Full Judgment Text
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PETITIONER:
AKADASI PADHAN
Vs.
RESPONDENT:
STATE OF ORISSA
DATE OF JUDGMENT:
05/12/1962
BENCH:
GAJENDRAGADKAR, P.B.
BENCH:
GAJENDRAGADKAR, P.B.
SINHA, BHUVNESHWAR P.(CJ)
WANCHOO, K.N.
GUPTA, K.C. DAS
SHAH, J.C.
CITATION:
1963 AIR 1047 1963 SCR Supl. (2) 691
CITATOR INFO :
RF 1964 SC1486 (8)
R 1969 SC1081 (5,13,19)
R 1969 SC1100 (10)
E 1970 SC 129 (8)
R 1970 SC 564 (70,178)
RF 1971 SC 733 (3,8)
R 1972 SC 971 (9)
E 1973 SC 974 (11,12,13)
RF 1973 SC1461 (434,740,742,1185)
R 1979 SC 25 (24,33)
RF 1980 SC1789 (120)
RF 1981 SC 679 (16,28,37,38)
R 1984 SC 326 (30,31,68)
R 1984 SC 657 (16)
R 1987 SC2310 (12)
R 1990 SC 123 (30)
RF 1991 SC 672 (31)
ACT:
State Monopoly-Kendu Leaves-Appointment of agents-Agreement
with agents-Validity of-Article 19 (6) (ii)-Scope and effect
of-Rule 7 (5)-Validity of Act and ss. 3, 4, 8,-Orissa Kendu
Leaves (Control of Trade) Act, 1961 (Orissa 28 of 1961), ss.
3, 4, 8-Constitution of India, Arts. 19 (1) (f) and (g), 19
(6).
HEADNOTE:
Prior to 1961, the petitioner used to carry on extensive
trade in the sale of Kendu leaves. In 1962, the State of
Orissa acquired a monopoly in the trade of Kendu leaves and
put restrictions on the fundamental rights of the
petitioner. Three notifications were issued by the State on
January 8, 1962, January 25, 1962 and March 10, 1962 for
that purpose. In his petition under Art. 32, the petitioner
challenged the validity of the notifications and also the
validity of the whole Act, particularly ss. 3 and 4, on the
ground that they violated Art. 19 (1) (f) and (g). The
petitioner prayed for a declaration that the whole act was
ultra vires and also an order restraining the State from
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giving effect to the notification and the Act,
Held, that the Orissa Kendu Leaves (Control of Trade) Act,
1961, is a valid piece of legislation. The creation of
State monopoly in Kendu Leaves is within the scope of Art.
19 (6) of the Constitution as amended by the constitution
(First amendment) Act, 195 1. ,A law creating a State
monopoly in the narrow and limited sense is valid under the
latter part of Art. 19 (6). If it indirectly impinges on
any other right, its validity cannot be challenged on that
ground. If the said law contains other incidental
provisions which are not essential and do not constitute an
integral part of the monopoly created by it, the validity of
those provisions has to be tested under the first part of
Art. 19 (6). If they directly impinge on any other
fundamental right granted by Art. 19 (1), the validity of
the said clauses has to be tested by reference to the
corresponding clauses of Art. 19.
692
The essential attributes of the law creating a monopoly will
vary with the nature of the trade or business in which the
monopoly is created. They will depend upon the nature of
the commodity, the nature of commerce in which it is
involved and several other circumstances.
A law relating to State monopoly in respect of road
transport or air transport would not normally infringe the
citizen’s fundamental right under Art. 19 ’(1) (f).
Likewise, a State monopoly to manufacture steel, armaments,
transport vehicles or railway engines and coaches can be
provided for by law and that would not normally impinge on
Art. 19 (1) (f). However, if the law creating such
monopolies makes incidental provisions directly impinging on
the citizens’ right under Art. 19 (1) (f), the case would be
different.
Having regard to the scheme of the State monopoly envisaged
by the Act, s. 4 cannot be said to be such an essential part
of the said monopoly as to fall within the expression "law
relating to" under Art. 19 (6). The validity of s. 4 has to
be tested in the light of the first part of Art. 19 (6) so
far as the petitioner’s rights under Art. 19 (1) (g) are
concerned and under Art. 19 (5) so far as his rights under
Art. 19 (1) (f) are concerned, So tested, the restrictions
regarding the fixation of prices prescribed by s. 4 are
reasonable and in the interest of the general public both
under Art. 19 (5) and Art. 19 (6). Hence s. 4 is valid.
Section 3 of the Act is also not open to any challenge.
This section allows either the Government or an officer of
the Government authorised in that behalf or an agent in
respect of the unit in which the leaves have grown, to
purchase or transport Kendu leaves. The Court was satisfied
that the two categories of persons specified in cls. (b) and
(c) are intended to work as agents of the Government and all
their actions and dealings in pursuance of the provisions of
the Act would be actions and dealings on behalf of the
Government and for the benefit of the Government. If s. 3
is valid, s. 8 which authorises the appointment of agents,
must also be held valid.
When the State carries on any trade, business or industry it
must inevitably carry it on either departmentally or through
its officers appointed for that purpose. In the very nature
of things, the State cannot function without the help of its
servants or employees and that inevitably introduces the
concept of agency in a narrow and limited sense. There are
some trades or businesses in which it may be inexpedient to
undertake the work of trade or business departmentally or
with the assistance
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693
of State servants. in such cases, it is open to the State to
employ the services of agents, provided the agents work on
behalf of the State and not for themselves.
