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PETITIONER: OM PRAKASH SUD ETC. ETC.

       Vs.

RESPONDENT: STATE OF J & K & ORS. ETC. ETC.

DATE OF JUDGMENT16/02/1981

BENCH: ISLAM, BAHARUL (J) BENCH: ISLAM, BAHARUL (J) PATHAK, R.S. REDDY, O. CHINNAPPA (J)

CITATION:  1981 AIR 1001            1981 SCR  (2) 841  1981 SCC  (2) 270        1981 SCALE  (1)314

ACT:      Constitution of  India 1950,  Article  14-Allotment  of resin-Industrial policy decision of State-Object of-Balanced economic and  regional  development  of  State-Selection  of quota seekers-Article 14 whether violated.

HEADNOTE:      The petitioners  in their  writ petitions to this Court alleged that  they were  carrying on  small scale industries for the  manufacture of  resin and  turpentine oil  and that they applied  to the  Government for  allotment of resin for their industries  but  the  Government  referring  to  their policy decision  of March  20,  1978  refused  to  make  any allotment, and  that they  purchased raw  material from  the open market  and  managed  to  run  their  industries.  They further alleged  that while  they were  refused allotment of supply of  raw-materials, the  State, respondent  No. I made allotments to  respondent nos.  4 to  16 n  although most of them were not even formally registered at the time of making the  impugned   orders  of  allotment  and  that  they  were consequently   adversely    discriminated   against,   while respondent nos.  4 to  16 were  favoured  and  as  such  the impugned orders of allotment were liable to be struck down " violative of Article 14 of the Constitution of India.      The  State,   respondent  No.   1  contested  the  writ petition, denied the material allegations of the petitioners and alleged  that the  allocations were  made in  conformity with the  State Industrial  Policy decision  of securing the balanced economic and regional development of the State that there was a preponderance of industries in the Jammu Region, and that  the industries  of  the  petitioners  as  well  as respondent nos.  4 to  16  were  also  functioning  in  that region. Allotments  of resin  were  made  districtwise,  110 applications were  received and considered and allotment was made to respondents nos. 4 to 16.      On  the   question  whether   the  orders  of  the  1st respondent allotting quotas of resin to respondent nos. 4 to 16 were  arbitrary  and  violative  of  Article  14  of  The Constitution. ^      HELD :  1(i) Respondent  No. 1  has not explained as to

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how and  on what  basis if  any, the allotments were made by the  impugned   orders  in   favour  of  the  new  allottees respondent nos. 1 to 16 whose industries were located in the Jammu region. [847 C]      (ii) Although  the State  Government has taken reliance on the  State Industrial Policy decision, it does not appear to have followed it in practice, except in the cases of five respondents. No  reasonable basis had been adopted in making the allotments  in favour  of the  new allottees and denying the allotments to the petitioners. [84913-F] 842      2. The  rule of  equality does  not  mean  mathematical equality. It  permits of  practical  inequalities.  What  is needed is  that the  selection of  quota seekers  as in  the instant case  should have  a rational relation lo the object sought lo  be achieved  in the industrial policy decision of the State.  If the selection or differentiation is arbitrary and lacks a rational basis it offends Article 14. [849 D]      3. "Equality  before the  Law" or  "equal protection of the  laws‘’   within  the  meaning  of  Article  14  of  the Constitution  of   India  means  absence  of  any  arbitrary discrimination by  the law  or in  their administration.  No undue favour  to one  or hostile  discrimination to  another should be  shown. A  classification is reasonable when it is not  an   arbitrary  selection   but  rests  on  differences pertinent  to   the  subject   in  respect   of  which   the classification is  made. The classification permissible must be based  on some  real and  substantial distinction, a just and reasonable relation to the objects sought to be attained and cannot  be made  arbitrary and  without any  substantial basis. [848 H-849 A]      State of  West Bengal  v. Anwar  Ali,  [19521  SCR  284 referred to.

