Vijay Kumar Gupta v. Union of India — 1997 DIGILAW 145 (CAL)

JUDGMENT Pal, J. The appellant has challenged a notice dated 7th April, 1916 published by the Eastern Railway. The Impugned notice invites application for enlistment of contractors for three categories of works contracts under the Chief Works Manager, Eastern Railway, Liluah. The works contracts pertain to the sorting out of ash, rubbish earth, etc. either from the Liluah workshop or from wagons in Liluah workshop and their disposal or dumping or loading on to wagons. The advertisement specifies that only Co operative Societies should apply for enlistment. The co-operative societies were required to be reputed and listed and registered in West Bengal as well as registered with the Eastern Railway. 2. Admittedly, the appellant had been carrying out the work as described In the advertisement as an approved contractor enlisted with the Eastern Railway previously The work contract between the appellant and the Railway Authorities was terminated by the respondent authorities The termination was challenged under Article 226 (referred to as the first petition). An interim order was passed for a limited period restraining the respondents from terminating the contract. However, the Interim order initially granted was not extended but an order was passed to the extent that the termination would be Subject to the result of the writ petition and that the work contract if awarded to a third party would abide by the results of the writ petition. An appeal is pending from the refusal to extend the interim order. The first petition is also pending. 3. The Impugned notice being published, the appellant then filed a second writ petition In May 1996. He prayed for an Interim order to restrain the respondents from giving any effect to the Impugned notice. The interim order was refused. Hence this appeal. During the pendency of the appeal it transpired that M/s. Baidyabati Co-operative Labour Contract & Construction Society Limited had been appointed pursuant to the impugned notice, It was added as a part to the appeal by an order dated 26th July 1996. The stay application was disposed of on 5th September, 1996 by directing that the appeal as well as the writ petition should be decided after filing of affidavits before the Appeal Court. Affidavits were thereafter filed. 4. The stay application was disposed of on 5th September, 1996 by directing that the appeal as well as the writ petition should be decided after filing of affidavits before the Appeal Court. Affidavits were thereafter filed. 4. Briefly stated the arguments of the appellant are first, that the impugned notice was violative of Art. 14 as well as 19(1)(g) and Arts 301 to 305 of the Constitution as It had created a monopoly in co-operative societies and that this could not be done by an executive fiat. Several decisions have been cited which will be Doted subsequently. The second submission is that the purpose of the impugned notice was to eliminate the petitioner from carrying on the works and to frustrate the appellant's challenge in the first writ petition. The third submission of the appellant is that the appointment of the respondent No.3 pursuant to the advertisement was bad as the appointment had been made in violation of the terms of the advertisement it is also alleged that the respondent No.3 was not a genuine co-operative society nor was it a labour co-operative as claimed by it. 5. The respondents including the private respondent have submitted that the restriction in favour of co-operative societies was not an arbitrary one as it was done to implement Government policy. There was as such no question of malafides. It is also submitted that by limiting the enlisting the Railways were not restricting or preventing the right of the appellant to carryon any trade under Article 19(1) (g) and that there was no question of any monopoly. It is said that even if it were a restriction on the appellant's right to trade it was a reasonable one when the respondents were empowered to effect administratively In exercise of power derived from Section 11 (h) of the Railways Act, 1989. It is submitted that the word "Law" in Article 19(1) (g) means a rule of action established by authority. Reliance has been placed on the decision reported in (1) AIR 1982 SC 33 (27) in this context. Finally, it is submitted that the private respondent was a genuine labour co operative society and that the decision was duly taken. 6. It is submitted that the word "Law" in Article 19(1) (g) means a rule of action established by authority. Reliance has been placed on the decision reported in (1) AIR 1982 SC 33 (27) in this context. Finally, it is submitted that the private respondent was a genuine labour co operative society and that the decision was duly taken. 6. It is nobody's case that this Court cannot scrutinise the action of the respondent authorities in limiting the enlistment of contractors to only co-operative societies to see whether any fundamental right of the appellant has been affected thereby. 7. For the purposes of Article 14, it will have to be seen whether the classification in favour of co operative societies is reasonable and founded on intelligible differentia which distinguishes that group from all other persons and secondly, whether the creation of such a privileged groups has a reasonable nexus with the object sought to be achieved. (See (2) M/s. Kasturilal v. State of J & K, AIR 1980 SC 1992 ; (3) Triloki Nath Pandey v Stale of U. P., AIR 1990 All 143 ). 8. According to the Railway Authorities the impugned advertisement had been issued in implementation of a policy decision a contained in Circulars of the Railway Board dated 21.9.73 and 3 5.91. The circular dated 21.9.73 provides;- "......the Board have decided that the banding contracts for goods, parcels. coal, coal ashes, cinder picking, ash-pit cleaning etc., should be awarded to genuine co operative Labour Contract Societies of actual workers, without call of tenders irrespective of the volume of the contract. Thus, the ceiling limit of Rs. 2 lakhs for allotment of such contract to co-operative societies through negotiation shall be removed. Other conditions governing allotment of the contracts will continue as before......... Efforts should be made to organise co-operative labour contract societies at places, where they do not already exist, to take up handling contracts on the Railways." 