Case: Kasturi Lal Lakshmi Reddy Vs. State of Jammu and Kashmir and Another

persuade them to set up an industry. The State must be free in such a case to negotiate with a private entrepreneur A with a view to inducing him to set up an industry within the State and if the State enters into a contract with such entrepreneur for providing resources and other facilities for setting up an industry, the contract cannot be assailed as invalid so long as the State had acted bona fide, reasonably and in public interest. If the terms and conditions of the contract or the surrounding circumstances show that the State has acted mala fide or out of improper or corrupt motive or in order to promote the private interests of someone at the cost of the State, the Court will undoubtedly interfere and strike down State action as arbitrary, unreasonable or contrary to public interest. But so long as the State action is bonafide and reasonable, the Court will not interfere merely on the ground that no advertisement was given or publicity or made or tenders invited. Here, the 2nd respondents approached the State for the purpose of setting up a modern factory for manufacture of resin, turpentine oil and other derivatives and asked for allocation or resin and the State, with a view to offering an incentive to the 2nd respondents to set up the factory, made the impugned order awarding the tapping contract in respect of these blazes to the 2nd respondents as a part of a package deal. We have already pointed out and w need not repeat again, that the impugned order was reasonable and in the interest of the State and in the circumstances, we are clearly of the view that it cannot be assailed as invalid merely because no advertisements were issued inviting offers for setting up a factory and taking the tapping contract as an integral part of the transaction.27. It may, however, be pointed out that though no advertisements were issued by the State, the Chief Minister of Jammu and Kashmir had in the course of three speeches delivered by him-one in Bombay. the other in Calcutta and the third in New Delhi invited entrepreneurs to set up industries within the State with a view to bringing about rapid industrialisation and economic development of the State by utilising its "peculiar natural resources" and converting them into finished or semi-finished products and promising "various forms of assistance and incentives" for the purpose. These speeches were widely advertised in the newspapers and it was, therefore, known to entrepreneurs that the State would be willing to provide resources and other facilities to those who were interested in setting up industries within the State and, in fact. the State was anxious to attract entrepreneurs to start industries and it was in pursuance of this invitation that Prabhat Tarpens and Synthetics Private Limited, Dujodwala Resins and Tarpens. Pvt. Ltd., Pine Chemicals Limited and the second respondents made their respective offers f or putting up factories within the State. It is, there fore, in any event not correct to say that the petitioners had no opportunity of making an offer of setting up a factory and obtaining a tapping contract for the purpose.28. It is also necessary to point out that the claims of the petitioners in writ petition No. 481 of 1978 and some others were considered by the Forest Minister and other forest officials at the meeting held on 25th December, 1978 and applying the criteri on of "financial status and its distillation in the factory"-which criterion cannot be said to be irrational or irrelevant-the application of the 2nd respondents was unanimously accepted. This decision cannot be said to be mala fide or prompted by improper or corrupt motive. There is, in fact, no evidence before us to show or even as much as to suggest that any favour was conferred on the 2nd respondents at the cost of the State or that the 2nd respondents were preferred to some others without any basis or justification. The petitioners in writ petition No. 481 of 1979 had very little experience of extraction of resin, since they had taken tapping contract for the first time only in 1978-79 and so far as processing of resin is concerned, they had no experience at all, as they did not have any factory for processing of resin nor had they at any time in the past, participated in any auction of resin. The petitioners in writ petition No. 481 of 1979 were principally grocery and provision merchants and though they had taken some tapping contracts in the past, they had no experience at all in processing of resin since they did not own any factory. The 2nd respondents, on the other hand, had large experience in extraction of resin from inaccessible forests of Poonch Division and they also possessed considerable experience in distillation and processing of resin since they had two factories, one in Hoshiarpur and the other in Delhi. The State h ad in fact given two contracts to the 2nd respondents in the year 1974-75 to install factories for manufacture of resin and turpentine oil in the public sector and these contracts have been carried out by the 2nd respondents to the entire satisfaction of the State. Therefore, so far as the relative merits of the petitioner on one hand and the 2nd respondents on the other were concerned, the 2nd respondents were definitely superior and it cannot be said that the State acted unreasonably or contrary to public interest in preferring the 2nd respondents and permitting them to put up a factory within the State and awarding them tapping contract in respect of these blazes for the purpose of the factory. It may be pointed that the petitioners in writ petition No. 482 of 1979 had not even got their registration renewed for the year 1979-80 and hence no tapping contract could possibly be given to them. We must, accordingly, reject the third ground of challenge urged on behalf of the petitions.29.