Akadasi Padhan Vs. State of Orissa
 INSC 347 (5 December 1962)
SINHA, BHUVNESHWAR P.(CJ) WANCHOO, K.N.
GUPTA, K.C. DAS SHAH, J.C.
CITATION: 1963 AIR 1047 1963 SCR Supl. (2)
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)
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).
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 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
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
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
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
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 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
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 contemplated 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
Motilal v. The Government of the State of
U.P. I.L.R. 9511 All. 269 A. K. Gopalan v. State of Madras,  S.C. R. 88,
Ram Singh v. The State of Delhi,  S. C. R. 451, Express Newspapers (P)
Ltd. v. Union of India,  S.C. R. 12, State of Bombay v. R. M. D.
Chamarbaugwala,  S. C. R. 874. Ex parts Bright in Resmith,  10 L R.
Ch. D. 566 and Weiner Harris,  1 K. B. 285, referred to.
Saghir Ahmed v. State of U. P. r1 S. C.
R. 707, Parbhani Transport Co-operative SocietyLtd v. The Regional Transport
Authority, Aurangabad,  3 S. C. R. 177, Dosa Satyanarayanamurty v. The
Andhra Pradesh State Road Transport Corporation,  1 S. C. R. 642 and H.
C. Narayanappa v. State of Mysore,  3 S. C. R. 742, relied upon.
ORIGINAL JURISDICTION : Petition No. 73 of
Petition under Art. 32 of the Constitution of
India for enforcement of Fundamental Rights.
694 G. S. Pathak and C. P. Lal, for the
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 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
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 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
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 thusbe 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 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
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.
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
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 AttorneyGeneral 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 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 qualifications 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, 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.
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 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 subsidiary
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)  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.
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 guaranteed 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)  S.C.R. 451, 456. (2)  S.C.R. 12, 128-130,
(3) 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.
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
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 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 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 so prices which can be regarded as fair
are intended to 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) 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
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
It is true that the last part of the
statement refers to any fundamental rights of the citizen, but that, in the
context, 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)  3 S.C.R. 177,187. (2)  1
S.C.R. 642., (3)  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, industry 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 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 theworking 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 corporation
owned or controlled by the State cannot be widened and must be strictly
construed and agency can be permitted only in respect of trades or 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
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
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
We have already observed that the petitioner
has not specifically and clearly alleged that the price actually fixed under s.
4 is grossly unfair and as such, contravenes his rights under Art. 19(1)(f). No
evidence has been adduced before us to show that the price is even
unreasonable. On the other hand, the counter affidavit filed by respondent No.
2 would seem to show that the price has been fixed in accordance with the
recommendations made by the Advisory Committee and it does not compare unfavourably
with the 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 in such form as Government may direct within ten days of 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 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 installments 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 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, 723 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 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.