New Bihar Biri Leaves Co. & Ors Vs.
State of Bihar & Ors [1981] INSC 3 (6 January 1981)
SARKARIA, RANJIT SINGH SARKARIA, RANJIT SINGH
PATHAK, R.S.
CITATION: 1981 AIR 679 1981 SCR (2) 417 1981
SCC (1) 537 1981 SCALE (1)1
ACT:
Constitution of India 1950, Articles 19(6)
clauses (i) & (ii)-Clauses whether distinct and separate-Law covered by the
clauses whether to satisfy the test of reasonableness Article 19(1)(g)
citizen's right to enter into contract with State-Whether fundamental right can
be enforced though contractual Bihar Kendu Leaves (Control of Trade) Act 1973
& Bihar Kendu Leaves (Control of Trade) Rules, 1973-Clause 13 and Clause
4(bb) of agreement prescribed by rules-Whether unreasonable and violative of
Articles 14 and 19 HELD:
Kendu leaves used in the manufacture of bidis
are grown as forest produce in several States. On March 10, 1972 the State of
Bihar issued the Bihar Kendu Leaves (Control of Trade) Ordinance, 1972, which
was replaced by the Bihar Kendu Leaves (Control of Trade) Act, 1973. The
purpose was to create a State monopoly in the matter of sale of Kendu leaves to
the manufacturers of bidis to regulate the trade in relation to the grower of
Kendu plants and their collection and sale through the agency of the State to
the registered manufacturers of bidis. Section 4, empowered the State
Government for the purpose of purchase and sale of Kendu leaves on its behalf,
to appoint agents in respect of different units. Section 9 provided that the
authorised agents will be bound to accept delivery of all those Kendu leaves
which are fit for the purpose of manufacture of bidis.
In exercise of its rule-making powers the
State Government notified the Bihar Kendu Leaves (Control of Trade) Rules,
1972, which was continued by Section 23 of the Act even after the repeal of the
Ordinance. Provisions regarding the disposal of Kendu leaves were made in Rule
9.
Sub-rule (I) provided that Kendu leaves
collected or likely to be collected shall be sold or otherwise disposed of by
tender on terms and conditions specified in the Tender Notice. The Tender was
required by sub-rule (2) to be advertised in newspapers. Sub-rule (9) provided
that the successful tenderer or successful bidder shall be appointed as
purchaser and the entire quantity of Kendu leaves collected or likely to be
collected or such lesser quantity out of it as may be offered to him by the
State shall be purchased by him on terms and conditions in the agreement to be
executed by the purchaser. Sub-rule (10) required the purchaser to execute an Agreement
in Form `M' within 15 days of the receipt of the order of appointment.
By a Notification dated January 16, 1974 the
Rules were amended and sub-clause (bb) after clause 4(b) was added in Form `M'
of the Agreement which provided that the purchaser shall not raise any
objection against the quality of Kendu leaves or shortage of leaves. Condition
13 of the Tender Notice was also incorporated in the statutory Agreement, Form
`M' providing 418 that for every unit a minimum royalty will be `payable by the
purchaser, and that this amount shall be payable by the tenderer even if by the
end of the season, the price of Kendu leaves at the offered rate, collected and
delivered to the purchaser, fell short of this amount, the amount being payable
before the leaves are utilized or taken out and if not paid, realisable as
arrears of land revenue.
In their writ petitions the petitioners who
were carrying on trade in Kendu leaves, assailed the Rules framed under the Act
and clause 13 and clause 4(bb) of the Tender Notice and the Statutory Agreement
and the notices of demand issued demanding royalty in respect of the
undelivered quantity of Kendu leaves.
It was contended that: (i) the provisions and
conditions contained in clause 4(bb) and clause 13 amount to an unreasonable
restriction on freedom to carry on trade or business in Kendu leaves guaranteed
under Article 19(1) (g) of the Constitution and that they are not within the
protection of sub-clause (ii) in the second part of clause (6) of Article 19;
(ii) that the provisions in their immediate operation and effect, are harsh,
unconscionable, arbitrary, unfair and oppressive, thereby violating Article 14,
(iii) the foreclosure of the right of the purchaser to refuse delivery on the
ground of the leaves offered, not being of requisite quality, is inconsistent
and ultra vires of the proviso to Section 9(1) of the Act and (iv) that the
auctions are held in January, while the Agents are not appointed till March or
April, the plucking season, and consequently, no reasonable estimate of the
expected yield is possible.
The respondents argued that (i) there is a
paucity of skilled people who could be employed as Agents and the prevailing
practice is that the persons appointed as Agents, are sponsored by the
purchasers and that the terms of the Agreement, taken as a whole are not
one-sided, (ii) if a person voluntarily takes upon himself under the terms of a
contract, such risks and chances of benefit, he has no right in the event of
suffering a loss to be compensated for it even under the ordinary law in a
suit, much less the Court of writ jurisdiction can grant any such relief, (iii)
the right to enter into a contract on particular terms with the State is not a
fundamental right, (iv) as the petitioners had not paid amounts required to be
adjusted against the remuneration of the Agents they are not entitled to relief
under Article 32, and (v) the provisions are directly and essentially related
to the operation of monopoly and, as such are within the protection of
sub-clause (ii) of clause (6) of Art. 19.
Dismissing the petitions and appeal ^
HELD: 1. The condition in 4(bb) in the Tender
Notices and the statutory agreement is couched in peremptory, drastic and
absolute language, not qualified by any words showing that the bar envisaged in
it will be attracted only in cases where the purchaser has had an earlier
opportunity to raise his objection but failed to do so, or, where he had on an
earlier occasion raised such an objection which was heard and overruled by the
competent Forest Officer.
Condition 4(bb) therefore is inconsistent
with and repugnant to Section 9(1), proviso of the Act which contains a built-
in-warranty, that the Kendu leaves offered would be fit for manufacture of
bidis; that is to say, the leaves would be of merchantable quality and as such,
invalid. [442D-H] 419
2. The scheme of the Bihar Act and the Rules
and Forms including that of the impugned condition 13 was designed remove the
deficiencies, infirmities and vices pointed out in Rashbihar's Panda v. State
of Orissa [1969] 3 S.C.R. 374.
The impugned condition 13 satisfied the test
of reasonableness under the first part of Articles 19(6). The contention, that
in actual operation, the impugned provision (clause 13) creates a monopoly in
favour of a class of middlemen consisting of `Agents' and purchasers, and
enables them to earn unduly large profits at the cost of the public or pluckers
and growers is not acceptable.[439G-H, 440A-B]
3. (i). Clause (6) of Article 19 falls into
two parts, indicating that the two parts of the clause are intended to be
distinct and separate. The words "reasonable restrictions" which find
pivotal mention in the first part, have not been repeated in the second part
which omission makes it clear that a law covered by sub-clause (ii) is not
required to satisfy the test of reasonableness under the first part of the
clause and no objection to have validity of such a law is tenable on the ground
that it infringes the right guaranteed under Article 19(1)(g). Sub-clause (ii)
is thus an exception to the main substantive provision in clause (1) of the
Article. [431G-H, 432A-B] 3(ii). The basic and essential features which are
directly and immediately connected with the creation of the State monopoly are
found in the body of the Act itself. The provisions incorporated in the Forms
of Tender Notice and Agreement are merely subsidiary or incidental provisions,
therefore, do not fall within the protection of sub-clause (ii) in the second
part of Article 19(6). [432E-F] 3(iii). Where the business to be carried on by
a citizen is in a commodity, the sale of which is a State monopoly, conditioned
by some statutory terms, (analogous to the impugned conditions) which in
operation, have a direct and immediate impact on the fundamental freedom of the
citizen guaranteed under Article 19(1) (g), the citizen cannot enter into a
contract with the Government for purchase of such a commodity except on the
statutory terms laid down by the seller-State. The Tender Notice and the
Agreement which the purchasers enter into with the Government, although couched
in statutory Forms, are therefore, not bereft of their contractual character.
