{"id":151127,"date":"1980-05-09T00:00:00","date_gmt":"1980-05-08T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/kasturi-lal-lakshmi-reddy-vs-state-of-jammu-and-kashmir-on-9-may-1980"},"modified":"2016-02-13T17:53:49","modified_gmt":"2016-02-13T12:23:49","slug":"kasturi-lal-lakshmi-reddy-vs-state-of-jammu-and-kashmir-on-9-may-1980","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/kasturi-lal-lakshmi-reddy-vs-state-of-jammu-and-kashmir-on-9-may-1980","title":{"rendered":"Kasturi Lal Lakshmi Reddy vs State Of Jammu And Kashmir & … on 9 May, 1980"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Kasturi Lal Lakshmi Reddy vs State Of Jammu And Kashmir & … on 9 May, 1980<\/div>\n
Equivalent citations: 1980 AIR 1992, \t\t 1980 SCR (3)1338<\/div>\n
Author: P Bhagwati<\/div>\n
Bench: Bhagwati, P.N.<\/div>\n
           PETITIONER:\nKASTURI LAL LAKSHMI REDDY\n\n\tVs.\n\nRESPONDENT:\nSTATE OF JAMMU AND KASHMIR & ANOTHER\n\nDATE OF JUDGMENT09\/05\/1980\n\nBENCH:\nBHAGWATI, P.N.\nBENCH:\nBHAGWATI, P.N.\nTULZAPURKAR, V.D.\nPATHAK, R.S.\n\nCITATION:\n 1980 AIR 1992\t\t  1980 SCR  (3)1338\n 1980 SCC  (4)\t 1\n CITATOR INFO :\n D\t    1984 SC 415\t (6)\n F\t    1985 SC1147\t (12)\n R\t    1986 SC 180\t (39)\n RF\t    1986 SC1003\t (1,6,7)\n R\t    1987 SC 251\t (37)\n R\t    1987 SC 558\t (15)\n R\t    1987 SC1086\t (28)\n R\t    1987 SC1109\t (30,36)\n RF\t    1988 SC 157\t (8,10)\n R\t    1988 SC1989\t (12)\n F\t    1989 SC1629\t (4,14)\n F\t    1989 SC1642\t (25,26,27)\n RF\t    1991 SC 537\t (29)\n RF\t    1991 SC1153\t (12)\n RF\t    1992 SC   1\t (132)\n\n\nACT:\n     Government contracts-Limitations  on the  Government to\ngrant\tcontracts-Test\t  of\treasonableness-Concept\t  of\nreasonableness and  concept of\tpublic interest,  explained-\nArticles 14 & 19 of the Constitution.\n\n\n\nHEADNOTE:\n     Resin is a forest produce extracted from certain pieces\nof trees  popularly known  as Chir  trees.  The\t process  of\nextraction is  called tapping,\tinvolves several  steps, and\nrequires  employment   of  skilled  labour  and\t involves  a\nconsiderable amount  of expenditure.  The State\t of Jammu  &\nKashmir started\t tapping operation  in respect\tof its\tChir\ntrees since  about  1973  by  giving  contracts\t to  private\nparties\t for   extraction  and\t collection  of\t resin.\t The\ncontracts were\tof three  types; one  was contract  on\twage\nbasis commonly\tknown as  wage contract\t which was  given by\nauctioning the\tblazes to  the person  who was\tprepared  to\nundertake the  work of extraction and collection of resin at\nthe lowest  rates of labour charges and in such contract the\nentire resin extracted and collected by the contractor would\nbelong to  the State  and the  contractor would\t be entitled\nonly to\t the wage  or  labour  charges\tfor  extraction\t and\ncollection of  resin; the second type of contract was on the\nbasis of  royalty without load and under this contract which\nwas given  by auction stipulating for payment of royalty per\nblaze, the  entire resin  extracted  and  collected  by\t the\ncontractor would  belong to him and he would be free to sell\nor process it as he likes; the third type of contract was on\nthe basis of royalty with load and under this contract which\nwas also given by auction, the royalty was payable per blaze\nand out of resin extracted and collected by the companies, a\ncertain part  would have  to be\t surrendered to\t the  State,\nwhile the balance would remain with the contractor.\n     Every year,  the State  auctioned\tthe  blazes  in\t the\ndifferent forests within its territory and about 40 per cent\nof the\tforests were  given on royalty basis, some with load\nand some  without load,\t while the  balance of\tabout 60 per\ncent  were  given  on  wage  contract  basis.  Most  of\t the\ncontractors  bidding   at  the\tauction\t were  having  their\nfactories outside  Jammu &  Kashmir either  in\tU.P.  or  in\nPunjab. The  State in  furtherance of  its policy  to  bring\nabout rapid  industrialisation decided\tthat from  the\tyear\n1979-80 onwards\t the resin extracted from its forests should\nnot be allowed to be exported outside the territories of the\nState and  should be  utilised only  by\t industries  set  up\nwithin the State. The State, in fact, entered into contracts\nwith  three  manufacturers,  namely,  Prabhat  Turpentine  &\nSynthetics Pvt.\t Ltd., Dujedwala  Resin and  Turpentine\t Co.\nLtd. and Pine Chemicals Ltd. Under these contracts the three\nmanufacturers agreed  to set  up factories  in the State for\nthe manufacture\t of resin  turpentine and  other derivatives\nand the\t State agreed to make available to them respectively\nan ensured  supply of  4000, 3500  and 8000 metric tonnes of\nresin per  year. The  State had\t also commitments  to supply\nresin to  its own concerns namely, J&K Industries Ltd. which\nwas  running   a  factory   for\t manufacture  of  resin\t and\nturpentine as  also to\tvarious small  scale units which are\nset up in the State. Since\n1339\nthe total  requirement of  these 24,000 metric tonnes always\nfell short it was decided at a meeting held on 9th December,\n1976 of\t the Forest officials that the increase of target of\nproduction could  be achieved  only through  replacement  of\nroyalty contracts  by wage  contracts wherever\tpossible and\nhence in  future blazes should be auctioned for tapping only\non wage contract basis.\n     There were certain forests in Resin and Ramban Division\nof the\tState which  was out  of access\t on account of their\ndistance from  the roads  and so  were some  forests in\t the\nPoonch Division\t near the  line of  actual control and there\nwere 1,28,856  blazes  situated\t in  the  lower\t regions  of\ninaccessible forests  and no  contractors could be found for\ntaking tapping\tcontracts  even\t on  the  basis\t of  royalty\nwithout load  for  blazes  in  the  higher  regions  of\t the\ninaccessible areas.  In the  Rasi Division  out of  6,08,115\nblazes which  were attempted  to be given for tapping in the\nyear 1976-77  on royalty  contract basis  without load, only\n1,28,856 blazes\t were taken  by one Prem Kumar Sood and that\ntoo on royalty of only Rs. 2.55 per blaze as against royalty\nof about  Rs. 6\t per blaze  obtained by\t the State  in other\ninaccessible areas  by giving contract on royalty basis with\nload of\t 3 Kg.\tper blaze.  For the year 1978-79 no one came\nforward to  make a  bid for  taking  the  contract  even  on\nroyalty basis without load, with the result that practically\nno tapping  was done  from  these  6,08,115  blazes  in\t the\nforests of  the Rasi  division upto 1979-80. There were also\nsome new  blazes marked\t in the forests of the Rasi division\nfor the year 1979-80 and out of them 4,20,340 blazes were in\nareas which were inaccessible on account of their being at a\ndistance of  8 to 40 kilometers from the road side. Even out\nof the\told 6,08,115  there were  3,10,604 blazes which were\nsituated in  the same category of inaccessible areas. So far\nas the\tforests in  the Ramban\tDivision are concerned there\nwere 1,24,400 blazes which were equally inaccessible \"due to\nlong lead up to coupe boundaries and transit depots\" and the\nposition in  regard to\t3,30,000  blazes  which\t were  under\ntapping in  Poonch Division  was also similar to that of the\ninaccessible areas  in Rasi  and Ramban\t Division  with\t the\nadditional handicap  of their  being situated along the line\nof actual  control. There  were thus  in all about 11,85,414\nblazes in  the Rasi,  Ramban and  Poonch Division which were\ninaccessible areas  and having\tregard to  the high  cost of\nextraction and\tcollection of  resin as also the scarcity of\ntrained labour\tin those  areas it  was not possible to give\nout those blazes by auction on wage contract basis. The past\nexperience showed  that even on the basis of royalty without\nload contractors  were not  forthcoming for taking contracts\nin respect  of blazes  in the inaccessible areas of the Rasi\nDivision and  giving out of the aforesaid blazes in the Rasi\nRamban and  Poonch Division  on\t wage  contract\t basis\twas,\ntherefore,  almost  an\timpossible  proposition.  The  Chief\nConservator of Forests and other Forest Officers accordingly\ndecided at  the meeting\t held on December 9, 1978 that those\nblazes could  not be  tapped through  wage contract  because\n\"apart from  the total\tnon-availability of  local labour in\nthese areas  cost of production due to long lead up to coupe\nboundaries and\ttransit depots would be prohibitive\" and all\nsuch areas  should,  therefore,\t be  excluded  from  tapping\nthrough wage  contract. These decisions taken at the meeting\non 9th December, 1978 were confirmed at a subsequent meeting\nwhich  took   place  between  Forest  Minister,\t the  Forest\nSecretary, the\tChief Conservative  Forest Officer and other\nForest Officers\t on 26th  December,  1978.  It\twas  further\ndecided in  this  meeting  that\t the  \"departmental  tapping\nthrough wage  contract should be confined to accessible Chir\nforests\"  only\tand  so\t far  as  11,85,414  blazes  in\t the\ninaccessible areas  of the  Rasi, Ramban and Poonch Division\nare concerned the consensus was that \"these blazes should be\nallotted to some private party\n1340\nas procurement of resin from them through wage contracts was\nnot feasible  being difficult and costly\" and \"the financial\nstatus and experience in extraction of resin from forest and\nits distillation  in the factory should be decisive factors\"\nin  regard   to\t such\tallotment.  Therefore,\t the  second\nrespondent who\thad earlier  addressed a  letter dated\t15th\nApril, 1978  to the  State Government  offering to  set up a\nfactory for  manufacture of  resin turpentine  oil and other\nderivatives in\tthe State with the latest know-how under the\nsupervision of the State Government and seeking allotment of\n10,000 metric  tonnes of resin annually for the purpose was,\nby an  Order of the State Government dated 27th April, 1979,\nsanctioned  allotment\tof  11.85   lacs   blazes   in\t the\ninaccessible areas  of Rasi, Ramban and Poonch Divisions for\na period  of 10 years on the terms and conditions set out in\nthe order.\n     The petitioners,  thereupon challenged  this order made\nby the State Government under Article 32 of the Constitution\non the\tgrounds, namely,  (a) that  the order  is arbitrary,\nmala fide  and not  in public  interest, inasmuch  as a huge\nbenefit has  been conferred  on the  2nd respondents  at the\ncost of\t the State; (b) the order creates monopoly in favour\nof the 2nd respondent who is a private party and constitutes\nunreasonable restriction  on the right of the petitioners to\ncarry on  tapping contract  business under  Art. 19(1)(g) of\nthe Constitution; and (c) the State has acted arbitrarily in\nselecting the  2nd respondent for awarding tapping contract,\nwithout affording  any opportunity to others to complete for\nobtaining such\tcontract and this action of the State is not\nbased  on   any\t rational  or  relevant\t principle  and\t is,\ntherefore, violative  of Art. 14 of the Constitution as also\nof the\trule of\t administrative Law which inhibits arbitrary\naction by the State.\n     Dismissing the petitions, the Court\n^\n     HELD: (1)\tWith the  growth of  the welfare  state, new\nforms of  property in  the shape  of Government\t largess are\ndeveloping, since  the Government  is increasingly  assuming\nthe role  of regulator\tand dispenser of social services and\nprovider of  a large  number  of  benefits  including  jobs,\ncontracts, licences,  quotas, mineral  rights etc.  There is\nincreasing  expansion\tof  the\t  magnitude  and   range  of\ngovernmental functions,\t as we\tmove closer  to the  welfare\nstate, and  the result\tis that\t more and more of our wealth\nconsists of these new forms of property. Some of these forms\nof wealth  may be  in the  nature of  privilege. The law has\nhowever not  been slow\tto recognise  the importance of this\nnew kind  of wealth  and  the  need  to\t protect  individual\ninterest in  it and  with that end in view, it has developed\nnew  forms  of\tprotection.  Some  interests  in  Government\nlargess,  formerly   regarded  as   privileges,\t have\tbeen\nrecognised as  rights, while  others have  been given  legal\nprotection not\tonly by\t forging procedural  safeguards\t but\nalso  by  confining,  structuring  and\tchecking  Government\ndiscretion in  the matter of grant of such largess. [1354 F-\nH, 1355 A]\n     The discretion  of the  Government is  not unlimited in\nthat the  Government cannot  give largess  in its  arbitrary\ndiscretion or  at its  sweet will  or on  such terms  as  it\nchooses\t in   its  absolute   discretion.  There   are\t two\nlimitations imposed  by law  which structure and control the\ndiscretion of the Government in this behalf. The first is in\nregard to  the terms on which largess may be granted and the\nother, in  regard to  the persons  who may  be recipients of\nsuch largess.