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PETITIONER: MADHYA PRADESH RATION VIKRETA SANGHSOCIETY & ORS. ETC. ETC.

       Vs.

RESPONDENT: STATE OF MADHYA PRADESH & ANR.

DATE OF JUDGMENT22/09/1981

BENCH: SEN, A.P. (J) BENCH: SEN, A.P. (J) PATHAK, R.S.

CITATION:  1981 AIR 2001            1982 SCR  (1) 750  1981 SCC  (4) 535        1981 SCALE  (3)1420  CITATOR INFO :  D          1986 SC1527  (26)

ACT:      Constitution  of  India,  1950,  Art,  14,  and  Madhya Pradesh  (Foodstuffs)  Civil  Supplies  Public  Distribution Scheme, 1981-Distribution  of  foodstuffs  at  fair  prices- Scheme of  running fair  price shop  through retail dealers- Replacement of-Fair  price  shops  by  agents  appointed  by Government with  preference to  co operative  societies-Such scheme whether valid .      Art. 14-Concept of equality-Equality before law-Unequal treatment of  equals-Whether  permissible-Advocates  whether can form consumer’s cooperative society.

HEADNOTE:      The Madhya  Pradesh Foodstuffs  (Distribution)  Control order, 1960,  was promulgated  by the  State Government,  in exercise of the powers conferred by section 3 read with s. 5 of the  Essential Commodities Act, 1955, to enable the State Government to  distribute foodstuffs  at fair prices through fair price  shops. In  1977, the State Government decided to appoint unemployed graduates as retail dealers of Government fair price  shops.  The  whole  system  of  distribution  of foodstuffs at  fair price  shops to  the consumers collapsed due to  flagrant violations  of the  Control  order  by  the retail dealers.      In July  1980, the  Government decided  that  the  fair price  shops   should  be   run  by  consumers’  cooperative societies. Pursuant  to this, on October 31, 1980, the State Government  amended   the  Control  order  by  deleting  the provisions relating  to  fair  price  shops  through  retail dealers and  providing for  running of  the fair price shops under a  Government scheme.  On March  20, 1981,  the  State Government promulgated the Madhya Pradesh (Foodstuffs) Civil Supplies Public  Distribution Scheme,  1981,  replacing  the earlier Scheme.  The Scheme  envisaged allotment of shops to the public by inviting applications from it by notification, giving preference  to co-operative  societies. The important feature of  the Scheme was that the fair price shops were to be run  under the  direct control  and  supervision  of  the Collector and  that the  fair price shop-keeper was required to keep  sufficient stocks of foodstuffs to prevent hardship

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and inconvenience to the consumers.      The petitioners filed writ petitions in the High Court, contending that  the introduction  of  the  new  scheme  for running of Government fair price shops by 751 agents to  be appointed  under a  Government scheme,  giving preference to  co-operative societies, in replacement of the earlier Scheme  of running  fair price  shops through retail dealers, was  violative of  Arts. 14  and 19  (l) (g) of the Constitution. The  contention  was  rejected  and  the  writ petitions dismissed.      In the  Special Leave  Petitions to  this Court, it was contended that  although there  was no  objection to a State monopoly in  trade, the  action of the Government should not be  arbitrary,   irrational   and   irrelevant,   and   that arbitrariness was  writ large  in  the  formulation  of  the Scheme inasmuch  as  there  was  selection  of  co-operative societies of  all descriptions  to run  the fair price shops and therefore the Scheme was, in fact, not being implemented to carry out its professed object.      Dismissing the Special Leave Petitions, ^      HELD:  1.   The  Scheme   in  no   way  infringes   the petitioners’ right  to carry  on their  trade in foodgrains. They are  free to  carry on  business as wholesale or retail dealers in  foodgrains by  taking  out  licences  under  the Madhya Pradesh  Foodgrains (Licensing) order, 1964. There is no fundamental  right in any one to be appointed as an agent of a fair price shop under a Government Scheme. [758F]      Sarkari Sasta  Anaj Vikreta  Sangh, Tehsil  Bamatra and Ors. v.  State of  Madhya Pradesh and Ors. WP No. 4186 of 81 decided on  August 25,  1981  and  R.D.  Shetty  v.  Airport Authority, [1979] 3 SCR 1014 at 1042 referred to.      2. The  question whether  fair price shops in the State under a  Government Scheme  should be  directly run  by  the Government  through   the  instrumentality   of   consumers’ cooperative societies  as its agents or by retail dealers to be appointed  by the  Collector is  essentially a  matter of policy with which the Court is not concerned. [758 C]      3. The wider concept of equality before the law and the equal protection  of laws  is that  there shall  be equality among  equals.  Even  among  equals  there  can  be  unequal treatment based  on an  intelligible  differentia  having  a rational relation  to the  objects  sought  to  be  achieved Consumers’ cooperative  societies form  a distinct  class by themselves. [757 F]      4.   The   impugned   scheme   neither   suffers   from arbitrariness nor  is it  irrational to the object sought to be achieved  It was  evolved in  exercise of  the  executive power  of  the  State  Government  under  Art.  162  of  the Constitution after  the earlier  Scheme was found unworkable as a  result of flagrant violations of the provisions of the Control order by unscrupulous retail dealers. Entrusting the distribution  of   foodstuffs  to   consumers’   cooperative societies was  an inevitable  step which  was taken  by  the Government in  the interest  of the  general public.  Giving preference to the consumers’ cooperative societies could not be said  to be  arbitrary,  irrational  or  irrelevant.  The Scheme lays  down detailed  guidelines regulating the manner of grant or refusal of such applications. [756 H-757 E]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION :  Special Leave Petition

