Akadasi Padhan vs State Of Orissa

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

Court: Supreme Court of India

Case Number: Petition No. 73 of 1962

Decision Date: 5 December 1962

Coram: P.B. Gajendragadkar, Bhuvneshwar P. Sinha, K.N. Wanchoo, K.C. Das Gupta, J.C. Shah

In this case the Supreme Court of India reported the matter titled Akadasi Padhan versus State of Orissa, with the judgment dated 5 December 1962. The opinion was authored by Justice P.B. Gajendragadkar and was delivered by a bench comprising Justices P.B. Gajendragadkar, Bhuvneshwar P. Sinha, K.N. Wanchoo, K.C. Das Gupta and J.C. Shah. The petitioner was identified as Akadasi Padhan and the respondent as the State of Orissa. The judgment was pronounced on 5 December 1962 and the bench composition was reiterated as Gajendragadkar, P.B., Sinha, Bhuvneshwar P. (Chief Justice), Wanchoo, K.N., Gupta, K.C. Das and Shah, J.C. The official citation of the decision is 1963 AIR 1047 and 1963 SCR Supl. (2) 691.

The decision also listed a series of citator references, including RF 1964 SC1486 (8), R 1969 SC1081 (5, 13, 19), R 1969 SC1100 (10), E 1970 SC 129 (8), R 1970 SC 564 (70, 178), RF 1971 SC 733 (3, 8), R 1972 SC 971 (9), E 1973 SC 974 (11, 12, 13), RF 1973 SC1461 (434, 740, 742, 1185), R 1979 SC 25 (24, 33), RF 1980 SC1789 (120), RF 1981 SC 679 (16, 28, 37, 38), R 1984 SC 326 (30, 31, 68), R 1984 SC 657 (16), R 1987 SC2310 (12), R 1990 SC 123 (30), and RF 1991 SC 672 (31). The Act under consideration was the State Monopoly‑Kendu Leaves‑Appointment of Agents‑Agreement with Agents‑Validity of‑Article 19 (6)(ii)‑Scope and Effect of‑Rule 7 (5)‑Validity of Act and sections 3, 4, 8, specifically the Orissa Kendu Leaves (Control of Trade) Act, 1961 (Orissa 28 of 1961), sections 3, 4, 8, applied in the context of the Constitution of India articles 19 (1)(f), 19 (1)(g) and 19 (6).

According to the headnote, before 1961 the petitioner had been carrying on a large‑scale business dealing in the sale of Kendu leaves. In 1962 the State of Orissa enacted a monopoly over the trade of Kendu leaves and issued three notifications dated 8 January 1962, 25 January 1962 and 10 March 1962 to enforce that monopoly, thereby restricting the petitioner’s fundamental rights. The petitioner filed a petition under Article 32 challenging both the validity of those notifications and the validity of the entire Act, especially sections 3 and 4, on the ground that they violated Articles 19 (1)(f) and 19 (1)(g). The relief sought included a declaration that the Act was ultra vires and an order restraining the State from giving effect to the notifications and the Act. The Court held that the Orissa Kendu Leaves (Control of Trade) Act, 1961 was a valid piece of legislation. It observed that the creation of a State monopoly in Kendu leaves fell within the scope of Article 19 (6) of the Constitution as amended by the First Amendment Act, 1951, and that a law establishing a narrow State monopoly was permissible under the latter part of Article 19 (6). The Court further clarified that if such a law indirectly affected any other right, its validity could not be challenged on that basis; however, if the law contained incidental provisions that were not essential to the monopoly, those provisions needed to be examined under the first part of Article 19 (6). Finally, the Court stated that any provision directly impinging on a fundamental right guaranteed by Article 19 (1) must be tested by reference to the corresponding clauses of Article 19.

In this case the Court observed that the essential characteristics of a law creating a monopoly depend on the particular trade or business in which the monopoly is established. Such characteristics are determined by the nature of the commodity involved, the kind of commerce to which it relates, and various other surrounding circumstances. The Court explained that a statute providing for a State monopoly over road transport or air transport would ordinarily not violate a citizen’s fundamental right guaranteed by article 19 (1) (f) of the Constitution. Similarly, a law permitting the State to monopolise the manufacture of steel, armaments, transport vehicles, railway engines or coaches would normally be regarded as permissible and would not ordinarily encroach upon the right under article 19 (1) (f). The Court added, however, that if a law creating such a monopoly also contains incidental provisions that directly affect the right protected by article 19 (1) (f), the analysis would be different.

Applying this principle to the scheme of the State monopoly envisaged by the Orissa Kendu Leaves (Control of Trade) Act, the Court held that section 4 of that Act could not be characterised as an essential part of the monopoly that falls within the expression “law relating to” under article 19 (6). Consequently, the validity of section 4 had to be examined in the light of the first limb of article 19 (6) insofar as the petitioner’s rights under article 19 (1) (g) were concerned, and in the light of article 19 (5) insofar as his rights under article 19 (1) (f) were concerned. After such testing, the Court found that the price‑fixation restrictions imposed by section 4 were reasonable, served the public interest, and therefore satisfied the requirements of both article 19 (5) and article 19 (6). On this basis the Court declared section 4 to be valid.

The Court further held that section 3 of the Act was not open to challenge. Section 3 authorises either the Government, a Government officer authorised to act on its behalf, or an agent appointed for the unit in which the Kendu leaves have grown to purchase or transport such leaves. The Court was satisfied that the persons described in clauses (b) and (c) of section 3 were intended to act as agents of the Government, and that all their actions undertaken under the provisions of the Act would be on behalf of and for the benefit of the Government. Because section 3 was held valid, the Court consequently held section 8, which authorises the appointment of such agents, to be valid as well.

Finally, the Court explained that when the State engages in any trade, business or industry, it must inevitably do so either through its own departments or through officers appointed for that purpose. By its very nature the State cannot operate without the assistance of its servants or employees, which introduces the concept of agency in a narrow and limited sense. The Court recognised that in certain trades or businesses it may be impractical for the State to undertake the work departmentally or with the assistance of its servants; in such situations the State is permitted to employ agents, provided those agents act on behalf of the State and not for personal gain.

