Civil Appeal Nos3677 3680 of 1986 Etc
From the Judgment and Order dated 1031986 of the Karnataka High Court in WP Nos
4053 to 4056 of 1985
Shanti Bhushan Dr YS Chitale HB Datar KR Nagaraja 1011 RS Hegde RB Datar SS Jawali BP Singh NDB Raju RP Wadhwani Aruneshwar Gupta Swaraj Kaushal KMM Khan SR Setia ATM Sampath and CS Vaidyanathan for the appearing parties
The Judgment of the Court was delivered by CHINNAPPA REDDY J
Special leave granted in all the cases
These appeals raise common questions of law and may therefore be disposed of by a common judgment
In exercise of its powers under section 637 of the  the Central Government specified 50 as the number of All India Tourist Vehicle Permits  which may be granted by the Karnataka State Transport Authority
By section 24 of Amending Act 47 of 1978 a proviso to section 637 was introduced
We are concerned in these appeals with the vires and interpretation of this proviso
By the time the proviso came into force 36 permits had been granted by the Karnataka State Transport Authority and 14 remained to be granted
There were as many as 495 applications for the grant of these 14 permits
By an order dated February 1 1984 the Supreme Court directed the Karnataka State Transport Authority to dispose of these applications
The State Transport Authority by its proceedings dated April 30 1984 granted 11 out of the 14 permits to the Karnataka State Tourism Development Corporation one permit to the Indian Tourism Development Corporation and two permits to the Karnataka State Road Transport Corporation
A number of appeals were preferred to the Karnataka State Transport Appellate Tribunal
The Tribunal by its order dated February 28 1985 set aside the grant of the two permits in favour of the Karnataka State Road Transport Corporation set aside the grant of three out of eleven permits to the Karnataka State Tourism Development Corporation and instead granted three permits to private operators and increased the number of permits granted to the Indian Tourism Development Corporation from one to three
The Tribunal took the view that having regard to the rule of preference enunciated by the proviso to section 637 the applications from the non preferred  category had to be excluded as the number of applications from the applicants who were required to be given preference exceeded the number of permits to be granted
It was on that ground that the grant of two permits to the Karnataka State Road Transport Corporation was set aside though the Appellate Tribunal had no doubt regarding the resources and ability of that corporation to operate the tourist services
It was on that ground again it was so stated by the Tribunal that some of the appellants 1012 before the Tribunal had to be denied the grant of permits though otherwise they would have been entitled to the grant of permits having regard to their expertise experience and resources
The Tribunal rejected their appeals regretfully
A large number of applicants filed writ petitions in the High Court
The writ petitions were rejected by the High Court on the ground that the preference contemplated by the proviso to section 637 contemplated exclusion of the non preferred  class if sufficient number of applicants from the preferred classes were available
The decision of this Court in Sher Singh vs Union of India  was distinguished on the ground that in that case the court interpreted the word preference  occurring in section 471 H in the back ground of the provisions of Chapters IV and IV A of the Act under the former of which the State Transport Undertaking would have preference whereas under the latter the State Transport Undertaking would have a monopoly
The Karnataka State Road Transport Corporation the Karnataka State Tourism Development Corporation and some other private operators have filed these appeals by special leave of this Court under article 136 of the Constitution
Shri Shanti Bhushan learned counsel for the Karnataka State Road Transport Corporation Dr Chitley learned counsel for some of the private operators Shri Datar learned counsel for the Karnataka State Tourism Development Corporation Shri Sampat and Shri Javali learned counsel for other private operators submitted that the State Transport Appellate Tribunal and the High Court were wrong in distinguishing the decision of this court in Sher Singh s case and that the true position was that on a correct interpretation of the proviso to sec
637 the preference became operative only if other things were equal
It was also urged that the fourth sub clause of the proviso offended article 14 and had to be struck down
Shri CS Vaidyanathan learned counsel for some of the preferred private operators urged that the view taken by the High Court and the State Transport Appellate Tribunal was correct and that the fourth sub clause of the proviso to section 637 did not offend article 14 of the Constitution
We may now glance at some of the relevant provisions of the  section 233 defines a transport vehicle as meaning a public service vehicle or a goods vehicle
A public service vehicle is defined in section 225 as any motor vehicle used or adapted to be used for the carriage of passengers for hire or reward and includes a motor cab contract carriage and stage carriage
