MANNALAL JAIN versus THE STATE OF ASSAM AND OTHERS

authority concerned was bound to consider the petitioner's application for licence and had failed to do so. The High Court issued a writ of mandamus directing that the petitioner's application be considered on its merits. As the licensing authority did not consider the petitioner's application till June 7, l9GO, the latter on that date moved the High Court. again for enforcement of the writ issued. On receipt ofihe notice this motion, tho licensing authority passed an order on June 8, 1960 again refusing to grant the petitioner the licence. This order stated, "Your petition is considered. As the Assam Co·OJl>erative Marketing Society has already been granted a licence to deal in rice and paddy with branches spread all over this district, it is considered unnecessary to grant further dealing licences to individual. dealers for the same aFea. Hence the petition is rejected."

p. 955

The petitioner thereupon' dropped his motion to the H;gh Court of Assam of June 7, 1960 and !no"ted tlie High Court;' afresh tinder Axt,' 226 against the order of lJune 8, 1960 refusing him the licence and the High Court on August 8, 1960, quashed it on the ground that the licensing authority had to act in a quaE-judicial capacity and tl1at it had decided the case on the in8tructions of tho Stato Government without considering for itself the merits of the case in terms of the Licensing Order. The authority was again directed to decide the case in a quasijuclicial capacity.

pp. 955–956

The licensing authority not having taken up for decision the petitioner's caso for thcJ grant of Jiccnco as directed by tho High Court, he moved the High Court on September 8, for appropriate reliof1. On receipt of the notico of this motion the licensing authority passed an order on September 13, 1960, again refusing to grant lieonoo tu the petit.ioncr and certain other private dealers. The order stated, "For the areas for which the applications have been ma.de the As sam Co-oporath-e Apex Marketing Socioty has carlior applied for and has been granted licence. This is a relevant consideration under cl. 5(b) of the Assam Foodgrains (Licensing and Control) Order, lOGO. The stock of foodgra.ins available in the area can caHily be procured by the party already given the licence. Being a Co-operative Society it has better facility in this respect. As such I do not find it necessary to grant licence to those applicants. The petitions are htereforo rejected". Thereupon tho High Court on :November 10, l!l60, made an order on tho petitioner's a.forosaid motion of September 8, 1960 discharging the rule as the order asked for had boon mad<l. It o bscr-red that the order of September 13, 1960 was not before it and it waa competent to say whether that order was in consonance with its order of August 8, 1960. It also observed that it did not find sufficient reason to take any action against the licensing . authority for the dl·lay in the matter of the disposal of the application for licence. · . .

p. 956

Before proceeding furth<lr I would J.We tp point out that the Assam Foodgrains (Licensing ~nd Control) Order; 1960 being the Licensing Order by which the petitioner's application for licence for 1960 was governed did not contain any· provision enabling any preference to be given to a co-operative society in the matter of the grant of licence.

pp. 956–957

I now come to the present petition. _It was moved in this Court by the petitioner under Art. 32 of the Constitution challenging the validity of tho order of the Licensing authority dated September 13, 1960, and asking that the licence granted to the Assam Co-operative Apex .Marketing .Society be declared illegal and for an order directing the licensing authority to consider the applications for licences according to the provisions of the Licensing Order. 1960. - Tho petition came up for hearing on February 2, 1961. By that date the year for which the petitioner had asked for a licence had expired and tho Licensing Order, 19GO had been replaced. by another Order of 1961. In the result the petition had become substantially infructuous. The petitioner, therefore, suggested to this Court that he would make an application for a licence for the year 1961 and in the meantime the petition might stand adjourned. An order was thereupon made adjourning the petition sine die.

