IN THE HIGH COURT OF GUJARAT AT AHMEDABAD LETTERS PATENT APPEAL No 15 of 2003 in SPECIAL CIVIL APPLICATIONNo 7190 of 2002 with LETTERS PATENT APPEALS Nos. 16 of 2003 to 85 of 2003 with LETTERS PATENT APPEAL NO. 314 OF 2003 WITH LETTERS PATENT APPEALS NOS. 234/2003, 240/2003, 241/2003, 242/2003, 244/2003 & 246/2003 WITH LETTERS PATENT APPEALS NOS.238/2003, 243/2003, 245/2003 & 247/2003 WITH LETTERS PATENT APPEALS NOS.248/2003, 235/2003 & 303/2003 WITH LETTERS PATENT APPEALS NOS.237/2003 & 239/2003 WITH LETTERS PATENT APPEAL NO.236 OF 2003 WITH LETTERS PATENT APPEAL NO.118 OF 2003 WITH LETTERS PATENT APPEAL NO.225 OF 2003 WITH CIVIL APPLICATION NO.213 OF 2003 WITH CIVIL APPLICATIONS NOS.216/2003 TO 283 OF 2003, 285/2003, 291/2003, 1614/2003 TO 1628/2003, 566/2003, 1484/2003, 1866/2003 AND CIVIL APPLICATION NO.2005/2003 For Approval and Signature: Hon'ble MR.JUSTICE R.K.ABICHANDANI and Hon'ble MR.JUSTICE KUNDAN SINGH ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- SHRIJEE TRADING COMPANY Versus STATE OF GUJARAT -------------------------------------------------------------- Appearance: LETTERS PATENT APPEALS NOS. 15/2003 TO 85/2003 and 314/2003 : MR.S.B.VAKIL, SR. ADVOCATE with MR.A.S.VAKIL Advocate for the Appellants MR.S.N.SHELAT, ADVOCATE GENERAL with Ms.Harsha Devani, Assistant Government Pleader for the Respondents LETTERS PATENT APPEAL NO.118/2003 : MR.B.I.MEHTA, Advocate for the appellant MR.S.N.SHELAT, ADVOCATE GENERAL with Ms.Harsha Devani, Assistant Government Pleader for the Respondents LETTERS PATENT APPEAL NO.225/2003 : MR.J.S.YADAV, Advocate for the appellant MR.S.N.SHELAT, ADVOCATE GENERAL with Ms.Harsha Devani, Assistant Government Pleader for the Respondents LETTERS PATENT APPEALS NOS.234/2003, 240/2003, 241/2003, 242/2003, 244/2003 & 246/2003 : MR.S.N.SHELAT, ADVOCATE GENERAL with Ms.Harsha Devani, Assistant Government Pleader for the Appellants MR.J.S.YADAV, Advocate for Respondent No.5 in LETTERS PATENT APPEAL NO.234/2003 RULE SERVED on the Respondents in all Appeals LETTERS PATENT APPEALS NOS.238/2003, 243/2003, 245/2003 & 247/2003 : MR.S.N.SHELAT, ADVOCATE GENERAL with Ms.Harsha Devani, Assistant Government Pleader for the Appellants MR.R.M.CHHAYA, Advocate for the Respondents in all the Appeals. LETTERS PATENT APPEALS NOS.248/2003, 235/2003 & 303/2003 : MR.S.N.SHELAT, ADVOCATE GENERAL with Ms.Harsha Devani, Assistant Government Pleader for the Appellants MR.R.C.JANI, Advocate for the Respondents in all the Appeals. LETTERS PATENT APPEALS NOS.237/2003 & 239/2003 : MR.S.N.SHELAT, ADVOCATE GENERAL with Ms.Harsha Devani, Assistant Government Pleader for the Appellants MR.M.K.VAKHARIA, Advocate for the Respondents LETTERS PATENT APPEAL NO.236 OF 2003 : MR.S.N.SHELAT, ADVOCATE GENERAL with Ms.Harsha Devani, Assistant Government Pleader for the Appellants MR.J.S.YADAV, Advocate for the Respondents -------------------------------------------------------------- CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH Date of decision: 01/08/2003 ORAL JUDGEMENT (Per : MR.JUSTICE R.K.ABICHANDANI for the Court) 1. All these appeals are directed against the judgement and order dated 4th December 2002 made by the learned Single Judge in a group of petitions in which the petitioners challenged the action of the State Government of deciding not to renew under Rule 5 of the Gujarat Essential Articles (Licensing, Control & Stock Declaration) Order, 1981 (hereinafter referred to as "the Licensing Order of 1981"), the licences of wholesale kerosene dealers, who were not the agents / dealers of the Oil Companies, from 1-8-2002, and seeking a direction on the respondents to renew the licences of the petitioners as wholesale dealers in kerosene for a period of five years from the date of their applications for renewal with consequential and incidental orders. The petitioners challenged the provisions of Amendment Order 2002 made on 31-7-2002, by which definition of "Public Distribution System Kerosene Wholesale Dealer" was added as per Clause 2(18A) in the Licensing Order, 1981, and also the circular dated 31-7-2002 deciding not to renew the licences of those who were not covered by the said definition and to take action to cancel the existing licences of such persons. 1.1 One group of appeals, being Letters Patent Appeals No.15 of 2003 & cognate appeals is filed by the original petitioners against the orders rejecting their applications for renewal of licences, while the other group of appeals, being Letters Patent Appeal No. 234 of 2003 and cognate matters, are filed by the State Government against the order allowing the petitions, challenging the cancellation of existing licences. All the appeals arise from a common judgement, and have been argued together by the learned counsel appearing for the respective parties. 