In this case, the Court observed that Rule 7(5) requires a person appointed as an agent to execute an agreement in a form directed by the Government. The Court found this rule problematic because it leaves the determination of the agreement’s terms and conditions to the arbitrary discretion of the officer concerned, which exceeds the authority of the State Government. The Court held that the terms and conditions must be prescribed by rules rather than left to ad hoc decisions. The Court then examined the specific agreement that had been executed and concluded that there was no doubt that the person appointed under that agreement to operate the State’s monopoly did not qualify as an agent within the narrow meaning of Article 19(6)(ii). The agreement allowed the appointed individual to conduct the trade essentially on his own account; any profit remaining after payment of the stipulated amount under the contract belonged to him, and any loss incurred was also his. The Court noted that the individual was not answerable to the State Government, and the State Government did not bear responsibility for his actions. Consequently, the Court ruled that the agreement could not be reconciled with the provisions of Section 3 of the Act and was therefore invalid. Because the agreement was invalid, the State Government could not implement the Act’s provisions through agents appointed under it. The Court referred to numerous authorities, including Motilal v. The Government of the State of U.P., A. K. Gopalan v. State of Madras, Ram Singh v. The State of Delhi, Express Newspapers (P) Ltd. v. Union of India, State of Bombay v. R. M. D. Chamarbaugwala, the English cases Bright in Resmith and Weiner Harris, as well as Indian decisions such as Saghir Ahmed v. State of U.P., Parbhani Transport Co‑operative Society Ltd. v. The Regional Transport Authority, Aurangabad, Dosa Satyanarayanamurty v. The Andhra Pradesh State Road Transport Corporation, and H. C. Narayanappa v. State of Mysore. The judgment was delivered in the original jurisdiction under Petition No. 73 of 1962, an application under Article 32 of the Constitution for enforcement of fundamental rights. Counsel for the petitioner appeared, and the Attorney‑General of India, together with the Advocate‑General for the State of Orissa and counsel for respondent No. 1, were also present. The judgment was pronounced on 5 December 1962 by Justice Gajendragadkar.

The petitioner, Akadasi Pradhan, owned approximately 130 acres of land in the village of Bettagada, which lay in the sub‑division of Rairakhel in the district of Sambalpur. On about 80 acres of that holding, Kendu leaves grew. Kendu leaves were used in the manufacture of bidis, and prior to the year 1961 the petitioner had been engaged in a substantial trade in Kendu leaves, transporting the leaves to various markets both within the district of Sambalpur and to locations outside the district. When the Orissa Kendu Leaves (Control of Trade) Act was enacted in 1961 and came into force on 3 January 1962, the State acquired a monopoly over the trade in Kendu leaves. The petitioner alleged that this monopoly severely restricted his fundamental rights guaranteed under Articles 19(1)(f) and 19(1)(g) of the Constitution, and that restriction formed the core basis of the present petition. The petition further claimed that the Act, in substance, created a monopoly that favoured certain persons described in the legislation as “Agents,” and that, on this view, the Act was a colourable piece of legislation. Under the provisions of the Act three separate notifications had been issued, and the petitioner also challenged the validity of each of those notifications. The first notification, issued on 8 January 1962 under section 5 of the Act, provided a schedule of the districts, the number of units into which each district was divided, and the local area covered by each unit. The district of Sambalpur, where the petitioner’s land was situated, had been divided into five units, and the petitioner’s holdings fell within units 2 and 5. On 10 January 1962, a further notification invited applications from persons who wished to be appointed as Agents of the Government of Orissa for the purchase and trade of Kendu leaves; that notification expressly stated that the Government reserved to itself the right to reject any or all applications in respect of any unit without assigning any reason. The second notification, dated 25 January 1962, prescribed the price of Kendu leaves at fifty leaves per naya paisa and asserted that the price had been fixed by the State Government after consultation with the Advisory Committee appointed under section 4 of the Act. The third and final notification, issued on 10 March 1962, made certain corrections to the units of the local areas that had been notified by the 8 January 1962 notification. The petitioner challenged the validity of these notifications on the ground that the statutory provisions empowering their issuance were themselves invalid, and he also contended that the Act as a whole was ultra vires. The petition asserted that sections 3, 5, 6 and 16 of the Act were invalid because they contravened Article 14 of the Constitution; however, the petitioner did not argue that particular point before the Court, reserving the main attack for the broader challenge to the Act and especially to sections 3 and 4 on the grounds that they violated Articles 19(1)(f) and 19(1)(g).

In this petition the petitioner challenged the validity of the entire Act and, in particular, sections three and four, alleging that those provisions contravened Article 19 (1) (f) and Article 19 (1) (g) of the Constitution. The relief sought by the petitioner was a declaration that the whole Act was ultra vires and an order restraining respondent No 1, the State of Orissa, from giving effect either to the provisions contained in the impugned notifications or to the provisions of the Act itself. Respondent No 1 opposed the petition primarily on the ground that the Orissa Legislature possessed the competence to enact the legislation and that none of its provisions infringed Article 19 (1) (f) or Article 19 (1) (g). It was further submitted that, under Article 19 (6), a State Legislature is authorized to establish a State monopoly in any business, and that a monopoly created pursuant to that power cannot be successfully challenged on the basis of Article 19 (1) (f) or Article 19 (1) (g). To support its contention that the price‑fixing mechanism and the monopoly scheme imposed by the Act were reasonable, respondent No 1 referred to the earlier legislative history concerning Kendu leaves and emphasized that the Act had been enacted following the recommendations of a Taxation Enquiry Committee appointed by the State Government in 1959. It also highlighted that seventy‑five percent of the Kendu leaves produced in Orissa were grown on Government land, and that the monopoly created by the Act thus affected only twenty‑five percent of the total state‑wide output. The affidavit filed by respondent No 1 further demonstrated that the price fixed after consultation with the Advisory Committee was fair, reasonable, and would leave a satisfactory margin of profit for the growers of Kendu leaves. These competing contentions formed the basis for the Court’s consideration of the validity of both the Act and the notifications. Before examining the specific provisions of the Act, the Court found it necessary to set out the legislative background relating to Kendu leaves. In 1949 the Government of Orissa issued an order under the authority conferred by subsection (1) of section 3 of the Orissa Essential Articles Control and Requisitioning (Temporary Powers) Act 1947. This order, known as the Orissa Kendu Leaves (Control and Distribution) Order, 1949, divided the State into defined units and issued licences to persons authorized to trade in Kendu leaves. The District Magistrate was empowered to fix the minimum rate periodically, and the order required licence‑holders to purchase Kendu leaves from pluckers or owners of private trees and forests at rates not less than the prescribed minimum. Consequently, the trade in Kendu leaves was placed under the control of licensed traders who were obligated to procure the leaves from the original producers at the stipulated minimum rates.

