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PETITIONER: AKADASI PADHAN

       Vs.

RESPONDENT: STATE OF ORISSA

DATE OF JUDGMENT: 05/12/1962

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. SINHA, BHUVNESHWAR P.(CJ) WANCHOO, K.N. GUPTA, K.C. DAS SHAH, J.C.

CITATION:  1963 AIR 1047            1963 SCR  Supl. (2) 691  CITATOR INFO :  RF         1964 SC1486  (8)  R          1969 SC1081  (5,13,19)  R          1969 SC1100  (10)  E          1970 SC 129  (8)  R          1970 SC 564  (70,178)  RF         1971 SC 733  (3,8)  R          1972 SC 971  (9)  E          1973 SC 974  (11,12,13)  RF         1973 SC1461  (434,740,742,1185)  R          1979 SC  25  (24,33)  RF         1980 SC1789  (120)  RF         1981 SC 679  (16,28,37,38)  R          1984 SC 326  (30,31,68)  R          1984 SC 657  (16)  R          1987 SC2310  (12)  R          1990 SC 123  (30)  RF         1991 SC 672  (31)

ACT: State Monopoly-Kendu Leaves-Appointment of  agents-Agreement with agents-Validity of-Article 19 (6) (ii)-Scope and effect of-Rule 7 (5)-Validity of Act and ss. 3, 4, 8,-Orissa  Kendu Leaves (Control of Trade) Act, 1961 (Orissa 28 of 1961), ss. 3, 4, 8-Constitution of India, Arts. 19 (1) (f) and (g),  19 (6).

HEADNOTE: Prior  to  1961, the petitioner used to carry  on  extensive trade  in the sale of Kendu leaves.  In 1962, the  State  of Orissa acquired a monopoly in the trade of Kendu leaves  and put   restrictions   on  the  fundamental  rights   of   the petitioner.  Three notifications were issued by the State on January  8,  1962, January 25, 1962 and March 10,  1962  for that purpose.  In his petition under Art. 32, the petitioner challenged  the validity of the notifications and  also  the validity of the whole Act, particularly ss. 3 and 4, on  the ground  that  they violated Art. 19 (1) (f)  and  (g).   The petitioner  prayed for a declaration that the whole act  was ultra  vires  and also an order restraining the  State  from

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giving effect to the notification and the Act, Held,  that the Orissa Kendu Leaves (Control of Trade)  Act, 1961,  is  a valid piece of legislation.   The  creation  of State  monopoly in Kendu Leaves is within the scope of  Art. 19  (6) of the Constitution as amended by  the  constitution (First  amendment)  Act,  195 1. ,A  law  creating  a  State monopoly in the narrow and limited sense is valid under  the latter  part of Art. 19 (6).  If it indirectly  impinges  on any  other right, its validity cannot be challenged on  that ground.    If  the  said  law  contains   other   incidental provisions which are not essential and do not constitute  an integral part of the monopoly created by it, the validity of those  provisions has to be tested under the first  part  of Art.  19  (6).   If  they  directly  impinge  on  any  other fundamental  right granted by Art. 19 (1), the  validity  of the  said  clauses  has to be tested  by  reference  to  the corresponding clauses of Art. 19. 692 The essential attributes of the law creating a monopoly will vary  with the nature of the trade or business in which  the monopoly  is created.  They will depend upon the  nature  of the  commodity,  the  nature  of commerce  in  which  it  is involved and several other circumstances. A  law  relating  to  State  monopoly  in  respect  of  road transport  or air transport would not normally infringe  the citizen’s   fundamental  right  under  Art.  19  ’(1)   (f). Likewise, a State monopoly to manufacture steel,  armaments, transport  vehicles  or railway engines and coaches  can  be provided  for by law and that would not normally impinge  on Art.  19  (1)  (f).   However,  if  the  law  creating  such monopolies makes incidental provisions directly impinging on the citizens’ right under Art. 19 (1) (f), the case would be different. Having regard to the scheme of the State monopoly  envisaged by the Act, s. 4 cannot be said to be such an essential part of  the said monopoly as to fall within the expression  "law relating to" under Art. 19 (6).  The validity of s. 4 has to be  tested in the light of the first part of Art. 19 (6)  so far  as  the petitioner’s rights under Art. 19 (1)  (g)  are concerned  and under Art. 19 (5) so far as his rights  under Art.  19 (1) (f) are concerned, So tested, the  restrictions regarding  the  fixation of prices prescribed by  s.  4  are reasonable  and in the interest of the general  public  both under Art. 19 (5) and Art. 19 (6).  Hence s. 4 is valid. Section  3  of the Act is also not open  to  any  challenge. This  section allows either the Government or an officer  of the  Government  authorised in that behalf or  an  agent  in respect  of  the  unit in which the leaves  have  grown,  to purchase or transport Kendu leaves.  The Court was satisfied that the two categories of persons specified in cls. (b) and (c) are intended to work as agents of the Government and all their actions and dealings in pursuance of the provisions of the  Act  would  be actions and dealings on  behalf  of  the Government  and for the benefit of the Government.  If s.  3 is  valid, s. 8 which authorises the appointment of  agents, must also be held valid. When the State carries on any trade, business or industry it must inevitably carry it on either departmentally or through its officers appointed for that purpose.  In the very nature of things, the State cannot function without the help of its servants  or  employees and that inevitably  introduces  the concept of agency in a narrow and limited sense.  There  are some trades or businesses in which it may be inexpedient  to undertake  the work of trade or business  departmentally  or with the assistance

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693 of State servants. in such cases, it is open to the State to employ  the services of agents, provided the agents work  on behalf of the State and not for themselves. Rule 7 (5) provides that on appointment as agent the  person appointed  shall  execute  an  agreement  in  such  form  as Government  may direct.  This rule is bad because it  leaves it  to the sweet will and pleasure of the officer  concerned to fix any terms and conditions on an ad hoc basis.  This is beyond  the competence of the State Government.   The  terms and conditions of the agreement must be prescribed by rules. When the agreement actually made in this case is considered, it leaves no room for doubt that the person appointed  under the  agreement to work the monopoly of the State is  not  an agent  in  the  strict and narrow sense  of  the  term  con. templated  by Art. 19 (6) (ii).  The agent  appointed  under this agreement seems to carry on the trade substantially  on his  own account.  If he makes any profit after  paying  the amount specified in the contract, that profit is his.  If he incurs  any  loss,  that  loss  is  his.   He  is  not  made accountable   to  tile  State  Government  and   the   State Government  is  not  responsible for  his  actions.   It  is impossible to hold that the agreement is consistent with the terms of s. 3 of the Act.  Hence, the agreement is  invalid. The State Government cannot implement the provisions of  the Act  with the assistance of agents appointed under the  said invalid agreement. Motilal  v. The Government of the State of U.P. I.L.R.  9511 All.  269 A. K. Gopalan v. State of Madras, [1950]  S.C.  R. 88,  Ram Singh v. The State of Delhi, [1951] S. C.  R.  451, Express  Newspapers (P) Ltd. v. Union of India, [1959]  S.C. R. 12, State of Bombay v. R. M. D. Chamarbaugwala, [1957] S. C.  R. 874.  Ex parts Bright in Resmith, [1879] 10 L R.  Ch. D. 566 and Weiner Harris, [1910] 1 K. B. 285, referred to. Saghir  Ahmed  v.  State of U. P. r[9551]1  S.  C.  R.  707, Parbhani Transport Co-operative Society- Ltd v. The Regional Transport Authority, Aurangabad, [1960] 3 S. C. R. 177, Dosa Satyanarayanamurty   v.  The  Andhra  Pradesh   State   Road Transport  Corporation,  [1961]  1 S. C. R. 642  and  H.  C. Narayanappa  v.  State  of Mysore, [1960] 3 S.  C.  R.  742, relied upon.

