Hamid Raza vs State of M.P.

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Writ Petition (civil) 61 of 1956

Decision Date: 9 February 1959

Coram: S.R. Das, S.K. Das, P.B. Gajendragadkar, K.N. Wanchoo, M. Hidayatullah

The case titled Hamid Raza versus State of Madhya Pradesh was decided on 9 February 1959 by the Supreme Court of India, and the judgment appears in AIR 1960 SC 994. The bench that heard the petition comprised Chief Justice S.R. Das, Justice S.K. Das, Justice P.B. Gajendragadkar, Justice K.N. Wanchoo and Justice M. Hidayatullah. The petitioner, Hamid Raza, filed writ petition (civil) 61 of 1956 seeking relief against the State of Madhya Pradesh. He invoked Article 32 of the Constitution, asserting that this provision offered a more expeditious and adequate remedy for his grievance. Prior to invoking Article 32, on 4 January 1956 the petitioner obtained a certificate of fitness from the Judicial Commissioner of Vindhya Pradesh. The certificate was intended to allow him to appeal an order dated 7 May 1955 that had been issued in writ application No. 25 of 1955. Although he had deposited the required security and paid the printing charges, he nevertheless turned to Article 32 because he considered it a faster and more appropriate remedy. The petitioner carried on a business of manufacturing bidis under the name Hamid Raza Manufacturing Company, which was located in the town of Rewa. The Vindhya Pradesh Tendu Leaves Act, 1953 was enacted in that year and became effective on 19 May 1954, establishing a regulatory framework for the trade of Tendu leaves. In compliance with a provision of that Act, the petitioner submitted an application for a licence to purchase Tendu leaves on 19 January 1955; this application is annexed to the record as document ‘A’. The Divisional Forest Officer of Rewa, on 4 February 1955, refused to grant the licence, stating that licences for Tendu Patti would not be issued because the Tendu Patti of that division had already been auctioned. A week after the refusal, the petitioner made a second application for the licence and also met personally with the Divisional Forest Officer and the Chief Conservator of Forests of Vindhya Pradesh, Rewa. He received no written response to his second application, but he reported that the officials orally informed him that his request for a licence would not be entertained.

Following the refusal, the petitioner approached the Judicial Commissioner of Vindhya Pradesh under Article 226 of the Constitution, seeking a writ or writs compelling the authorities to grant him a licence. During the hearing the authorities offered to allow the petitioner to purchase Tendu leaves from the contractors who had obtained the forest areas through auction, and they undertook to issue a licence on that basis. The petitioner declined the offer, insisting that he required a licence based on his own application rather than on a purchase arrangement with the contractors. The Judicial Commissioner found the offer satisfactory, refused to issue the writ, and consequently dismissed the petition. Nevertheless, the Judicial Commissioner also issued a certificate of fitness, which later formed the basis for the petitioner’s present filing under Article 32 of the Constitution. In the present petition the petitioner challenged Section 3 of the Vindhya Pradesh Tendu Leaves Act, 1953, alleging that the provision was inconsistent with Part III of the Constitution and therefore void. He initially relied on Articles 14 and 19 of the Constitution to support his challenge, arguing that the provision infringed his fundamental rights. However, at the hearing the petitioner abandoned that line of attack and confined his objections to the specific restrictions that the licence would impose. He described those restrictions as unwarranted, excessive, arbitrary, and fundamentally contrary to the guarantees provided by the Constitution.

