Case: Madhya Pradesh Ration Vikreta Sanghsociety & Ors. Etc. Etc Vs. State Of Madhya Pradesh & Anr

SEN, J.1. The only question involved in this and the connected Special Leave Petitions directed against a judgment of the Madhya Pradesh High Court is whether the Madhya Pradesh (Food-stuffs) Civil Supplies Public Distribution Scheme, 1981, formulated by the State Government under sub-cl.(d) of cl. 2 of the Madhya Pradesh Foodstuffs (Distribution) Control order, 1960, introducing a new scheme for running of Government fair price shops by agents to be appointed under a Government scheme giving preference to cooperative societies, in replacement of the earlier scheme of running such fair price shops through retail dealers appointed under cl. 3 of the order, is violative of Arts. 14 and 19 (1) (g) of the Constitution.2. To give a short resume. The Madhya Pradesh Foodstuffs (Distribution) Control order, 1960 (hereinafter called the Control order) was made by the State Government in exercise of the powers conferred by s. 3 of the Essential Commodities Act, 1955, read with Government of India, Ministry of Food and Agriculture (Depart of Food), order No. GSR 1088 dated November 15, 1958, to provide for distribution of foodstuffs at fair prices under a Government scheme The scheme of the Control order is that with a view to distributing food-stuffs at fair prices through fair price shops, the A Collector would, under the Government Scheme, appoint any person as a retail dealer in respect of foodstuffs under cl. 3 of the Control order. The Control order was designed to enable the State Government to distribute foodstuffs at fair prices through fair price shops. In 1977, as a matter of policy it was decided to appoint unemployed graduates as retail dealers of Government fair price shops. The whole system of distribution of foodstuffs at fair price shops to the consumers, however, collapsed due to flagrant violations of the Control order by the retail dealers. It was found that the shops were opened well after the appointed time, shops were closed well before the time, the consumers were not able to obtain their ration easily and very often the traders would withhold the foodstuffs i n stock and refuse to sell the same to the consumers, causing serious inconvenience and harassment to them. Another great drawback which the Government experienced was that stocks which were required to be lifted by the traders were no t lifted within the time and more often than not the stocks would become wasted and rendered useless.3. In July 1980, the Chief Minister called a Conference of high officials including the Director, Civil and Food Supplies and the Collect ors of various districts. The Collectors narrated their experience about the unsatisfactory manner of working of the then existing system of running fair price shops through retail dealers and spoke of the plight of the poor consumer. Th ere was a meaningful, close and in-depth discussion at the Conference and in the light of the experience gained, the Government decided that it was necessary to replace the existing system of running fair price shops through retail dealers by the G overnment directly running these fair price shops through agents appointed by the Collector. It was also decided that these fair price shops should be run by consumers cooperative societies. In the wake of the changes to be brought about, th e State Government, on October 31, 1980, accordingly amending the Control order by deleting the provisions relating to running of fair price shops through retail dealers and providing for running these shops under a Government scheme. The expression fair price shop has been defined by the newly added clause 2 (bb) to mean a shop set up by the Government under the Government Scheme. On March 20, 1981, the State Government promulgated the Madhya Pradesh (Foodstuffs) Civil Supplies Public Distribution Scheme, 1981.4. Under the impugned scheme, the Collector, by virtue of cl. 3, was to establish fair price shops. In establishing the fair shops, the Collector was to follow certain guidelines. These ar e: (a) that a shop should be established for each area with a population of 2, 000 and the consumers should not be required to travel more than 5 Km. for purchasing foodstuffs, (b) in the urban areas for the purpose of demarcation of area s, a Ward or a Mohalla is a unit and in rural areas, the Panchayat is a unit, (c) the location of fair price shop shall be, as far as possible, in the centre of such area, for meeting the requirements of the residence for which it is established. Cl ause 4 provided that the fair price shops would be allotted by the Sub Divisional officer and the allottee will have no legal ownership over the fair price shops. Then a set of guidelines was also issued for the purpose of regulating the manner of allotment of fair price shops. In making the allotment of fair price shops, cooperative societies were to be given top priority. In the event of a cooperative society in the area expressing its inability in writing to run a fair pr ice shop, or if there was no such cooperative society in existence in such an area, the fair price shop may be allotted to others. The allotment of a fair price shop was to be made after publication of a