2. According to the appellants - original petitioners, though they had earlier succeeded in Letters Patent Appeal No.538 of 2001, in which a Division Bench of this Court had set aside the executive orders made for excluding the wholesale kerosene dealers who were not dealers appointed by the Government Oil Companies, the State Government has repeated the same action and again excluded the appellants from being considered for issuing licences to them as wholesale kerosene dealers, to which they were entitled under the provisions of the Licensing Order of 1981 and which were being given to them and renewed from time to time till the amendment was made in the Licensing Order of 1981 by inserting the said definition clause 2(18A) by the impugned Amendment Order, 2002. The respondents have now, on the basis of the amendment taken a decision to abolish the wholesale dealers from the business of Public Distribution System in kerosene, excepting only those persons who were the agents / dealers appointed by the Government Oil Companies. According to the appellants, the respondents have discriminated against the appellants though they fell in the same class to which the other wholesale dealers in kerosene appointed by the Government Oil Companies belonged. The respondents, by a separate definition of "Public Distribution System Kerosene Wholesale Dealer", have created two classes of wholesale dealers contrary to the provisions of the Licensing Order of 1981 and in violation of the provisions of Article 14 of the Constitution of India. According to the appellants, they were doing the business of selling kerosene since 15 to 35 years and their families depended on the said source of income. The respondents authorities, however, by orders dated 31.7.2002 had decided not to renew the licences and to cancel them if already issued, in contravention of the directions contained in the decision of this Court, by which the earlier similar circulars were set aside. It was also pleaded that the agents / dealers of the Government Oil Companies were like any other traders or businessmen and simply because they were appointed as the dealers / agents by such Oil Companies, there did not exist any intelligible differentia between them and the appellants who were also wholesale dealers in the same business. Moreover, the Licensing Order of 1981 did not provide for any such disability. According to the petitioners, they had a fundamental right under Article 19(1)(g) of the Constitution to carry on the said business and the restrictions which were sought to be imposed by the respondents were not warranted by the provisions of Article 19(6) of the Constitution. It was also pleaded that if there were any instances of malpractice, adulteration or violation of any provisions of the Licensing Order, then action could be taken against the defaulting individuals, but the removal of the entire class of wholesale dealers in kerosene on the basis of presumptions against them was not warranted and was beyond the powers and jurisdiction of the respondent No.1. According to the appellants, they had already made applications for renewal before the expiry of their licences and therefore, were entitled to get their licences renewed in view of Clause-5 of the Order of 1981. It was pleaded that, before making the impugned Amendment Order, 2002, the respondents did not undertake any exercise for being satisfied for reaching an opinion that it was expedient and necessary in the interest of public to make such an order. It was also contended that the impugned Amendment Order was not applicable to the petitioners who had made their applications for renewal of licences earlier than 31-7-2002. Moreover, it was held by the order dated 10th July 2002 made by the learned Single Judge in an earlier petition (Special Civil Application No.3492 of 2002) that those petitioners were entitled to get renewal for five years and not for a lesser period. Similar treatment ought to be given even to the present petitioners, whose applications for renewal were pending on 31-7-2002. 3. In the affidavit-in-reply filed on behalf of the respondent No.1 dated 6th September 2002, it was contended that, on the basis of the facts and figures which were available with the Department, there was reason to believe that a large amount of stock of kerosene was directly being diverted into the black market and that the wholesale dealers of kerosene formed the basis of irregularities and hence, it was desirable to remove the basis itself. The wholesale dealers were an extra chain in the system of distribution of kerosene which was considered, by and large, responsible for the black marketing of kerosene. It was stated that the Amendment Order dated 31-7-2002 amending the Licensing Order of 1981 by adding the definition of "PDS Kerosene Wholesale Dealers" in clause 2(18A) was issued after obtaining the opinion of the Legislative & Parliamentary Affairs Department