[432G- H, 433A & C]
4. The minimum royalty or price payable being
fixed on the basis of 75 per cent of the estimated annual yield in standard
bags from the unit multiplied by the rates offered and accepted. Such an
estimate, is made on the basis of the average actual yield from that unit for
the preceding three years. Such an estimated yield is notified and published in
the Tender Notices every year. Purchasers in the trade, know beforehand as to
what they are bidding for, and they are generally persons who have been in the
trade for several years and, as such have a special knowledge of forming their
own estimates of the expected yield and the chances of profit and loss from
that particular unit in a particular year. [433F-G]
5. As the chances of profit and risks of loss
are evenly divided between the seller-state and the purchasers, it cannot be
said that the impugned condition in clause 13 of the Tender Notice and the
Agreement is manifestly unreasonable. The impugned condition 13 is a
restriction imposed in the general public interest. [434B-C]
6. Although the Act and the Rules contemplate
that the Agents appointed by the Government will be under its full control and
liable to compensate 420 the Government for any shortage, damage or loss caused
in collection or delivery or any defect in the quality of the leaves collected,
to the Government, yet, in actual practice, the real position is that the
Agents are generally persons sponsored by and otherwise, deeply interested in
the purchasers. [435B-C]
7. The agents are to be appointed every year
at short notice when the plucking season is at hand and as there is a dearth of
suitable persons having adequate experience and skill of work as efficient
agents, the Government is driven into a situation in which they have to appoint
persons sponsored by the purchasers as Agents. The rules framed under the Act
envisage a strict and exclusive control of the Government over the Agents and
their activities, and provide for their liability to compensate the Government
for the loss occasioned by their misconduct or neglect. The condition in
condition 13 far from creating a monopoly in the trade in favour of middlemen,
operates as an ironclad safeguard against leakage of the public revenue by
assuring a minimum return to the public exchequer from the sale of Kendu
leaves. The provision is aimed to secure the full benefit from the trade to the
State leaving chances of making reasonable, marginal profit to the purchasers.
[435C- D, 439B-E]
8. It is a fundamental principle of general
application that if a person of his own accord, accepts a contract on certain
terms and works out the contract, he cannot be allowed to adhere to and abide
by some of the terms of the contract which proved advantageous to him and
repudiate the other terms of the same contract which might be disadvantageous
to him. The maxim, is qui approbat non reprobat. A party to an instrument or
transaction cannot take advantage of one part of a document or transaction and
reject the rest. [441E-H] Verschures Creameries Ltd. v. Hull & Netherlands
Steamship Co. [1921] 2 K B.608 and Douglas Menzies v. Umphelby [1908] A.C. 224
at p. 232 referred to.
In the instant case the petitioners had by
offering highest bids at public auctions or by Tenders, accepted and worked out
the contracts in the past but are now resisting the demands or other action,
arising out of the impugned condition 13 on the ground that this condition is
violative of Article 19(1)(g) and 14 of the Constitution. The impugned
conditions though bearing a statutory complexion, retain their basic
contractual character. Though a person cannot be debarred from enforcing his
fundamental rights on the ground of estoppel or waiver, the principle which
prohibits a party to a transaction from approbating a part of its conditions
and reprobating the rest, is different from the doctrine of estoppel or waiver.
[442A-C]
ORIGINAL JURISDICTION : Writ Petitions Nos.
2222- 2252/77 & 121 to 125/79, 405 & 441/74, 46 & 47/75.
(Under Article 32 of the Constitution.) AND
CRIMINAL APPEAL No. 300 OF 1974.
Appeal by Special Leave from the Judgment and
Order dated 14-2-1974 of the Patna High Court in Criminal Writ Jurisdiction No.
421 F. S. Nariman, Anil B. Devan, J. B.
Dadachanji, K. J. John, J.S. Sinha and Tarini Prasad for the Petitioners in
WPs. Nos. 121-125/79, 2222-2252/77 & 46-47/75.
Y. S. Chitale, K. K. Sinha and S. K. Sinha
for the Petitioners in W.P. Nos. 405 & 441/74 and Crl. A. No. 300/74.
Lal Narain Sinha, Attorney General of India,
Ram Balak Mahto, and U. P. Singh for the Respondents Nos. 1-2 in all W.Ps. and
Appeal.
Miss A. Subhashini for Respondent No. 3 in WP
Nos. 2222-2252/77.
The Judgment of the Court was delivered by
SARKARIA, J.- The common question that has been seriously pressed into argument
in this batch of writ petitions and criminal appeal mentioned in the title,
relates to the constitutional validity of certain Rules framed under the State
of Bihar under the Bihar Kendu Leaves (Control of Trade) Act, 1973 (hereinafter
referred to as the 'Act') particularly clause 13, clause 4 (bb) of the Tender
Notice and of the Statutory Agreement notified by the Bihar Government in the
Bihar Government Gazette, and the notices of demand issued under the impugned
provisions demanding "royalty" from the petitioners in respect of the
undelivered quantity of Kendu leaves.
All these writ petitions will be disposed of
by this common judgment. The basic question being common, it will suffice to
state the facts giving rise to Writ Petitions 2222 to 2252 of 1977, filed by
the New Bihar Bidi Leaves Co.
The petitioners in all these writ petitions
are either firms or individuals carrying on trade in Kendu leaves in the State
of Bihar. However, petitioner No. 31 is an association of traders in Kendu
leaves, of which the other petitioners are members.
Kendu leaves are grown as forest produce in
several States, including the States of Bihar, Orissa, Andhra Pradesh,
Maharashtra, Gujarat, Madhya Pradesh and a part of Uttar Pradesh. Under the old
system in Bihar, the right to pluck and extract Kendu leaves from a forest
coupe carved out by the Forest Department, was auctioned by the State
Government.
On March 10, 1972, while the State of Bihar
was under the President's rule, the Governor of Bihar issued the Bihar Kendu
Leaves (Control of Trade) Ordinance, 1972. The provisions of this Ordinance
were continued under successive Ordinances and ultimately replaced by the
aforesaid Act of 1973. This Act created State monopoly in the matter of sale of
Kendu leaves to the manufacturers of 422 bidis. Its purpose is to regulate this
trade in relation to the grower of Kendu plants and the collection and sale of
the same through the agency of the State to the registered manufacturers of
bidis. Under its scheme, a specified area of Kendu leaves is divided into
units. The 'grower' is defined as 'a grower who holds lands on which Kendu
plants grow or who is in possession of such lands under a lease or otherwise,
and includes the State Government.' Under Section 3, the State Government may,
by notification in the Official Gazette, declare any area to be a specified
area for the purposes of the Act and divide every such specified area into such
number of units as it may deem fit. 'Unit' means a sub-division of a specified
area constituted under Section
3. Under Section 4, the State Government may,
for the purpose of purchase and sale of Kendu leaves on its behalf, appoint agents
in respect of different units and any such agent may be appointed in respect of
more than, any one unit but not more than three units. The terms, conditions
and the procedure for appointment of agents have been prescribed by the Rules
framed under the Act, which we shall presently notice. Section 5 places
restriction on purchase or transport of Kendu leaves. Section 8 mandates the
Forest Officer incharge of a Division to set up in each unit a number of
depots. Section 9 is important and its material part runs as under:
"(1) The State Government or its
authorised officer or agent shall purchase Kendu leaves offered for sale and
deliver at the depot during the business hours at the rates fixed under Section
7:
Provided that it shall be open to the State
Government or its authorised officer or agent, for reasons to be communicated
in writing, to refuse to purchase or accept delivery of any Kendu leaves which,
in their opinion, are not fit for the purpose of manufacture of bidis." It
will be seen that the proviso to sub-section (1) contains a built-in warranty
inasmuch as it says that the authorised agents will be bound to accept delivery
of all those Kendu leaves which, in their opinion, are fit for the purpose of
manufacture of bidis. In other words, the Kendu leaves to be purchased by the
authorised agents of the Government must be of merchantable quality.