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]So far as the first limitation is concerned, it flows directly from the thesis that, unlike a private individual, the State cannot act as it pleases in the matter of giving largess. Though ordinarily a private individual would be guided by economic considerations of selfgain in any action taken by him, it is always open to him under the law to act contrary to hisor to oblige another in entering into a contract or. dealing with his property. But the Government is not free lo act as it likes in granting largess such as awarding a contract or selling or leasing out its property. Whatever be its activity, the Government is still the Government and is, subject to restraints inherent in its position in a democratic society. The constitutional power conferred on the Government cannot be exercised by it arbitrarily or capriciously or in and unprincipled manner; it has to be exercised for the public good. Every activity of the Government has a public element in it and it must therefore, be informed with reason and guided by public interest. Every action taken by the Government must be in public interest; the Government cannot act arbitrarily and without reason and if it does, its action would be liable to be invalidated. If the Government awards a contract or leases out or otherwise deals with its property or grants any other largess, it would be Liable to be tested for its validity on theof reasonableness and public interest and if it fails to satisfy either best, it would be unconstitutional andwhat is the test of reasonableness which has to be applied in order to determine the validity of governmental action. It is undoubtedly true, as pointed out by Patanjali Shastri, J. in State of Madras v. V.G. Rau, that in forming his own conception of what is reasonable, in all the circumstances of a given case, it is inevitable that the social philosophy and the scale of values of the judge participating in the decision, would play an important part, but even so, me test of reasonableness is not a wholly subjective test and its contours are fairly indicated by the Constitution. The concept of reasonableness in fact pervades the entire constitutional scheme. The interaction of Arts. 14, 19 and 21 analysed by this Court in Maneka Gandhi v. Union of India, clearly demonstrated that the requirement of reasonableness runs like a golden thread through the entire fabric of fundamental rights and, as several decisions of this Court show, this concept of reasonableness finds its positive manifestation and expression in the lofty ideal of social and economic justice which inspires and animates the Directive Principles. It has been laid down by this Court in E.P. Royappa v. State of Tamil Nadu, and Maneka Gandhis case (supra) that Art. 14 strikes at arbitrariness in State action and since the, principle of reasonableness and rationality, which is legally as well as philosophically an essential element of equality oris protected by this article, it must characterise every governmental action, whether it be under the authority of law or in exercise of executive power without making ofalso the concept of reasonableness runs through the totality of Art. 19 and requires that restrictions on the freedoms of the citizen, in order to be permissible, must at the best be reasonable. Similarly Art. 21 in the full plenitude of its activist magnitude as discovered by Maneka Gandhis case, insists that no one shall be deprived of his life or personal liberty except in accordance with procedure established by law and such procedure must be reasonable, fair and just. The Directive Principles concretise and give shape to the concept of reasonableness envisaged in Articles 14, 19 and 21 and other articles enumerating the fundamental rights. By defining the national aims and the con stitutional goals, they setforth the standards or norms of reasonableness which must guide and animate governmental action. Any action taken by the Government with a view to giving effect to any one or more of the Directive Principles would ordinarily, subject to any constitutional or legal inhibitions or otherconsiderations, qualify for being regarded as reasonable, while an action which is inconsistent with or runs counter to a Directive Principle would incur the reproach of being unreasonable.So also the concept of public interest must as far as possible receive its orientation from the Directive Principles. What according to the founding fathers constitutes the plainest requirement of public interest is set out in the Directive Principles and they embody par excellence the constitutional concept of public interest. If, therefore, any