JUDGMENT R.M. Saha, J. - How statutory authorities in exercise of wide general powers conferred on them cannot but act in the manner provided in Statute or rules, otherwise the action becomes vulnerable even if it is in good faith is demonstrated by this petition filed by a licencee under Industries (Development and Regulation) Act, 1951 (fa brevity INDRA) against the order dated 5th August, 1988 passed by Additional Milk Commissioner under U.P. Milk Act of 1976. 2. Why was the order passed and what prompted petitioner to seek protection of this Court may be narrated in brief. When the company was established in 1960, by petitioner's predecessor, to manufacture 4000 tonnes of milk food annually under a licence granted by Government of India under IDRA as Milk Food had been declared to be of public importance by the Union, the Central Dairy Farm, (hereinafter referred as CDF), a State Government undertaking producing butter, ghee, and piggery was already in existence. It appears to have been principal consumer of cream, a by-product produced by petitioner. Whether the supply was made under some agreement entered between petitioner and CDF is a condition precedent for its establishment or it was done as mutual understanding between two commercial entities guided by rule of demand and supply and availability of surplus could not be established by any positive material by either of the parties. But from two letters sent by General Manager CDF in 1962 and 1963 this much is clear that dispute about quantity to be supplied and price to be paid existed even then. However, in 1976 U.P. Milk Act was enacted to provide for regulation and control of production, supply and distribution of milk and its conversion into milk products. Section 11 of the Act required any person setting up a dairy or milk processing unit to obtain a licence. Whether a licencee u rider I DRA was also required to obtain licence and if so then in respect of same item namely, milk food, or different items is defined as milk product and on what condition shall be adverted to later but the petitioner obtained a licence under section 11(2) of the Act in 1979, which was granted without any condition or restriction on manufacture of ghee or use of cream. But when the licence was renewed in 1984-85 the licencing authority imposed a restriction that petitioner shall not manufacture more than 60 tonnes of ghee and that also for its staff. This was the first prick, the frequency and intensity of which increased with every renewal. Even though petitioner objected to such restriction and challenged the order by way of appeal but neither yielded any result and when next renewal was done the permission to manufacture even 60 tonnes of ghee was withdrawn. Direction was also issued to collect 1,16,666 kgs. of milk per day instead of 36,(XX0 tonnes per annum or on average of 1,16,666 kgs. per day. Although the restrictions were on increase but they appear to have been within tolerable limits and were challenged by way of appeal which to date could not be decided on pretext that petitions did not pursue them. Before referring to the final and last order it will not be out of place to mention that the dispute, both in respect of supply of cream and payment of its price with CDF used to be resolved by mutual agreements arrived in presence of Officers of Animal Husbandry and later by officials under Milk Act as well. For instance in 1967 the petitioner acknowledged undoubted value of CDF being in close proximity which took enormous quantities of supplies of cream whenever there was major surplus even at the cost of inconvenience and financial risk. Yet it informed CDF that it shall have first option on cream if it was beyond their own ghee manufacture. In 1981 the differences between the two were resolved in a meeting held by officers of two organisations and it was agreed that CDF shall lift approximately 70% of cream available for sale on average monthly price paid by outsiders to petitioner. Similar meetings were held in 1982, 1983, 1985 and 7th Sept. 1987. In the last meeting the price of cream was fixed at 59% allocated to fat and 40% SNF which is described as two axis formula Claim of CDF for damages and petitioner for interest was rejected. Before resumption of supplies of cream the CDF was to pay Rs. Similar meetings were held in 1982, 1983, 1985 and 7th Sept. 1987. In the last meeting the price of cream was fixed at 59% allocated to fat and 40% SNF which is described as two axis formula Claim of CDF for damages and petitioner for interest was rejected. Before resumption of supplies of cream the CDF was to pay Rs. 39 lakhs and odd In respect of production and supply of cream it was agreed that petitioner shall supply four metric tonne of fat per day to CDF in each month of October, November, December, January and February and three tonnes in August, September, March and April, and surplus over and above it could