In 1960 the Government of Orissa issued the Orissa Kendu Leaves Control Order, which was made under the same provision of the Orissa Essential Articles Control and Requisitioning (Temporary Powers) Act, 1947 that had been used for the earlier 1949 order. The 1960 order kept the existing licence holders in place, but it also introduced new measures such as the appointment of a committee in each district to determine the minimum price for Kendu leaves. Thus the licensing system that had existed under the 1949 order continued to operate under the later order. When the state government changed, the monopoly that had favoured the licence holders was replaced by a system of controlled competition. Later, when the Congress Party returned to power, it found that the controlled‑competition scheme introduced by the previous coalition government had caused a decline in government revenue. Acting on the recommendations of the Taxation Enquiry Committee, the legislature then passed the present Act with the purpose of establishing a State monopoly over the trade in Kendu leaves. Consequently, although the new Act creates a State monopoly, a form of monopoly that benefited the licence holders had been in effect in the State since 1949, interrupted only briefly by the experiment with controlled competition carried out by the coalition government. The Act now consists of twenty sections, and, as indicated in its preamble, it was enacted because the legislature considered it necessary to regulate the trade in Kendu leaves by creating a State monopoly. Section 2 of the Act provides definitions for several terms: “agent” means an agent appointed under section 8; “unit” means a unit constituted under section 5; “grower of Kendu leaves” means any person who owns land on which Kendu plants grow or who possesses such land under a lease or any other arrangement; and “permit” means a permit issued under section 3. Section 3(1) stipulates that only the Government, an officer of the Government authorised to act in that capacity, or an agent responsible for the unit in which the leaves have grown may purchase or transport Kendu leaves. By restricting purchase and transport to these categories, section 3 creates a monopoly over the trade. Although the provision contains two explanations and two sub‑sections, they are not essential to the present discussion. Section 4 deals with the fixation of the sale price. Sub‑section 4(1) requires that the price at which Kendu leaves shall be purchased be fixed by the State Government after consultation with an Advisory Committee constituted under sub‑section 4(2). Once fixed, the price must be published in the Gazette not later than the thirty‑first day of January, and after publication that price shall apply for the entire year and shall not be altered during that period.

In explaining the provisions of the Act, the Court described that once a price was fixed under section 4(1), it remained applicable for the entire calendar year and could not be altered during that time. The proviso to that subsection authorized the setting of different prices for different units, taking into account five specified factors. The first factor considered the prices that had been fixed under any law during the preceding three years for the area in question; the second factor examined the quality of the leaves grown in the unit; the third factor related to the transport facilities available in the unit; the fourth factor concerned the cost of transport; and the fifth factor looked at the general level of wages for unskilled labour prevailing in the unit. Section 4(2) required the government to constitute an advisory committee comprising not fewer than six members, the number of which could be altered by notification from time to time. The proviso to this clause further stipulated that no more than one‑third of the committee members could be persons who were growers of Kendu leaves. Under subsection (3) the Court noted that the committee’s duty was to advise the government on any matters that the government referred to it, while subsection (4) provided that the committee’s business should be conducted in the manner prescribed by the Act and that its members were entitled to any allowances that might be prescribed. The Court then outlined the remaining sections of the Act: section 5 empowered the constitution of units; section 6 dealt with the opening of depots, the publication of price lists and the hours of business; section 7(1) imposed an obligation on the government, an authorized officer or an agent to purchase Kendu leaves offered at the price fixed under section 4 in the manner specified, with a proviso allowing the government or any officer or agent to refuse purchase of leaves that, in their opinion, were not fit for bidi manufacture. Section 7(2) provided a remedy for any person aggranted by refusal of purchase, and section 7(3) addressed cases where leaves offered were suspected to have originated from government forests, prescribing the procedure for such situations. Section 8 concerned the appointment of agents for different units and permitted a single person to be appointed for more than one unit. Under section 9 every grower of Kendu leaves whose annual production was likely to exceed ten standard maunds was required to register in the prescribed manner. Section 10 authorised the government, its officers or agents to sell or otherwise dispose of the Kendu leaves they had purchased. Section 11 provided that any net profits generated by the state government as a result of the operation of the Act were to be applied and divided between the various Samitis and Gram Panchayats as prescribed. Finally, section 12 dealt with the delegation of powers under the Act.

The Act contains a number of distinct provisions. Section 13 empowers the authorities to enter premises, conduct searches and seize material. Section 14 prescribes the penalties for violations of the Act. Section 15 enumerates the offences created by the legislation, and Section 16 declares those offences to be cognizable. Section 17 provides a safeguard for acts performed in good faith, ensuring that such acts are exempt from penalty. Section 18 authorises the Government to formulate detailed rules for the implementation of the Act. Section 19 repeals, to the extent that it concerns kendu leaves, the Orissa Essential Articles Control and Requisitioning (Temporary Powers) Act, 1955. Finally, Section 20 gives the State Government the authority to remove any doubts or difficulties that may arise in the operation of the law. These provisions together constitute the broad framework of the legislation.

The first major issue presented to the Court was raised by counsel for the petitioner, who argued that the creation of a State monopoly over the purchase of kendu leaves infringes the petitioner’s fundamental rights guaranteed under Article 19(1)(f) and Article 19(1)(g) of the Constitution. A point of contention before the Court was whether the petitioner could invoke the right protected by Article 19(1)(g). The Attorney General, appearing for the State, submitted that the petitioner is simply a grower of kendu leaves. Accordingly, while the petitioner may claim that the restrictions interfere with his right to dispose of his property under Article 19(1)(f), he cannot contend that his occupation, trade or business has been affected in a manner that would invoke Article 19(1)(g).

For the purposes of adjudicating the petition, the Court elected to allow the petitioner to challenge the validity of the Act on both grounds, namely Article 19(1)(f) and Article 19(1)(g). This decision required the Court to examine the petitioner’s argument that the State monopoly contravenes Article 19(1)(g). The petitioner’s counsel maintained that the amendment effected by the Constitution (First Amendment) Act, 1951, which introduced Article 19(6), does not exempt a law establishing a State monopoly from the test imposed by Article 19(6). In other words, the amendment merely permits the legislature to enact a law creating a State monopoly, but it does not relieve the legislature from the requirement that the law be reasonable and that the restrictions be justified in the public interest.

Conversely, the Attorney General argued that the purpose of the First Amendment was to place monopoly statutes beyond the reach of challenge under Article 19(1)(f) and Article 19(1)(g). Thus, the two sides advanced opposing extremes. The petitioner’s position was that the monopoly law must be examined in the light of Article 19(6); if the law satisfies the test, any alleged infringement of Article 19(1)(g) would not invalidate the statute. The State, on the other hand, contended that the amendment was intended to render the monopoly law entirely valid, thereby insulating it from any challenge based on the freedoms guaranteed by Article 19(1)(f) or Article 19(1)(g).