governmental action is calculated to implement or give effect to a Directive Principle, it would ordinarily, subject to any other overriding considerations, be informed with publicGovernment, therefore, cannot, for example, give a contract or sell or lease out its property for a consideration less than the highest that can be obtained for it, unless of course there are other considerations which render it reasonable and in public interest to do so. Such considerations may be that some Directive Principle is sought to be advanced or implemented or that the contract or the property is given not with a view to earning revenue but for the purpose of carrying out a welfare scheme for the benefit of a particular group or section of people deserving it or that the person who has offered a higher consideration is not otherwise fit to be given the contract or the property. We have referred to these considerations to only illustratively, for there may be an infinite variety of considerations which may have to be taken into account by the Government in formulating its policies and it is on a total evaluation of various considerations which have weighed with the Government in taking a particular action, that the Court would have to decide whether the action of the Government is reasonable and in public interest. But one basic principle which must guide the Court in arriving at its determination on this question is that there is always a presumption that the Governmental act ion is reasonable and in public interest and it is for the party challenging its validity to show that it is wanting in reasonableness or is not informed with public interest. This burden is a heavy one and it has to be discharged to the satisfaction of the Court by proper and adequate material. The Court cannot lightly assume that the action taken by the Government is unreasonable or without public interest because, as we said above, there are a large number of policy considerations which must necessarily weigh with the Government in taking action and therefore the Court would not strike Down governmental action as invalid on this ground, unless it is clearly satisfied that the action is unreasonable or not in public interest. But where it is so satisfied, it would be the plainest duty of the Court under the Constitution to invalidate the governmental action. This is one of the most important functions of the Court and also one of the most essential for preservation of the rule ofmay be pointed out that this ground of invalidity, namely, that the government al action is unreasonable or lacking in the quality of public interest, is different from that of malafides though it may, in a given case, furnish evidence ofsecond limitation on the discretion of the Government in grant of largess is in regard to the persons to whom such largess may be granted. It is now well settled as a result of the decision of this Court in Ramana D. Shetty v. International Airport Authority of India &Ors. (supra) that the Government is not free like an ordinary individual, in selecting the recipients for its largess and it cannot choose to deal with any person it pleases in its absolute and unfettered discretion. The law is now well established that the Government need not deal with anyone. but if it does so, it must do so fairly without discrimination and without unfair procedure. Where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or g ranting other forms of largess. the Government cannot act arbitrarily at its, sweet will and, like a private individual, deal with any person it pleases, but its action must be in conformity with some standard or norm which is not arbitrary, irrational or irrelevant. The governmental action must not be arbitrary or capricious, but must be based on some principle which meets the test of reason and relevance. This rule was enunciated by the Court as a rule of administrative law and it was also validated by the Court as an emanation flowing directly from the doctrine of equality embodied in Art. 14. The Court referred to the activist magnitude of Art. 14 as evolved in E. P. Royappa v. State of Tamil Nadu (supra) and Maneka Gandhis case (supra) and observed that it must follow "as a necessary corollary from the principle of equality enshrined in Art. 14 that though the State is entitled to refuse to enter into relationship with anyone, yet if it does so, it cannot arbitrarily choose any person it likes for entering into such relationship and discriminate between persons similarly circumstanced, but it must act in conformity with some standard or principle which meets the test of reasonableness andand any departure from such standard or principle would be invalid unless it can be supported or justified on some rational andground." This decision has reaffirmed the principle of reasonableness andin governmental action which lies at the core of our entire constitutional scheme andargument plausible though it may seem at first blush, is in our opinion not well founded and a closer look at the facts will clearly show that it cannot bemay first clear the ground by stating a few undisputed facts. The practice which was being followed by the State until the yearwas to give out blazes in the chir forests either on wage contract basis or on royalty basis with or