be disposed of by petitioner as legally permissible. Future payment was to be made by CDF in cash. Resumption of supply of cream was to commence from 8th September, 1987 provided CDF made payments etc. In case of default, CDF was required to pay 18% interest and it was left open to petitioner to discontinue supplies and dispose of entire cream in accordance with law. But even the ink had not dried on the agreement and the CDF on very next day informed that formula of price, fixation was not correct. It was followed by another letter dated 21st September, raising dispute about supply of cream and insisting that full cream produced by petitioner should be supplied to CDF. But for the time being it was agreeable to accept four and three tonnes in the months mentioned in the agreement. This letter was replied on 3rd November, 1987 and attention was drawn to agreement arrived on 7th September, 1987. Claim of entire supply of cream was refuted and it was insisted that in case any cream was supplied over and above agreed amount then it would be on market price without any guarantee of quality etc. Letter exchange went on and in July 1988 CDF claimed over payment due to erroneous application of price formula. And then came the impugned letter of Additional Commissioner determining price of cream at 52% fat and 48% SNF resulting in reducing the price of cream. The petitioner was further directed to supply 4 tonnes of cream each day every month. And the Dairy Officer was directed not to issue any permit to export any cream. And then came the impugned letter of Additional Commissioner determining price of cream at 52% fat and 48% SNF resulting in reducing the price of cream. The petitioner was further directed to supply 4 tonnes of cream each day every month. And the Dairy Officer was directed not to issue any permit to export any cream. Therefore, what started in 1984-85 as partial restriction on manufacture of ghee in course of four years ended in total prohibition of manufacturing ghee, collection of 1, 16,066 kgs. of milk per day instead of average per day collection, fixation of price of cream on ratio of 52% allocated to fat as compared to 59% in 1987, supply of 4 tonnes of cream every day and total prohibition on export of cream provoking petitioner to assail the action of opposite parties not only as arbitrary, unreasonable but wholly illegal and unfounded as the provisions of Milk Act being ultravires, the Central Act, the order was not only liable to be quashed, but direction is sought to restrain opposite parties from imposing any restriction. 3. Taking up the constitutional challenge first the principal argument raised by learned-counsel for petitioner was that Milk Food having been specified in Schedule I of IDR Act Tika Ramji v. State of Uttar Pradesh, AIR 1956 SC 676 , the State of U.P. did not have any power to enact a law,.on the same subject. The submission appears to be devoid of any substance. An industry the control of which by Union is declared by Parliament by law to be expedient in public interest is relegated to entry 52 of List I of the VII Schedule, but, 'when, however, it came to the products of the controlled industries comprised in entry 52 of list I, trade an commerce in, and production, supply an distribution of these goods became the subject-matter of entry 33 of list III and bot Parliament and State Legislature ha jurisdiction to legislate in regard thereto. Sine the Central and State Legislature are entitled to legislate in regard to subject of production, supply and distribution of Milk food the argument of lack of Legislative competent is out of context. Sine the Central and State Legislature are entitled to legislate in regard to subject of production, supply and distribution of Milk food the argument of lack of Legislative competent is out of context. But the issue that arises is the provisions of State enactment are invalid or void being repugnant to any provision i the Central enactment ( AIR 1983 SC 1019 )' A State law is said to be repugnant to Centre law when its provisions encroach or class with any provision in the Central Act. That i if the field is already occupied by Central enactment then the provisions in the State Act to that extent shall become repugnant'. But if both the legislations deal with separate and distinct matters though of a cognate and allied character repugnancy does not aril ( AIR 1983 SC 1019 ). What was urged was that since price fixation, export, licencing etc. of Milk Food is governed by IDRA the State Legislature could not regulate the same and the action of opposite parties in exercise of power under Milk Act was without jurisdiction. The submission ignores the width of expression production, supply and distribution used in entry 33. It includes even price fixation or provision to regulate export etc. Therefore, what survives to be examined is if in this regard the field is occupied. Section 11(2) of