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Hrudananda Patra and anr. Vs. Revenue Divisional Commissioner Central Division and ors. - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtOrissa High Court
Decided On
Case NumberO.J.C. Nos. 725 and 738 of 1978
Judge
Reported inAIR1979Ori13
ActsConstitution of India - Articles 14, 19 and 19(1)
AppellantHrudananda Patra and anr.
RespondentRevenue Divisional Commissioner Central Division and ors.
Appellant AdvocateG. Rath, ;R.K. Rath, ;N.C. Panigrahi and ;G.S. Sarangi, Advs.
Respondent AdvocateR.C. Ram, Adv. (for No. 4) and ;B.B. Mohanty, Govt. Adv. (for Nos. 1 to 3)
DispositionPetitions allowed
Cases ReferredUnion of India v. Anglo Afghan Agencies
Excerpt:
.....246, are not good law]. - the additional district magistrate, puri thereupon recommended to the higher authorities that the said quarries should be settled with these highest bidders. but when a law creates exclusion of competition or imposes restrictions creating something like a monopoly in somebody to the exclusion of others, the basis on which the said exclusion or restrictions are imposed must be reasonable and the same can be questioned by the court. law is well settled that the state can make a classification for the purpose of achieving particular legislative objects, but the classification must satisfy two conditions -(1) this must be founded on intelligible differentia and (2) the differentia must have a rational relation to the object sought to be achieved. 434 of air)..........of any trade or business. the monopoly contracts in the present case were not in favour of the state government. article 19(6) of the constitution provides a reasonable restriction on the fundamental rights of citizens as contained in article 19(1)(g). if the state obtained a monopoly it would be defensible as a reasonable restriction on the rights of citizens to carry on any business or trade and to ply buses. on the other hand, if the state conferred any mono-poly right on a citizen it would be indefensible and impermissible and would be an infraction of the inviolable provision of the constitution.'the order, setting the lease in favour of opposite party no. 4 without any rational basis but only on the sole basis that the co-operative societies have a right to take the lease if.....
Judgment:

S. Acharya, J.

1. The facts in both these two writ petitions are similar and the orders impugned in both the writ applications are identical. The counsel appearing for the parties in both the cases are the same; facts are similar; the questions of law involved for decision in both these cases are the same; the counsel appearing for the parties advanced only one set of arguments which covers both the cases and they desire that both the cases may be disposed of by one judgment. Accordingly both the cases are hereby disposed of by this one judgment.

2. The Patia stone quarry and the Kalarahang stone quarry were put to public auction on 6-3-78 as per notice (Annexure 3) issued by opposite party No. 3. The petitioner in O.J.C. No. 725/78 was the highest bidder in respect of the Patia stone quarry, and the petitioner in O.J.C. No. 738/78 was the highest bidder in respect of the Kalarahang stone quarry. The petitioners in both the cases deposited 50% of the lease amounts as required under the notice Annexure 3 and being called upon by the concerned authority. The Additional District Magistrate, Puri thereupon recommended to the higher authorities that the said quarries should be settled with these highest bidders. The Tahsildar, Bhubaneswar (opposite party No. 3) in his report (Annex. 6 in both the cases) also reported that the previous lessee, opposite party No. 4, had defaulted and misconducted himself in various ways in complying with the terms and conditions of the lease of the previous year.

In spite of the above facts the Revenue Divisional Commissioner, Central Division, Cuttack (opposite party No. 1) directed that the said two stone quarries be settled with opposite party No. 4, a co-operative society, and not with the petitioners, as can be seen from Annexure 7. Accordingly the said two Sairats have been settled for one year in favour of opposite party No. 4 in spite of the highest bid amounts offered by the petitioners in the auction. While confirming the lease of the said two Sairats in favour of opposite party No. 4 the lease amounts as stated above were directed to be paid in four equal instalments, as can be seen from the order of the Sub-divisional Officer, Bhubaneswar (opposite party No. 2) dated 24-5-78 quoted in paragraph 11 of the counter filed on behalf of opposite parties 1 to 3. The aforesaid orders, settling the Sairats with opposite party No. 4 in preference to the petitioners, are being challenged in these two writ applications.