\n[1355 A-B]\n     So far  as the  first limitation is concerned, it flows\ndirectly from  the thesis that, unlike a private individual,\nthe State cannot act as it pleases in the matter\n1341\nof giving  largess. Though  ordinarily a  private individual\nwould be  guided by  economic considerations of self-gain in\nany action  taken by him, it is always open to him under the\nlaw to\tact contrary  to  his  self-interest  or  to  oblige\nanother in  entering into  a contract  or dealing  with\t his\nproperty. But  the Government is not free to act as it likes\nin granting  largess such  as awarding a contract or selling\nor leasing  out its  property. Whatever be its activity, the\nGovernment is  still  the  Government  and  is,\t subject  to\nrestraints inherent in its position in a democratic society.\nThe constitutional  power conferred on the Government cannot\nbe exercised  by it  arbitrarily or  capriciously or  in  an\nunprincipled manner;  it has  to be exercised for the public\ngood. Every  activity of the Government has a public element\nin it  and it  must therefore,\tbe informed  with reason and\nguided\tby  public  interest.  Every  action  taken  by\t the\nGovernment must be in public interest; the Government cannot\nact arbitrarily\t and without  reason and  if  it  does,\t its\naction would  be liable to be invalidated. If the Government\nawards a  contract or leases out or otherwise deals with its\nproperty or  grants any other largess, it would be liable to\nbe  tested   for  its\tvalidity  on   the  touch-stone\t  of\nreasonableness and  public  interest  and  if  it  fails  to\nsatisfy\t either\t test,\tit  would  be  unconstitutional\t and\ninvalid. [1355 B-F]\n     Ramana Dayaram  Shetty  v.\t The  International  Airport\nAuthority  of\tIndia  &  Ors.<\/a>\t[1979]\t3  S.  C.  R.  1014,\nreiterated.\n     (2)  In   forming\this   own  conception\tof  what  is\nreasonable, in\tall the circumstances of a given case, it is\ninevitable that\t the social  philosophy\t and  the  scale  of\nvalues of  the judge  participating in\tthe decision,  would\nplay  an   important  part,   but  even\t  so,  the  test  of\nreasonableness is  not a  wholly  subjective  test  and\t its\ncontours are  fairly  indicated\t by  the  Constitution.\t The\nconcept\t of  reasonableness  in\t fact  pervades\t the  entire\nconstitutional scheme.\tThe  requirement  of  reasonableness\nruns like  a golden  thread through  the  entire  fabric  of\nfundamental rights  and, as  several decisions of this Court\nshow, this  concept of\treasonableness\tfinds  its  positive\nmanifestation and  expression in  the lofty  ideal of social\nand  economic\tjustice\t which\tinspires  and  animates\t the\nDirective Principles. Article 14 strikes at arbitrariness in\nState action  and since\t the principle of reasonableness and\nrationality, which  is legally as well as philosophically an\nessential  element  of\tequality  or  non-arbitrariness,  is\nprojected  by  this  article,  it  must\t characterise  every\ngovernmental action,  whether it  be under  the authority of\nlaw or in exercise of executive power without making of law.\nSo also\t the concept  of  reasonableness  runs\tthrough\t the\ntotality of  Art. 19  and requires  that restrictions on the\nfreedoms of  the citizens,  in order to be permissible, must\nat the\tleast be  reasonable. Similarly\t Art. 21 in the full\nplenitude of  its activist magnitude as discovered by Maneka\nGandhi's case,\tinsists that no one shall be deprived of his\nlife or personal liberty except in accordance with procedure\nestablished by\tlaw and\t such procedure\t must be reasonable,\nfair and just.\n[1355 G-H, 1356 A-D]\n     State of  Madras v.  V. G.\t Rao<\/a> [1952]  SCR 597; Maneka\nGandhi v.  Union of India<\/a> [1978] 2 SCR 621; E. P. Royappa v.\nState of Tamil Nadu<\/a> [1974] 2 SCR 348 referred to.\n     (3) The  Directive Principles concretise and give shape\nto the\tconcept of  reasonableness envisaged in Articles 14,\n19 and\t21 and\tother Articles\tenumerating the\t fundamental\nrights. By defining the national aims and the constitutional\ngoals,\tthey   set  forth   the\t standards   or\t  norms\t  of\nreasonableness which  must guide  and  animate\tgovernmental\naction. Any action taken by the Government\n1342\nwith a\tview to\t giving effect\tto any\tone or\tmore of\t the\nDirective  Principles\twould  ordinarily,  subject  to\t any\nconstitutional or  legal  inhibitions  or  other  overriding\nconsiderations, qualify\t for being  regarded as\t reasonable,\nwhile an  action which\tis inconsistent with or runs counter\nto a  Directive Principle  would incur the reproach of being\nunreasonable. [1356 D-F]\n     (4) The  concept of  public interest  must\t as  far  as\npossible  receive   its\t orientation   from  the   Directive\nPrinciples.  What   according  to   the\t  founding   fathers\nconstitutes the\t plainest requirement  of public interest is\nset out\t in the\t Directive Principles  and they\t embody\t par\nexcellence the\tconstitutional concept\tof public  interest.\nIf, therefore  any  governmental  action  is  calculated  to\nimplement or  give effect to a Directive Principle, it would\nordinarily, subject  to any other overriding considerations,\nbe informed with public interest. [1356 A-H, 1357 A]\n     (5) Where\tany governmental action fails to satisfy the\ntest of\t reasonableness and  public interest and is found to\nbe wanting  in the qualities of reasonableness or lacking in\nthe element  of public\tinterest, it  would be\tliable to be\nstruck down  as invalid.  It  must  follow  as\ta  necessary\ncorollary from\tthis proposition  that the Government cannot\nact in\ta manner  which would benefit a private party at the\ncost of the State; such an action would be both unreasonable\nand contrary  to public interest. The Government, therefore,\ncannot, for  example, give  a contract\tor sell or lease-out\nits property  for a consideration less than the highest that\ncan be\tobtained for  it, unless  of course  there are other\nconsiderations which  render it\t reasonable  and  in  public\ninterest to  do so.  Such considerations  may be  that\tsome\nDirective Principle  is sought to be advanced or implemented\nor that\t the contract  or the  property is  given not with a\nview, to earning revenue but for the purpose of carrying out\na welfare  scheme for  the benefit  of a particular group or\nsection of  people deserving  it or  that the person who has\noffered a  higher consideration\t is not\t otherwise fit to be\ngiven the contract at the property. These considerations are\nreferred to only illustratively for there may be an infinite\nvariety of  considerations which  may have  to be taken into\naccount by the Government in formulating its policies and it\nis on  a total\tevaluation of  various considerations  which\nhave weighed  with the\tGovernment in  taking a\t particulars\naction, that  the Court\t would have  to decide\twhether\t the\naction\tof  the\t Government  is\t reasonable  and  in  public\ninterest. [1357 A-E]\n     But one  basic principle  which must guide the Court in\narriving at its determination on this question is that there\nis always  a  presumption  that\t the  Government  action  is\nreasonable and\tin public  interest and\t it is for the party\nchallenging its\t validity to  show that\t it  is\t wanting  in\nreasonableness or is not informed with public interest. This\nburden is  a heavy  one and  it has  to be discharged to the\nsatisfaction of\t the Court  by proper and adequate material.\nThe Court cannot lightly assume that the action taken by the\nGovernment  is\t unreasonable  or  without  public  interest\nbecause, there\tare a  large number of policy considerations\nwhich must  necessarily weigh  with the Government in taking\naction\tand  therefore\tthe  Court  would  not\tstrike\tdown\ngovernmental action  as invalid on this ground, unless it is\nclearly satisfied  that the action is unreasonable or not in\npublic interest.  But where  it is so satisfied, it would be\nthe plainest  duty of  the Court  under the  Constitution to\ninvalidate the\tgovernmental action. This is one of the most\nimportant function  of the  Court and  also one\t of the most\nessential for preservation of the rule of law. [1357 E-H]\n1343\n     It is imperative in a democracy governed by the rule of\nlaw that  governmental action must be kept within the limits\nof the law and if there is any transgression, the Court must\nbe ready  to condemn  it.  It  is  a  matter  of  historical\nexperience that\t there is  a tendency in every government to\nassume more  and more powers and since it is not an uncommon\nphenomenon in  many countries  that the legislative check is\ngetting diluted,  it is\t left to the Court as the only other\nreviewing   authority\tunder\tthe   Constitution   to\t  be\nincreasingly vigilant  to ensure observance with the rule of\nlaw and\t in this  task, the  Court must not finch or falter.\nThis ground  of invalidity,  namely, that  the\tgovernmental\naction is  unreasonable or  lacking the\t quality  of  public\ninterest, is  different from  that of  mala fides  though it\nmay, in\t a given case, furnish evidence of mala fides. [1358\nA-C]\n     (6) The  second limitation\t on the\t discretion  of\t the\nGovernment in  grant of\t largess is in regard to the persons\nto whom\t such largess  may be granted. The Government is not\nfree  like   an\t ordinary   individual,\t in   selecting\t the\nrecipients for its largess and it cannot choose to deal with\nany  person  it\t pleases  in  its  absolute  and  unfettered\ndiscretion.  The  law  is  now\twell  established  that\t the\nGovernment need\t not deal with anyone, but if it does so, it\nmust do\t so fairly without discrimination and without unfair\nprocedure. [1358 C-E]\n     Where  the\t Government  is\t dealing  with\tthe  public,\nwhether by  way of giving jobs or entering into contracts or\ngranting other\tforms of  largess, the Government cannot act\narbitrarily  at\t  its  sweet   will  and,   like  a  private\nindividual, deal  with any person it pleases, but its action\nmust be\t in conformity\twith some  standard or norm which is\nnot arbitrary,\tirrational or  irrelevant. The\tgovernmental\naction must  not be  arbitrary or  capricious, but  must  be\nbased on  some principle  which meets the test of reason and\nrelevance. [1358 B]\n     In the instant case;\n     A.\t The   impugned\t order\t cannot\t be   said   to\t  be\ndisadvantageous to  the State  or in  any way  favouring the\nsecond respondents at the cost of the State. [1363 B]\n     (i) It was not a tapping contract simpliciter which was\nintended to  be given  to the  second respondents. The whole\nobject of  the impugned\t order was  to make  available\t3500\nmetric tonnes  of resin\t to the\t second respondents  for the\npurpose of  running the\t factory to be set up by them. [1361\nB, E]\n     (ii) The  advantage to the State was that a new factory\nfor  manufacture   of  resin,\tturpentine  oil\t  and  other\nderivatives would  come up  within its\tterritories offering\nmore job  opportunities to  the State  and increasing  their\nprosperity and augmenting the State revenues and in addition\nthe State  would be assured of a definite supply of at least\n1500 metric tonnes of resin for itself without any financial\ninvolvement or\trisk and  with this  additional quantity  of\nresin available\t to it,\t it would  be able to set up another\nfactory creating more employment opportunities. [1361 E-G]\n     (iii) The\tState would  be able to secure extraction of\nresin from  the inaccessible areas on the best possible term\ninstead of allowing them to remain unexploited or given over\nat ridiculously low royalty. [1361 E-H]\n     (iv) No  huge  benefit  was  conferred  on\t the  second\nrespondents at\tthe cost  of the  State. The  terms  of\t the\ncontract made it clear that the second respon-\n1344\ndents would  have to  extract at least 5000 metric tonnes of\nresin from  the blazes\tallotted to  them  in  order  to  be\nentitled to retain 3500 metric tonnes. [1362 A-B]\n     (v) Under\tthe impugned  order the State would get 1500\nmetric tonnes  of resin\t at the rate of Rs. 114\/-per quintal\nwhile the second respondent would have to pay at the rate of\nRs. 474\/-  per quintal for the balance of 3500 metric tonnes\nretained by them. Obviously, a large benefit would accrue to\nthe State under the impugned order. If the State were to get\nthe blazes  in these  inaccessible areas tapped through wage\ncontract, the  minimum cost  would be Rs. 175\/- per quintal,\nwithout taking\tinto account  the additional  expenditure on\naccount of  interest, but under the impugned order the State\nwould get  1500 metric\ttonnes of resin at a greatly reduced\nrate of\t Rs. 114\/-  per quintal\t without any risk or hazard.\nThe State would also receive for 3500 metric tonnes of resin\nretained by  the second\t respondent price  or royalty at the\nrate of\t Rs. 474\/-  per quintal\t which would  be much higher\nthan the  rate of  Rs. 260\/-  per quintal at which the State\nwas allotting resin to medium scale industrial units and the\nrate of Rs. 320\/-per quintal at which it was allotting resin\nof small scale units within the State. [1362 G-H, 1363 A-B]\n     B. The  impugned order  neither created any monopoly in\nfavour of  the second  respondent nor  imposed\tunreasonable\nrestriction on\tthe right  of the  petitioner  to  carry  on\ntapping business under Article 19(1)(g). [1364 D]\n     (i) The impugned order did not hand over the tapping of\nthe entire  forest area\t in the State exclusively to the 2nd\nrespondent so  as to  deny the\topportunity of\ttapping\t any\nforest areas  to the  petitioner. What\twas done  under\t the\nimpugned order\twas merely  to allot 11,85,414 blazes in the\ninaccessible areas  of Rasi,  Ramban and Poonch divisions to\nthe 2nd\t respondent so\tthat the  respondent could  have  an\nassured supply\tof 3500\t metric\t tonnes\t of  resin  for\t the\npurpose of  feeding the\t factory to be set up by them in the\nState and  a large  number of  blazes amounting\t to about 60\nlacks in other forest areas of the State were left available\nfor tapping by the petitioners and other forest contractors.