1969 (1) TMI 79 - SC - Indian Laws

Summary

Issues Involved:
1. Validity of the Orissa Kendu Leaves (Control of Trade) Act, 1961.
2. Infringement of fundamental rights under Articles 19(1)(f) & (g) and Article 14.
3. Legality of the Government's scheme for advance purchase contracts by private negotiation.
4. Allegations of mala fide actions by the Government.
5. Discrimination in the tender process for the sale of Kendu leaves.

Issue-wise Detailed Analysis:

1. Validity of the Orissa Kendu Leaves (Control of Trade) Act, 1961:

The Supreme Court examined the Orissa Kendu Leaves (Control of Trade) Act, 1961, which established a state monopoly on the trade of Kendu leaves. The Act was previously upheld in Akadasi Padhan v. The State of Orissa (1962), where the Court ruled that the creation of a state monopoly in Kendu leaves was protected by Article 19(6) as amended by the Constitution (First Amendment) Act, 1951. The Court found that the fixation of prices under Section 4 was reasonable and in the interest of the general public under Articles 19(5) and 19(6). However, the Court also noted that agents appointed under the Act were not acting strictly as government agents but were trading on their own account, rendering those agreements invalid.

2. Infringement of fundamental rights under Articles 19(1)(f) & (g) and Article 14:

The appellants argued that the principal provisions of the Act infringed their fundamental rights under Articles 19(1)(f) & (g) and Article 14. They contended that Sections 3 and 4, and Rule 7(5) infringed their rights under Article 19(1)(f) and (g), while Sections 5, 6, and 9 contravened the equality clause of the Constitution. The Court reiterated that the state monopoly in Kendu leaves was reasonable and in the public interest, thus protected under Article 19(6)(ii). However, the schemes adopted by the Government for the sale of Kendu leaves were found to be discriminatory and imposed unreasonable restrictions on the right to carry on business, violating Articles 19(1)(g) and 14.

3. Legality of the Government's scheme for advance purchase contracts by private negotiation:

The Government of Orissa had adopted a scheme to enter into advance purchase contracts with certain traders through private negotiation, rather than through open competition. The High Court held that the Government's discretion under Section 10 of the Act to dispose of Kendu leaves "in such manner as the Government may direct" was not arbitrary and was not amenable to writ jurisdiction. However, the Supreme Court found that the schemes were discriminatory as they restricted the right to make offers to a limited class of persons, effectively shutting out other traders and new entrants, thus violating Articles 19(1)(g) and 14.

4. Allegations of mala fide actions by the Government:

The appellants alleged that the Government's actions were mala fide and intended to benefit party supporters. They argued that the scheme was a "fraud on the Constitution" and aimed at increasing party funds to the detriment of public revenue. The Supreme Court noted that while the High Court found no evidence of mala fides, the Government's actions were still subject to scrutiny for reasonableness and non-discrimination. The Court emphasized that the Government's discretion must be exercised in the public interest and not for private gain.

5. Discrimination in the tender process for the sale of Kendu leaves:

The appellants contended that the Government's tender process was discriminatory as it favored certain old contractors, excluding others from participating. The Supreme Court found that the classification based on the previous year's performance was not a reasonable basis for exclusion and had no direct relation to the public interest objectives of the monopoly. The Court held that the schemes were ex facie discriminatory and imposed unreasonable restrictions on the right to carry on business, thus violating Articles 19(1)(g) and 14.

Conclusion:

The Supreme Court concluded that both the schemes adopted by the Government for the sale of Kendu leaves were violative of the fundamental rights under Articles 19(1)(g) and 14. The Court directed that tenders for the purchase of Kendu leaves be invited from all interested persons in the next season, ensuring that the State acts in the interest of the general public and not any specific class of traders. The Court made no further orders in the petitions and directed that there be no order as to costs in all the appeals.