9. The Circular dated 3.5.90 also recognises the policy of the Ministry of Railways to encourage Labour Co operative Societies. 10. That a policy decision wail taken by the Railway Board over two decades ago is established by the records. The records also show that this policy has been followed from time to time. The Circular dated 3.5.90 also recognises the policy of the Ministry of Railways to encourage Labour Co operative Societies. 10. That a policy decision wail taken by the Railway Board over two decades ago is established by the records. The records also show that this policy has been followed from time to time. Diverse circulars have been Issued by the Railway Authorities extending the operation of the policy to different aspects of handling work of the Railway Authorities. No one has challenged the policy as being unreasonable or against public interest. 11. It is true that the impugned advertisement is not expressly in terms of this policy. However on a scrutiny of the records It appears that all the applicants who were in fact considered for enlistment pursuant to the advertisement, were labour contractors. The records Ii well as the affidavit of the respondent authorities clearly speak of the Intention of the Railway Authorities that by the phrase "Co-operative Society" in the advertisement what was intended and in fact implemented 'was Labour Co-operative Societies. 12 A similar situation arose in the case or (4) Sarkari Sastha Aanaj Bikreta Sangh v. The State of Madhya Pradesh, AIR 1981 SC 2030 The Government of M. P. had promulgated a scheme known as the Madhya Pradesh Food Stuffs (Civil Supply Distribution) Scheme 1981 The Scheme provided that in the allotment of fair price shop, Co-operative Societies were to be given the first preference. A challenge was thrown to the Scheme on the ground Inter alia that the classification in favour of Co-operative Societies was arbitrary. The Supreme Court construed the Scheme and held that in the context the expressions "Co-operative Society" was meant to include the Consumers Co-operative Societies only and no others. On that basis the classification was held to be reasonable one. 13. The decision to limit the enlistment of contracts to labour co-operatives was thus in conformity with the policy. It cannot therefore be held to be arbitrary. 14. The decisions cited by the appellant do not militate against this conclusion. In the case of (5) Punjab Drugs Manufactures Association v. State of Punjab, AIR 1989 P& H 117 it was held that the State could n3t arbitrarily choose to exclude persons for the purpose of entering into Contracts. It follows that where the choice is based on a rational principle, the action of the State cannot be criticised. In the case of (5) Punjab Drugs Manufactures Association v. State of Punjab, AIR 1989 P& H 117 it was held that the State could n3t arbitrarily choose to exclude persons for the purpose of entering into Contracts. It follows that where the choice is based on a rational principle, the action of the State cannot be criticised. Similarly, In (6) Hrudananda Patra v. Revenue Divisional Commissioner, AIR 1979 Orissa 13, It was found that a monopoly bad been created In favour of co-operative societies and since the monopoly was not on the basis of any Intelligible differentia having rational relation to the object 80ught to be achieved or Interest of the general public it was held to be In violation of Article 14. 15. The same criticism cannot be levelled at the classification created by the Impugned action of the Railway Authorities in this case. Labour Co-operative Societies form a distinct class by themselves. Benefits and concessions granted to them ultimately benefit persons of small means and promote social Justice in accordance with the directive principles. This is an Intelligible differentia between individuals deriving personal profit and Labour Co-operative Societies where the profit is distributed among the members who come from an economically deprived class. (See (7) M. P. Ration Bikreta Sangh Society v. State of Madhya Pradesh, AIR 1981 SC 2001 ). 16. As far as the private respondent is concerned it was registered on 2nd May, 1989. It has been enlisted with the Railways as a contractor since 1989. The records show that the Railway' Authorities held an Inquiry then as to whether the private respondent was a genuine labour co-operative. According to an enquiry report dated 11.9.89 submitted by the Welfare Inspector, Eastern Railway, Howrah, on the date the report the private respondent had 52 members of which all the members were worker members except for six persons who formed the Board of Directors. The maximum number of the workers were in the age group of 20-30 years and were manual workers and on the date of the Inspector's report they were without employment The Welfare Inspector reported that the Society was a genuine one "as per the extent order of the Board on the subject". A copy of the by-laws submitted by the respondent No.6 also appears from the records of the Railway Authorities. A copy of the by-laws submitted by the respondent No.6 also appears from the records of the Railway Authorities. The records also show that the added respondent has earlier carried out work pursuant to the tender placed on it by the respondent authorities without any complaint. 