JUDGMENT:      ORIGINAL JURISDICTION: Writ Petition Nos. 3464-65, 5908 & 3231 of 1980.            (Under Article 32 of the Constitution)      S. N.  Kacker, K.  N. Bhatt  and Surendara Raju for the Petitioners in W. P. Nos 3464-65/80 and 5908/80.      Soli J.  Sorabjee, E.  C. Agarwala, R. Satish and V. K. Pandita for the Petitioner in WP 3231,/80.      L. N.  Sinha, Att.  Genl. and  Altaf Ahmed for R. 1. in WPs 3464 65/80.      Y. S. Chitaley and Vineet Kumar for R. 14 in WP 3231/80 and for R. 2 in WPs 3464-65/80.      R. P. Bhatt and N. R. Chaudhary for R. 4 in WP 3464/80.      P. R.  Mridul and Naunit Lal for R. 7 in WP 3231/80 and for R. 2 in WP 3464-65/80.      Anil Dev Singh and Ashok Grover for R. 15 in WP 3231/80 and R. 3 in WPs 3464-65/80.      S. K.  Bhattacharya and  Suresh Sethi for R R. 6 and 12 in WP 3464 65/80.      Satish Vij for R. 15 in WP 3464-3465/80.      S. Balakrishnan  and S. K. Bhattacharya for R. 16 in WP No. 3231/80.      The Judgment of the Court was delivered by      BAHARUL ISLAM, J.-BY these writ petitions under Article 32 of  the Constitution  the petitioners have challenged the orders of the 843 first respondent  (the State of Jammu and Kashmir) allotting quotas of resin to respondents. According to the petitioners

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these orders denying similar treatment to them are arbitrary and violative of Article 14 of the Constitution of India.      2.  The  material  facts  in  the  four  petitions  are similar.  The   industries  of  which  the  petitioners  are partners are  admittedly  small  scale  industries  for  the manufacture of  resin and  turpentine oil. The industries of the petitioners’  in Writ  Petitions Nos.  3465 of  1980 and 3231 of  1980 were  provisionally registered but revalidated for short  periods. The  industry of  the petitioner in Writ Petition No.  3464 of  1980  was  provisionally  registered, revalidation was  applied  for  but  was  not  granted.  The industry of the petitioner in Writ Petition No. 5908 of 1980 was formally  registered. It  appears that  the  petitioners were applying  to the  Government for  allotment of resin as well as raw material for their industries but the Government referring to their policy decision of March 20, 1978 refused to make any allotment of Oleo resin to them. The petitioners in Writ  Petition Nos.  3464 and  5908 of  1980 have alleged that they  purchased raw-material  from the  open market and somehow managed  their  industries  to  run  for  a  certain period.      3. Resin  is admittedly a forest product extracted from "Chir trees".  It has been alleged that only three States of India, namely, Himachal Pradesh, Uttar Pradesh and Jammu and Kashmir have Chir forests. The petitioners have alleged that the State  of Himachal  Pradesh and  Uttar  Pradesh  stopped selling  resin  for  the  last  several  years  in  view  of establishment of  factories in  public and joint sectors and that the  State of  Jammu and  Kashmir was  selling resin by public auction.  Sometime after  October 1978  the State  of Jammu and  Kashmir, it  has been  further alleged, virtually created monopoly  in favour  of  three  existing  industrial units and  committed to  supply them  about 17,000  M. T. of resin for  long time  to come. There is a Public sector unit in Jammu  which consumes about 3,000 tons of resin per year. Several small  scale industries,  according to  petitioners, were  assured   supply  of   resin  even  as  late  as  1979 notwithstanding  the   Government’s   aforesaid   industrial policy. In  such a  situation, being  unable to procure raw- materials for  their industries,  the petitioners approached the relevant  authorities including  the Deputy  Minister of Industry and  the Chief  Minister of  Jammu and  Kashmir for allotment of raw-materials but to no avail. (For the sake of convenience  we   shall  hereinafter   refer  only   to  the respondents and  Annexures in  W. P.  No. 3231 of 1980). The petitioners further  allege that  while  they  were  refused allotment of supply of raw- materials, respondent No. 1 made allotments to  respondents No.  4 to  16 (hereinafter called "allottee respondents") although most of them 844 were not  even formally registered at the time of making the impugned orders of allotment.      The petitioners  contend that in the circumstances they were adversely  discriminated against while respondents Nos. 4 to  16 were  favour ed and as such the impugned orders are liable to be struck down as , violative of Article 14 of the Constitution of India.      4. The impugned orders have been annexed as Annexures N to Z-1.  The letter of allotment (Annexure ’X’) in favour of M/s. Sud  Pine Industries  (respondent No.  27)  is  in  the following terms:-           "Sub: Supply  of resin to M/s. Sud Pine Industries      Kunwani for their factory at Talab Jammu.           Government Order No. 175 DIC/1980 dated 30-5-1980.      In partial  modification of Government order No. 2. DIC