The next relevant provision is to be found in
Section 11 which is as follows "(1) Every manufacturer of bidis within the
State shall get himself registered within such period on payment of such fee
and in such manner as may be prescribed.
423 (2) Every manufacturer of bidis within
the State registered under sub-section (1) shall furnish a declaration in such
form by such date and in such manner as may be prescribed." Section 12
provides that Kendu leaves purchased by the State Government or by its
authorised officer or agent, shall be disposed of in such manner as the State
Government may direct. Section 20 of the Act gives the State Government the power
to make rules subject to the conditions of previous publication, to carry out
all or any of the purposes of this Act. Sub-section (2) of that Section
provides that such rules may provide for all or any of the following matters,
namely:- "(a) procedure to be followed in making appointment of agents;
(b) to (d) ..............;
(e) the manner of registration under Section
10;
(f) the manner of registration, the period
within which such registration shall be made and the fee payable thereof under
sub-section (1) of Section 11;
(g) form of declaration, authority to whom,
date by which and the manner in which the declaration shall be furnished under
sub- section (2) of Section 11;
(h) ............." In exercise of its
powers under the then extent Ordinance analogous to those under Section 20, the
State Government of Bihar notified the Bihar Kendu Leaves (Control of Trade)
Rules, 1972 (for short the 'Rules'). These rules were, as already noticed,
continued by Section 23 of the Act, event after the repeal of the Ordinance
concerned.
Rule 2(8) defines 'Purchaser' to mean a
person to whom Kendu leaves have been sold by the State Government under
Section 12 Under clause (1) of the same Rule, 'Standard bag' means a bag
containing 1000 standard gaddis of Kendu leaves and where the standard gaddis
are not bagged, reference to standard bag shall be construed as a reference to
1000 standard gaddis or 50,000 leaves. Under clause (11), "Standard
gaddi" means a bundle containing 50 Kendu leaves.
Rule 3 provides the manner of appointing
agents. The application for agency is to be submitted in Form "A".
This Form requires 424 the applicant for appointment as Agent to make a
Declaration, inter alia, to this effect:
"I/We ........ hereby declare that I/We
have read and understood all the provisions of the Bihar Kendu Leaves (Control
of Trade) Ordinance, 1972 and the rules made thereunder and the conditions of
agency mentioned in the notice issued under rule 3(1) and I/we agree to abide
by the same. I/we have personally inspected the unit No..... if I/we am/are
appointed as an agent for the unit mentioned above, I/we undertake to purchase
from growers and collect from land of State Government and deliver a quantity
of Kendu leaves on both counts, which shall not be less than ..... Standard
bags as mentioned in the notice. I/we shall execute the agreement with the
State Government in Form 'C' within 15 days.
Witness:
1.
2. Signature of the applicant." Under
sub-rule (7) of Rule 3, if, in the opinion of the State Government, it is not
possible to select a suitable agent for the purpose out of the persons who had
applied for appointment as agent, or where any agency is terminated and there
is not sufficient time for calling fresh applications, the State Government may
appoint any person as agent who in their opinion is suitable for the work. Such
a person to be appointed as Agent is required to furnish a declaration in Form
'B'. Sub-rule (9) requires that on appointment as an agent, the person so
appointed shall execute an agreement in Form 'C' within fifteen days of the
receipt of the order of appointment, failing which the appointment shall be
liable to be cancelled and upon such cancellation, the security deposit shall
be forfeited; and the agent shall be liable to pay the loss, if any, incurred
by the State Government as a result of such cancellation of the appointment.
Then, a formula has been provided as to how such loss on cancellation of the
appointment shall be calculated. The loss so determined shall be recoverable
from the agent or surety as arrears of land revenue. Sub-rule (10) requires the
agent so appointed for a particular unit to deposit security before signing the
Agreement. It also provides how the amount to be deposited should be
calculated. Sub-rule (11) provides that the agent shall purchase Kendu leaves
from growers and from such labourers who pluck Kendu leaves from the Government
forests and other lands at the depot opened by him or ordered to be opened by
the Divisional Forest Officer. Clause (ii) of sub-rule (11) lays 425 down that
unless ordered by the Divisional Forest Officer or an officer authorised by him
in writing, the agent shall not slacken or stop the purchase or collection in
any depot within the unit. Sub-rule (12) requires the agent to deliver immediately
the Kendu leaves purchased or collected by him to the purchaser appointed for
the unit. Sub-rule (13) provides:
"The agent shall maintain such account
and submit such periodical returns to the Divisional Forest Officer or to any
other officer authorised by him as may be directed by the Divisional Forest
Officer." Sub-rule (14) requires the agent to furnish a list of persons
employed by him with the unit, immediately to the Divisional Forest Officer,
and he is bound to remove any such person whose employment is objected to by
the Divisional Forest Officer. Sub-rule (15) is material and reads as under:
"If the agent during the period of
agency has duly observed and performed all the terms and conditions of the
agency to the satisfaction of the State Government and if the State Government
is satisfied that he has done his best to collect maximum quantity of leaves
from the unit, it may grant to the agent yearly renewal of agency for a period
to be fixed by the State Government on such terms and conditions as may be
decided upon for each year." Sub-rule (16) provides that the agent shall
be advanced such money for the performance of agency as may be directed by the
State Government from time to time.
Rule 6(7) lays down the procedure of enquiry
about rejected Kendu leaves. According to this procedure, on receipt of a
complaint under sub-section (2) of Section 9 of the Act, the officer shall hold
the enquiry after the necessary notice to the person concerned and pass such
orders in terms of sub-section (3) or (4) of Section 9 as he deems fit.