notification inviting applications for allotment from the public The applications received were to be scruitinised on merits and the one who fulfilled the maximum qualifications shall be allotted the shop. Another set of principles was laid down dealing with the manner of working of fair price shops, but they are matters of detail. One important feature is that the fair shops are to be run under the direct control and supervision of the Collector and the other important feature is that the fair price shop keeper was required to keep sufficient stocks of foodstuffs as specified by the State Government or the Collector in that behalf, to prevent hardship and inconvenience to the consumers.5. The validity of the impugned scheme has been unheld by this Court in Sarkari Sasta Anaj Vikreta Sangh, Tehsil Bamatra and Ors. v. State of Madhya Pradesh and Ors. decided on August 26, 1981. The main challenge was that the scheme created a monopoly in trade in favour of cooperative societies and was thus violative o f Arts. 14 and 19 (1) (g) of the Constitution. This Court, agreeing with the High Court, rejected the contention in view of Mannalal Jain v. State of Assam and Ors.(1) In that case, the question was whether cl. 5 (e) Of the Assam Foodgrains ( Licensing and Control) order, 1961, which provided for giving preference to cooperative societies created a monopoly in trade in favour of cooperative societies. On a construction of cl. 5 (e) which merely embodied a rule of preference in favour of cooperative societies, this Court in Mannalal Jains case(supra) held that cl. 5 (e) did not have the effect of creating a monopoly in favour of cooperative societies. In upholding the validity of cl. S (e), the Court ob served:We are of the view that by reason of the position which cooperative societies may occupy in the village economy of a particular area, it cannot be laid down as a general proposition that sub-cl. (e) of cl. 5 of the Control order, 1961, is unrelated to the objects mentioned in s. 3 of the Essential Commodities Act, 1955 There may be places or areas where cooperative societies are in a better position for maintaining or increasing supplies of rice and paddy and even for securing their equitable distribution and availability at fair prices.6. The Court, therefore, repelled the contention that cl. 5 (e) had no relation whatever to the objects mentioned in s. 3 of t he Act and went on to say:(2)Sub-cl. (e) of cl. 5, we have already stated, enables the licensing authority to give preference to a cooperative society in certain circumstances; but it does not create a monopoly in favour of cooperative societies. The preference given has a reasonable relation to the objects of the legislation set out in s. 3 of the Act.7. In the Sarkari Sasta, Anaj Vikreta Sangh case the impugned scheme was also challenged on various other grounds but the court negatived all the contentions raised and we need not refer to them as they are not really relevant for our purposes. Suffice it to say, the Court pointed out that the scheme had been framed by the State Government in exercise of its executive function under Art. 162 of the Constitution; that under the scheme the fair price shops were to be run by consumers cooperative societies; that the scheme was framed by the State Government in public interest With a view to securing equitable distribution of foodgrains at fair prices to the consumers, that the rule of preference to cooperative societies does not create a monopoly in trade and is, therefore, not violative of the petitioners fundamental rights under Arts. 14 and 19(1)(g) of the Constitution; and that no one had a fundamental right to be appointed a Government agent for running a fair price shop which was a matter of grant of privilege. The validity of the impugned scheme has, therefore, been upheld in all its aspects.8. In support of these petitions, learned counsel for the petitioners contends that the real point was not pressed in the Sarkari Sasta Anaj Vikreta Sanghs case (supra). He contends that there is no objection to a State monopoly in trade, the action of the Government should not be arbitrary, irrational and irrelevant. If the governmental action disclose arbitrariness it is to be invalidated as violative of Art 14. In support of the contention, he places reliance on certain observations of Bhagwati, J. in the Airport Authority case(). In dealing with the question, Bhagwati, J. Observed:It is now well settled .. that Art. 14 strikes at arbitrariness in State action and ensure fairness and equality of treatment. It requires that State action must not be arbitrary but must be based on some rational and relevant principle which is non- discriminatory; it must not b e guided by any extraneous or irrelevant considerations, because that would be denial of equality.. The State cannot, therefore. act arbitrarily in entering into relationship, contractual or otherwise with a third party, but its action must conform to some standard or norm which is rational and non-discriminatory.The observations made by Bhagwati, J. in the Airport Authority case (supra) have been quoted with approval in Kasturi Lal v. State of J &K(2).9. It is true that according to the rule laid down in the Airport Authority case (supra) if