In order to understand the arguments before the Court, it was necessary to recall the background of the amendment made by the Constitution (First Amendment) Act of 1951. Shortly after the Constitution commenced, the courts began to examine how socio‑economic statutes, enacted by legislatures in pursuit of welfare policies, affected the fundamental rights of citizens, particularly those concerning property. The rights that citizens most frequently relied upon were set out in Articles 19(1)(f) and (g) as well as Article 31. With respect to State monopolies, there was no doubt that Entry 21 in List III gave both the State and the Union legislatures the competence to enact laws dealing with commercial and industrial monopolies, combines and trusts, so that the question of legislative competence to create monopolies could not be challenged. Nevertheless, the validity of those monopoly statutes was contested on the ground that they violated the citizens’ rights under Article 19(1)(f) and (g). A landmark decision illustrating this conflict was the Allahabad High Court case of Moti Lal v. The Government of the State of Uttar Pradesh, reported in I.L.R. (1951) 1 All. 269, where a transport monopoly created by the Uttar Pradesh Government in favour of the State‑operated Bus Service known as the Government Roadways was struck down as unconstitutional because the court held that the monopoly entirely deprived citizens of the rights guaranteed by Article 19(1)(g). The consequence of that decision was the realization by the legislature that mere competence to enact monopoly legislation did not automatically ensure its constitutionality if the law infringed Article 19(1). This realization prompted the amendment of Article 19(6). It is also noteworthy that, around the same period, the courts began reviewing statutes concerning the acquisition of property and their impact on citizens’ fundamental right to property under Article 19(1)(f). The judicial scrutiny of acquisition laws led to the amendment of Article 31 on two occasions: first by the Constitution (First Amendment) Act of 1951 and later by the Constitution (Fourth Amendment) Act of 1955.

The amendment to Article 19(6) was therefore introduced to address these concerns. As it stands after amendment, the provision reads: “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 (1) I.L.R. (1951) 1 All. 269. 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, (i) the professional or technical qualifications necessary for practising.” This wording expressly clarifies that the restriction in sub‑clause (g) does not impede the State from enforcing existing laws that impose reasonable restrictions in the public interest, nor does it prevent the State from legislating on matters concerning professional or technical qualifications required for practice. By inserting this language, Parliament intended to ensure that statutes creating monopolies or regulating professions could withstand constitutional challenge, thereby accomplishing the purpose for which the amendment to Article 19(6) was originally made.

The amendment to Article 19(6) states that the State may make a law relating to any profession, occupation, trade or business. It further permits the State to enact a law concerning the carrying on by the State or by a corporation owned or controlled by the State of any trade, business, industry or service, whether such law results in the complete or partial exclusion of citizens or otherwise. It would be observed that the amendment expressly provides, inter alia, that nothing in Article 19(1)(g) shall prevent the State from legislating on the carrying on by the State of any trade, business, industry or service, regardless of whether the legislation creates a total or partial monopoly excluding citizens. This language clearly allows the State to pass a statute that creates a complete monopoly, whereby citizens are wholly excluded from the specified trade, business, industry or service. It also authorises a statute that permits a partial exclusion of citizens from the same trade, business, industry or service. Consequently, a law that authorises the State to carry on a business to the complete or partial exclusion of citizens will not be struck down on the ground that it contravenes Article 19(1)(g). The question that now arises for the Court is the precise scope and effect of this provision. In interpreting Article 19(6) the Court must recognise that a purely literal construction may not yield the appropriate meaning. The task of construing an important constitutional provision such as Article 19(6) cannot be reduced to a mere grammatical exercise. While interpreting the provision, the Court must keep in mind the political and economic philosophy that underlies the text, and therefore adopt a liberal, purposive approach rather than a strictly literal and mechanical one. With the rise of socialist philosophy, the doctrine of State ownership has been widely discussed by political and economic thinkers. Broadly, two contrasting approaches emerge. To the socialist, nationalisation or State ownership is a matter of principle justified by the general notion of social welfare. To the rationalist, nationalisation or State ownership is a matter of expediency driven by considerations of economic efficiency, increased output and productivity. The latter view supports nationalisation only when it is clear that State ownership would be more efficient, economical and productive. The former approach is not much influenced by such considerations and treats nationalisation as a principle that all important nation‑building industries should come under State control. The first approach is doctrinaire, while the second is pragmatic. The doctrinaire approach holds that all national wealth and means of production should be under national control, whereas the pragmatic approach accepts nationalisation only when it serves efficiency and increased output. The amendment made by the Legislature in Article 19(6) shows that, in the Legislature’s view, a law relating to the creation of a State monopoly should be presumed to be

In this case, the Court observed that the amendment to article 19(6) was made expressly “in the interests of the general public.” Article 19 (6) (ii) demonstrates that the Constitution places no numerical or substantive limit on the authority of the State to create a State monopoly. The extent of that authority can be appreciated by examining the language employed in the provision, which refers to trade, business, industry or service. The Court noted that, depending on the circumstances of a particular case and in accordance with the requirements of any trade, business, industry or service, the State is empowered to exclude citizens from participation, either wholly or partially. Accordingly, the Court said that the purpose behind the amendment, as far as it concerns the concept of a State monopoly, does not reflect a pragmatic, efficiency‑oriented rationale but rather a doctrinaire, socialist‑inspired rationale. For that reason, the Court found no merit in Mr. Pathak’s contention that the establishment of a State monopoly must be justified by demonstrating that the restrictions are reasonable and are in the interests of the general public. The Court held that the amendment itself makes it clear that a State monopoly affecting any trade or business is to be presumed reasonable and to be in the public interest for the purposes of article 19 (1)(g). The Court further explained that article 19 (6) authorises the State to enact legislation creating State monopolies, whether partial or total, in any trade, business, industry or service. The State may assume a monopolistic role for administrative purposes, to mitigate the adverse effects of competition, to regulate prices, to improve the quality of goods, or even to generate profit for the State treasury. The Court observed that the framers of the Constitution apparently believed that such monopolies or nationalisation schemes would fall within, and be shielded by, article 19 (6) as originally drafted; however, when judicial decisions invalidated that assumption, Parliament enacted the amendment to clarify the constitutional intent. The Court pointed out that the amendment begins with the words “in particular,” indicating that reasonable restrictions on the fundamental right guaranteed by article 19 (1)(g), provided they serve the general public, are saved by article 19 (6). Because the matter is justiciable, the amendment adds that statutes establishing State monopolies or nationalisation schemes constitute examples of reasonable public‑interest restrictions and therefore must be treated as such. Consequently, the Court concluded that the validity of statutes covered by the amendment is no longer a question for judicial review. This reasoning reveals the doctrinaire approach adopted by the amendment with respect to State monopolies, a conclusion that nevertheless still