p. 957

Thereafter the petitioner on J!'ebruary 4, 1961, made a fresh application for licence for dealing in paddy for the year 1961. An order was made by the licensing authority on this application on April l l, 1961, in tl1ese terms : "Having regard to the existing licences in these areas (.M1mgaldai and GauhatiJ, and tho quantity of food grains available therein any further licences would be . super· fluous." In the result the petitioner was refused licence for the year 1961. Thereafter, the petitioner under orders obtained from this Court amended his petition and now seeks to challenge the order of April II, 1961. The respondents to this petition arc the State of Assam and some of _ ite officers including the licensing authority concer~e<l, 'as a.!so the Assam Co-operative apex llfarketmg Soc1cty, hereafter called the Apex Society. . As I have alroady sni<l, the application for l1ccneo for 1961 was goYerned by the Licensing Or<ler, 1961. Tho <lisputo in this case mainly turns on cl. (e) of paraJraph 5 of this Order. That paragraph ia in these terms:

pp. 957–958

«In granting or refusing a licenco under this Order, the licensing authority shall, among other matters, have regard to the following, namely :-

p. 958

(a) the stock of foodgrai.ns available in the locality for which tho liocnce is required;

p. 958

(b) the number of persons who havo applied for and those who have beon granted licences in respect of the foodgrnins undor this Order in the locality;

p. 958

(t•) tho buiiinoss ordinarily carried on by tho applicant;

p. 958

(d) the past activities of the applieant as a licensee or bu.qincss man/firm; and

p. 958

( e) whether the appliuant is a co-

p. 958

operative society."

p. 958

It is not in dispute that in the areas to which the Licensing Order 1961, had been applied, licence~ to deal in paddy had been given to various Co-operative Societies which were subsidiarios · of tho Apex Society and no licence had been given to any private dealer. The respondents say that these grants were duly made under cl. (e) of paragraph 5 of tho Licensin~ Orde~, Hl_ul. It is ·this actiGn which forms tho mam grievance of the petitioner. He puts his cont-ention on two grounds. F!rst, ~e says that cl. (c) of p9.~~~raph. 5 of •the L1censmg 9rder l!l~ l 1s ultra vire.~ 1t has no relation to the object of the Essential Commodities Act under which it was made. Secondly, he says that .in any event the Order has been applied in a discriminatory manner and with a view to create a monopoly in favour of the Apex Society to deal in paddy and the petitioner's fundamental rights under Arts. 19(l)(g) and 14 have thereby been violated.

pp. 958–959

It does not seem to me that either of these two contentions is well founded. I shall first consider whether paragraph 5(e) of the Order is ultra vires the Act. Now it is important to note that the validity of the Act is not challenged. It would follow that if the Order made under the Act is not ultra vires, it would be perfectly valid. It is s. 3 of the Act which enables the Orders to be made. That section so far as relevant is in these terms:

p. 959

S. 3 (1).-If the Central Government is of opinion that it is necessary or expedient so to do for maintaining or increasing supplies of any essential commodity or for securing their equitable distribution and availability at fair prices, it may, by order, provide for regulating or prohibiting the production, sup· ply and distribution thereof and trade and

p. 959

commerce therein. The object of the Act, therefore, is to maintain or increase the supplies of essential commodities which include foodgrains and to secure their equitable distribution and availability at fair prices. Clause (e) of paragraph 5 of the Licensing Order, 1961 certainly allows a co-operative society to be preferred in the matter of ii grant of licence. The question then is, would the' object of the Act be achieved if the trade in paddy is given to co-operative societies ? I think it would. A co.operative society is one which has as its object the promotion of the economic interests of its members in accordance with co-operative principles : see s. 4 of the Co-operative Societies Act, 1912. A society carries on businOSB in aocordanco with co-operative prmc1ples when it trades with its own members, tho profit motive not be:ing paramount in such business. When, therefore, a licenco to purohe.se paddy is gfren to co-operative society of growers, what happens is that tho seller sells to a body of which he is a member. The result is the virtual elimination of tho middleman and a consequential rcdu<>tion in the price. Tho following observations from the judgment of this Court in iVaremlra ]( umar v. The Union of India(') are, to my mind, very apposite in the present context :

pp. 959–960

"That middleman's profitl! increase the price of goods which the consumer has to pay is axiomatic." (p. 389). "It has therefore been the endeaYour at least in modern time11 for those responsible for social control to keep middlemen's activities to the minimum and to replaoe them largely by co.operative sale societies of producers and co-operative sale

p. 960

societies of the consumers." (p. 390). Therefore, I feel no doubt that if tho purchase of paddy is left to growers co-operatives-and that is what cl. (e) of paragraph 5 aims at-rice, which ill husked paddy, can reasonably be expected to be made available to the consumers at a fair price. That would servo the object of the Act and the clause c,annot, therefore, be said to be ultra viru the Act.