Rule 7 (5) provides that on appointment as agent the person
appointed shall execute an agreement in such form as
Government may direct. This rule is bad because it leaves
it to the sweet will and pleasure of the officer concerned
to fix any terms and conditions on an ad hoc basis. This is
beyond the competence of the State Government. The terms
and conditions of the agreement must be prescribed by rules.
When the agreement actually made in this case is considered,
it leaves no room for doubt that the person appointed under
the agreement to work the monopoly of the State is not an
agent in the strict and narrow sense of the term con.
templated by Art. 19 (6) (ii). The agent appointed under
this agreement seems to carry on the trade substantially on
his own account. If he makes any profit after paying the
amount specified in the contract, that profit is his. If he
incurs any loss, that loss is his. He is not made
accountable to tile State Government and the State
Government is not responsible for his actions. It is
impossible to hold that the agreement is consistent with the
terms of s. 3 of the Act. Hence, the agreement is invalid.
The State Government cannot implement the provisions of the
Act with the assistance of agents appointed under the said
invalid agreement.
Motilal v. The Government of the State of U.P. I.L.R. 9511
All. 269 A. K. Gopalan v. State of Madras, [1950] S.C. R.
88, Ram Singh v. The State of Delhi, [1951] S. C. R. 451,
Express Newspapers (P) Ltd. v. Union of India, [1959] S.C.
R. 12, State of Bombay v. R. M. D. Chamarbaugwala, [1957] S.
C. R. 874. Ex parts Bright in Resmith, [1879] 10 L R. Ch.
D. 566 and Weiner Harris, [1910] 1 K. B. 285, referred to.
Saghir Ahmed v. State of U. P. r[9551]1 S. C. R. 707,
Parbhani Transport Co-operative Society- Ltd v. The Regional
Transport Authority, Aurangabad, [1960] 3 S. C. R. 177, Dosa
Satyanarayanamurty v. The Andhra Pradesh State Road
Transport Corporation, [1961] 1 S. C. R. 642 and H. C.
Narayanappa v. State of Mysore, [1960] 3 S. C. R. 742,
relied upon.
JUDGMENT:
ORIGINAL JURISDICTION : Petition No. 73 of 1962.
Petition under Art. 32 of the Constitution of India for
enforcement of Fundamental Rights.
694
G. S. Pathak and C. P. Lal, for the petitioner.
M. C. Setalvad, Attorney-General of India, Dinabandhu Sahu,
Advocate-General for the State of Orissa, C. B. Agarwala, R.
H. Dhebar, and R. N. Sachthey, for respondent No. 1.
1962. December 5. The judgment of the Court was delivered
by
GAJFNDRAGADKAR, J.-In challenging the validity of the Orissa
Kendu Leaves (Control of Trade) Act, 1961 (No. 28 of 1961)
(hereinafter called the Act), this petition under Art. 32 of
the Constitution raises an important question about the
scope and effect of the provisions of Art. 19 (6). The
petitioner Akadasi Pradhan owns about 130 acres of land in
village Bettagada, Sub-division Rairakhel in the District of
Sambalpur, and in about 80 acres of the said land lie grows
Kendu leaves. Kendu leaves are used in the manufacture of
Bidis; and so, prior to 1961, the petitioner used to carry
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on extensive trade in the sale of Kendu leaves by
transporting them to various places in and outside the
District of Sambalpur. But since the Act was passed in 1961
and it came into force on the 3rd of January, 1962, the
State has acquired a monopoly in the trade 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.
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
69
in which the districts are divided and the local area
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 the Government reserved to itself the
right to, reject any or all applications in respect of any
unit without assigning any reason whatsoever. Then followed
the notification of the 25th January, 1962, which prescribed
the price for the Kendu leaves @ 50 leaves per naya paisa.
This notification stated that the said price had been fixed
by the State Government in consultation with the Advisory
Committee appointed under s. 4 of the Act The last
notification to which reference must be made is the
notification which was issued on March 10, 1962, making
certain corrections in the units of the local areas notified
by the notification of the January 8, 1962. The validity of
these notifications is challenged by the petitioner on the
ground that the relevant provisions under which the said
notifications are issued are invalid, and also on the
general ground that the Act in its entirety is ultra vires.
The petition has averred that sections 3, 5, 6 and 16 of the
Act are invalid because they contravene Art. 14, but this
part of the case has not been argued before us. The main
attack has been directed generally against the validity of
the whole Act and sections 3 and 4 in particular on the
ground that they violate Art. 19 (1) (f) and (g). The
relief claimed by the petitioner is that this Court may
declare that the whole Act is ultra vires and restrain
respondent No. 1, the State of Orissa, from giving effect
either to the provisions of the impugned notifications or to
the provisions of the impugned Act.
696
The challenge made by the petitioner to the validity of the
Act and the relevant notifications is met by respondent No.
1 mainly on the ground that the Orissa Legislature was
competent to pass the Act and that its provisions do not
contravene Art. 19 (1) (f) or (g). It is urged that under
Art. 19 (6), the State Legislature is empowered to create a
State monopoly in any or business and a monopoly thus
created cannot be successfully challenged either under Art.