The Court identified two difficult questions that required answers. First, it needed to determine the meaning of the phrase “a law relating to” a monopoly as used in the amendment. Second, it had to examine the effect of the amendment on the remaining provisions of Art. 19 (1). The Attorney‑General argued that the amendment meant that whenever a statute created a State monopoly, that statute would no longer be subject to the reasonableness test prescribed by the first part of Art. 19 (6). He further contended that the validity of such a statute could not be examined under any other clause of Art. 19 (1). Applying this view to the present Act, the Attorney‑General urged that if the State monopoly was protected by the amendment to Art. 19 (6), then every provision of the Act that gave effect to that monopoly was likewise protected, and the petitioners could not be allowed to challenge the validity of those provisions on any ground. In essence, he maintained that anything protected by the amendment must be deemed constitutionally valid without being tested by any other provision of Art. 19 (1). In addressing the precise definition of “a law relating to”, the Court noted that the phrase appeared in Art. 19 (6), which functions as an exception to the main provision of Art. 19 (1)(g). Laws falling under Art. 19 (6) were considered valid even though they infringed the fundamental right guaranteed by Art. 19 (1)(g). This was the effect of the scheme contained in Art. 19 (1) read together with clauses (2) to (6) of that article. Consequently, the Court found it unreasonable to give the phrase an excessively broad or liberal construction. The expression “a law relating to” a State monopoly could not, in the present context, be interpreted to include every provision contained in the statute, regardless of whether it had a direct connection with the creation of the monopoly. The Court held that the expression should be understood to refer only to the law dealing with the monopoly in its essential features. When a law creates a State monopoly, the Court must examine which provisions of that law are fundamentally and necessarily required for the creation of the monopoly. Only those essential and basic provisions are protected by the latter part of Art. 19 (6). Any other provisions enacted by the Act that are merely subsidiary, incidental, or merely helpful to the operation of the monopoly do not fall within that part and must have their validity assessed under the first part of Art. 19 (6). In other words, the amendment to Art. 19 (6) shields only those provisions of a law that are integrally and essentially connected with the creation of the monopoly; provisions that are incidental do not receive that protection.

In this case the Court considered that any law protected by the latter part of article 19 (6) must still satisfy the conditions laid down in the first part of that article. The Court then asked what impact the amendment would have on the other fundamental rights that are guaranteed by article 19 (1). It was observed that a law creating a State monopoly could, in certain circumstances, affect a citizen’s right under article 19 (1)(f) because such a law might interfere with the right to dispose of property. The Court examined whether the learned Attorney‑General was correct in arguing that laws protected by the latter part of article 19 (6) cannot be examined in the light of the other fundamental rights contained in article 19 (1). The answer, the Court held, depended on the nature of the law that was being scrutinised. The Court noted that the several rights enumerated in the seven sub‑clauses of article 19 (1) are distinct fundamental rights and that each may be regulated only if the corresponding provisions in clauses (2) to (6) are satisfied. When the effect of a law that seeks to regulate the right guaranteed by article 19 (1)(g) on the right guaranteed by article 19 (1)(f) is examined, the Court said it is necessary to distinguish between the direct purpose of the enactment and any indirect or incidental effect it may have. If the legislation is aimed directly at controlling the citizen’s right under article 19 (1)(g), its validity must be tested according to the requirements of article 19 (6). Conversely, if a law that creates a State monopoly affects a citizen’s right under another clause of article 19 (1), such as article 19 (1)(f), only indirectly or incidentally, that does not make the enactment infirm. Referring to the observation of Chief Justice Kania in the case of A K Gopalan v. State of Madras, the Court explained that when legislation directly attempts to control a citizen’s freedom of speech, expression, or the right to assemble peaceably, the question of whether the legislation is saved by the relevant clause of article 19 arises. However, if the legislation is not directed at any of those subjects and a citizen’s right is curtailed only as a consequence of other legislation, for example punitive or preventive detention, then the question of the application of article 19 does not arise. The proper approach, the Court stressed, is to look at the directness of the legislation rather than the consequences of a otherwise valid detention. These observations were later endorsed by Justice Patanjali Sastri in Ram Singh v. State of Delhi, where it was added that in Gopalan’s case the majority view was that a law authorising deprivation of personal liberty did not fall within the ambit of article 19 and therefore its validity was not to be judged by the tests prescribed in that article.

In its analysis the Court observed that a statutory provision must satisfy the standards laid down in Articles twenty‑one and twenty‑two, and because section three of the impugned law met those standards, the provision was held to be constitutional. The Court noted that this reasoning had previously been endorsed by the same Court in the cases of Express Newspapers (Private) Ltd. v. The Union of India (1959) and The State of Bombay v. R. M. D. Chamarbaugwala (1957). Consequently, when a challenge is raised against the validity of a statute that creates a state monopoly on the ground that its provisions infringe other fundamental rights guaranteed by Article nineteen, paragraph one, the Court explained that it is necessary first to determine the purpose of the Act and its direct effect. If the direct effect of the Act is to encroach upon any other right secured by Article nineteen, paragraph one, the validity of the statute must be examined in light of the specific clause of Article nineteen that corresponds to that right. Conversely, if the impact on the said right is indirect or remote, the Court held that the statute cannot be successfully contested on that basis. The Court further explained that clause six of Article nineteen is linked to the fundamental right protected by Article nineteen, paragraph one, sub‑paragraph g, just as the other clauses of Article nineteen are linked to the rights set out in sub‑paragraphs a through f. Accordingly, the protection afforded by clause six is available only to resist a claim that the statute violates the right under sub‑paragraph g. Should the statute, in substance, affect any other right directly, the shield of clause six does not apply and the statute must be sustained by reference to the requirements of the appropriate clause of Article nineteen. From this reasoning the Court concluded that a law establishing a state monopoly in the narrow and limited sense previously described would be valid under the latter part of Article nineteen, clause six, and that an indirect infringement of any other right would not provide a ground for invalidation. However, if the statute contains additional incidental provisions that are not essential to the creation of the monopoly and do not form an integral part of it, the Court held that the validity of those provisions must be assessed under the first part of Article nineteen, clause six. If such provisions directly impair any other fundamental right guaranteed by Article nineteen, paragraph one, their validity must be tested by reference to the corresponding clause of Article nineteen. The Court observed that when the validity of those provisions is examined under both the first part of Article nineteen, clause six, and Article nineteen, paragraph five, the outcome is essentially the same because the tests prescribed by the two clauses are identical. In the Court’s opinion, this method creates harmony among the various provisions of Article nineteen and prevents any conflict between them.

In the majority of cases where a statute creates a State monopoly, the Court observed that no direct conflict with the citizens’ right to practice any profession, trade, or business under Article 19(1)(f) ordinarily arose. For example, when the State, acting under a monopoly, purchases raw material from the open market and then manufactures finished goods, there is scarcely any occasion for the infringement of that constitutional right. The Court also noted that a monopoly over road transport or air transport, created by legislation, would generally not encroach upon the fundamental right guaranteed by Article 19(1)(f). Likewise, a State monopoly that authorises the manufacture of steel, armaments, transport vehicles, or railway engines and coaches would normally be a legal provision that does not impinge on the same right. The Court cautioned, however, that if a law establishing such a monopoly contained incidental provisions that directly affected citizens’ rights under Article 19(1)(f), the situation would be different. Determining which provisions of a statute are essential for the creation of a monopoly was described as a question of fact, dependent on the nature of the trade or business, the commodity involved, the type of commerce, and other relevant circumstances.

