1. Bidi manufacturer challenged a restrictive condition in a license to purchase Tendu leaves, limiting purchases to contractors, under the Vindhya Pradesh Tendu Leaves Act, 1953. (Para 2 , 7 )
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1959 Supreme(SC) 17
SUPREME COURT OF INDIA
9th February, 1959
S.R. DAS, C.J.I., S.K. DAS, P.B. GAJENDRAGADKAR, K.N. WANCHOO AND M. HIDAYATULLAH, JJ.
Hamid Raza, Petitioner
Versus
State of M.P., Respondent.
Petition No. 61 of 1956.
Advocates Appeared
M/s. G. C. Mathur and C. P. Lal, Advocates, for petitioner; M/s. H. J. Umrigar and R. H. Dhebar, Advocates, for Respondent.
Licensing authorities cannot impose conditions not prescribed by the enabling Act or Rules. Any such condition that creates an unreasonable monopoly and restricts the fundamental right to carry on trade or business under Article 19(6) of the Constitution is ultra vires and void.
Headnote:(A) Constitution of India - Articles 14, 19 and 32 - State Tendu Leaves Act, 1953 - Sections 3 and 17 - State Tendu Leaves Rules, 1954 - Rules 3 and 4 - Licensing for trade of Tendu leaves - Condition imposed in license requiring purchase only from contractors - Whether such condition is ultra vires the Act and Rules and violates fundamental rights - Licensing authority cannot impose conditions not prescribed by the rules - Restriction creating a monopoly for certain traders to the exclusion of others is an unreasonable restriction on the right to carry on trade or business under Article 19(6). (Paras 8, 10, 11, 12, 13)
(B) Administrative Law - Scope of licensing authority - Power to impose conditions must be found in the enabling Act or the rules framed thereunder - Bona fide motives do not justify the imposition of conditions that exceed statutory authority. (Para 11)
Facts of the case:
A manufacturer of bidis applied for a license to purchase and transport Tendu leaves under a state act. A license was eventually granted, but the licensing authority added a condition that the leaves must be purchased only from contractors. The petitioner challenged this condition as being in excess of the powers conferred by the Act and Rules and as a violation of fundamental rights to carry on trade and business.
Findings of Court:
The Act and Rules did not authorize the licensing authority to restrict purchases to contractors only, especially regarding leaves from private lands. The addition of such a condition created a monopoly for contractors, who were also manufacturers, thereby unfairly restricting the petitioner's business and ability to compete in the market.
Issues: Whether the licensing authority had the power to add a restrictive condition to the license not provided for in the Act or Rules, and whether such a condition constituted an unreasonable restriction on the fundamental right to trade.
Ratio Decidendi: The court held that any condition imposed on a license must be prescribed by the rules or authorized by the Act. Since the restrictive condition was not found in the statutory framework and resulted in an unreasonable restriction on trade by creating a monopoly, it was declared ultra vires and void.
Result: Petition allowed.
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2. Petitioner contended the restrictive license condition was ultra vires the Act and Rules and violated fundamental rights; State argued it was necessary to protect contractors' rights. (Para 7 , 8 , 9 )
3. The licensing authority lacked statutory power to restrict purchases to contractors only, as the Act and Rules did not cover leaves on Jagir or tenant lands. (Para 10 , 11 , 12 )
4. A condition imposed in a license that is not authorized by the governing Act or Rules and unreasonably restricts fundamental rights is ultra vires and void. (Para 11 , 13 )
5. Petition allowed; the restrictive clause limiting purchases to contractors declared void and ordered to be omitted from the license. (Para 13 , 14 )
6. Can a licensing authority impose conditions not explicitly provided for in the governing Act or Rules?
No. The authority to add conditions to a license must be found within the Act or the rules framed thereunder. Any condition added without such statutory authorization, even if done with bona fide motives, is not justifiable and is ultra vires. (Para 8 , 11 )
7. What is the legal effect of a license condition that creates a monopoly and restricts trade?
If a license condition creates a monopoly in favor of certain parties to the exclusion of others, thereby destroying the business of competitors, it constitutes an unreasonable restriction on the right to carry on trade under Article 19(6) of the Constitution. (Para 12 , 13 )
8. Does the power to grant licenses under a statute allow the government to restrict purchases from private landowners if the statute only covers government land?