\n[1364 D-G]\n     (ii) The  petitioner and other forest contractors could\nbid for\t wage contract\tin respect of the other blazes which\nwere more than five times in number than the blazes allotted\nto the\tsecond respondent.  The petitioners in writ petition\n481  of\t  1979,\t in  fact,  obtained  a\t wage  contract\t for\nextraction of  resin from  an easily  accessible  forest  in\nRajouri Division  for the aggregate sum of Rs. 2,80,250\/- in\nthe year  1979-80 and though it is true that the petitioners\nin writ petition No. 482\/79 did not obtain any wage contract\nfor tapping in this year, it was not because blazes were not\navailable for  tapping, but  because the  petitioner did not\nget their registration renewed. [1364 F-H]\n     C. Neither\t the impugned  order in favour of the second\nrespondents could  be said to be arbitrary and unreasonable.\n[1365 A]\n     (i)  The\tState  was   not  unjustified  in  excluding\n11,85,414 blazes situated in the inaccessible areas of Rasi,\nRamban and  Poonch divisions  from the\tauctions, since\t the\npast experience\t showed that  even on  the basis  of royalty\nwithout load,  it was  difficult to  attract bidders and the\nmaximum that  could be\tobtained, and  that too\t only in one\nsolitary year,\twas Rs.\t 2-55 per  blaze without load, which\nwas an absurdly low return and it was, therefore, felt quite\n1345\n     justifiably, that\tit would  be futile to include these\nblazes in  the auctions\t for tapping on wage contract bases.\nThe State  also could  not award  a contract simpliciter for\ntapping on the basis of royalty with or without load because\nas  a\tmatter\tof   policy,  with  a  view  to\t encouraging\nindustrialisation, the\tState  did  not\t want  resin  to  go\noutside its  territories but  wanted it\t to be used only for\nthe purpose  of feeding\t industries set\t up within the State\nand even if a condition could legitimately be imposed on the\ncontractor that\t he should  sell  the  resin  extracted\t and\nretained by  him only  to industries  within the  State,  it\nwould be  difficult to\tensure observance  of such condition\nand moreover the object of the State to make resin available\nto the\tlocal industries  at a\treasonable  price  might  be\nfrustrated,  because  the  contractor  taking  advantage  of\nscarcity in  supply of\tresin might,  and in all probability\nwould,\ttry   to  extract  a  much  higher  price  from\t the\nindustries needing  resin.  It\twas  thus  found  to  be  an\nimpracticable proposition to tap these blazes either on wage\ncontract basis\tor on  the basis  of royalty with or without\nload. [1365 A-F]\n     (ii) The  impugned Order was unquestionable and without\ndoubt  in  the\tinterest  of  the  State  and  even  with  a\nmicroscopic examination\t there in  nothing in it which could\npossibly incur\tthe reproach of being condemned as arbitrary\nor irrational. [1366 B-C]\n     (iii) It  is true that no advertisements were issued by\nthe State  inviting tenders for award of tapping contract in\nrespect of  these blazes  or stating  that tapping  contract\nwould be  given to  any party  who is  prepared to  put up a\nfactory for  manufacture of  resin, turpentine oil and other\nderivatives within  the State,\tbut it\twas  not  a  tapping\ncontract simpliciter which was being given by the State. The\ntapping contract was being given by way of allocation of raw\nmaterial for  feeding the  factory to  be set  up by the 2nd\nrespondent [1366 A-C]\n     The predominent  purpose  of  the\ttransaction  was  to\nensure setting up of a factory by the 2nd respondent as part\nof the\tprocess of  industrialisation of the State and since\nthe 2nd\t respondent wanted assurance of a definite supply of\nresin as  a condition  of putting  up the factory, the State\nawarded the  tapping contract to the 2nd respondent for that\npurpose.  If   the  State   were  giving   tapping  contract\nsimpliciter there  can be no doubt that the State would have\nto auction or invite tenders for securing the highest price,\nsubject,  of   course,\tto  any\t other\trelevant  overriding\nconsiderations of  public weal\tor interest,  but in  a case\nlike this  where the  State is\tallocating resources such as\nwater,\tpower,\t raw  material\tetc.,  for  the\t purpose  of\nencouraging setting  up of  industries within the State, the\nState is  not bound to advertise and tell the people that it\nwants a\t particular industry  to be  set up within the State\nand invite  those interested  to come  up with proposals for\nthe purpose.  The State may choose to do so if it thinks fit\nand in\ta given\t situation, it\tmay  even  turn\t out  to  be\nadvantageous for  the State  to do  so, but  if any  private\nparty comes  before the\t State\tand  offers  to\t set  up  an\nindustry, the  State would  not be  committing breach of any\nconstitutional or  legal obligation  if it  negotiates which\nsuch  party  and  agrees  to  provide  resources  and  other\nfacilities for\tthe purpose  of setting up the industry. The\nState is not obliged to tell such party; \"Please wait I will\nfirst  advertise,   see\t whether   any\tother\toffers\t are\nforthcoming and\t then after  considering all  offers, decide\nwhether I  should let  you set up the industry\". It would be\nmost unrealistic to insist on such a procedure, particularly\nin an  area like  Jammu and  Kashmir  which  on\t account  of\nhistorical,  political\t and  other   reasons,\tis  not\t yet\nindustrially developed\tand where  entrepreneurs have  to be\noffered attractive terms in order to persuade them to set up\nan\n1346\nindustry. The State must be free in such a case to negotiate\nwith a\tprivate entrepreneur  with a view to inducing him to\nset up\tan industry within the State and if the State enters\ninto  a\t  contract  with  such\tentrepreneur  for  providing\nresources and  other facilities\t for setting up an industry,\nthe contract  cannot be\t assailed as  invalid so long as the\nState  has   acted  bona  fide,\t reasonably  and  in  public\ninterest. If the terms and conditions of the contract or the\nsurrounding circumstances show that the State has acted mala\nfide or\t out of\t improper or  corrupt motive  or in order to\npromote the private interests of some one at the cost of the\nState, the  Court will undoubtedly interfere and strike down\nState action  as  arbitrary,  unreasonable  or\tcontrary  to\npublic interest.  But so  long as  the State  action is bona\nfide and  reasonable, the Court will not interfere merely on\nthe ground that no advertisement was given or publicity made\nor tenders invited. [1366 C-H, 1367 A-D]\n\n\n\nJUDGMENT:\n<\/pre>\n
     ORIGINAL JURISDICTION  : Writ Petitions Nos. 481-482 of
\n1979.\n<\/p>\n
     (Under Article 32 of the Constitution of India).
\n     K. N. Bhatt for the Petitioner.\n<\/p>\n
     Altaf Ahmed for Respondent No. 1.\n<\/p>\n
     E. C. Agarwal for Respondent No. 2.\n<\/p>\n
     The Judgment of the Court was delivered by,
\n     BHAGWATI, J.-These\t two writ petitions under Art. 32 of
\nthe Constitution  raise questions  of some importance in the
\nfield  of   constitutional  law,  but  they  are  not  exact
\nquestions which\t can be\t divorced from the facts giving rise
\nto them\t and in\t order to resolve them satisfactorily, it is
\nnecessary to  state the\t facts in  some detail.\t Though\t the
\npetitioners in\tthe two\t writ petitions\t are different,\t the
\nrespondents are\t the same and the same Order of the State of
\nJammu and  Kashmir is challenged in both the writ petitions.
\nHence whatever\twe say in regard to the first writ petition,
\napplies equally in regard to the second.\n<\/p>\n
     The dispute  in these  writ petitions  relates  to\t the
\nvalidity of  an Order  dated 27th April, 1979, passed by the
\nGovernment of  Jammu  and  Kashmir,  allotting\tto  the\t 2nd
\nrespondents 10\tto 12 lacs blazes annually for extraction of
\nresin from  the inaccessible  chir forests  in Poonch, Reasi
\nand Ramban  Divisions of  the State for a period of 10 years
\non the\tterms and  conditions set  out\tin  the\t Order.\t The
\nvalidity of the Order has been challenged on various grounds
\nwhich we shall presently set out, but in order to understand
\nand appreciate\tthese grounds,\tit  is\tnecessary  to  state
\nbriefly the  circumstances in  which the  Order came  to  be
\npassed by  the Government  of Jammu  and Kashmir. There is a
\ncommodity called  Oleo-resin, which we shall hereafter refer
\nshortly as  resin, which  is a forest produce extracted from
\ncertain species\t of trees popularly known as chir trees. The
\nprocess of  extraction is  called `tapping’  and it involves
\nseveral steps. Chir trees are annually given one or two
\n1347<\/span>
\nwounds which are technically called blazes and cups and lips
\nare fixed  at the  bottom of  each blazes  for collection of
\nresin. The  actual collection of resin starts from 1st April
\nand ends  on 31st  October every  year. The  maximum flow of
\nresin from  blazes is  during the months of May and June and
\nin the subsequent months of the working season, namely, July
\nto October,  the flow  gradually decreases  due to the rainy
\nseason followed by fall in temperature. The tapping of resin
\nis a  continuous process  and the initial blazing have to be
\nfollowed by  freshening given  every week. If the blazes are
\nnot freshened regularly, the resin ducts get blocked and the
\nblazes become  dry and once a blaze becomes dry, the flow of
\nresin stops  completely. The  resin that is collected in the
\ncups is\t transferred to\t tin containers\t every\tweek-end  or
\nearlier\t if  required,\tand  the  tin  containers  are\tthen
\ntransported to\tthe transit  depots for being carried to the
\ndestination. This  process of tapping requires employment of
\nskilled\t labour\t  and  involves\t a  considerable  amount  of
\nexpenditure. The  State of Jammu and Kashmir started tapping
\noperations in  respect of its chir trees since about 1973 by
\ngiving contracts  to  private  parties\tfor  extraction\t and
\ncollection of resin. The contracts were of three types :\n<\/p>\n
\t  (1)\tOne was\t contract on  wage  basis,  commonly
\n\t       known as\t wage contract,\t which was  given by
\n\t       auctioning the  blazes to  the person who was
\n\t       prepared to  undertake the work of extraction
\n\t       and collection  of resin\t at the lowest rates
\n\t       of labour  charges and  in such contract, the
\n\t       entire resin  extracted and  collected by the
\n\t       contractor would\t belong to the State and the
\n\t       contractor would be entitled only to the wage
\n\t       or  labour   charges   for   extraction\t and
\n\t       collection of resin.\n<\/p><\/blockquote>\n
\t  (2)\tThe second type of contract was on the basis
\n\t       of  royalty   without  load  and\t under\tthis
\n\t       contract, which\twas again  given by  auction
\n\t       stipulating for payment of royalty per blaze,
\n\t       the entire  resin extracted  and collected by
\n\t       the contractor  would belong  to him  and  he
\n\t       would be\t free to  sell or  process it  as he
\n\t       liked.\n<\/p><\/blockquote>\n
\t  (3)  The third type of contract given by the State
\n\t       was on  the basis  of royalty  with load\t and
\n\t       under this  contract, which was also given by
\n\t       auction, the  royalty was  payable per  blaze
\n\t       and out\tof the resin extracted and collected
\n\t       by the  contractor, a certain part would have
\n\t       to be  surrendered to  the  State  while\t the
\n\t       balance would remain with the contractor.\n<\/p><\/blockquote>\n
Every year  the State  auctioned the blazes in the different
\nforests within\tits territory  and about  40 per cent of the
\nforests were given on royalty
\n1348<\/span>
\nbasis, some  with load\tand some  without  load,  while\t the
\nbalance of  about 60  per cent\twere given  on wage contract
\nbasis.\n<\/p>\n
     The resin,\t which was  thus obtained  by the  State  by
\ngiving out blazes on contract whether on royalty-cum-load or
\non wage\t basis, was auctioned by the State from time to time
\nand  manufacturers  having  factories  for  manufactures  of
\nresin, turpentine  and other derivatives purchased it at the
\nauctions. It  is common ground that most of these purchasers
\nwere manufacturers  having  their  factories  in  Hoshiarpur
\ndistrict of  Punjab and\t at the material time, they depended
\nfor their  requirement of  raw-material solely\ton the resin
\navailable at  the auction  held by the State since supply of
\nresin had  ceased to  be available  from Uttar\tPradesh\t and