3. The stand taken by opposite parties 1 to 3 is that the two stone quarries in question are the property of the Government; Government has the exclusive power to dispose of the same or to carry on any trade or business in respect of the same in any manner it thinks fit and proper; the administrative order of the Government in that direction is not justiciable and cannot be questioned in these writ applications; merely because the petitioners were the highest bidders they did not acquire any right to get settlement of the said Sairats as specifically mentioned in Clause (4) of Annexure 3; and that a case of monopoly, as urged by the petitioners, is not made out in settling the Sairats in favour of opposite party No. 4, The writ petitions are contested mainly on the above averments.

4. Opposite party No. 4 filed a separate counter, and at the hearing the learned counsel for opposite party No. 4 merely supported the contentions of the counsel for opposite parties 1 to 3.

5. It is urged by Mr. Rath, the learned counsel for the petitioners, that the basis on which the Sairats have been settled with opposite party No. 4 in preference to the petitioners, in effect amounts to creation of a monopoly in favour of opposite party No. 4 without any law to support the same, and it constitutes an infringement of the fundamental right to trade with the Government guaranteed under Article 19(1)(g) of the Constitution of India; and the exclusion of the petitioners and others similarly placed from getting the benefit of the settlement of Government Sairats on the aforesaid basis is prohibited by Article 14 of the Constitution. In this connection it is urged that the fundamental right to trade with the Government guaranteed under Article 19(1)(g) of the Constitution cannot be taken away or restricted in any manner except by making any law for the purposes enunciated under Clause (6) of that Article, and there is no law supporting the arbitrary and monopolistic order passed in this case. Mr. Rath contends that it is evident from paragraph 5 of the counter of opposite parties 1 to 3 that the orders settling the Sairats with opposite party No. 4 are monopolistic in nature and are therefore liable to be quashed.

6. The word 'monopoly' has not been defined in the Constitution. According to the Shorter Oxford English Dictionary the word 'monopoly' means -- 'exclusive possession of the trade in some commodity; an exclusive privilege (conferred by the sovereign or the State) of selling some commodity or 'trading with a particular place or country; exclusive possession, control or exercise of something.' In Gresham's Comprehensive English Dictionary the meaning of that word is stated as -- 'an exclusive trading privilege; sole right or power of selling something or full command over a sale of it possession or assumption of anything td the exclusion of others.' In Jowitt's Dictionary of English Law 'monopoly' has been explained as 'the exclusive privilege of selling any commodity; a licence or privilege allowed by the Crown, for the sole buying, selling, making, working, and using of anything.' The Constitution of India disfavours monopoly in trade because of the provisions in Article 19(1)(g) and Article 14 of the Constitution. Under our Constitution any citizen has the right to engage in any lawful business or trade or occupation as of right and at his pleasure, subject of course to the power of the State to regulate or restrict any occupation, trade or business on the grounds specified in Clause (6) of Article 19.

The right to carry on any trade, occupation or business can be impaired by the State by a valid law (as it is understood in the wider sense in the Constitution) within the permissible limits prescribed under Clause (6) of Article 19. A restriction which is not authorised by a valid law cannot be saved. If a monopoly is created by law in favour of the State or a Corporation owned or controlled by the State to carry on any trade or business on any particular field to the exclusion of others that cannot be questioned on the ground that it is an infringement of the right guaranteed by Article 19(1)(g). So the State by a valid law can create monopoly in favour of itself or in favour of a Corporation owned or controlled by the State without being called upon to justify its action in court as reasonable. But when a law creates exclusion of competition or imposes restrictions creating something like a monopoly in somebody to the exclusion of others, the basis on which the said exclusion or restrictions are imposed must be reasonable and the same can be questioned by the Court.

A monopoly cannot be created by an administrative order. It can be created only by law made in the interest of the general public or in favour of the State or a corporation owned or controlled by the State, as is evident from Article 19(6) of the Constitution. It is open to the State authorities to give preference to cooperative societies if they are of the opinion that granting the lease to a cooperative society would facilitate the objects of any law in force. Law is well settled that the State can make a classification for the purpose of achieving particular legislative objects, but the classification must satisfy two conditions -- (1) This must be founded on intelligible differentia and (2) the differentia must have a rational relation to the object sought to be achieved.

