Rajeshwar Dayal v. State of Uttar Pradesh — 1985 DIGILAW 540 (ALL)

JUDGMENT A. Banerji, J. - The questions raised in these two writ petitions are identical and it would be convenient to decide them by a common order. 2. The petitioner in Writ Petition No. 11289 of 1983 started a diary business in the Town Area of Kithor, district Meerut in 1970. He installed machinery and chilling plant and also acquired tankers for carrying milk from one place to another. The petitioner collects milk from various places from inside the "reserved area" and thereafter puts the same in chilling process in his dairy. Thereafter the milk is carried to various places outside the "reserved area". The petitioner purchases and sells about 10,000 litres of milk every day. Similar work is done by serveral other dairies in the area. 3. Similar is the position with the petitioner in the other Writ Petition No. 11290 of 1983 except that it is situate at Gahloti in district Bulandshahr and purchases and sells approximately 15,000 litres of milk every day. 4. The petitioners stated that the State Legislature passed an Act viz, U.P. Milk Act, 1976 (Act No. 7 of 1976), hereinafter referred to as the Act. It was to provide for the regulation, control of production, supply and distribution of milk and its conversion into milk products with a view to develop the dairy industry in the State and for matters connected therewith. Section 11 of the Act prohibited the setting up a dairy or milk processing unit beyond the limit fixed by the Milk Board without obtaining a licence. The petitioners had applied for licence under the Act and had been granted a licence under S. 11(2) of the Act in 1979. This licence is being renewed from year to year and is still continuing. Under S. 12 of the Act the Board has the power to declare the area to be "reserved area" by means of a Notification to ensure the availability of sufficient milk at fair price. The term 'Board' has been defined under S. 2(b) of the Act which means the Uttar Pradesh Rajya Dugdh Parishad constituted by the State Government under S. 3 of the Act. On 4th Jan. The term 'Board' has been defined under S. 2(b) of the Act which means the Uttar Pradesh Rajya Dugdh Parishad constituted by the State Government under S. 3 of the Act. On 4th Jan. 1977 the Board in exercise of its powers under S. 12 of the Act issued a Notification directing that only such dairy/dairies which are authorised, shall transport milk without any licence within the reserved area to any place outside such area. The Board has power under S. 2(2) of the Act to regulate the price within the reserved area and the dairy/dairies located within the "reserved area" have to purchase milk from the milk producers at the price fixed by the Board. Section 13 of the Act further provides that no person other than an "authorised person" shall collect, carry or transport milk or milk products from any place within a reserved area to any place outside such area without obtaining a licence. The term "authorised person" has been defined under S. 2(a) of the Act which means the persons authorised by the Board by notification for any purpose under the Act. 5. In the, notification dated "Jan. 4, 1977 (Annexure 1 to the writ petition) the Board in exercise of the powers under Ss. 12 and 13 of the Act declared the reserved areas and also laid down the price of milk of various qualities in the reserved area as well as prohibited the carrying of milk or milk products from the reserved area to any place outside the said area without obtaining a valid permit from the licensing authority under the Act. However, the notification clarified that there would be no bar in the transport or carriage of up to a specified amount of ghee, milk and other milk products for export outside the reserved area by any person for personal consumption. The notification also named the' authorised person' who were entitled to carry milk and milk products outside the reserved area. Twelve area in the State were declared as "reserved area" under the above notification and one co-operative Dairy in each area was named as the authorised person. The notification also named the' authorised person' who were entitled to carry milk and milk products outside the reserved area. Twelve area in the State were declared as "reserved area" under the above notification and one co-operative Dairy in each area was named as the authorised person. Pradeshik Co-operative Dairy Federation Limited, Lucknow (in short 'PCDF') was named as the authorised person for the reserved area in Meerut, and the Aligarh Dugdha Utpadak Sahkari Sangh (in short 'Aduss') was named as the authorised person in respect of the 'reserved area' of Aligarh (In Writ Petition No. 11290 of 1983). Subsequently, a notification dated 30-3-1983, Annexure 2 to the Writ Petition. was published under which the previous notification dated 4-5-1982 was amended and certain areas of district Bulandshahr were notified as' reserved areas' and the PCDF was named as the 'authorised person' of these areas. The petitioner of Writ Petition. No. 11289 of 1983 is aggrieved by this order. 