In the present dispute, the State monopoly concerned the procurement of Kendu leaves, and the principal controversy centred on the provision in section 4 that fixed the purchase price. Counsel for the petitioner argued that fixing the purchase price was not essential to the existence of the monopoly, while the Attorney‑General contended that the monopoly could not operate without such a price fixation. The Court declined to accept the view that the price‑fixing clause was an essential feature of the monopoly. It recognised that the price‑fixing provision might have been introduced for the benefit of Kendu leaf growers, and that this consideration would be relevant when assessing the reasonableness of the restriction imposed by the section. The Court illustrated a hypothetical scenario in which a law prescribed an unreasonably low purchase price; in such a case, the price‑fixing measure could not be deemed an essential part of the monopoly and its reasonableness would have to be examined under Article 19(1)(g). Applying the facts of the present case, the Court found it difficult to conclude that the State monopoly could not function without fixing the purchase price, yet it remained doubtful that price fixation formed an integral component of the monopoly in this context.

In this case the Court observed that, given the design of the state monopoly created by the Act, section 4 could not be characterised as an essential component of that monopoly such that it would fall within the phrase “law relating to” in Article 19 (6) of the Constitution. Accordingly the Court was satisfied that the constitutional validity of section 4 had to be examined under the first limb of Article 19 (6) with respect to the petitioner's right to trade guaranteed by Article 19 (1)(g), and under Article 19 (5) with respect to his right to practice any occupation guaranteed by Article 19 (1)(f). After this analysis the Court found no impediment to upholding the validity of section 4.

The Court explained that if the legislature had allowed the state monopoly to operate without fixing purchase prices, growers would have suffered hardship and the State would have obtained an undue advantage. Permitting the ordinary forces of demand and supply to determine prices for a highly perishable commodity such as Kendu leaves would, in all probability, have produced prices that were adverse to the interests of growers and beneficial to the State. For this reason the legislature deliberately incorporated a price‑fixing mechanism and prescribed the machinery to carry it out.

The Court noted that the prices fixed under section 4 were not minimum prices, because fixing a minimum price would have served no useful purpose in the context of a state monopoly. Instead, the provision intended to fix prices that could be regarded as fair. A representative advisory committee was required to be appointed, and the prices were to be fixed after consultation with, and in accordance with, the recommendations of that committee. The Court found that the present prices had indeed been fixed based on the committee’s advice, demonstrating that the purpose of price fixation was to enable growers to realise a fair price. No party had argued that the prices were unduly low or that they compared unfavourably with the prices prevailing in the locality in previous years.

Consequently the Court held without hesitation that the restrictions imposed by section 4 on price fixing were reasonable and served the general public’s interest both under Article 19 (5) and Article 19 (6). The challenge to the validity of section 4 therefore failed. At this stage the Court referred to four earlier decisions in which the construction of Article 19 (6) had been considered incidentally. In Saghir Ahmad v. State of U. P., the Court was called upon to examine the validity of provisions of the Uttar Pradesh Road Transport Act, No. 11 of 1951, and the question had to be decided in light of Article 19 (6) as it stood before the amendment. By the time the judgment was delivered, however, the amendment had been enacted, and Mukherjea, J., speaking for the Court, noted the effect of that amendment.

In the course of its discussion, the Court noted that the amendment to Article 19 (6) had been mentioned only incidentally. The judge who observed the amendment remarked that its consequence was that the State would no longer be required to justify a legislative action as reasonable before a court, and that no objection could be raised on the ground that such action infringed the freedom guaranteed by Article 19 (1) (g). The judge further observed that, had the statute in question been enacted after the new clause of Article 19 (6) had come into force, the question of reasonableness would not have arisen at all, and the appellants’ case on that point would have been unarguable. While acknowledging the significance of these observations, the Court also pointed out that the effect of the amendment itself had not been fully examined, and that its impact on the right guaranteed by Article 19 (1) (f) had received no attention. The Court then referred to the decision in The Parbhani Transport Co‑operatives Society Ltd. v. The Regional Transport Authority, Aurangabad, where it was held that Article 19 (6) states that nothing in Article 19 (1) (g) shall affect the operation of any existing law insofar as that law relates to the State making a law concerning the carrying on of any trade, business, industry or service, whether that involves exclusive or partial monopoly or competition with citizens. That passage was interpreted to mean that the State may engage in any business, either as a monopoly or in competition, without violating any fundamental rights of citizens. The Court clarified, however, that the reference to “any fundamental rights of the citizen” could not be read to automatically include the right under Article 19 (1) (f). The Court then cited Dosa Satyanarayanamurty v. The Andhra Pradesh State Road Transport Corporation, observing that sub‑clause (ii) of Article 19 (6) is drafted in very wide terms, permitting the State to enact legislation for carrying on a business or service to the exclusion, either wholly or partially, of citizens, and that there are no limitations on the State’s power to confer a monopoly on any area, person or persons. Similar observations were made in H C Narayanappa v. The State of Mysore.

The Court indicated that it must now consider the argument advanced by counsel Mr Pathak, who contended that the Act was infirm because it sought to create a monopoly in favour of individual citizens designated in the Act as “agents”. To resolve this issue, the Court stated that it would have to return once more to the amendment made in Article 19 (6) and examine the scope of the State’s authority to create monopolies, especially in relation to the role of agents within a State‑created monopoly.

In considering the amendment made to Article 19(6), the Court examined the contention that, although the Constitution permits the State to create a monopoly by legislation, the trade on which the monopoly is imposed must be conducted either directly by the State itself or by a corporation that is owned or controlled by the State. The Court acknowledged that the power to create a monopoly is granted to the legislatures in very broad terms and that it may be exercised with respect to any trade, business, industry or service. However, the Court observed that this wide‑ranging authority is not without a concurrent limitation, which is inherent in the very notion of a State monopoly. That limitation requires that, when a State monopoly is established, the State must either carry on the trade itself or do so through a corporation in which it has ownership or control. Up to this point the argument presented no difficulty. The learned counsel for the petitioner, Mr Pathak, further argued that the State is prohibited from appointing any agents to perform the functions of the monopoly, whereas the learned Attorney‑General for the State contended that the State is entitled not only to conduct the trade through its own departments or officers but also to appoint agents to act on its behalf. To support the broader view, the Attorney‑General submitted that persons who can be regarded as agents in the commercial sense may be validly engaged by the State to implement its monopoly.

