# NEW BIHAR BIRI LEAVES CO. & ORS v. STATE OF BIHAR & ORS

- **Citation:** [1981] 2 S.C.R. 417
- **Court:** Supreme Court of India
- **Decided:** 1981
- **Case number:** CRIMINAL APPEAL No. 300 OF 1974
- **Bench:** R. s. SARKARIA, R. s. PATHAK
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/new-bihar-biri-leaves-co-ors-v-state-of-bihar-ors-8108
- **Pages:** 27

## Headnote

1J
I
Constitution of India 1950, Articles 19(6) clauses
(i) &
(ii)-Clauses
I
whether distinct and separate-Law covered by the clauses whether to satisfy
the test of reasonableness.
~ Article 19(1) (g)-Citizen's right to enter into contract with State-Whether
fundamental right can be enforced though contractual.
C
Bihar Ke11du Leaves (Control of Trade) Act 1973 & Bihar Ken.du Leaves
(Control of Trade) Rules, 1973-Clause 13 and Clause 4(bb) of agreement
•
prescribed by rules-Whether unreasonable and violative of Articles 14 and 19.
•
Kendu leaves used in the manufacture of bidis are grown oo forest produce
in several States.
On March 10, 1972 the State of Bihar issued the Bihar
D
Kendu Leaves (Control of Trade) Ordinance, 1972, which was replaced by
the Bihar Kendu Leaves (Control of Trade) Act, 1973. The purpose was to
create a State monopoly in the matter of sale of Kendu leaves to the manufacturers· of bidis to regulate the trade in relation to the grower of Kendu
plants and their collection and sale through the agency of the State to the
registered manufacturers of bidis. Section 4, empowered the State Government
for the purpose of purchase and sale of Kendu leaves on its behalf, to appoint
E
agents in respect of different units.
Section 9 provided that the authorised
aSents will be bound to accept delivery of all those Kendu leaves which are
fit for the purpose of mannfacture of bidis.
In exercise of its ru.Ie-.making powers the State Government notified the
Bihar Kendu LeavOB (Control of Trade) Rules, 1972, which was continued
by Section 23 of the Act even after the repeal of the Ordinance. Provisions
regarding the disposal of Kendu leaves were made in Rule 9.
Sub-rule (I)
~
-provided that Kendu leaves collected or likely to be collected shall be sold
ror otherwise disposed of by tender on terms and conditions spocified in the
Tender Notice. The Tender was required by sub-rule (2) to be advertised
in newspapers. Sub-role (9) provided that the successful tenderer or successful bidder shall be appointed as purchaser and the entire quantity of Kendu
leaves collected or likely to be collected or such lesser quantity out of it as
may be offered to him by the State shall be purchased by him on terms and
conditions in the agreement to be executed by the purchaser. Sub-rule (10)
required the purchaser to execute an Agreement in Form 'M' within 15 days
of the receipt of the order o:E appointment.
•
By a Notification dated January 16, 1974 the Rules were amended and
sub-clause (bb) after clause 4(b) was added in Form 'M' of the Agreement
which provided that the purchaser shall not raise any objection against the
quality of Kendu leaves or shortage of leaves.
Condition 13 of the Tender
Notice was a1so incorporated in the statutory Agreement, Form 'M' providing
F
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418
SUPREME COURT REPORTS
[1981) 2 S.C.R.
A
that for every unit a minimum royalty will be 'payable by the purchaser,' and
that this amount shall be payable by the tenderer even if by the end of the
season, the price of Kendu leaves at the offered rate, collected und delivered
to the purchaser, fell short of this amount, the amount being payable before
the leaves are utilized or taken out and if not paid, realisable as arrears of
land revenue.
B
In their writ petitions the petitioners who were carrying on trade in ~en~u
leaves, assailed the Rules framed under the Act and clause ,13 and clause 4(bb)
of the Tender Notice and the Statutory Agreement and the notices of demand
issued demanding royalty in respect of the undelivered
quantity
of Kendu:
leaves.
c
It was contended that : (i) the provisions and conditions contained in clause
4(bb) and clause 13 amount to an unreasonable restriction on freedom to
carry on trade or business in Kendu leaves guaranteed under Article 19 (I) {g)
of the Constitution and that they are not within the protection of sub-clause
(ii) i)l the second part of clause (6) of Article 19; (ii) that the provisions in
their immediate operation and ef

## Text

_Characters 0–39,232 of 73,249. This is a partial read: ask again with offset=39232 for what follows._

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•
417
NEW BIHAR BIRI LEAVES CO. & ORS.
v.
STATE OF BIHAR & ORS.
lam/pry 6, 1981
[R. s. SARKARIA AND R. s. PATHAK, JJ.]
1J
I
Constitution of India 1950, Articles 19(6) clauses
(i) &
(ii)-Clauses
I
whether distinct and separate-Law covered by the clauses whether to satisfy
the test of reasonableness.
~ Article 19(1) (g)-Citizen's right to enter into contract with State-Whether
fundamental right can be enforced though contractual.