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(Civil) Nos. 4034, 4350, 4270, 4536-38 and 5074 of 1981. 752      From the  judgment and order dated the 13th April, 1981 of the  Madhya Pradesh  High  Court  at  Jabalpur  in  Misc. Petition Nos.  723/80, 874/80, 797/80, 833/80, 91/81, 169/81 and 91/81 respectively.      Swaraj Kaushal  for the petitioners in SLP Nos. 4270/81 and 4350/81      S.S. Khanduja  for the  petitioners in  SLP Nos.  4536- 38181 and 507418 1 .      A.K. Sen,  V.S. Dabir,  Dr. N.  M. Ghatate  and  S.  V. Deshpande for the petitioners in SLP No. 4034/81.      Gopal Subramanium, D.P. Mohanty and R.A. Shroff for the Respondents in  SLP Nos.  4270/81, 4350/81,  4536-38/81  and 5074/81      Gopal Subramnium, D.P. Mohanty and S.A. Shroff; for the Respondent in SLP No. 4034/81.      The order of the Court was delivered by      SEN, J.  The only  question involved  in this  and  the connected  Special   Leave  Petitions   directed  against  a judgment of  the Madhya  Pradesh High  Court is  whether the Madhya   Pradesh   (Food-stuffs)   Civil   Supplies   Public Distribution  Scheme,   1981,  formulated   by   the   State Government under  sub-cl.(d) of  cl. 2 of the Madhya Pradesh Foodstuffs (Distribution) Control order, 1960, introducing a new scheme  for running  of Government  fair price  shops by agents to  be appointed  under a  Government  scheme  giving preference to  cooperative societies,  in replacement of the earlier scheme  of running  such fair  price  shops  through retail dealers  appointed under  cl.  3  of  the  order,  is violative of Arts. 14 and 19 (1) (g) of the Constitution.      To give  a short  resume. The Madhya Pradesh Foodstuffs (Distribution) Control  order, 1960  (hereinafter called the ’Control  order’)  was  made  by  the  State  Government  in exercise of  the powers  conferred by  s. 3 of the Essential Commodities  Act,  1955,  read  with  Government  of  India, Ministry of Food and Agriculture (Depart of Food), order No. GSR  1088   dated  November   15,  1958,   to  provide   for distribution of foodstuffs at fair prices under a Government scheme The  scheme of  the Control order is that with a view to 753 distributing food-stuffs  at fair  prices through fair price shops, the A Collector would, under the ’Government Scheme’, appoint  any  person  as  a  retail  dealer  in  respect  of foodstuffs under  cl. 3  of the  Control order.  The Control order  was  designed  to  enable  the  State  Government  to distribute foodstuffs  at fair  prices  through  fair  price shops. In  1977, as  a matter  of policy  it was  decided to appoint unemployed graduates as retail dealers of Government fair price  shops.  The  whole  system  of  distribution  of foodstuffs at  fair price  shops to  the consumers, however, collapsed due to flagrant violations of the Control order by the retail  dealers. It was found that the shops were opened well after the appointed time, shops were closed well before the time, the consumers were not able to obtain their ration easily  and  very  often  the  traders  would  withhold  the foodstuffs in  stock and  refuse to  sell the  same  to  the consumers, causing  serious inconvenience  and harassment to them.  Another   great   drawback   which   the   Government experienced was that stocks which were required to be lifted by the  traders were  not lifted  within the  time and  more often than  not the  stocks would become wasted and rendered useless.      In July 1980, the Chief Minister called a Conference of