17. The other aspect of the matter is the decision of the Railway Authorities to limit the enlistment of co-operative societies registered in West Bengal who are already enlisted with the Eastern Railways. According to the Railway Authorities this was done to ensure control and accountability as it was found that independent contractors had worked unsatisfactorily and by quoting low rates bad utilised the opportunities of pilferring rail way scrap materials. It is not either illogical or irrational to consider that co-operative societies registered in West Bengal and already enlisted-with the Railway Authorities could be subject to greater control than the individual. I am Not prepared to bold on the basis of the materials before this Court that the workers employed by the private respondents are the same workers who had been earlier employed by the appellant as alleged by him. Even If this were so, it would not make the decision of the Railway Authorities to limit the grant of contracts to Co operative Societies registered in West Bengal who were already enlisted with the respondents an arbitrary one. 18. The challenge to the action under Article 19(1) (g) proceeds on the basis that the appellant's fundamental right to carryon his trade with the Government has been restricted by the Impugned notice. He says a monopoly had been created in favour of co-operative societies. He then says that the restriction was not only unreasonable but it had not been validly effected under Article 19(6), 19. The two basis premises on which the appellant has founded his submissions are incorrect. No citizen has a fundamental right to carryon' business with the Government. Therefore, the question of restricting any right does not arise. It is open to the State to choose who it will deal with. The only limitation on the right of the State to choose is Article 14. In other words, the right of the citizen not to be discriminated against or be excluded arbitrarily casts a corresponding duty on the State to act equitably and rationally. It is open to the State to choose who it will deal with. The only limitation on the right of the State to choose is Article 14. In other words, the right of the citizen not to be discriminated against or be excluded arbitrarily casts a corresponding duty on the State to act equitably and rationally. (See: Sarkari Sastha Aanaj Bikreta Sangh v. The State of Madhya Pradesh, AIR 1981 SC 2030 ; Punjab Drugs Manufacturers Association v Slate of Punjab (supra). I have already held that the duty has been discharged in this case. 20. The second premise is that a monopoly had been created by the Impugned notice. A monopoly would arise if there were a cansalisation of the trade by the Government thereby prohibiting others from carrying on the same trade. It is only when such an exclusive right to carryon a particular business or trade is vested by the Government or authority In one or more persons or concerns can there be said to be a monopoly and a consequent Infringement of Art. 19(1)(g). 21. In this case there is no monopoly. It is not as if the appellant cannot carryon his business at all, not only with other customers but even with the Railway Authorities as the Impugned notice is limited in Its area of application (See: M/s. Kasturi Lal v. State of J & K (supra); (8) Krishnah Kakkanth v. Government of Kerala, AIR 1997 SC 137). The challenge to the action under Art. 19(1)(g) must therefore fail. 22. There being no violation of Art. 19(1)(g), the further question whether the restriction has been validly effected need not be considered. 23. This brings us to the next ground of challenge to the action of the respondent authorities and that is the alleged violation of Articles 301 to 305 of the Constitution. The appellant case is that the requirement In the Impugned advertisement created a local preference which was contrary to the scheme of Part-XIII of the Constitution. 24. This is not a ground which was taken either in the writ petition nor in the memorandum of appeal. In any event Articles 301 to 305 deal with the freedom of inter-State trade, commerce and inter-course. I have failed to see the relevance' of these Articles of the Constitution to the facts of this case. 25. 24. This is not a ground which was taken either in the writ petition nor in the memorandum of appeal. In any event Articles 301 to 305 deal with the freedom of inter-State trade, commerce and inter-course. I have failed to see the relevance' of these Articles of the Constitution to the facts of this case. 25. Having upheld the decision of the Railway Authorities to enlist labour co• operatives to respect of the works in question, the appellant's challenge to the actual award of the works contract to the private respondent cannot be sustained for the simple reason that the-appellant could not in any event have been considered for the job. No labour co-operative has complainted about the allotment of the work to the private respondent. 26. Besides, among the eligible co-operative societies, the private respondent's rate was the lowest. No adverse Inference can also be drawn from the time schedule within which the private respondent was chosen. On 17th April, 1996 the advertisement was issued. The private respondents applied on 22nd May, 1996. The Tender Committee meeting was held on 2nd June, 1996 when the decision to recommend the respondent No.3 was taken The recommendation was accepted by the concerned authority on 3rd June, 1996. This was communicated to the respondent• No.6 on 4th June, 1996 and the agreement with the respondent No.3 was executed between the Railways and the respondent No.3 on 8th June, 1996. 27. The submission of the appellant that the entire exercise culminating in the appointment of the private respondent was resorted to frustrate the earlier proceedings filed by him is belied by the existence of the policy framed as far back as 1973 by the Railway Authorities End the continuous implementation and extension of the same. 28. In conclusion the following observations of the Supreme Court may appositely be quoted :- "The 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 action 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. 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 reasonable or not in public interest. (Emphasis mine) (See; M/s. Kasturi Lal v. State of J & K, AIR 1980 SC 1992 ). 29. The appellant has failed to discharge this onus. For all these reasons the writ application and the appeal are both dismissed. There will be no order as to costs. Jain, J.: I agree.