A motor car is defined in section 216 as any motor vehicle other than a transport vehicle 1013 omni bus road roller tractor motor cycle or invalid carriage
A contract carriage is defined as broadly a motor vehicle which carries a passenger or passengers for hire or reward under a contract Tourist vehicle is defined by section 229 A as a contract carriage constructed or adapted and equipped and maintained in accordance with such specifications as the State Government may by notification in the Official Gazette specify in this behalf
Stage carriage is defined by section 229 as a motor vehicle carrying or adapted to carry more than six persons excluding the driver which carries passengers for hire or reward at separate fares paid by or for individual passengers either for the whole journey or for stages of the journey Chapter IV sections 42 to 68 deals with Control of Transport vehicles
Section 42 prescribes permits for the use of a transport vehicle in any public place
Sections 46 47 and 48 deal with the grant of stage carriage permits
Section 471 prescribes the matters to be taken into consideration in granting stage carriage permits and the first consideration naturally is the interest of the public generally
 The proviso to section 471 prescribes that other things being equal a registered cooperative society and a person possessing a licence for driving transport vehicles shall be given preference over individual owners in granting stage carriage permits
Section 471 A enables the State Government to reserve a certain percentage of stage carriage permits for the Scheduled Castes and Scheduled Tribes
Section 471 C enables the State Government to reserve a certain percentage of stage carriage permits to persons belonging to economically weaker sections of the community
Section 471 H prescribes that notwithstanding anything contained in the section an application for stage carriage permit from a State Transport undertaking for operating in any inter State route shall be given preference overall other applications provided of course the authority is satisfied that the State Transport Undertaking would be able to operate in the inter State route without detriment to its responsibility for providing efficient and adequate road transport services in any notified area or notified route
Sections 49 50 51 deal with the grant of contract carriage permits
Section 52 and 53 deal with private carrier s permit and sections 54 55 and 56 deal with public carrier s permit
Section 57 deals generally with the procedure to be followed in applying for and granting permits
Section 631 stipulates broadly that a permit granted by the Regional Transport Authority of any one region shall not be valid in any other region unless the permit has been countersigned by the Regional Transport Authority of that other region and a permit granted in any one State shall not be valid in any other State unless countersigned by the State Transport Authority of 1014 that other State or by the Regional Transport Authority concerned
Section 637 is the provision with whose interpretation and vires we are primarily concerned in this case
It is as follows 7 Notwithstanding anything contained in sub section1 but subject to any rules that may be made under this Act any State Transport Authority may for the purpose of promoting tourism grant permits valid for the whole or any part of India in respect of such number of tourist vehicles as the Central Government may in respect of that State specify in this behalf and the provisions of Sections 49 50 51 57 58 59 59 A 60 61 and 64 shall as far as may be apply in relation to such permits Provided that preference shall be given to applications for permits from i the India Tourism Development Corporation ii a State Tourism Development Corporation iii a State Tourist Department iv such operators of tourist cars or such travel agents as may be approved in this behalf by the Ministry of the Central Government dealing in tourism
 Section 68 enables the State Government to make rules for the purpose of carrying into effect the provisions of Chapter IV
Chapter IV A relates to special provisions relating to State Transport Under takings
 Sections 68 C 68 D and 68 E provide for the preparation and publication of schemes of road transport service to be provided by State Transport Undertakings the procedure to be followed etc
Section 68 F1 prescribes that where in pursuance of an approved scheme a State Transport Undertaking applies for a stage carriage permit a contract carriage permit or a public carrier s permit in respect of a notified area or notified route such permit shall be granted to the State Transport Undertaking by the State Transport Authority in a case where the said area or route lies in more than one region and the Regional Transport Authority in any other case
This is to be so notwithstanding anything to the contrary contained in Chapter IV
1015 The general scheme of the Act in the matter of grant of permits for stage carriages and contract carriages appears to be that except in the case of a notified route or notified area where under section 68 F1 the permit has to be necessarily granted to the State Transport Undertaking in all other cases the claims of all eligible applicants must be considered on merits applying the rules of preference wherever the claims are approximately equal