The petitioner originally relied on Articles fourteen and nineteen of the Constitution, arguing that the statutory scheme violated those guarantees. During the hearing, however, the petitioner abandoned that line of attack and limited the dispute to the alleged unwarranted and void restrictions imposed by the licence. Before addressing those contentions, the Court found it necessary to set out briefly the main provisions of the Act and the rules made thereunder. The preamble of the Act states that it aims to impose reasonable restrictions on the trade and commerce of Tendu leaves in Vindhya Pradesh, declaring such restrictions necessary in the public interest. Sections three through six of the Act introduce a licensing system to regulate the purchase, transport, and trade of Tendu leaves. Section three provides that no person may purchase or transport Tendu leaves for trade in any part of Vindhya Pradesh unless he obtains a licence from the licensing authority. A person may also be legally exempted by the State Government under sub-section three of the same provision. The Act further stipulates that a licence shall be granted upon payment of prescribed fees, for a period directed by the licensing authority. The licence must be in a form and contain particulars as directed by the authority and is subject to any conditions and restrictions that may be prescribed. Section two paragraph (f) defines the term “prescribed” to mean prescribed by the rules framed under the Act. Exemption from licensing was granted only to tenants for Tendu trees standing on their holdings, as specified in Notification number 22/XV/F/54 dated 8-6-1954.

Consequently, after the Act came into force, no person other than a tenant who did not obtain a licence could purchase or transport Tendu leaves in Vindhya Pradesh. The Act also contains a provision for granting contracts to collect and sell Tendu leaves from government-owned trees throughout the state, which are awarded to contractors accepted by the Government. These contracts, created under section seven, are granted to licencees through auctions, and the entire state is divided into areas for the purpose of awarding such contracts. During the term of a contract, the contractor holds the exclusive right throughout the designated area or areas to collect Tendu leaves from forest lands, government waste lands, and all other lands. Such collection does not include Jagir lands still possessed by Jagirdars nor lands held by tenants under any circumstance. The remaining provisions of the Act address ancillary matters related to the issuance of licences and contracts and prescribe penalties for violations of its provisions. Section seventeen empowers the State Government to formulate rules necessary for the implementation of the Act, to be issued through a notification in the official Gazette. On January twenty-fifth, nineteen fifty-five, the Vindhya Pradesh Tendu Leaves Rules of 1954 came into force, as published in the Gazette.

In this case the Court explained that the Rules of 1954, hereinafter referred to as the Rules, became effective when they were published in the Vindhya Pradesh Gazette numbered 157 on 11 February 1955. Rule 3 of those Rules required the forest ranges of Vindhya Pradesh to be divided into convenient units and authorized the auction of the right to collect Tendu leaves from one or more of those units, including areas belonging to the Government, to contractors. The same rule also provided that in any unit or other area for which no contract had been awarded, the purchase, collection and sale of Tendu leaves could be permitted to licence-holders. Rule 4 further stipulated that where a contract had already been granted under Rule 3, a licence to purchase, collect, transport or sell Tendu leaves would, for the duration of that contract, be granted only to the contractors holding the contract. In contrast, in other areas, including Government land where no contract existed, licences to collect Tendu leaves could be issued on the condition that the licence-holder paid a royalty at a rate specified in the licence. The Court noted that the remaining Rules were not relevant to the matter before it and therefore need not be discussed. As a consequence of a decision of the Judicial Commissioner of Vindhya Pradesh, the Government issued a licence to the petitioner in Form No I, which was the form prescribed by the Rules and is reproduced as Annexure E. However, because contracts had already been awarded to contractors throughout Vindhya Pradesh, the licensing authority amended the licence form to indicate that the licence was for purchase from those contractors. The petitioner challenged this amendment on two grounds: first, that it exceeded the powers granted to the licensing authority by the Act and the Rules; and second, that it violated his fundamental rights to carry on any occupation, trade or business and to acquire, hold and dispose of property, as guaranteed by Articles 14 and 19. The petitioner argued that the contested condition did not derive from the Rules, was discriminatory and imposed an unjustified restriction on his constitutionally guaranteed rights. The Court observed that the petitioner’s submission was that the Act allowed conditions to be imposed only through the Rules, and that the term “prescribed” was defined to mean “prescribed by the Rules framed under the Act.” Section 17, the Court explained, conferred on the State Government alone the power to make Rules, and not on any other authority. The Rules themselves stipulated the form in which licences were to be granted, and that form set out the conditions governing the licences. Consequently, any condition not expressly contained in the Rules or in the prescribed form could not be imposed by any authority in Vindhya Pradesh. The amendment to the licence form therefore represented a restriction on the operation of the licence that was not contemplated by either the Rules or the original licence form. The State of Madhya Pradesh, which had succeeded the State of Vindhya Pradesh after the reorganisation of States, responded to the petition…