The Court expressed that it could not endorse either the restrictive construction advocated by Mr Pathak or the expansive construction proposed by the Attorney‑General. The Court reasoned that whenever the State engages in any trade, business or industry, it inevitably does so either through its departmental machinery or through officers appointed for that purpose. By the very nature of governmental operation, the State cannot function without the assistance of its servants or employees; consequently, a narrow and limited concept of agency is inevitably introduced. It would be difficult to exclude the notion of agency altogether, because the State may, for instance, appoint a public officer to manage the trade or may, where appropriate, appoint an agent to act on its behalf. Ordinarily, the trade should be carried out departmentally or with the help of public servants. Nevertheless, there are certain trades or businesses for which it would be impractical to conduct the activity solely through departmental channels or state employees. In such circumstances, the State may legitimately employ agents, provided that those agents operate on behalf of the State and not for their own personal benefit. The Court illustrated this point with the example of Kendu leaves, which are not cultivated but grow naturally in forests and are harvested only for a few months each year. Because the commercial activity of purchasing and selling these leaves is confined to a short period, it would not be expedient for the State to rely exclusively on government servants; employing agents would be more suitable, appropriate and efficient. Accordingly, only persons who can be described as agents in the strict and narrow sense may be entrusted with the functioning of a State monopoly. If an agent acquires a personal interest, ceases to be accountable to the principal, lacks the authority to bind the principal, or any other term of the agency indicates that the trade is not being conducted solely on behalf of the State, such an arrangement would fall outside the scope of Article 19(6)(ii).

In this case, the Court observed that the buying and selling of Kendu leaves normally took place only during a limited seasonal window of three to four months each year. Because the commercial activity was confined to that short period, the Court reasoned that it would not be practical for the State to rely continuously on its own officers to administer the monopoly over the trade. Instead, employing agents could be more convenient, appropriate and efficient. Consequently, the Court held that only persons who could be described as agents in the strict and narrow sense could legitimately be entrusted by the State with the operation of the monopoly. The Court further explained that an agency relationship would be excluded if the agent developed a personal interest in the monopoly, stopped being accountable to the principal at every stage, was unable to bind the principal by his actions, or if any term of the agency indicated that the trade was being conducted partly for the benefit of the individual rather than exclusively on behalf of the State. Such circumstances, the Court said, would fall outside the scope of Article 19(6)(ii). The Court therefore concluded that when a law creates a State monopoly, the conduct of that monopoly may be left to the State itself, to State officers appointed for that purpose, to a State department, or to persons appointed as agents who perform the work solely on the State’s behalf. This arrangement, the Court emphasized, satisfies the requirements of Article 19(6)(ii). In other words, the Court asserted that the limitation requiring the trade to be carried out by the State or by a corporation owned or controlled by the State could not be broadened; it must be interpreted narrowly, and agency may be permitted only in trades or businesses where it is unavoidable and where the agency operates within well‑recognised limits. Whether a particular State monopoly has been entrusted to an agent of the type described would have to be determined as a question of fact in each case. The Court instructed that the existence of an agency relationship must be proved on its substance, examining the nature of the agreement, the circumstances surrounding its formation, and its terms, rather than merely its form. Accordingly, the Court found that Section 3 of the Act was not open to challenge. Section 3 authorised either the Government, a Government officer authorised for that purpose, or an agent concerning the unit where the leaves grew, to purchase or transport Kendu leaves. The Court was satisfied that the two categories of persons mentioned in clauses (b) and (c) were intended to act as agents of the Government, and that all their actions and dealings under the Act would be on behalf of and for the benefit of the Government. The Court rejected the contention that the persons specified in clauses (b) and (c) were intended by the Act to act on their own account.

In this case the Court observed that the view that the persons mentioned in clauses (b) and (c) of section 3 were intended to work on their own account conflicted with the purpose of the provision and with the ordinary meaning of the language used in those clauses. Consequently the Court affirmed the validity of section 3, holding that clauses (b) and (c) were added only for clarification and did not create any type of agency that would lie outside the scope of section 3 had those clauses not been enacted. Because section 3 was found to be constitutionally sound, the Court further held that section 8, which authorises the appointment of agents, must also be valid. The petition had also challenged the constitutionality of sections 5, 6 and 9 on the ground that they violated Article 14, but the Court noted that no specific argument had been raised before it to support the claim that any provision of the Act contravened Article 14. The petition further alleged that the Act was a colourable piece of legislation; however, that argument was based on whether the agreement entered into by the State Government with the agents correctly reflected the effect of sections 3 and 8. The Court reiterated that the only provisions seriously challenged were sections 3 and 4 and, having already determined that those sections were not invalid, concluded that the allegation of colourability lacked substance. Accordingly, the notifications that were impugned, having been issued under the proper provisions of the Act, could not be successfully contested once the Act itself was held to be valid. The Court also observed that the petitioner had not specifically and clearly alleged that the price fixed under section 4 was grossly unfair or that it violated his rights under Article 19(1)(f). No evidence was presented to show that the price was unreasonable, and the respondent’s counter‑affidavit indicated that the price had been fixed in accordance with the recommendations of the Advisory Committee and did not compare unfavourably with prevailing local prices for Kendu leaves. Therefore, the principal grounds on which the petitioner sought to challenge the Act failed. Nonetheless, the Court recognised two remaining points raised by the petitioner that warranted consideration. The first point concerned the actual agreement entered into between respondent No. 1 and the agents. That agreement comprised ten clauses and appeared to have been drafted in compliance with Rule 7(5) of the rules framed under the Act. It was noted that on 9 January 1962 the State Government had published the rules made under the power conferred by section 18 of the Act, and that Rule 7 dealt with the appointment of agents, prescribing the form of application and the requirement that an appointed agent execute an agreement in a form directed by the Government within ten days, failure of which would lead to cancellation of the appointment and forfeiture of any earnest money deposited. The Court further observed that while a prescribed form existed for the application for agency, no prescribed form existed for the agreement between the State Government and the agent, making the agreement effectively ad hoc and, in the Court’s view, unreasonable. Consequently, the Court indicated that if the State Government intended for agents to be appointed to carry out the State monopoly authorised by the Act, it must ensure that the appointment process, including the agreement, follows a reasonable and standardized procedure.