\nHimachal Pradesh  on account  of the  policy adopted  by the
\nGovernments in\tthese territories.  The State,\thowever,  in
\nfurtherance   of   its\t policy\t  to   bring   about   rapid
\nindustrialisation,  decided   that  from  the  year  1979-80
\nonwards, the  resin extracted from its forests should not be
\nallowed to  be exported outside the territories of the State
\nand should  be utilised only by industries set up within the
\nState. The  State in  fact entered into contracts with three
\nmanufacturers, namely,\tPrabhat\t Turpentine  and  Synthetics
\nPvt. Ltd., Dujodwala Resin and Turpentine Pvt. Ltd. and Pine
\nChemicals Ltd.\tunder which these three manufacturers agreed
\nto put-up  factories in\t the State for manufacture of resin,
\nturpentine and\tother derivatives  and the  State agreed  to
\nmake available\tto them\t respectively an  assured supply  of
\n4,000, 3500  and 8000  metric tonnes  of resin per year. The
\nvalidity of these contracts was challenged before us in writ
\npetitions Nos.\t37-38 of 1979, but these writ petitions were
\ndismissed by  us by an Order made on 21-12-79. The State had
\nalso commitments to supply resin to its own concern, namely,
\nJ &  K Industries  Ltd., which\twas running  a\tfactory\t for
\nmanufacture of resin and turpentine as also to various small
\nscale units  which were set-up in the State. It appears that
\nthe total  requirements of  the State  for  the\t purpose  of
\nmeeting these commitments was in the neighbourhood of 24,000
\nmetric tonnes of resin. Now in view of the fact that quite a
\nlarge number  of forests  were being  given out by the State
\nfor  tapping  on  royalty  contract  basis,  sometimes\teven
\nwithout load,  the aggregate  quantity of  resin  which\t was
\nbeing collected\t by the\t state was  very much  short of\t the
\ntotal requirement  of  24,000  metric  tonnes  and  it\twas,
\ntherefore, felt\t to be absolutely necessary for the State to
\nincrease its  procurement of  resin so as to be able to meet
\nits commitments.  With this  end in  view a  meeting of\t the
\nChief Conservator  of forests and other forest officials was
\nheld on\t 9th December,\t1978 for  the purpose  of discussing
\nways and  means for  achieving a higher target of production
\nof resin.  It was decided at this meeting that the increased
\ntarget\tof   production\t could\t be  achieved  only  through
\nreplacement of royalty contracts by wage con-\n<\/p>\n
1349<\/span><\/p>\n
tracts wherever possible and hence in future blaze should be
\nauctioned for tapping only on wage contract basis.\n<\/p>\n
     Now there\twere certain  forests in  Reasi\t and  Ramban
\nDivisions of  the State\t which were  difficult of  access on
\naccount of  their distance  from the  roads and so were some
\nforests in  the Poonch\tDivision near  the  line  of  actual
\ncontrol. So  far as  the forests  in the Rea i Division were
\nconcerned, there  were 6,08,115\t blazes which were attempted
\nto be  given for  tapping in  the year\t1976-77\t on  royalty
\ncontract basis\twithout load  but out  of them only 1,28,856
\nblazes were  taken by  one Prem Kumar Sood and that too on a
\nroyalty of  only Rs.  2.55 per\tblaze, as against royalty of
\nabout Rs.  6\/- per  blaze obtained  by the  State  in  other
\ninaccessible areas  by giving contract on royalty basis with
\nload of\t 3 Kg.\tper blaze.  Moreover, these  1,28,856 blazes
\nwere situate  in the  lower reaches  of inaccessible forests
\nand  no\t contractors  could  be\t found\tfor  taking  tapping
\ncontracts, even\t on the\t basis of  royalty without load, for
\nblazes in  the higher regions of the inaccessible areas. The
\nsame 1,28,856  blazes were  again put-up for auction for the
\nyear 1977-78, but no bidders came forward to take a contract
\neven on\t royalty without load basis. Then for the year 1978-
\n79, out\t of these  1,28,856 blazes,  72,951 blazes were once
\nagain put-up  for auction  and though  these were situate in
\nless inaccessible  areas than  the rest\t of the\t blazes, the
\nresponse was  most discouraging\t and no\t one came forward to
\nmake a\tbid for\t taking the  contract even  on royalty basis
\nwithout load. The result was that practically no tapping was
\ndone from  these 6,08,115 blazes in the forests of the Reasi
\nDivision upto  1979-80. There  were  also  some\t new  blazes
\nmarked in  the forests\tof the\tReasi Division\tfor the year
\n1979-80 and out of them, 4,20,340 blazes were in areas which
\nwere inaccessible on account of their being at a distance of
\n8 to  40 k.ms.\tfrom the  roadside.  Even  out\tof  the\t old
\n6,08,115  blazes  there\t were  3,10,674\t blazes\t which\twere
\nsituate in  the same  category of inaccessible areas. So far
\nas the\tforests in  the Ramban Division are concerned, there
\nwere 1,24,400 blazes which were equally inaccessible “due to
\nlong lead  upto coupe boundaries and transit depots” and the
\nposition in  regard to\t3,30,300  blazes  which\t were  under
\ntapping in  Poonch Division, was also similar to that of the
\ninaccessible areas  in Reasi  and Ramban  Divisions with the
\nadditional handicap of their being situate along the line of
\nactual control.\t There were  thus  in  all  about  11,85,414
\nblazes in  the Reasi, Ramban and Poonch Divisions which were
\nin inaccessible\t areas and having regard to the high cost of
\nextraction and\tcollection of  resin as also the scarcity of
\ntrained labour\tin those  areas, it was not possible to give
\nout these blazes by auction on wage contract basis. The past
\nexperience showed  that even on the basis of royalty without
\nload, contractors were not forth-coming for taking contracts
\nin respect of
\n1350<\/span>
\nblazes in  the inaccessible  areas of the Reasi Division and
\ngiving out  of the aforesaid blazes in the Reasi, Ramban and
\nPoonch Divisions  on wage  contract  basis  was,  therefore,
\nalmost an  impossible proposition.  The Chief Conservator of
\nForests and  other forest  officers accordingly\t decided  at
\ntheir meeting  of December  9, 1978  that these blazes could
\nnot be\ttapped through wage contract because “apart from the
\ntotal non-availability\tof local labour in these areas, cost
\nof production  due to  long lead  upto coupe  boundaries and
\ntransit depots\twould be  prohibitive” and  all\t such  areas
\nshould, therefore, be excluded from tapping wage contracts.\n<\/p>\n
     These decisions  taken in\tthe meeting of 9th December,
\n1978 were confirmed at a subsequent meeting which took place
\nbetween the Forest Minister, the Forest Secretary, the Chief
\nConservator of\tForests and  other forest  officers on\t26th
\nDecember, 1978.\t It was further decided in this meeting that
\n“the departmental  tapping through  wage contracts should be
\nconfined to  accessible chir  forests” only  and so  far  as
\n11,85,414 blazes  in the  inaccessible areas  of the  Reasi,
\nRamban and  Poonch Divisions  were concerned,  the consensus
\nwas that  “these blazes\t should be  allotted to some private
\nparty  as  procurement\tof  resin  from\t them  through\twage
\ncontracts was  not feasible, being difficult and costly” and
\n“the financial\tstatus and experience in extraction of resin
\nfrom forests  and its  distillation in the factory should be
\ndecisive factors”  in regard  to such  allotment. Now  it is
\nnecessary to  point out\t that, prior  to the  date  of\tthis
\nmeeting, the 2nd respondents had addressed a letter dt. 15th
\nApril 1978 to the Minister for Industries, offering to setup
\na factory for manufacture of resin, turpentine oil and other
\nderivatives in the State “with the latest know-how under the
\nsupervision of\tthe State  Government” and seeking allotment
\nof 10,000  metric tonnes of resin annually for that purpose.
\nThe 2nd\t respondents pointed  out in  their letter that they
\npossessed vast\texperience in  processing of  resin and\t re-
\nprocessing of  resin and turpentine oil and manufacture of a
\nwide range  of derivatives,  since they\t had 2 factories for
\nmanufacture of\tresin and  turpentine oil, one in Hoshiarpur
\nand the\t other in  Delhi and  moreover, they  had also\tbeen
\nworking as  resin extraction contractors since 1974 and were
\nalso bulk  purchasers of  resin at  the auctions held by the
\nState. It  was also  stated by the 2nd respondents that they
\nhad reliably  learnt that  Camphor and\tAllied Products Ltd.
\nand Prabhat  General Agencies  were being  considered by the
\nState for  allotment of resin to feed the units to be set-up
\nby  them   within  the\t State\tand   they  expressed  their
\nwillingness  to\t take  the  allotment  of  resin  for  their
\nproposed factory  on the  same terms  and  conditions.\tThis
\noffer of  the 2nd  respondents was  forwarded to  the Forest
\nMinister, but  despite the  policy of the State to encourage
\nsetting-up of resin-based industrial units in the State, it
\n1351<\/span>
\nwas not\t found possible,  having regard\t to the\t commitments
\nalready made by the State, to make any allotment of resin to
\nthe 2nd\t respondents. A\t proposal was,\ttherefore, mooted by
\nthe forest  officials that  about 10  to 12  lacs blazes  in
\ninaccessible areas  could be  made available  for tapping to
\nthe 2nd respondents on certain terms and conditions, so that
\nout of\tthe quantity  tapped, a\t certain  portion  could  be
\nretained by  the 2nd  respondents for  being utilised in the
\nfactory to  be set-up  by them\twithin\tthe  State  and\t the
\nbalance could  be surrendered  to the  Government.  The\t 2nd
\nrespondents were agreeable to this proposal and in fact they
\nput it\tforward as an alternative proposal for consideration
\nby the\tState, but  no decision\t was taken  on it  until the
\nmeeting of  26th  December,  1978.  When,  as  a  result  of
\ndiscussions at\tthis meeting, the consensus was reached that
\n11,85,414 blazes  in the inaccessible areas of Reasi, Ramban
\nand Poonch  Divisions should  be allotted  to  some  private
\nparty for  ensuring supply  of resin  to be  utilised in the
\nfactory to  be set-up  by such\tparty within  the State, the
\nproposal of the 2nd respondents was considered alongwith the
\napplications of some others including the petitioners in the
\nlight of  the factors  agreed upon at the meeting and having
\nregard to  the vast  experience of  the 2nd  respondents  in
\nextraction and\tprocessing of  resin and in view of the fact
\nthat they  were large  purchasers of  resin at\tthe auctions
\nheld by\t the State,  it was decided that the case of the 2nd
\nrespondents  should  be\t processed  for\t submission  to\t the
\nGovernment.\n<\/p>\n
     It appears\t that J\t & K  Resin Contractors\t Association
\n(hereinafter referred  to as  the association)\tcame to know
\nsometime in  October, 1978  that  the  2nd  respondents\t had
\napproached the\tState Government and there was a proposal to
\nallot to  them “certain resin coupes on royalty system of 10
\nyears” on  the basis  that they\t would install a factory for
\nmanufacture of\tresin and  turpentine at  Jammu with sizable
\ninvestment. The\t association thereupon addressed a letter to
\nthe Chief  Minister in\tOctober,  1978\tcomplaining  against
\ngiving\tof   contract  to   an\toutside\t  party\t by  private
\nnegotiations and  pleading that contract, whether on royalty
\nbasis or otherwise, should be given only by open auction. It
\nis significant\tto note\t that  no  offer  was  made  by\t the
\nassociation  in\t  this\tletter\t to  set  up  a\t resin-based
\nindustrial unit\t in the\t State and  the only  plea was\tthat
\ntapping contract should not be given by private negotiations
\nto a  non-state party,\tbut should  be given  only  by\topen
\nauction. Since the decision was taken at the meetings of 9th
\nDecember, 1976\tand 26th  December, 1978  that blazes in the
\ninaccessible areas Reasi, Ramban and Poonch Divisions should
\nnot be given on wage contract basis, they were excluded from
\nthe  auctions\theld  by  the  State  and  the\tassociation,
\ntherefore, addressed a letter dated 22nd January 1979 to the
\nChief Conservator of Forests
\n1352<\/span>
\nrequesting him to include these blazes in the auctions. This
\nwas followed  by another  letter dated\t5th  February,\t1979
\naddressed by  the association  to the  Forest Minister where
\nthe request  for inclusion  of these  blazes in the auctions
\nwas  repeated  by  the\tassociation.  The  association\talso
\npleaded with  the Forest  Minister that\t instead of adopting
\nthe wage  contract method  for giving out blazes for tapping
\ncontracts, “The\t system of  royalty contract  with increased
\nload” should be continued in the forests divisions including
\nReasi, Ramban  and Poonch.  The same request was repeated by
\nthe association\t in a letter dated 8th March, 1979 addressed
\nto the Chief Minister. There was obviously no reply to these
\ncommunications\tsince  it  had\talready\t been  decided\tthat
\ntapping of  blazes in  the accessible chir forests should be
\ndone only through wage contracts and 11,85,414 blazes in the
\ninaccessible areas  of Reasi  Ramban  and  Poonch  Divisions
\nshould be allotted to some private party, which was prepared
\nto set-up a factory for manufacture of resin, turpentine and
\nother derivatives in the State.\n<\/p>\n