without load. The result was that about 50 per cent of the resin extracted used to be taken away by the contractors and the balance of 50 per cent remained with the State which the State partly made available to its own factories and small scale units in the State and partly sold by auction and out of the quantity auctioned the bulk was purchased by manufacturers having factories in Hoshiarpur. It appears that from about 1975 onwards the State embark ed upon a policy of industrialisation and in furtherance of this policy, it decided some time in the later half of 1978, that from the yearno resin should be allowed to he exported outside the State territories and that it should be made available for being utilised only in industries set up within the State. But this measure by itself was not enough, because so long as contracts for extracting resin were given on royalty basis with or without load, a sizable quantity of resin extract ed would go into the hands of the contractors and would not become available to the State for fulfilling its commitments. The State, therefore, decided as a matter of policy to replace royalty contracts by wage contracts wherever possible and to auction blazes for tapping only on wage contracts basis. But, as pointed out above, there were certain forests in Reasi, Ramban and Poonch Divisions which were difficult of access on account of their distance from the roads and some of the forests in Poonch Division were near the line of actual control and consequently it was found impracticable to give them for tapping on wage contract basis. It was difficult to give them for tapping even on the basis of royalty without load and the maximum that could be obtained for a part of the blazes in the Reasi, Division in the yearwas royalty of Rs. 2.55 per blaze without load. It was, therefore, decided by the State to exclude about 11, 85, 414 blazes in the Reasi, Ramban and Poonch Divisions from tapping through wage contract and they were kept out of the auctions held by the State. The Association undoubtedly made representations requesting the State to include these blazes in the auctions, but as is evident from the letters dated 5th February 1979 and 8th March 1979 addressed respectively to the Forest Minister. and the Chief Minister, the emphasis of the Association was that the system of working should be changed from wage contract to royalty contract" and that these blazes should be put to auction on royalty basis. The State obviously, in view of its policy, could not accede to this request made on behalf of the Association and since, having regard to past experience. it was felt that it would be futile to offer these blazes for tapping through wage contract, the State was not unjustified in not including them in the auctions. Now the second respondents offered to set up a factory for manufacture of resin, turpentine oiland other derivatives in theState and requested to State to make allotment of resin annually for this purpose on the same terms and conditions on which allotment was proposed to be made to Camphor and Allied Products Ltd. and Prabhat General Agencies. The State, in view of its policy of Industrialisation, was interested in the setting up of the factory by the second respondents, particularly since the second respondents had two factories for manufacture of resin, turpentine oil and other derivatives and they possessed larger experience in processing of resin and reprocessing, of resin, turpentine oil and other derivatives. But, having regard to the commitments already made by it, it was not possible for the State to make any definite allotment of resin to the second respondents. The State, however, had these blazes in the Reasi, Ramban and Poonch Divisions which it was finding impracticable to tap through wage contract and the State, therefore, decided to give them for tapping to the second respondents on certain terms and conditions, so that the second respondents could if they were prepared to tap these blazes in inaccessible areas, secure an assured supply of 3500 metric tones of resin for the purpose of the factory to be set up by them within the State. It was in these circumstances that the impugned order dated 27th April 1979 came to be passed by theis clear from theof the facts and circumstances in which the impugned order came to be made and terms and conditions set out in the impugned Order that it was not a tapping contract simpliciter which was intended to be given to the second respondents. The second respondents wanted to be assured of regular supply of raw material in the shape of resin before they could decide to set up a factory within the State and it was for the purpose of ensuring supply of such raw material that the impugned order was made giving tapping contract to the second respondents. It was really by way of allocation of raw material for running the factory that the impugned order was passed. The terms of the impugned order show beyond doubt that the second respondents were under an obligation to set up a factory within the State and that 3500 metric tones of resin which was permitted to be retained by the second respondents out of the resin extracted by them was required to be utilised in the factory to be set up by them and it was provided that no part of the