19(1) (f) or under Art. 19 (1) (g). In support of its case
that the prices fixed under the Act and the scheme of
enforcing the State monopoly adopted by the Act are
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reasonable, respondent No.1 has referred to the previous
legislative history in respect of Kendu leaves, and has
pointed out that the Act was passed in pursuance of the
recommendations made by a Taxation Enquiry Committee
appointed by the State 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.
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 subsection (1) of s. 3 of the Orissa Essential
Articles Control and Requisitioning (Temporary Powers) Act
697
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. The District Magistrate fixed the
minimum rate from time to time and the Order provided that
the licensees were bound to purchase Kendu leaves from the
pluckers or owners of private trees and forests at rates not
below the minimum prescribed. In other words, the trade of
Kendu leaves was entrusted to the licensees who were under
an obligation to purchase Kendu leaves offered to them at
prices not below the minimum prescribed by the Order.
This Order was followed by the Orissa Kendu Leaves Control
Order, 1960, passed under the same provision of the Orissa
Act of 1947. The licensees were continued under this Order,
but some other provisions were made, such as the appointment
of a Committee for each District to fix the minimum price.
In other words, the licensing system continued even under
this latter Order.
It appears that when there was a change in the Government of
Orissa, the monopoly created in favour of the licensees was
changed over to controlled competition, and when the
Congress Government, came back to power, it was faced with
the problem that the controlled competition introduced by
its predecessor had led to a loss in Government revenue.
That is why, in pursuance of the recommendations made by the
Taxation Enquiry Committee, the present Act has been passed
with the object of creating a State monopoly in the trade of
Kendu leaves. It would thus- be seen that though the Act
creates a State monopoly in the trade of Kendu leaves, a
kind of monopoly in favour of the licensees had been in
operation in the State since 1949,
698
except for a short period when the experiment of controlled
competition was tried by the Coalition Government which was
then in power.
Let us now examine the broad features of the Act. The Act
consists of 20 sections, and as its preamble indicates, it
was passed because the Legislature thought that it was
expedient to provide for regulation of trade in Kendu leaves
by creation of State monopoly in such trade. Section 2 of
the Act defines "agent" as meaning an agent appointed under
section 8, and "’unit" as a unit constituted under section
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5; "’grower of Kendu leaves" means any person who owns lands
on which Kendu plants grow or who is in possession of such
lands under a lease or otherwise; and ""permit" means a
permit issued under section 3. Section 3(1) provides that no
person other than (a) the Government; (b) an officer 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
699
years in respect of the area in question; cl. (b) refers to
the quality of the leaves grown in the unit; cl. (c) to the
transport facilities available in the unit; cl. (d) to the
cost of transport; and cl. (e) to the general level of wages
for unskilled labour prevalent in the unit. Section 4(2)
provides that the Advisory committee to be constituted by
the Government shall consist of not less than six members as
will be notified from time to time; and the proviso to it
lays down that not more than one-third of such members shall
be from amongst persons who are growers of Kendu leaves.
Under sub-section (3), it is provided that it shall be the
duty of the Committee to advise Government on such matters
as may be referred to it by Government; and sub-section (4)
prescribes that the business of the Committee shall be
conducted in such manner and the members shall be entitled
to such allowances, if any, as may be prescribed. Section 5
allows the constitution of units-, and s. 6 provides for the
opening of depots, publication of price list and the hours
of business etc. Section 7(1) imposes an obligation on the
Government and the authorised officer or agent to purchase
Kendu leaves offered at the price fixed under s. 4 in the
manner specified by it; under the proviso, option is left to
the Government or any officer or agent not to purchase any
leaves which in their opinion are not fit for the purpose of
manufacture of bidis. Section 7(2) provides for a remedy to
a person aggrieved by the refusal of the Government to
purchase the Kendu leaves. Section 7(3) deals with cases
where leaves offered are suspected to be leaves from the
Government forests and it lays down the manner in which such
a case should be dealt with. Section 8 deals with the
appointment of agents in respect of different units and it
allows one person to be appointed for more than one unit.
Under s. 9, every grower of Kendu leaves has to get himself
registered in the prescribed manner if the quantity of
leaves grown by him during the year is likely to exceed ten
standard maunds. Section 10
700
authorises the Government or its officer or agent to sell or
otherwise dispose of Kendu leaves purchased by them.
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Section 11 provides for the application of net profits which
the State Government may make as a result of the operation
of this Act; this profit has to be divided between the
different Samitis and Gram Panchayats as prescribed by the
said section. Section 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.
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 article 19(1) (f), he cannot
claim to be a person whose occupation, trade or business has
been affected. For the purpose of the present petition, we
have, however, decided to proceed on the basis that the
petitioner is entitled to challenge the validity of the Act
both under Art. 19 (1) (f) and Art. 19(1) (g) ; and that
makes it necessary to examine the argument raised by Mr.
Pathak that the creation of the State
701
monopoly contravenes Art. 19 (1) (g).