6. The petitioner's case was that it was incumbent under the Act for the Milk Board to grant licence to an applicant under S. 14(1). According to Mr.. M. S. Negi learned counsel for the petitioners, his first contention was that the language of S. 14 was that a licence had to be given where conditions for the grant of licence had been complied with and licence fee had been deposited. Sub-secs. (2), (3) and (4) provided for the cancellation of licence. Sub-sec. (6) provided for an appeal against the order. Even the Rules did not lay down, according to the counsel, any restriction in the grant of licence to indicate that such a licence under S. 13 would be granted to only one authorised person. 7. The second contention was that there was no justification in appointing only one authorised person for every reserved area and much less any justification for appointing a Co-operative Society as the authorised person, particularly when dairies like that of the petitioners were working for many years with big establishments. 8. Thirdly, it was urged that according to the scheme of the Act three separate notifications were necessary whereas only one had been issued in this case. 8. Thirdly, it was urged that according to the scheme of the Act three separate notifications were necessary whereas only one had been issued in this case. The first notification had to be in respect of a' reserved area', secondly, a notification fixing the price therein and thirdly, nominating the authorised person/persons who would be entitled to carry or transport milk or milk products outside the reserved area. The contention was that since these three acts took place one after another as mentioned above, these could not be issued in one notification. 9. The fourth contention was that by making the nomination for only one' authorised person' in each' reserved area' a monopoly in the carrying of trade and business had been created which was hit by the provisions of Article 19(6)(ii)(b) of the Constitution of India. A monopoly business could not be created in favour of any one person. Lastly, it was contended that the impugned notification (Annexure I) infringed the fundamental right of carrying on trade and business by the petitioners. 10. Shri Murli Dhar, learned counsel for the respondent Milk Board, in reply urged that no constitutional provision has been violated or infringed nor does the provisions of Article 19(6)(ii)(b) of the Constitution have any application to the facts of the case. Only the question of reasonableness may be examined in this case. He refuted the argument on the question of monopoly and urged that no monopoly has been created in any sense of the term. Several persons had applied for the licence including the respondent Co-operative Society in each case. The Milk Board chose to have only one authorised person for each reserved area so as to have a better control over the export of milk or milk products outside the reserved area. The refusal of the licence in favour of the petitioners was neither void nor illegal. Further, adequate reasons had been given for refusing licence. He refuted the argument that three Notifications were necessary in this case instead of the one issued. Lastly he urged that S. 14(1) of the Act did not indicate that licence had to be given to each person who applied. The power was discretionary but guidelines were indicated. 11. We may take up the third point first. He refuted the argument that three Notifications were necessary in this case instead of the one issued. Lastly he urged that S. 14(1) of the Act did not indicate that licence had to be given to each person who applied. The power was discretionary but guidelines were indicated. 11. We may take up the third point first. Whether only one Notification, Annexure 1 to the Writ Petition, was in order and in consonance with the scheme of the Act, or there should have been three separate Notifications? The contention was that the three matters had to be decided and each came in a different stage, hence these three matters could not be placed in one notification. The three matters were in respect of the 'reserved area,'price of milk and milk, products in the' reserved area' and' the appointment of authorised person'. Having heard the learned counsel for the parties we see no good reason why the three notifications could not be issued simultaneously. After all, the act of declaring a reserved area and of announcing the price of milk and products in that area could be done simultaneously there was no impediment. The appointment of authorised agent could also be done at the same time, as applications by intending parties, were pending. 12. We will now consider the first point. Reference may be made to the provisions of S. 14(1) of the Act. It reads as follows :- "14(1). A licence under the provision of this Act shall be granted or renewed by the licensing authority in the prescribed manner, subject to prescribed conditions and on furnishing of such security and payment of such fees as may be prescribed." 