be of interest to note that about the same time, the impact of legislative enactments in regard to acquisition of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Art. 19(6) cannot always be accomplished by treating the said problem as a mere exercise in grammar. In interpreting such a provision, it is essential to bear in mind the political or the economic philosophy underlying the provisions in question, and that would necessarily involve the adoption of a liberal and not a literal and mechanical approach to the problem. With the rise of the philosophy of Socialism the doctrine of State ownership has been often discussed by political and economic thinkers. Broadly speaking, this discussion discloses a difference in approach. To the socialist, nationalisation or State ownership is a matter of principle and its justification is the general notion of social welfare. To the rationalist, nationalisation or State ownership is a matter of expediency dominated by considerations of economic efficiency and increased output of production. This latter view supported nationalisation only when it appeared clear that State ownership would be more efficient, more economical and more productive. The former approach was not very must influenced by these considerations, and treated it a matter of principle that all important and nation-building ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut when judicial decisions rendered the said assumption invalid, it was thought necessary to clarify the intention of the Constitution by making the amendment. It is because the amendment was thus made for purposes of clarification that it begins with the words in particular . These words indicate that restrictions imposed on the fundamental rights guaranteed by Art. 19(1)(g) which are reasonable and which are in the interest of the general public, are saved by Art. 19(6) as it originally stood; the subject-matter covered by the said provision being justiciable, and the amendment adds that the State monopolies or nationalisation Schemes which may be introduced by legislation, are an illustration or reasonable restrictions imposed in the interests of the general public and must be treated as such. That is why the question about the validity of the laws covered by the amendment is no longer left to be tried in Courts. This brings out the doctrinaire approach adopted by the amendment in respect of a State monopoly as such. 16. This conclusion, however, still leaves two somewhat difficult questions to be decided; what does a law relating to a monopoly used in the amendment mean ? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endment made in Art. 19(6) is to protect the law relating to the creation of monopoly and that means that it is only the provisions of the law which are integrally and essentially connected with the creation of the monopoly that are protected. The rest of the provisions which may by incidental do not fall under the latter part of Art. 19(6) and would inevitably have to satisfy the test of the first part of Art. 19(6). 18. The next question to consider is : what is the effect of the amendment on the other fundamental rights guaranteed by Art. 19(1) ? It is likely that a law creating a State monopoly may, in some cases, affect a citizens rights under Art. 19(1)(f) because such a law may impinge upon the citizens' right to dispose of property. Is the learned Attorney-General right when he contends that laws protected by the latter part of Art. 19(6) cannot be tested in the light of the other fundamental rights guaranteed by Art. 19(1) ? The answer to this question would depend upon the nature of the law under scrutiny. There is no doubt that the several rights guaranteed by the 7 sub-clauses of Art. 19(1) are separate and distinct fundamental rights and they can be regulatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... augwala MANU/SC/0019/1957 : [1957]1SCR874 . Therefore, in dealing with the attack against the validity of a law creating state monopoly on the ground that its provisions impinge upon the other fundamental rights guaranteed by Art. 19(1), it would be necessary to decide what is the purpose of the Act and its direct effect. If the direct effect of the Act is to impinge upon any other right guaranteed by Art. 19(1), its validity will have to be tested in the light of the corresponding clauses in Art. 19; if the effect on the said right is indirect or remote, then its validity cannot be successfully challenges. 21. It will be recalled that clause (6) is co-related to the fundamental right guaranteed under Art. 19(1)(g) as other clauses are co-related to the other fundamental rights guaranteed by Art. 19(1)(a) to (f), and so, the protection afforded by the said clause would be available to the impugned statute only in resisting the contention that it violates the fundamental right guaranteed under Art. 19(1)(g). If the statute, in substance, affects any other right not indirectly but directly, the protection of clause 19(6) will not avail and it will have to be sustained by reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they will depend upon the nature of the commodity, the nature of commerce in which it is involved and several other circumstances. In the present case, the State monopoly has been created in respect of Kendu leaves, and the main point of dispute between the parties is about the fixation of purchase price which has been provided for by s. 4. Mr. Pathak contends that the fixation of purchase price is not essential for the creation of monopoly, whereas the learned Attorney-General argues that monopoly could not have functioned without the fixation of such price. We are not prepared to accept the argument that the fixation of purchase price in the context of the present Act was an essential feature of the monopoly. It may be that the fixing of the said price has been provided for by s. 4 in the interests of growers of Kendu leaves themselves, but that is a matter which would be relevant in considering the reasonableness of the restriction imposed by the section. But take a hypothetical case where in creating a State monopoly for purchasing a commodity like Kendu leaves, the law prescribes a purchase price at an unreasonably low rate, that cannot be said to be an essential part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpare unfavourably with the prices prevailing in the locality in the previous years. Therefore, we fell no hesitation in holding that restrictions in regard to the fixing of price prescribed by s. 4 are reasonable and in the interests of the general public both under Art. 19(5) and Art. 19(6). The result is that the challenge to the validity of section 4 fails. 