     The 2nd  respondents presumably, on coming to know that
\ntheir alternative  proposal for\t allotment of  10 to 12 lacs
\nblazes in  inaccessible areas  was being  processed  by\t the
\nGovernment, addressed  a letter dated 22nd February, 1979 to
\nthe Secretary to the Forest Department formulating the broad
\nterms of the proposal and requesting the State Government to
\nconsider the  proposal favourably  and come  to\t a  decision
\nimmediately, since  the tapping\t season was  commencing from
\n1st April,  1979. The  association by  its letter dated 18th
\nMarch,\t1979  addressed\t to  the  Chief\t Minister  protested
\nagainst the blazes in the Reasi, Ramban and Poonch Divisions
\nbeing given  to\t the  2nd  respondents\tby  negotiations  on
\nroyalty basis  for 10 years and urged that doing so would be
\ncontrary to the interests of the local contractors and local
\nlabour and  “will also\tbe a  source of\t huge  loss  to\t the
\nGovernment  exchequer”\t since\tthe   price  of\t  resin\t was
\nincreasing day\tby day.\t Once again  a plea  was made by the
\nassociation that  these\t blazes\t should\t be  given  out\t for
\ntapping contract  by public  auction. The  petitioners\talso
\ncomplained to  the Chief  Minister by  a letter addressed in
\nMarch,\t1979   against\tgiving\t of  contract\tto  the\t 2nd
\nrespondents who\t were an  outside party\t and offered to take
\n“all the  untapped forests  in the  State on  2 to  3 years’
\nlease on  rotational basis”  stating that  they would pay 50
\npaise per  blaze more  than that  offered  under  any  other
\nproposal and  that out\tof the\tquantity tapped by them they
\nwould retain  3,000 metric  tonnes which  they would utilise
\nfor  manufacturing   resin,   turpentine   oil\t and   other
\nderivatives in\ta new modern factory to be set-up by them in
\nsome backward  area of\tthe State.  The State did not accept
\nthis offer made by the petitioners and
\n1353<\/span>
\ndecided to  go ahead with giving tapping contract in respect
\nof these blazes to the 2nd respondents.\n<\/p>\n
     The State\taccordingly,  passed  an  order\t dated\t27th
\nApril, 1979  sanctioning allotment  of 11.85  lacs blazes in
\nthe inaccessible areas of Reasi, Ramban and Poonch Divisions
\nto the 2nd respondents for a period of 10 years on the terms
\nand conditions\tset out\t in the\t order. The  2nd respondents
\nwere required  by clause  II(iii) of  the order to surrender
\n25% of\tthe annual  resin collected  by them,  subject to  a
\nminimum of  1500 metric\t tones per  annum, to  the State for
\nfeeding the  new  resin\t distillation  plant  which  J\t&  K
\nIndustries Ltd.\t proposed to  set up  Rajouri\/Sunderbani and
\nthey could retain the balance of the extracted resin subject
\nto a maximum of 3500 metric tones per annum. Clauses II (iv)
\nand V  of the  order provided that the 2nd respondents shall
\nset-up a  resin distillation plant in the small scale sector
\nfor processing\tof upto\t 3500 metric  tones of resin and the
\nextracted resin\t which is  allowed to remain with them under
\nthe order  shall be  utilised only in the plant to be set-up
\nby them\t and shall  not be removed outside the State. Clause
\nII(v) of  the order  stipulated\t that  the  2nd\t respondents
\nshall:\n<\/p>\n
     “(a) be paid  the same  wages for\tpart  of  the  resin
\n\t  extracted and delivered to the department as would
\n\t  be sanctioned\t by the\t Forest Department from year
\n\t  to year  for other  departmental resin  extruction
\n\t  contracts  for   the\tadjoining   blocks  in\t the
\n\t  respective locality;\n<\/p><\/blockquote>\n
     (b)    get\t proportionate\trebate\tin  royalty  on\t the
\n\t  quantity thus\t surrendered (i.e.  no royalty shall
\n\t  be charged for such quantity); and\n<\/p><\/blockquote>\n
     (c)   deliver such resin at the JKL factory at Rajouri\/
\n\t  Sunderbani for  which no transport charges will be
\n\t  allowed.\n<\/p><\/blockquote>\n
Clause III  provided that the price of resin retained by the
\n2nd respondents\t shall be Rs. 350\/- per quintal and it shall
\nbe subject  to review  after  three  years  and\t every\tyear
\nthereafter and so far as the royalty is concerned, Clause IV
\nstated that it shall be worked out by a committee, the basis
\nof calculation\tbeing  the  cost  of  resin  extraction\t and
\ncollection in  adjoining areas\tgiven out  on wage-contracts
\nfrom year  to year  and the  sale price of resin as fixed at
\nRs. 350\/-  per quintal,\t for a\tperiod of  three years after
\nwhich it shall be reviewed annually.” This order made by the
\nState  Government   is\tbeing\tchallenged  in\tthe  present
\npetitions filed under Art. 32 of the Constitution.\n<\/p>\n
1354<\/span><\/p>\n
     There were\t in the\t main three  grounds  on  which\t the
\nvalidity  of  the  order  was  assailed\t on  behalf  of\t the
\npetitioners. They were as follows:\n<\/p>\n
     (A)  That the  Order is  arbitrary, malafide and not in
\n\t  public interest,  inasmuch as\t a huge\t benefit has
\n\t  been conferred  on the 2nd respondents at the cost
\n\t  of the State.\n<\/p><\/blockquote>\n
     (B)   The order  creates monopoly\tin favour of the 2nd
\n\t  respondents who or a private party and constitutes
\n\t  unreasonable\trestriction  on\t the  right  of\t the
\n\t  petitioners to  carry on tapping contract business
\n\t  under Art. 19 (1) (g) of the Constitution.
\n     (C)  The State  has acted\tarbitrarily in selecting the
\n\t  2nd respondents  for\tawarding  tapping  contract,
\n\t  without affording  any opportunity  to  others  to
\n\t  compete  for\tobtaining  such\t contract  and\tthis
\n\t  action of  the State\tis not based on any rational
\n\t  or relevant  principle and is therefore, violative
\n\t  of Art. 14 of the Constitution as also of the rule
\n\t  of administrative  law  which\t inhibits  arbitrary
\n\t  action by the State.\n<\/p><\/blockquote>\n
We shall examine these grounds in the order in which we have
\nset them  out. but,  before we do so, we may preface what we
\nhave to\t say by\t making a  few preliminary  observations ill
\nregard to the law on the subject.\n<\/p>\n
     It was  pointed out  by this  Court in  “Ramana Dayaram
\nShetty v. The International Airport Authority of India\tors.<\/a>
\nthat with  the growth  of the  welfare state,  new forms  of
\nproperty in  the shape of Government largess are developing,
\nsince the  Government is  increasingly assuming\t the role of
\nregulator and dispenser of social services and provider of a
\nlarge  number\tof  benefits   including  jobs,\t  contracts,
\nlicences, quotas,  mineral rights  etc. There  is increasing
\nexpansion  of\tthe  magnitude\tand  range  of\tGovernmental
\nfunctions, as  we move\tcloser to the welfare state, and the
\nresult is that more and more of our wealth consists of these
\nnew forms  of property. Some of these forms of wealth may be
\nin the nature of legal rights but the large majority of them
\nare in\tthe nature  of privileges.  The law  has however not
\nbeen slow  to recognise\t the importance\t of this new kind of
\nwealth and the need to protect individual interest in it and
\nwith that  end in  view,  it  has  developed  new  forms  of
\nprotection. Some  interests in\tGovernment largess, formerly
\nregarded as privileges, have been recognised
\n1355<\/span>
\nas rights, while others have been given legal protection not
\nonly by forging procedural safeguards but also by confining,
\nstructuring and checking Government discretion in the matter
\nof grant  of such  largess. The discretion of the government
\nhas been  held to  be not  unlimited in\t that the Government
\ncannot give  largess in\t its arbitrary\tdiscretion or as its
\nsweet will  or on  such terms  as it chooses in its absolute
\ndiscretion. There  are two  limitations imposed by law which
\nstructure 1  and control the discretion of the Government in
\nthis behalf.  The first\t is in\tregard to the terms on which
\nlargess may  be granted\t and the  other. In  regard  to\t the
\npersons who may be recipients of such largess.\n<\/p>\n
     So far  as the  first limitation is concerned, it flows
\ndirectly from  the thesis that, unlike a private individual,
\nthe State  cannot act  as it pleases in the matter of giving
\nlargess. Though\t ordinarily a  private individual  would  be
\nguided by economic considerations of self-gain in any action
\ntaken by  him, it is always open to him under the law to act
\ncontrary to  his  self-interest\t or  to\t oblige\t another  in
\nentering into  a contract or. dealing with his property. But
\nthe Government\tis not\tfree lo\t act as it likes in granting
\nlargess such  as awarding  a contract  or selling or leasing
\nout its\t property. Whatever  be its activity, the Government
\nis still  the  Government  and\tis,  subject  to  restraints
\ninherent in  its  position  in\ta  democratic  society.\t The
\nconstitutional power  conferred on  the Government cannot be
\nexercised by  it  arbitrarily  or  capriciously\t or  in\t and
\nunprincipled manner;  it has  to be exercised for the public
\ngood. Every  activity of the Government has a public element
\nin it  and it  must therefore,\tbe informed  with reason and
\nguided\tby  public  interest.  Every  action  taken  by\t the
\nGovernment must be in public interest; the Government cannot
\nact arbitrarily\t and without  reason and  if  it  does,\t its
\naction would  be liable to be invalidated. If the Government
\nawards a  contract or leases out or otherwise deals with its
\nproperty or  grants any other largess, it would be Liable to
\nbe  tested   for  its\tvalidity  on   the  touch-stone\t  of
\nreasonableness and  public  interest  and  if  it  fails  to
\nsatisfy\t either\t best,\tit  would  be  unconstitutional\t and
\ninvalid.\n<\/p>\n
     Now what  is the test of reasonableness which has to be
\napplied in  order to  determine the validity of governmental
\naction. It  is undoubtedly true, as pointed out by Patanjali
\nShastri, J.  in State of Madras v. V.G. Rau,<\/a> that in forming
\nhis own\t conception  of\t what  is  reasonable,\tin  all\t the
\ncircumstances of  a given  case, it  is inevitable  that the
\nsocial philosophy  and the  scale of  values  of  the  judge
\nparticipating in the decision, would play an important part,
\nbut even  so, me  test of  reasonableness is  not  a  wholly
\nsubjective test and its contours are fairly indicated by the
\nConstitution. The concept of reason-\n<\/p>\n
1356<\/span><\/p>\n
ableness in  fact pervades the entire constitutional scheme.
\nThe interaction\t of Arts.  14, 19  and 21  analysed by\tthis
\nCourt  in   Maneka  Gandhi   v.\t Union\t of  India,<\/a>  clearly
\ndemonstrated that  the requirement  of\treasonableness\truns
\nlike  a\t  golden  thread   through  the\t  entire  fabric  of
\nfundamental rights  and, as  several decisions of this Court
\nshow, this  concept of\treasonableness\tfinds  its  positive
\nmanifestation and  expression in  the lofty  ideal of social
\nand  economic\tjustice\t which\tinspires  and  animates\t the
\nDirective Principles. It has been laid down by this Court in
\nE.P. Royappa  v. State\tof Tamil  Nadu, and  Maneka Gandhi’s<\/a>
\ncase (supra)  that Art. 14 strikes at arbitrariness in State
\naction\tand  since  the,  principle  of\t reasonableness\t and
\nrationality, which  is legally as well as philosophically an
\nessential  element  of\tequality  or  non-arbitrariness,  is
\nprotected  by  this  article,  it  must\t characterise  every
\ngovernmental action,  whether it  be under  the authority of
\nlaw or in exercise of executive power without making of law.
\nSo also\t the concept  of  reasonableness  runs\tthrough\t the
\ntotality of  Art. 19  and requires  that restrictions on the
\nfreedoms of the citizen, in order to be permissible, must at
\nthe best  be reasonable.  Similarly  Art.  21  in  the\tfull
\nplenitude of  its activist magnitude as discovered by Maneka
\nGandhi’s case,\tinsists that no one shall be deprived of his
\nlife or personal liberty except in accordance with procedure
\nestablished by\tlaw and\t such procedure\t must be reasonable,
\nfair and  just. The Directive Principles concretise and give
\nshape to the concept of reasonableness envisaged in Articles
\n14, 19 and 21 and other articles enumerating the fundamental
\nrights. By defining the national aims and the constitutional
\ngoals,\t they\tsetforth   the\t standards   or\t  norms\t  of
\nreasonableness which  must guide  and  animate\tgovernmental
\naction. Any  action taken  by the  Government with a view to
\ngiving effect to any one or more of the Directive Principles
\nwould ordinarily,  subject to  any constitutional  or  legal
\ninhibitions or other over-riding considerations, qualify for
\nbeing regarded\tas reasonable,\twhile  an  action  which  is
\ninconsistent with  or runs  counter to a Directive Principle
\nwould incur the reproach of being unreasonable.\n<\/p>\n
     So also  the concept  of public interest must as far as
\npossible  receive   its\t orientation   from  the   Directive
\nPrinciples.  What   according  to   the\t  founding   fathers
\nconstitutes the\t plainest requirement  of public interest is
\nset out\t in the\t Directive Principles  and they\t embody\t par
\nexcellence the\tconstitutional concept\tof public  interest.