JUDGMENT: ORIGINAL JURISDICTION : Petition No. 73 of 1962. Petition  under  Art. 32 of the Constitution  of  India  for enforcement of Fundamental Rights. 694 G. S. Pathak and C. P. Lal, for the petitioner. M.  C. Setalvad, Attorney-General of India, Dinabandhu Sahu, Advocate-General for the State of Orissa, C. B. Agarwala, R. H. Dhebar, and R. N. Sachthey, for respondent No. 1. 1962.   December 5. The judgment of the Court was  delivered by GAJFNDRAGADKAR, J.-In challenging the validity of the Orissa Kendu  Leaves (Control of Trade) Act, 1961 (No. 28 of  1961) (hereinafter called the Act), this petition under Art. 32 of the  Constitution  raises an important  question  about  the scope  and  effect of the provisions of Art.  19  (6).   The petitioner  Akadasi Pradhan owns about 130 acres of land  in village Bettagada, Sub-division Rairakhel in the District of Sambalpur, and in about 80 acres of the said land lie  grows Kendu  leaves.  Kendu leaves are used in the manufacture  of Bidis;  and so, prior to 1961, the petitioner used to  carry

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on   extensive  trade  in  the  sale  of  Kendu  leaves   by transporting  them  to  various places in  and  outside  the District of Sambalpur.  But since the Act was passed in 1961 and  it  came into force on the 3rd of  January,  1962,  the State has acquired a monopoly in the trade of Kendu leaves,, and  that  has put severe restrictions  on  the  fundamental rights of the petitioner under Articles 19 (1) (f) and  (g). That, in substance., is the basis of the present petition. The  petition alleges that, in substance, the Act creates  a monopoly  in  favour  of certain  individuals  described  as Agents  by the relevant provisions of the Act., and in  that sense,  it is a colourable piece of legislation.  Under  the relevant  provisions of the Act., three  notifications  have been issued, and the validity of these notifications is also challenged   by  the  petition.   The   first   notification published on the 8th of January, 1962 under section 5 of the Act, gives a schedule of the Districts, the number of units 69 in  which  the  districts are divided  and  the  local  area covered  by  the said units.  The District of  Sambalpur  in which  the  petitioner resides has been  divided  into  five units  and the petitioner’s lands fall under units 2 and  5. On  January 10, 1962, applications were called from  persons who  desired to be appointed as Agents of the Government  of Orissa  for purchase of and trade in Kendu leaves,  and  the notification  by  which these applications were  called  for made  it  clear that the Government reserved to  itself  the right  to, reject any or all applications in respect of  any unit without assigning any reason whatsoever.  Then followed the notification of the 25th January, 1962, which prescribed the  price for the Kendu leaves @ 50 leaves per naya  paisa. This notification stated that the said price had been  fixed by  the State Government in consultation with  the  Advisory Committee  appointed  under  s.  4  of  the  Act  The   last notification  to  which  reference  must  be  made  is   the notification  which  was issued on March  10,  1962,  making certain corrections in the units of the local areas notified by the notification of the January 8, 1962.  The validity of these  notifications is challenged by the petitioner on  the ground  that  the relevant provisions under which  the  said notifications  are  issued  are invalid,  and  also  on  the general ground that the Act in its entirety is ultra vires. The petition has averred that sections 3, 5, 6 and 16 of the Act  are invalid because they contravene Art. 14,  but  this part  of the case has not been argued before us.   The  main attack  has been directed generally against the validity  of the  whole  Act and sections 3 and 4 in  particular  on  the ground  that  they  violate Art. 19 (1) (f)  and  (g).   The relief  claimed  by the petitioner is that  this  Court  may declare  that  the  whole Act is ultra  vires  and  restrain respondent  No. 1, the State of Orissa, from  giving  effect either to the provisions of the impugned notifications or to  the provisions of the impugned Act. 696 The challenge made by the petitioner to the validity of  the Act and the relevant notifications is met by respondent  No. 1  mainly  on  the ground that the  Orissa  Legislature  was competent  to  pass the Act and that its provisions  do  not contravene  Art. 19 (1) (f) or (g).  It is urged that  under Art. 19 (6), the State Legislature is empowered to create  a State  monopoly  in  any  or business and  a  monopoly  thus created cannot be successfully challenged either under  Art. 19(1) (f) or under Art. 19 (1) (g).  In support of its  case that  the  prices  fixed under the Act  and  the  scheme  of enforcing  the  State  monopoly  adopted  by  the  Act   are

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reasonable,  respondent  No.1 has referred to  the  previous legislative  history  in respect of Kendu  leaves,  and  has pointed  out  that the Act was passed in  pursuance  of  the recommendations   made  by  a  Taxation  Enquiry   Committee appointed by the State Government in 1959.  Besides, it  has emphasised  that  75% of the Kendu leaves  produced  in  the State  of Orissa grow in Government lands, and the  monopoly created by the Act affects only 25% of the total produce  of Kendu   leaves  in  the  State.   The  affidavit  filed   by respondent   No.1  also  shows  that  the  price  fixed   in consultation  with  the  Advisory  Committee  is  fair   and reasonable  and would leave a fair margin of profit  to  the grower  of kendu leaves.  It is on these  rival  contentions that  the validity of the Act as well as  the  notifications has to be considered in the present petition. Before referring, to the relevant provisions of the Act,  it would be relevant to refer to the legislative background  in respect of Kendu leaves.  In 1949, the Government of  Orissa had  passed an order in exercise of its powers conferred  on it  by  subsection  (1)  of s. 3  of  the  Orissa  Essential Articles Control and Requisitioning (Temporary Powers) Act  697 1947.   This  Order  was  called  the  Orissa  Kendu  Leaves (Control and Distribution) Order, 1949.  The broad scheme of this  Order was that the area in the State was divided  into units, and licences were issued to persons who were entitled to trade in Kendu leaves.  The District Magistrate fixed the minimum  rate from time to time and the Order provided  that the  licensees were bound to purchase Kendu leaves from  the pluckers or owners of private trees and forests at rates not below the minimum prescribed.  In other words, the trade  of Kendu  leaves was entrusted to the licensees who were  under an  obligation to purchase Kendu leaves offered to  them  at prices not below the minimum prescribed by the Order. This  Order was followed by the Orissa Kendu Leaves  Control Order,  1960, passed under the same provision of the  Orissa Act of 1947.  The licensees were continued under this Order, but some other provisions were made, such as the appointment of  a Committee for each District to fix the minimum  price. In  other words, the licensing system continued  even  under this latter Order. It appears that when there was a change in the Government of Orissa, the monopoly created in favour of the licensees  was changed  over  to  controlled  competition,  and  when   the Congress  Government, came back to power, it was faced  with the  problem that the controlled competition  introduced  by its  predecessor  had led to a loss in  Government  revenue. That is why, in pursuance of the recommendations made by the Taxation Enquiry Committee, the present Act has been  passed with the object of creating a State monopoly in the trade of Kendu  leaves.  It would thus- be seen that though  the  Act creates  a  State monopoly in the trade of Kendu  leaves,  a kind  of  monopoly in favour of the licensees  had  been  in operation in the State since 1949, 698 except for a short period when the experiment of  controlled competition was tried by the Coalition Government which  was then in power. Let  us now examine the broad features of the Act.  The  Act consists  of 20 sections, and as its preamble indicates,  it was  passed  because  the Legislature thought  that  it  was expedient to provide for regulation of trade in Kendu leaves by  creation of State monopoly in such trade.  Section 2  of the Act defines "agent" as meaning an agent appointed  under section  8, and "’unit" as a unit constituted under  section