25. At this stage, we may refer to four decisions of this Court in which the question about the construction of Art. 19(6) has been incidentally considered. In Saghir Ahmad v. The State of U.P. MANU/SC/0110/1954 : [1955]1SCR707 , this Court was called upon to consider the validity of the relevant provisions of the U.P. Road Transport Act (No. II of 1951) and the question had to be decided in the light of Art. 19(6) as it stood before the amendment. But at the time when the judgment of this Court was pronounced, the Amendment Act had been passed, and Mukherjea, J., who spoke for the Court, referred to this amendment incidentally. The result of the amendment , observed the learned Judge, is that the State would not have to justify such action as reasonable at all in a Court of law and no objection could be taken to it on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt urged by Mr. Pathak that the Act is bad because it seeks to create a monopoly in favour of individual citizens described by the Act as 'agents'. For deciding this question, we must revert once again to the amendment made in Art. 19(6). The argument is that though the State is empowered to create State monopoly by law, the trade in respect of which the monopoly is sought to be created must be carried on by the State or by a corporation owned or controlled by the State. There can be no doubt that though the power to create monopoly is conferred on the legislatures in very wide terms and it can be created in respect of any trade, business, industry or service, there is a limitation imposed at the same time and the limitation is implicit in the concept of State monopoly itself. If a State monopoly is created, the State must carry on the trade, or the State may carry it on by a corporation owned or controlled by it. Thus far, there is no difficult. Mr. Pathak, however, contends that the State cannot appoint any agents in carrying on the State monopoly, whereas the learned Attorney-General urges that the State is entitled not only to carry on the trade by itself or by its offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to bind the principal by his acts, or if there are any other terms of the agency which indicate that the trade or business is not carried on solely on behalf of the State but at least partially on behalf of the individual concerned, that would fall outside Art. 19(6)(ii). Therefore, in our opinion, if a law is passed creating a State monopoly and the working of the monopoly is left either to the State or to the officers of the State appointed in that behalf, or to the department of the State, or to persons appointed as agents to carry on the work of the monopoly strictly on behalf of the State, that would satisfy the requirements of Art. 19(6)(ii). In other words, the limitations imposed by the requirement that the trade must be carried on by the State or by a corporation owned or controlled by the State cannot be widened and must be strictly construed and agency can be permitted only in respect of trades or business where it appears to be inevitable and where it works within the well recognised limits of agency. Whether or not the operation of State monopoly has been entrusted to an agent of this type, will have to be tried as a question of fact in each case. The relationship ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no substance. The notifications which were impugned have also been issued under the relevant provisions of the Act and their validity also cannot be effectively challenged once we reach the conclusion that the Act is good and valid. We have already observed that the petitioner has not specifically and clearly alleged that the price actually fixed under s. 4 is grossly unfair and as such, contravenes his rights under Art. 19(1)(f). No evidence has been adduced before us to show that the price is even unreasonable. On the other hand, the counter affidavit filed by respondent No. 2 would seem to show that the price has been fixed in accordance with the recommendations made by the Advisory Committee and it does not compare unfavourably with the price prevailing in the past in this locally in respect of Kendu leaves. Therefore, the main grounds on which the petitioner came this Court to challenge the validity of the Act fail. 31. There are, however, two other points which have been urged before us and on which the petitioner is entitled to succeed. The first ground relates to the agreement actually entered into between respondent No. 1 and the agents. This agreement consists of ten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be relevant and material if a contract of Government forest was made in favour of the party signing those conditions; and some others would indicate that the person appointed as an agent is not an agent at all but is a person in whom personal interest is created in carrying on the so called agency work. Clause 4 of the agreement provides for the payment which the agent has to make in respect of the Kendu leaves from private lands as well as from Government lands. It is not easy to appreciate the precise scope of the provisions of the respective sub-clauses of clause 4 and their validity. But, on the whole, it does appear that after the agent makes the payment prescribed by the relevant clauses to the Government, he is likely to keep some profit to himself; and that would clearly show that the relationship is not of the type which is permissible under Art. 19(6)(ii), Under clause 4(iii), the agent has to pay a sum of ₹ 5/- per bag to the Government as consideration for being permitted by Government to enter into and collect leaves from Government lands and forests. It is remarkable that in the absence of any specific rule, the amount to be paid per bag can be determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted under the agreement to work the monopoly of the State is not an agent in the strict and narrow sense of the term contemplated by Art. 19(6)(ii). The agent appointed under this agreement seems to carry on the trade substantially on his own account, subject, of course, to the payment of the amount specified in the contract. If he makes any profit after complying with the said terms, the profit is his; if he incurs any loss owing to circumstances specified in clause 6, the loss is his. In terms, he is not made accountable to the State Government; and in terms, the State Government is not responsible for his actions. In such a case, it is impossible to hold that the agreement in question is consistent with the terms of s. 3 of the Act. No doubt, the learned Attorney-General contended that in commercial transactions, the agreement in question may be treated as an agreement of agency, and in support of this argument he referred us to the decision in Ex parte Bright In re Smith I.L.R. (1879) Ch. D. 566, and Weiner v. Harris [1910] 1 K.B. 285. It is true that an agent is entitled to commission in commercial transactions, and so, the fact that a person earns commission in transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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