governmental action disclosed arbitrariness, it would be liable to be invalidated as offending against Art. 14. There can be no quarrel wit h the principles laid down in that case, but the difficulty is about the application of those principles to the facts and circumstances of the present case. We have given a brief outline of the impugned scheme and it cannot be said that it suffer s from arbitrariness or is irrational to the object sought to be achieved.10. The State Government after due deliberation, took a responsible decision to run the fair price shops directly, being satisfied that it was necessary so to do with the object of distributing foodstuffs at fair prices to the consumers, after taking into consideration the fact that the earlier experiment of running these shops through retail dealers was an utter failure. The scheme has been designed by the State Government by executive action under Art 162 of the Constitution with a view to ensuring equitable distribution of foodstuffs at fair prices. As already stated, the Court has found in the Sarkari Sasta Anaj Vikreta Sangh c ase (supra), the entire system of distribution of foodstuffs had collapsed and had become wholly unworkable due to flagrant violations of the provisions of the Control order by the retail dealers. The action of the State Gove rnment hl entrusting the distribution of foodstuffs to consumers cooperative societies, though drastic, was an inevitable step taken in the interests of the general public. The State Government was not bound to give the fair price s hops to the retail dealers under a Government scheme. The governmental action in giving preference to consumers cooperative societies cannot be construed to be arbitrary, irrational or irrelevant. The impugned scheme does not confer arbitr ary or uncanalised power on the Collector in the matter of grant or refusal of applications for appointment as agents for the purpose of running fair price shops. The scheme lays down detailed guidelines regulating the manner of grant or refus al of such applications.11. The wider concept of equality before the law and the equal protection of laws is that there shall be equality among equals. Even among equals there can be unequal treatment based on an intelligible differenti a having a rational relation to the objects sought to be achieved. Consumers cooperative societies form a distinct class by themselves. Benefits and concessions granted to them ultimately benefit persons of small means and promote social justice in accordance with the directive principles. There is an intelligible differentia between the retail dealers who are nothing but traders and consumers cooperative societies. The position would have been different if there was a mono poly created in favour of the later. The scheme only envisages a rule of preference. The formulation of the scheme does not exclude the retail traders from making an application for appointment as agents. It is, however, urged that the impugned sche me is not being implemented as to carry out its avowed object. It was said that there was arbitrariness in selection of cooperative societies of all descriptions, not necessarily consumers cooperative societies. There is no merit in the contention that there was preferential treatment given to cooperative societies in the matter of allotment of fair price shops. Our attention was drawn to the fact that a fair price shop has been allotted to Adhivakta (Advocates) Sangh, Jabalp ur. Advocates are also consumers and where is nothing to prevent them from forming a consumers cooperative society for lawyers as a class if they fulfil the conditions laid down in the law. We have no reason to think that the State Governme nt was not actuated with the best of intentions in bringing about a change in the system of distribution of foodstuffs through fair price shops12. The question whether fair price shops in the State of Madhya Pradesh under a Government scheme sho uld be directly run by the Government through the instrumentality of consumers cooperative societies as its agents or by retail dealers to be appointed by the Collector under cl. 3 of the Control order, is essentially a matter of policy with wh ich the Court is not concerned. The learned counsel for the State reiterated the assurance given in the Sarkari Sasta Anaj Vikreta Sangh case (supra), as was done by the learned Advocate General before the High Court, that by the expressi on "cooperative societies" hl the scheme, the Government intended and meant "consumers cooperative societies", and that if by mistake there was a wrong allotment made to a cooperative society which was not a "consumers cooperative society, the Government would take steps to cancel the allotment.13. The constitutionality of the impugned scheme is also challenged as abridging Art. 19(1)(g) of the Constitution. The short answer to the challenge is that the scheme in no way infringes the petitioners right to carry on their- trade in foodgrains. They are free to carry on business as wholesale or retail dealers in foodgrains by taking out licences under the Madhya Pradesh Foodgrains (Licensing) order, 1964. There is no fundamental right in any one to be appointed as an agent of a fair price shop under Government Scheme.14.