p. 960

Tlwn it is said that cl. (e) of paragraph 5 would result in creating a monopoly in favour of co-operative societies and that would be illegal and also outside tho object of the Aot. This cont<intion also seems to me to be ill founded. It seem8 to me that if parngra.ph 5 had cunt1•incd only cl. (e) dir(!cti:ng preference being gi\·en to co-operative societies in tho matter of grant of licences - and that is tho basis on which the present contention is advancedthat would not have made ·it bad. The question li of creating a monopoly does not really arise in such a case. The Order may then allow one class only, namely, co-operative societies, to do the business. That would, as I have already stated, advance the object of the Act. It would also however amount to a prohibition of others doing the business. The only questjon then would be whether such prohibition would be reasonable under Art. 19(6). That is how the matter appears to have been considered by this Court in two cases to which I will now refer.

pp. 960–961

The first is the case of Narendra Kumar( earlier mentioned. There an order called the "Non-ferrous Metal Control Order, 1~58" had been issued under s. of the Essential Commodities Act, as the Licensing Order now under consideration also was Clause (4) of the order there considered provided that no person could acquire any non-ferrous metal except under a permit issued by the Controller in accordance with such principles as the Central Government might from time to time specify. Subsequently, the Central Government enunciated certain principles for the grant of these permits in a certain communication to the Chief Industrial Adviser. Under these principles, no permit could be issued to a dealer but it could only be issued to certain manufacturers. The result was that the dealer's trade was totally prohibited and only certain manufacturers were eligible for permits to carry on the trade of selling non-ferrous metals. Certain dealers moved this Court under Art. a2 for a declaration that cl. (4) rea.d with the principles formulated by the Government was bad as offending Art. 19( I )(f) and (g). rhis Court held that (p. 387): ..

p. 961

"It is reasonable to think that the makers of the Constitution considered the word "restriction" to be sufficiently wide to save laws 'inconsistent' with Art. 19(1), or 'taking away the rights' conferred by the Article, provided this incm1sistcncy or taking away was reasonable in the interest.s of tho different matters mentioned in the clause. There can be no <l.oubt therefore that they intended the word 'restriction' to include cases of 'prohibition' also. The contention that a law prohibiting the exercise of a fundamental right is in no case saved, cannot thoro-

pp. 961–962

foro bo accepted." Haviug considered the facts of tho case, the Court et•me to the conclllsion that cl. ( :~) of the Order, tho legality of which aloo had been challenged, and cl. (4) were valid provisions. It observed that, (p. 390):

p. 962

"It must therefore be held that cl. 3 of the Order even though it results in the eliminination of the dealer from the trade. ia a reasonable restriction in the interests of the gerniral public. Clause 4 read with the priliaiplcs specified must also ho hold for the same reason to oo a reasonable restric-

p. 962

tion." I ought here to point out that the principles enunciated by tho Government worn held to be of no effect thoy had not been issued in complianoo with sub-BS. (5) and (6) of s. ~of the Essential Commodities Act and on that basis petition w&s allowed and a writ was issued restraining tho Union from giving effect to cl. ·i of the order so long as the principlos governing the iBl!uc of pormits were not duly epocified. This however does not affect the force of the observations that I have earlier read from tho judgment in tho case.

p. 962

It seems to me that these observations fullv qpply to tho present case. '!'he order read with t'hc policy statement though it rosulted in a complete prohibition in trading by dealer~ and in the creation of what· the· •petitioner would oall a monopoly in favour of certain manufacturers was held to be good as a reasonable rostriCJtion on tho dealer's right· to trade under Art. 19(6) and the wriil was issued only because the formalities required for specifying the policy statement had not been complied with. There is no defect in the issue of the Licensing Order, 1961, with which the present case is concerned. Therefore, the only question would be whether such a prohibition of the trade of tho dealers like the petitioner, if any, by the Licensing Order, 1961 would be reasonable in the circumstances of this case.