C
Bihar Ke11du Leaves (Control of Trade) Act 1973 & Bihar Ken.du Leaves
(Control of Trade) Rules, 1973-Clause 13 and Clause 4(bb) of agreement
•
prescribed by rules-Whether unreasonable and violative of Articles 14 and 19.
•
Kendu leaves used in the manufacture of bidis are grown oo forest produce
in several States.
On March 10, 1972 the State of Bihar issued the Bihar
D
Kendu Leaves (Control of Trade) Ordinance, 1972, which was replaced by
the Bihar Kendu Leaves (Control of Trade) Act, 1973. The purpose was to
create a State monopoly in the matter of sale of Kendu leaves to the manufacturers· of bidis to regulate the trade in relation to the grower of Kendu
plants and their collection and sale through the agency of the State to the
registered manufacturers of bidis. Section 4, empowered the State Government
for the purpose of purchase and sale of Kendu leaves on its behalf, to appoint
E
agents in respect of different units.
Section 9 provided that the authorised
aSents will be bound to accept delivery of all those Kendu leaves which are
fit for the purpose of mannfacture of bidis.
In exercise of its ru.Ie-.making powers the State Government notified the
Bihar Kendu LeavOB (Control of Trade) Rules, 1972, which was continued
by Section 23 of the Act even after the repeal of the Ordinance. Provisions
regarding the disposal of Kendu leaves were made in Rule 9.
Sub-rule (I)
~
-provided that Kendu leaves collected or likely to be collected shall be sold
ror otherwise disposed of by tender on terms and conditions spocified in the
Tender Notice. The Tender was required by sub-rule (2) to be advertised
in newspapers. Sub-role (9) provided that the successful tenderer or successful bidder shall be appointed as purchaser and the entire quantity of Kendu
leaves collected or likely to be collected or such lesser quantity out of it as
may be offered to him by the State shall be purchased by him on terms and
conditions in the agreement to be executed by the purchaser. Sub-rule (10)
required the purchaser to execute an Agreement in Form 'M' within 15 days
of the receipt of the order o:E appointment.
•
By a Notification dated January 16, 1974 the Rules were amended and
sub-clause (bb) after clause 4(b) was added in Form 'M' of the Agreement
which provided that the purchaser shall not raise any objection against the
quality of Kendu leaves or shortage of leaves.
Condition 13 of the Tender
Notice was a1so incorporated in the statutory Agreement, Form 'M' providing
F
G
B
•
"
418
SUPREME COURT REPORTS
[1981) 2 S.C.R.
A
that for every unit a minimum royalty will be 'payable by the purchaser,' and
that this amount shall be payable by the tenderer even if by the end of the
season, the price of Kendu leaves at the offered rate, collected und delivered
to the purchaser, fell short of this amount, the amount being payable before
the leaves are utilized or taken out and if not paid, realisable as arrears of
land revenue.
B
In their writ petitions the petitioners who were carrying on trade in ~en~u
leaves, assailed the Rules framed under the Act and clause ,13 and clause 4(bb)
of the Tender Notice and the Statutory Agreement and the notices of demand
issued demanding royalty in respect of the undelivered
quantity
of Kendu:
leaves.
c
It was contended that : (i) the provisions and conditions contained in clause
4(bb) and clause 13 amount to an unreasonable restriction on freedom to
carry on trade or business in Kendu leaves guaranteed under Article 19 (I) {g)
of the Constitution and that they are not within the protection of sub-clause
(ii) i)l the second part of clause (6) of Article 19; (ii) that the provisions in
their immediate operation and effect, are harsh,
unconscionable,
arbitrary,
unfair and oppressive, thereby violating Article 14, (ill) the foreclosure of the
right of the purchaser to refuse delivery Oil the ground of the \eaves offered,
not being of requisite quality, is inconsistent and ultra vires of the proviso to
Section 9(1) of the Act and (iv) that the auctions are held in January, while
the Agents are not appointed till March or April, the plucking season, and
consequently, no reasonable estimate of the expected yield is possible.
D
E
F
G
H
The respondents argued that (i) there is a paucity of skilled people who
could be employed as Agents and the prevailing practice is that the persons
appointed as Agents, are sponsored by the purchasers and that the terms of'
the Agreement, taken as a whole are not one-sided, (il) if a person voluntarily
takes upon himself under the terms of a contract, such risks and chances of
benefit, he has no right in the, event of suffering a loss to be compensated for
it even under the ordinary law in a suit, much less the Court of writ jurisdiction can grant any such relief, ,(iii) the right to enter into a contract on parti·
cular terms with the State is not a fundamental right, (iv)
as the petitioners
bad not paid amounts required to be adjusted against the remunera lion of the
Agents they are not entitled to relief under Article 32, and (v) the provisions l('
are directly and essentially related to the operation of monopoly and, as such
are wtihin the protection of sub-cloose (ii) of claus (6) of Art 19.
Dismissing the petitions and appeal
HFLD: !. The condition in 4(bb) in the Tender Notices and the statutory
agreement is couched in peremptory, drastic and absolute language, not qua1ified by any words showing that the bar envisaged in it will be attracted only
in cases where the purchaser bas had an earlier_ opportunity to raise his objec·
tion but failed to do so, or, where he had on an earlier occasion raised such
an objection which was heard and overruled by the competent Forest Officer.