Resin extracted should be allowed to be removed outside the State. The whole object of the impugned order was to make available 3500 metric tones of resin to the second respondents for the purpose of running the factory to be set up by them. The advantage to the State was that a new factory for manufacture of resin, turpentine oil and other derivatives would come up within its territories offering more job opportunities to the people of the State increasing their prosperity and augmenting the State revenues and in addition the State would be assured of a definite supply of at least 1500 metric tones of resin for itself without any financial involvement or risk and with this additional quantity of resin available to it, it would be able to set up another factory creating more employment opportunities and, in fact, as the counter affidavit of Ghulam Rasul, under secretary to the Government filed on behalf of the State shows the Government lost no time in taking steps to set up a public sector resin distillation plant in a far flung area of the State, namely, Sundarbani, in Rajouri District. Moreover, the State would be able to secure extraction of resin from these inaccessible areas on the best possible terms instead of allowing them to remain unexploited or given over at ridiculously low royalty. We cannot accept the contention of the petitioners that under the impugned order a huge benefit was conferred on the second respondents at the cost of the State. Itis clear from theterms of the impugned order that the second respondents would have to extract at least 5000 metric tones of resin from the blazes allotted to them in order to be entitled to retain 3500 metric tones. The counter affidavit of Ghulam Rasul on behalf of the first respondent and Guran Devaya on behalf of the second respondents show that the estimated cost of ex traction and collection of resin from these inaccessible areas would be at the least Rs. 175/ per quintal, though according to Guran Devaya it would be in the neighbourhood of Rs. 200 per quintal, but even if we take the cost at the minimum figure of Rs. 175/ per quintal, the total cost of extraction and collection would come to Rs. 87, 50, 000/and on this investment of Rs. 87, 50, 000/required to be made by the second respondents the amount of interest at the prevailing bank rat e would work out to about Rs. 13, 00,Now, as against this expenditure of Rs. 87, 50, 000/plus Rs. 13, 00, 000/the second respondents would be entitled to claim from the State in respect of 1500 metric tones of resin to be delivered to it only at the rate sanctioned by the Forest Department for the adjoining accessible forests which were being worked on wage contract basis. It is stated in the counter affidavits of Ghulam Rasul and Guran Devaya and this statement is not seriously challenged on behalf of the petitioners, that the cost of extraction and collection as sanctioned by the Forest Department for the adjoining accessible forests given on wage contract basis in the yearwas Rs. 114/per quintal an d the second respondents would, thus, be entitled to claim from the State no more than Rs. 114/per quintal in respect of 1500 metric tones to be delivered to it and apart from bearing the difference between the actual cost of extraction and collection and the amount received from the State at the rate of Rs. 114/per quintal in respect of 1500 metric tones, the second respondents would have to pay the price of the remaining 3500 metric tones to be retained by them at the rate of Rs. 350/per quintal. On this reckoning, the cost of 3500 metric tones to be retained by the second respondents would work out at Rs. 474/per quintal. The result would be that under the impugned order the State would get 1500 metric tones of res in at the rate of Rs. 114/per quintal while the second respondents would have to pay at the rate of Rs. 474/per quintal for the balance of 3500 metric tones retained by them. Obviously, a large benefit would accrue to the State under the impugn ed order. If the State were to get the blazes in these inaccessible areas tapped through wage contract, the minimum cost would be Rs. 175/per quintal, without taking into account the additional expenditure on account of interest, but under the impugned order the State would get 1500 metric tones of resin at a greatly reduced rate of Rs. 114/per quintal without any risk or hazard. The State would also receive for 3500 metric tones of resin retained by the 2nd respondents price or royalty at the rate of 474/per quintal which would be much higher than the rate of Rs. 260/per quintal at which the State was allotting resin to medium scale industrial units and the rate of Rs. 320/per quintal at which it was allotting resin to small scale units within the State. It is difficult to see how on these facts the impugned order could be said to be disadvantageous to the State or in any way favouring the second respondents at the cost of the State. The argument of th e petitioners was that at the auctions held in December 1978, January 1979 and April 1979, the price of resin realised was as much as Rs.and Rs. 700/per quintal respectively and when the market price was so high, it was improper and contrary to public interest on the part of the State to sell resin to the second respondents at