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high  officials  including  the  Director,  Civil  and  Food Supplies  and  the  Collectors  of  various  districts.  The Collectors   narrated    their    experience    about    the unsatisfactory manner of working of the then existing system of running fair price shops through retail dealers and spoke of the  plight of the poor consumer. There was a meaningful, close and  in-depth discussion  at the Conference and in the light of  the experience gained, the Government decided that it was  necessary to  replace the existing system of running fair price  shops through  retail dealers  by the Government directly running  these  fair  price  shops  through  agents appointed by  the Collector.  It was also decided that these fair price  shops should  be run  by consumers’  cooperative societies. In  the wake  of the changes to be brought about, the State  Government,  on  October  31,  1980,  accordingly amending  the  Control  order  by  deleting  the  provisions relating to  running of  fair  price  shops  through  retail dealers and  providing  for  running  these  shops  under  a Government scheme. The expression ’fair price shop’ has been defined by  the newly added clause 2 (bb) to mean a shop set up by  the Government  under the Government Scheme. On March 20,  1981,  the  State  Government  promulgated  the  Madhya Pradesh  (Foodstuffs)  Civil  Supplies  Public  Distribution Scheme, 1981. 754      Under the  impugned scheme, the Collector, by virtue of cl. 3,  was to  establish fair  price shops. In establishing the  fair   shops,  the  Collector  was  to  follow  certain guidelines. These are: (a) that a shop should be established for each  area with  a population of 2,000 and the consumers should not  be required  to  travel  more  than  5  Km.  for purchasing foodstuffs,  (b)  in  the  urban  areas  for  the purpose of  demarcation of  areas, a  Ward or a Mohalla is a unit and  in rural  areas, the  Panchayat is a unit, (c) the location of fair price shop shall be, as far as possible, in the centre of such area, for meeting the requirements of the residence for  which it  is established.  Clause 4  provided that the  fair price  shops would  be allotted  by  the  Sub Divisional officer  and the  allottee  will  have  no  legal ownership  over   the  fair  price  shops.  Then  a  set  of guidelines was also issued for the purpose of regulating the manner of  allotment of  fair price  shops.  In  making  the allotment of fair price shops, cooperative societies were to be given top priority. In the event of a cooperative society in the  area expressing  its inability  in writing  to run a fair price shop, or if there was no such cooperative society in existence  in such  an area,  the fair  price shop may be allotted to  others. The  allotment of a fair price shop was to be  made after  publication of  a  notification  inviting applications for  allotment from the public The applications received were  to be  scruitinised on merits and the one who fulfilled the  maximum qualifications  shall be allotted the shop. Another  set of  principles was laid down dealing with the manner  of working  of fair  price shops,  but they  are matters of  detail. One  important feature  is that the fair shops are to be run under the direct control and supervision of the Collector and the other important feature is that the fair price  shop keeper  was  required  to  keep  sufficient stocks of foodstuffs as specified by the State Government or the Collector  in  that  behalf,  to  prevent  hardship  and inconvenience to the consumers.      The validity  of the impugned scheme has been unheld by this Court  in Sarkari  Sasta  Anaj  Vikreta  Sangh,  Tehsil Bamatra and Ors. v. State of Madhya Pradesh and Ors. decided on August  26, 1981.  The main challenge was that the scheme