pp. 962–963

Tho other case to which I wish to refer is Glass Ohatons I inporters d: User's Association v. The Union of India ( decided by this Court on April 10, 1961. That case arose out of a petition under Art. 32 by certain importers of glass chatons. There, the Central Government had issued an order under the Import and Export (Control) Act, 1947, called the Imports (Control) Order, 1955, prohibiting the import of glass chatons except under a licence. Paragraph 6 of the Order laid down a number of grounds on which the Central Government or the Chief Controller of Imports and ilxpeTts might refuse to grant a licenoe or direct any other licensin~ authority not to grant a licence. The ground mentioned in cl. (h) of this paragraph was "if the licensing authority decide to canalwe imports and the distribution thereof through special or specialised agencies or channels." It appears that since 1958, licences had been granted to the Sta.te Trading Corporation. No applications for licences ha.d been made by the . petitioners or any other trader at any time since 1957. It was however contended tha.t so long as paragraph 6(h) of the Order remained, it was useless for the private traders to apply for licences. The argui.:wnt advanced on behalf of the petitioners was that para.graph 6(h) was void being in contravention of Art. 19(l)(f) and (g). In regard to this argument thia Court observed:

p. 963

., 984 SUPM.ME OOURT R:ti:PORTS [ 1962)

p. 964

"Iii is obvious that if a decision has been made that imports shall be by particular agenciee or channels the granting of licence to an1 applicant outside the agency or channel would frustrate tho implementation of that deci~ion. If therefore a canalization of imports is in tho interests of the general public the refusal of imports licences to applicants outside the agencies or channels docided upon must nooessarily be held also in tho interests of tho genera.I public. Tho rPal question theroforo is : Is the canalization through special or specialized agencies or channels in the interests of the general

p. 964

public." The Court held that it was unable to accept the argument that a decision that imports shall be canalised is per se not a reasonable restriction on the right to trade. On the facts of the case, the Court took the view that a decision to canaliae imports of glass chatons was in the interest of tho general public. In this case, it had been contended that the Government was creating a monopoly in favour of tltc State Trading Corporation. The Court held tilat the period of permits granted to the State Trading Corporation having alroady expired, the (jUestion did not really arise. But, ns would have been noticed earlier, tho Court really dealt with the same contention in deciding the validity of para.graph G(h) of the Order. This decision londt eqm~lly strong support to the view that preferl'nco directed to be given by cl. ( e) of paragraph 5 of the J,iconsing Order with which we are concerned to co·operntive societies would not necessarily render it invalid.

p. 964

I feel no doubt on the facts. of the prcsellt case that a preference to co-operative sooietieB. if th'e.t resufted in the deniers being prevented altogothcr from dealing in paddy, would ~ ' reasonable rstriction on the Ia.tter's right of tra.dc. Asaam is a deficit State in foodgrains. It ii the duty of the State Government to see that the people living within it~ boundaries are supplied with adequate foodgrains and that at a reasonable price. If paddy is procured for the use of the consumers in the State through a co-operative society, there is good reason, as already stated, to think that rice at a reasonable price would be available to the piiople of Assam. I will later in detail discuss the structure and the activities of the co-operative societies to whom licences had been granted. What I will have to say there will amply establish that it was a reasonable step to have taken to put the trade in charge solely of the co-operative societies.

pp. 964–965

I turn now to the petitioner's second contention, namely, that cl.(e) of paragraph 5 has been worked in a discriminatory manner so as to create a monopoly in favour of the Apex Society. The first thing that I wish to observe is that licences have not been given for the year 1961 to the Apex Society but they have been given to a large number of primary co-operative societies of growers. I find it difficult, in any case, to appreciate how this can be sa.id to create a monopoly. It may amount to a prohibition of trade by some persons. That however is a different matter with which I have already dealt. I may state here that it appears that in 1960 the licences had been issued to the Apex Society, but that is not the situation now. Whether what was done in 1960 was strictly legal or not is not a question that now arises, f:>r we are no longer concerned with the licences for 1960. . Before proceeding further, I think it right to say a few things about the co-operative societies with whioh we are concerned. About 1957, the Assam Government sponsored the formation of the Apex Society. I would like to remind here that it is one of the directive principles of the Constitution that co-operative societies should be emiottraged. Now, the structure of the Apex Society ii like a pyr&mid~ It appears to have three tiers. On the top is the Apex Society. Under it

