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Jawahar and Co., Katni and ors. Vs. State of Madhya Pradesh and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial;Constitution
CourtMadhya Pradesh High Court
Decided On
Case NumberMisc. Petn. No. 361 of 1981
Judge
Reported inAIR1981MP214; 1981MPLJ519
ActsConstitution of India - Article 14; Madhya Pradesh Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1964 - Sections 4, 7 and 12
AppellantJawahar and Co., Katni and ors.
RespondentState of Madhya Pradesh and ors.
Appellant AdvocateV.S. Dabir, Adv.
Respondent AdvocateS.L. Saxena, Govt. Adv.
DispositionPetitions allowed
Cases ReferredIn Rasbihari Panda v. State of Orissa
Excerpt:
.....with which we are concerned. for the units remaining unsold even thereafter in the year 1980. the state government invited tenders on purchasers' agreement fixing the upset price per standard baa, according to this system, purchasers were to be appointed on the basis of price to be paid per standard bad of the notified estimated yield in terms of standard bags. the purchase price per standard bad comprised of the collection charges which the government had to pay to the agents and royalty which was to be retained by the government. 9. dispute has arisen from the decision to grant renewal in the current year 1981 to some of the purchasers of the year 1980 and not in all of them who have satisfied the conditions of the renewal clause. 11. it appears that even in the implementation of this..........continues till the break of monsoon in the middle of june. under section 4 of the adhiniyam the state government may appoint agents for the purpose of purchase of, and trades in, tendu leaves on its behalf on the prescribed terms and conditions etc. under section 7 the state government fixes the price at which tendu leaves shall be purchased by it or by any of its authorised officer or agent from growers of tendu leaves other than the state government. section 12 relates to disposal of leave and reads as under :'tendu leaves purchased by the state government or by its officer or agent, under this act shall be sold or otherwise disposed of in such manner as the state government may direct,'it is, therefore, clear that the state government has a wide discretion in the disposal of tendu.....
Judgment:

J.S. Verma, J.

1. The only question involved in these petitions is: whether, the petitioners who were purchasers of some units of tendu leaves in the previous year 1980, having exercised their option for renewal of the same units during the current year 1981 in the manner prescribed, have been illegally discriminated by the State in refusing them the renewal when several other purchasers of the previous vear have been granted renewal of their units under the same renewal Clause? The facts relevant are stated hereafter, 2. The trade in tendu leaves by creation of State monopoly is regulated by the provisions of the Madhya Pradesh Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1964 (Act No. 29 of 1964), hereinafter called the Adhiniyam. By Section 3 of the Adhiniyam the area within which tendu leaves are grown is divided into units. In all. there were 1806 such unit in the State during previous year 1930 as well as the current year 1981 with which we are concerned. The collection of tendu leaves usually starts each year by the end of April and continues till the break of monsoon in the middle of June. Under Section 4 of the Adhiniyam the State Government may appoint agents for the purpose of purchase of, and trades in, tendu leaves on its behalf on the prescribed terms and conditions etc. Under Section 7 the State Government fixes the price at which tendu leaves shall be purchased by it or by any of its authorised officer or agent from growers of tendu leaves other than the State Government. Section 12 relates to disposal of leave and reads as under :

'Tendu leaves purchased by the State Government or by its officer or Agent, under this Act shall be sold or otherwise disposed of in such manner as the State Government may direct,'

It is, therefore, clear that the State Government has a wide discretion in the disposal of tendu leaves which is subject only to the rights available to others for entering into a contract with the Government. These are the only relevant provisions of the Adhiniyam.

3. It is in this context, that Article 14 of the Constitution is attracted. It is now settled, and no longer in dispute, that Article 14 is attracted at the threshold when the Government enters into a contract and equal opportunity is to be siven for this purpose to all persons equally placed and intending to enter into the contract (See Ramana Dayaram Shetty v. The International Airport Authority of India, AIR 1979 SC 1628.) Reference may also be made to the decision in Rasbihari Panda v. State of Orissa, AIR 1960 SC 1031 wherein validity of the scheme adopted by the Government for sale of Tendu leaves was adjudged in the light of Article 14 and Article 19(1)(g) of the Constitution. It is, therefore, clear that validity of exercise of the discretion available to the State Government for disposal of tendu leaves under Section 12 the Adhiniyam. which is similar to the provision conferring discretion in the State of Orissa in Rasbihari's case has to be tested on the touchstone of Article 14.