Mr. Pathak suggests that the effect of the amendment made by
the Constitution (first Amendment) Act, 1951 in Art. 19(6)
is not to exempt the law passed for creating a stage
monopoly from application of the rule prescribed by the of
Art. 19(6). In other words he suggests effect of the
amendment is merely to enable legislature to pass a law
creating a state monopoly the first part that the the State
but that does not mean that the said law will still not have
to be justified on the ground that the restrictions imposed
by it are reasonable and are in the interest of the
general public. On the other hand, the learned Attorney-
General contends that the object of the amendment was to put
the monopoly laws beyond the pale of challenge under Art.
19(1) (f ) and (g). It would thus be noticed that the two
rival contentions take two extreme positions. The
petitioner’s argument is that the monopoly law has to be
tested in the light of Art. 19(6) : if the test is
satisfied, then the contravention of Art. 19(1) (g) will not
invalidate the law. On the other hand, the State contends
that the monopoly law must be deemed to be valid in all its
aspects because that was the very purpose of making the
amendment in Art. 19(6).
Before proceeding to examine the merits of these
contentions, it is relevant to recall the genesis of the
amendment introduced by the Constitution (First Amendment)
Act, 1951. Soon after the Constitution came into force, the
impact of socio-economic legislation, passed by the
legislature in the country in pursuance of their welfare
policies, on the fundamental rights of the citizens in
respect of property came to be examined by Courts, and the
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Articles on which the citizens relied were 19(1) (f) and (g)
and 31 respectively. In regard to State monopolies, there
never was any doubt that as a
702
result of Entry 21 in List III both the State and the Union
Legislatures were competent to pass laws in regard to
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
(1). 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 property on the citizens’ fundamental rights
to property under Art. 19(1) (f) also came for judicial
review and the decisions of Courts in respect of the
acquisition laws in turn led to the amendment of Art. 31 on
two occasions; firstly, when the Constitution (First
Amendment) Act was passed in 1951 and secondly, when the
Constitution (Fourth Amendment) Act was passed in 1955.
Article 19(6) as amended reads thus
"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
(1) I.L.R. (1951) 1 All. 269.
703
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 the State from making any law
relating to,
(i) the professional or technical qualifica-
tions necessary for practising any profession
or carrying on any occupation, trade or
business, or
(ii) the carrying on by the State or by
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 would be noticed that the amendment provides, inter alia,
that nothing contained in Art. 19(1) (g) will prevent the
State from making any law relating to the carrying on by the
State of any trade, business, industry or service, whether
to the exclusion, complete or partial, of citizens or
otherwise ; and this clearly means that the State may make a
law in respect of any trade, business, industry or service
whereby complete monopoly could be created by which
’Citizens are wholly excluded from the trade, business,
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industry or service in question; or a law may be passed
whereby citizens are partially excluded from such trade,
business, industry or service ; and a law relating to the
carrying on of the business either to the complete or
partial exclusion of citizens will not be affected because
it contravenes Art. 19 (1) (g). The question which arises
for our decision is : what exactly is the scope and effect
of this provision ?
704
In attempting to construe Art. 19(6), it must be borne in
mind that a literal construction may not be quite
appropriate. The task of construing important
Constitutional provisions like Art. 19(6) cannot always be
accomplished by treating the said problem as a mete exercise
in grammar. In interpreting such a provision, it is
essential to bear in mind the political or the economic
philosophy underlying the pro. visions 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 much influenced by these considerations, and treated it
a matter of principle that all important and nation-building
industries should come under State control. The first
approach is doctrinaire, while the second is pragmatic. The
first proceeds on the general ground that all national
wealth and means of producing it should come under national
control, whilst the second supports nationalisation only on
grounds of efficiency and increased output.
The amendment made by the Legislature in Art. 19 (6) shows
that according to the Legislature, a law relating to the
creation of State monopoly should be presumed to be in the
interests of the general public. Art. 19 (6) (ii) clearly
shows that
705
there is no limit placed on the power of the State in
respect of the creation of State monopoly. The width of the
power conferred on the State can be easily assessed if we
look at the words used in the clauses which cover trade,
business, industry or service. It is true that the State
may, according to the exigencies of the case and
consistently with the requirements of any trade, business,
industry or service, exclude the Citizens either wholly or
partially. In other words, the theory underlying the
amendment in so far as it relates to the concept of State
monopoly, does not appear to be based on the pragmatic
approach, but on the doctrinaire approach which socialism
accepts. That is why we feel no difficulty in rejecting Mr.
Pathak’s argument that the creation of a State monopoly must
be justified by showing that the restrictions imposed by it
are reasonable and are in the interests of the general
public. In our opinion, the amendment clearly indicates
that State monopoly in respect of any trade or business must
be presumed to be reasonable and in the interests of general
public, so far as Art. 19(1) (g) is concerned.
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The amendment made in Art. 19 (6) shows that it is open to
the State to make laws for creating State monopolies, either
partial or complete, in respect of any trade, business,
industry or service. The State may enter trade as a
monopolist either for administrative reasons, or with the
object of mitigating the evils flowing from competition, or
with a view to regulate prices, or improve the quality of
goods, or even for the purpose of making profits in order to
enrich the State exchequer. The Constitution-makers had
apparently assumed that the State monopolies or schemes of
nationalisation would fall under, and be protected by Art.
If) (6) as it originally stood; but when judicial decisions
rendered the said assumption invalid, it was thought
necessary to clarify the intention of the Constitution by
making
706
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 interests 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 of 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.