13. The contention of the learned counsel that use of the phrase "shall be granted" imposed an obligation on the licensing authority to grant the licence where the applicant applies in the prescribed manner and fulfils the prescribed conditions and furnishes requisite security and pays the prescribed fees. In other words, learned counsel emphasised that the use of the term "shall" connotes a mandate on the licensing authority to grant the licence where the conditions enumerated in the sub-section are fulfilled. We cannot agree to this line of argument. The use of the term "shall" does not always mean that it is mandatory. The term "shall" is also used to mean 'may'. We cannot agree to this line of argument. The use of the term "shall" does not always mean that it is mandatory. The term "shall" is also used to mean 'may'. It will, however, depend on the circumstances and in the context in which it is used in the statute. All that sub-s. (1) of S. 14 lays down is that a licence he granted to an applicant who fulfils the prescribed requirements and the prescribed conditions for the grant of licence and furnishes requisite security and pays the prescribed fees therefor. What are the conditions to be considered? A reference may be made to the Rules made under the Act. It is known as the U.P. Milk Rules, 1976. Chapter VII of the Rules is headed as "The Manner of Licensing and Rates of Licensing Fee". Rule 16(a) requires that the application for the grant of licence to collect, carry or transport milk or milk product within reserved area or to any place outside such area under S. 13 of the Act has to be made in Form E Schedule I. It requires the application to be presented by the applicant in person or sent through the medium of post office to the licensing authority. Clause (c) requires the filing of such information as is necessary for the consideration of the application. Rule 17 states that on receipt of the application for issue of licence in the prescribed form the licensing authority will take into consideration the following 7 conditions viz. : (i) the licence will be granted subject to the provisions of Act and the rules framed thereunder; (ii) the place or premises, available facilities and equipment and machinery to be used for handling of milk and milk products shall conform to the hygienic standards as may from time to time be specified by the board to the satisfaction of licensing authority. (iii) the financial capacity or resources of the applicant to handle the quantity of milk and milk products applied for : (iv) The applicant is not a convict of any offence under any law relating to purity and quality standards of milk or milk products for the time being in force; (v) The Licensing Authority may refuse to sanction or renew a licence if it is satisfied that it will not be in the public interest to grant or renew licence having regard to relevant factors prevailing such as availability, quality and price of milk in a particular area : (vi) any other terms and conditions prescribed by the Board of the Licensing Authority from time to time: (vii) the applicant is not a minor, insane or bankrupt. 14. A reference to cl. (v) of the conditions would show that it gave an absolute discretion to the licensing authority to refuse to sanction or renew a licence if it was satisfied that it was not in the public interest to grant or renew the licence having regard to relevant factors prevailing in the area in regard to availability, quality and price of milk. This particular clause makes the grant of the licence discretionary. If the licensing authority is satisfied that the grant of licence will not be in the public interest, he may refuse to grant the same. This very clause indicates that the provisions of S. 14(1) for the grant of licence is not mandatory but on the contrary discretionary. Consequently the phrase "shall be granted" can only mean "may be granted". We are satisfied that there are no merits in the above submission made by the learned counsel for the petitioner and the grant of licence is not mandatory. It depends upon the discretion of the licensing authority subject to the guidelines given in cl. (v) of R. 17. 15. The next contention was that there was no justification in appointing only one authorised person for every reserved area. A supplementary question was that there was no justification for appointing a Co-operative Society as the authorised person in the circumstances of the case. (v) of R. 17. 15. The next contention was that there was no justification in appointing only one authorised person for every reserved area. A supplementary question was that there was no justification for appointing a Co-operative Society as the authorised person in the circumstances of the case. The question whether one or more persons can be named as authorised person for the purposes of collecting, carrying or transporting milk or milk products from any place within a reserved area to any place outside such area is not restricted by any provisions in S. 13 stipulates (sic) is the prohibition of a person other than an authorised person to do so and such an authorised person had to obtain a licence from the licensing authority. Consequently, every authorised person would have to be a licensee to enable him to operate as stipulated in S. 13. The question whether the licensing authority should grant licence to only one or more persons depends on the facts and circumstances of each case. Since there is nothing in the statute' or in the Rules prescribing the appointment of more than one person, the licensing authority, if the exigencies of situation so demand, may appoint more than one authorised person. However, there is no bar in his appointing only one authorised person for the purpose of S. 13 of the Act in any one reserved area. Where the licensing authority feels that only one authorised person would be sufficient he may appoint one such person. If he is of the opinion that it would facilitate the carrying out the objects of the Act by appointing only one authorised person ,the may do so. The substance is that the lncensing authority may appoint one or more authorised persons under S. 13 of the Act but if he does not appoint more than one such authorised person, he commits no illegality or irregularity. This is clear because the provision of S. 14(1) is discretionary. It is open to the licensing authority not to grant a licence. In this view of the matter the contention that only one authorised person could not be appointed for the purpose of S. 13 of the Act is mis-conceived. 