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of 1979  dated 20-1-1979  sanction is accorded to the supply of crude  (oleo) resin  700 tonnes  per annum  by the Forest Deptt. to  M/s. Sud  Pine Industries  for their  factory  at Kunjwani Talab  Jammu on  the terms and conditions specified in the  above said  order. The  supply  of  resin  shall  be subject to  its being  reviewed by  the Government  with due regards to its availability from year to year.      By order of the Govt. of J & K.                                                     Sd/-                                     (Sheikh Ghulam Rasool)                                    Secretary to Government." The orders  as per annexures L to W in favour of respondents 17 to  26 are  identical  in  material  parts.  It  will  be sufficient if  the material portion of Annexure N is quoted. It runs thus.           "Sanction is  accorded  to  the  supply  of  crude      (oleo) resin by the Forest Department to M/s. Kashmir R      & T  Works, Srinagar,  for their  factory at  Srinagar,      subject to the terms and conditions of the agreement to      be entered  into between  the Forest Department and the      party and on the following specific conditions:-           1.   The  Forest   Department  will  supply  Crude                (oleo) resin  @ 700  TPA to the firm from the                date the  Unit is formally registered subject                to its  being reviewed with due regard to its                availability from year to year; 845           2.   The resin  will be  supplied @  Rs. 320/- per                quintal, unless otherwise reviewed on year to                year basis.           3.   The cost  of empty  tin will be charged @ Rs.                5/- per tin in addition to the above rate;           4.   By order  of  the  Government  at  Jammu  and                Kashmir.                                  Sd/- Sheikh Ghulam Rasool                                    Secretary to Government."                                             (emphasis added)      5.  It   is  obvious   that  the  industries  of  these respondents were  not formally registered at the time of the impugned orders of allotment.      6. The  State of  Jammu and  Kashmir (Respondent No. 1) have filed  a counter  affidavit. They  have not  denied the material allegations  of the  petitioners but  they say that the allocations  have been  made in  order to  implement the industrial policy of the State Government as enunciated in a "Report of  the  Development  Review  Committee,  Jammu  and Kashmir" a  committee headed by Shri L. K. Jha, the Governor of the  State. Respondent  No. 1  has quoted from the report the ’Goals’ of the industrial policy which read:           "The balanced  economic development  of the  State      will obviously,  be one of the foremost concerns of the      Government. They  would like  to emphasis maximum self-      sufficiency and  self-reliance  consistently  with  the      need to  promote the  requisite and desirable degree of      inter-dependence with  other parts of the country. ’The      objective will  be  to  secure  the  most  prudent  and      beneficial utilization  of the  natural  resources  and      skills peculiar  to this  State; to achieve the maximum      possible F  rate of  economic growth, consistently with      the need  to  secure  a  degree  of  balanced  regional      development as  well as balance between the rural areas      and the urban, to maximise State per capita income, and      to generate the maximum employment potential.           Many areas  of the  State are as cut off, isolated      and poor  as they  were at the dawn of independence. We