Except in the case of a notified route or notified area the application of no applicant may be altogether excluded from consideration on the sole ground that another applicant is entitled to preference under one or the other provisions of the statute
The proviso to section 471 for example provides that other conditions being equal an application for a stage carriage permit from a cooperative society or a person holding a valid licence for driving transport vehicles shall as far as may be be given preference over applications from individual owners
There is no problem here since the proviso itself says that the rules of preference will apply only if other conditions are equal
Section 471 H also enunciates a rules of preference and says that an application for stage carriage permit from State Transport Undertaking for operating in any inter State route shall be given preference overall other applications
While it is true that section 471 H does not expressly refer to other things being equal it appears to be implicit in the provision that other things are equal
The rule is a rule of preference and not a rule of exclusion
Section 471 H does not say for example like section 68 F1 that the permit shall be granted to the State Transport Undertaking
That is how section 471 H was interpreted in Sher Singh s case
Desai J speaking for the court observed However when an application for a permit is made under Chapter IV the Undertaking has to compete with private operators who may as well make an application for permit
When the Undertaking applies for permit under Chapter IV it must satisfy the Regional Transport Authority that it is better suited than the private operator to render transport facility to the travelling public
471 H however provides that in the case of inter State route the Undertaking will have preference in the matter of stage carriage permit
Does preference of this nature deny equality guaranteed by article 14 The expression preference  amongst others means prior right advantage precedence etc
But how would it be possible to give precedence to one over the other
It signifies that other things being equal 1016 one will have preference over the others
When an application for a stage carriage permit is being processed as required by sec
47 the application of the Undertaking for an inter State route shall be examined as application of any other private operator
Their merits and demerits must be ascertained keeping in view the requirements of a to f of section 471 and after comparing the merits and demerits of both not with the yard stick of mathematical accuracy but other things being equal the application of the Undertaking will have preference over others
Qualitative and quantitative comparison on broad features of passenger transport facility such as fleet facilities to travelling public and other relevant consideration may be undertaken and after balancing these factors other things being equal the application of the Undertaking shall be given preference over other applicants
There is no question of eliminating private operators merely because the Undertaking applies for a stage carriage permit under Chapter IV
That situation is catered to under Chapter IV A
In an application under Chapter IV Corporation has to enter the arena like any other applicant face the competition and come up to the level of other private operators intending to obtain stage carriage permits and then in respect of the route in question claim preference
Would this statutory provision violate equality guaranteed by article 14 The answer is obviously in the negative                     let it be made clear that while considering the application for stage carriage permit under section 47 the private operator has an equal chance to get a permit even on inter State route if it shows that the Undertaking is either unable to provide efficient and economical service or that the private operator is better equipped to render the same
Preference in this context would mean that other things generally appearing to be qualitatively and quantitatively equal though not with mathematical accuracy statutory provision will tilt the balance in favour of the Undertaking
 What has been said by the Court with reference to the preference 1017 provided for in section 471 H applies with equal force to the preference provided for by the proviso to section 637
In the judgment under appeal the High Court attempted to distinguish the decision of this Court in Sher Singh s case on the ground that any other interpretation would have wiped out the difference between Chapter IV and Chapter IV A
We do not think the High Court was right in distinguishing the case in that fashion
The reference to Chapter IV A there was for the purpose of contrasting the exclusion contemplated by section 68F1 with the preference to be given under section 47 1 H and so to interpret the word preference  occurring in section 471 H
We have no hesitation in saying that all that has been said about preference  in Sher Singh s case in relation to section 471 H applies mutatis mutandis to the preference contemplated by the proviso to section 637