the rate of Rs. 320/per quintal under the impugned order. This argument, plausible though it may seem, is fallacious because it does not take into account the policy of the State not to allow export of resin outside its territories but to allot it only for use in factories set up within the State. It is obvious that, in view of this policy no resin would be auctioned by the State and there would b e no question of sale of resin in the open market and in this situation, it would be totally irrelevant to import the concept of market price with reference to which the adequacy of the price charged by the State to the 2nd respondents could be judged. If the State were simply selling resin, there can be no doubt that the State must endeavour to obtain the highest price subject, of course, to any other overriding considerations of public interest and in that event its action in giving res in to a private individual at a lesser price would be arbitrary and contrary to public interest. But, where the State has, as a matter of policy, stopped selling resin to outsiders and decided to allot it only to industries set up within the State f or the purpose of encouraging industrialisation, there can be no scope for complaint that the State is giving resin at a lesser price than that which could be obtained in the open market. The yardstick of price in the open market would be wholly inept, because in view of the State policy, there would be no question of any resin being sold in the open market. The object of the State in such a case is not to earn revenue from sale of resin, but to promote the setting up of industries within the State. Moreover, the prices realised at the auctions held in December 1978? January 1979 and April 1979 did not reflect the correct and genuine price of resin, because by the time these auctions came to be held, it had become known that the State had taken a policy decision to ban export of resin from its territories with effect fromand the prices realised at the auctions were therefore scarcity prices. In fact, the auction held in April 1979 was the last auction in t he State and since it was known that in future no resin would be available for sale by auction in the open market to outsiders, an unduly high price of Rs. 700/per quintal was offered by the factory owners having their factories outside the State, so that they would get as much resin or the purpose of feeding their industrial units for some time. The counter affidavits show that, in fact, the average sale price of resin realised during the yearwas only Rs. 433/per quintal and as compared to this price, the 2nd respondents were required to pay price of royalty at a higher rate of Rs. 474/per quintal for 3500 metric tones of resin to be retained by them under the impugned order. It is in the circumstances impossible to see how it can at all be said that any benefit was conferred on the second respondents at the cost of the State. The first head of challenge against the impugned order must, therefore, beimpugned order did not hand over the tapping of the entire forest area in the State exclusively to the 2nd respondents so as to deny the opportunity of tapping any forest areas to the petitioners. What was done under the impugned order was merely to allot 11, 85, 414 blazes in the inaccessible areas of Reasi, Ramban and Poonch divisions to the 2nd respondents so that the 2nd respondents could have an assured supply of 3500 metric tones of resin for the purpose of feeding the factory to be set up by them in the State and a large number of blazes amounting to about 68 lacs in other forest areas of the State were left available for tapping by the petitioners and other forest contractors. No monopoly was created in favour of the second respondents; the petitioners and other forest contractors could bid for wage contract in respect of the other blazes which were more than five times in number than the blazes allotted to the second respondents. The petitioners in writ petition 481 of 1979, in fact, obtained a wage contract for extraction of resin from an easily accessible forest in Rajouri Division for the aggregate sum of Rs. 2, 80, 250/in the yearand though it is true that the petitioners in writ petition No. 482/79 did not obtain any wage contract for tapping in this year, it was not because blazes were not available for tapping, but because the petitioners did not get their registrationthird and last ground of challenge is also difficult to sustain. We fail to see how the action of the State in making the impugned order in favour of the 2nd respondents could be said to be arbitrary or unreasonable. Itis clear from thefacts we have narrated above and we need not repeat those facts again, that the State was not unjustified in excluding 11, 85, 414 blazes situate in the inaccessible areas of Reasi, Ramban and Poonch Divisions from the auctions , since the past experience showed that even on the basis of royalty without load, it was difficult to attract bidders and the maximum that could be obtained, and that too only in one solitary year, was Rs. 2.55 per blaze without load, which was an absurdly low return and it was, therefore, felt quite justifiably, that it would be futile to include these blazes in the auctions for tapping on wage contract basis. The