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5; "’grower of Kendu leaves" means any person who owns lands on  which Kendu plants grow or who is in possession of  such lands  under  a lease or otherwise; and  ""permit"  means  a permit issued under section 3. Section 3(1) provides that no person  other  than (a) the Government; (b)  an  officer  of Government  authorised  in that behalf; or (c) an  agent  in respect  of the unit in which the leaves have  grown;  shall purchase  or transport Kendu leaves.  It is thus clear  that by  imposing  restrictions on the purchase or  transport  of Kendu  leaves, section 3 has created a monopoly.  There  are two explanations to s. 3(1) and two sub-sections to the said section, but it is unnecessary to refer to them.  Section  4 deals  with the fixation of sale price.  Section  4(1)  lays down that the price at which Kendu leaves shall be purchased shall  be fixed by the State Government  after  consultation with  the  Advisory  Committee constituted  under  s.  4(2). After the price is thus fixed, it has to be published in the Gazette in the manner prescribed not later than the 31st day of  January  and  after it is  published,  the  price  would prevail" for the whole of the year and shall not be  altered during  that  period.   The  proviso  to  s.  4(1)   permits different  prices  to be fixed for different  units,  having regard to the five factors specified in clauses (a) to  (e). Clause  (a) has reference to the prices fixed under any  law during the preceding three  699 years in respect of the area in question; cl. (b) refers  to the quality of the leaves grown in the unit; cl. (c) to  the transport  facilities available in the unit; cl. (d) to  the cost of transport; and cl. (e) to the general level of wages for  unskilled labour prevalent in the unit.   Section  4(2) provides  that the Advisory committee to be  constituted  by the Government shall consist of not less than six members as will  be notified from time to time; and the proviso  to  it lays down that not more than one-third of such members shall be  from  amongst persons who are growers of  Kendu  leaves. Under  sub-section (3), it is provided that it shall be  the duty  of the Committee to advise Government on such  matters as may be referred to it by Government; and sub-section  (4) prescribes  that  the  business of the  Committee  shall  be conducted  in such manner and the members shall be  entitled to such allowances, if any, as may be prescribed.  Section 5 allows the constitution of units-, and s. 6 provides for the opening  of depots, publication of price list and the  hours of business etc.  Section 7(1) imposes an obligation on  the Government  and the authorised officer or agent to  purchase Kendu  leaves offered at the price fixed under s. 4  in  the manner specified by it; under the proviso, option is left to the  Government or any officer or agent not to purchase  any leaves which in their opinion are not fit for the purpose of manufacture of bidis.  Section 7(2) provides for a remedy to a  person  aggrieved  by the refusal of  the  Government  to purchase  the Kendu leaves.  Section 7(3) deals  with  cases where  leaves  offered are suspected to be leaves  from  the Government forests and it lays down the manner in which such a  case  should  be dealt with.  Section 8  deals  with  the appointment  of agents in respect of different units and  it allows  one person to be appointed for more than  one  unit. Under s. 9, every grower of Kendu leaves has to get  himself registered  in  the  prescribed manner if  the  quantity  of leaves grown by him during the year is likely to exceed  ten standard maunds.  Section 10 700 authorises the Government or its officer or agent to sell or otherwise  dispose  of  Kendu  leaves  purchased  by   them.

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Section 11 provides for the application of net profits which the  State Government may make as a result of the  operation of  this  Act;  this profit has to be  divided  between  the different  Samitis and Gram Panchayats as prescribed by  the said  section.  Section 12 deals with delegation of  powers; s.  13  confers power of entry, search and  seizure;  s.  14 deals  with  penalty; s. 15 deals with offences  and  s.  16 makes  the offences cognizable; Section 17 makes savings  in respect  of  acts  done  in  good  faith;  by  section   18, Government is given power to make rules; by section 19,  the Orissa   Essential  Articles  Control   and   Requisitioning (Temporary  Powers)  Act, 1955 is repealed in so far  as  it relates  to kendu leaves; and s. 20 gives the power  to  the State  Government to remove doubts and difficulties.   These are the broad features of the Act. The first contention which has been raised by Mr. Pathak  on behalf  of  the  petitioner is that the  creation  of  State monopoly in respect of the trade of purchase of kendu leaves contravenes  the petitioner’s fundamental rights under  Art. 19(1) (f)and (g).  There has been some controversy before us as to whether the petitioner can claim any fundamental right under   Art.  19(1)  (g).   The  learned  Attorney   General contended  that the petitioner is merely a grower  of  kendu leaves  and as such, though he may be entitled to  say  that the  restrictions  imposed by the Act affect  his  right  to dispose  of his property under article 19(1) (f), he  cannot claim to be a person whose occupation, trade or business has been  affected. For the purpose of the present petition,  we have,  however,  decided to proceed on the  basis  that  the petitioner is entitled to challenge the validity of the  Act both  under  Art. 19 (1) (f) and Art. 19(1) (g) ;  and  that makes  it  necessary to examine the argument raised  by  Mr. Pathak that the creation of the State  701 monopoly contravenes Art. 19 (1) (g). Mr. Pathak suggests that the effect of the amendment made by the  Constitution (first Amendment) Act, 1951 in Art.  19(6) is  not  to  exempt  the law passed  for  creating  a  stage monopoly  from application of the rule prescribed by the  of Art.  19(6).   In  other words he  suggests  effect  of  the amendment  is  merely to enable legislature to  pass  a  law creating a state monopoly the  first part that the the State but that does not mean that the said law will still not have to be justified on the ground that the restrictions  imposed by   it  are  reasonable  and are in  the  interest  of  the general   public.  On the other hand, the learned  Attorney- General contends that the object of the amendment was to put the  monopoly laws beyond the pale of challenge  under  Art. 19(1)  (f ) and (g).  It would thus be noticed that the  two rival   contentions   take  two  extreme   positions.    The petitioner’s  argument  is that the monopoly law has  to  be tested  in  the  light  of  Art. 19(6)  :  if  the  test  is satisfied, then the contravention of Art. 19(1) (g) will not invalidate  the law.  On the other hand, the State  contends that the monopoly law must be deemed to be valid in all  its aspects  because  that was the very purpose  of  making  the amendment in Art. 19(6). Before   proceeding   to  examine  the   merits   of   these contentions,  it  is relevant to recall the genesis  of  the amendment  introduced by the Constitution (First  Amendment) Act, 1951.  Soon after the Constitution came into force, the impact   of  socio-economic  legislation,  passed   by   the legislature  in  the country in pursuance of  their  welfare policies,  on  the  fundamental rights of  the  citizens  in respect  of property came to be examined by Courts, and  the