Since the State Transport Appellate Tribunal and the High Court have failed to consider the merits of the claims of the Karnataka State Road Transport Corporation and the private operators who did not get a certificate of approval from the Central Government because of the rule of preference contained in proviso to section 637 the proper course for us is to set aside the orders of the State Transport Appellate Tribunal and the High Court and to direct the State Transport Appellate Tribunal to re hear the appeals and dispose them of in accordance with law after considering the claims of the eligible applicants in the manner indicated in Sher Singh s case and now
A question was raised before us about the vires of the fourth clause of the proviso to section 637
Clauses i to iii of the proviso providing for preference to be given to applications for permits from the Indian Tourism Development Corporation the State Tourism Development Corporation and the State Tourist Department were not questioned but the preference provided for by clause iv and to be given to such operators of tourist cars or such travel agents as may be approved in this behalf by the Ministry dealing in tourism was questioned as an infringement of article 14 of the Constitution
We find it difficult to sustain this clause and uphold its validity
The very idea that a Tribunal created by a statute for the purpose of considering rival claims and granting permits on merits should be compelled to give peference to persons securing the approval of the executive Government appears to us to be arbitrary and unreasonable
To the extent that it goes the clause pre empts the decision of the designated tribunal by executive discretion
It was said that the clause contained sufficient guidelines for the exercise of discretion in granting approval by the Central Government
It was said that the object of the proviso to section 1018 637 was very obviously the promotion of tourism and the approval of the Central Government would be given to those operators of tourist cars and travel agents who may be expected to serve that purpose
It is difficult to agree with these submissions
In the first place clause d it is seen provides for a preference not to operators of tourist vehicles but to operators of tourist cars and travel agents
Though the permits to be granted are for tourist vehicles the preference is confined to operators of tourist cars and travel agents
One may understand a preference granted to operators of tourist vehicles but it is difficult to understand why preference should be given to operators of tourist cars in the matter of granting permits for tourist vehicles which may well be omnibuses required to travel long distances
Surely it cannot be said that experience of running a tourist taxi is a better qualification than running a tourist bus when the question of granting permits for tourist vehicles arises
The High Court of Karnataka tided over the difficulty by interpreting the expression tourist cars as meaning tourist vehicles
It is difficult to agree with the interpretation of the Karnataka High Court having regard to the definitions of Transport Vehicle and motor car contained in section 229 A and section 216 respectively
While a tourist vehicle may include a motor car a motor car by definition excludes an omnibus
In the second place we have no indication as to the manner in which the approval of the Central Government is to be sought and granted and the considerations which are expected to weigh with the Central Government
Shri CS Vaidyanathan learned counsel for the Preferred  Operators has placed before us a Scheme for granting approval to tourist transport operators in India  The scheme makes no reference to the proviso to sec
637 of the 
On the other hand it mentions that approval carries with it certain privileges such as allotment of ex STC vehicles and that it is therefore necessary that the department is able to exercise some control on the functioning of these operators
The terms and conditions to be fulfilled are that the party must have been in the car hire business for a period of 2 years with the help of cars of indigenous make or cars obtained from elsewhere and should have sufficient contacts with travel agencies hoteliersairlines etc
and should be financially sound or that they should be owning and operating five vehicles as tourist taxies of either indigenous make or acquired from elsewhere regardless of the period in the car hire business or that they should be ex Defence Service personnel who satisfy certain prescribed conditions
It is seen that the scheme excludes omnibus operators and requires applicants to have 1019 either two years  experience in the car hire business with contacts in the tourist business or to own five tourist taxies
There are no guidelines as to how the discretion to grant approval is to be exercised once the minimum conditions are fulfilled
The matter appears to be left to the total discretion of the Central Government virtually as we said pre empting the decision of the statutory tribunal
We think that clause iv of the proviso to section 637 is unconstitutional and we so declare it
In the result we set aside the orders of the State Transport Appellate Tribunal and the High Court and direct the State Transport Appellate Tribunal to hear the appeals in the light of what we have said
PSS Appeals allowed


Summary:
Sub section 7 of section 63 of the empowers the State Transport Authority for the purpose of promoting tourism to grant permits valid for the whole or any part of India in respect of such number of tourist vehicles as the Central Government may in respect of that State specify in this behalf
A proviso to that sub section introduced by section 24 of the Amending Act of 1978 laid down that preference shall be given to applications for permits from i the India Tourism Development Corporation iii a State Tourism Development Corporation iii a State Tourist Department and iv operators of tourist cars or travel agents approved in this behalf by the Central Government
There were as many as 495 applications before the Karnataka State Transport Authority for the grant of 14 All India Tourist Vehicle permits
By its proceedings dated April 30 1984 the Authority granted 11 permits to the Karnataka State Tourism Development Corporation one to the Indian Tourism Development Corporation and two to the Karnataka State Road Transport Corporation
1009 On appeals being preferred the Karnataka State Transport Appellate Tribunal by its order dated February 28 1985 set aside the grant of two permits in favour of the Karnataka State Road Transport Corporation three out of eleven permits to the Karnataka State Tourism Development Corporation and instead granted three permits to private operators and increased the number of permits granted to the Indian Tourism Development Corporation from one to three on the premises that in view of the rule of preference enunciated by the proviso to section 637 the applications from the non preferred category had to be excluded as the number of applications from the applicants who were required to be given preference exceeded the number of permits to be granted
Though some of the appellants before the Tribunal had better expertise experience and resources they did not succeed
The High Court rejected the writ petitions on the ground that the rule of preference contained in the proviso to section 637 contemplated exclusion of the non preferred  class if sufficient number of applicants from the preferred classes were available
In these appeals by special leave it was contended for the appellants that on a correct interpretation of the proviso to section 637 the preference became operative only if other things were equal
It was also urged that the fourth sub clause of the proviso offended article 14 of the Constitution and had to be struck down
Allowing the appeals the Court  HELD 11 The rule contained in the proviso to section 637 of the is a rule of preference and not a rule of exclusion for it does not say that the permit shall be granted to the categories of operators specified therein
The claims of eligible applicants must be considered on merits applying the rule of preference whenever the claims are approximately equal
The application of an applicant is not to be altogether excluded from consideration on the sole ground that another applicant is entitled to preference
Though the proviso does not expressly refer to other things being equal the principle is very much implicit in it
1015B E 12 What has been said by this Court in Sher Singh vs Union of India   about preference in relation to section 471 H applies mutatis mutandis to the preference contemplated by the proviso to section 637 in the instant case
1017C 1010 21 Clause iv of the proviso to section 637 is arbitrary unreasonable and unconstitutional
There is no indication in it as to the manner in which the approval of the Central Government is to be sought and granted and the considerations which are expected to weigh with the Central Government
It compels a tribunal created by a statute for the purpose of considering rival claims and granting permits on merits to give preference to persons securing the approval of the Executive Government
To the extent the clause goes it pre empts the decision of the designated tribunal by executive discretion
1017E G 22 The clause provides for a preference not to operators of tourist vehicles but to operators of tourist cars and travel agents though the permits to be granted are for tourist vehicles
It is difficult to understand why preference should be given to operators of tourist cars in the matter of granting permits for tourist vehicles which may well be omnibuses required to travel long distances
1018B C 23 The experience of running a tourist taxi cannot be said to be a better qualification than running a tourist bus when the question is of granting permits for tourist vehicles
1018C D 3
Having regard to the definitions of tourist vehicle  and motor car  contained in section 229 A and section 216 respectively of the Act the expression tourist cars  cannot be said to mean tourist vehicles 
While a tourist vehicle may include a motor car a motor car by definition excludes an omnibus
1018D E In the instant case the State Transport Appellate Tribunal and the High Court have failed to consider the merits of the claims of the Karnataka State Road Transport Corporation and the private operators who did not get a certificate of approval from the Central Government because of the rule of preference contained in proviso to section 637
Their orders are therefore set aside
The State Transport Appellate Tribunal is directed to re hear the appeals and dispose them of in accordance with law
1017C E