16. The other aspect of the question, namely, that there was no justification for the appointment of a Co-operative Society as the, authorised person, in our opinion, has no substance. In this view of the matter the contention that only one authorised person could not be appointed for the purpose of S. 13 of the Act is mis-conceived. 16. The other aspect of the question, namely, that there was no justification for the appointment of a Co-operative Society as the, authorised person, in our opinion, has no substance. A Co-operative Society usually has a wider base and is subject to the control of the State partially albeit remotely. The object under the Act can be better achieved if it is operated through co-operative societies. It was observed by the Hon. S. K. Das, J. (speaking for the majority) in the case of Mannalal Jain v. State of Assam, AIR 1962 SC 386 , "that there may be places or areas where Co-operative Societies are in a better position for maintaining or increasing supplies of rice and paddy and even for securing their equitable distribution availability at fair prices". Two Hon'ble Judges, Sarkar and Mudholkar (who were in minority) held that one of the directive principles of the Constitution was that Co-operative Society should be encouraged. Their Lordships were unanimous on the point that preference to Co-operative Societies could be given in certain circumstances, as stated in sub-cl. (e) of Cl. 5 of the Control Order, 1961. Thus the grant o the license to a Co-operative Society does not offend any provision of law. We are of the view that the grant of license to the Co- operative Societies in these two reserved areas was not bad in law. 17. A perusal of S. 15 of the Act shows that the State Government may in the public interest and subject to the provisions of the Act and the Rules made thereunder, by notification regulate or fix prices in respect of the sale or supply of Milk, or the manufacture, sale or supply of any milk product and the transport of milk or any milk product from one area in the State to another area in the State of its export to any place outside the State. It is evident from the above that ,the State Government can by a notification not only fix the price of milk or milk products but can also restrict the transport of milk or milk products from one area to another or to an area outside the State. It is evident from the above that ,the State Government can by a notification not only fix the price of milk or milk products but can also restrict the transport of milk or milk products from one area to another or to an area outside the State. This provision is in consonance with the object of the Act. The object of the Act can be better achieved,if there be only one or as small a number as possible of licensees. After all, the reserved area is usually a deficit area and the movement of fluid milk from that area to other area may cause untold misery or hardship to the residents of that area, particularly the children. If all the milk were to be converted into cream or butter or a like, it may reduce the availability of fluid milk. 18. In the present case the licence has been given only to the Co-operative Society (PCDF) and in Aligarh to ADUSS in the two writ petitions which are Co-operative Societies and they have been specifically named in the notification issued by the Government. There would be better control in the matter of export of milk or milk products from the reserved area if there be one such licensee. However, it is made clear that even if there be more than one licensee in any reserved area it would not offend any provision of law but it would entirely depend on the discretion of the licensing authority subject to the provisions of the law and the Rules. Adequate reasons have been given in the present case for refusal of the licence of the petitioners. A perusal of Annexure CA-1 shows that the reason for refusal is one which is contemplated under Cl. (v) of R. 17 of the U.P. Milk Rules. 1976. 19. We therefore, find no merits in this contention either. 20. The next contention urged by the learned counsel was that by granting the license under S. 13 of the Act to the Co-operative, Society (PCDF) and the Aligarh ADUSS would result in a monopoly in their respective area to the exclusion of all others including the petitioners. The case of the petitioners is that no monopoly can be created in trade or business in favour of any person or persons. To do so would be violative of the constitutional provisions. The case of the petitioners is that no monopoly can be created in trade or business in favour of any person or persons. To do so would be violative of the constitutional provisions. Learned counsel for the petitioners has relied on the provisions of Article 19(6)(ii) of the Constitution of India. Article 19(1)(g) of the Constitution reads as follows : "All citizens shall have the right- (g) To practise-any profession, or to carry on any occupation, trade or business." Article 19(6) (ii) of the Constitution reads as follows: "19(6) Nothing in sub-clause (g) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, and, in particular, nothing in the said sub-clause shall affect the operation of any existing law in so far as it relates to, or prevent the State from making any law relating to, (ii) the carrying on by the State, or by a corporation owned or controlled by the State, of any trade, business, industry or service, whether to the exclusion, complete or partial, of citizens or otherwise." Great emphasis was laid by the learned counsel on sub-Art.