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Articles on which the citizens relied were 19(1) (f) and (g) and  31 respectively.  In regard to State monopolies,  there never was any doubt that as a 702 result of Entry 21 in List III both the State and the  Union Legislatures  were  competent  to pass  laws  in  regard  to commercial and industrial monopolies, combines and  trusts.- so  that the legislative competence of the  Legislatures  to create  monopolies by legislation could not  be  questioned. But  the validity of such legislation came to be  challenged on the ground that it contravened the citizen’s rights under Art. 19(1) (f) and (g).  As a typical case on the point,  we may  refer  to the decision of the Allahabad High  Court  in Moti  Lal  v. The Government of the State of  Uttar  Pradesh (1).   The  result of this decision was that a  monopoly  of transport  sought  to be created by the U.P.  Government  in favour  of  the  State operated Bus Service,  known  as  the Government  Roadways, was struck down  as  unconstitutional, because  it was held that such a monopoly  totally  deprived the  citizens  of their rights under Art. 19(1) (g).   As  a result  of this decision it was realised by the  Legislature that  the legislative competence to create monopolies  would not necessarily make monopoly laws valid if they contravened Art.  19(1).   That is why Art. 19(6) came  to  be  amended. Incidentally,  it may be of interest to note that about  the same time, the impact of legislative enactments in regard to acquisition of property on the citizens’ fundamental  rights to  property  under Art. 19(1) (f) also  came  for  judicial review  and  the  decisions  of Courts  in  respect  of  the acquisition laws in turn led to the amendment of Art. 31  on two   occasions;  firstly,  when  the  Constitution   (First Amendment)  Act  was passed in 1951 and secondly,  when  the Constitution (Fourth Amendment) Act was passed in 1955. Article 19(6) as amended reads thus               "Nothing in sub-clause (g) of the said  clause               shall affect the operation of any existing law               in so far as it imposes, or prevent the State (1)  I.L.R. (1951) 1 All. 269. 703               from making any law imposing in the  interests               of the general public, reasonable restrictions               on the exercise of the right conferred by  the               said sub-clause, and, in particular nothing in               the said sub-clause shall affect the operation               of  any existing law in so far as  it  relates               to,  or prevent the State from making any  law               relating to,               (i)   the professional or technical qualifica-               tions necessary for practising any  profession               or  carrying  on  any  occupation,  trade   or               business, or               (ii)  the  carrying  on  by the  State  or  by               corporation owned or controlled by the  State,               of  any trade, business, industry or  service,               whether to the exclusion, complete or partial,               of citizens or otherwise." It would be noticed that the amendment provides, inter alia, that  nothing contained in Art. 19(1) (g) will  prevent  the State from making any law relating to the carrying on by the State  of any trade, business, industry or service,  whether to  the  exclusion,  complete or  partial,  of  citizens  or otherwise ; and this clearly means that the State may make a law  in respect of any trade, business, industry or  service whereby   complete  monopoly  could  be  created  by   which ’Citizens  are  wholly excluded from  the  trade,  business,

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industry  or  service in question; or a law  may  be  passed whereby  citizens  are partially excluded from  such  trade, business,  industry or service ; and a law relating  to  the carrying  on  of  the business either  to  the  complete  or partial  exclusion of citizens will not be affected  because it  contravenes Art. 19 (1) (g).  The question which  arises for  our decision is : what exactly is the scope and  effect of this provision  ? 704 In  attempting to construe Art. 19(6), it must be  borne  in mind   that  a  literal  construction  may  not   be   quite appropriate.     The    task   of    construing    important Constitutional  provisions like Art. 19(6) cannot always  be accomplished by treating the said problem as a mete exercise in  grammar.   In  interpreting  such  a  provision,  it  is essential  to  bear in mind the political  or  the  economic philosophy underlying the pro. visions in question, and that would necessarily involve the adoption of a liberal and  not a literal and mechanical approach to the problem.  With  the rise  of the philosophy of Socialism, the doctrine of  State ownership has been often discussed by political and economic thinkers.   Broadly  speaking this  discussion  discloses  a difference  in approach.  To the socialist,  nationalisation or  State  ownership  is  a  matter  of  principle  and  its justification  is the general notion of social welfare.   To the  rationalist,  nationalisation or State ownership  is  a matter of expediency dominated by considerations of economic efficiency and increased output of production.  This  latter view  supported nationalisation only when it appeared  clear that   State  ownership  would  be  more   efficient,   more economical and more productive.  The former approach was not very much influenced by these considerations, and treated it a matter of principle that all important and nation-building industries  should  come  under State  control.   The  first approach is doctrinaire, while the second is pragmatic.  The first  proceeds  on  the general ground  that  all  national wealth and means of producing it should come under  national control, whilst the second supports nationalisation only  on grounds of efficiency and increased output. The  amendment made by the Legislature in Art. 19 (6)  shows that  according  to the Legislature, a law relating  to  the creation  of State monopoly should be presumed to be in  the interests  of the general public.  Art. 19 (6) (ii)  clearly shows that  705 there  is  no  limit placed on the power  of  the  State  in respect of the creation of State monopoly.  The width of the power  conferred on the State can be easily assessed  if  we look  at  the words used in the clauses which  cover  trade, business,  industry or service.  It is true that  the  State may,   according   to  the  exigencies  of  the   case   and consistently  with the requirements of any trade,  business, industry  or service, exclude the Citizens either wholly  or partially.   In  other  words,  the  theory  underlying  the amendment  in so far as it relates to the concept  of  State monopoly,  does  not  appear to be based  on  the  pragmatic approach,  but on the doctrinaire approach  which  socialism accepts.  That is why we feel no difficulty in rejecting Mr. Pathak’s argument that the creation of a State monopoly must be justified by showing that the restrictions imposed by  it are  reasonable  and  are in the interests  of  the  general public.   In  our opinion, the amendment  clearly  indicates that State monopoly in respect of any trade or business must be presumed to be reasonable and in the interests of general public, so far as Art. 19(1) (g) is concerned.

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The  amendment made in Art. 19 (6) shows that it is open  to the State to make laws for creating State monopolies, either partial  or  complete, in respect of  any  trade,  business, industry  or  service.   The  State may  enter  trade  as  a monopolist  either for administrative reasons, or  with  the object of mitigating the evils flowing from competition,  or with  a view to regulate prices, or improve the  quality  of goods, or even for the purpose of making profits in order to enrich  the  State exchequer.  The  Constitution-makers  had apparently  assumed that the State monopolies or schemes  of nationalisation  would fall under, and be protected by  Art. If) (6) as it originally stood; but when judicial  decisions rendered  the  said  assumption  invalid,  it  was   thought necessary  to clarify the intention of the  Constitution  by making 706 the  amendment.  It is because the amendment was  thus  made for purposes of clarification that it begins with the  words "in  particular"  These  words  indicate  that  restrictions imposed on the fundamental rights guaranteed by Art. 19  (1) (g)  which are reasonable and which are in the interests  of the general public, are saved by Art. 19(6) as it originally stood;  the  subject-matter covered by  the  said  provision being  justiciable,  and the amendment adds that  the  State monopolies   or   nationalisation  Schemes  which   may   be introduced by legislation, are an illustration of reasonable restrictions imposed in the interests of the general  public and must be treated as such.  That is why the question about the  validity  of the laws covered by the  amendment  is  no longer  left  to be tried in Courts.  This  brings  out  the doctrinaire approach adopted by the amendment in respect  of a State monopoly as such. This   conclusion,  however,  still  leaves   two   somewhat difficult questions to be decided; what does "a law relating to" a monopoly used in the amendment mean ? And what is  the effect  of the amendment on the other provisions of Art.  19 (1) ?  The Attorney-General contends that the effect of  the amendment  is  that whenever any law is  passed  creating  a State  monopoly,  it  will not have to  stand  the  test  of reasonableness  prescribed by the first part of  Art.  19(6) and its reasonableness or validity cannot be examined  under any other provision of Art. 19 (1).  Taking the present Act, he  urges  that if the State monopoly is  protected  by  the amendment  of Art. 19 (6), all the relevant provisions  made by  the Act in giving effect to the said monopoly  are  also equally  protected  and the petitioners cannot be  heard  to challenge  their validity on any ground.  What is  protected by  the amendment must be held to be constitutionally  valid without being tested by any other provisions of Art.    (1). That,  in  substance, is the position taken by  the  learned Attorney-General.  707 In dealing with the question about the precise denotation of the clause ""a law relating to"’, it is necessary to bear in mind  that this clause occurs in Art. 19(6) which is,  in  a sense, an exception to the main provision of Art.  19(1)(g). Laws  protected  by Art. 19 (6) are regarded as  valid  even Though  they impinge upon the fundamental  right  guaranteed under  Art.  19(1)(g).   That is the effect  of  the  scheme contained in Art. 19(1) read with clauses (2) to (6) of  the said  Article.  That being so, it would be  unreasonable  to place  upon the relevant clause an unduly wide  and  liberal construction.  "A law relating to" a State monopoly  cannot, in the context, include all the provisions contained in  the said law whether they    have   direct  relation  with   the