The State asserted that the contractors were granted not merely the right to collect leaves from forest trees but also the right to collect leaves from trees situated on Jagir lands or on the holdings of tenants. To support this claim, the State produced the contractual form and emphasized that the contractors had been assured of the exclusive right to collect, transport, and sell Tendu leaves from all lands, including those belonging to Jagirs and tenants. On the basis of that assurance, the State justified the inclusion of a restrictive condition in the licence, arguing that the contractors would be prejudiced if the petitioner were permitted to purchase leaves from tenants and Jagirdars in violation of the contractors’ exclusive entitlement.

The scheme of the Act together with the rules, as previously examined, clearly did not contemplate that the Government or the licensing authorities could dispose of leaves from trees standing on Jagir land or on tenants’ holdings. If the State chose to act in that manner, it was plainly acting beyond the authority granted by the Act and the rules. Consequently, the State found itself in a difficult position because a licencee who was not a contractor remained free, even under the Act and the rules, to deal with Jagirdars and tenants regarding leaves from trees belonging to them. The State’s justification for imposing the condition in the licence could not be derived from any provision of the Act or the rules.

The licence form is prescribed and the conditions are likewise indicated by the rules. Any authority to add a condition to the licence must be found either in the Act or in the rules. The State was unable to point to any provision in either the Act or the rules that authorized the licensing authorities to restrict the operation of the licence to purchases solely from contractors. Therefore, the addition of this condition, although motivated by a bona-fide purpose, was not permissible under the Act or the rules.

The effect of inserting this condition is evident. The Act and the rules intended that licencees should have the liberty to purchase Tendu leaves from Jagirdars and tenants; the lands of Jagirdars and tenants were not meant to be incorporated into the contracts granted to contractors. It was acknowledged that the contractors were themselves Bidi manufacturers, and granting them the right to collect leaves from every tree in the former Vindhya Pradesh created a monopoly in their favour, thereby excluding other licencees who would have to buy leaves for their businesses at prices dictated by the contractors. Naturally, the contractors would seek to ensure that rival traders could not obtain leaves at competitive prices, which would impede those traders’ ability to compete in Bidi manufacturing. In the Court’s view, the inclusion of an additional term in the licence would therefore seriously affect and potentially destroy the business of manufacturers such as the petitioner.

In this case the Court observed that the condition which required the petitioner to obtain tendu leaves exclusively from contractors in Vindhya Pradesh would seriously damage the business of manufacturers such as the petitioner. The Court further held that the State’s reliance on Section 3(2)(c) of the Act to justify the clause was misplaced, because that provision does not support the restriction in question. Similarly, the Court found that Rule 4 could not save the condition, since the rule was intended to apply solely to trees that are owned by the Government.

Consequently the Court concluded that the insertion of the clause into the licence represented a clear disregard of the statutory scheme and the regulatory rules governing the trade. The clause was characterized as an unreasonable limitation on the rights guaranteed to the petitioner under Part III of the Constitution. Accordingly, the Court declared the words “from contractors in Vindhya Pradesh” to be both ultra vires and void. The Court relied upon the precedent set in Rashid Ahmed v. Municipal Board, Kairana (1950 SCR 566 : 1950 AIR(SC) 163), observing that the restriction could not be said to be reasonable within the meaning of Article 19(6) of the Constitution.

The Court therefore directed that the offending words be struck out of the licence granted to the petitioner. As a result, the petitioner would be entitled to procure leaves from contractors only with respect to Government-owned trees, a situation that is expressly provided for by the Act and the rules. For trees situated in Jagirs or on tenants’ holdings, the licence would now enable the petitioner to obtain leaves from the open market. The petition was accordingly allowed in the terms set out, and the Court ordered that the respondent bear the costs of the petition.