Condition 4(bb) therefore is inconsistent with and repugnant to Section 9(1),
proviso of the Act which contains a built-in-warranty, that the Kendu leaves
offered would be fit for manufacture of bidis; that is to say, the leaves would
be of merchantable quality and as such, invalid. [4420-H]
.
•
{
•
•
•
•
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BIR! LEA YES V. BIHAR
419
2. The scheme of the Bihar Act and the Rules and Forms including that
A
of the impugned condition 13 was designed remove the deficiencies, infirmities and vices pointed out in Rashbihari's Panda v. State of Orissa
[1969]
3 S.C .. R. 374.
The impugned condition 13 satisfied the test of reasonableness
under the first part of Articles 19 ( 6). The contention, that in actual operation, the
impugned provision (clause 13) creates a n1onopoly in favour of a class of
middlemen consisting of 'Agents' and purchasers, and enables them to earn unduly large profits at the cost of the public or pluckers and growers is not acceptB
able.
[4390-H, 440A-B]
3. (i). Clause (6) of Article 19 falls into two parts, indicating that the two
parts of the clause are intended to be distinct and separate.
The
words
"reasonable restrictions" which find pivotal mention in the first part, have not
been repeated in the second part which omission makes. it clear that a law
covered by sub-clause (ii) is not required to satisfy the test of reasonableness
under the first part of the clause and no objection to have validity of such a
law is tenable on the ground that it infringes the right guaranteed under Article
l9(l)(g). Sub-clause (ii) is thus an exception to the main substantive provision in clause (1) of the Article. (4310-H, 432A-BJ
3(ii). The basic and essential features which are directly and immediately
connected with the creation of the State monopoly are found in the body of
c
the Act itself. The provisions incorporated in the Forms of Tender Notice
D
and Agreement are merely subsidiary or incidental prov1s1ons,
therefore,
do
not fall within the protection of sub-clause (ii) in the second part of Article
19(6). [432E-F]
3(iii). \Vhere the business to be carried on by a citizen is in a commodity,
the sale of which is a State monopoly,- conditioned by some statutory terms,
(analogous to the impugned conditions) which in operation, have a direct and
immediate impact on the fundamental freedom of the citizen guaranteed under
E
Article 19(1) (g), the citizen cannot enter into a contract with the Government
for purchase of such a commodity except on the statutory terms laid down
by the seller-State. The Tender Notice and the Agreement \Vhich the purchasers
enter into with the Government, although couched in statutorv Forms, are
therefore, not bereft of their contractual character. [432G-H, 433A & C]
4. The minimum royalty or price payable being fixed on the basis of 7 5
~r
cent of the estimated annual yield in standard bags from the unit multiplied
"9'
~Y the rates offered and accepted. Such an estimate, is made on the basis of
the average actual yield from that unit for the preceding three years.
Such
F
•
an estimated yield is notified and published in the Tender Notices every year.
Purchasers in the trade, know beforehand as to what they are bidding for, and
they are generally persons who have been in the trade for several years and,
as such have a special knowledge of forming their own estimate-s of the expect·
ted yield and the chances of profit and loss from that particular nnit in a
particular year. [433F-OJ
5. As the chances of profit and risks of loss are evenly divided between the
seller-state and the purchasersi it cannot be said that the impugned condition
in clause 13 of the Tender Notice and the Agreement is manifestly nnreasonaG
ble. The impugned condition 13 is a restriction imposed in the general public
H
interest. [434B-C]
6. Although the Act alld the Rules contemplate that the Agents appointed
by the qovernment will be under its foll control and liable to compensate
j ! i
t
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420
SUPREME COURT REPORTS
[1981] 2 S.C.R.
A
the Government for any shortage, damage or loss caused in collection or delivery or any defect in the quality of the leaves collected, to the Government,
yet, in actual practice, the real position is that the Agents are generally persons
sponsored by and otherwise, deeply interested in the purchasers. [435B-C]
B
c
D
E
7. The agents are to be appointed every year at short notice
when the
plucking season is at hand and as there is a dearth of suitable· persons having
adequate experience. and skill of work as efficient agents, the Government is
dril'en into a situation in which they have to appoint persons sponsored by the
purchasers as Agents. The rules framed under the Act envisage a strict and
exclusive control of the Government over the Agents and iheir activities, and
provide for their liability to compensate the Government for the loss occasioned by their misconduct or neglect. The condition in condition 13 far from
creating a monopoly in the trade in favour of middlemen,
operates
as an
ironclad safeguard against leakage of the public revenue by assuring a minimum return to the public exchequer from the sale of Kendu leaves. The. provision is aimed to secure the full benefit from the trade to the State leaving
chances of making reasonable, marginal profit to the purchasers.
[435C-D. 439B-E]
8. It is a fundamental principle of general application th.1t if a person
of his own accord, accepts a contract on certain terms and works out the contract, he cannot be allowed to adhere to and abide by some of the: terms of
the contract which proved advantageous to him and repudiate the other terms
of the same contract which might be disadvantageous to him.