IDR Act no doubt empowers the Central Government to impose conditions while granting the licence. And in exercise of this power conditions were imposed as well ,But they did not relate to price fixation or export of the milk food. It could be done Under section 18G by a notified order issued by Government of India. But since no order was issued the State could exercise this function and the action would not be bad. 4. But section 11 of IDR Act provide that any person establishing a new industrial undertaking after commencement of the A shall do so in accordance with a licence issued in that behalf by Central Government. But since no order was issued the State could exercise this function and the action would not be bad. 4. But section 11 of IDR Act provide that any person establishing a new industrial undertaking after commencement of the A shall do so in accordance with a licence issued in that behalf by Central Government. Therefore, the State legislature could not make a law which may provide for taking out a licence or registration of an industry which by virtue of its specification in Schedule I of IDR Act is taken out of entry 24 of list II of VII schedule and becomes subject matter of entry 52 of list I. Consequently section 11 of the Milk Act requiring a dairy or processing unit to obtain a licence could not apply to an industrial undertaking which had obtained a licence under IDR Act. Much argument was, however, advanced on sub-section (3) of section 11 of the Milk Act, which reads as under : "Notwithstanding anything contained in sub-sections(l) and (2) a milk processing unit licenced under the Industries (Development and Regulation) Act, 1951 shall not be refused licence under this Act, if it makes an application in the prescribed manner and complies with the prescribed conditions and furnishes such security and pays such fees as may be prescribed." Does it require a unit licenced under IDRA to obtain yet another licence under this Act? It cannot as if the provision is interpreted to mean that a licencee shall have to obtain a licence for the same purpose for which it had been granted licence under IDRA then the provision shall become invalid on principle of occupied field. At the same time, the State legislature being competent to enact on the same subject to the extent, it does not encroach upon any provision under Central Act, the provision in the Act or action in pursuance of it to the extent it does not clash shall neither be invalid nor ultra vires. Jain v. Union of India, 1970 2 SCWR 59 : AIR 1970 SC 267 .. From a perusal of licence issued under IDRA it is clear that the petitioner was not only granted licence but numerous conditions were imposed controlling its activities. The only field left for State Government was to impose conditions for collection of milk. Jain v. Union of India, 1970 2 SCWR 59 : AIR 1970 SC 267 .. From a perusal of licence issued under IDRA it is clear that the petitioner was not only granted licence but numerous conditions were imposed controlling its activities. The only field left for State Government was to impose conditions for collection of milk. It is thus obvious that the claim of opposite parties that by virtue of sub-section (2) of section 11 they were entitled to issue licence for production of milk food and impose such condition as in their opinion was just and proper cannot be accepted 5. What then is the scope of section 11(3)? In other words what would be the field of operation of State Government under this sub section. Two things stand out clearly, one that it is a non obstante clause and its rigour has been made more intense by taking out discretion of licencing authority due to use of expression, shall not be refused licence under this Act. Which licence shall not be refused? obviously not the licence for the purpose a licence has been granted under IDRA. Therefore, it has to be licence other than that issued under IDR Act. If apart from milk food a licencee intends to manufacture any milk product within meaning of the expression defined under the Act it shall have to obtain a licence under this Act. And an application for grant of licence for such item cannot be refused. The apprehension of opposite. parties that such construction shall defeat the objective of provision appears to be devoid of any merit. A construction other than this may lead to unwarranted consequences and clothe the Authority under Milk Act with arbitrary power. It can be demonstrated by this case itself. For instance the huge amount of cream produced by petitioner cannot be consumed and since it cannot be retained except for short duration say twenty-four to forty-eight hours it has to be put to some use, namely producing of ghee etc. For this purpose the petitioner is required to take out a licence under the Milk Act. And if the application is made it cannot be rejected. Otherwise the petitioner shall have to remain on mercy