M.P. OIL EXTRACTION AND ANR. ETC. versus STATE OF MADHYA PRADESH AND ORS.

Citation: [1997] SUPP. 1 S.C.R. 671 · Decided: 09-07-1997 · Supreme Court of India · Bench: G.N. RAY · Disposal: Dismissed

Judgment (excerpt)

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M.P. OIL EXTRACTION AND ANR. ETC. 
v. 
STATE OF MADHYA PRADESH AND ORS. 
JULY 9, 1997 
[G.N. RAY AND G.T. NANAVATI, JJ.] 
Industrial Policy 1979-Supply of Sal seeds to Industrial units-Special 
treatment to certain class of industries set up at the instance of State Govt. 
A 
B 
in backward and tribal areas-Agreement by State Govt. with respondent in-
C 
dustries for reservation and supply of sal seeds on payment of detem1ined 
royalty-Renewal of lease in favour of respondent-industries-Validity 
of-Held, industrial policy of 1979 not arbitrary-No illegality or arbitrariness 
in the agreement giving special treatment to certain class of in-
dustries-Renewal clause and [1.Xation of royalty just and proper-Constitution 
of India: Article 14. 
D 
The appellants filed writ petitions in the High Court challenging the 
agreement entered into by the State Government with Baster Oil Mills and 
Sal Udyog (Pvt.) Ltd. for distribution of specified amount of sat seeds 
annually. The said writ petitions were dismissed. Special Leave Petitions E 
were filed before this Co1,1rt and by way of interim order, this Court 
direi:tcrl the State to supply 5000 M.T. of sal seeds in favour of each of the 
appellants. The said appeals stood disposed of and the order of High 
Court became final. 
The appellants under two separate agreements with the Govt. got F 
reservation of 13 to 17 units of sal seeds producing forest in their favour. 
Such reservation of forest was challenged before the High Court and the 
agreement for reservation of forest was set aside. In the year 1983, the 
appellants again managed to get reservation and allotment of 7500 M.T. 
of sat seeds per annum under two separate agreements from the State 
Govt. On challenge, the High Court quashed the said agreements. Special G 
Leave Petitions were filed by the appellants against the above order. This 
Court disposed of the petitions upholding the allotment and reservation 
of sal seeds iii favour of Baster Oil Mills and M/s. Sal Udyog (Pvt.) Ltd. 
and two other units selected by the State Govt. under the 1979 Industrial 
Policy. The appellants again filed two separate but identical writ petitions H 
671 
672 
SUPREME COURT REPORTS [1997] SUPP. 1 S.C.R. 
A challenging the reservation and allotment of 10,000 M.T. of sat seeds in 
favour of M/s. M.P. Glychem Industries. The said writ petitions were also 
dismissed by the High Court. Thereafter, writ petitions were filed by 
appellants challenging the renewal of lease in favour of respondents and 
also challenging the determination of royalty to he paid. The writ petitions 
B were again dismissed. Hence the present appeals. 
The contention of the appellants inter a/ia was that the action of 
State Govt. treating only a few of the industrial units of the State in a very 
favoured manner by entering into fresh agreements for supply of sat seeds 
has amounted to deliberate discrimination against them which was 
C violative of Articles 14 and 19 of the Constitution; the royalty paid by the 
respondents for supply of sat seeds under the impugned agreements was 
absolutely minimal and much less than the auction price for sat seeds and 
thus they were facing unjust competition from the favoured child of the 
State Government. 
D 
The contention of the respondents was that there was a fundamental 
difference between the two categories of industries operating in the State 
using sal seeds for production i.e. those new units with specific agreements 
with State Govt. under the industrial policy and those units existing prior 
to the policy not selected by the Government. The Courts having upheld 
E the said agreement for reservation of sat see~s in favour of respondents 
the renewal clause being part of the agreement to give protection cannot 
be held to be arbitrary and violative of Article 14 of the Constitution. 
Dismissing the appeals, this Court 
F 
HELD : 1.1. The industrial policy of 1979 which was subsequently 
revised from time to time cannot he held arbitrary and based on no reason 
whatsoever hut founded on mere ipsi dixit of the State Government of M.P. 
The executive authority of the State must he within its competence to frame 
policy for the administration of the State. Unless the policy framed is 
G absolutely capricious and, not being informed by any reason whatsoever, 
can he clearly held to he arbitrary and founded on mere ipsi dixit of the 
executive functionaries thereby offending Article 14 of the Constitution or

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