The
maxim
is qui approbat non reprobat. A party to an instrument or transaction cannot
take advantage of one part of a document or transaction and reject the resL
[441E·Hl
Verschures Crean1eries Ltd. v. Hull & Netherlands Steamship Co. [1921]
2 K. B .. 608 and Douglas Menzies v. Umphelby [1908] A.C. 224 at p. 232 referred to.
In the instant case the petitioners had by offering highest bids at public
auctions or by Tenders, accepted and Vlo'orked out the contracts in; the past but
are now resisting the demands or other action, arising out of the impugned
condition 13 on the ground that this condition is violative of Articles 19(1){g)
and 14 of the Constitution. The impugned conditions though bearing a statutory complexion, retain their basic contractual character. Though
a
person
coo.not be debarred from enforcing his fundamental rights on the ground of
estoppel or waiver, the principle which prohibits a party to a transaction from
approbating a part of its conditions and reprobating the rest, is different from
the doctrine of estoppel or waiver. [442A-C]
G
ORIGINAL JURISDICTION : Writ Petitions Nos. 2222-2252/77
&
•
I
•
-'1 •
'
... •
121 to 125/79, 405 & 441174, 46 & 47 /75.
~
(Under Article 32 of the Constitution.)
AND
CRIMINAL APPEAL No. 300 OF 1974.
H
Appeal by Special Leave from the Judgment and Order dated
14-2-1974 of the Patna High Court in Criminal
Writ
Jurisdiction
No. 68/73.
•
•
•
•
•
BIRl LEAVES v. BIHAR (Sarkaria, !.)
421
F. S. Nlitiman, Anil B. Devan, J. B. Dadachanji, K. J. John, l. ,S.
A
Sinha and Tarini Prasad for the Petitioners in WPs. Nos. 121-125/1
79, 2222-2252/77 & 46-47175.
Y. S. Chitale, K. K. Sinha and S. K. Sinha for the Petitioners in
W.P. Nos. 405 & 441/74 and Cr!. A. No. 300/74.
Lal Narain Sinha, Attorney General of India, Ram Balak Mahto,
B
and U. P. Singh for the Respondents Nos. 1-2 in all W.Ps. and Appeal.
Miss A .. Subhashini for Respondent No, 3 in WP Nos. 2222-2252/
17.
The Jlldgme'.nt of the Court was delivered by
SARKAJUA, J.-The common
question that has been
seriously
pressed itito argument in this batch of writ petitions and criminal
appeal mentioned in the title, relates to the constitutiopal validity of
certain Rules framed under the State of Bihar under the Bihar Kendu
Leaves (Control of Trade) Act, 1973 (hereinafter referred to as the
'Act') p:irticularly clause 13, clause 4 (bb) of the Tender Notice and
of the sμtutory Agreement notified by the Bihar Government in the
Bihar Government Gazette,. and the notices of demand issued under
the impugned provisions demanding "royalty" from tl1e petitioners in
respect pf the undelivered quantity of K endu leaves.
c
D
All these writ petitions will be disposed of by this common judgment. The basic question being common, it will suffice to state
E
the facfs giving rise to Writ Petitions 2222 to 2252 of 1977, filed by
the NejV Bihar Bidi Leaves Co.
The petitioners in all these writ petitions are either firms or individuals: carrying on trade in Kendu leaves in the State of Bihar. However, Retitioner No. 31 is an association of traders in Kendu leaves,
of which the other petitioners are members.
K~ndu leaves are grown as
forest
produce in several States,
including the States of Bihar, Orissa, Andhra Pradesh, Maharashtra,
Gujarat, Madhya Pradesh and a part of Uttar Pradesh. Under the old
system in Bihar, the right to pluck and extract Kendu leaves from a
forest: coupe carved out by the Forest Department, was auctioned by
the S~ate Government.
dn March 10, 1972, while the State of Bihar was
under
the
Presitlent's rule, the Governor of Bihar issued
the Bihar Kendu
Leaves (Control of Trade) Ordinance, 1972. The provisions of this
Ordlimnce were continued under successive Ordinances and ultimately
repl~ced by the aforesaid Act of 1973. This Act created State monopoly: in the matter of sale of Kendu leaves to the manufacturers
of
11-~7 SCI/ SJ
G
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A
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B
c
D
E
F
G
H
422
SUPREME COURT REPORTS
[1981] 2 S.C.R.