7. In the present case there is no law creating any special right in favour of the co-operative societies in a matter of this nature. For the purpose of defending the settlement of the Sairats in favour of the co-operative society the concerned authorities seek shelter under the Government instructions contained in letter No. 62388-E.A.-III. 200/64-R dated 25-9-64 from the Secretary to Government (Revenue) to the Board of Revenue, Orissa. In paragraph 5 of the counter filed by opposite parties 1 to 3 by the Assistant Financial Advisor-cum-Under Secretary to the Revenue Divisional Commissioner, Central Division, Cuttack it is, inter alia, stated:--

'5. That the contention of the petitioner that the Government Circular under Annexure-1 is only applicable where a lease is for five years and not otherwise is not correct. Even if the said contention is accepted then the Government Circular dated 25-9-64 would apply to the present case and under the said circular the Co-operative Society if takes part in the bid and is not highest bidder then the chance has to be given to the said society to communicate its acceptance to take the bid on the amount which was the highest bid, and in case the Society agrees, then the sairat has to be settled with it and not with the highest bidder. It is respectfully submitted that whether Annexure 1 is operative or 1964 Circular is operative, in either case the Society has the right to get the lease if it agrees to take it on the amount which was the highest bid.'

Mr. Rath submits that the settlement of the Sairats on the above basis creates a monopoly in favour of the co-operative societies, which is not permitted under Clause (6) of Article 19 and it offends the provisions of Article 19(1)(g) and Article 14 of the Constitution.

8. In paragraph 5 of the said letter from the Secretary to the Government (Revenue) to the Board of Revenue, Orissa under the caption 'Preference to Co-operative Societies in the auction sale', it is inter alia, stated as follows:--

'As already said all Sairats shall normally be settled by public auction. Where a registered Co-operative Society takes part in the bid and is the highest bidder, the sale should be confirmed in favour of such Society. If, however, the society taking part in the bid is not the highest bidder, it should be called upon to state in writing within 7 days from the date of receipt of the communication in that regard if it agrees to take the lease by paying the amount offered by the highest bidder. This statement should always be supported by a resolution of the Society. In case the Society agrees, the Sairat should be settled with it and not with the highest bidder.'

From paragraph 5 of the aforesaid counter quoted above, it is evident that opposite party No. 1, in applying the Government instructions contained in paragraph 5 of the aforesaid letter felt bound to settle the said Sairats in favour of opposite party No. 4 and not with the highest bidders as the said co-operative society (O. P. No. 4) communicated its acceptance to take the Sairats on lease for the highest bid amounts. By the settlement of the Sairats with opposite party No. 4 in the aforesaid basis and manner the petitioners have been actually excluded at the threshold from carrying on trade with the Government, which is prohibited under Article 19(1)(g) read with Article 14 of the Constitution. It is of course true that the Government is free to enter into contract with any party in respect of its property and opposite party No. 1 was not bound to settle the Sairats in favour of the highest bidders. But in preferring some one who was not the highest bidder the concerned authorities cannot adopt a policy of excluding particular persons from entering into the contract with the Government by merely saying that as per the said Government instruction some others have the right to get the lease of the Government land. In this case the authority concerned has settled the Sairats to the exclusion of the petitioners only because he felt that he was bound to do so on the aforesaid Government instruction. Granting the lease on the aforesaid discriminatory basis, without indicating therein that the said grant was in the interest of the general public or would facilitate or advance the object or the purpose of any law in force, has in effect created an illegal monopoly in favour of opposite party No. 4. So the exclusion of the petitioners merely on the aforesaid basis amounted to a discrimination which violated the right guaranteed under Article 14 and has created a monopoly at the threshold in favour of opposite party No. 4 to the exclusion of the highest bidder, thereby violating the provisions of Article 19(1)(g) read with Clause (6) thereof. In this connection reference may be made to the observations made in paragraphs 9 and 10 of the decision reported in AIR 1962 SC 386 (Mannalal Jain v. State of Assam).

In the decision reported in AIR 1971 SC 2068 (State of Rajasthan v. Mohan Lal) it has been held:--

'5. It is manifest that after the Constitution came into force every citizen under Article 19(1)(g) of the Constitution has the right of freedom of trade including the right to ply buses and trucks on the road. Under Article 13, the law has to be in consonance with the Constitution. It has, therefore, to be found out as to whether there is any law by virtue of which the State of Rajasthan could grant or keep alive any monopoly contract. The answer is in the negative. There cannot be any law in violation of the provisions of the Constitution. A monopoly right cannot be conferred on a citizen under the Constitution nor can it be justified under the Constitution.