4. It may be mentioned that the purchasers of units during the earlier year 1979 had similar renewal clause permitting them to exercise option to repurchase their units, in accordance with the conditions laid by the State Government. But the policy in 1980 was revised and it was decided not to act on the renewal clause. Accordingly tenders were invited in the open market for all 106 units from all persons irrespective of their having taken contract in the earlier year 1979. These tenders for all the 1806 units were invited initially on a lump sum basis according to which each unit was to be sold for a lump sum amount irrespective of the total quantity collected, and the purchaser himself had also to collect all the tendu leaves within the unit. Upset Price was fixed separately for each unit. However, tenders were received on this basis for only 727 out of the total of 1806 units. Accordinely 727 units alone could be sold on a lump sum basis. Out of the remaining units. 422 units situated within the tribal areas were later purchased by M. P. Raiya Vipanan Sangh. a co-operative society, at the upset price fixed by the State Government. For the units remaining unsold even thereafter in the year 1980. the State Government invited tenders on purchasers' agreement fixing the upset price per standard baa, According to this system, purchasers were to be appointed on the basis of price to be paid per standard bad of the notified estimated yield in terms of standard bags. In this system agents were appointed by the Government for collection of tendu leaves who were paid collection charges by the State Government and after collecting tendu leaves they also supervised its handing over to the purchasers.

The purchase price per standard bad comprised of the collection charges which the Government had to pay to the agents and royalty which was to be retained by the Government. The purchaser was bound to purchase all the leaves collected and handed over to him by the agent with the only difference that for the Quantity in excess of the notified estimated yield, he was required to pay royalty at a lesser rate. However, even on this basis only 414 units could be sold out of which 231 units were sold below the upset price fixed by the State Government. Thereafter, in all 243 units remained unsold during the year 1980.

5. The petitioners in both these petitions are purchasers of the year 1980 who had purchased units within the category of 231 units sold by the State Government below the upset price under the purchasers' agreement system or standard bag basis.

6. The petitioners in M. P. No. 361 of 1981 purchased in all eight such units in the year 1980 all of which were within the Jabalour Forest Division. The names of these units are 9-Bilhari. 10-Salaiya, 1A-Khitoli, 1B-Karlele 2-Salaiva Sihora, 3-Sakrigah, 8-A Deorihatai and 8-B-Bihori, The petitioners in M. P. No. 372 of 1981 similarly purchased eight units, all in Sidhi Forest Division, known as 1-Budsons.

3-Rampur, 6-Simariva, 7-Arori, 26-Raimilan, 32-Chatoli, 9-B Hanumangarh and 21-Mahuagaon.

7. The tender notice inviting tenders from purchasers in the year 1980 contained the renewal clause for the next year, that is 1981 in Clause 25 which reads as under

^^;fn srk djkjukes dh lekfIr ds nks ekg iwoZsrk uohuhdj.k ds fy;s vkosnu i= izLrqr djrk gS] rks l{ke vf/kdkjh vius Lofonsdls ,slh 'krksZ ij tks 'kklu r; djsa uohuhdj.k djus ckcr fopkj djsxkA**

A similar clause was ultimately incorporated in the purchaser's agreement executed subsequently in the petitioners' favour when they were sold the aforesaid units for the year 1980. There is no dispute that the renewal clauses were the same for all purchasers of 1980 under both the systems irrespective of the fact whether they had purchased at the upset price or above or below the same. In short, no distinction was drawn between them for the purpose of renewal on the basis that they were purchasers below the upset price or at or above the upset fixed by the State Government. This term translated in english means that in case the purchasers applied for renewal two months prior to the expiry of the period, the competent authority would consider the question of renewal on such terms and conditions as may be specified by the Government. Admittedly several purchasers of the year 1980 including the petitioners in both these petitions applied for renewal of their units during the current year 1981, in accordance with the renewal clause. Even though the Government has granted renewal to some acting on the renewal clause vet it has refused renewal to others including the petitioners. This has given rise to the present controversy.