bidis. Its purpose is to regulate this trade in relation to the grower :if
Kendu plants and the collection and sale of the same through
the
agency of the State to the registered manufacturers of bidis. Under its
scheme, a specified area of Kendu leaves is divided into units. The
'grower' is defined as 'a grower who holds lands on which Kenda
plants grow or who is in possession of such lands under a lease or
otherwise, and includes the State Government.' Under Section 3, the
State Government may, by notification
in
the
Official
Gazette,
declare any area to be a specified area for the purposes of the Act
and divid_e every such specified area into such number of units as it
may deem fit. 'Unit' means a sub-division of a specified area constituted under Section 3. Under Section 4, the State Government may, -1
for the purpose of purchase and sale of Kendu leaves on its behalf,
appoint agents in respect of different units and any such agent may
be appointed in respect of more than, any one unit but not more than
•
•
three units. The terms, conditions and the procedure ior appointment
of agents have been prescribed by the Rules framed under the Act,
which we sh•ll presently notice. Section 5 places restriction on pur-
•
chase or transport of Kendu leaves. Section 8 mandates the Forest_
Officer incharge of a Division to set up in each unit a number of
depots. Section 9 is important and its material part runs as under:
"(I) The State Government or its authorised officer or
agent shall purchase Kendu
leaves
offered for sale and
deliver at the depot during the bus_iness hours at the rates
fixed under Section 7:
Provided that it shall be open to the State Government or its
authorised officer or agent, for reasons to be communicated
in writing, to refuse to purchase or accept delivery of any
Kendu leaves which, in their opinion, are not fit for the
purpose of manufacture of bidis.''
It will be seen that the proviso to sub-section ( 1) contains a built-in -~
warranty inasmuch as it says that the authorised agents will be bound
to accept delivery of all those Kendu leaves which, in their opinion,
~
are fit for the purpose! of manufacture of bidis. In other words, the
Kendu leaves to be
purchased by the authorised agents
of thel
Government must be of merchantable quality.
•
The next relevant provision is to be found in Section 11 which is
as follows
"(1) Every manufacturer of bidis within the State shall
get himself registered within such period on payment of such
fee and in such manner as may be prescribed.
•
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BIRI LEAVES v. BIHAR (Sarkaria, !.)
423
(2) Every manufacturer of bidis
within
the
State
A
registered under sub-section (I) shall furnish a declaration
in snch form by such date and in such manner as may be
prnscribed."
Section 12 provides that Kendu leaves purchased by the State Government or by its authorised officer or agent, shall be disposed of in
B
such manner as the State Government may direct. Section 20 of the
Act gives the State Government the power to make rules subject to
the conditions of previous publication, to carry out all or any of the
purposes of this Act. Sub-section (2) of that Section provides that
-"Such rules may provide for all or any of the following matters,
· namely:-
C
" (a) procedure to be followed in making appointment of
a~nts;
(b) to (d) ............ ,
( e) the manner of registration under Section 1 O;
{ f) the manner of registration, the period within which
such registration shall be made and the fee payable
thereof under sub-section (1) of Section 11 ;
(g) form of declaration, authority to whom, date
by
which and the manner in which the .ckclaration shall
be furnished under sub-section (2) of Section 11;
(h)
"
In exercise of its powers under the then extent Ordinance
analogous to those under Section 20, the State Government of Bihar
notified the Bihar Kendu Leaves (Control of Trade) Rules, 1972 (for
short the 'Rules'). These rules were, as already noticed, continued by
~lion 23 of the Act, event after the repeal of the Ordinance con-
' cemed.
Rule 2(8) defines 'Purchaser' to mean a person to whom Kendu
leaves have been sold by the State Government under Section 12
Under clause (1) of the same Rule, 'Standard bag' means
a bag
conlaining 1000 standard gaddis of Kendu leaves and
where
the
standard gaddis are not bagged, reference to standard bag . shall be
construed as a reference to 1000 standard gaddis or 50,000 leaves.
Under clause ( 11) , "Standard gaddi" -means a bundle containing 50
Kendn leaves .
Rule 3 provides the manner of appointing agents. The applicaD
E
F
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tion for agency is to be submitted in ·Form "A". This Fonn requires
A
B
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424
SUPREME COURT REPORTS
[198!] 2 S.C.R.
the applicant for appointment as Agent to make a Declaration .. inter
aNa, to this effect:
"I/We ........ hereby declare that I/We have read
and understood all the provisions of the
Bihar
Kendu
Leaves (Control of Trade) Ordinance, 1972 and the rules
made thereunder and the conditions of agency mentioned
in the notice issued under rule 3 (1) and I/we agree
to
abide by the
same. , I/we have personally inspected the
unit No ..... if I/we am/are appointed as an agent for the
unit mentioned above, I/we undertake lo purchase from
growers and collect from land of State Government
and
___,
deliver a quantity of Kendu leaves on both counts, which
shall not be less than . . . . . . Standard bags as mentioned
in the notice. I/we shall execute the agreement witlt the State
Government in Form 'C' within 15 days.
Witness:
1.
2.
Signature of the applicant."