Decision reasoning: 0[ds]The validity of the impugned scheme has been unheld by this Court in Sarkari Sasta Anaj Vikreta Sangh, Tehsil Bamatra and Ors. v. State of Madhya Pradesh and Ors. decided on August 26, 1981. The main challenge was that the scheme created a monopoly in trade in favour of cooperative societies and was thus violative o f Arts. 14 and 19 (1) (g) of the Constitution. This Court, agreeing with the High Court, rejected the contention in view of Mannalal Jain v. State of Assam and Ors.(1) In that case, the question was whether cl. 5 (e) Of the Assam Foodgrains ( Licensing and Control) order, 1961, which provided for giving preference to cooperative societies created a monopoly in trade in favour of cooperative societies. On a construction of cl. 5 (e) which merely embodied a rule of preference in favour of cooperative societies, this Court in Mannalal Jains case(supra) held that cl. 5 (e) did not have the effect of creating a monopoly in favour of cooperative societies. In upholding the validity of cl. S (e), the Court obe are of the view that by reason of the position which cooperative societies may occupy in the village economy of a particular area, it cannot be laid down as a general proposition that(e) of cl. 5 of the Control order, 1961, is unrelated to the objects mentioned in s. 3 ofthe Essential Commodities Act, 1955 There may be places or areas where cooperative societies are in a better position for maintaining or increasing supplies of rice and paddy and even for securing their equitable distribution and availability at fair prices.The Court, therefore, repelled the contention that cl. 5 (e) had no relation whatever to the objects mentioned in s. 3 of t he Act and went on to(e) of cl. 5, we have already stated, enables the licensing authority to give preference to a cooperative society in certain circumstances; but it does not create a monopoly in favour of cooperative societies. The preference given has a reasonable relation to the objects of the legislation set out in s. 3 of thethe Sarkari Sasta, Anaj Vikreta Sangh case the impugned scheme was also challenged on various other grounds but the court negatived all the contentions raised and we need not refer to them as they are not really relevant for our purposes. Suffice it to say, the Court pointed out that the scheme had been framed by the State Government in exercise of its executive function under Art. 162 of the Constitution; that under the scheme the fair price shops were to be run by consumers cooperative societies; that the scheme was framed by the State Government in public interest With a view to securing equitable distribution of foodgrains at fair prices to the consumers, that the rule of preference to cooperative societies does not create a monopoly in trade and is, therefore, not violative of the petitioners fundamental rights under Arts. 14 and 19(1)(g) of the Constitution; and that no one had a fundamental right to be appointed a Government agent for running a fair price shop which was a matter of grant of privilege. The validity of the impugned scheme has, therefore, been upheld in all its aspects.It is now well settled .. that Art. 14 strikes at arbitrariness in State action and ensure fairness and equality of treatment. It requires that State action must not be arbitrary but must be based on some rational and relevant principle which is nondiscriminatory; it must not b e guided by any extraneous or irrelevant considerations, because that would be denial of equality.. The State cannot, therefore. act arbitrarily in entering into relationship, contractual or otherwise with a third party, but its action must conform to some standard or norm which is rational andobservations made by Bhagwati, J. in the Airport Authority case (supra) have been quoted with approval in Kasturi Lal v. State of J &K(2).It is true that according to the rule laid down in the Airport Authority case (supra) if governmental action disclosed arbitrariness, it would be liable to be invalidated as offending against Art. 14. There can be no quarrel wit h the principles laid down in that case, but the difficulty is about the application of those principles to the facts and circumstances of the present case. We have given a brief outline of the impugned scheme and it cannot be said that it suffer s from arbitrariness or is irrational to the object sought to be achieved.The State Government after due deliberation, took a responsible decision to run the fair price shops directly, being