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PETITIONER: RANJIT SINGH ETC. ETC.

       Vs.

RESPONDENT: UNION OF INDIA

DATE OF JUDGMENT26/09/1980

BENCH: PATHAK, R.S. BENCH: PATHAK, R.S. KRISHNAIYER, V.R.

CITATION:  1981 AIR  461            1981 SCR  (1) 847  1980 SCC  (4) 311

ACT:      Constitution of  India 1950,  Art. 19(1) (g) and 32 and Arms Act  1959- Petitioner  granted licence to manufacture a specified number of guns-curtailment of quota-Whether valid- Whether laches in invoking the jurisdiction of the Court.

HEADNOTE:      In 1950,  the State  Government issued  a manufacturing licence renewable  every year  to the  petitioners  for  the manufacture by hand of a specified number of guns per month. The guns were however not proof-tested.      After  the   Arms  Act   1959,  came  into  force,  the government  insisted   that  the  guns  manufactured  should undergo proof-testing.  Pursuant to  that condition in 1960, the petitioners  installed machinery  and plant,  by  making substantial investment  of funds.  From 1964, the Government of India, reduced the monthly quota of guns.      The petitioners  in their  writ petitions under Article 32 alleged  that this reduction had resulted in considerable hardship to  them because  of the fixed overhead costs which could not  be avoided.  They also alleged that though in the case of  a number  of other  such manufacturers  quotas were restored, in  their cases, the Government refused to restore the quotas.      The Union  of India,  however, denied the allegation of arbitrariness, and  stated  that:  (a)  what  was  done  was pursuant to  the Industrial  Policy Resolution of 1956 which envisioned an  exclusive monopoly  in the Central Government in the  matter of manufacturing arms and ammunition and that in fixing  the quota the manufacturing capacity of a concern was not  a determining  factor; (b)  there is no fundamental right under Article 19(1)(g) of the Constitution to carry on the manufacture  of arms;  and (c)  there was  laches on the part of the petitioners.      Allowing the writ petitions, ^      HELD: (a)(i)  Any curtailment of the quota must proceed on the  basis of  reason and  relevance. The  Government  is entitled to  take into  consideration  the  requirements  of current administrative  policy pertinent  to the maintenance of law  and order  and internal  security. If  all  relevant factors are  not considered,  or  irrelevant  considerations

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allowed to find place, the decision is vitiated by arbitrary judgment. [850F; E]      In the  instant case  the Government  of India  had not taken  into   careful  consideration  the  several  elements necessary for forming a decision on the 848 quota permissible to each of the petitioners. That should be done and  for that purpose the petitioners would be entitled to  place   before  the  Government  a  fresh  and  complete statement of their case, with supporting material, to enable the Government to reach a just decision. [850G-H]      (ii)  The  Industrial  Policy  Resolution  envisaged  a prohibition against  an increase  in the  quota of guns, not its  curtailment.   No  objection  could  be  taken  to  the government’s instructions  on the subject. The other factors governing  the   fixation  of   the  actual  quota  are  the production capacity  of the factory, the quality of the guns produced  and  the  economic  viability  of  the  unit.  The Industrial Policy  Resolution contains a specific commitment to permit  the  continuance  of  the  factories  which  were functioning for several years earlier. [850C; D-E]      (b) The Arms Act 1959, expressly contemplates the grant of licences  for manufacturing  arms and  an applicant for a licence is entitled to have it considered in accordance with the terms  of the  statute and to press for its grant on the basis of the criteria set forth in it. [851A-B]      (c) The  licences are granted for specific periods with a right  to apply  for renewal on the expiry of each period. Each renewal constitutes a further grant of rights and it is open to  the applicant  to show  on each  occasion that  the quota governing  the preceding  period should  be revised in the light of present circumstances. [851C]      In  the   instant  case   the  petitioners   had   been continuously agitating  for the  restoration of their quota. They are,  therefore, not  guilty of laches and are entitled to relief. [851D]

JUDGMENT:      ORIGINAL JURISDICTION:  Writ Petition  Nos. 833-835  of 1979.            (Under article 32 of the Constitution)      P. Parmeswara  Rao, G.  D. Gupta  and Ashwani Kumar for the Petitioners.      U. R. Lalit and Miss A. Subshashini for the Respondent.      The Judgment of the Court was delivered by      PATHAK, J.-In these three petitions under Article 32 of the Constitution,  the petitioners  separately  pray  for  a restoration of the quota originally granted to them in their respective licences for the manufacture of fire-arms.      Writ Petition  No. 833 of 1979 has been filed by Ranjit Singh who alleges that his father Pritam Singh commenced the business of  manufacturing guns  in  1950  under  a  licence issued by  the Government  of Jammu and Kashmir. The licence permitted him to manufacture 849 30 guns  per month.  The guns  were manufactured by hand and were not  proof-tested. The licence was renewed annually and the  quota   was  maintained  throughout.  Later,  with  the enactment of  the Arms  Act, 1959,  the licence  was  issued under that  statute. The  Government insisted  that the guns manufactured by  Pritam Singh  should undergo proof-testing, and  for   that  purpose   it  became   necessary  for   the manufacturer to purchase and install the necessary machinery