Rule 9 makes provision regarding the disposal
of Kendu leaves. Under sub-rule (1), Kendu leaves collected or likely to be
collected by the State Government or by its authorised officer shall ordinarily
be sold or otherwise disposed of by tender on such terms and conditions as are
specified in the Tender Notice and Tender Form issued by the State Government
or by an officer authorised by the State Government in this behalf. The Tender
Notice is required by sub-rule (2) to be advertised in newspapers and in such
other manner as the State Government may deem-fit. Sub-rule (8) 426 provides:
"Notwithstanding anything contained in the foregoing provisions, the State
Government may sell or otherwise dispose of Kendu leaves collected or likely to
be collected by it or by its officers or agents by auction on such terms and
conditions as may be decided by it." Sub-rule (9) reads as under:
"The successful tenderer or successful
bidder, as the case may be, shall be appointed as purchaser for the particular
unit, and the entire quantity of Kendu leaves collected or likely to be
collected from such unit or such lesser quantity out of it may be offered to
him by the State, its officer or agent in such unit, shall be purchased by him
in such manner and on such terms and conditions as may be specified in the
agreement to be executed by such purchaser under sub- rule (10)." Sub-rule
(10) requires the purchaser to execute an Agreement in Form 'M' within 15 days
of the receipt of the order of appointment. Sub-rule (11) requires such
purchaser before signing the agreement to deposit the security calculated as
provided in that sub-rule. Sub-rule (13) provides that the purchaser, if he
desires to consume the leaves within the unit or to remove the leaves delivered
to him outside the unit immediately or at any time before the 30th June, shall
pay the purchase price in full for the quantity of leaves delivered to him
calculated at the rate specified in the purchaser's agreement. If the purchaser
agrees in writing to keep the delivered leaves within the unit under his
supervision and risk and under insurance against theft, fire and wastage at his
expense but under the custody and control of the Divisional Forest Officer he
may at the time of delivery of leaves pay only such part of the purchase price
of the delivered leaves, as may be specified in the purchaser's agreement. The
balance of the purchase price may be paid in instalments on the dates specified
in the purchaser's agreement or on any earlier date before the leaves are
removed outside the unit or are delivered for consumption within the unit. In
no case the purchaser shall be allowed to remove all the leaves unless full
price has been paid.
By Notification, dated January 16, 1974,
published in the Extra-ordinary Gazette of Bihar Government of the same date,
the Rules were amended, and sub-clause (bb) after clause 4(b) was added in Form
'M' of the Agreement. This sub-clause (bb) reads as under:
"The purchaser shall not raise any
objection against the quality of Kendu leaves or shortage of leaves in the
standard gaddis." 427 This is one of the impugned provisions. The other
impugned provision is to be found in condition (13) of the Tender Notices
published in the Bihar Government Gazette, every year inviting tenders for the
purchase of Kendu leaves. This condition (13) which is also incorporated in the
statutory Agreement (Form-M), runs as follows:
"For every unit a minimum royalty will
be payable by the purchaser. The amount of minimum royalty will be 75% of the
amount arrived at by multiplying the notified yield in standard bags by the
offer made by the purchaser per standard bag. This amount shall be payable by
the tenderer even if by the end of the season, the price of Kendu leaves at the
offered rate, collected and delivered to the purchaser, fell short of this
amount. This whole amount will be payable before the leaves are utilized or
taken out and, if not paid, will be realised as arrears of land revenue."
The first proposition canvassed by Mr. Nariman appearing for the petitioners in
Writ Petitions 405 and 441 of 1974, is the Petitioners argued that the
aforesaid impugned provisions/conditions comprised in the aforesaid clause
4(bb) and clause (13) amount to an unreasonable restriction on the petitioners'
fundamental freedom to carry on trade or business in Kendu leaves; guaranteed
under Article 19(1)(g) of the Constitution; that the impugned provisions are
not within the protection of sub-clause (ii) in the second part of clause (6) of
Article 19 because the impugned provisions are not "integrally and
essentially connected" with the creation of the monopoly in favour of the
State, but are only incidental or subsidiary to the operation of the monopoly.
In support of this proposition, learned
counsel has referred to the decisions of this Court in Akadesi Padhan v. State
of Orissa and Rashbihari Panda etc. v. State of Orissa.
The second proposition propounded by Mr.
Nariman is that the impugned provisions violate the fundamental rights of the
petitioners' guaranteed under Article 14 of the Constitution, because in their
immediate operation and effect, they are harsh, unconscionable, arbitrary
unfair and oppressive; that even where the quantity offered to the purchaser is
far less than 75% of the notified estimated yield, or the leaves offered are
not of merchantable quality, the impugned provisions unreasonably obligate the
purchaser to pay royalty for 75 per cent of the estimated yield irrespective of
whether the shortfall in the quantity 428 offered/delivered or the
unmerchantable quality of the leaves offered is due to the fraud or negligence
of the Agent who, under the Rules, is supposed to be independent of the
purchaser and under the exclusive control of the Government; that the impugned
provisions operate irrationally and unfairly as they make no discerning
distinction between honest purchasers who are not blamable for the shortfall
and dishonest purchasers who through their fraud or collusion with the agent or
officers of the Government contribute to the shortfall. Thus, the impugned
provisions tar honest and dishonest purchasers with one and the same brush
which results in procrustean cruelty.
Third, the impugned provision which
forecloses the right of the purchaser to refuse delivery on the ground of the
leaves offered, not being of requisite quality, is inconsistent with and ultra
vires of the Proviso to Section 9(1) of the Act which contains a built-in
warranty that the leaves offered or delivered shall be fit for the purpose of manufacture
of bidis.
Dr. Chitale, appearing for the petitioners in
Writ Petitions 121 to 125 of 1979, has by and large adopted the arguments of
Mr. Nariman. He has drawn our attention to Annexure 'C' to Writ Petition 47 of
1975, wherein quite a large number of instances are given to show that the
shortfall in the actual delivery of the Kendu leaves to the purchasers as
against the estimated yield is considerable.
Learned counsel has emphasised that the
auctions are held in January, while the Agents are not appointed till March or
April, which is the plucking season, and in January, no reasonable estimate of
the expected yield is possible. It is maintained that the allegations in the
counter-affidavit filed on behalf of the State to the effect, that the purchasers
inspect the units and make their own estimates of the expected yield is
factually incorrect because in January no such estimate is possible.
Dr. Dewan, who has appeared for some of the
petitioners, cited Maneka Gandhi's case in support of his contention, that the
impugned provisions in their direct and inevitable effect, impinge upon the
fundamental rights of the petitioners guaranteed under Articles 14 and 19(1)
(g) of the Constitution. Learned counsel contrasted the impugned provisions
with the Rules in vogue in the State of Andhra Pradesh, which, according to
him, have a reasonable basis.
Mr. K. S. Sinha, appearing for the appellant
in Criminal Appeal 300 of 1974, submitted that the validity of the impugned
provisions was indirectly involved in this appeal, though in a different
context. It is pointed out that the permit to remove the leaves was refused to
429 the appellant on the ground that he had taken away the leaves without
paying 75 per cent of the royalty and had contravened Rule 16. The point sought
to be made out is that if the impugned Rules are not held to be valid, this
appeal must, in consequence, succeed.
On the other hand, Mr. L. N. Sinha, learned
Attorney- General submits on behalf of the respondents that there is a paucity
of skilled people who could be employed as Agents;
that in actual practice the persons appointed
as Agents are sponsored by the purchasers.
(i) It is submitted that the terms of the
Agreement, taken as a whole, are not one-sided. Whereas under the conditions of
the Tender Notice and the Agreement the purchasers voluntarily bind themselves
to pay the full price of the unit which is fixed according to the Rules,
irrespective of any shortfall in the quantity offered and delivered, they,
under the terms of the same Agreement get the benefit of purchasing Kendu
leaves offered in excess of 75 per cent of the estimated yield at the
concessional rate of 55 per cent only of the purchase price. It is argued that
if the conditions of the Tender Notice and the statutory Agreement are
considered as a whole, it is evident that the risks of loss and chances of
benefit are equally divided between the purchasers and the State.