\nIf, therefore,\tany governmental  action  is  calculated  to
\nimplement or give effect to a
\n1357<\/span>
\nDirective Principle,  it would\tordinarily, subject  to\t any
\nother overriding  considerations, be  informed\twith  public
\ninterest.\n<\/p>\n
     Where any governmental action fails to satisfy the test
\nof reasonableness and public interest discussed above and is
\nfound to  be wanting  in the  quality of  reasonableness  or
\nlacking in  the element\t of public  interest,  it  would  be
\nliable to  be struck  down as  invalid. It  must follow as a
\nnecessary  corollary   from  this   proposition\t  that\t the
\nGovernment cannot  act in  a manner  which would  benefit  a
\nprivate party at the cost of the State; such an action would
\nbe both\t unreasonable and  contrary to\tpublic interest. The
\nGovernment, therefore,\tcannot, for example, give a contract
\nor sell\t or lease  out its property for a consideration less
\nthan the  highest that\tcan be\tobtained for  it, unless  of
\ncourse\tthere  are  other  considerations  which  render  it
\nreasonable  and\t  in  public   interest\t to   do  so.\tSuch
\nconsiderations may  be\tthat  some  Directive  Principle  is
\nsought to be advanced or implemented or that the contract or
\nthe property is given not with a view to earning revenue but
\nfor the\t purpose of  carrying out  a welfare  scheme for the
\nbenefit of a particular group or section of people deserving
\nit or that the person who has offered a higher consideration
\nis not\totherwise fit  to  be  given  the  contract  or\t the
\nproperty. We  have referred  to these considerations to only
\nillustratively, for  there may\tbe an  infinite\t variety  of
\nconsiderations which  may have\tto be  taken into account by
\nthe Government\tin formulating\tits policies  and it is on a
\ntotal  evaluation   of\tvarious\t considerations\t which\thave
\nweighed with  the Government  in taking a particular action,
\nthat the  Court would  have to\tdecide whether the action of
\nthe Government is reasonable and in public interest. But one
\nbasic principle\t which must  guide the\tCourt in arriving at
\nits determination on this question is that there is always a
\npresumption that  the Governmental  action is reasonable and
\nin public  interest and\t it is for the party challenging its
\nvalidity to  show that it is wanting in reasonableness or is
\nnot informed  with public  interest. This  burden is a heavy
\none and\t it has\t to be discharged to the satisfaction of the
\nCourt by  proper and  adequate material.  The  Court  cannot
\nlightly assume\tthat the  action taken\tby the Government is
\nunreasonable or\t without public interest because, as we said
\nabove, there  are a  large number  of policy  considerations
\nwhich must  necessarily weigh  with the Government in taking
\naction\tand  therefore\tthe  Court  would  not\tstrike\tDown
\ngovernmental action  as invalid on this ground, unless it is
\nclearly satisfied  that the action is unreasonable or not in
\npublic interest.  But where  it is so satisfied, it would be
\nthe plainest  duty of  the Court  under the  Constitution to
\ninvalidate the\tgovernmental action. This is one of the most
\nimportant functions  of the  Court and\talso one of the most
\nessential for preservation of the rule of law.\n<\/p>\n
1358<\/span><\/p>\n
It is  imperative in a democracy governed by the rule of law
\nthat governmental  action must\tbe kept within the limits of
\nthe law\t if there  is any  transgression the  Court must  be
\nready to condemn it. It is a matter of historical experience
\nthat there  is a tendency in every government to assume more
\nand more  powers and  since it is not an uncommon phenomenon
\nin countries  that the legislative check is getting diluted,
\nit is  left  to\t the  Court  as\t the  only  other  reviewing
\nauthority under the Constitution to be increasingly vigilant
\nto ensure  observance with the rule of law and in this task,
\nthe court  must not  flinch or falter. It may be pointed out
\nthat  this   ground  of\t  invalidity,\tnamely,\t  that\t the
\ngovernmental  action  is  unreasonable\tor  lacking  in\t the
\nquality of  public interest, is different from that of mala-
\nfides though  it may,  in a  given case, furnish evidence of
\nmala-fides.\n<\/p>\n
     The  second   limitation  on   the\t discretion  of\t the
\nGovernment in  grant of\t largess is in regard to the persons
\nto whom\t such largess may be granted. It is now well settled
\nas a  result of\t the decision  of this\tCourt in  Ramana  D.
\nShetty v.  International Airport  Authority of\tIndia & Ors.<\/a>
\n(supra) that  the Government  is not  free like\t an ordinary
\nindividual, in\tselecting the recipients for its largess and
\nit cannot  choose to  deal with any person it pleases in its
\nabsolute and  unfettered discretion.  The law  is  now\twell
\nestablished that  the Government  need not deal with anyone.
\nbut  if\t  it  does   so,  it   must  do\t so  fairly  without
\ndiscrimination\tand  without  unfair  procedure.  Where\t the
\nGovernment is  dealing with  the public,  whether by  way of
\ngiving jobs  or entering  into contracts  or granting  other
\nforms of  largess. the\tGovernment cannot act arbitrarily at
\nits, sweet  will and,  like a  private individual, deal with
\nany person  it pleases, but its action must be in conformity
\nwith  some   standard  or   norm  which\t is  not  arbitrary,
\nirrational or  irrelevant. The\tgovernmental action must not
\nbe arbitrary  or capricious,  but  must\t be  based  on\tsome
\nprinciple which meets the test of reason and relevance. This
\nrule was enunciated by the Court as a rule of administrative
\nlaw and\t it was\t also validated by the Court as an emanation
\nflowing directly  from the  doctrine of equality embodied in
\nArt. 14.  The Court  referred to  the activist\tmagnitude of
\nArt. 14\t as evolved  in E. P. Royappa v. State of Tamil Nadu<\/a>
\n(supra) and  Maneka Gandhi’s  case (supra) and observed that
\nit must\t follow “as a necessary corollary from the principle
\nof equality  enshrined in  Art. 14  that though the State is
\nentitled to  refuse to\tenter into relationship with anyone,
\nyet if\tit does\t so, it cannot arbitrarily choose any person
\nit  likes   for\t entering   into   such\t  relationship\t and
\ndiscriminate between persons similarly circumstanced, but it
\nmust act in conformity with some standard or principle which
\nmeets the  test of reasonableness and non-discrimination and
\nany departure from such standard or
\n1359<\/span>
\nprinciple would\t be invalid  unless it\tcan be\tsupported or
\njustified on  some rational  and non-discriminatory ground.”
\nThis decision has reaffirmed the principle of reasonableness
\nand non-arbitrariness  in governmental\taction which lies at
\nthe core of our entire constitutional scheme and structure.\n<\/p>\n
     It is  in the  light of  these two\t limitations on\t the
\ndiscretion of  the Government  in the  matter  of  grant  of
\nlargess that  we must  proceed to  examine  the\t grounds  of
\nattack urged on behalf of the petitioners.\n<\/p>\n
Re Ground A:\n<\/p>\n
     The argument  under this head of challenge was that the
\nState had  under the impugned order granted tapping contract
\nto  the\t  2nd  respondents   on\t terms\t which\twere  highly
\ndisadvantageous to  the State and involved considerable loss
\nof revenue  to the  Government\texchequer.  The\t petitioners
\ncontended that\tthe price  of resin  realised at the auction
\nheld in\t December 1978\twas Rs. 484\/- per quintal; it was Rs
\n520\/- per quintal at the auction held in January 1979 and it
\nrose to\t Rs. 720\/-  per quintal at the auction held in April
\n1979 but  despite this\tphenomenally high  price which could
\nhave been obtained in auction, the State chose to sell resin
\nto the\t2nd respondents\t at a  low price  of Rs.  350\/-\t per
\nquintal for  a period  of 3  years under the impugned order,
\nconferring huge\t benefits on the 2nd respondents at the cost
\nof the\tGovernment exchequer.  The impugned  order therefore
\nsaid the petitioners, was wholly arbitrary, unreasonable and
\ncontrary to public interest and was liable to be struck down
\nas invalid.  This argument  plausible though  it may seem at
\nfirst blush, is in our opinion not well founded and a closer
\nlook at\t the facts  will clearly  show\tthat  it  cannot  be
\nsustained.\n<\/p>\n
     We\t may  first  clear  the\t ground\t by  stating  a\t few
\nundisputed facts.  The practice\t which was being followed by
\nthe State  until the  year 1979-80 was to give out blazes in
\nthe chir forests either on wage contract basis or on royalty
\nbasis with or without load. The result was that about 50 per
\ncent of\t the resin  extracted used  to be  taken away by the
\ncontractors and the balance of 50 per cent remained with the
\nState which  the State\tpartly made  available\tto  its\t own
\nfactories and small scale units in the State and partly sold
\nby auction  and out  of the  quantity auctioned the bulk was
\npurchased by  manufacturers having  factories in Hoshiarpur.
\nIt appears’  that from about 1975 onwards the State embarked
\nupon a\tpolicy of  industrialisation and  in furtherance  of
\nthis policy, it decided some time in the later half of 1978,
\nthat from the year 1979-80, no resin should be allowed to he
\nexported outside the State territories and that it should be
\nmade available\tfor being utilised only in industries set up
\nwithin the State. But this measure by itself was not enough,
\nbecause so long as
\n1360<\/span>
\ncontracts for  extracting resin\t were given on royalty basis
\nwith or\t without load, a sizable quantity of resin extracted
\nwould go  into the  hands of  the contractors  and would not
\nbecome\tavailable   to\tthe   State   for   fulfilling\t its
\ncommitments. The  State, therefore,  decided as\t a matter of
\npolicy\tto  replace  royalty  contracts\t by  wage  contracts
\nwherever possible  and to auction blazes for tapping only on
\nwage contracts\tbasis. But, as pointed out above, there were
\ncertain forests\t in Reasi, Ramban and Poonch Divisions which
\nwere difficult\tof access  on account of their distance from
\nthe roads  and some  of the  forests in Poonch Division were
\nnear the  line of  actual control  and consequently  it\t was
\nfound  impracticable  to  give\tthem  for  tapping  on\twage
\ncontract basis.\t It was\t difficult to  give them for tapping
\neven on\t the basis  of royalty\twithout load and the maximum
\nthat could  be obtained\t for a\tpart of\t the blazes  in\t the
\nReasi, Division\t in the year 1976-77 was royalty of Rs. 2.55
\nper blaze  without load.  It was,  therefore, decided by the
\nState to exclude about 11,85,414 blazes in the Reasi, Ramban
\nand Poonch  Divisions from tapping through wage contract and
\nthey were  kept out  of the  auctions held by the State. The
\nAssociation undoubtedly\t made representations requesting the
\nState to  include these\t blazes in  the auctions,  but as is
\nevident from  the letters  dated 5th  February 1979  and 8th
\nMarch 1979  addressed respectively  to the  Forest Minister.
\nand the\t Chief Minister, the emphasis of the Association was
\nthat the  system of  working should  be changed\t from  wage’
\ncontract to  royalty contract”\tand that these blazes should
\nbe put\tto auction on royalty basis. The State obviously, in
\nview of its policy, could not accede to this request made on
\nbehalf of  the Association  and since, having regard to past
\nexperience. it\twas felt  that it  would be  futile to offer
\nthese blazes  for tapping  through wage\t contract, the State
\nwas not\t unjustified in\t not including them in the auctions.