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creation  of  the monopoly or not. In our  opinion,      the said expression should be construed to mean the law relating to the monopoly in its absolutely essential features.  If  a law  is passed creating a State monopoly, the  Court  should enquire  what are the provisions of the said law  which  are basically  and essentially necessary for creating the  State monopoly.   It is only those essential and basic  provisions which  are protected by the latter part of art.  19(6).   If there are other provisions made by the Act which are  subsi- diary  incidental  or  helpful  to  the  operation  of   the monopoly,  they  do  not  fall  under  the  said  part   and their--validity must be judged under the first part of  Art. 19(6).  In other words, the effect of the amendment made  in Art. 19(6) is to protect the law relating to the creation of monopoly  and that means that it is only the  provisions  of the law which are integrally and essentially connected  with the, creation of the monopoly that are protected.  The  rest of the provisions which may by incidental do not fall  under the  latter part of Art. 19(6) and would inevitably have  to satisfy the test of the first part of Art. (19)(6). The next question to consider is: what is the 708 effect  of  the amendment on the  other  fundamental  rights guaranteed by Art. 19(1) ? It is likely that a law  creating a  State  monopoly  may in some cases,  affect  a  citizens’ rights  under Art. 19(1)(f) because such a law  may  impinge upon  the  citizens’ right to dispose of property.   Is  the learned  Attorney-General right when he contends  that  laws protected by the latter part of Art. 19(6) cannot be  tested in  the light of the other fundamental rights guaranteed  by Art.  19(1) ? The answer to this question would depend  upon the  nature  of the law under scrutiny.  There is  no  doubt that  the several rights guaranteed by the 7 sub-clauses  of Art. 19(1) are separate and distinct fundamental rights  and they  can be regulated only if the provisions  contained  in clauses  (2)  to  (6) are respectively  satisfied.   But  in dealing  with the question as to the effect of a  law  which seeks  to regulate the fundamental right guaranteed by  Art. 19(1)(g) on the citizen’s right guaranteed by Art. 19(1)(f), it  will  be  necessary to distinguish  between  the  direct purpose  of the Act and its indirect or  incidental  effect. If  the legislation seeks directly to control the  citizens’ right  tinder Art. 19(1) (g), its validity has to be  tested in the light of the provisions contained in Art. 19(6),  and if  such  a legislation, as for instance, a law  creating  a State   monopoly,  indirectly  or  incidentally  affects   a citizen’s right under any other clause of Art. 19(1) as  for instance,  Art.  19(1)(f),  that  will  not  introduce   any infirmity  in the Act itself.  As was observed by Kania,  C. J. I., in A. K. Gopalan v. The State of Madras (1), if there is a legislation directly attempting to control a  citizen’s freedom  of speech or expression, or his right  to  assemble peaceably  and without arms etc., the question whether  that legislation is saved by the relevant clause of Art. 19  will arise.   If  however,  the legislation is  not  directly  in respect  of  any of these Subjects, but as a result  of  the operation  of other legislation, for instance, for  punitive or preventive detention, his right under any of these (1)  [1950] S.C.R. 88, 101.  709 sub-clauses is abridged, the question of the application  of Art.  19  does  not ’arise.  The true approach  is  only  to consider the directness of the legislation and not what will be the result of the detention otherwise valid.  On the mode of the detenue’s life.

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These  observations were subsequently adopted  by  Patanjali Sastri, J., in Ram Singh. v. The State of Delhi(1) who added that  in  Gopalan’s case the majority view was  that  a  law which  authorises  deprivation of personal liberty  did  not fall within the purview of Art. 19 and its validity was  not to  be judged by the criteria indicated in that Article  but depended on its compliance with the requirements of Articles 21  and 22, and since s. 3 satisfied those requirements,  it was constitutional. The  same view has been accepted by this Court  ,in  Express Newspapers (Private) Ltd. v. The Union of India(2 ) as  well as  in The State of Bombay v. R. M. D.  Chamarbaugwala.  (3) Therefore,  in dealing with the attack against the  validity of  a  law creating state monopoly on the  ground  that  its provisions impinge upon the other fundamental rights guaran- teed  by Art. 19 (1), it would’ be necessary to decide  what is  the  purpose of the Act and its direct effect.   If  th6 direct effect of the Act is to impinge upon any other  right guaranteed  by  Art. 19 (1), its validity will  have  to  be tested in the light of the corresponding clauses in Art. 19; if the effect on the said right is indirect or remote,  then it’s validity cannot be successfully challenged. It  will  be recalled that clause (6) is correlated  to  the fundamental right guaranteed under Art. 19 (1) (g) as  other clauses  are  co-related  to the  other  fundamental  rights guaranteed by Art. 19 (1) (a) to (f), and so, the protection afforded  by  the  said clause. would be  available  to  the impugned  statute only in resisting the contention  that  it violates the (1) [1951] S.C.R. 451, 456.  (2) [1959] S.C.R. 12, 128-130, (3)[1957] S.C.R. 874, 927, 710 fundamental right guaranteed under Art. 19 (1) (g).  If  the statute,   in  substance,  affects  any  other   right   not indirectly  but  directly, the protection of clause  19  (6) will not avail and it will have to be sustained by reference to the requirements of the corresponding clauses in Art. 19. The  position,  therefore, is that a law  creating  a  state monopoly  in the narrow and limited sense to which  we  have already  referred  would be valid under the latter  part  of Art.  19  (6), and if it indirectly impinges  on  any  other right, its validity cannot be challenged on that ground.  If the said law contains other incidental provisions which  are not essential and do not. constitute an integral part of the monopoly  created  by it, the validity of  those  provisions will have to be tested under the first part of Art. 19  (6), and if they directly impinge on any other fundamental  right guaranteed by Art. 19 (1), the validity of the said  clauses will  have  to be tested by reference to  the  corresponding clauses  of Art. 19.  It is obvious that if the validity  of the said provisions has to be tested under the first part of Art-.  19 (6) as well as Art. 19 (5), the position would  be the  same  because  for all practical  purposes,  the  tests prescribed  by  the said two clauses are the same.   In  our opinion,  this approach introduces a harmony in  respect  of the  several  provisions of Art. 19 and  avoids  a  conflict between them.  In this connection, it is necessary to add that in a  large majority  of  cases  where State  monopoly.  is  created  by statute,  no  conflict would really arise e.g.  where  under State monopoly, the State purchases raw material in the open market  and manufactures finished goods, there would  hardly be  an occasion for the infringement of the citizens’  right under  Art.  19  (1) (f).  Take, for  instance.,  the  State monopoly  in respect of road transport or air  transport;  a