and concurrence of the Government of India, and the said Order was not a mere executive instruction since it was issued in exercise of the powers under Section 3(1) of the Essential Commodities Act, 1955. The impugned notification dated 31-7-2002, at Annexure "A" to the affidavit-in-reply, was issued pursuant to the said Amendment Order, 2002, and instructions were given to the subordinate officers not to renew the licence of wholesale dealers who were not company agents and whose licences had expired on 31-7-2002. It was contended that the policy decision was taken in the interest of the public and to remove the difficulties which were faced in the public distribution system. In paragraph 9 of the said reply, it was stated that, by the impugned order, the company's agents have to operate in the public distribution system and directly supply the PDS kerosene to the retailers, who in turn, would supply to the consumers and thus, the government have adopted a `two tier' system doing away with the earlier `three tier' system. It is stated that the PDS Kerosene is meant for the downtrodden and weaker sections of the society and the government was spending a huge amount of subsidy for PDS kerosene for giving relief to the card-holders by supplying it at a cheaper rate and therefore, it was the duty of the government to see that the benefit of subsidy reaches the targeted people. It is further stated that, on the basis of experience, it was found that the extra tier (wholesale dealers, who were not company agents/dealers) was engaged in diversion of kerosene by converting blue kerosene into white kerosene for the purpose of black-marketing and adulteration. Therefore, the government took a policy decision for the smooth functioning of the distribution system through company agents and retailers. Such a policy decision was in the interest of public at large and was not violative of the fundamental rights guaranteed by Article 14 or 19(1)(g) of the Constitution of India. It was also contended that the petitioners were not entitled to any renewal of their licences in view of the said policy decision reflected by the Amendment Order, 2002, and the impugned Circular. 4. The petitioners denied the averments of the affidavit-in-reply contending in their rejoinder that the number of prevention of blackmarketing cases filed against the wholesale dealers dealing in PDS kerosene was substantially less in comparison to those appointed by Oil Companies dealing in kerosene. A list of cases of black marketing / adulteration filed against the agents of the Oil Companies and Wholesale Dealers was given in the rejoinder, and it was contended that, there was indulgence and favouritism shown to the agents appointed by oil companies in violation of the fundamental right of the petitioners - guaranteed by Article 14 of the Constitution of India. It was contended that the impugned Amendment Order, 2002 appeared to have been made at the dictates and wishes of the representatives of the oil companies. It was further contended that the petitioners had fundamental right to carry on trade in kerosene and the restrictions on their rights to carry on trade as wholesalers was unconstitutional and against the decision taken by the Division Bench in the earlier Letters Patent Appeals. It was also contended that the system had not been changed and the government had retained `three tier' system even after the impugned Order, because, the wholesale licences possessed by the agents of the oil companies had been kept intact, while those who were not the agents or dealers of such oil companies, were sought to be done away with. It was contended that the impugned Orders were violative of Articles 14, 19 (1)(g) and 21 of the Constitution. In paragraph 8 of the rejoinder, the petitioners contended that, to have an agency of an oil company was not a matter of wish, desire or competence of the petitioners, because, the agency was designed by all the oil companies as per the marketing plan and it may not be possible for the petitioners to get the appointment as an agent at the places where they were doing business, because, prior to the appointment of an agent, certain eligibility was prescribed by the oil companies and such conditions were mandatory. It was pointed out that the learned Single Judge, by judgement and order in Special Civil Application No.3492 of 2002, had directed the respondents to strictly consider the applications for renewal of licences made by those petitioners, in accordance with clause 5 of the Licencing Order of 1981, and that judgement should be treated as judgement in rem and made applicable to all persons even though they may not have appeared in Special Civil Application No.3492 of 2002. In paragraph 10 of the rejoinder, it was contended that almost in all cases, the petitioners had made applications for renewal of licence in the year 2000-2001 and paid the renewal fees for a period of five years and their licences should be treated to have been renewed in view of the decision of the learned Single Judge in Special Civil Application No.3492 of 2002. 