RASHBIHARI PANDA ETC. versus STATE OF ORISSA

Citation: [1969] 3 S.C.R. 374 · Decided: 16-01-1969 · Supreme Court of India · Bench: M. HIDAYATULLAH

Cited by 7 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

RASHBIHARI PANDA ETC. 
v. 
STATE OF ORISSA 
January 16, 1969 
(M. HIDAYATULLAH, C.J., 
J. C. SHAH, 
V. RAMASWAMI, 
G. K. MITTER AND A. N. GROVER, JJ.J 
Orissa Kendu Leaves (Control of Trade) Act (28 of 1961) s. 10-
Scheme of Government for sale and ·disposal of leaves purchased by it-
Contracts tvith. and invitation to offer, restricted to licencees of previous 
year-If violative of Arts. 14 c.nd 19(1)(g) of Constitution-Art. 19(6) 
(ii)-Mo1wpo/y of Government-Tests for validity-Bona fides of Govern-
n1ent and error of judg111ent by Governrnent-1/ a defence to discri111ina-
tio11. 
Kendu tree is a wild growth and its Jeaf is used mainly in the manu-
facture of bidis. 
To regulate trade in Kendu leaves and prevent exploita-
tion of growers and pluckers the respondent-State adopted diverse mea-
sures. 
In 1961, the Orissa Kendu I.eaves (Control of Trade) Act, 1961, 
was enacted. By s. 3 of the Act no person other than the Government, 
an authorised officer of the Government, or an agent appointed by the 
Government, shall purchase or transport Kendu leaves; and under s. 4 
the Government is authorised to fix the price at which the leaves shall be 
purchased from the gro\\•ers by the officer or agent of the Government. 
Section JO provides that the Kendu leaves purchased shall be sold or 
disposed of iu such manner as the Government may direct, and under s. 
11, at least one half of the net profits derived by the Government is to be 
paid to Sa111itis and Gram Panchayats. A grow~r of Kendu leaves chal· 
lcnged ss. 3 and/4 and r. 7(5) made under the Act as infringing his 
fundamental rights under Arts. 14 and 19(1)(f) and (g). This Court, in 
Akudasi Padh<n v. State of Orissa, (1963] Supp. 2 S.C.R. 691, held that 
ss. 3 and 4 did not infringe Art. 19(6)(ii), but that the State was in· 
competent to implement the provisions of the Act and give effect to its 
n1onopoly. because, the agents appointed \vere not really agents of the 
Government but were autho'rised to carry on trade in the leaves purchased 
not on behalf of the Government but on their own account, and that it 
thus gave rise to a monopoly in favour of the agents which was not pro· 
tectcd by Art. 19(6)(ii) since the law cannot be used by the State for 
the private benefit of agents. 
Thereafter. the State- made some changes 
in the implementotion of its monopoly. 
In J 966, it inrited tenders from 
persons desirous of purchasing Kendu leaves purchased by the. officers and 
agents of the Government. 
During the years 1966 and 1967, the prices 
of Kendu leaves ruled very high and when sales \Vere effected by public 
auction, prices .;onsiderably in excess of those at which 
tenders 
\\.'ere 
nccepted \\'ere realised. 
Early in 1968, the State evolved another scheme 
under which. the State offered to renew the licences of those traders who 
in the State's view had worked Satisfactorily in the previous year_ and had 
paid the amounts due from them regularly. The scheme was objected to. 
and realising thJt, the scheme a'rbitrarily excluded many persons interested 
in the trade-. and hence was objectionable, the Government dec,ided to in· 
vite offers for advance purchases of Kendu leaves but restricted the invita-
tion to those individuals who had carried out the contracts in the previous 
year without default and to the satisfaction of the Government, that is, 
the existing contractors were given the exclusive right to make offers to 
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RASHBIHARI PANDA v. ORISSA (Shah, J.) 
375 
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purchase Ke11du leaves. 
This new method 
of offering 
to enter 
into 
agreements for advance purchases ot' Kendu leaves by private 
offers in 
preference to open competition, was challenged by writ petitions in the 
High Court as violative of the petitioner's fundamental rights under Arts. 
14 and l9(l)(g). 
The High Court held that under s. JO of the Act the Government 
cpuld dispose of the leaves in such manner as it thought fit, that the only 
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question for the Court was whether in adopting the new scheme of offer:ing 
to enter into advance purchase contracts 
by 
private 
negotiation 
the 
Govern.ment had acted bona fide, and that the petitioners failed to sho\v 
that in exercising its dbcrction the Government acted arbitrarily or with-
out bona fir/es. 
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In appeal to this Court, 
HELD : The validity of a law by which the State assumed the mono-
poly to trade in a given commodity has to be judged by the test whether 
the entire benefit aris

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