Under sub-rule (7) of Rule 3, if, in the opinion of the State
Government, it is not possible to select a suitable agent for the purpose out of the persons who had applied for appointment as agent,
or where any agency is terminated and there is not sufficient time for
calling fresh applications, the State Government may appoint
any
person as agent who in their opinion is suitable for the work. Such a
person to be appointed as Agent is required to furnish a declaration
in Form 'B'. Sub-rule (9) requires that on appointment as an agent,
the person so appointed shall execute an agreement in Form
'C'
within fifteen days of the receipt of the order of appointment, failing
which the appointment shall be liable to be cancelled and upon such
cancellation, the security· deposit shall be forfeited; and the
age~t";
shall be liable to pay the loss, if any, incurred by the State Government
as a result of such cancellation of the appointment. Then, a formula
has been provided as to how such loss on cancellation of the appointment shall be calculated. The loss so determined shall be recoverable
from the agent or surety as arrears of land revenue. Sub-rule
(10)
requires the agent so appointed for a particular unit to deposit
security before signing the Agreement. Jt also
provides
how
the
amount to be deposited shOllld be calculated. Sub-rule ( 11) provides
that the agent shall purchase Kendu leaves from growers and from
such labourers who pluck Kendu leaves from the Government forests
and other lands at the depot opened by him or ordered to be opened
by the Divisional Forest Officer. Clause (ii) of sub-rule (11) lays
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BIR! LEAVES v. BUIAR ( Sarkaria' I.)
425
down that unless ordered by the Divisional Forest Officer or an officer
authorised by him in writing, the agent shall not slacken or stop the
purchase or collection in any depot within the unit. Sub-rule (12)
requires the agent to deliver immediately the Kendu leaves purchased
or collected by him to the purchaser appointed for the unit. Sub-rule
(13) provides :
"The agent shall maintain such account and submit such
periodical returns to thei Divisional Forest Officer or to any
other officer authorised by him as may be directed by the
Divisional Forest Officer."
Sub-rule (14) requires the agent to furnish a list of persons employed
by him with the unit, immediately to the Divisional Forest Officer,
and he is bound to remove any such person whose employment is
objected to by the Divisional Forest Officer. Sub-rule (15) is material
and reads as under :
"If the agent during the period of agency
has duly
observed and performed all the terms and conditions of the
agency to the satisfaction of the State Government and if the
State Government is satisfied that he has done his best to
collect maximum quantity of leaves from the unit, it may
grant to the agent yearly renewal of agency for a period to
be fixed by the State Government on such terms and conditions as may be decided upon for each year."
Sub-rule (16) provides that the
agent
shall be advanced such
money for the performance of agency as may be directed by the State
Government from time to time.
Rule 6(7) Jays down the procedure of enquiry about rejected
,~du leaves. According to this procedure, on receipt of a complaint
(under sub-section (2) of Section 9 of the Act, the officer shall hold
the enquiry after the necessary notice to the person concerned and
pass such orders in terms of sub-section (3) or (4) of Section 9 as
he deems fit.
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Rule 9 makes provision regarding the disposal of Kendu leaves.
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Under sub-rule ( 1), Kendu leaves collected or likely to be collected
by the State Government or by its authorised officer shall ordinarily
be sold or otherwise disposed of by tender
on such
terms. and
conditions as are specified in the Tender Notice and Tender Form
issued by .the State Government or by an officer authorised by the
State Government in this behalf. The Tender Notice is required by
H
sub-rule ( 2) to be advertised in newspapers and
in such other
manner as the State Government may deem-fit.
Sub-rule
(8)
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SUPREME COURT REPORTS
[1981] 2 S.C.R.
A
provides : "Notwithstanding anything contained in the foregoing provisions, the State Government may sell or otherwise dispose of Kendu
leaves collected or likely to be collected by it or by its officers or
agents by auction on such terms and conditions as may be decided by
it." Sub-rule (9) reads as under :
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"The successful tenderer or successful bidder, as
the
case may be, shall be appointed as purchaser for the particular unit, and the entire quantity of Kendu leaves collected
or likely to be collected from such unit or such lesser
quantity out of it may be offered to him by the State, its
officer or agent in such unit, shall be purchased by him in
such manner and on such terms and conditions as may be
specified in the agreement to be executed by such purchaser
under sub-rule (10)."
Sub-rule ( 10) requires the purchaser to execute an
Agreement
in Form 'M' within 15 days of the receipt of the order of appoint-
» ment. Sub-rule (11) requires such purchaser
before
signing
the
agreement to deposit the security calculated as, provided in that subrule. Sub-rule (13) provides that the purchaser, if he desires to consume the leaves within the unit or to remove the leaves delivered to
him outside the unit immediately or at any time before the 30th June,
shall pay the purchase price in full for the quantity of leaves delivered
E
to him calculated at the rate specified in the purchaser's agreement.
If the purchaser agrees in writing to keep the delivered leaves within
the unit under his supervision and risk and under insurance against
theft, fire and wastage at his expense but under the custody and control of the Divisional Forest Officer he may at the time of delivery of
leaves pay only such part of the purchase price of the delivered leaves,
F
as may be specified in the purchaser's agreement. The balance of tl:i!!,.r
purchase price may be paid in instalments on the dates specified in 1
the purchaser's agreement or on any earlier date before the leaves are
removed outside the unit or are delivered for consumption within the
unit. In no case the purchaser shall be allowed to remove
all the
G
leaves unless full price has been paid.
H
By NotiJicati()n, dated January 16, 1974, published in the Extraordinary Gazette of Bihar Governrnen\ of the same date, the Rules
were amended, and sub-clause (bb) after clause 4(b) was added in
Form 'M' of the Agreement. This sub-clause (bb) reads as under :
"The purchaser shall not raise any objection against the
quality of Kendu leaves or
shortage
of leaves in
the
standard gaddis."