No. If the Act and Rules only contemplate the disposal of resources from government-owned lands, the government exceeds its authority by restricting a licensee's ability to purchase those resources from private holders, such as tenants or Jagirdars. (Para 10 , 12 )
Judgment
HIDAYATULLAH, J. : The petitioner Hamid Raza has moved this Court under Art. 32 of the Constitution. Previous to this the petitioner had obtained a certificate of fitness from the Judicial Commissioner of Vindhya Pradesh on 4-1-1956 to appeal against the order dated 7-5-1955 passed on writ application No. 25 of 1955. Though the petitioner deposited the amount of security, as well as the printing charges; he took recourse to Art. 32, as a more expeditious and adequate remedy.
2. The petitioner carries on business as a manufacturer of bidis under the name and style of Hamid Raza Manufacturing Company Rewa. In the year 1953, the VINDHYA PRADESH TENDU LEAVES ACT , 1953, was enacted and it came into force on May 19, 1954. In pursuance of a provision therefor the petitioner applied to the appropriate authority on January 19, 1955, for a licence. His application is Annexure A . On February 4, 1955, the Divisional Forest Officer, Rewa, declined to grant him a licence stating as the reason therefor as follows :
"With reference to your above application I have to inform you that no licence for Tendu Patti, will be issued as the Tendu Patti of this division were auctioned."
A week later the petitioner made a second application for licence. He also interviewed the Divisional Forest Officer and the Chief Conservator of Forest Vindhya Pradesh, Rewa. Though he heard nothing in reply to his application, it appears that he was informed orally that no licence would be granted to him.
3. The petitioner thereupon applied to the Judicial Commissioner, Vindhya Pradesh Art. 226 of the Constitution requesting for writ or writs to compel the grant of licence to him. Before the Judicial Commissioner the authorities made an offer, and undertook, to grant to the petitioner a licence to purchase Tendu leaves from the contractors to whom the forest areas in Vindhya Pradesh had previously been auctioned. Though the petitioner did not accept this offer, the Judicial Commissioner considered it fair enough and in view of it he declined to issue a writ and dismissed the petition. As previously stated the Judicial Commissioner, Vindhya Pradesh, granted a certificate of fitness on which action was also taken, but the petitioner moved this Court under Art. 32 of the Constitution separately.
4. In this petition the petitioner challenged Section 3 of the VINDHYA PRADESH TENDU LEAVES ACT 1953 (hereinafter called the Act) as being contrary to the provisions of Part III of the Constitution and thus void. He relied in this connection mainly upon Arts. 14 and 19 of the Constitution. At the hearing this mode of attack was abandoned and the case was confined to the restrictions proposed to be imposed by the licence which were described as unwarranted and void.
5. Before dealing with these contentions it is necessary to examine briefly what the Act and the rules under it provide. The Act declared in the preamble that it was to provide for "reasonable restrictions on the trade and commerce of (sic) Tendu leaves in Vindhya Pradesh", which it was further declared, were necessary in the public interest. By Ss. 3 to 6 a system of licensing was introduced. Section 3 of the Act provided as follows :
1. No person shall, unless he obtains a licence from the licensing Authority, or is exempted by the State Government under sub-section (3), purchase and transport for trade Tendu leaves in any part of Vindhya Pradesh.
2. A licence under this Act shall be granted -
(a) on payment of such fees as may be prescribed,
(b) for such period as the Licensing Authority may direct;
(c) in such form and contain such particulars as the Licensing Authority may direct either generally or in any particular instance, in this behalf; and
(d) subject to such restrictions and on such conditions as may be prescribed.
3. .........................
Under Section 2 (f) the word "Prescribed" was defined as "prescribed by the rules framed under the Act". It may be pointed out here that exemption was granted only to te