(ii) It is stressed that what is sold at the
time of auction is the estimated produce from a unit, as such, and the highest
bidder or tenderer gets the contract to purchase that unit at a price the
minimum of which is fixed at 75% of the amount arrived at by multiplying the
notified estimated yield in terms of standard bags from that unit. It is urged
that (if a person voluntarily takes upon himself under the terms of a contract,
such risks and chances of benefit, he has no right in the event of suffering a
loss to be compensated for it even under the ordinary law in a suit, much less
the Court of writ jurisdiction can grant him any such relief). It is pointed
out that actually, in 110 out of 1000 units, that yield exceeded in the
notified estimates, and as a result, the purchasers reaped full benefit of the
excess supply at concessional rates.
(iii) (a) It is emphasised that the liability
of the petitioners to pay the whole price for the unit arises from the contract
and, as such, it cannot be considered to have a direct impact on the
fundamental right of the petitioners to carry on their trade or business; that
the right to enter into a contract on particular terms with the State is not a
fundamental right. Even this Court-proceeds the argument- cannot reconstruct
the terms and conditions voluntarily agreed between the petitioners and the
State.
430 (iii) (b) It is argued that it is not a
fit case to be decided under Article 32 of the Constitution, because in several
of these petitions the purchasers (petitioners) were in default, inasmuch as
they did not pay the amounts required to be adjusted against the remuneration
of the Agents; that in most of the cases the purchasers reaped that full
benefits of the contract and only in stray cases, they suffered loss; that
since they had availed of the chance of reaping and advantage, they could not
turn round and attack the validity of the terms and conditions of the contract
which they had voluntarily made and worked out.
(iv) Another point sought to be made out is
that the impugned provisions are directly and essentially related to the
operation of the monopoly and, as such, fall within the protection of
sub-clause (ii) of clause (6) of Art. 19.
(v) In the alternative, it is submitted that
the impugned provisions satisfy the test of reasonableness under the first part
of clause (6) of the said Article, and in applying that test the voluntary
nature of the contract and the obligations willingly undertaken by the
purchaser with all the risks of loss and chances of gain should not be lost
sight of that a purchaser who acts on a contract voluntarily entered into by him
is precluded from repudiating some of its conditions which involve risk of loss
and to accept those which are advantageous to him.
In support of the proposition that one who
has received the benefits of statute is precluded from attacking the
constitutionality of a condition attached by the statute, the learned
Attorney-General has referred to these decisions of the Supreme Court of United
States: Berth Fisheries Co. v. Industrial Commission of the State of Wisconian;
St. Louis Casting Co. v. Construction Co.; and United Food Fuel Gas Co. v. Rail
Road Commission.
In reply, Mr. Nariman submits that writ
petitions have been filed from 1973 onwards by various purchasers to challenge
the validity of the impugned provisions, as notified every year for inviting
tenders, in the High Court or in this Court, and from time to time interim
orders staying the operation of the impugned provisions have been issued either
by the High Court or this Court; that in view of this, it cannot be said that
the petitioners are precluded from challenging the validity of the impugned
provisions on the ground of acquiescence, waiver or estoppel. It is maintained
that fundamental rights cannot be waived, 431 particularly those under Article
14 of the Constitution and the principle of estoppel enunciated in the American
decisions is not applicable in India. In support of this argument, reference
has been made to the decision of this Court in Basheshar Nath v. The
Commissioner of Income-tax, Delhi & Rajasthan & Anr.
The learned Attorney-General further
submitted that his argument was not to the effect that the petitioners were
incompetent to enforce their fundamental right on the ground of waiver or
estoppel; but that a person who voluntarily enters into a contract cannot
retain the benefit accrued to him thereunder and repudiate the other part of
the contract which might have occasioned loss to him; that this principle is
different from that of waiver or estoppel.
The first question for consideration is,
whether the impugned provisions fall within the protection of sub-clause (ii)
of Article 19(6) and therefore, it is not necessary for those provisions to
satisfy the test of reasonableness under the first part of clause (6) of the
Article.
The relevant part of clause (6) reads thus:
"(6) Nothing in sub-clause (g) of the
said clause shall affect the operation of any existing law in so far as it
imposes, or prevent the State from making any law imposing, in the interests of
the general public, reasonable restrictions on the exercise of the right
conferred by the said sub-clause, and, in particular, nothing in the said
sub-clause shall affect the operation of any existing law in so far as it
relates to, or prevent the State from making any law relating to,- (i)
....................................
(ii) the carrying on by the State, or by a
Corporation owned or controlled by the State, of any trade, business, industry
or service, whether to the exclusion, complete or partial, of citizens or
otherwise." It will be seen that clause (6) falls into two parts.
The first part commences with the phrase:
"Nothing in sub- clause (g) of the said clause (1) of the Article".
Phrase to the same effect, with the addition of pre-fixed words "and, in
particular" are repeated at the commencement of the second part, also.
This indicates that the two parts of the clause are intended to be distinct and
separate. Further, the words "reasonable restrictions" which find
pivotal mention in the 432 first part, have not been repeated in the second
part, which omission makes it clear that a law covered by sub-clause (ii) is
not required to satisfy the test of reasonableness under the first part of the
clause and no objection to the validity of such a law is tenable on the ground
that it infringes the right guaranteed under Article 19(1) (g). Sub- clause
(ii) is thus in the nature of an exception to the main substantive provision in
clause (1) of the Article. Its language therefore, which is explicitly
restrictive, has to be strictly construed. The protection of sub-clause (ii) in
the second part is, in terms, available to the law only "in so far as it
relates to" the carrying on by the State, or by a Corporation owned or
controlled by the State, of any trade, business, industry, or service to the
exclusion, complete or partial of the citizens or otherwise. The ambit of the
words "in so far as it relates to" in the context of sub-clause (ii)
in the second part of clause (6), came up for consideration before this Court
in Akadasi Padhan's case (ibid). Gajendragadkar, J., as he then was, speaking
for the Court, held that only those provisions of the law which are
"integrally and essentially" connected with the creation of the
monopoly are protected under the second part of clause (6), but those
provisions which are not absolutely essential for creating the monopoly, but
are merely incidental, subsidiary or helpful to the operation of the monopoly
do not fall under the second part of clause (6) and their validity must be
judged, under the first part of Article 19(6).
Now, let us apply this test to the provisions
which are impugned in the instant case. These provisions are incorporated in
the Forms of Tender Notice and the Agreement by Rules framed under the Act. The
basic and essential features which are directly and immediately connected with
the creation of the State monopoly are to be found in the body of the Act,
itself. In any case, the impugned provisions are merely subsidiary or
incidental provisions relating to the operation of the monopoly. The impugned
provisions, therefore, do not fall within the protection of sub-clause (ii) in
the second part of Article 19 (6).
The question, however, still remains whether
the right to enter into a contract with the State on particular terms is a
fundamental right falling within the purview of Article 19 (1) (g). The learned
Attorney-General maintains that it is not.
Whatever may be the position with regard to
contracts relating to other matters, where the business to be carried on by a
citizen is in a commodity, the sale of which is a State monopoly, conditioned
by some statutory terms, analogous to the impugned conditions, which, in
operation, have a direct and immediate impact on the fundamental 433 freedom of
the citizen guaranteed under Article 19(1)(g), the citizen cannot enter into a
contract with the Government for purchase of such a commodity except on the
statutory terms laid down by the seller-State. Sale of Kendu leaves for
manufacture of bidis being a State monopoly, the petitioners-purchasers could,
if they so desired, purchase the Kendu leaves only in the manner prescribed by
the statutory rules on terms and conditions notified in the Tender Notices.
Even so, these conditions leave sufficient room to the free volition of the
intending purchasers, particularly in the matter of fixing the rates and the
minimum price payable for the estimated yield from a particular unit in terms
of standard bags. The Tender Notice and the Agreement which the purchasers
enter into with the Government, although couched in statutory Forms, are not
bereft of their contractual character, either.