of the authorities under Milk Act whose action may result in rendering the unit economically unavailable. For this purpose the petitioner is required to take out a licence under the Milk Act. And if the application is made it cannot be rejected. Otherwise the petitioner shall have to remain on mercy of the authorities under Milk Act whose action may result in rendering the unit economically unavailable. Therefore subsection (3) of section 11 cannot be relied and it cannot be urged that it was incumbent upon petitioner to obtain a licence under Milk Act for manufacture of Milk Food. 6. Although the licence for item other than milk food can be refused but the licencing authority can grant or renew it subject to such restriction as can be considered to be reasonable and in public interest. But fixation of price or determining quantity of export are not in domain of licencing authority. These powers under the Act and rules vest in State Government. Section 15 is clear and specific. It empowers State Government in public interest to regulate or fix price in respect of sale or supply of milk or manufacture, sale or supply of milk product and the transport of those items inside and outside State. Clause (iii) of rule 7 laying down functions of Milk Commissioner under the Act further dispels any doubt as it empowers to make recommendation only to Government in regard to prohibition or regulation of sale and transport of milk products under section 15. Section 13 which deals with licencing of transporters could not be invoked for restricting or permitting export Even the learned Advocate General had to candidly admit that there was no escape from the conclusion that price fixation and restricting export of an item of milk product. could be done by State Government. Cream or Ghee are milk products under Milk. Act and in absence of any provision in IDR Act or any notified order under section 18G of Act 65 of 1951 the State land not the authorities under Milk Act could control it supply and distribution, fix its price and permit or restrict export. In the circumstances, the order dated 5th August, 1988 passed by Additional Milk Commissioner being in violation of statutory provision and the well established dictum that it is essential for lawful exercise of power that it should be exercised by the authority of person upon whom it is conferred by the Statute cannot be maintained. 7. In the circumstances, the order dated 5th August, 1988 passed by Additional Milk Commissioner being in violation of statutory provision and the well established dictum that it is essential for lawful exercise of power that it should be exercised by the authority of person upon whom it is conferred by the Statute cannot be maintained. 7. Even though there is neither any indication in the Act or rules nor it has been averred that the power could be delegated and it was in fact delegated but assuming that the power could be exercised by the Additional Commissioner or Commissioner can the exercise of power be said to be reasonable, equitable or just or in good faith. A public authority has no unfettered discretion. The primary requirement of exercise of power vested with discretion is that it should not be arbitrary or according to private notions nor it should be exercised as pretext or pretence. None of these expressions or words can be applied rigidly as exercise of power reasonably or arbitrarily varies with circumstances. That is why an action in good faith at times with too much adherence to the words of Act without any regard to scheme and purpose of the Act is rendered unreasonable. Can it be said that action of the Additional Commissioner was in consonance with these principles? Price fixation of cream till September, 1987 was undertaken by negotiation between petitioner, CDF and authorities. In the impugned order it was done unilaterally. After all the petitioner was vitally interested in fixation of price therefore, there should have been some valid reason to exclude it from the process in August, 1988. Similarly in September, 1987 it was agreed that petitioner shall supply 4 tonnes of cream in certain months and three tonnes in others. No reason has been disclosed in the counter-affidavit to justify that the supply should be 4 tonnes in every month. From the very inception of company the cream was supplied to CDF and the maximum reached was 70% in August, 1981 and4 tonnes in 1987. No figures or data have been disclosed about the requirement of CDF and its capacity. The agreement arrived in September 1987 was based on reality of nonavailability of adequate milk in some of the months due to low productivity. No figures or data have been disclosed about the requirement of CDF and its capacity. The agreement arrived in September 1987 was based on reality of nonavailability of adequate milk in some of the months due to low productivity. Nor was there any justification for directing Dairy Officer not to issue any export permit, as the surplus of cream left after meeting requirements could either be converted into ghee or exported. In absence of any permission to manufacture ghee the petitioner could export only. But imposing total ban even if it was over and above 4 tonnes per day could not be considered regulation of distribution which is reasonable. Even in 1987 the petitioner was permitted to use surplus as was legally permissible. Equally unjustified is the direction to collect 1,16,666 Kgs. of milk per day as productivity of milk in some months is low, For these reasons also the order cannot be maintained. 