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1969 (1) TMI 79

llant : Mr J. B. Dadachanji, A. S. R. Chari and Govind Das, Advocates For The Respondents : Mr J. B. Dadachanji, A. S. R. Chari, and Govind Das, Advocates JUDGMENT J.C. Shah, J 1. These appeals arise out of orders passed in petitions moved before the High Court of Orissa challenging the scheme adopted by the Government of Orissa for sale of Kendu leaves in which the State has assumed a monopoly of trading, by the Orissa Kendu Leaves (Control of Trade) Act 28 of 1961. 2. Kendu tree is a wild growth. Its leaf is used mainly in the manufacture of bidis. To regulate the trade in Kendu leaves the State of Orissa has adopted diverse executive and legislative measures. In exercise of the powers conferred by Section 3(1) of the Orissa Essential Articles Control and Requisitioning (Temporary Powers) Act, 1947 the Government of Orissa issued the Orissa Kendu Leaves (Control and Distribution) Order, 1949, providing for the issue of licences to person trading in Kendu leaves. The District Magistrates were authorised to fix the minimum rates for purchase of Kendu leaves and the Order provided that the licensees shall purchase Kendu leaves from the pluckers or owners of private trees and forests .....

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e Act infringed his fundamental rights under Articles 19(1)(f) & (g) and Article 14. A He challenged Sections 3 and 4 and Rule 7(5) as infringing the fundamental right under Article 19(1)(f) and (g) of the Constitution, and Sections 5, 6 and 9 as contravening the equality clause of the Constitution. This Court held in Akadasi Padhan v. The State of Orissa 1962 : [1963] Supp. 2 S.C.R. 691 that the Orissa Kendu (Control of Trade) Act, 1961, was a valid piece of legislation, and creation of a State monopoly in Kendu leaves was protected by Article 19(6) as amended by the Constitution (First Amendment) Act, 1951. In the opinion of the Court, fixation of prices prescribed by Section 4 was reasonable and in the interest of the general public both under Article 19(5) and Article 19(6) and Section 4 of the Act was on that account valid. The Court further held that Section 3 which allowed the Government or an officer of the Government authorised in that behalf or an agent in respect of the unit in which the leaves were grown, to purchase or transport Kendu leaves for and on behalf of the Government, was not open to attack. But in the view of the Court the categories of persons mentioned .....

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s were addressed to certain traders intimating that it had been decided by the Government of Orissa to renew leases of Kendu leaf Units held by them, for the year 1968 if they accepted the terms set out therein. Under this scheme the Government offered to those licensees who in their view had worked satisfactorily in the previous year and had paid the amounts due from them regularly to continue their licences with the added provision that the agents with whom they had been working in 1967 will also work during 1968. The link between the agent and the purchaser which had been the subject-matter of agitation in previous years, it was claimed, was extended by the scheme. 9. On January 24, 1968, a petition was moved by Rashbihari Panda in the High Court of Orissa under Article 226 of the Constitution challenging the action of the Government. The Government, it appears, had second thoughts and the offers to renew the previous licenses were withdrawn and the licensees were informed that the Government had decided to invite offers for advance-purchases from persons who had purchased Kendu leaves from individual units during the year 1967 and had not committed default in payment of the due .....

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ons or personal approach in the matter of sale of Kendu leaves by the Government , and after careful consideration, the Government determined the fair price that may be realized by selling Kendu leaves; that the dealers who were given contracts for two years by the previous Ministries had been offered options to purchase the leaves at rates higher than those obtaining during the last few years and that under the new policy the profits earned rose from ₹ 1,00,75,000 in 1962-63 to ₹ 1,91,00,000 in 1968-69. It was also submitted that Under Section 10 of the Kendu Leaves (Control of Trade) Act, the Government was authorised to dispose of the Kendu leaves in such manner as the Government may direct and thereby the authority vested in the Government to use their discretion was not amenable to the writ jurisdiction of the High Court , and that from the data furnished it was clear that the Government had acted in the best interests of the State and the figures showed their bona fides in the matter . 12. The High Court was of the view that the State having assumed monopoly of trading in Kendu leaves was alone entitled to purchase the Kendu leaves from the primary producers, and .....

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the right in the interests of the general public or for the protection of the interests of any scheduled tribe. Clause (6) of Article 19 which was amended by the Constitution (First Amendment) Act, 1951, sets out the restrictions which may be imposed upon the right to practise a profession or to carry on any occupation, trade or business. It states : Nothing in Sub-clause (g) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said Sub-clause, and, in particular, nothing in the said Sub-clause shall affect the operation of any existing law in so far as it relates to, or prevent C the State from making any law relating to, - (i). . . (ii) the carrying on 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. In Akadsi Padhan s case MANU/SC/0089/1962 : [1963] Supp. 2 S.C.R. 691 this Court held that by the amendments in Article 19(6) it was intended that the S .....

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monopoly sales were to be made at concessional rates and that the benefit which would have otherwise been earned by the State accrued to those purchasers. 15. Section 10 of the Act is a counter-part of Section 3 and authorises the Government to sell or otherwise dispose of Kendu leaves in such manner as the Government may direct. If the monopoly of purchasing Kendu leaves by Section 3 is valid, insofar as it is intended to be administered only for the benefit of the State, the sale or disposal of Kendu leaves by the Government must also be in the public interest and not to serve the private interests of any person or class of persons. It is true that it is for the Government, having regard to all the circumstances, to act as a prudent business-man would, and to sell or otherwise dispose of Kendu leaves purchased under the monopoly acquired Under Section 3, but the profit resulting from the sale must be for the public benefit and not for private gain. Section 11 which provides that out of the net profits derived by the Government from the trade in Kendu leaves an amount not less than one half is to be paid to the Samitis and Grama Panchayats emphasises the concept that the machinery .....

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shut out all other persons carrying on trade in Kendu leaves and also new entrants into that business. It was ex facie discriminatory, and imposed unreasonable restrictions upon the right of persons other than existing contractors to carry on business. In our view, both the schemes evolved by the Government were violative of the fundamental right of the petitioners under Article 19(1)(g) and Article 14 because the schemes gave rise to a monopoly in the trade in Kendu leaves to certain traders, and singled out other traders for discriminatory treatment. 18. The classification based on the circumstance that certain existing contractors had carried out their obligations in the previous year regularly and to the satisfaction of the Government is not based on any real and substantial distinction bearing a just and reasonable relation to the object sought to be achieved i.e., effective execution of the monopoly in the public interest. Exclusion of all persons interested in the trade, who were not in the previous year licensees is ex facie arbitrary : it had no direct relation to the object of preventing exploitation of pluckers and growers of Kendu leaves, nor had it any just or reasonab .....

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, especially in the light of the financial position of the offer or, the security which he was willing to give and the effect which the acceptance of the offer may have on the other traders and the general public interest. 21. The learned Judges of the High Court have observed that in their view the exercise of the discretion was not shown to be arbitrary, nor was the action shown to be lacking in bona fides. But that conclusion is open to criticism that the Government is not shown to have considered the prevailing prices of Kendu leaves about the time when offers were made, the estimated crop of Kendu leaves, the conditions in the market and the likelihood of offers at higher prices carrying out their obligations, and whether it was in the interests of the State to invite tenders in the open market from all persons whether they had or had not taken contracts in the previous year. If the Government was anxious to ensure due-performance by those who submitted tenders for purchase of Kendu leaves, it was open to the Government to devise adequate safeguards in that behalf. In our judgment, the plea that the action of the Government was bona fide cannot be an effective answer to a clai .....

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