Since the impugned provisions do not, as
already noticed, fall within the protection of sub-clause (ii) in the second
part of clause (6), they must satisfy the test of being a reasonable
restriction under the first part of that clause.
The first point in this connection to be
determined is, what actually is sold to the purchasers under the terms of the
Tender Notice and the statutory Agreement ? Is it an estimated yield of a unit
in terms of standard bags which is sold or the actual yield in terms of
standard bags offered or delivered ? From the scheme of the Rules, particularly
Rule 9(9) extracted in a foregoing part of this judgment, it is clear that what
is sold to the successful bidder at the annual auction is the entire quantity
of Kendu leaves collected or likely to be collected from a particular unit or
such lesser quantity out of that unit as may be offered to him by the State or
its agent or officer for a particular year at a price called `royalty'. The
minimum royalty or price payable being fixed on the basis of 75 per cent of the
estimated annual yield in standard bags from the unit multiplied by the rates
offered and accepted. Such an estimate, as it appears from the
counter-affidavit is made on the basis of the average actual yield from that
unit for the preceding three years. Such an estimated yield is notified and
published in the Tender Notices every year.
Purchasers in the trade, therefore, know
before-hand as to what they are bidding for. Purchasers are generally persons
who have been in the trade for several years and as such, have a special
knowledge of forming their own estimates of the expected yield and the chances
of profit and loss from that particular unit in a particular year. While it is
true that the bidders have to enter into Agreement on the terms and conditions
notified by the Government, yet it cannot be lost sight of that in spite of the
fact that 434 the impugned provisions in Condition 13 of the Agreement and the
Tender Notice in 1973 and the impugned Condition 4(bb) has been notified
annually since the amendment of the statutory Forms in January 1974, the
petitioners and their fellowmen in the trade have been offering rates of bids
and entering into agreement on the notified terms and conditions, including the
impugned provisions. Only a few writ petitions have been filed now and then by
certain purchasers who suffered loss, to challenge these impugned provisions
since 1973. In view of the fact that the chances of profit and risks of loss
are evenly divided between the seller-State and the purchasers and in the light
of the aforesaid historical background, it cannot be said that the impugned
condition in clause 13 of the Tender Notice and the Agreement is manifestly
unreasonable. The impugned Condition 13 is a restriction imposed in the general
public interest.
Fixation of a minimum price on the basis of
estimated yield from a particular unit in a particular year operates as an
insurance against loss or leakage of public Revenue due to connivance or
collusion between purchasers on the one hand, and the servants and agents of
the seller-State on the other. This method also assures a minimum wage to the
pluckers of the Kendu leaves who, as has been affirmed in the counter-affidavit
of the respondent-State, are generally Adivasis or persons belonging to
economically backward classes.
We are unable to accept the contention of the
learned counsel for the petitioners, that the impugned provisions are harsh and
unreasonable inasmuch as they obligate the purchasers to pay for the
undelivered shortfall of Kendu leaves even where such shortfall is due to the
negligence or fraud of the Agent of the Government. The real position has been
explained in the counter-affidavit filed on behalf of the State in Writ
Petitions 2222 to 2252 of 1977, thus :
"Technically speaking the Agents were
appointed by the State Government but the persons so appointed were actually
sponsored by the respective purchasers. The Agents were the persons of the
purchasers and were loyal to their old masters. This is an incontrovertible
fact. In most of the cases the agents got the full amount of their commission
and handling charges adjusted towards the purchase price of the units at the
end of collection season. Specific instances are on record that in many cases
the Agents were close relatives such as father, sons, brothers of the
purchasers. In the case of firms, the Agents were partners in the same firm. In
some cases the purchasers and the Agents interchanged their positions.
Purchasers became Agents while the latter 435 became purchasers. This was a
common trick of the trade which is still in vogue.
Some of the instances showing the
relationship between the petitioners/purchasers and the Agents are tabulated in
Annexure `A' hereto." Although the Act and the Rules noticed earlier
contemplate that the Agents appointed by the Government will be under its full
control and liable to compensate the Government for any shortage, damage or
loss caused in collection or delivery or any defect in the quality of the
leaves collected, to the Government, yet, in actual practice, the real position
is that the Agents are generally persons sponsored by and otherwise, deeply
interested in the purchasers. In their counter-affidavit, the Government has
explained that there is a dearth of suitable persons having adequate experience
and skill of work as efficient Agents.
The Agents are to be appointed every year at
short notice when the plucking season is at hand. Circumstances being what they
are, the Government is driven into a situation in which they have to appoint
persons sponsored by the purchasers as Agents. From this real factual position,
viz., the close bond and rapport between the purchasers and the agents, two
inferences arise. First, that at the time of auction, the intending purchasers
are in a position to form a reasonable estimate of the return which they are
likely to have for the year concerned from that particular unit or units for
which they offered the rates. Second, that if the purchase price were to be
fixed not on the basis of any estimated annual yield from a particular unit but
on the basis of the quantity actually delivered, the risk of loss or leakage of
public revenue by reason of fraud and collusion between the purchasers and the
agents will manifestly increase. Looked at from this angle also, against the
real factual background, the impugned Condition 13 cannot be said to be
unreasonable.
Mr. Nariman contended that if the factual
position, as stated in the counter-affidavit filed on behalf of the State, is
correct, then the impugned condition 13 will be hit by the ratio of this
Court's decisions in Rashbihari Panda etc. v. State of Orissa (ibid) and
Akadasi Padhan's case (ibid), because in that situation the conclusion would be
ineluctable that the monopoly is being worked by the State not for its
exclusive benefit or in the public interest but to benefit a class of
profiteers comprised of the purchasers and their agents, thereby creating a
monopoly within a monopoly.
In order to appreciate this contention, it is
necessary to notice Rashbihari Panda's case. To regulate trade in Kendu leaves
and prevent exploitation of growers and pluckers, the State of Orissa enacted
436 the Orissa Kendu Leaves (Control of Trade) Act. 1961. By Section 3 of that
Act, which is analogous to Section 3 of the Bihar Act, no person other than the
Government, an authorised officer of the Government, or an agent appointed by
the Government, is entitled to purchase or transport Kendu leaves; and under
Section 4 of that Act, the Government is authorised to fix the price at which
the leaves shall be purchased from the growers by the officer or agent of the
Government. Section 10 of that Act provided that the Kendu leaves purchased
shall be sold or disposed of in such manner as the Government may direct, and
under Section 11, at least one-half of the net profits derived by the
Government is to be paid to Samitis and Gram Panchayats.
In Akadasi Padhan's case (ibid), a grower of
Kendu leaves challenged Sections 3 and 4 and Rule 7(5) made under that Act on
the ground that it contravened his fundamental right under Articles 14 and
19(1)(a) and (g) in this Court. It was held that Sections 3 and 4 did not
infringe Article 19(6) (ii), but the State Government was incompetent to
implement the provisions of the Act and give effect to its monopoly, because
the agents appointed were not really agents of the Government but were
authorised to carry on trade in the leaves purchased not on behalf of the Government
but on their own account, and that it thus gave rise to a monopoly in favour of
the agents which was not protected by Article 19(6) (ii) since the law cannot
be used by the State for the private benefit of agents. After the decision in
Akadasi Padhan's case, the Orissa State made some changes in the implementation
of its monopoly. In 1966, it invited tenders from persons desirous of
purchasing Kendu leaves purchased by the officers and agents of the Government.