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and plant. The machinery was installed shortly after 1960 on a  substantial   investment  of   funds  raised  with  great difficulty and, it is said, in the result the factory is now capable of  manufacturing 50  guns per month. Until the year 1963, the  licence in  favour of Pritam Singh was renewed by the Government  of Jammu  & Kashmir for the full quota of 30 guns. But  with effect  from the year 1964 the Government of India began  to issue  the licences.  The quota  was reduced from 30  guns to  10 guns  per month, and it is alleged that this has  resulted in  considerable hardship  in view of the financial liability  and the establishment expenses suffered pursuant to  the installation of the machinery. On the death of Pritam  Singh in 1969, the business was carried on by the petitioner and  his mother,  and the  licence now  stands in their  names.  Several  representations  were  made  to  the authorities for  the restoration  of the  original quota but there was  no satisfactory  response. The  petitioner claims that his  plea for the restoration of his original quota has been supported by the State Government. The petitioner cites a number  of cases  where the  quota reduced  in the case of other manufacturers  has been  restored and  relies on other material to  show that  the determination  of his  quota has been arbitrary.      Writ Petition  No. 834 of 1979 has been filed by Bachan Singh.  The   facts  incorporated  in  the  petition  run  a materially similar  course, except  that the  original quota granted to the petitioner consisted of 50 guns per month and has now been reduced to 5 guns per month.      The petitioner  in the  third Writ Petition, No. 835 of 1979, is  Uttam Singh. In his case, the original quota of 50 guns a  month has  been reduced  to 15  guns a  month.  Here again, the pattern of facts is substantially similar to that traced in the other two writ petitions.      In opposition to the writ petitions, the Union of India which is the sole respondent, relies on an Industrial Policy Resolution of  1956 which envisions an exclusive monopoly in the Central  Government in  the matter of manufacturing arms and ammunition  while permitting  existing manufacturers  in the private sector to continue to carry on their business on a limited  scale. It  is asserted that in fixing a quota the manufacturing capacity  of a  concern is  not a  determining factor, 850 and it  is denied that the Government has acted arbitrarily. It is  also urged  that the  petitioners  should  be  denied relief on the ground of laches.      The Union  of India  rests its  case on  the Industrial Policy Resolution  of 1956.  Under that Resolution, however, it was  decided that  no objection  would be  taken  to  the continuance of  the manufacture  of arms  and ammunition  by existing units  in the  private sector  already licensed for such manufacture  provided the  operation of those units was strictly restricted  to the  items already  manufactured  by them and that no expansion of their production or increasing the capacity  of the  items already  produced was undertaken without the  prior sanction  of  the  Government  of  India. Plainly, what  was envisaged  was a  prohibition against  an increase in  the quota,  not its  curtailment. Purporting to implement the  Industrial Policy  Resolution, the Government issued instructions that the quota fixed should be such that the market  was not  flooded with  arms and  ammunition.  No objection can  be raised to that. It is as it should be, but with that  primary consideration  defining the outer limits, there are  other factors  which govern  the fixation  of the actual quota.  There  is  the  production  capacity  of  the

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factory, the  quality of  guns  produced  and  the  economic viability of the unit. The Government is bound to keep these in mind  while deciding on the manufacturing quota. There is need to  remember that  the manufacture of arms has been the business of  some of  these units  for several years and the Industrial Policy  Resolution contains a specific commitment to permit  the continuance  of those factories. On the other side, the  Government is entitled to take into consideration the requirements  of current administrative policy pertinent to the  maintenance of  law and order and internal security. Any curtailment of the quota must necessarily proceed on the basis of  reason and  relevance. If all relevant factors are not considered, or irrelevant considerations allowed to find place, the  decision is  vitiated by  arbitrary judgment. On the material placed before us, we are not satisfied that the Government of India has taken into careful consideration the several elements  necessary for  forming a  decision on  the quota permissible  to each  of these  petitioners. We are of opinion that it should do so now. And, for that purpose, the petitioners  should   be  entitled   to  place   before  the Government a  fresh and  complete statement  of their  case, with supporting  written material,  to enable the Government to reach a just decision in each case.      We need  not, in  the circumstances, consider the other grounds on which the petitioners claim relief. 851      On behalf  of the  Government it is urged that there is no  fundamental   right  under   Article  19(1)(g)   of  the Constitution to  carry on  the  manufacture  of  arms.  That contention is  disposed of  shortly.  The  Arms  Act,  1959, expressly   contemplates   the   grant   of   licences   for manufacturing arms.  An applicant  for a licence is entitled to have  it considered  in accordance  with the terms of the statute and  to have  for its  grant on  the  basis  of  the criteria set forth in it.      The other  contention on  behalf of  the Government  is that the  petitioners are  guilty  of  laches.  We  are  not impressed by the contention for the reason that the licences are granted  for specific  periods with a right to apply for renewal  on   the  expiry   of  each  period.  Each  renewal constitutes a  further grant of rights and it is open to the applicant to  show on each occasion that the quota governing the preceding  period should  now be revised in the light of present circumstances.  Besides, the  petitioners have  been continuously agitating  for the  restoration of their quota. Having regard  to the peculiar circumstances of these cases, we are not inclined to deny them relief.      Accordingly, we allow the writ petitions and direct the respondent Union  of India  to reconsider  the manufacturing quota fixed  in the case of each petitioner after allowing a reasonable period to the respective petitioners to set forth their case  on the  merits,  with  such  supporting  written material as they may choose to place before it. N.V.K.    Petitions allowed. 852