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law relating to such a monopoly would not normally  infringe the  citizen’s  fundamental right’ under Art.  19  (1)  (f). Similarly, a State monopoly to 711 manufacture  steel,  armaments, or  transport  vehicles,  or railway  engines  and coaches, may be provided  for  by  law which would normally not impinge on Art. 19(1) (f).  If  the law   creating  such  monopolies  were,  however,  to   make incidental provisions directly that     impinging   on   the citizens’  rights  under  Art. 19(1)(f),  would  be  another matter. What  provisions of the impugned statute are  essential  for the creation of the monopoly, would always be a question  of fact.   The  essential  attributes of  the  law  creating  a monopoly will vary with the nature of the trade or  business in which the monopoly is created; they ’will depend upon the nature of the commodity, the nature of commerce-in which  it is  involved  and  several another  circumstances.   In  the present case, the State monopoly has been created in respect of  Kendu leaves, and the main point of dispute between  the parties  is about the fixation of purchase price  which  has been  provided  for by s. 4. Mr. Pathak  contends  that  the fixation of purchase price is not essential for the creation of  monopoly, whereas the, learned  Attorney-General  argues that monopoly could not have functioned without the fixation of  such price.  We are not prepared to accept the  argument that  the fixation of purchase price in the context  of  the present  Act was an essential feature of the  monopoly.   It may  be that the fixing of the said price has been  provided for  by  s. 4 in the interests of growers  of  Kendu  leaves themselves, but that is a matter which would be relevant  in considering the reasonableness of the restriction imposed by the section.  But take a hypothetical case where in creating a  State  monopoly for purchasing. a  commodity  like  kendu leaves,   the  law  prescribes  a  purchase  price   at   an unreasonably  low  rate,  that  cannot  be  said  to  be  an essential  part  of  the State monopoly  as  such,  and  its reasonableness will have to be tested under Art.’  19(1)(g). On the facts of 14is case and in the light of the  commodity in respect 712 of  which  monopoly is created, it seems difficult  to  hold that  the State monopoly could not have  functioned  without fixing  the  purchase  price.  We are  not  suggesting  that fixing  prices  would  never be an  essential  part  of  the creation  of  State monopoly though, prima facie,  it  seems doubtful whether fixing purchase price can properly form  an integral part, of state monopoly; what we are holding in the present  case  is that having regard to the  scheme  of  the state monopoly envisaged by the Act, s. 4 cannot be said  to be  such an essential part of the said monopoly as  to  fall within  the expression "law relating to" under  Art.  19(6). Therefore,  we are satisfied that the validity of s. 4  must be  tested in the light of the first part of Art.  19(6)  as far  as  the  petitioner’s rights under  Art.  19(1)(g)  are concerned,  and under Art. 19(5) so far as his rights  under Art. 19(1)(f) are concerned. Thus considered, there can be no difficulty in upholding the validity  of section 4. As we have just indicated,,  if  the legislature  had  allowed  the  State  monopoly  to  operate without  fixing the prices, it would have meant hardship  to the  growers  and  undue advantage to  the  State.   If  the ordinary law of demand and supply was allowed to govern, the Prices    in all probability the said prices would have work adversely to the interests of the growers and to the benefit

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of  the  State in the case of  perishable  commodities  like Kendu leaves.  That is why the legislature has  deliberately provided  for  the fixation of’ prices  and  prescribed  the machinery in that behalf.  It is true that the prices  fixed are not the minimum prices; but the fixing of minimum prices would have served no useful purpose   when a State  monopoly was being created and soprices  which  can be  regarded  as fair are intendedto be fixed by s.4. A  representative advisory  Committee  has  to  be  appointed  and  it  is  in consultation  with  the advice of the  said  Committee  that prices have to be  713 fixed.   In  fact,  the  present  prices  have,  been  fixed according  to  the  recommendations  it  made  by  the  said Committee.  Thus, it is clear that the object of fixing  the prices was to help the growers to realise a fair price.   It is  nobody’s case that the prices are unduly low or  compare unfavourably with the prices. prevailing in the locality  in the  previous  years.  Therefore, we feel no  hesitation  in holding  that restrictions in regard to the fixing of  price prescribed  by s. 4 are reasonable and in the  interests  of the  general public both under Art. 19(5) and  Art.  19)(6). The result is that the challenge to the validity of  section 4 fail’S. At this stage, we may refer to four decisions of this  Court in  which the question about the construction of Art.  19(6) has  been incidentally considered.  In Saghir, Ahmad v.  The State  of U. P. (1), this Court was called upon to  consider the  validity of the relevant provisions of the U.  P.  Road Transport  Act (No.  11 of 1951) and the question had to  be decided  in the light of Art. 19(6) as it stood before  the’ amendment.  But at the time when the judgment of this  Court was  pronounced,  the  Amendment Act had  been  passed,  and Mukherjea,  J.,  who spoke for the Court, referred  to  this amendment  incidentally.   ’-The result of  the  amendment", observed  the  learned judge, "is that the State  would  not have to justify such action as reasonable at all in a  Court of  law and no objection could be taken to it on the  ground that  it  is an infringement of the right  guaranteed  under Art. 19(1)(g) of the Constitution.  It is quite true that if the  present statute was passed after the coming into  force of  the  new clause in Art. 19(6) of the  Constitution,  the question of reasonableness would not have arisen at all  and the appellants’ case on this point, at any rate, would  have been  unarguable."  While appreciating the effect  of  these observations, however, we have to bear in mind the fact (1)[1955] S.C, R. 707. 727, 714 that  the effect of the amendment did not really fall to  be considered and the impact of the amendment in Art. 19(6)  on the right under Art. 19(1)(f) has not been noticed. In  The Parbhani Transport Co-operative Society Ltd. v.  The Regional Transport Authority Aurangabad, (1) this Court  has observed that Art. 19 (6) by providing that nothing in  Art. 19(1)(g) shall affect the application of any existing law in so  far as it relates to, or prevents the State from  making any  law  relating to the carrying on by the  State  of  any trade,  business,  industry  or  service,  whether  to   the exclusion,  complete or partial, of citizens  or  otherwise, would  seem  to  indicate that the State may  carry  on  any business  either as a monopoly, complete or partial,  or  in competition  with  any citizen and that would not  have  the effect of infringing any fundamental rights of such citizen. It is true that the last part of the statement refers to any fundamental rights of the citizen, but that, in the context,