During the years 1966 and 1967, the prices of Kendu leaves ruled very high and
when sales were affected by public auction, prices considerably in excess of
those at which tenders were accepted were realised. Early in 1968, the State
evolved another scheme under which, it offered to renew the licences of those
traders who in the State's view had worked satisfactorily in the previous year
and had paid the amounts due from them regularly. The scheme was objected to,
and realising that, the scheme arbitrarily excluded many persons interested in
the trade, and hence was objectionable, the Government decided to invite offers
for advance purchases of Kendu leaves but restricted the invitation to those
individuals who had carried out the contracts in the previous year without
default and to the satisfaction of the Government that is, the existing
contractors were given the exclusive right to make offers to purchase Kendu
leaves.
This new method of offering to enter into
agreements for advance purchases of Kendu leaves by private offers in
preference to open competition, was challenged by writ petitions in the High
Court as 437 violative of the petitioner's fundamental rights under Articles 14
and 19(1) (g).
Reversing the decision of the High Court,
this Court, in appeal, held, The validity of a law by which the State assumed
the monopoly to trade in a given commodity has to be judged by the test whether
the entire benefit arising therefrom is to enure to the State, and the monopoly
is not used as a cloak for conferring private benefit upon a limited class of
persons. The monopoly of purchasing Kendu leaves under Section 3 may be held to
be valid if, it be administered only for the benefit of the State. Similarly,
the right to sell or dispose of Kendu leaves by the State under Section 10, in
such manner as the Government may direct, would be valid if it be exercised in
public interest and not to serve the private interest and not to serve the
private interests of any person or class of persons. The profit resulting from
the sale must be for the public benefit and not for private gain. Section 11
also emphasises the concept that the machinery of sale or disposal of the
leaves must also be geared to serve the public interest. If the scheme of
disposal creates a class of middlemen who could purchase from the Government at
concessional rates and earn large profits disproportionate to the nature of the
service rendered or duty performed by them, it cannot claim the protection of
Article 19(6) (ii) as it is not open to the Government to create a monopoly in
favour of third parties from its own monopoly.
(Head-note of the Official Report) It was
further held :
"The right to make offers being open to
a limited class of persons the schemes effectively shut out all other persons
carrying on trade in Kendu leaves as well as new entrants into the trade. Both
the schemes, evolved by the Government, namely, the one of offering to enter
into contracts with certain named licencees, and the other of inviting tenders
from licencees who had in the previous year carried out their contracts
satisfactorily gave rise to a monopoly in the trade in the leaves to certain
traders and singled out other traders for discriminating treatment. Therefore,
they were violative of the fundamental right of the petitioners under Articles
14 and 19(1) (g) and as the schemes were not integrally and 438 essentially'
connected with the creation of the monopoly, they were not protected by Article
19(6) (ii).
It was further observed that if the only
anxiety of the Government was to ensure due performance by those who submitted
tenders, Government could devise adequate safeguards. But the classification
based on the circumstance that certain existing contractors had carried out
their obligation in the previous year regularly and to the satisfaction of the
Government, is not based on any real and substantial distinction bearing a just
and reasonable relation to the objects sought to be achieved namely, the
effective execution of the monopoly in public interest, the prevention of
exploitation of pluckers and growers of Kendu leaves, or the securing of the
full benefit from the trade, to the State.
On the basis of this reasoning, it was
finally held that the scheme could not be supported on the ground that it
imposed reasonable restrictions, within the meaning of Article 19(6), on the
fundamental rights of traders to carry on business in Kendu leaves. Hence, the
plea that the action of the Government was bona fide could not be an effective
answer to that challenge.
It may be noted that the decision of this
Court in Rashbihari's case (ibid) was announced on January 16, 1969.
The Bihar Act, with which we are concerned,
was passed in 1973. The Bihar Legislature, therefore could not but be aware of
the unconstitutional features pointed out by this Court in the schemes of the
Orissa Act and the Rules framed thereunder. Care has been taken by the Bihar
Legislature, and the Government to exercise the scheme of the Bihar Act and the
Rules and Forms framed or prescribed thereunder, of the vices from which the
schemes of Orissa Legislation suffered. This will be clear from a comparative
study of the Orissa schemes and the Bihar scheme. Firstly, under the Orissa
schemes, the monopoly was not being worked for the entire benefit of the State
or in the general public interest, but was being used as a cloak for conferring
private benefit upon a limited class of persons. The offers for purchasing
Kendu leaves were restricted to a particular class of contractors and were not
open to the general public. This vice does not exist in the Bihar scheme
including the scheme of the impugned provisions. The notified estimate annual
yield for a unit or units is sold either by inviting tenders from the public by
publishing a Tender Notice or by public auction after a similar notice.
Any person who wants to carry on the business
of purchasing Kendu leaves for the purpose of manufacture of Bidis is entitled
to submit his offer in the prescribed Tender Form in response to the public
notice inviting tenders, or offer his bid at the auction, if the disposal is by
public 439 auction. Secondly, the scheme of disposal envisaged by the impugned
provisions of the Orissa Act and the Orissa rules created a class of middlemen
who could purchase from the Government at concessional rates and earn large
profits disproportionate to the service rendered or duty performed by them. In
contrast with this, the Bihar scheme in question does not operate to create any
monopoly in favour of any particular class of purchasers. Nor does the Bihar
scheme enable the purchasers to make unduly large profits at the cost of the
public revenue or others. Even if the agents, in actual practice, are persons
sponsored by the purchasers, then also, the rules framed under the Bihar Act
envisage a strict and exclusive control of the Government over the Agents and
their activities, and provide for their liability to compensate the Government
for the loss occasioned by their misconduct or neglect. Under the impugned
Condition 13, the minimum price payable for the unit or units concerned by a
purchaser is 75 per cent of the notified estimated yield from that unit or
units, in terms of standard bags multiplied by the rates or bid offered by the
purchaser and accepted by the Government, even if the actual yield from that
unit or units falls short of 75 per cent of the estimated yield. This condition
far from creating a monopoly in the trade in favour of middlemen, operates as
an ironclad safeguard against leakage of the public revenue by assuring a
minimum return to the public exchequer from the sale of Kendu leaves. The
provision is aimed to secure the full benefit from the trade to the State
leaving chances of making reasonable, marginal profit to the purchasers.
It was observed in Rashbihari's case, that it
would be in the interest of State to invite tenders in the open market from all
persons irrespective of their having taken contracts in the previous year. This
suggestion has been adopted by the scheme of the Bihar Act and the Rules and
the Forms of Tender Notice and Agreement prescribed thereunder.
Some other defects pointed out by this Court
in the operation of the Orissa schemes, were that the Government had not
estimated the crop and the prevailing prices of Kendu leaves about the time
when offers were made, nor the conditions in the market, nor offers of higher
prices and the likelihood of offerers of higher prices carrying out their
obligations. The scheme of the Bihar Act and the Rules, and Forms including
that of the impugned condition 13 is designed to remove the deficiencies, infirmities
and vices pointed out by this Court in Rashbihari's case.
For these reasons, we are unable to accept
the contention, that in actual operation, the impugned provision (clause 13)
creates a monopoly in favour of a class of middlemen consisting of `Agents' and
pur- 440 chasers, and enables them to earn unduly large profits at the cost of
the public or pluckers and growers.
The impugned Condition 13 satisfies the test
of reasonableness under the first part of Article 19(6). We, therefore, repel
the challenge to the validity of that condition on the ground of Article 19(6).