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created  a  monopoly  in  trade  in  favour  of  cooperative societies and  was thus violative of Arts. 14 and 19 (1) (g) of the  Constitution. This  Court, agreeing  with  the  High Court, rejected  the contention  in view of Mannalal Jain v. State of  Assam and  Ors.(1) In  that case, the question was whether cl. 5 (e) 755 Of the Assam Foodgrains (Licensing and Control) order, 1961, which  provided   for  giving   preference  to   cooperative societies  created   a  monopoly   in  trade  in  favour  of cooperative societies.  On a construction of cl. 5 (e) which merely  embodied   a  rule   of  preference   in  favour  of cooperative  societies,   this  Court   in  Mannalal  Jain’s case(supra) held  that cl.  5 (e) did not have the effect of creating a  monopoly in  favour of cooperative societies. In upholding the validity of cl. S (e), the Court observed :(’)           We are  of the view that by reason of the position      which cooperative  societies may  occupy in the village      economy of a particular area, it cannot be laid down as      a general  proposition that sub-cl. (e) of cl. 5 of the      Control  order,  1961,  is  unrelated  to  the  objects      mentioned in  s. 3  of the  Essential Commodities  Act,      1955 There  may be  places or  areas where  cooperative      societies are  in a  better position for maintaining or      increasing supplies  of rice  and paddy  and  even  for      securing their  equitable distribution and availability      at fair prices. D The Court, therefore, repelled the contention that cl. 5 (e) had no relation whatever to the objects mentioned in s. 3 of the Act and went on to say :(2)           Sub-cl. (e)  of cl.  5, we  have  already  stated,      enables the licensing authority to give preference to a      cooperative society  in certain  circumstances; but  it      does not  create a  monopoly in  favour of  cooperative      societies.  The   preference  given  has  a  reasonable      relation to  the objects  of the legislation set out in      s. 3 of the Act. In the  Sarkari Sasta,  Anaj Vikreta Sangh case the impugned scheme was  also challenged on various other grounds but the court negatived  all the  contentions raised and we need not refer to  them as  they are  not  really  relevant  for  our purposes. Suffice  it to say, the Court pointed out that the scheme had  been framed  by the State Government in exercise of  its   executive  function   under  Art.   162   of   the Constitution; that  under the  scheme the  fair price  shops were to be run by consumers’ cooperative societies; that the scheme was framed by the State Government in public interest With a view to securing equitable distribution of foodgrains at fair prices to the 756 consumers,  that  the  rule  of  preference  to  cooperative societies does  not create  a  monopoly  in  trade  and  is, therefore, not  violative of  the  petitioners’  fundamental rights under  Arts. 14 and 19(1)(g) of the Constitution; and that no  one had  a fundamental  right  to  be  appointed  a Government agent  for running  a fair price shop which was a matter of  grant of  privilege. The validity of the impugned scheme has, therefore, been upheld in all its aspects.      In support  of these petitions, learned counsel for the petitioners contends  that the real point was not pressed in the Sarkari  Sasta Anaj  Vikreta Sangh’s  case  (supra).  He contends that  there is  no objection to a State monopoly in trade, the action of the Government should not be arbitrary, irrational  and   irrelevant.  If  the  governmental  action disclose arbitrariness  it is to be invalidated as violative