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cannot  be taken to mean a decision that a right under  Art. 19(1)(f) would necessarily fall within the scope of the said observation. In Dosa Satyanarayanamurty v. The Andhra Pradesh State  Road Transport Corporation, (2) this Court has observed that sub- clause  (ii) of Art. 19 (6) is couched in very  wide  terms. Under it, the State can make law for carrying on a  business or  service  to  the  exclusion,  complete  or  partial,  of citizens    or   otherwise..................   There    are, therefore, no limitations on the State’s power to make  laws conferring monopoly on it in respect of an area, and  person or persons to be excluded. (p. 649). To  the  same effect are the relevant observations  made  by this Court in the case of H. C. Narayanappa v. The State  of Mysore (3). (1) [1960] 3 S.C.R. 177,187.  (2) [1961] 1 S.C.R. 642., (3) [1960] 3 S.C.R. 742, 752.  715 We  must now examine the validity of the argument  urged  by Mr. Pathak that the Act is bad because it seeks to create  a monopoly  in favour of individual citizens described by  the Act as "agents’.  For deciding this question, we must revert once  again  to  the  amendment made  in  Art.  19(6).   The argument  is that though’ the State is empowered  to  create State  monopoly  by law, the trade in respect of  which  the monopoly  is sought to be created must be carried on by  the State or by a corporation owned or controlled by the  State. There  can  be  no doubt that though  the  power  to  create monopoly is conferred on the legislatures in very wide terms and it can be created in respect of any trade, business, in- dustry or service, there is a limitation imposed at the same time and that limitation is implicit in the concept of State monopoly itself.  If a State monopoly is created, the  State must  carry on the trade, or the State may carry it on by  a corporation  owned or controlled by it.  Thus far, there  is no difficulty.  Mr. Pathak, however, contends that the State cannot appoint any agents in carrying on the State monopoly, whereas  tile learned Attorney-General urges that the  State is  entitled not only to carry on the trade by itself or  by its officers serving in its departments, but also by  agents appointed  by  it  in that behalf; and  in  support  of  his argument that agents can be appointed, the learned Attorney- General  suggests that persons who can be treated as  agents in a commercial sense can be validly appointed by the  State in working out its monopoly.  We are not inclined to  accept either the narrow construction pressed by Mr. Pathak, or the broad  construction  suggested  by  the  learned   Attorney- General.  It seems to us that when the State’ carries on any trade, business or industry, it must inevitably carry it  on either  departmentally or through its officers appointed  in that  behalf.  In the very nature of things., the  State  as such,  cannot function without the help of its  servants  or employees  and  that inevitably introduces  the  concept  of agency 716 in  a  narrow  and limited sense If  the  State  cannot  act without the aid and assistance of its employees or servants, it  would  be  difficult to exclude the  concept  of  agency altogether.  just as the State can appoint a public  officer to carry on the trade or its business, so can it appoint  an agent  to  carry  on the trade on its  behalf  Normally  and ordinarily, the trade should be carried on departmentally or with  the  assistance of public servants appointed  in  that behalf.’ But there may be some trades or businesses in which it  would be inexpedient to undertake the work of  trade  or

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business  departmentally  or with the  assistance  of  State servants.   In such cases, it would be open to the State  to employ  the services of agents provided the agents  work  on behalf  of the State and not for themselves.  Take the  case of  Kendu leaves with which we are concerned in the  present proceedings.   These leaves are not cultivated but  grow  in forests  and  they are plucked during 3 to  4  months  every year,  so that the trade of purchasing and selling  them  is confined  generally to the said period.  In such a case,  it may  not  be  expedient  for the  State  always  to  appoint Government  servants  to  operate the  State  monopoly,  and agency would be more convenient, appropriate and  expedient. Thus considered, it is only persons who can be called agents in  the strict and narrow sense to whom the working  of  the State  monopoly can be legitimately left by the  State.   If the agent acquires a personal interest in the working of the monopoly, ceases to be accountable to the principal at every stage, is not able to bind the principal by his acts, or  if there are any other terms of the agency which indicate  that the trade or business is not carried on solely on behalf  of the State but at least partially on behalf of the individual concerned,   that  would  fall  outside  Art.  19(6)   (ii). Therefore,  in  our opinion, if a law is passed  creating  a State  monopoly  and the- working of the  monopoly  is  left either  to  the  State  or to  the  officers  of  the  State appointed in that behalf, or to the department 71 of the State, or to persons appointed as agents to carry  on the  work of the monopoly strictly on behalf of  the  State, that would satisfy the requirements of Art. 19(6) (ii).   In other words, the limitations imposed by the requirement that the  trade  must be carried on by the State or by  a  corpo- ration  owned or controlled by the State cannot  be  widened and  must be strictly construed and agency can be  permitted only in respect of trades or businesses where it appears  to be inevitable and where it works within the well  recognised limits  of  agency.  Whether or not the operation  of  State monopoly  has been entrusted to an agent of this type,  will have  to be tried as a question of fact in each  case.   The relationship of ’agency must be proved in Substance, and  in deciding  the question, the :nature of tile  agreement,  the circumstances  under  which the agreement was made  and  the terms  of the agreement will have to be carefully  examined. It  is not the form, but the substance that will decide  the issue.   Thus considered, we do not think that s. 3 is  open to any challenge.  Section 3 allows either the Government or an  officer of the Government authorised in that  behalf  or ail  agent in respect of the unit in which the  leaves  have grown,  to  purchase  or  transport  Kudu  leaves.   We  are satisfied  that the two categories of persons  specified  in clauses  (b) and (c) are intended to work as agents  of  the Government  and  all  their actions and  their  dealings  in pursuance of the provisions of the Act would be actions  and dealings on behalf’ of the Government and for the benefit of the  Government.  Mr. Pathak’s contention that  the  persons specified in clauses (b) and (c) are intended by the Act  to work  on  their own account seems to us to  be  inconsistent with the object of the section and the plain meaning of  the words  used  in the relevant clauses.  We wish  to  make  it clear  that we uphold the validity of section 3. because  we are  satisfied that clauses (b) and (c) of the said  section have been added merely 718 for clarification and are not intended to and do not include any  forms  of  agency which would  have  been  outside  the

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provision  of  s.  3 if the said two clauses  had  not  been enacted.  If section 3 is valid, then s. 8 which  authorises the appointment of agents must also be held to be valid. In  the  petition, the validity of sections 5, 6 and  9  was challenged on the ground that they contravene Art. 14.   But as  we have already mentioned, no contention has been  urged before  us  in  support of the plea that Art.  14  has  been contravened by any section of the Act.  The petition further avers  that the Act was a colourable piece  of  legislation, but that argument really proceeded on the basis whether  the agreement  entered  into by the State  Government  with  the agents   to  which  we  shall  presently   refer   correctly represents the effect of ss. 3 and 8 of the Act.  So far  as the Act is concerned, the two sections which were  seriously challenged  were  sections 3 and 4 and as  we  have  already held, the provisions in these two sections are not shown  to be invalid; and so, the argument that the Act is colourable, has  no  substance.  The notifications which  were  impugned have  also been issued under the relevant provisions of  the Act and their validity also cannot be effectively challenged once we reach the conclusion that the Act is good and valid. We  have  already  observed  that  the  petitioner  has  not specifically  and  clearly alleged that the  price  actually fixed under s. 4 is grossly unfair and as such,  contravenes his  rights  under  Art. 19(1)(f).   No  evidence  has  been adduced   before  us  to  show  that  the  price   is   even unreasonable.   On  the other hand,  the  counter  affidavit filed by respondent No. 2 would seem to show that the  price has  been fixed in accordance with the recommendations  made by  the  Advisory  Committee and it  does  not  compare  un- favourably  with the prices prevailing in the past  in  this locality  in respect of Kendu leaves.  Therefore,  the  main grounds on which the petitioner came to 719 this Courtto  challenge the        validity of the  Act fail.      There  are, however, two other points which  have  been urged  before us and on which the petitioner is entitled  to succeed.  The first ground relates to the agreement actually entered  into between respondent No.1 and the agents.   This agreement consists of ten clauses and it has apparently been drawn in accordance with Rule 7(5) of the Rules framed under the  Act.   It appears that on January 9,  1962,  the  Rules framed  by  the  State Government by  virtue  of  the  power conferred on it by s. 18 of’ the Act were published.  Rule 7 deals  with appointment of Agent.  Rule 7(2) prescribes  the form in which an application for appointment as agent has to be made. Rule 7(5) provides that on appointment as agent the person    appointed shall execute an agreement insuch  form as Government may direct within ten daysof the date  of receipt  of  the  order of  appointment  failing  which  the appointment  shall be liable to cancellation and the  amount deposited  as earnest money shall be liable  to  forfeiture. It  is significant that though the Form for  an  application which  has  to be made by a person applying  for  agency  is prescribed,  no form has been prescribed for  the  agreement which the State Government enters into with the agent.   The agreement is apparently entered into on an ad hoc basis  and that clearly is unreasonable.  In our opinion,, if the State Government  intends that for carrying on the State  monopoly authorised by the Act agents must be appointed, it must take care to appoint agents on such terms and conditions as would justify  the conclusion that the relationship  between  them and  the State Government is that of agents  and  principal; and  if  such  a result is intended to be  achieved,  it  is