\nNow the\t second respondents  offered to set up a factory for
\nmanufacture of\tresin, turpentine  oil and other derivatives
\nin the\tState and  requested to\t State to  make allotment of
\nresin annually\tfor this  purpose  on  the  same  terms\t and
\nconditions on  which allotment\twas proposed  to be  made to
\nCamphor\t and   Allied  Products\t Ltd.  and  Prabhat  General
\nAgencies.  The\t State,\t  in   view   of   its\t policy\t  of
\nIndustrialisation, was\tinterested in  the setting up of the
\nfactory by  the second\trespondents, particularly  since the
\nsecond respondents  had two  factories\tfor  manufacture  of
\nresin,\tturpentine   oil  and  other  derivatives  and\tthey
\npossessed larger  experience  in  processing  of  resin\t and
\nreprocessing,\tof   resin,   turpentine   oil\t and   other
\nderivatives. But,  having regard  to the commitments already
\nmade by\t it, it\t was not  possible for the State to make any
\ndefinite allotment  of resin  to the second respondents. The
\nState, however,\t had these  blazes in  the Reasi, Ramban and
\nPoonch Divisions which it was finding impracticable to tap
\n1361<\/span>
\nthrough wage  contract and  the State, therefore, decided to
\ngive them  for tapping\tto the second respondents on certain
\nterms and  conditions, so  that the second respondents could
\nif they\t were prepared\tto tap\tthese blazes in inaccessible
\nareas, secure  an assured  supply of  3500 metric  tones  of
\nresin for  the purpose\tof the\tfactory to be set up by them
\nwithin the  State. It  was in  these circumstances  that the
\nimpugned order\tdated 27th  April 1979\tcame to be passed by
\nthe State.\n<\/p>\n
     It is  clear  from\t the  back-drop\t of  the  facts\t and
\ncircumstances in  which the  impugned order  came to be made
\nand terms  and conditions set out in the impugned Order that
\nit was not a tapping contract simpliciter which was intended
\nto  be\t given\tto   the  second   respondents.\t The  second
\nrespondents wanted  to be  assured of  regular supply of raw
\nmaterial in  the shape\tof resin before they could decide to
\nset up a factory within the State and it was for the purpose
\nof ensuring  supply of\tsuch raw  material that the impugned
\norder  was  made  giving  tapping  contract  to\t the  second
\nrespondents. It\t was really  by way  of\t allocation  of\t raw
\nmaterial for running the factory that the impugned order was
\npassed. The  terms of  the impugned  order show beyond doubt
\nthat the  second respondents were under an obligation to set
\nup a  factory within the State and that 3500 metric tones of
\nresin which  was permitted  to be  retained  by\t the  second
\nrespondents out\t of the resin extracted by them was required
\nto be  utilised in  the factory\t to be set up by them and it
\nwas provided  that no  part of the Resin extracted should be
\nallowed to be removed outside the State. The whole object of
\nthe impugned  order was\t to make available 3500 metric tones
\nof resin  to the  second  respondents  for  the\t purpose  of
\nrunning the  factory to\t be set up by them. The advantage to
\nthe State  was that  a new factory for manufacture of resin,
\nturpentine oil\tand other  derivatives would  come up within
\nits territories\t offering  more\t job  opportunities  to\t the
\npeople\tof   the  State\t  increasing  their  prosperity\t and
\naugmenting the\tState revenues\tand in\taddition  the  State
\nwould be  assured of  a definite  supply of  at\t least\t1500
\nmetric tones  of resin\tfor  itself  without  any  financial
\ninvolvement or\trisk and  with this  additional quantity  of
\nresin available\t to it,\t it would  be able to set up another
\nfactory creating more employment opportunities and, in fact,
\nas the counter affidavit of Ghulam Rasul, under secretary to
\nthe Government\tfiled on  behalf  of  the  State  shows\t the
\nGovernment lost\t no time  in taking steps to set up a public
\nsector resin  distillation plant  in a far flung area of the
\nState, namely,\tSundarbani, in\tRajouri District.  Moreover,
\nthe State  would be  able to secure extraction of resin from
\nthese inaccessible  areas on the best possible terms instead
\nof allowing  them to  remain unexploited  or given  over  at
\nridiculously low royalty. We cannot accept the contention of
\nthe petitioners that under the im-\n<\/p>\n
1362<\/span><\/p>\n
pugned order  a huge  benefit was  conferred on\t the  second
\nrespondents at\tthe cost  of the State. It is clear from the
\nterms of  the impugned\torder that  the\t second\t respondents
\nwould have  to extract\tat least  5000 metric tones of resin
\nfrom the  blazes allotted to them in order to be entitled to
\nretain 3500  metric tones.  The counter\t affidavit of Ghulam
\nRasul on  behalf of the first respondent and Guran Devaya on
\nbehalf of  the second  respondents show\t that the  estimated
\ncost of\t extraction  and  collection  of  resin\t from  these
\ninaccessible areas  would be  at  the  least  Rs.  175\/\t per
\nquintal, though according to Guran Devaya it would be in the
\nneighbourhood of  Rs. 200  per quintal,\t but even if we take
\nthe cost  at the minimum figure of Rs. 175\/ per quintal, the
\ntotal cost  of extraction  and collection  would come to Rs.
\n87,50,000\/-  and  on  this  investment\tof  Rs.\t 87,50,000\/-
\nrequired to  be made by the second respondents the amount of
\ninterest at the prevailing bank rate would work out to about
\nRs. 13,00,000\/-.  Now, as  against this\t expenditure of\t Rs.
\n87,50,000\/- plus  Rs.  13,00,000\/-  the\t second\t respondents
\nwould be entitled to claim from the State in respect of 1500
\nmetric tones of resin to be delivered to it only at the rate
\nsanctioned  by\tthe  Forest  Department\t for  the  adjoining
\naccessible forests  which were being worked on wage contract
\nbasis. It  is stated  in the  counter affidavits  of  Ghulam
\nRasul and  Guran Devaya\t and this statement is not seriously
\nchallenged on  behalf of  the petitioners,  that the cost of
\nextraction  and\t collection  as\t sanctioned  by\t the  Forest
\nDepartment for\tthe adjoining  accessible forests  given  on
\nwage contract  basis in\t the year  1979-78 was Rs. 114\/- per
\nquintal and  the second respondents would, thus, be entitled
\nto claim  from the  State no more than Rs. 114\/- per quintal
\nin respect  of 1500  metric tones  to be delivered to it and
\napart from bearing the difference between the actual cost of
\nextraction and\tcollection and\tthe amount received from the
\nState at  the rate  of Rs.  114\/- per  quintal in respect of
\n1500 metric  tones, the second respondents would have to pay
\nthe price  of the remaining 3500 metric tones to be retained
\nby them\t at the\t rate of  Rs. 350\/-  per  quintal.  On\tthis
\nreckoning, the\tcost of\t 3500 metric tones to be retained by
\nthe second  respondents would  work out\t at  Rs.  474\/-\t per
\nquintal. The  result would  be that under the impugned order
\nthe State  would get  1500 metric tones of resin at the rate
\nof Rs.\t114\/- per quintal while the second respondents would
\nhave to\t pay at\t the rate  of Rs.  474\/- per quintal for the
\nbalance of  3500 metric tones retained by them. Obviously, a
\nlarge benefit  would accrue  to the State under the impugned
\norder. If  the\tState  were  to\t get  the  blazes  in  these
\ninaccessible areas tapped through wage contract, the minimum
\ncost would  be Rs.  175\/- per  quintal, without\t taking into
\naccount the  additional expenditure  on account of interest,
\nbut under the impugned order the State would get 1500 metric
\ntones of resin at a greatly reduced rate of Rs. 114\/- per
\n1363<\/span>
\nquintal without\t any risk  or hazard.  The State  would also
\nreceive for  3500 metric  tones of resin retained by the 2nd
\nrespondents price  or royalty  at  the\trate  of  474\/-\t per
\nquintal which  would be\t much higher  than the\trate of\t Rs.
\n260\/- per  quintal at which the State was allotting resin to
\nmedium scale  industrial units and the rate of Rs. 320\/- per
\nquintal at which it was allotting resin to small scale units
\nwithin the  State. It is difficult to see how on these facts
\nthe impugned  order could  be said  to be disadvantageous to
\nthe State  or in any way favouring the second respondents at
\nthe cost  of the  State. The argument of the petitioners was
\nthat at the auctions held in December 1978, January 1979 and
\nApril 1979,  the price\tof resin realised was as much as Rs.
\n484\/-, Rs.  520\/- and Rs. 700\/- per quintal respectively and
\nwhen the  market price\twas so\thigh, it  was  improper\t and
\ncontrary to public interest on the part of the State to sell
\nresin to the second respondents at the rate of Rs. 320\/- per
\nquintal under  the impugned  order. This argument, plausible
\nthough it  may seem,  is fallacious because it does not take
\ninto account  the policy of the State not to allow export of
\nresin outside  its territories\tbut to allot it only for use
\nin factories set up within the State. It is obvious that, in
\nview of this policy no resin would be auctioned by the State
\nand there  would be no question of sale of resin in the open
\nmarket and in this situation, it would be totally irrelevant
\nto import  the concept\tof market  price with  reference  to
\nwhich the  adequacy of the price charged by the State to the
\n2nd respondents\t could be  judged. If  the State were simply
\nselling resin,\tthere can  be no  doubt that  the State must
\nendeavour to obtain the highest price subject, of course, to
\nany other  overriding considerations  of public interest and
\nin that\t event its  action in  giving  resin  to  a  private
\nindividual at a lesser price would be arbitrary and contrary
\nto public interest. But, where the State has, as a matter of
\npolicy, stopped\t selling resin\tto outsiders  and decided to
\nallot it  only to industries set up within the State for the
\npurpose of  encouraging industrialisation,  there can  be no
\nscope for  complaint that  the State  is giving\t resin at  a
\nlesser price  than that\t which could be obtained in the open
\nmarket. The  yardstick of  price in the open market would be
\nwholly inept,  because in  view of  the State  policy, there
\nwould be  no question  of any  resin being  sold in the open
\nmarket. The  object of\tthe State  in such  a case is not to
\nearn revenue  from sale of resin, but to promote the setting
\nup of  industries within  the State.  Moreover,\t the  prices
\nrealised at the auctions held in December 1978? January 1979
\nand April 1979 did not reflect the correct and genuine price
\nof resin,  because by  the time\t these auctions\t came to  be
\nheld, it  had become known that the State had taken a policy
\ndecision to  ban export\t of resin  from its territories with
\neffect from  1979-80 and the prices realised at the auctions
\nwere therefore scarcity prices. In fact, the
\n1364<\/span>
\nauction held in April 1979 was the last auction in the State
\nand since  it was  known that  in future  no resin  would be
\navailable  for\tsale  by  auction  in  the  open  market  to
\noutsiders, an unduly high price of Rs. 700\/- per quintal was
\noffered by the factory owners having their factories outside
\nthe State,  so that  they would\t get as\t much resin  or\t the
\npurpose of feeding their industrial units for some time. The
\ncounter affidavits  show that,\tin fact,  the  average\tsale
\nprice of resin realised during the year 1978-79 was only Rs.
\n433\/- per  quintal and\tas compared  to this  price, the 2nd
\nrespondents were  required to  pay price  of  royalty  at  a
\nhigher rate  of Rs.  474\/- per quintal for 3500 metric tones
\nof resin to be retained by them under the impugned order. It
\nis in  the circumstances impossible to see how it can at all
\nbe said\t that  any  benefit  was  conferred  on\t the  second
\nrespondents at\tthe cost  of the  State. The  first head  of
\nchallenge against  the impugned\t order must,  therefore,  be
\nrejected.\n<\/p>\n
RE. GROUND “B”:\n<\/p>\n
     It is  difficult to  appreciate how  the impugned order
\ncould be assaulted on the ground that it created monopoly in
\nfavour\tof  the\t 2nd  respondents  or  imposed\tunreasonable
\nrestriction on\tthe right  of the  petitioners to  carry  on
\ntapping business under Article 19(1) (g). The impugned order
\ndid not\t hand over  the tapping of the entire forest area in
\nthe State  exclusively to  the 2nd respondents so as to deny
\nthe  opportunity   of  tapping\t any  forest  areas  to\t the
\npetitioners. What  was done  under the\timpugned  order\t was
\nmerely to  allot 11,85,414  blazes in the inaccessible areas
\nof Reasi, Ramban and Poonch divisions to the 2nd respondents
\nso that\t the 2nd respondents could have an assured supply of
\n3500 metric  tones of  resin for  the purpose of feeding the
\nfactory to be set up by them in the State and a large number
\nof blazes  amounting to\t about 68 lacs in other forest areas
\nof  the\t State\twere  left  available  for  tapping  by\t the
\npetitioners and\t other forest  contractors. No\tmonopoly was
\ncreated in favour of the second respondents; the petitioners
\nand other  forest contractors could bid for wage contract in
\nrespect of  the other blazes which were more than five times
\nin  number   than  the\t blazes\t allotted   to\tthe   second
\nrespondents. The  petitioners in  writ petition 481 of 1979,
\nin fact,  obtained a  wage contract  for extraction of resin
\nfrom an easily accessible forest in Rajouri Division for the
\naggregate sum  of Rs.  2,80,250\/- in  the year\t1979-80\t and
\nthough it  is true that the petitioners in writ petition No.
\n482\/79 did  not obtain any wage contract for tapping in this
\nyear, it  was not  because blazes  were\t not  available\t for
\ntapping, but  because the  petitioners\tdid  not  get  their
\nregistration renewed.\n<\/p>\n
1365<\/span><\/p>\n
RE. GROUND “C”\n<\/p>\n
     The  third\t  and  last  ground  of\t challenge  is\talso
\ndifficult to  sustain. We  fail to see how the action of the
\nState in  making the  impugned order  in favour\t of the\t 2nd
\nrespondents could  be said  to be arbitrary or unreasonable.