satisfied that it was necessary so to do with the object of distributing foodstuffs at fair prices to the consumers, after taking into consideration the fact that the earlier experiment of running these shops through retail dealers was an utter failure. The scheme has been designed by the State Government by executive action under Art 162 of the Constitution with a view to ensuring equitable distribution of foodstuffs at fair prices. As already stated, the Court has found in the Sarkari Sasta Anaj Vikreta Sangh c ase (supra), the entire system of distribution of foodstuffs had collapsed and had become wholly unworkable due to flagrant violations of the provisions of the Control order by the retail dealers. The action of the State Gove rnment hl entrusting the distribution of foodstuffs to consumers cooperative societies, though drastic, was an inevitable step taken in the interests of the general public. The State Government was not bound to give the fair price s hops to the retail dealers under a Government scheme. The governmental action in giving preference to consumers cooperative societies cannot be construed to be arbitrary, irrational or irrelevant. The impugned scheme does not confer arbitr ary or uncanalised power on the Collector in the matter of grant or refusal of applications for appointment as agents for the purpose of running fair price shops. The scheme lays down detailed guidelines regulating the manner of grant or refus al of suchwider concept of equality before the law and the equal protection of laws is that there shall be equality among equals. Even among equals there can be unequal treatment based on an intelligible differenti a having a rational relation to the objects sought to be achieved. Consumers cooperative societies form a distinct class by themselves. Benefits and concessions granted to them ultimately benefit persons of small means and promote social justice in accordance with the directive principles. There is an intelligible differentia between the retail dealers who are nothing but traders and consumers cooperative societies. The position would have been different if there was a mono poly created in favour of the later. The scheme only envisages a rule of preference. The formulation of the scheme does not exclude the retail traders from making an application for appointment as agents. It is, however, urged that the impugned sche me is not being implemented as to carry out its avowed object. It was said that there was arbitrariness in selection of cooperative societies of all descriptions, not necessarily consumers cooperative societies. There is no merit in the contention that there was preferential treatment given to cooperative societies in the matter of allotment of fair price shops. Our attention was drawn to the fact that a fair price shop has been allotted to Adhivakta (Advocates) Sangh, Jabalp ur. Advocates are also consumers and where is nothing to prevent them from forming a consumers cooperative society for lawyers as a class if they fulfil the conditions laid down in the law. We have no reason to think that the State Governme nt was not actuated with the best of intentions in bringing about a change in the system of distribution of foodstuffs through fair pricequestion whether fair price shops in the State of Madhya Pradesh under a Government scheme sho uld be directly run by the Government through the instrumentality of consumers cooperative societies as its agents or by retail dealers to be appointed by the Collector under cl. 3 of the Control order, is essentially a matter of policy with wh ich the Court is not concerned. The learned counsel for the State reiterated the assurance given in the Sarkari Sasta Anaj Vikreta Sangh case (supra), as was done by the learned Advocate General before the High Court, that by the expressi on "cooperative societies" hl the scheme, the Government intended and meant "consumers cooperative societies", and that if by mistake there was a wrong allotment made to a cooperative society which was not a "consumers cooperative society, the Government would take steps to cancel theshort answer to the challenge is that the scheme in no way infringes the petitioners right to carry on theirtrade in foodgrains. They are free to carry on business as wholesale or retail dealers in foodgrains by taking out licences under the Madhya Pradesh Foodgrains (Licensing) order, 1964. There is no fundamental right in any one to be appointed as an agent of a fair price shop under Government Scheme.