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 ? And what is the
effect of the amendment on the other provisions of Art. 19
(1) ? The Attorney-General contends that the effect of the
amendment is that whenever any law is passed creating a
State monopoly, it will not have to stand the test of
reasonableness prescribed by the first part of Art. 19(6)
and its reasonableness or validity cannot be examined under
any other provision of Art. 19 (1). Taking the present Act,
he urges that if the State monopoly is protected by the
amendment of Art. 19 (6), all the relevant provisions made
by the Act in giving effect to the said monopoly are also
equally protected and the petitioners cannot be heard to
challenge their validity on any ground. What is protected
by the amendment must be held to be constitutionally valid
without being tested by any other provisions of Art. (1).
That, in substance, is the position taken by the learned
Attorney-General.
707
In dealing with the question about the precise denotation of
the clause ""a law relating to"’, it is necessary to bear in
mind that this clause occurs in Art. 19(6) which is, in a
sense, an exception to the main provision of Art. 19(1)(g).
Laws protected by Art. 19 (6) are regarded as valid even
Though they impinge upon the fundamental right guaranteed
under Art. 19(1)(g). That is the effect of the scheme
contained in Art. 19(1) read with clauses (2) to (6) of the
said Article. That being so, it would be unreasonable to
place upon the relevant clause an unduly wide and liberal
construction. "A law relating to" a State monopoly cannot,
in the context, include all the provisions contained in the
said law whether they have direct relation with the
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creation of the monopoly or not. In our opinion, the
said expression should be construed to mean the law relating
to the monopoly in its absolutely essential features. If a
law is passed creating a State monopoly, the Court should
enquire what are the provisions of the said law which are
basically and essentially necessary for creating the State
monopoly. It is only those essential and basic provisions
which are protected by the latter part of art. 19(6). If
there are other provisions made by the Act which are subsi-
diary incidental or helpful to the operation of the
monopoly, they do not fall under the said part and
their--validity must be judged under the first part of Art.
19(6). In other words, the effect of the amendment 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).
The next question to consider is: what is the
708
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 regulated only if the provisions contained in
clauses (2) to (6) are respectively satisfied. But in
dealing with the question as to the effect of a law which
seeks to regulate the fundamental right guaranteed by Art.
19(1)(g) on the citizen’s right guaranteed by Art. 19(1)(f),
it will be necessary to distinguish between the direct
purpose of the Act and its indirect or incidental effect.
If the legislation seeks directly to control the citizens’
right tinder Art. 19(1) (g), its validity has to be tested
in the light of the provisions contained in Art. 19(6), and
if such a legislation, as for instance, a law creating a
State monopoly, indirectly or incidentally affects a
citizen’s right under any other clause of Art. 19(1) as for
instance, Art. 19(1)(f), that will not introduce any
infirmity in the Act itself. As was observed by Kania, C.
J. I., in A. K. Gopalan v. The State of Madras (1), if there
is a legislation directly attempting to control a citizen’s
freedom of speech or expression, or his right to assemble
peaceably and without arms etc., the question whether that
legislation is saved by the relevant clause of Art. 19 will
arise. If however, the legislation is not directly in
respect of any of these Subjects, but as a result of the
operation of other legislation, for instance, for punitive
or preventive detention, his right under any of these
(1) [1950] S.C.R. 88, 101.
709
sub-clauses is abridged, the question of the application of
Art. 19 does not ’arise. The true approach is only to
consider the directness of the legislation and not what will
be the result of the detention otherwise valid. On the mode
of the detenue’s life.
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These observations were subsequently adopted by Patanjali
Sastri, J., in Ram Singh. v. The State of Delhi(1) who added
that in Gopalan’s case the majority view was that a law
which authorises deprivation of personal liberty did not
fall within the purview of Art. 19 and its validity was not
to be judged by the criteria indicated in that Article but
depended on its compliance with the requirements of Articles
21 and 22, and since s. 3 satisfied those requirements, it
was constitutional.
The same view has been accepted by this Court ,in Express
Newspapers (Private) Ltd. v. The Union of India(2 ) as well
as in The State of Bombay v. R. M. D. Chamarbaugwala. (3)
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 guaran-
teed by Art. 19 (1), it would’ be necessary to decide what
is the purpose of the Act and its direct effect. If th6
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
it’s validity cannot be successfully challenged.
It will be recalled that clause (6) is correlated 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
(1) [1951] S.C.R. 451, 456. (2) [1959] S.C.R. 12, 128-130,
(3)[1957] S.C.R. 874, 927,
710
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
to the requirements of the corresponding clauses in Art. 19.
The position, therefore, is that a law creating a state
monopoly in the narrow and limited sense to which we have
already referred would be valid under the latter part of
Art. 19 (6), and if it indirectly impinges on any other
right, its validity cannot be challenged on that ground. If
the said law contains other incidental provisions which are
not essential and do not. constitute an integral part of the
monopoly created by it, the validity of those provisions
will have to be tested under the first part of Art. 19 (6),
and if they directly impinge on any other fundamental right
guaranteed by Art. 19 (1), the validity of the said clauses
will have to be tested by reference to the corresponding
clauses of Art. 19. It is obvious that if the validity of
the said provisions has to be tested under the first part of
Art-. 19 (6) as well as Art. 19 (5), the position would be
the same because for all practical purposes, the tests
prescribed by the said two clauses are the same. In our
opinion, this approach introduces a harmony in respect of
the several provisions of Art. 19 and avoids a conflict
between them.