The next question is whether the impugned
provisions are violative of the fundamental rights of the petitioners under
Article 14 of the Constitution. The argument is that these provisions treat
unequals as equals, even where crying dissimilarities exist and thus their
operation results in Procrustean cruelty.
The point sought to be made out is that even
if the shortfall in the quantity supplied or the substandard nature of the
quality offered to the purchaser is solely due to the fraud, negligence or
misconduct of the Agent or servant of the Government, the loss due to such
shortfall or deficiency in quality must fall on the purchaser, notwithstanding
the fact that he (purchaser) was in no way privy or contributory to that fraud,
negligence or misconduct of the Agent or Government servant and thus the
impugned provisions do not make any discerning distinction between honest
purchasers and dishonest purchasers, but tar those dissimilarly situated
classes with one and the same brush. The argument though attractive, does not
stand a close examination.
At the time of inviting Tenders in the
prescribed Form or inviting purchasers to bid at the publication, all tenderers
or bidders are treated equally in the sense that they can offer their rates or
bids subject to the statutory conditions including the impugned provisions.
While accepting the highest Tender of rates per standard bag or the highest
bid, it is not possible to classify the purchasers whose offers/bids have been
accepted into `honest' purchasers and `dishonest' purchasers. Everybody whose
offer or bid is accepted, is assumed to be honest.
Secondly, in entering into a contract of
purchase of the notified estimated yield in terms of standard bags, the
discretion and volition of the tenderer or bidder, also, plays an important
part in calculating the minimum price payable for the estimated yield from the
particular unit.
According to the impugned Condition 13 of the
Tender Notice, which also forms a part of the prescribed Form in which tenders
are invited, the successful tenderer or bidder whose tender or bid is accepted
by the Department, has to pay a minimum royalty, also described as `revenue' or
price, which will be 75 per cent of the notified estimated yield in terms of
standard bag by the tenderer or bidder.
441 Thus, the volition of the purchaser also
plays a prominent part in fixing the rate or price payable by him. By means of
his offer in the Tender Form or by bidding at the auction, the purchaser binds
himself to pay this minimum royalty even if by the end of the year, the number
of bags collected is less than the notified estimated yield. The purchasers
form their own estimates of the expected yield from a particular unit for a
particular year and then make their offers of rates in the prescribed Tender
Form, or when the disposal is by public auction, the purchasers make their bids
subject to the terms published in the Tender or Auction Notices. If, according
to the estimate of an intending purchaser, the unit concerned is not likely to
yield the quantity notified, it is open to him either not to submit any tender
or offer or rates at all, or not to offer a bid or an amount higher than that
which, according to his own estimate or calculation, would be a reasonable
price of the bargain. In other words, if a person with his eyes open tenders
the highest rates per standard bag or offers the highest bid at public auction,
as the case may be, of his own accord, it will be assumed that he did so
because in his own estimation the acceptance of the contract at those rates and
subject to the notified terms and condition would afford him a reasonable scope
for making profit. Furthermore, under the scheme of the Bihar Act and Rules, the
sale is not restricted to any particular class of persons as in Rashbiharis
case. Anyone who wants to do business of purchase of Kendu leaves can submit
his tender of rates in the prescribed Form, or offer his bid at the auction, as
the case may be, subject to the notified conditions of the Tender
Notice/Auction Notice.
It is a fundamental principle of general
application that if a person of his own accord, accepts a contract on certain
terms and works out the contract, he cannot be allowed to adhere to and abide
by some of the terms of the contract which proved advantageous to him and
repudiate the other terms of the same contract which might be disadvantageous
to him. The maxim is qui approbat non reprobat, (one who approbates cannot
reprobate). This principle, though originally borrowed from Scots Law, is now
firmly embodied in English Common Law. According to it, a party to an
instrument or transaction cannot take advantage of one part of a document or
transaction and reject the rest. That is to say, no party can accept and reject
the same instrument or transaction (Per Scrutton L.J. Verschures Creameries,
Ltd. v. Hull & Netherlands Steamship Co.; See Douglas Menzies v. Umphelby;
See also Stroud's Judicial Dictionary, Vol. I, page 169, 3rd Edn.).
442 The aforesaid inhibitory principle
squarely applies to the cases of those petitioners who had by offering highest
bids at public auctions or by Tenders, accepted and worked out the contracts in
the past but are now resisting the demands or other action, arising out of the
impugned Condition 13 on the ground that this condition is violative of
Articles 19(1)(g) and 14 of the Constitution. In this connection, it will bear
repetition, here, that the impugned conditions though bear a statutory
complexion, retain their basic contractual character, also. It is true that a
person cannot be debarred from enforcing his fundamental rights on the ground
of estoppel or waiver. But the aforesaid principle which prohibits a party to a
transaction from approbating, a part of its conditions and reprobating the
rest, is different from the doctrine of estoppel or waiver).
For the foregoing reasons, the challenge to
the impugned Condition No. 13, on the ground of Article 14, also, is
unsustainable and is rejected.
Now, we take up the impugned Condition 4(bb).
It provides that no objection from the purchaser with regard to the quantity or
quality of the leave in the gaddis (bundles) offered would be tenable. This
condition is couched in peremptory, drastic and absolute language. It is not
qualified by any words showing that the bar envisaged in it will be attracted
only in cases where the purchaser has had an earlier opportunity to raise this
objection but failed to do so, or, where he had on an earlier occasion raised
such an objection which was heard and overruled by the competent Forest
Officer. We have already noticed that Section 9(1), proviso, of the Act
contains a built-in-warranty, that the Kendu leaves offered would be fit for
manufacture of bidis;
that is to say, the leaves would be of
merchantable quality.
Condition 4(bb) therefore, is inconsistent
with and repugnant to Section 9(1), proviso of the Act and, as such, invalid.
It is, therefore, not necessary to test its validity on the ground of Articles
19 and 14 of the Constitution.
In the light of the above discussion, we
would dismiss all the Writ petitions, namely, Writ Petitions 2222 to 2252 of
1977, Writ Petitions 121 to 125 of 1979, Writ Petitions 405 and 441 of 1974,
Writ Petitions 46 and 47 of 1975, excepting to this extent that the aforesaid
clause 4(bb) in the Tender Notices and the statutory Agreement in question.
being inconsistent with the proviso to
Section 9(1) of the Act, is declared to be invalid.
In Criminal Appeal 300 of 1974, the
prosecution of the appellants for an offence under Section 379, Penal Code has
already been quashed by the High Court by its judgment dated February 14, 1974;
but the Order dated September 11, 1973 of the Sub- Divisional Magistrate, Saheb
Ganj, taking cognizance of a case instituted by the Divisional Forest Officer,
Dumka, for offences under Section 409, Penal Code and Section 5(2) read with
Section 16 of the Bihar Kendu Leaves (Control of Trade) Ordinance (46 of 1973)
was not quashed.
The main contention of appellant 1, Shankar
Prasad Bhagat, was that he received only 650 standard bags as against the
notified estimated 1500 bags, and the Condition 13 of the statutory Agreement
under which he was required to pay for the undelivered or unoffered quantity of
the leaves was unconstitutional.
Since we have held that the aforesaid
Condition 13 is valid, this contention must fail. We, therefore, dismiss this
appeal. The case shall now go back to the Sub- Divisional Magistrate for
disposal in accordance with law.
We advisedly abstain from making any
observation with regard to the merits of the case.
N.K.A. Petitions and Appeal dismissed.
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