JUDGMENT

VENKATARAMIAH, J.:— In these appeals by special leave we are concerned with the question of constitutional validity, of Section 6 of the Kerala Forest Produce (Fixation of Selling Price) Act, 1978 (Act 29 of 1978) (hereinafter referred to as the Act).

2. The appellant Hindustan Paper Corporation Ltd. is a company owned by the Central Government carrying on the business of manufacturing newsprint at its factory in the State of Kerala. Before its factory was established an agreement was entered into between the appellant Hindustan Paper Corporation Ltd. and the Government of Kerala on October 7, 1974 under which the Government of Kerala agreed to grant to the appellant the right of free use of water from the Muvattupuzha river for the purpose of manufacturing newsprint and also to make available annually to the appellant 1,50,000 tonnes of eucalyptus wood. The Government of Kerala further agreed to keep reserved from the date of agreement the State plantations of eucalyptus grandis in Pamba, Kottayam, Punalur, Thenmalai and Trivandrum Forest Divisions as constituted then for the appellant and not to permit harvesting of eucalyptus wood and reeds by other parties and for the regeneration of the forest in the areas, the Chief Conservator of Forests, Kerala State was required in consultation with the appellant to prepare and implement a scientific management plan which would include fire-protection and epidemic control programmes. The appellant agreed to pay to the Government of Kerala royalty for the raw materials supplied to the appellant at the rate of Rs. 11/- per tonne of green wood of eucalyptus grandis and eucalyptus tereticornis (both with 50 per cent moisture) and at the rate of Rs. 12/- per tonne of green reeds with 50 per cent moisture. There were several other conditions in the agreement with which we are not concerned in these cases. After the above agreement was entered into the appellant established its factory. The Punalur Paper Mills Ltd. and the Gwalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. which were companies in the private sector had also established their factories in the State of Kerala which consumed forest produce as raw material. The Kerala State Bamboo Corporation Limited and the Travancore Plywood Industries Limited which were owned by the Government of Kerala were also carrying on business in the State of Kerala.

3. In the year 1978 the Act was passed by the Kerala Legislature with the object of providing for the procedure to be followed in fixing the selling prices of certain important forest produce, for the prohibition of the sale of such forest produce at less than the prices so fixed and for matters incidental or ancillary thereto. The Act was also intended to provide for the proper regeneration and maintenance of the forests in the State. The Act governs only those forests which are considered as reserved forests within the meaning of Kerala Forest Act, 1961 and forests vested in the Government under Section 3 of the Kerala Private Forests (Vesting and Assignment) Act, 1971. It provides, for the determination of the selling price of certain forest produce specified in Clause (o) of Section 2 of the Act. Section 3 of the Act requires the Government to notify in the Gazette before the end of each financial year the selling price of every forest produce for the following financial year. The notified price has to be fixed by the Government after taking into consideration the recommendations of the Expert Committee consisting of the officers mentioned in Section 4(2) of the Act. Subsection (3) of Section 4 of the Act requires the Expert Committee to make its recommendation having regard inter alia to the market price of the forest produce, the cost of regenerating and maintaining. the forest produce in cases where regeneration is necessary after selling the forest produce; and such other matters as may be prescribed. Section 5 is the crucial section in the Act. It reads as follows :

"5. Forest