In this connection, it is necessary to add that in a large
majority of cases where State monopoly. is created by
statute, no conflict would really arise e.g. where under
State monopoly, the State purchases raw material in the open
market and manufactures finished goods, there would hardly
be an occasion for the infringement of the citizens’ right
under Art. 19 (1) (f). Take, for instance., the State
monopoly in respect of road transport or air transport; a
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law relating to such a monopoly would not normally infringe
the citizen’s fundamental right’ under Art. 19 (1) (f).
Similarly, a State monopoly to
711
manufacture steel, armaments, or transport vehicles, or
railway engines and coaches, may be provided for by law
which would normally not impinge on Art. 19(1) (f). If the
law creating such monopolies were, however, to make
incidental provisions directly that impinging on the
citizens’ rights under Art. 19(1)(f), would be another
matter.
What provisions of the impugned statute are essential for
the creation of the monopoly, would always be a question of
fact. The essential attributes of the law creating a
monopoly will vary with the nature of the trade or business
in which the monopoly is created; they ’will depend upon the
nature of the commodity, the nature of commerce-in which it
is involved and several another 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 State monopoly as such, and its
reasonableness will have to be tested under Art.’ 19(1)(g).
On the facts of 14is case and in the light of the commodity
in respect
712
of which monopoly is created, it seems difficult to hold
that the State monopoly could not have functioned without
fixing the purchase price. We are not suggesting that
fixing prices would never be an essential part of the
creation of State monopoly though, prima facie, it seems
doubtful whether fixing purchase price can properly form an
integral part, of state monopoly; what we are holding in the
present case is that having regard to the scheme of the
state monopoly envisaged by the Act, s. 4 cannot be said to
be such an essential part of the said monopoly as to fall
within the expression "law relating to" under Art. 19(6).
Therefore, we are satisfied that the validity of s. 4 must
be tested in the light of the first part of Art. 19(6) as
far as the petitioner’s rights under Art. 19(1)(g) are
concerned, and under Art. 19(5) so far as his rights under
Art. 19(1)(f) are concerned.
Thus considered, there can be no difficulty in upholding the
validity of section 4. As we have just indicated,, if the
legislature had allowed the State monopoly to operate
without fixing the prices, it would have meant hardship to
the growers and undue advantage to the State. If the
ordinary law of demand and supply was allowed to govern, the
Prices in all probability the said prices would have work
adversely to the interests of the growers and to the benefit
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of the State in the case of perishable commodities like
Kendu leaves. That is why the legislature has deliberately
provided for the fixation of’ prices and prescribed the
machinery in that behalf. It is true that the prices fixed
are not the minimum prices; but the fixing of minimum prices
would have served no useful purpose when a State monopoly
was being created and soprices which can be regarded as
fair are intendedto be fixed by s.4. A representative
advisory Committee has to be appointed and it is in
consultation with the advice of the said Committee that
prices have to be
713
fixed. In fact, the present prices have, been fixed
according to the recommendations it made by the said
Committee. Thus, it is clear that the object of fixing the
prices was to help the growers to realise a fair price. It
is nobody’s case that the prices are unduly low or compare
unfavourably with the prices. prevailing in the locality in
the previous years. Therefore, we feel 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 fail’S.
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. (1), this Court was called upon to consider
the validity of the relevant provisions of the U. P. Road
Transport Act (No. 11 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 the ground
that it is an infringement of the right guaranteed under
Art. 19(1)(g) of the Constitution. It is quite true that if
the present statute was passed after the coming into force
of the new clause in Art. 19(6) of the Constitution, the
question of reasonableness would not have arisen at all and
the appellants’ case on this point, at any rate, would have
been unarguable." While appreciating the effect of these
observations, however, we have to bear in mind the fact
(1)[1955] S.C, R. 707. 727,
714
that the effect of the amendment did not really fall to be
considered and the impact of the amendment in Art. 19(6) on
the right under Art. 19(1)(f) has not been noticed.
In The Parbhani Transport Co-operative Society Ltd. v. The
Regional Transport Authority Aurangabad, (1) this Court has
observed that Art. 19 (6) by providing that nothing in Art.
19(1)(g) shall affect the application of any existing law in
so far as it relates to, or prevents the State from making
any law relating to the carrying on by the State of any
trade, business, industry or service, whether to the
exclusion, complete or partial, of citizens or otherwise,
would seem to indicate that the State may carry on any
business either as a monopoly, complete or partial, or in
competition with any citizen and that would not have the
effect of infringing any fundamental rights of such citizen.
It is true that the last part of the statement refers to any
fundamental rights of the citizen, but that, in the context,
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cannot be taken to mean a decision that a right under Art.
19(1)(f) would necessarily fall within the scope of the said
observation.
In Dosa Satyanarayanamurty v. The Andhra Pradesh State Road
Transport Corporation, (2) this Court has observed that sub-
clause (ii) of Art. 19 (6) is couched in very wide terms.
Under it, the State can make law for carrying on a business
or service to the exclusion, complete or partial, of
citizens or otherwise.................. There are,
therefore, no limitations on the State’s power to make laws
conferring monopoly on it in respect of an area, and person
or persons to be excluded. (p. 649).