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    have to improve the living standards in these specially      backward areas  for whom  in terms of the quickest mode      of transportation,  Srinagar is  more distant  than the      State is from Kerala.           Many sections  of the  community  similarly,  like      Scheduled Castes;  Gujarat  and  Bakarwalas  and  other      backward class  need to  be assisted  in  their  speedy      uplift. 846           Ladakh needs  a visible  acceleration of the tempo      of its development so that our people in this far flung      and difficult frontier area can realise the full fruits      of development in the shortest possible time."      Respondent No.  1 has  given the district wise break-up of the  applications received  from different regions. It is as follows:      Jammu                                      -       63      Udaypur                                    -       10      Rajouri                                    -        1      Poonch                                     -        1      Doda                                       -        1      Kathua                                     -        9      Anantnag                                   -        2      Srinagar                                   -       11      Outsiders                                  -       12                                                   ----------                                        GRAND TOTAL       110                                         Applications                                                  -----------      They  have   also  shown   the  allotments   of   resin districtwise. The  industries of the respondents No. 4 to 16 are also  small scale  industries. The break-up of the small scale industries  as given  in Annexure  R.II (in  W.P.  No. 3464) shows  that Jammu  has the  largest  number  of  units namely, 10,  Second comes Srinagar with 4, then come Udampur with 3,  Kathua (in  Jammu Division), Anantnag and Baramulla (in Kashmir  Division), with  one  each.  Rajouri  in  Jammu Division has  none. It  appears that  the industries  of the present applicants are also in the Jammu region and those of respondents No.  4 to 16 also appear to have been located in the Jammu  region. In  their affidavit  at para 3 respondent No. 1 has stated that all the applications for allocation of resin were considered from time to time at various levels by the State  Government and  it was decided on May 30, 1980 as follows:           (a)  The allotment  of resin  to the existing unit                should be rationalised;           (b)  Applications received  from various districts                be considered for allotment of resin.      The State  Government have  submitted that they made no promise of  supply of  raw-material in  favour of any of the petitioners. The petitioners have submitted, in our opinion, correctly, that  as there  were already 10 units functioning in small  scale sector  in the  Jammu region and inasmuch as the allottee  respondents’ industries  were also  located in the Jammu  region, allocations  in  their  favour  would  be inconsistent with the Government’s industrial policy. 847      7. In the instant case, respondent No. 1 as well as the other parties  has taken reliance on their industrial policy statement as  stated  above.  We  have  already  quoted  the relevant portions  of the State Industrial policy statement. The Government have stated that they have considered all the 110 applications  including those  of the petitioners coming from industrialists  of different parts of the country. They

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have stated,  and their  statement is  corroborated  by  the documents, that  there is preponderance of industries in the Jammu region  and industries  of the  petitioners as well as respondents No.  4 to  16 were  also functioning in the same region. Respondent  No. 1 has not explained as to how and on what basis, if any, the allotments were made by the impugned orders in  favour of the new allottees whose industries were located in the Jammu region.      Pawan Kumar  Sharma, the petitioner in W.P. No. 3231 of 1980 states  that his  industry was provisionally registered under the  Provisional Registration  Certificate dated 29-1- 1976. It  was further extended for further short periods. He says that  as there  was assurance from the authorities that raw-materials will be allotted to him after he completed the installation of requisite machinery.      The J. K. Resin and Turpentine Industries of petitioner Om Prakash  Sud, was  provisionally registered  in the  year 1975. He  was also  approaching the  Government from time to time to  get allotment  of  the  raw-materials  but  got  no favourable reaction  from the  Government. He states that he had already established his factory and got it insured for a sum of  Rs. 6.80  lakhs. He  obtained raw-material  from the open market and was running his industry.      Petitioner, Ravindra  Dutt of  M/s.  Dinesh  Resin  and Turpentines in  W.P. No.  3465  of  1980  alleges  that  his industry was  provisionally registered  on 25-10-1975  which was extended  upto April,  1979. Letter  of 31st  May,  1979 shows that  his industry was later on formally registered as a  small   unit.  This   factory  was  producing  resin  and turpentine out  of the  resin which  he purchased  from open auction He  was approaching the Government from time to time to get requisite quantity of raw-materials but failed to get it.      Petitioner, Shamlal  Kapoor, Director  of  Jammu  Resin Enterprises Private  Limited, alleges  that his industry was formally registered with the Government of J & K. He alleges that his industry was functioning for a long time and trying to get  necessary quota of raw-materials from respondent No. 1. He was approaching the Government to get requisite quota. Sud Pine  Industries, was  provisionally registered on 10-3- 1978 and  formally registered on 10-10-1978. It appears from Annexure N, in respect of respondent M/s Kashmir R & T Works 848 (respondent No. 17), Annexure O in respect of M/s. Sun Shine R &  T Industries (respondent No. 18), Annexure P in respect of M/s.  Woolan Paints and Chemicals Scopore (respondent No. 19) Annexure Q in respect of M/s. Pine Wood Products Company (respondent No. 20), Annexure R in respect of M/s. Haji Mast Ali Slaria  (respondent No.  21), Annexure  S in  respect of M/s. Phyto  Chemicals (respondent  No. n  22), Annexure T in respect  of   M/s.  New   Himalayan  Paints   and  Chemicals (respondent No.  23), Annexure  U in  respect of  M/s. S. K. Chemical (respondent  No. 24), Annexure V in respect of M/s. Rajindra R & T (respondent No. 25) and Annexure W in respect of M/s. Bharat Paints and Chemicals (respondent No. 26) that the allotments  were made in their favour "from the date the unit is  formally registered"  which shows  that  industries were not  even registered at the time of the impugned orders of  this   allotment.  Respondent   M/s.  Rajindra   R  &  T Industries,  Udhampur,  appears  to  stand  on  a  different footing. He  appears to  have fulfilled  all the  conditions required for  allocation of  resin in  accordance  with  the policy of the State of J & K. The industry is an experienced one  and   the  factory  started  production  of  resin  and turpentine at Hoshiarpur since 1948. It is a firm registered