(6), Cl. (ii). He urged that it was permissible for the State or a corporation owned or controlled by the State of carrying on any trade, business, industry or service even to the exclusion, complete or partial, of citizens or otherwise. In other words, his contention was that if it was a State or a corporation owned or controlled by State it could have monopoly rights in carrying on any trade, business, industry or service. The exclusion of other citizens meant monopoly rights, he urged. But, in the present case, the learned Counsel added, the Co-operative Society was neither a State nor a corporation owned or controlled by the State. Consequently, it could not carry on any trade or business to the exclusion of any other citizens. In short, his submission was that in giving a right to a person exclusively in dealing in milk or milk products in so far as it concerns the carrying on trade outside the area amounted to the creation of a monopoly right in favour of the Co-operative Society. In short, his submission was that in giving a right to a person exclusively in dealing in milk or milk products in so far as it concerns the carrying on trade outside the area amounted to the creation of a monopoly right in favour of the Co-operative Society. In support of his contention learned counsel referred to a decision in the case of State of Rajasthan v. Mohan Lal Vyas, AIR 1971 SC 2068 where their Lordships observed as follows (at p. 2069) . "If the State obtained a monopoly it would be defensible as a reasonable restriction on the rights of citizens to carry on any business or trade and to ply buses. On the other hand, if the State conferred any monopoly right on a citizen it would be indefensible and impermissible and would be an infraction of' the inviolable provision of the Constitution. The Constitution forbids grant by the State to a citizen of monopoly right to carry on the business of plying buses undertaken in the agreements." 21. Learned counsel contended that the Supreme Court had clearly laid down that no monopoly business can be created in favour of a citizen. 22. Learned counsel also referred to the case of Ras Bihari v. State of Orissa, AIR 1969 SC 1081 where the scheme of selling Kendu leaves to selected purchasers or of accepting tenders only from a specified class of purchasers was not integrally and essentially connected with the creation of the monopoly and was not protected by Article 19(6)(ii). Their Lordships held that it had therefore, to satisfy the requirement of reasonableness under the first part of Article 19(6). 23. Reference may also be made to the case of Akadasi Padhan v. State of Orissa, AIR 1963 SC 1047 . Their Lordships held that by the amendments in Article 19(6) it was intended that the State monopoly in respect of any trade or business must be presumed to be reasonable and in the interests of the general public. In this case the Court held that the agents who had been appointed merely for purchasing Kendu leaves but were authorised to carry on trade in Kendu leaves, purchases on their own account were not protected under Article 19(6)(ii) of the Constitution. In this case the Court held that the agents who had been appointed merely for purchasing Kendu leaves but were authorised to carry on trade in Kendu leaves, purchases on their own account were not protected under Article 19(6)(ii) of the Constitution. The Court held that while the monopoly in favour of the Government to carry on the business of purchasing Kendu Leaves was justified but the law could not be used by the State for providing benefit to the agent. Consequently, it was held that the agents who gained huge profits disproportionate to the nature of the service rendered or duty performed by them, they could not claim the protected , of Article 19(6)(ii). 24. It is clear from a perusal of the provisions of Article 19(6) and the decisions referred to above, that State enterprise or an enterprise by a corporation owned and controlled by the State could be invested with monopoly powers to carry on trade or business but not so in the case of others. In all such other cases first part of Article 19(6) would come into play, namely, the Court has to see whether the impugned order was reasonable or not. 25. Another thing, which is clearly discernible from the above decisions is that the provisions of Article 19(6)(ii) have no application to the facts of the present case. The PCDF and the Aligarh Dairy are neither State nor corporations owned or controlled by the State. Consequently, even if there was a monopoly created in their favour it would be necessary for them to pass the test of reasonableness. 