8. For the current year 1981 the State Government decided to act on the renewal clause while disposing of the 1806 units instead of inviting tenders in the open market from all persons irrespective of their having taken contracts in the previous year, as was done in 1980 and which is more beneficial to the State as pointed out by the Supreme Court. (See Rashbehari Panda's case (AIR 1969 SC 1081) (supra) and New Bihar Biri Leaves Co. v. State of Bihar (1981) 1 SCC 537. Para 41 : (AIR 1981 SC 679)). It is not disputed before us that such a course was open to the Government and if it had done as inviting tenders for all units from the open market to secure full benefit from the trade, then no grievance could be made by previous year's purchasers with the renewal clause. The grievance made before us is that having decided to honour the renewal clause and act upon it. no discrimination could be made between persons who have the benefit of the same renewal clause.

9. Dispute has arisen from the decision to grant renewal in the current year 1981 to some of the purchasers of the year 1980 and not in all of them who have satisfied the conditions of the renewal clause. This dispute arises as a result of the decision contained in order No. Kra. 26/14/- 01-3-1980 dated. Bhopal, the 16th January 1981 issued by the State Government in its Forest Department (Annexure B). This decision in substance is as follows:

(i) Out of the total 1806 units in all 434 units selected by the M. P. Rajya Vipanan Sangh are granted to it;

(ii) Renewal to purchasers of the previous year 1980 would be granted on the following conditions, namely;

(a) Those purchasers who had purchased on the basis of lump sum price per unit, in case they had purchased at or above the upset price, and had ap-plied for renewal according to Clause 25 of the tender notice should be granted renewal at the renewal price of last years' sole price plus 18 %.

(b) Those purchasers who had purchased on the purchasers' agreement basis i.e. the standard ban basis, in case they had purchased at or above the upset price, and had applied for renewal according to any of the two methods should be granted renewal according to the method of lump sum price per unit, at the renewal price calculated on the basis indicated.

(iii) Thereafter the remaining units should be disposed of according to the lump sum price basis.

10. The gist of the decision contained in the above order dated 16-1-1981 (Annexure-B) is that the 434 units selected by the M. P. Raiva Vipanan Sanah are granted to them. Out of the remaining, renewal has to be granted of those units which were purchased at or above the upset price during the previous year 1980 under any of the two methods namely, lump sum price per unit basis or purchaser's agreement (standard bag) basis on the renewal price calculated as indicated, if application for renewal was made in the manner prescribed. In other words application for renewal made under a similar renewal clause and according to the same terms and conditions by a purchaser of the previous year 1980 below the upset price was not to be considered while all other similar purchasers were to be granted renewal. The units remaining for disposal thereafter had to be disposed of by inviting tenders from the open market on the lump sum price basis.

11. It appears that even in the implementation of this order (Annexure-B) there was considerable confusion and many previous years' purchasers who claimed to have satisfied all the conditions of this order were refused renewal. That led to filing of some petitions by them but later renewal having been granted to them, such petitions were dismissed as infructuous. We are in these petitions concerned only with some of those previous years' purchasers with identical renewal clause who had admittedly applied for renewal according to the conditions specified and have not been considered for renewal because they were purchasers below the upset price during the previous year. Including aforesaid units of these petitioners of which they were purchasers in the previous year and similar units, the notice inviting tenders from open market was published in the M. P, Rajapatra dated 7-3-1981 by the State Government for disposal of the remaining units. This has led to the filing of these petitions.

12. The petitioners grievance is that there is no basis to discriminate between purchasers of the previous year 1980 having the benefit of the same renewal clause in each case, if they had satisfied all the conditions laid down, merely on the ground that some were purchasers below the upset price while others to whom renewal is granted were previous years' purchasers at or above the upset price. They contend that there is no reasonable classification and it also has no rational nexus with the object sought to be achieved. They contend that for the purpose of renewal during current year 1981 all the purchasers of the previous year 1980 having the benefit of the same renewal clause who had satisfied the specified conditions are in the same category, irrespective of the price at which they purchased their units in the previous year. On this basis it is contended by Shri V. S. Dabir that the State Government order (Annexure-B) dated 16-1-1981 makes a hostile discrimination which violates the guarantee of equality contained in Article 14 of the Constitution.