8. With this ends the 'legal submissions and commences the most difficult and tough problem of adjusting equities and granting relief. The CDF is engaged in production of butter and ghee which has its market not, only in the State but all through the country and to military posted in border areas. The availability of cream to it is of prime necessity. Therefore, irrespective of ally illegality including initiation of proceedings before Magistrate the regular supply of cream to CDF has to be maintained. But in a manner which may be in accordance with law. Normally it should be by negotiation and mutual agreement as was being done since 1960. For this purpose there should be annual meeting between officers of the two departments and they should be assisted in arriving at a settlement by the officers under Milk Act not by threat of coercive action or refusal to renew licence or initiation of proceedings before Magistrate or to use the words of learned counsel for petitioner by arm twisting but in a spirit of co-operation working for the benefit of society, and not for individual or private gain. The CDF which is a Government and be more concerned with public service. The petitioner too should not forget that its only aim should not be to earn profit as much as it can. It is an undertaking for manufacturing milk food which has been declared to be of public importance. The CDF which is a Government and be more concerned with public service. The petitioner too should not forget that its only aim should not be to earn profit as much as it can. It is an undertaking for manufacturing milk food which has been declared to be of public importance. The cream produced by it is no doubt a by-product which can be used or consumed by it but it should not be oblivious of its social responsibility of ensuring adequate and regular supply of cream to CDF. It may have fundamental right to carry on trade or business and to manufacture ghee out of cream produced by it but it has a larger duty towards society for the discharge of which it is necessary that it should supply the cream to CDF not because it is a Government company but because it is catering to public necessity. It cannot claim to be similarly situated with other manufacturers of milk food as there might not be a dairy like CDF. At least there is no foundation for it. Nor it can claim arbitrariness or unreasonableness if it is required to supply cream to CDF. In the present day context it does not lie in the mouth of petitioner to claim that it shall not' supply even an ounce of cream. 9. Therefore, while quashing the letter dated 5th August, 1988 the following directions are issued. (i) Supply of cream by petitioner to CDF shall be resumed' within three days in accordance with sub-clause (3) of Clause III of Agreement dated 7th September, 1987. (ii) Price of the cream to be paid to petitioner shall be determined by agreement and in absence of any agreement by the price determined to be payable by co-operative societies to producers with over head charges etc. (iii) It shall remain open to CDF and petitioner to agree for supply of cream over and above that was agreed in September, 100 (iv) In respect of surplus cream left after meeting requirement of CDF in the manner indicated above the petitioner may apply under section 11(3) for manufacture of ghee etc. (iii) It shall remain open to CDF and petitioner to agree for supply of cream over and above that was agreed in September, 100 (iv) In respect of surplus cream left after meeting requirement of CDF in the manner indicated above the petitioner may apply under section 11(3) for manufacture of ghee etc. (v) Surplus cream left over and above the requirement of CDF can be sold by petitioner in open market or be exported for which the necessary export permit shall not he refused (vi) Milk collection shall be made by petitioner as determined by authorities but its average shall be worked out on annual basis. (vii) Since the petitioner has succeeded on legal issues the opposite parties are not entitled to any damages. (viii) Dispute about arrears or overpayment shall be resolved by a committee to be appointed within two weeks comprising officers of two organisations and high officials of Animal Husbandry and Milk Act. 10. Parties shall bear their own costs.