6. In 1951 there was an amendment of the Constitution whereby Article 19(6) provided that the monopoly rights could be created in favour of the State in respect of any trade or business. The monopoly contracts in the present case were not in favour of the State Government. Article 19(6) of the Constitution provides a reasonable restriction on the fundamental rights of citizens as contained in Article 19(1)(g). If the State obtained a monopoly it would be defensible as a reasonable restriction on the rights of citizens to carry on any business or trade and to ply buses. On the other hand, if the State conferred any mono-poly right on a citizen it would be indefensible and impermissible and would be an infraction of the inviolable provision of the Constitution.'

The order, setting the lease in favour of opposite party No. 4 without any rational basis but only on the sole basis that the co-operative societies have a right to take the lease if they offer the highest bid, had the effect of shutting out all persons other than the co-operative societies, thereby depriving them of the equality of opportunity in the matter of public contracts. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity applies also to matters of public contracts. Though the State has the right to trade, it has a corresponding duty to observe equality as provided under Article 14 of the Constitution. In this connection, the observations of their Lordships of the Supreme Court in paragraphs 9 and 10 of the decision reported in AIR 1977 SC 1496 (Radhakrishna Agarwal v. State of Bihar) and in paragraph 12 of the decision reported in AIR 1975 SC 266 (E.E. and Chemicals' Ltd. v. State of West Bengal) may be seen.

In Clause (4) of Annexure 3 (the auction sale notice) it is stated that the authorities are not bound to accept the highest bid. So the highest bidder does not acquire a vested right to get settlement of the Sairats. It is, therefore, open to the authorities not to settle the Sairats at all with anybody. They can, under Article 298 of the Constitution, also settle the same with any of the other bidders including the co-operative society or any other person. But in so doing they cannot act arbitrarily or capriciously, nor can they thereby create a monopoly in favour of anybody. In exercising the executive power of the Government, it is the duty of the State to observe fairness and impartiality as far as possible, and this power is to be exercised to facilitate the object of any law or the purpose for which the lease is granted or in the interest of the State or the general public. From Annexure 7 and the counter filed by opposite parties 1 to 3 it is quite evident that the settlement of the lease with opposite party No. 4 was not on any such consideration. The highest bidders, i.e. the petitioners, have not been granted the lease merely on the sole reason and basis that the co-operative society has the right under the said administrative instructions to get the lease of the Sairats. Thus by granting the lease in favour of the co-operative society, opposite party No. 4, a monopoly in favour of the co-operative society has been created, and the discrimination made on the basis of the administrative instructions does not indicate that it was made on the basis of any intelligible differentia having a rational relation to the object sought to be achieved or in the interest of the general public. A monopoly created by an administrative instruction issued by the Assam Government in the matter of granting licence for dealing in rice and paddy in favour of a particular co-operative society was struck down by the Supreme Court in the case reported in AIR 1962 SC 386 (Mannalal Jain v. State of Assam) as the grant of the said licence created a monopoly in favour of a particular co-operative society.

9. The learned Government Advocate contended that the authorities by rejecting the highest bidders and granting the lease in favour of opposite party No. 4 merely performed an executive function, and so the correctness of their executive decision is not open to judicial review. The decision reported in AIR 1972 SC 1816 (State of Orissa v. Harinarayan) cited in support of the above contention, is distinguishable on facts and it does not squarely apply to this case. In that case the Government supported their order on the provisions of Sections 22 and 29 of the Excise Act. The validity of these two sections was not challenged in that case. As the impugned order was passed under Sections 22 and 29 of the Excise Act, whose validity was not challenged, their Lordships held that the power that the Government reserved for itself under Clause (6) of its order is nothing more than what was conferred on it by the legislature under Sections 22 and 29 of the Excise Act. Accordingly it was not possible to challenge the validity of Section 29 itself. It has been further held that even apart from the power conferred on the Government under Sections 22 and 29, the power retained under Clause (6) of its order was not unconstitutional. Thus it is obvious that the said decision cannot be called in aid for this case.