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BIR! LEAVES v. BIHAR (Sarkaria, l.).
427
This is one of the impugned provisions.
The other impugned proviA
-sion is to be found in condition (13) of the Tender Notices published
in the Bihar Government Gazette, every year inviting tenders for the
puchase of Ken du leaves. This condition
( 13) which is also incorporated in the statutory Agreement (Fonn-M), runs as follows :
"For every unit a minimum royalty will be payable by
the purchaser. The amount of minimum royalty will
be
75% of the amount arrived at by multiplyihg the notified
yield in standard bags by the offer made by the purchaser
per standard bag.
This amount shall be payable by the
tenderer even if by the end of the season,
the _ price of
Kendu leave« at the offered rate, collected and delivered to
the purchaser, fell short of this amount. This whole amount
will be payable before the leaves are utilized or taken out
and, if not paid, will be realised as arrears of land revenue."
The first proposition ca:nvas&ed by Mr. Nariman appearing for the
B
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petitioners in Writ Petitions 405 and 441 of 1974, is the Petitioner•
D
argued that the aforesaid impugned provisions/conditions comprised
in the aforesaid clause 4(bb) and clause (13) amount to alli unreasonable restriction on the petitioners' fundamental freedom to carry on
trade or business in Kendu leaves; guaranteed under Article
19(l)(g) of the Constitution; that the impugned provisions are not
within the protection of sub-clause (ii) in the second part of claus~
E
( 6) of Article 19 because the impugned provisions are not "integrally
and essentially connected" with the creation of the monopoly in favour
-Of the State, but are only incidental or subsidiary to the operation of
the monopoly.
In support of this proposition, learned counsel has referred to the
decisions of this Court in Akadesi Padhan v. State of Orissa(') and
Rashbihari Panda etc. v. State of Orissa. (')
The second proposition propounded by Mr. Nariman is that the
impugmd provisions violate the fundamental rights of the petitioners'
1lUaranteed under Article 14 of the Constitution, becausei in their immediate operation and effect, they are harsh, unco'nscionab]e, arbitrary
11'nfair and oppressive; that even where the quantity offered
to
the
vurchaser is far less than 75% of the notified estimated yield, or the
leaves offered are not of merchantable quality, the impugned provisions
unreasonably obligate the purchaser to pay royalty for 75 per cent of
the estimated yield irresp;:ctive of whether the shortfall in the quantity
(l) [1%3] Supp, 2 S.C.R. 691
(2) (1969] 3 S.C.R. 374
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428
SUPREME COURT REPORTS
[1981] 2 S.C.R.
offered/delivered or the unmercha'n(l!ble quality of the leaves offered
is due to the fraud or negligence of the Agent who, under the Rules,
iS supposed to be independent of the purchaser and under the exclusive control of the Government; that the impugned provisions operate
irrationally and unfairly as they make no discerning distinction between
honest purchasers who are not blamable for the shortfall and dishonest
purchasers who through their fraud or collusion with the agent or
officers of the Government contribute to the sh01;tfa:I1.
Thus, the impugned provisions tar honest and dishonest purchasers with one and
the same brush which results in procrustean cruelty.
.__.,,
Third, the impugned provision which forecloses the right of the
purchaser to refuse delivery on the ground of the leaves offered, not
being of requisite quality, is incqnsistent with and ultra vire.• of the
Proviso to Section 9 ( l) of the Act which contains a built-in warranty
that the leaves offered or delivered shall be fit for the
purpose of
manufacture of bidis.
-
Dr. Chitale, appearing for the petitioners in Writ Petitions 121 to
125 of 1979, has by and large adopted the argnments of Mr. Nariman.
He has drawn our attention to Annexure 'C' to Writ Petition 47 of
1975, wherein quite a large number of instanc~s are given to show
that the shortfall in the actual delivery of the Kendu leaves to the
purchasers as against the estimated yield is
considerable.
Learned
counsel has emphasised that the auctions are held in January, while the
Agents are not appointed till March or April, which is the plucking
season, and i'n January, no reasonable estimate of the expected yield
is possible.
It is maintained that the allegations
in
the
counteraffidavit filed on behalf of the State to the effect, that the purchasers
inspect the nnits and make their own estimates of the expected yield
is factually incorrect because in Jauuary no such estimate is possible.
Dr. Dewan, who has appeared for some of the petitioners, cited
Maneka Gandhi's case(') in support of his contention, that the impugned provisions in their direct and inevitable effect, impinge upon
the fundamental rights of the petitioners guaranteed under Articles 14
and 19 (1) (g) of the Constitution.
Learned counsel contrasted the
impugned provisions with the Rules in vogue in the State of Andh.ra
Pradesh, which, according to him, have a reasonable basis.
Mr. K. S. Sinha, appearing for the appellant i'l1 Criminal Appeal
300 of 1974, submitted that the validity of the impugned provisions
was indirectly involved in this appeal, though in a different context.