\nIt is  clear from  the facts  we have  narrated above and we
\nneed not  repeat those\tfacts again,  that the State was not
\nunjustified in\texcluding 11,85,414  blazes situate  in\t the
\ninaccessible areas  of Reasi,  Ramban and  Poonch  Divisions
\nfrom the  auctions, since  the past  experience showed\tthat
\neven on\t the basis of royalty without load, it was difficult
\nto attract  bidders and\t the maximum that could be obtained,
\nand that  too only  in one  solitary year,  was Rs. 2.55 per
\nblaze without  load, which was an absurdly low return and it
\nwas, therefore,\t felt quite  justifiably, that\tit would  be
\nfutile to  include these  blazes in the auctions for tapping
\non wage\t contract basis.  The State  also could\t not award a
\ncontract simpliciter  for tapping  on the  basis of  royalty
\nwith or without load, because, as a matter of policy, with a
\nview to\t encouraging industrialisation,\t the State  did\t not
\nwant resin to go outside its territories but wanted it to be
\nused only  for the  purpose of\tfeeding\t industries  set  up
\nwithin the  State and even if a condition could legitimately
\nbe imposed  on the  contractor that he should sell the resin
\nextracted and  retained by him only to industries within the
\nState, it  would be  difficult to  ensure observance of such
\ncondition and moreover the object of the State to make resin
\navailable to  the local\t industries at\ta  reasonable  price
\nmight be frustrated, because the contractor taking advantage
\nof  scarcity   in  supply   of\tresin,\tmight,\tand  in\t all
\nprobability would,  try to  extract a much higher price from
\nthe industries\tneeding resin.\tIt was\tthus found  to be an
\nimpracticable proposition to tap these blazes either on wage
\ncontract basis\tor on  the basis  of royalty with or without
\nload.\n<\/p>\n
     Now the  2nd respondents  had made an offer for putting
\nup a  modern plant  for manufacture of resin, turpentine oil
\nand other  derivatives within  the State  provided they were
\nassured a  definite supply  of resin  every year. But having
\nregard to  the commitments  already made  by it,  it was not
\npossible for  the State\t to make  any definite allocation of
\nresin to  the 2nd  respondents and  a proposal was therefore
\nmooted that 11,85,414 blazes in inaccessible areas of Reasi,
\nRamban and  Poonch Divisions  could be\tallocated to the 2nd
\nrespondents for\t tapping on certain terms and conditions, so
\nthat the  2nd respondents  could tap these blazes and out of
\nthe resin extracted, obtain for themselves an assured supply
\nfor running  the factory  to be\t set up by them and make the
\nbalance quantity available to the State for its own purpose.
\nThe 2nd respondents were agreeable to this proposal
\n1366<\/span>
\nand they  accordingly put forward an alternative proposal on
\nthese  lines   for  the\t  consideration\t of  the  State\t and
\neventually, the\t impugned order came to be made in favour of
\nthe 2nd\t respondents. We have already discussed the terms of
\nthe impugned  order and\t it is\tclear from what we have said
\nthat the  impugned  order  was\tunquestionable\tand  without
\ndoubt, in  the\tinterest  of  the  State  and  even  with  a
\nmicroscopic examination\t we Pail to see anything in it which
\ncould possibly\tincur the  reproach of\tbeing  condemned  as
\narbitrary or  irrational. It  is true that no advertisements
\nwere issued  by the  State inviting  tenders  for  award  of
\ntapping contract in respect of these blazes; or stating that
\ntapping contract would be given to any party who is prepared
\nto put up a factory for manufacture of resin, turpentine oil
\nand other  derivatives within  the State,  but\tit  must  be
\nremembered that\t it was\t not  tapping  contract\t simpliciter
\nwhich was being given by the State. The tapping contract was
\nbeing given by way of allocation of raw material for feeding
\nthe factory  to be  set\t up  by\t the  2nd  respondents.\t The
\npredominant purpose of the transaction was to ensure setting
\nup of  a factory  by the  2nd respondents  as  part  of\t the
\nprocess of  industrialisation of the State and since the 2nd
\nrespondents wanted  assurance of  a definite supply of resin
\nas a  condition of putting up the factory, the State awarded
\nthe  tapping  contract\tto  the\t 2nd  respondents  for\tthat
\npurpose.  If   the  State   were  giving   tapping  contract
\nsimpliciter there  can be no doubt that the State would have
\nto auction or invite tenders for securing the highest price,
\nsubject,  of   course,\tto  any\t other\trelevant  overriding
\nconsiderations of  public weal\tor interest,  but in  a case
\nlike this  where the  State is\tallocating resources such as
\nwater,\tpower,\t raw  materials\t etc.  for  the\t purpose  of
\nencouraging setting up of industries within the State, we do
\nnot think  the State  is bound\tto advertise  and  tell\t the
\npeople that  it wants  a particular  industry to  be set  up
\nwithin the State and invite those interested to come up with
\nproposals for the purpose. The State may choose to do so, if
\nit thinks  fit and in a given situation, it may even turn to
\nbe advantageous\t for the  State to do so, but if any private
\nparty comes  before the\t State\tand  offers  to\t set  up  an
\nindustry, the  State would  not be  committing breach of any
\nconstitutional or  legal obligation  if it  negotiates\twith
\nsuch  party  and  agrees  to  provide  resources  and  other
\nfacilities for\tthe purpose  of setting up the industry. The
\nState is  not obliged  to tell\tsuch party;  “Please wait. I
\nwill first  advertise, see  whether  any  other\t offers\t are
\nforthcoming and\t then after  considering all  offers, decide
\nwhether I  should let  you set up the industry.” It would be
\nmost unrealistic  to insist on such a procedure particularly
\nin an  area like  Jammu and  Kashmir  which  on\t account  of
\nhistorical,  political\t and  other   reasons,\tis  not\t yet
\nindustrially developed\tand where  entrepreneurs have  to be
\noffered attractive terms in order to persuade them to set up
\nan industry. The State
\n1367<\/span>
\nmust be\t free in  such a  case to  negotiate with  a private
\nentrepreneur A\twith a\tview to\t inducing him  to set  up an
\nindustry within\t the State  and if  the State  enters into a
\ncontract with  such entrepreneur for providing resources and
\nother facilities  for setting  up an  industry, the contract
\ncannot be assailed as invalid so long as the State had acted
\nbona fide,  reasonably and  in public interest. If the terms
\nand  conditions\t  of  the   contract  or   the\t surrounding
\ncircumstances show that the State has acted mala fide or out
\nof improper  or corrupt\t motive or  in order  to promote the
\nprivate interests  of someone  at the cost of the State, the
\nCourt will  undoubtedly\t interfere  and\t strike\t down  State
\naction as  arbitrary, unreasonable  or\tcontrary  to  public
\ninterest. But  so long\tas the\tState action is bonafide and
\nreasonable, the\t Court will  not  interfere  merely  on\t the
\nground that  no advertisement was given or publicity or made
\nor tenders invited. Here, the 2nd respondents approached the
\nState for  the purpose\tof setting  up a  modern factory for
\nmanufacture of\tresin, turpentine  oil and other derivatives
\nand asked for allocation or resin and the State, with a view
\nto offering  an incentive  to the  2nd respondents to set up
\nthe factory,  made the\timpugned order\tawarding the tapping
\ncontract in  respect of\t these blazes to the 2nd respondents
\nas a part of a package deal. We have already pointed out and
\nw need\tnot  repeat  again,  that  the\timpugned  order\t was
\nreasonable and\tin the\tinterest of  the State\tand  in\t the
\ncircumstances, we  are clearly of the view that it cannot be
\nassailed as  invalid merely  because no\t advertisements were
\nissued inviting\t offers for  setting up a factory and taking
\nthe tapping contract as an integral part of the transaction.\n<\/p>\n
     It\t may,\thowever,  be  pointed  out  that  though  no
\nadvertisements were  issued by the State, the Chief Minister
\nof Jammu  and Kashmir  had in  the course  of three speeches
\ndelivered by  him-one in  Bombay. the  other in Calcutta and
\nthe third  in New  Delhi invited  entrepreneurs\t to  set  up
\nindustries within  the State  with a  view to bringing about
\nrapid industrialisation\t and  economic\tdevelopment  of\t the
\nState by  utilising its\t “peculiar  natural  resources”\t and
\nconverting them\t into finished or semi-finished products and
\npromising “various  forms of  assistance and incentives” for
\nthe purpose.  These speeches  were widely  advertised in the
\nnewspapers and\tit was,\t therefore, known  to  entrepreneurs
\nthat the  State would  be willing  to provide  resources and
\nother facilities  to those who were interested in setting up
\nindustries within  the State  and, in  fact. the  State\t was
\nanxious to  attract entrepreneurs to start industries and it
\nwas in pursuance of this invitation that Prabhat Tarpens and
\nSynthetics Private  Limited, Dujodwala\tResins and  Tarpens.
\nPvt. Ltd., Pine Chemicals Limited and the second respondents
\nmade their respective offers for putting up factories within
\nthe State.  It is,  there fore,\t in any event not correct to
\nsay that the petitioners had no oppor-\n<\/p>\n
1368<\/span><\/p>\n
tunity of  making an  offer of\tsetting\t up  a\tfactory\t and
\nobtaining a tapping contract for the purpose.\n<\/p>\n
     It is  also necessary  to point  out that the claims of
\nthe petitioners\t in writ  petition No.\t481 of 1978 and some
\nothers were  considered by  the Forest\tMinister  and  other
\nforest officials  at the meeting held on 25th December, 1978
\nand applying  the criterion  of “financial  status  and\t its
\ndistillation in\t the factory”-which criterion cannot be said
\nto be  irrational or  irrelevant-the application  of the 2nd
\nrespondents was\t unanimously accepted.\tThis decision cannot
\nbe said\t to be\tmala fide or prompted by improper or corrupt
\nmotive. There  is, in fact, no evidence before us to show or
\neven as\t much as to suggest that any favour was conferred on
\nthe 2nd respondents at the cost of the State or that the 2nd
\nrespondents were  preferred to some others without any basis
\nor justification.  The petitioners  in writ petition No. 481
\nof 1979\t had very  little experience of extraction of resin,
\nsince they  had taken  tapping contract\t for the  first time
\nonly in\t 1978-79 and  so  far  as  processing  of  resin  is
\nconcerned, they\t had no\t experience at\tall, as they did not
\nhave any factory for processing of resin nor had they at any
\ntime in\t the past, participated in any auction of resin. The
\npetitioners  in\t  writ\tpetition   No.\t481   of  1979\twere
\nprincipally grocery  and provision merchants and though they
\nhad taken  some tapping\t contracts in  the past, they had no
\nexperience at  all in processing of resin since they did not
\nown any factory. The 2nd respondents, on the other hand, had
\nlarge experience  in extraction\t of resin  from inaccessible
\nforests\t of   Poonch  Division\t and  they   also  possessed
\nconsiderable experience\t in distillation  and processing  of
\nresin since  they had  two factories,  one in Hoshiarpur and
\nthe other  in  Delhi.  The  State  had\tin  fact  given\t two
\ncontracts to  the 2nd  respondents in  the year\t 1974-75  to
\ninstall factories  for manufacture  of resin  and turpentine
\noil in\tthe public  sector and\tthese  contracts  have\tbeen
\ncarried\t out   by  the\t 2nd  respondents   to\tthe   entire
\nsatisfaction of the State. Therefore, so far as the relative
\nmerits of the petitioner on one hand and the 2nd respondents
\non the\tother  were  concerned,\t the  2nd  respondents\twere
\ndefinitely superior  and it  cannot be\tsaid that  the State
\nacted  unreasonably   or  contrary  to\tpublic\tinterest  in
\npreferring the 2nd respondents and permitting them to put up
\na  factory  within  the\t State\tand  awarding  them  tapping
\ncontract in  respect of\t these blazes for the purpose of the
\nfactory. It  may be  pointed that  the petitioners  in\twrit
\npetition No. 482 of 1979 had not even got their registration
\nrenewed for  the year  1979-80 and hence no tapping contract
\ncould possibly\tbe given  to  them.  We\t must,\taccordingly,
\nreject the  third ground of challenge urged on behalf of the
\npetitions.\n<\/p>\n
1369<\/span><\/p>\n
     We are,  therefore,  of  the  view\t that  there  is  no
\nsubstance in  any of the contentions raised on behalf of the
\npetitioners and\t it was\t for this  reason that\tby an  order
\ndated 15-2-1980, we dismissed both these writ petitions with
\nno order as to costs.\n<\/p>\n
S.R.\t  Petitions dismissed.\n<\/p>\n
1370<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Kasturi Lal Lakshmi Reddy vs State Of Jammu And Kashmir & … on 9 May, 1980 Equivalent citations: 1980 AIR 1992, 1980 SCR (3)1338 Author: P Bhagwati Bench: Bhagwati, P.N. PETITIONER: KASTURI LAL LAKSHMI REDDY Vs. RESPONDENT: STATE OF JAMMU AND KASHMIR & ANOTHER DATE OF JUDGMENT09\/05\/1980 BENCH: BHAGWATI, P.N. BENCH: […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-151127","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nKasturi Lal Lakshmi Reddy vs State Of Jammu And Kashmir & ... on 9 May, 1980 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/kasturi-lal-lakshmi-reddy-vs-state-of-jammu-and-kashmir-on-9-may-1980\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Kasturi Lal Lakshmi Reddy vs State Of Jammu And Kashmir & ... on 9 May, 1980 - 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