26. The question of reasonableness in the matter of grant of licence is quite different from that of any provision in an enactment giving exclusive right to a person. Where there are several applicants for the grant of a licence one or more applicants may succeed and the others may not. Whether it is granted in favour of one or more persons, the grantees have a sort of exclusive right to do the business to the exclusion of those who have not been granted the licence. It may be that all the applicants are well equipped and have resources to carry on the business but that does not mean that they all must get the licence. It may be that all the applicants are well equipped and have resources to carry on the business but that does not mean that they all must get the licence. In a case where ,the licence is given in the exercise of the discretionary power of the licensing authority in accordance with the provisions of the law, strictly speaking, the question of reasonableness does not arise. If the provisions of the law and the Rules have been followed in the grant of licence it would amount to a reasonable exercise of power. Absence of reasonableness is to be judged where the law is enacted or an order is passed without apparently considering rights of others. But where each application of grant of licence under S. 13 was rejected after giving reasons and where the reasons have not been found to be bad in law then in that event the question of considering reasonableness is not strictly attracted. The grant of licence even in favour of one person can be justified, as has been done in the present case. The law laid down by their Lordships in the case of State of Rajasthan v. Mohan Lal Vyas, AIR 1971 SC 2068 (supra) interprets the provisions of Article 19(6)(ii) and we may say so with great respect that the law laid down in the above case has no application in the case before us. 27. In the case of Bishamber Dayal Chandra Mohan v. State of U.P., (1982) 1 SCC 39 : AIR 1982 SC 33 their Lordships considered the meaning of reasonable restriction as used in Article 19(5) and (6), as follows : - "The expression "reasonable restriction" signifies that the limitation imposed on a person in enjoyment of the right should not be arbitrary or of an excessive nature, beyond what is required in the interests of the public. The test of reasonableness, wherever prescribed, should be applied to each individual statute impugned, and no abstract standard, or general pattern of reasonableness can be laid down as applicable in all cases. ' The restriction which arbitrarily or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a proper balance between the freedom guaranteed in Article 19(1) (g) and the social control permitted by Cl (6) of Article 19, it must be held to be wanting in that quality." 28. ' The restriction which arbitrarily or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a proper balance between the freedom guaranteed in Article 19(1) (g) and the social control permitted by Cl (6) of Article 19, it must be held to be wanting in that quality." 28. Applying the above test it is obvious that the appointment of the Co-operative- Society as the authorised person in respect of transport of milk or milk products to a place outside the reserved area was neither arbitrary, nor in excess of the power under the Act but was in the public interest. It was not in favour of one individual or individuals concerned but to the exercise for the good of the general public and particularly for those who dealt with milk or milk products, for the Co- operative Society was Apex Society dealing with milk or milk products. The petitioners who are purchasers of milk in the reserved area and who have dairies for processing milk can carry on their business in the purchase, sale and processing of milk and milk products and are free to do so even if they do not have a licence under S. 13 of the Act. The only restriction imposed on them is for their transporting outside the reserved area milk of milk products. They have made allegations that they are processing 10,000 and 15,000 litres of milk a day they are purchasing but it is nowhere stated in the petition as to the quantity of milk or milk products they were taking out the reserved area prior to the issuing of the notification dated 4-1-1977. Their trade in purchase, sale and processing of milk or milk products had not been stopped. A slight restriction has been placed in their carrying or transporting milk or milk products outside the reserved area. They can still sell their milk or milk products to the PCDF or the Aligarh Society (ADUSS) as the case may be, for being exported outside the reserved area. It is not the case of the petitioners that they depend entirely on the trade in exporting milk and milk products outside the reserved area. In view of the above it cannot be said that the petitioners are affected by the impugned order in such a manner that calls for interference. It is not the case of the petitioners that they depend entirely on the trade in exporting milk and milk products outside the reserved area. In view of the above it cannot be said that the petitioners are affected by the impugned order in such a manner that calls for interference. We are not satisfied that any case has been made out for interference. 29. In the result therefore the writ petition fails and is dismissed.