p. 965

SUPREME COUR'.r REPORTS [1962) come va.!'i.ous primary marketing co-op&a.tivo societies. At the bottom rung a.re a. large number of primary co-operativo secvico societies. Tho membership of tho markoting. societies co11Bists mostly of cultivators anq service sociuties, and of the servico societies, m9stly of cultivators. 'The function of the Apex Society appears to be to coordinate the working of tho subsidiary socioties and to obtain moneys from theCo-operativo A pox Bank an<l thereo11t mako advances to the cultivators through the subsidiary societies, to help them in thoir cultivation. The sorvice societies procure from the growers tho paddy grown by them which they can spa.re and realiso tho moneys advanced to them out of tho price of the paddy purchased. The money rAaliBed is duly passed on to the Apex Society. The paddy collected is sold by the service societies to the marketing soci!lties. The ma.rketing societies in tlicir turn delii-or part of the paddy to· the Government for creating a buffer atook and the. rem&<ining qva.ntity to mill11 for milling inoo rice, irr both cases · &<Joording to the direction~ of the Government. Tho benefits dorivod from the whole scheme are obviously very large. The middlem~n are oliminM!ld. Tho grow61'1 being themselves members of the 11ocietie11, participa.te in their proftts 'vha.tever they are. This helpe to keep down the price becam1e e. sorvico •ociety in p888ing on the pa.ddy to the marketing society charges v~ry little by way of profit and thnt profit is shared by the growors who are its mombera. This cn1tblee the growers to sell at a comparativoly lower priee. The growers ha.v, further the adva.Dta.ge of loans. from the Apex Society to holp them in the \vork of ouitivation; -'h!llle loans can bo easily advanocd a.nd

p. 966

liberal terms.boca.uso their repayment is aec.nrod by the prn<>e118 of purchase of the produce through the sPrvice eocietios. It would be roMona.ble to think that "1is would encourage cultivation a,nd ro1ult in l~er quanti.ties of foodgraina being produced. ~ would also help to aehiovG tbo object of the Act. It may further be pointed out that each of these societies is a body corporate: .see s.18 of the Co-operative Societies Act, 1912. The societies form a net work over the entire surplus grain producing area of Assam, each working in its own area. A vast number of growers of foodgrains are the members of the primary marketing and service societies. It is to these societies that the licences had been issued of which a grievancP is being made by the petitioner.

pp. 966–967

It appears that after the Apex and the subsidiary societies had been formed, the State Government with the concurrence of the Central Government decided on a policy of procuring paddy in certain specified areas only through these societies. The State Government thereupon issued instructions to certain officers at the ·end of 1959 that procurement of paddy for the Kharif year 1959-60 would be made throu~h the co-operative societies. It may be that it was for this reason that the licensing authority had stated in its order of February 17, 1930, earlier mentioned, that the petitioner's applica. tion for a licence could not he considered. I have now to remind that the Licensing Order, 1960 did not contain any provision enabling preference being given to a co-operative society in the grant of a licence. This case however is not concerned any more with regard to a licence for the year 1960 or the validity of any order of the licensing authority refusing to grant the petitioner any licence for that year.

p. 967

Returning to the contention that the power under paragraph 5 (e) of the Licensing Order had been exercised in a discriminatory manner, I wish first to observe that under the Order which I have already held to be good, the authority concerned in granting the licences was entitled to prefer a co-operative society, and this is what it has done. Though the result may have been to ·prevent the petitioner from carrying on the trade of purchasing and selling paddy, that in my view is, in the circumstances of this case, a reasonablo restriction on hiR right to tra.rle for that was necessary to secure for the people of Assam supply of foodgrains at n reasonable price anrl in adequate quantities.