It is pointed out that the permit to remove the leaves was refused to
(I) [1978] 2 S.C.R. 621
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BIR! LEAVES v. B111AR (Sarkaria, !.)
429
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the appellant on the ground thait he had taken away the leaves with-
· Aout paying 75 per cent of the royalty and had contravened Rule 16.
The point sought to be made out is that if the impugned Rules are
not held to be valid, this app~ mus!, in consequence, succeed.
On the other hand, Mr. L. N. Sinha, learned Attorney-General
submits on behalf of the respondents that there is a paucity of skilled
R:
people who could ~ employed as Agents; that in actual practice the
persons appointed as Agents are sponsored by the purchasers.
,.._,_
(i) It is submitted that the terms of the Agreement, taken as
a
whole, are not one-sided.
Whereas under the conditions of the
Tender Notice and the Agreement the purchasers voluntarily
binc\
themselves to pay the full price of the unit which is fixed according
to the Rules, irrespective of any shortfall in the quantity offered and
delivered, they, under the terms of the same Agreement get the benefit of purchasing Kendu leaves offered in excess of 75 per cent of the
estimated yield at the concessional rate of 55 per cent only of the
purchase price. It is argued that if the conditions of the Tender Notice
and the statutory Agreement are considered as a whole, it is evident
that the risks of loss and chances of benefit are equally divided between the purchasers and the State.
(ii) It is stressed that what is sold at the time of auction is the
estimated produce from a unit, as such, and the highest bidder or
tenderer gets the contract to purchase that unit al' a price the minimum of which is fixed at 75% of the amount arrived at by multiplying the notified estimated yield in terms of standard bags from that
unit. It is urged that (if a person volnntarily takes upon himself
under the tcnns of a contract, such risks and chances of be'nefi.t, he
'?"- - has no right in the event of suffering a loss to be compensated for it
<
even under the ordinary law in a suit, much less the Court of writ
jurisdiction can grant him any such relief). It is pointed out that
actually, in llO out of 1000 units, that yield exceeded in the notified
estimates, ami as a result, the purchasers reaped full benefit of the
~xcess supply at concessional rates.
(iii) (a) It is emphasised that the liability of the petitioners to
pay the whole price for the unit arises from the contract and, as such,
it cannot be considered to have a direct impact on the fundamental
right of the petitioners to carry on their trade or business; that the
right to enter into a contract on particular terms with the State is not
a fundamental right.
Even this Court-proceeds the argument-cannot
reCQnstruct the terms and conditions voluntarily agreed between the
petitioners and the State .
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SUPREME COURT REPORTS
[1981) 2 S.C.R.
(iii) (b) It is argued that it is not a. fit case to be decided under
Article 32 of the Constitution, because in several of these petitions
the purchasers (petitioners) were in default, inasmuch as they did
not pay the amounts required to be adjusted against the remuneration
of the Agents; that in most of the cases the purchasers reaped that full
benefits of the contract and only in stray cases, they suffered loss;
that since they had availed of the chance of reaping and advantage,
they could not turn round and attack the validity of the terms and
conditions of the contract which they had voluntarily made and worked out.
·
(iv) Another point sought to he made out is that the impugned
provisions are directly and essentially related to the operation of the
monopoly and, as such, fall within the protedion of sub-clause (ii)
of clause (6) of Art. 19.
(v) In the alternative, it is submitted that the impugned provisions
satisfy the test of reasonableness under the fir>t part of clause (6) of
the said Article~ and in applying that test the voluntary nature of thco
contract and the oblig2tions willingly undertaken by the purchaser with
all the risks of loss and chances of gain should not be lost sight of;
that a purchaser who acts on a -~ntract voluntarily entered into by him
is precluded from repudiating some of its conditions which involve risk
of loss and to accept those which are advantageous to him .
In support of the proposition that one who has received the benefits of statute is precluded from attacking the constitutionality of a
condition attached by the statute, the learned Attorney-G.cneral has
referred to these decisions of the Supreme Court of United
States :
Berth Fisheries Co. v. Industrial Commission of the Stale of Wisconian('); St. Louis Casting Co. v. Consrmc1ion Co.('); and United
Food Fuel Gas Co. v. Rail Road Commission.(")
Jn reply, Mr. Nariman submits that writ petitions have been filed
from 1973 onwards by various purchasers to challeniic the validity
of the impugned provisions, as notified every yeat for inviting tenders,
in the High Court or in this Court, and from time to time interim ordeT'
staying the operation of the impugned provisions have been issued
either by the High Court or this Court; that in \iew of this, it cannot
be said that the petitioners are precluded from challenging the validity
of the impugned provisions on the ground of acquiescence. waiver or
estoppel. It is maintained that fundamental rights cannot be waived,
------
(!) 71 L.Ed, 908
(2) 1923 us 469
(3) 102 us 415
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BIR! LEAVES v. B!HAR (Sarkaria, l.)
431
particularly those under Article 14 of the Constitution and the principle of estoppel enunciated in the American decisions is not applicable in India.
In support of this argument,
reference
has
been
made to the decision of this Court in Basheshar Nath v. The Commissioner of Income-tax, Delhi & fuliasthan & Anr.