In Raghunandan Panda's case reported in AIR 1975 SC 434 their Lordships approved the following observation made in Union of India v. K. P. Joseph (AIR 1973 SC 303) (at p. 434 of AIR) :--

'Generally speaking, an administrative order confers no justiciable right, but this rule, like all other general rules, is subject to exceptions,'

Having approved the above observations their Lordships in Raghunandan Panda's case held:--

'.....No person has a vested right to get any lease of the Government land; of course, he has got a right to get his application for lease disposed of fairly and not arbitrarily. If, therefore, it could be held in favour of the appellant that his claim for lease of the plot in question was capriciously, arbitrarily and unfairly rejected and that the lease granted to respondent No. 3 was arbitrary and unfair a case could be found in his favour .....'

In Radhakrishna Agarwal's case (AIR 1977 SC 1496) it has been held that Article 14 of the Constitution imports a limitation or imposes an obligation upon the State's executive power under Article 298 of the Constitution. All constitutional powers carry corresponding obligations with them.

In Erusian Equipment and Chemicals' case (AIR 1975 SC 266 at page 268) it has been held:--

'Under Article 298 of the Constitution the executive powers of the Union and the State shall extend to the carrying on of any trade and to the acquisition, holding and disposal of property and the making of contracts for any purpose. The State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade. The State has therefore the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. The order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contracts xxxxx When the State acts to the prejudice of a person it has to be supported by legality.'

10. On the above considerations I am of the opinion that the orders settling the lease of the Sairats in favour of opposite party No. 4 in preference to or to the exclusion of the petitioners are illegal, arbitrary and unconstitutional and are therefore liable to be set aside.

11. Apart from the above, it is also seen that Annexure 3 does not contain any stipulation that the quarries shall be settled with a co-operative society if such a society gives an intimation within 7 days that it is agreeable to pay the amount offered by the highest bidder. If the authorities concerned were actually peremptorily bound to grant the lease in favour of a co-operative society, as stated in the administrative instruction and the counter of opposite parties 1 to 3, then they should have mentioned the same in the auction notice so that intending bidders would have participated in the auction with the knowledge of the said stipulation or restriction. The Government and/or their agencies in exercise of their power, particularly in relation to the general public, must act very fairly. Public authorities should not act in derogation of their own representations, for that will affect the grace and the sanctity of the authority on which the government is founded.

In the present case the petitioners not only took part in the auction of the Sairats in question but also deposited 50% of the highest bid amount as required in Annexure 3, the auction notice. Thus on the representations made by the public authorities under Annexure 3 the petitioners acted to their detriment, and at that time they did not know that all their efforts in that direction would be reduced to nothing as soon as a co-operative society came into the field at a later stage. In the Union of India v. Anglo Afghan Agencies (AIR 1968 SC 718) their Lordships observed (at p. 723):--

'10. xx xx xx xx xxWe are unable to accede to the contention that the executive necessity releases the Government from honouring its solemn promises relying on which citizens have acted to their detriment. Under our constitutional set-up, no person may be deprived of his right or liberty except in due course of and by authority of law : if a member of the executive seeks to deprive a citizen of his right or liberty otherwise than in exercise of power derived from the law -- common or statute -- the courts will be competent to, and indeed would be bound to, protect the rights of the aggrieved citizen.'

On the above consideration also the authorities were not justified in settling the lease in favour of opposite party No. 4, in preference to and exclusion of the petitioners.

12. Mr. Rath, the learned counsel for the petitioners has also contended that opposite party No. 4 is not entitled to get settlement of the Sairats even under the aforesaid Government instruction because of its misconduct in the previous year, non-acceptance of the terms and conditions of settlement as stated in Annexure 3, as can be seen from the resolution passed by the society (Annexure A to the counter filed by opposite parties 1 to 3); and as the offer made by opposite party No. 4 is in the nature of a counter offer. The decision on these questions would depend on disputed facts alleged by the parties on these issues and so I would better not decide these matters here.

13. For reasons stated above, the orders in both the cases settling the Sairats in question in favour of opposite party No. 4, in preference to and exclusion of the petitioners are quashed. The petitioners have no vested right to get settlement of the Sairats merely because they are the highest bidders. The appropriate authorities, on fresh consideration, shall pass necessary orders in accordance with law for the settlement of these two Sairats.

14. Both the writ applications are accordingly allowed. The petitioner in each case is entitled to a hearing fee of Rs. 100/-.

Mohanti, J.

15. I agree.


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