To the same effect are the relevant observations made by
this Court in the case of H. C. Narayanappa v. The State of
Mysore (3).
(1) [1960] 3 S.C.R. 177,187. (2) [1961] 1 S.C.R. 642.,
(3) [1960] 3 S.C.R. 742, 752.
715
We must now examine the validity of the argument 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, in-
dustry or service, there is a limitation imposed at the same
time and that 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 difficulty. Mr. Pathak, however, contends that the State
cannot appoint any agents in carrying on the State monopoly,
whereas tile learned Attorney-General urges that the State
is entitled not only to carry on the trade by itself or by
its officers serving in its departments, but also by agents
appointed by it in that behalf; and in support of his
argument that agents can be appointed, the learned Attorney-
General suggests that persons who can be treated as agents
in a commercial sense can be validly appointed by the State
in working out its monopoly. We are not inclined to accept
either the narrow construction pressed by Mr. Pathak, or the
broad construction suggested by the learned Attorney-
General. It seems to us that when the State’ carries on any
trade, business or industry, it must inevitably carry it on
either departmentally or through its officers appointed in
that behalf. In the very nature of things., the State as
such, cannot function without the help of its servants or
employees and that inevitably introduces the concept of
agency
716
in a narrow and limited sense If the State cannot act
without the aid and assistance of its employees or servants,
it would be difficult to exclude the concept of agency
altogether. just as the State can appoint a public officer
to carry on the trade or its business, so can it appoint an
agent to carry on the trade on its behalf Normally and
ordinarily, the trade should be carried on departmentally or
with the assistance of public servants appointed in that
behalf.’ But there may be some trades or businesses in which
it would be inexpedient to undertake the work of trade or
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business departmentally or with the assistance of State
servants. In such cases, it would be open to the State to
employ the services of agents provided the agents work on
behalf of the State and not for themselves. Take the case
of Kendu leaves with which we are concerned in the present
proceedings. These leaves are not cultivated but grow in
forests and they are plucked during 3 to 4 months every
year, so that the trade of purchasing and selling them is
confined generally to the said period. In such a case, it
may not be expedient for the State always to appoint
Government servants to operate the State monopoly, and
agency would be more convenient, appropriate and expedient.
Thus considered, it is only persons who can be called agents
in the strict and narrow sense to whom the working of the
State monopoly can be legitimately left by the State. If
the agent acquires a personal interest in the working of the
monopoly, ceases to be accountable to the principal at every
stage, is not 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
71
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 corpo-
ration 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 businesses 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 of ’agency must be proved in Substance, and in
deciding the question, the :nature of tile agreement, the
circumstances under which the agreement was made and the
terms of the agreement will have to be carefully examined.
It is not the form, but the substance that will decide the
issue. Thus considered, we do not think that s. 3 is open
to any challenge. Section 3 allows either the Government or
an officer of the Government authorised in that behalf or
ail agent in respect of the unit in which the leaves have
grown, to purchase or transport Kudu leaves. We are
satisfied that the two categories of persons specified in
clauses (b) and (c) are intended to work as agents of the
Government and all their actions and their dealings in
pursuance of the provisions of the Act would be actions and
dealings on behalf’ of the Government and for the benefit of
the Government. Mr. Pathak’s contention that the persons
specified in clauses (b) and (c) are intended by the Act to
work on their own account seems to us to be inconsistent
with the object of the section and the plain meaning of the
words used in the relevant clauses. We wish to make it
clear that we uphold the validity of section 3. because we
are satisfied that clauses (b) and (c) of the said section
have been added merely
718
for clarification and are not intended to and do not include
any forms of agency which would have been outside the
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provision of s. 3 if the said two clauses had not been
enacted. If section 3 is valid, then s. 8 which authorises
the appointment of agents must also be held to be valid.
In the petition, the validity of sections 5, 6 and 9 was
challenged on the ground that they contravene Art. 14. But
as we have already mentioned, no contention has been urged
before us in support of the plea that Art. 14 has been
contravened by any section of the Act. The petition further
avers that the Act was a colourable piece of legislation,
but that argument really proceeded on the basis whether the
agreement entered into by the State Government with the
agents to which we shall presently refer correctly
represents the effect of ss. 3 and 8 of the Act. So far as
the Act is concerned, the two sections which were seriously
challenged were sections 3 and 4 and as we have already
held, the provisions in these two sections are not shown to
be invalid; and so, the argument that the Act is colourable,
has 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 un-
favourably with the prices prevailing in the past in this
locality in respect of Kendu leaves. Therefore, the main
grounds on which the petitioner came to
719
this Courtto challenge the validity of the Act
fail.
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 clauses and it has apparently been
drawn in accordance with Rule 7(5) of the Rules framed under
the Act. It appears that on January 9, 1962, the Rules
framed by the State Government by virtue of the power
conferred on it by s. 18 of’ the Act were published. Rule 7
deals with appointment of Agent. Rule 7(2) prescribes the
form in which an application for appointment as agent has to
be made. Rule 7(5) provides that on appointment as agent the
person appointed shall execute an agreement insuch form
as Government may direct within ten daysof the date of
receipt of the order of appointment failing which the
appointment shall be liable to cancellation and the amount
deposited as earnest money shall be liable to forfeiture.