5. In the sur-rejoinder filed on behalf of the respondents, it is stated that, so far as distribution of kerosene was concerned, the Central Government has always been recognizing, in all, two entities, viz. (1) dealers appointed by oil companies, and (ii) retailers, and it was in this connection that the Central Government was fixing up the amount of commissions for distribution of kerosene and no category of wholesale licence holder was taken into account. The category of wholesale licence holder was brought in picture by the State Government as a result whereof, the said wholesale licence holders were operating between the dealers appointed by the oil companies and the retailers on the other. It was however felt that the category of "wholesale licence holders" was quite unnecessary and unsatisfactory and was creating operational difficulties at many a time. Moreover, it was a root cause for various misuses, apart from the consequential delays in the supply of kerosene to the ultimate consumers. Under these circumstances, by virtue of the amendment made on 31st July 2002, the category of wholesale licence holder in kerosene has been done away with. In paragraph 6 of the surrejoinder, it is reiterated that, by doing away with the stage of wholesale licence holder, kerosene was now being distributed through two stages, namely, (1) from oil companies' dealers to retailers, and (2) from retailers to consumers and by the present set-up, supply of kerosene, which is an essential item to be made available to economically weaker sections of the society at fair price, is not in any way affected by the amendment in question and the supply has on the contrary become faster. It is submitted that the public interest is on the higher pedestal than the interest of an individual and therefore, the policy decision taken in the larger public interest would prevail. It is stated that the policy decision with regard to the restriction of extra channel from the existing public distribution system had been taken with a view to see that supply of kerosene was made faster and effective. The issuance of such Licencing Order being a legislative function exercised in the public interest could not be challenged on the ground of non-complaince of the principles of natural justice. 6. The learned Single Judge, after considering in detail the contentions raised by the rival parties, relevant provisions and the record, held that since the State took a decision to eliminate the system of distribution through wholesale dealers who were not authorized by the government oil companies with a view to see that the kerosene was supplied directly by the authorized dealers to the retailers, it could never be said that such a decision was not in the public interest. It was held that it was for the State to decide the manner in which the system of distribution should work and to ensure that the ultimate consumer gets better quality and maximum supply of essential items. A decision to eliminate middlemen like the petitioners from the chain of supply could not be said to be a decision which is not in a larger public interest. Such a decision was not ultra vires the object of the Licencing Order of 1981 or against any provisions of the Essential Commodities Act, 1955. The learned Judge held that the State had made the law by way of subordinate legislation for a laudable purpose with a view to ensure that consumer gets better supply of commodities by eliminating the class of middlemen and this was not beyond the scope of Article 19(6) of the Constitution. It was further held that the company agents or authorized dealers were directly getting supply from the manufacturers which was not the case so far as the petitioners were concerned. Moreover, the nature of control while functioning as a dealer appointed by the oil companies and while functioning as a wholesaler, without being appointed by the oil companies, would be different, because, in the former case, the authorization was subject to the control of the Government of India as well as the oil companies, during the course of supply, while in the latter, no such authorization was required from the Government of India nor was there any direct control of the oil companies. The accountability was more in the case of company agents in comparison to the petitioners who were not company agents. It could, therefore, not be said that the petitioners were similarly situated as those wholesalers who were appointed by the company as agents. Thus, the learned Single Judge negatived the challenge against the Amendment order of 2002 on the ground that it violated Article 14 