13. These petitions are opposed by the State Government only on the ground that previous years' purchasers below the upset price constitute a separate class distinct from the purchasers at or above the upset price and, therefore, such classification does not in-fringe the right of equality contained in Article 14. There is no dispute that but for the fact that the petitioners were previous years' purchasers below the upset price, they too would have been granted renewal, and that the case of such purchasers below the upset price was not even considered for this reason alone. It was also suggested by the learned Government Advocate. Shri S. L. Saxena, that the formula specified in the order (Annexure B) for calculating the renewal vice would cause unjust enrichment to previous Years' purchasers below the upset price since that formula has been made only on the basis of upset price having been raid the previous year.

To this, the reply of Shri Dabir is that a different formula can be prescribed for previous years' purchasers below the upset price to avoid any loss to the State and to equate both categories at purchasers for the purpose of payment of the renewal price for the current year 1981. This can be easily done since it is for the State Government to prescribe the formula for working out the renewal price, which the purchasers have to accept if they want renewal. The counsel for the petitioners at the hearing candidly stated that a different formula to work out the renewal pries to be paid by previous years' purchasers to ensure equality in the renewal price in all cases can be prescribed by the State Government by which the petitioners are willing to be bound.

14. On the rival contentions the only question for our decision is whether the classification made between purchasers of the previous year 1980 having the benefit of the same renewal clause merely on the around that one category had purchased in the previous year below the upset price fixed by the State Government and the other category had paid the upset price or above it and then granting renewal only to the latter category amounts to hostile discrimination prohibited by Article 14 of the Constitution. In other words is the State Government, after conceding the petitioners' claim for renewal on the basis of the renewal clause justified in refusing it only on the ground that in the previous year they had purchased at below the upset price while those to whom the renewal has been granted were previous years' purchasers at or above the upset price It is conceded on behalf of the respondents that the petitioners would have been granted the renewal in case they were previous years' purchasers at or above the upset price. since they had satisfied all other conditions.

15. The basic question is; whether for the purpose of disposal of tendu leaves durum the current year 1981, such a classification between the previous years' purchasers having the benefit of the same renewal clause, which the State Government has decided to act upon, amounts to a reasonable classification which is not hit by Article 14 of the Constitution We do not think it is so for the reasons given hereafter.

16. In Rasbihari Panda v. State of Orissa, AIR 1969 SC 1081 the Question which arose for decision was similar even though a basic fact therein was different as has been rightly pointed out by Shri S. L. Saxena. the learned Government Advocate and that difference led to a different result. All the same, the principle enunciated helps to decide the question before us. That too was a case relating to disposal of tendu leaves in the State of Orissa under a similar power. In that case too the previous years' purchasers had the benefit of a similar renewal clause but the State Government in its ultimate decision which was held invalid by the Supreme Court had given a go by to the renewal clause and thereafter decided to invite tenders for sale of the units only from the previous years' purchasers who had carried out their obligations in the previous year to the Government's satisfaction. That was not a case in which the Stale Government had confined the disposal of the units to the previous years' purchasers acting only on the renewal clause contained in the previous years' contract in their favour. The question, therefore, was whether such a classification which totally shut out the others violated Articles 14 and 19(1)(g) of the Constitution. The decision of the Supreme Court was that without relying on the renewal clause the disposal of units in the subsequent year could nor be confined only to that class of previous years' purchsers who had worked to the satisfaction of the Government shutting out all the others whose rights under Article 14 and Article 19(1)(g) of the Constitution were violated there by.

Rasbiharj's case, therefore, does not justify the State Government's action challenged in the present petitions since the decision is to act on the renewal clause discriminating between the previous years' purchasers only on the basis that persons denied renewal were purchasers below the upset price while those granted renewal were purchasers at or above the upset price in the previous year. The real object was pointed out by the Supreme Court as preventing exploitation of pluckers and growers of tendu leaves, and the securing of the full benefit from the trade to the State. It was pointed out that the classification made must bear a just and resonable relation to this object. Keeping this in view it has to be seen whether the classification made in the present case satisfied this test.