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of Art  14. In support of the contention, he places reliance on certain  observations of  Bhagwati,  J.  in  the  Airport Authority case(’).  In dealing  with the question, Bhagwati, J. Observed:           It is  now well settled .. that Art. 14 strikes at      arbitrariness in  State action  and ensure fairness and      equality of  treatment. It  requires that  State action      must not  be  arbitrary  but  must  be  based  on  some      rational  and   relevant  principle   which   is   non-      discriminatory; it must not be guided by any extraneous      or irrelevant  considerations, because  that  would  be      denial of  equality.. The  State cannot, therefore. act      arbitrarily in  entering into relationship, contractual      or otherwise  with a  third party,  but its action must      conform to  some standard or norm which is rational and      non-discriminatory. The  observations  made  by  Bhagwati,  J.  in  the  Airport Authority case  (supra) have  been quoted  with approval  in Kasturi Lal v. State of J & K(2).      It is  true that according to the rule laid down in the Airport  Authority   case  (supra)  if  governmental  action disclosed  arbitrariness,   it  would   be  liable   to   be invalidated as  offending against  Art. 14.  There can be no quarrel with  the principles laid down in that case, but the difficulty is  about the  application of those principles to the facts  and circumstances  of the  present case.  We have given a  brief outline  of the impugned scheme and it cannot be said  that it suffers from arbitrariness or is irrational to the object sought to be achieved. 757 The  State   Government  after   due  deliberation,  took  a responsible decision  to run  the fair price shops directly, being satisfied  that it  was necessary  so to  do with  the object of  distributing foodstuffs  at fair  prices  to  the consumers, after taking into consideration the fact that the earlier experiment  of running  these shops  through  retail dealers was  an utter  failure. The scheme has been designed by the State Government by executive action under Art 162 of the  Constitution   with  a   view  to   ensuring  equitable distribution  of  foodstuffs  at  fair  prices.  As  already stated, the  Court has  found  in  the  Sarkari  Sasta  Anaj Vikreta  Sangh   case  (supra),   the   entire   system   of distribution of  foodstuffs had  collapsed  and  had  become wholly  unworkable   due  to   flagrant  violations  of  the provisions of  the Control  order by the retail dealers. The action  of   the  State   Government   hl   entrusting   the distribution  of   foodstuffs  to   consumers’   cooperative societies, though  drastic, was  an inevitable step taken in the interests  of the  general public.  The State Government was not  bound to  give the  fair price  shops to the retail dealers under  a Government  scheme. The governmental action in giving  preference to  consumers’  cooperative  societies cannot  be   construed  to   be  arbitrary,   irrational  or irrelevant. The impugned scheme does not confer arbitrary or uncanalised power on the Collector in the matter of grant or refusal of  applications for  appointment as  agents for the purpose of  running fair  price shops.  The scheme lays down detailed  guidelines  regulating  the  manner  of  grant  or refusal of such applications.      The wider  concept of  equality before  the law and the equal protection  of laws  is that  there shall  be equality among  equals.  Even  among  equals  there  can  be  unequal treatment based  on an  intelligible  differentia  having  a rational relation  to the  objects sought  to  be  achieved. Consumers’ cooperative  societies form  a distinct  class by

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themselves.  Benefits   and  concessions   granted  to  them ultimately benefit persons of small means and promote social justice in  accordance with  the directive principles. There is an  intelligible differentia  between the  retail dealers who are  nothing  but  traders  and  consumers’  cooperative societies. The  position would  have been different if there was a  monopoly created  in favour  of the later. The scheme only envisages  a rule of preference. The formulation of the scheme does  not exclude  the retail  traders from making an application for appointment as agents. It is, however, urged that the  impugned scheme  is not  being implemented  as  to carry out  its avowed  object. It  was said  that there  was arbitrariness in  selection of  cooperative societies of all descriptions,   not   necessarily   consumers’   cooperative societies. There is no merit in the contention 758 that there  was preferential  treatment given to cooperative societies in  the matter  of allotment  of fair price shops. Our attention  was drawn  to the fact that a fair price shop has been  allotted to Adhivakta (Advocates) Sangh, Jabalpur. Advocates are also consumers and where is nothing to prevent them from  forming  a  consumers’  cooperative  society  for lawyers as  a class  if they fulfil the conditions laid down in the  law. We  have no  reason to  think  that  the  State Government was  not actuated  with the best of intentions in bringing about  a change  in the  system of  distribution of foodstuffs through fair price shops      The question  whether fair  price shops in the State of Madhya Pradesh  under a Government scheme should be directly run  by   the  Government  through  the  instrumentality  of consumers’ cooperative  societies as its agents or by retail dealers to  be appointed by the Collector under cl. 3 of the Control order,  is essentially a matter of policy with which the Court  is not  concerned. The  learned counsel  for  the State reiterated  the assurance  given in  the Sarkari Sasta Anaj Vikreta  Sangh case (supra), as was done by the learned Advocate  General   before  the  High  Court,  that  by  the expression  "cooperative   societies"  hl  the  scheme,  the Government  intended   and  meant   "consumers’  cooperative societies", and  that  if  by  mistake  there  was  a  wrong allotment made  to a  ’cooperative society’  which was not a "consumers’ cooperative  society’, the Government would take steps to cancel the allotment.      The constitutionality  of the  impugned scheme  is also challenged as  abridging Art.  19(1)(g) of the Constitution. The short  answer to  the challenge is that the scheme in no way infringes  the petitioners’  right to  carry  on  their- trade in  foodgrains. They  are free to carry on business as wholesale or  retail dealers  in foodgrains  by  taking  out licences under  the Madhya  Pradesh  Foodgrains  (Licensing) order, 1964.  There is no fundamental right in any one to be appointed as  an agent of a fair price shop under Government Scheme.      Accordingly, we  dismiss the  Special  Leave  Petitions with costs. N V.K.                            Petitions dismissed. 759