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necessary  that  the principal terms and conditions  of  the agency  agreement must be prescribed by the rules.  Then  it would be open to the citizens to examine the said terms and 720 conditions  and challenge their validity if they  contravene any provisions of the Constitution, or are inconsistent with the  provisions  of  the  Act  itself.   Therefore,  we  are satisfied  that the petitioner is entitled to  contend  that Rule 7(5) is bad ’in that it leaves it to the sweet will and pleasure  of  the officer concerned. to fix  any  terms  and conditions on an ad hoc basis; that is beyond the competence of  the State Government and such terms and conditions  must be prescribed by the rules made under section 18 of the Act. That  takes us to the terms and conditions of the  agreement which  has been produced before us.  These terms indicate  a complete  confusion  in the mind of the person  who  drafted them.  Some of them are terms which would be relevant in the case of agency, while others would be relevant and  material if a contract of Government forest was made in favour of the party  signing  those  conditions;  and  some  others  would indicate  that  the person appointed as an agent is  not  an agent  at all but is a person in whom personal  interest  is created in carrying on the so called agency work.  Clause  4 of  the agreement provides for the payment which  the  agent has  to  make in respect of the Kendu  leaves  from  private lands  as well as from Government lands.  It is not easy  to appreciate  the  precise  scope of  the  provisions  of  the respective sub-clauses of cl. 4 and their validity.  But, on the  whole,  it does appear that after the agent  makes  the payment   prescribed   by  the  relevant  clauses   to   the Government,-’he  is likely to keep some profit  to  himself; and that would clearly show that the relationship is not  of the type which is permissible under Art. 19 (6) (ii),  Under clause  4 (iii), the agent has to pay a sum of Rs.  5/-  per bag  to the Government as consideration for being  permitted by  Government  to  enter  into  and  collect  leaves   from Government lands and forests.  It is remarkable that in  the absence of any specific rule, the amount  721 to be paid per bag can be determined differently from  place to place and that is a serious anomaly. it is also not clear how this amount of Rs. 5/- per bag has been determined,  and in  the absence of any explanation it would be difficult  to accept  the plea of the learned Attorney-General  that  this amount  has been fixed after making calculations  about  the profits  which the agent was likely to secure and the  price which  the  total  produce of the  forest  was,  likely  to; acquire  on  an average basis.  Under clause 4  (V),  it  is conceded  that  the agent would be entitled  to  make  some, profits in some cases.  Clause 4 (vi) entitles the agent  to claim deductions for the expenses and commission that he may be entitled to in respect of the number of bags of processed leaves; and it requires him to pay to Government the profits accruing  from the trading in the leaves collected  in  four equal  instalments in the manner specified.  Under clause  4 (ix) the agent has to finance all transactions. involved  in purchase,  collections, storage, processing,  transport  and disposal of the Kendu leaves purchased or collected- in  the Unit.  Then there are certain sub,clauses under this  clause which would be appropriate ’if it was a matter of a contract between  the Government ’and a forest contractor.  Clause  4 (ix).  (i)  requires the agent to keep a register  of  daily accounts.  Under cl. 4(ix) (p) during the subsistence of the agreement, the agent is responsible for the disposal of  the Kendu   leaves  collected  or  purchased  by  him  and   the

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Government  shall not bear any liability whatsoever,  except as indicated in sub-clause (vii) of cl. 4 (ix). Clause   6  provides  that  subject  to  other   terms   and conditions, all charges and out goings shall be paid by  the agent  and  he  shall not be entitled  to  any  compensation whatsoever for any loss that may be sustained by reasons  of fire.,  tempest,  disease,  pest, flood,  draught  or  other natural  calamity, or by any ,Wrongful act committed by  any third party or for 722 any  loss sustained by him through any operation  undertaken in  the interest of fire conservancy.  This  clause  clearly shows  that the agent becomes personally liable to bear  the loss  which,under the normal rules of agency, the  principal would  have  to bear.  We have not thought it  necessary  to refer to all the clauses in detail because we -are satisfied that even if the agreement is broadly considered, it  leaves no  room  for  doubt that the person  appointed  under  the’ agreement to work the monopoly of the State is not an  agent in  the strict and narrow sense of the term contemplated  by Art. 19 (6) (ii).  The agent appointed under this  agreement seems  to  carry  on  the trade  substantially  on  his  own account,  subject, of course, to the payment of  the  amount specified  in  the  contract If he makes  any  profit  after complying  with  the said terms, the profit is  his;  if  he incurs an loss owing to circumstances specified in clause 6, tie  loss is his.  In terms, he is not made  accountable  to the State Government; and in terms, the State Government  is not  responsible  for his actions.  In such a case,  it  is, impossible  to  hold  that  the  agreement  in  question  is consistent with the terms of s. 3 of the Act.  No doubt, the learned  Attorney  -General  contended  that  in  commercial transactions, the agreement in question may be treated as an agreement  of  agency, and in support of this  argument  lie referred us to the decision ’in Ex parte Bright In re Smith, (1)  and Weiner v. Harris. (1) It is true that an  agent  is entitled  to commission in commercial transactions, and  so, the  fact  that  a person cams  commission  in  transactions carried on by him on behalf of another would not destroy his character as that other person’s agent.  Cases of Delcredere agents  are not unknown to commercial law.  But we must  not forget that we are dealing with agency which is  permissible under  Art.  19 (6) (ii), and as we have  already  observed, agency  which can be legitimately allowed under  Art.  19(6) (ii)  is agency in the strict and narrow sense of the  term; it includes (1) (1879) 10 L. R. Ch.  D. 566.  (2) (1910) 1 K.  285, 723 only  agents  who can be said to carry on  the  monopoly  at every  stage on behalf of the State for its benefit and  not for their own benefit at all.  All that such agents would be entitled to would be remuneration for their work as  agents. That being so, the extended meaning of the word "agent" in a commercial  sense  on which  the  learned,  Attorney-General relies is wholly inapplicable in, the context of Art. 19 (6) (ii).  Therefore, we must hold that the agreement which  has been Produced before us is invalid inasmuch as it is  wholly inconsistent with the requirements of s.     3 (1) (C). The  result  is, the’. petitioner  succeeds  only  Partially inasmuch  as  we have held that Rule 7 (5) is  bad  and  the agreement  is  invalid,  and  that  means  that  the   State Government cannot implement the provisions of :the Act  with the  assistance of agents appointed under the  said  invalid agreement.  We accordingly direct that a direction or  order to   that  effect  should  be  issued  against   the   State

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Government.   The main contentions raised by the  petitioner against the validity of the Act and its relevant  provisions on  which specific reliefs were claimed, however, fail.  The petition is accordingly partially ,allowed.  There     would be no order as to costs. Petition allowed in part. 724