17. The classification made in the present case bears no relation much less a just and reasonable relation to the object of preventing exploitation of pluckers and growers of tendu leaves. No attempt has even been made to justify the act on this basis. Similarly, there is no nexus of the classification made with the object of securing of the full benefit from the trade, to the State. For the purpose of obtaining the same renewal price from previous years' purchasers below the upset price, as would be obtained if they were purchasers at or above the upset price fixed for the unit, a different formula can be laid down to calculate the renewal price required to be paid by them. This will ensure equality between all previous years' purchasers for the purpose of payment of the renewal price and for this the petitioners specifically agree. The State Government cannot create in-equality between persons similarly placed by virtue of the same renewal clause by itself laying down only one formuls based on price paid for calculating the renewal clause and then take advantage of its own action to justify the classification. The object of securing full benefit from the trade, to the State can easily be achieved in this manner by granting renewal also to purchasers below the upset price, once decision to act on the renewal clause has been taken. It is a different matter, if the decision was to grant renewal to none and to sell all such units by inviting tenders from the open market to secure larger benefit for the State as is evident from the much hicher bids obtained in the open market this year for these units. But such a course not having been adopted, no discrimination between previous years' purchasers having equal benefit of the renewal clause can be made.

18. It is too well settled and does not require reference to any authority that 'to pass the test of permissible classification two conditions must be fulfilled, namely, (i) that the classification must be on a difference which distinguishes persons or things that are grouped together from others left out of the group, and (ii) that, that differentia must have a rational relation to the object sought to be achieved.....'

What is necessary is that there must be nexus between the basis of classification and the object sought to be achieved. Unless both these conditions coexist, the classification cannot be upheld as reasonable and is liable to be struck down as violating Article 14 of the Constitution.

19. As already indicated, the two necessary conditions to avoid infringement of Article 14 in the present case are not fulfilled inasmuch as the classification made between the previous years' purchasers merely on the ground that the class to whom renewal has been refused were purchasers below the upset price while the others to whom it has been granted were purchasers at or above the upset price, bears no ratio nal naxus with the object sought to be achieved. For this reason, having decided to act on the renewal clause, no such discrimination could be made refusing renewal only to some merely because they were previous years' purchasers below the upset price. As stated earlier, a different formula for calculating the renewal price payable by this class of purchasers could be laid down to ensure equality in payment of the renewal price.

20. It follows that the State Government's decision contained in its order (Annexure B) dated 16-1-1981 refusing renewal to previous years' purchasers merely on the ground that they were purchasers below the upset price while granting it to the others under the same renewal clause is arbitrary and contravenes Article 14 of the Constitution. It is, therefore, liable to be struck down to that extent only. There is no grievance made against grant of 434 units to M.P. Raiya Vipanan Sangh and such a challenge had already failed earlier in M. P. No. 109 of 1081 decided on 19-3-1981. This is also not a challenge by any new entrant in the field who was not a previous years' purchaser and, therefore, there is no occasion to examine the case from that angle. At the risk of repetition we may point out that these petitions are decided merely on the basis that the State Government having decided to act on the renewal clause this year, could it, thereafter refuse renewal only to some for the only reason indicated.

21. Accordingly these petitions are allowed. The State Government's order annexure 3 dated 18-1-1981 to the extent it refuses renewal only to purchasers of the previous year 1980 below the upset price, who have satisfied all the conditions laid down for this purpose and are willing to accept renewal on the conditions of renewal laid down by the State Government, is declared invalid. The respondents are directed to grant renewal of the aforesaid units for the current year 1981 to the petitioners on satisfaction of all the conditions laid down by the State Government for this purpose including payment of the renewal price to be fixed hereafter for such purchasers. This be done within a reasonable time so as to ensure availability of sufficient time to the petitioners to work their units during the current season which commences from end of April 1881. For calculating the renewal price to be paid by the petitioners and others like them, such a formula has to be prescribed by the respondents which will ensure payment of renewal price by them equal to that payable by the other class namely previous years' purchasers at or above the renewal price. The parties shall bear their own costs. The security amount be refunded to the petitioners.


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