pp. 967–968

ha\•e Very grave doubtR if the licensing authrl'ity waR intended to act in a quasi-judicial capacity in the matter of granting licences. It haR to be romemhcrcd that the question before it was not so much of tho comp,•ting right8 of various applicants or of :my lis between an :i.pplicant :ind the State. The duty of the lic,•nsing authority was to ad\·ance the object of t.hc Act in terms of the Lict>nsing Order. Its main consi1foration has to be to that tho liC<·nc<>B granted h~· it helped to mako focdgrains available at a fair price to the people of AaR!'ID. Tho Act ga1·e tho po,,..crs for that purpost>. ft ii because this pmpose is l<'gitimato that tlH' reRultant prohibition of trading by pri,·atc dealers is also legitimate. I belicrn that tlw two caaes I have carlior mentioned proceeded on the basis that the licensing authority was not a quasi-judicial officer. It is not necessl\fy for me however to pronounce finally on this question.

p. 968, margin F

It contcnclecl that the licensing authoritv in granting the licence to tho co-operative societ.}, had only carried out the directions of the Government ancl had not actor! independently. I find no basis fur this contention apart from tho bald allrgation of the petitioners which is dcni<'d by the rcspond•·nt. No directions by tho Assam Governmt•nt for the year 19t31 have been procl11cecl. The instrn0tions to which I have oRrlicr refcrrecl r<•quiring thP licence to be given to the co-operative societies were confined to tho yel\r l!l5!l-GO. That had no force in regard to the year l!l61 with which we arc concerned. Those instructions cannot be taken as opcmting for all time to com" for then t.he licensing authority's order granting licences to a co-opcrativt· society in future years will always ha\•e to ho held to have boen made under these inRtruetions. I am unable to take such a view of tho matter. As already stated, the High Court had by its Order of' August 1960 asked the licensing authority to proceed in a quasi-judicial manner. There is no" reason to think that the licensing authority had not observed this direction of the High Court.

pp. 968–969, margin F

It also seems to me reasonable to think that the Assam Government inserted cl. (e) in paragrarih 5 of the Licensing Order, 1961 in view of the judg- · ments of the High Court of Assam to which I have earlier referred. The Assam Government obviously intended thA.t the licensing authority wonld in view of cl. (e) give preference to the co-operative societies. Furthermore, s. 4 of the Act provides that an order made under s. 3 conferring powers on any officer or authority may contain directions to him as to the exercise of such powers. In my view, for the reasons earlier stated, a direction in the Licensing Order to give preference to co-operative societies would not be bad. It seems to me that cl. (e) of paragraph 5 of the Licensing Order, 1961 really amounts to such a direction. It was not necessary after the Licensing Order, 1961 for the Government of Assii.m therefore to give any other direction to the licensing authority.

p. 969

I do not think any question of violation of' Art. 14 can be seriously pressed. If the duty of the licensing authority was quasi-judicial in its nature, then it is difficult to appreciate how it can be said that it~ decision would offend Art. 14. In anv case, it seems to me quite clear that the co-operative societies form a class by themselves and a provision giving preference to such a class, would be a good provision because the object of the Act would be better served thereby for the reasons earlier mentioned; such provision would have a clear next1s with the object of the Act and therefore satisfy the test of Art. 14.

p. 969

Looking at the matter from any point of view it seems to me that the Order of the licensing authority giving preference to the co-operative 9i0 SUPREME COl"'RT REPORTS [1962) ~ocieties is not open to any objection. In my vi°'" that was a 1air Order to luwo been made in the circumstances of thi11 case.

pp. 969–970

I would for these roasons dismiss this pctiti on.

p. 970

.J.-I agree with the judgment <loliv<'red by Sarkar, J.

p. 970

BY CovRT-ln accordance with the opinion of thP- majority thi8 Writ Petition is allowed with costs.

p. 970

Petition allowed. STATE OF SAURASHTRA

p. 970

v. JA:llADAR i\fOHA~IAD ABDULLA AND ORS.

p. 970

(B. P. c. J., s. K. A. K.

p. 970

N. AYYA~GAR and

p. 970

J. R. JJ.)

p. 970

Art of Sf(Jte-Junag,zdh State----When integrated into lndial'olitical Queation-RPjerence Government for opinion-Grant&

p. 970

Adinini•tra/,or-lf en in Municipal courts Government of India Act (26 "· The ofjunagadh the 9l7. India

p. 970

the on The

p. 970

an Junagadh 1948, Junagadh and and State that of that

p. 970

the of .Juna~adh State

p. 970

January 1949. On between·......-

p. 970

9. 1947, and January 1949,

p. 970

of and The that

p. 970