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under the  Indian Partnership Act and has long experience in the business  including resin and turpentine since 1948. The industry set  up a  factory in  1970 in the rural industrial estate near  Udhampur which is a backward area. The industry was provisionally registered in 1970 and formal registration was granted on 29-2-1974. It applied for adequate quantities of raw-materials  and was allotted only 200 tons although it had been sanctioned 1500 per ton per annum since 1975.      Respondent M/s. Sud Pine Industries, M/s. Kashmir R & T Works, Bakshi  Resin & Turpentine and M/s. K. C. Soni Bakshi also appear  to be  on different  footings. It  appears from Annexures ’X’  and ’Y’  that the  first two  industries have already been  formally registered.  They are  existing units having already  started production. So far as respondent M/s Bakshi Resin and Turpentine is concerned, it had already set up factory  and started  production.  It  was  provisionally registered as  early as  1976 and  the unit  is located in a backward area.  So far  as respondent  K. C.  Soni  Resin  & Turpentine is concerned, it was formally registered on 19-4- 79. This  unit is  located in  a remote backward area of the State.      8. "Equality  before the  Law" or  "equal protection of the  laws"   within  the   meaning  of  Article  14  of  the Constitution  of   India  means  absence  of  any  arbitrary discrimination by  the law  or in  their administration.  No undue favour  to one  or hostile  discrimination to  another should be  shown. A  classification is reasonable when it is not  an   arbitrary  selection   but  rests  on  differences pertinent to the subject 849 in  respect   of  which  the  classification  is  made.  The classification permissible  must be  based on  some real and substantial distinction,  a just  and reasonable relation to the objects  sought  to  be  attained  and  cannot  be  made arbitrarily and  without any  substantial  basis..  ........ (See State  of West  Bengal v. Anwar Ali. The classification must not  be arbitrary  but be  rational, that is to say, it must not  only be based on some qualities or characteristics which are  to be  found in  all the persons grouped together and not  in others  who are  left out.  Those  qualities  or characteristics must  have  a  reasonable  relation  to  the object of the law. In order to pass the test, two conditions must be  fulfilled, namely, (1) that the classification must be   founded    on   an   intelligible   differentia   which distinguishes those  that are  grouped together from others, and (2)  that differentia  must have  a rational relation to the object sought to be achieved by the Act. The differentia which is  the basis  of the classification and the object of the Act  are distinct  things and  what is necessary is that there must be a nexus between them.      We are  not unaware  that the rule of equality does not mean mathematical  equality and that it permits of practical inequalities. But  what is  needed is  that the selection of quota seekers  as in the case in hand should have a rational relation  to  the  object  sought  to  be  achieved  in  the industrial policy decision of the State. If the selection or differentiation is  arbitrary and  lacks a rational basis it offends Article 14.      9. In  the instant  case, although the State Government has taken  reliance on  the State Industrial Policy decision referred to above, they do not appear to have followed it in practice, except  in  the  cases  of  the  five  respondents referred to  above. In  fact no  reasonable basis  has  been adopted in  making the  allotments  in  favour  of  the  new allottees and  denying allotments to the petitioners. In the

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circumstances the petitions are partly allowed, the impugned orders of  allotments except  in favour  of respondents, M/s Rajindra Resin  and  Turpentine  Industries,  M/s  Sud  Pine Industries, M/s  Kashmir R  & T  Works, M/s  Bakshi Resin  & Turpentine and  M/s  K.  C.  Soni  Resin  &  Turpentine  are quashed. The  petitions are  partly allowed.  The Rules  are made absolute  except as against these five respondents. The respondent. No.  1, the  State  of  Jammu  and  Kashmir,  is directed to  make the  other allotments of the raw-materials to the  applicants in  the light  of the  observations  made above.      10. Respondent  No. 1  shall pay costs of Rs. 100.00 to each of the petitioners. N.V.K.                             Petition partly allowed. 850