State also could not award a contract simpliciter for tapping on the basis of royalty with or without load, because, as a matter of policy, with a view to encouraging industrialisation, the State did not want resin to go outside its territories but wanted it to be used only for the purpose of feeding industries s et up within the State and even if a condition could legitimately be imposed on the contractor that he should sell the resin extracted and retained by him only to industries within the State, it would be difficult to ensure observance of such condition and moreover the object of the State to make resin available to the local industries at a reasonable price might be frustrated, because the contractor taking advantage of scarcity in supply of resin, might, and in all probability would , try to extract a much higher price from the industries needing resin. It was thus found to be an impracticable proposition to tap these blazes either on wage contract basis or on the basis of royalty with or withoutthe 2nd respondents had made an offer for putting up a modern plant for manufacture of resin, turpentine oil and other derivatives within the State provided they were assured a definite supply of resin every year. But having regard to the commitments already made by it, it was not possible for the State to make any definite allocation of resin to the 2nd respondents and a proposal was therefore mooted that 11, 85, 414 blazes in inaccessible areas of Reasi, Ramban and Poonch Divisions could be allocated to the 2nd respondents for tapping on certain terms and conditions, so that the 2nd respondents could tap these blazes and out of the resin extracted, obtain for themselves an assured supply for running the factory to be set up by them and make the balance quantity available to the State for its own purpose. The 2nd respondents were agreeable to this proposal and they accordingly put forward an alternative proposal on these lines for the consideration of the State and eventually, the impugned order came to be made in favour of the 2nd respondents. We have already discussed the terms of the impugned order and it is clear from what we have said that the impugned order was unquestionable and without doubt, in the interest of the State and even with a microscopic examination we Pail to see anything in it which could possibly incur the reproach of being condemned as arbitrary or irrational. It is true that no advertisements were issued by the State inviting t enders for award of tapping contract in respect of these blazes; or stating that tapping contract would be given to any party who is prepared to put up a factory for manufacture of resin, turpentine oil and other derivatives within the State, but it must be remembered that it was not tapping contract simpliciter which was being given by the State. The tapping contract was being given by way of allocation of raw material for feeding the factory to be set up by the 2nd respondents. The predominant purpose of the transaction was to ensure setting up of a factory by the 2nd respondents as part of the process of industrialisation of the State and since the 2nd respondents wanted assurance of a definite supply of resin as a condition of putting up the factory, the State awarded the tapping contract to the 2nd respondents for that purpose. If the State were giving tapping contract simpliciter there can be no doubt that the State would have to auction or invite tenders for securing the highest price, subject, of course, to any other relevant overriding considerations of public weal or interest, but in a case like this where the State is allocating resources such as water, power, raw materials etc. for the purpose of encouraging setting up of industries within the State, we do not think the State is bound to advertise and tell the people that it wants a particular industry to be set up within the State and invite those interested to come up with proposals for the purpose. The State may choose to do so, if it thinks fit and in a given situation, it may even turn to be advantageous for the State to do so, but if any private party comes before the State and offers to set up an industry, the State would not be committing breach of any constitutional or legal obligation if it negotiates with such party and agrees to provide resources and other facilities for the purpose of setting up the industry. The State is no t obliged to tell such party; "Please wait. I will first advertise, see whether any other offers are forthcoming and then after considering all offers, decide whether I should let you set up the industry." It would be most unrealistic to insist on such a procedure particularly in an area like Jammu and Kashmir which on account of historical, political and other reasons, is not yet industrially developed and where entrepreneurs have to be offered attractive terms in order to persuade them to set up an industry. The State must be free in such a case to negotiate with a private entrepreneur A with a view to inducing him to set up an industry within the State and if the State enters into a contract with such entrepreneur for providing resources and other facilities for setting up an industry, the contract cannot be assailed as invalid so long as the State had acted bona fide, reasonably