or 19(1)(g) of the Constitution. It was further held that the Amendment order was not retrospective in nature and that the subordinate legislation could be made with retrospective effect only if there was a specific delegation made for the purpose under the parent Act. There was no authority assigned by the Central Government to the State Government to make an Order under Section 3(1) of the Act or amendment in such Order with retrospective effect and therefore, the impugned Amendment Order was having prospective effect only from 31-7-2002 being the date when was published. It was therefore held that the instructions issued by the State Government under the impugned notification dated 31-7-2002 could not have the effect of altering the impugned Amendment order into an Order having retrospective effect, nor could any condition in the Licencing Order which was earlier issued have the effect of any vested right of a person for holding a valid licence by virtue of such condition. It was, therefore, held that the Amendment Order of 2002 touching the eligibility criteria for getting the licence as a wholesaler, could not be made applicable to persons who were already holding the licences on the date of amendment, since there was no legislation made for retrospectively taking away any vested rights under the licence. It was therefore held that the instructions issued on 31-7-2002 on the basis of the Amendment Order could not have the effect of taking away the vested rights of the persons holding valid licence as wholesale dealers in kerosene. The notices issued by the State Government proposing action against persons holding valid licence on the date of the Amendment Order for cancelling them were, therefore, held to be without authority and bad in law. It was further held that so far as the applications which were pending for renewal of the licence on the date of the Amendment Order were concerned, the provisions of the Amendment Order, as they existed on the date of taking decision on such applications, would apply and in that sense, the Amendment Order had "retroactive effect". Mere pendency of applications did not create any vested right in favour of the applicants and such applications were to be considered and decided keeping in view the eligibility criteria reflecting from the new definition added by clause 2(18A) of the Licencing Order. The learned Single Judge, therefore, held that the amendment in the Licensing Order of 1981 was not retrospective, and was only prospective, and that the rights of the persons already holding valid licence, to continue as wholesale dealers in kerosene which existed on the date of amendment, were not taken away until the expiry of the date of validity of licences, and further that, those whose applications for grant or renewal of licence were pending on the date of the amendment were not entitled to such licence on account of the Amendment Order of 2002 unless they acquire the status of company agents or authorized dealers of the company, and also that the Amendment Order of 2002 did not violate Article 14 or 19(1)(g) of the Constitution, rejected the petitions in which the petitioners had claimed grant or renewal of licences on the basis of their applications pending on the date of the Amendment Order, and allowed the petitions in cases where the petitioners were holding valid licences on the date of the Amendment Order. The present two groups of appeals are directed against this decision, one by the petitioners whose applications for grant or renewal of licence were pending on the date of the Amendment Order and the other by the State Government against the order allowing the petitions of those who were holding valid wholesalers licences on the date of the coming into force of the Amendment Order. 7. The learned Senior Counsel, arguing the appeals for all the appellants, whose petitions have been rejected, contended that the object of the definition clause was merely to avoid frequent repetition of the meaning of the words which are defined in the provisions of the enactment, wherever they may have been used. The definition of "PDS Kerosene Wholesale Dealer" inserted by clause 2(18A) of the Licencing Order of 1981 would apply wherever that phrase occurs in the said Licencing Order. Such definition cannot by itself bring about an amendment in the definition of the word "dealer" or "wholesaler" or in Clauses 3, 4, 7, 8 or 9 of the Licencing Order of 1981. Since the phrase was not used in any of the provisions of the Licencing Order, other than in the definition clause 2(18A) which was inserted by the impugned Amendment Order, 2002, such amendment was abortive and it did not have the effect of adding anything in the Licencing Order of 1981 that could authorized refusal of licence to the wholesale dealers or cancellation of the existing licences. It was submitted that