PETITIONER:
NEW BIHAR BIRI LEAVES CO. & ORS.
Vs.
RESPONDENT:
STATE OF BIHAR & ORS.
DATE OF JUDGMENT06/01/1981
BENCH:
SARKARIA, RANJIT SINGH
BENCH:
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]
JUDGMENT:
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 effected 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 quash-
443
ed 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.
444