By virtue of the power conferred on it by section 18 of the Act, the State Government published the Rules that are now in force. Rule 7 deals with the appointment of an agent. Under Rule 7(2) the form that must be used for an application seeking appointment as an agent is prescribed in detail. Rule 7(5) further provides that once a person is appointed as an agent, that person must execute an agreement in such form as the Government may direct, and must do so within ten days of receiving the order of appointment; if the appointed person fails to execute the agreement within that period, the appointment becomes liable to cancellation and any earnest‑money deposit made by the person is liable to be forfeited. It is significant that, although the form for the application by a prospective agent is specifically prescribed, no form has been prescribed for the agency agreement that the State Government is required to enter into with the agent. The agreement therefore appears to be prepared on an ad hoc basis, and such a practice is, in the Court’s view, unreasonable. In our opinion, if the State Government intends that agents must be appointed in order to carry on the State monopoly authorised by the Act, it must ensure that the agents are appointed on terms and conditions that clearly establish a relationship of agent and principal between the agent and the State Government; and if that result is to be achieved, the principal terms and conditions of the agency agreement must themselves be prescribed by the Rules. When the terms and conditions are prescribed, they become open to public scrutiny, enabling citizens to examine them and to challenge their validity if they contravene any provision of the Constitution or are inconsistent with the provisions of the Act itself. Accordingly, we are satisfied that the petitioner is entitled to contend that Rule 7(5) is defective because it leaves it to the unrestricted discretion of the officer concerned to fix any terms and conditions on an ad hoc basis; such unfettered discretion exceeds the competence of the State Government, and the requisite terms and conditions should instead be prescribed by the Rules made under section 18 of the Act. Turning now to the specific terms and conditions of the agreement that has been placed before us, the language of those terms reveals a complete confusion on the part of the drafter. Some clauses appear to be relevant to an agency relationship, while other clauses would be material only if a contract concerning Government forest land were being made in favour of the party signing the conditions; still other clauses suggest that the person named as an agent is in fact not an agent at all but rather a person whose personal interest is created by the performance of the so‑called agency work. Clause 4 of the agreement provides for the payment that the agent must make with respect to Kendu leaves taken from private lands as well as from Government lands. It is difficult to discern the precise scope of the various sub‑clauses contained in clause 4, and their validity is not easy to assess. Nonetheless, the Court notes that the provisions are ambiguous and warrant further examination.

In this case the Court observed that after the agent paid the amounts prescribed by the relevant clauses to the Government, the agent was likely to retain some profit for himself, which demonstrated that the relationship did not fall within the type of arrangement permitted by Article 19 (6) (ii). Under clause 4 (iii) the agent was required to pay a sum of five rupees per bag to the Government as consideration for being permitted to enter Government lands and to collect Kendu leaves. The Court remarked that, because no specific rule governed the amount, the payment per bag could vary from place to place, creating a serious anomaly in the scheme. It further noted that the method by which the five‑rupee figure had been determined was not explained, and therefore the Court could not accept the Attorney‑General’s contention that the amount had been fixed after calculating the agent’s expected profit and the average market price of the forest produce.

The Court recorded that clause 4 (V) conceded that the agent might be entitled to some profit in certain cases. Clause 4 (vi) authorised the agent to claim deductions for expenses and commission related to the number of bags of processed leaves, and it required the agent to pay the Government the profits arising from trading the leaves in four equal instalments in the manner prescribed. Clause 4 (ix) imposed upon the agent the obligation to finance all transactions involved in the purchase, collection, storage, processing, transport and disposal of the Kendu leaves purchased or collected in the unit, and the Court indicated that the sub‑clauses under this provision would be appropriate only if the arrangement were a contract between the Government and a forest contractor.

Clause 4 (ix)(i) required the agent to keep a register of daily accounts. Clause 4 (ix)(p) stipulated that during the subsistence of the agreement the agent was responsible for disposal of the Kendu leaves collected or purchased by him, and that the Government would bear no liability whatsoever except as indicated in sub‑clause (vii) of clause 4 (ix). Clause 6 provided that, subject to other terms and conditions, all charges and outgoings were to be borne by the agent and that the agent was not entitled to any compensation for loss caused by fire, tempest, disease, pest, flood, drought, other natural calamities, wrongful acts of any third party, or any loss sustained in operations undertaken for fire‑conservancy purposes. The Court observed that this clause clearly made the agent personally liable for losses that, under the normal rules of agency, would ordinarily be borne by the principal.

The Court concluded that it was unnecessary to refer to every clause in detail, as the foregoing discussion sufficiently demonstrated the character of the arrangement and its incompatibility with the agency model contemplated by the constitutional provision.

The Court was satisfied that even when the agreement is examined in a broad manner, it leaves no doubt that the person appointed under the agreement to operate the State monopoly does not qualify as an agent in the strict and narrow sense contemplated by Article 19(6)(ii). The individual appointed pursuant to the contract appears to carry on the trade essentially on his own account, subject only to the requirement that he pay the amount specified in the contract. If, after complying with the contractual terms, he makes a profit, that profit belongs to him; if, because of the circumstances described in clause 6, he suffers a loss, that loss also falls on him. In effect, he is not made accountable to the State Government, and the State Government is not liable for his actions. In such a situation, it is impossible to hold that the agreement is consistent with the provisions of section 3 of the Act. The learned Attorney‑General submitted that, in commercial transactions, the agreement could be treated as an agency agreement, and in support of that submission he referred to the decisions in Ex parte Bright In re Smith and Weiner v. Harris. It is true that an agent may be entitled to commission in commercial dealings, and the fact that a person receives commission for transactions he conducts on behalf of another does not per se destroy his character as that other person’s agent. Delcredere agents are recognised in commercial law. However, the Court noted that the agency at issue must be permissible under Article 19(6)(ii), and, as already observed, such permissible agency must be in the strict and narrow sense of the term; it must involve agents who carry on the monopoly at every stage on behalf of the State for the State’s benefit and not for their own benefit. The only remuneration such agents may receive is for the work performed as agents, as indicated in the authorities (1879) 10 L.R.Ch.D. 566 and (1910) 1 K. 285. Consequently, the broader commercial definition of “agent” upon which the Attorney‑General relied is wholly inapplicable in the context of Article 19(6)(ii). Therefore, the Court held that the agreement placed before it is invalid because it is entirely inconsistent with the requirements of section 3(1)(C). As a result, the petitioner succeeds only partially: the Court affirmed that Rule 7(5) is invalid and that the agreement is void, which means that the State Government cannot implement the provisions of the Act with the assistance of agents appointed under the void agreement. Accordingly, the Court directed that an order to that effect be issued against the State Government. The main contentions raised

The Court examined the contentions that had been advanced by the petitioner. The petitioner had contended that the Act, together with certain provisions that were relied upon for the reliefs claimed, was invalid. The Court considered each of those submissions and concluded that the challenge to the validity of the Act and of the relevant sections did not succeed. In other words, the Court was not persuaded by the arguments that the Act or its relevant sections should be set aside. As a result of that finding, the reliefs that the petitioner had asked for could not be granted in full. However, the Court did determine that the petition could be allowed in part, meaning that a limited portion of the relief sought was sufficient to be granted. The Court also observed that no order as to costs should be made in this case, and therefore each party would bear its own costs. Accordingly, the final outcome was that the petition was allowed in part, with the limited relief permitted and without any costs order against either side. Both parties were thereby left to continue their respective positions without further financial burden imposed by the court. The decision therefore reflected a balanced approach, granting only the relief that could be supported by the evidence.