and in public interest. If the terms and conditions of the contract or the surrounding circumstances show that the State has acted mala fide or out of improper or corrupt motive or in order to promote the private interests of someone at the cost of the State, the Court will undoubtedly interfere and strike down State action as arbitrary, unreasonable or contrary to public interest. But so long as the State action is bonafide and reasonable, the Court will not interfere merely on the ground that no advertisement was given or publicity or made or tenders invited. Here, the 2nd respondents approached the State for the purpose of setting up a modern factory for manufacture of resin, turpentine oil and other derivatives and asked for allocation or resin and the State, with a view to offering an incentive to the 2nd respondents to set up the factory, made the impugned order awarding the tapping contract in respect of these blazes to the 2nd respondents as a part of a package deal. We have already pointed out and w need not repeat again, that the impugned order was reasonable and in the interest of the State and in the circumstances, we are clearly of the view that it cannot be assailed as invalid merely because no advertisements were issued inviting offers for setting up a factory and taking the tapping contract as an integral part of themay, however, be pointed out that though no advertisements were issued by the State, the Chief Minister of Jammu and Kashmir had in the course of three speeches delivered byin Bombay. the other in Calcutta and the third in New Delhi invited entrepreneurs to set up industries within the State with a view to bringing about rapid industrialisation and economic development of the State by utilising its "peculiar natural resources" and converting them into finished orproducts and promising "various forms of assistance and incentives" for the purpose. These speeches were widely advertised in the newspapers and it was, therefore, known to entrepreneurs that the State would be willing to provide resources and other facilities to those who were interested in setting up industries within the State and, in fact. the State was anxious to attract entrepreneurs to start industries and it was in pursuance of this invitation that Prabhat Tarpens and Synthetics Private Limited, Dujodwala Resins and Tarpens. Pvt. Ltd., Pine Chemicals Limited and the second respondents made their respective offers f or putting up factories within the State. It is, there fore, in any event not correct to say that the petitioners had no opportunity of making an offer of setting up a factory and obtaining a tapping contract for theis also necessary to point out that the claims of the petitioners in writ petition No. 481 of 1978 and some others were considered by the Forest Minister and other forest officials at the meeting held on 25th December, 1978 and applying the criteri on of "financial status and its distillation in thecriterion cannot be said to be irrational orapplication of the 2nd respondents was unanimously accepted. This decision cannot be said to be mala fide or prompted by improper or corrupt motive. There is, in fact, no evidence before us to show or even as much as to suggest that any favour was conferred on the 2nd respondents at the cost of the State or that the 2nd respondents were preferred to some others without any basis or justification. The petitioners in writ petition No. 481 of 1979 had very little experience of extraction of resin, since they had taken tapping contract for the first time only inand so far as processing of resin is concerned, they had no experience at all, as they did not have any factory for processing of resin nor had they at any time in the past, participated in any auction of resin. The petitioners in writ petition No. 481 of 1979 were principally grocery and provision merchants and though they had taken some tapping contracts in the past, they had no experience at all in processing of resin since they did not own any factory. The 2nd respondents, on the other hand, had large experience in extraction of resin from inaccessible forests of Poonch Division and they also possessed considerable experience in distillation and processing of resin since they had two factories, one in Hoshiarpur and the other in Delhi. The State h ad in fact given two contracts to the 2nd respondentsin the yearto install factories for manufacture of resin and turpentine oil in the public sector and these contracts have been carried out by the 2nd respondents to the entire satisfaction of the State. Therefore, so far as the relative merits of the petitioner on one hand and the 2nd respondents on the other were concerned, the 2nd respondents were definitely superior and it cannot be said that the State acted unreasonably or contrary to public interest in preferring the 2nd respondents and permitting them to put up a factory within the State and awarding them tapping contract in respect of these blazes for the purpose of the factory. It may be pointed that the petitioners in writ petition No. 482 of 1979 had not even got their registration renewed for the yearand hence no tapping contract could possibly be given to them. We must, accordingly, reject the third ground of challenge urged on behalf of the petitions.