It is significant that though the Form for an application
which has to be made by a person applying for agency is
prescribed, no form has been prescribed for the agreement
which the State Government enters into with the agent. The
agreement is apparently entered into on an ad hoc basis and
that clearly is unreasonable. In our opinion,, if the State
Government intends that for carrying on the State monopoly
authorised by the Act agents must be appointed, it must take
care to appoint agents on such terms and conditions as would
justify the conclusion that the relationship between them
and the State Government is that of agents and principal;
and if such a result is intended to be achieved, it is
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necessary that the principal terms and conditions of the
agency agreement must be prescribed by the rules. Then it
would be open to the citizens to examine the said terms and
720
conditions and challenge their validity if they contravene
any provisions of the Constitution, or are inconsistent with
the provisions of the Act itself. Therefore, we are
satisfied that the petitioner is entitled to contend that
Rule 7(5) is bad ’in that it leaves it to the sweet will and
pleasure of the officer concerned. to fix any terms and
conditions on an ad hoc basis; that is beyond the competence
of the State Government and such terms and conditions must
be prescribed by the rules made under section 18 of the Act.
That takes us to the terms and conditions of the agreement
which has been produced before us. These terms indicate a
complete confusion in the mind of the person who drafted
them. Some of them are terms which would be relevant in the
case of agency, while others 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 cl. 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 Rs. 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
721
to be paid per bag can be determined differently from place
to place and that is a serious anomaly. it is also not clear
how this amount of Rs. 5/- per bag has been determined, and
in the absence of any explanation it would be difficult to
accept the plea of the learned Attorney-General that this
amount has been fixed after making calculations about the
profits which the agent was likely to secure and the price
which the total produce of the forest was, likely to;
acquire on an average basis. Under clause 4 (V), it is
conceded that the agent would be entitled to make some,
profits in some cases. Clause 4 (vi) entitles the agent to
claim deductions for the expenses and commission that he may
be entitled to in respect of the number of bags of processed
leaves; and it requires him to pay to Government the profits
accruing from the trading in the leaves collected in four
equal instalments in the manner specified. Under clause 4
(ix) the agent has to finance all transactions. involved in
purchase, collections, storage, processing, transport and
disposal of the Kendu leaves purchased or collected- in the
Unit. Then there are certain sub,clauses under this clause
which would be appropriate ’if it was a matter of a contract
between the Government ’and a forest contractor. Clause 4
(ix). (i) requires the agent to keep a register of daily
accounts. Under cl. 4(ix) (p) during the subsistence of the
agreement, the agent is responsible for the disposal of the
Kendu leaves collected or purchased by him and the
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Government shall not bear any liability whatsoever, except
as indicated in sub-clause (vii) of cl. 4 (ix).
Clause 6 provides that subject to other terms and
conditions, all charges and out goings shall be paid by the
agent and he shall not be entitled to any compensation
whatsoever for any loss that may be sustained by reasons of
fire., tempest, disease, pest, flood, draught or other
natural calamity, or by any ,Wrongful act committed by any
third party or for
722
any loss sustained by him through any operation undertaken
in the interest of fire conservancy. This clause clearly
shows that the agent becomes personally liable to bear the
loss which,under the normal rules of agency, the principal
would have to bear. We have not thought it necessary to
refer to all the clauses in detail because we -are satisfied
that even if the agreement is broadly considered, it leaves
no room for doubt that the person appointed 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 an loss owing to circumstances specified in clause 6,
tie 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 lie
referred us to the decision ’in Ex parte Bright In re Smith,
(1) and Weiner v. Harris. (1) It is true that an agent is
entitled to commission in commercial transactions, and so,
the fact that a person cams commission in transactions
carried on by him on behalf of another would not destroy his
character as that other person’s agent. Cases of Delcredere
agents are not unknown to commercial law. But we must not
forget that we are dealing with agency which is permissible
under Art. 19 (6) (ii), and as we have already observed,
agency which can be legitimately allowed under Art. 19(6)
(ii) is agency in the strict and narrow sense of the term;
it includes
(1) (1879) 10 L. R. Ch. D. 566. (2) (1910) 1 K. 285,
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only agents who can be said to carry on the monopoly at
every stage on behalf of the State for its benefit and not
for their own benefit at all. All that such agents would be
entitled to would be remuneration for their work as agents.
That being so, the extended meaning of the word "agent" in a
commercial sense on which the learned, Attorney-General
relies is wholly inapplicable in, the context of Art. 19 (6)
(ii). Therefore, we must hold that the agreement which has
been Produced before us is invalid inasmuch as it is wholly
inconsistent with the requirements of s. 3 (1) (C).
The result is, the’. petitioner succeeds only Partially
inasmuch as we have held that Rule 7 (5) is bad and the
agreement is invalid, and that means that the State
Government cannot implement the provisions of :the Act with
the assistance of agents appointed under the said invalid
agreement. We accordingly direct that a direction or order
to that effect should be issued against the State
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Government. The main contentions raised by the petitioner
against the validity of the Act and its relevant provisions
on which specific reliefs were claimed, however, fail. The
petition is accordingly partially ,allowed. There would
be no order as to costs.
Petition allowed in part.
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