Judgment:
P. Kodandarmayya, J.
1. The 1st petitioner is a public limited company incorporated under India Companies Act, 1913 having its registered office at Bombay. It manufactures ight commercial vehicles. The 2nd petitioenr is the shareholder of the 1st Petitieonr company. The challenge of these petitioners of the notification sisued under S. 9(1) of the A. P. General Sales-Tax Act granting concession inn the rate of tax payagle under the siad Act by the 2nd respondent was upheld by us in our judgment delivered to day and we staed fully the background of this challenge. Now the order in questin was issued by the first respondent herein the Government of Andhra Pradesh by its Industries & Commerce Department directing all Govenmenr Deparments and locl bodies to buy their requirement of light Commercal vehicles only from the wnd respondent. The 2nd reespondent company was formed and promoted by hyderabad Allwyn Limited whihc is an undertaking of the Andhra Pradesh State Goverment. The second respondent company started its venture of manufacturing light commercial vehicles setting up its factory at Zaheerabad in Medak district with the collaboration of Nissan Motor Company of Japan.
2. The impugned order refers the letter of the 2nd respondent company addressed to the Government on 13-2085 and it proceeds to State that the Government have examined the proposal of the M/s Allwyn Nissan Limited in the light of their need in the initial period of their project implementation, for marketing support from the State Government Departments, and State Government Departments, and State Public Sector undertakings, and directs the Purchase of the product of the 2nd respondent, 'Cabstar' in the follwing terms as set out in paras, 4 to 6 of the said G. O.
'Government hereby accordingly direct that all the Government Departments/Companies/Corporations/Municipal Corporations, Panchayat Samities and Gram Panchayats shall in future meet their purchase requirements of Ligh Commercial Vehicles only by purchase of 'Cabstar' from M/s. Allwyn Nissan Limited.
Such purchases of 'Cabstar' from M/s Allwyn Nissan LIMited can be made without going through the tendering formalities etc.,
If any such Department/Organisation wishes to meet their purchas requirement of the Light Commercial Vehicel by purchase of any vehicle other than 'Cabstar' from M/s Allwyn Nissan Limited, specific permission in this regard will have to be obtained from the Government in the Industries and Commerce Department.'
3. The contention of the petitioner is this G. O., is hit by Arts. 14 and 19(1)(g) and 301 of the Consitution as it is discriminatory in character in view of the fact that it completely excludes the goods of other manufacturers and favoured the 2nd respondent and the object is to prevent the competetion with the petitioners and the said order effectively wipes out all comptetion vis-a-vis the 2nd respondent company and leaves the field open, only to the light commercial vehicles, manufactured by the 2nd respondent-company. It is also averred in view of the notifications challenged in Writ Petition No. 7626/85 this Government Order re-inforced their submission that the 1st respondent Government wants to favour the 2nd respondent company by its illegitimate and improper actions and the same is liable to be interdicted by this Court under Art. 226 of the Constitution.
4. This was refuted by both the respondents stating broadly that the first respondent Government is free to purchase the goods of their choice and they are satisfied with the product of the 2nd respondent as it was found to be superrior in its quality. It was also urged that the petitioners have no fundamental righto sell their goods to the Government adnits Departments and it is incorrect to state that there is a total prohibition to purchse the goods of the petitioenrs and the G. O., permits purchasing of the goods from otehr manufacturers also, and the petitioenrs also can make representation to the Government and convince that their product is superior and hence it is submitted there is no violation of fundamental rights of the petitioners and in particular the 1st petitioner cannot invoke Art. 19 of the Consitution. The allegation of concerted action on the part of the Government with the 2nd respondnet is denied urging that it is legitimate to support the second respondent as it is a public undertaking.
5. The learned counsel of the petitioners Sri A. Setalwad submited that the impugned order taotally lacks in authority of law, and is volative of Art. 14, 19(1)(g) and also 301 of the Consitution. Sri T. Ananta Babu appearing for the 2nd respondent company has submitted that the circular is only an administrative order communicating the information to the Departmental wigns. It is only a disseminator in character about the quality of the vehicle and the advisibility of purchasing the same. It is also urged that the Government Departments and other bodies are free to purchase other vehicles except they have to seek earlier permissio from the Government which owuld be given in formal course. Sri N. V. Suruanarayana Murthy, the learned Government Pleader urged an additional ground stating tht the petitioer company cannot invoke Art. 19(1)(G) as it is not a citizen with in the meaning of the said article and no question of violation of Art. 19(1)(g) arises.
6. The learned counsel for the petitioners pointed out that admittedly this circular was issued without any statutory power vested in the Government and it is only under the executive power the G. O., was issued. Judged with the impugned notifications in the other writ petition, the G. O., clearly bars the entire trade of the petitioners and other manufactureers in the public sector. The terms of the G. O., are clear and normally the Departments are bound to obey the directive issued by the Government. The subordinate Officers cannot disregard the mandate issued by the Government and we can fairly assume that if this G. O., is implemented effectively the result would be that the entire Government departments, Companies, Corporations, Municipal Authorities, Panchayat Samities and Gram Panchayats shall not purchase the other light commercial vehicles except the product of the 2nd respondent. That is the first part of the offending portion of the G. O. The second part of the Government directive is that the above enumerated departments, and local authorities can purchasae the product of the 2nd respondnt without going through the tendering formaliteis. Finally a specific permissin must be obtained from the Government if any one wants to deviate from the circular and purchase a different product. We are not persuaded to accpet that this circular is such an ineffectie one which can be treated as mere nformative in characer and making choice of purchase by the Government and their departments. The order is very specific and the subordinate officers are bound to obey it. A violatin may even result in taking disciplinary action. Secondly in the absence of any stututory power under local Acts, the Government cannot issue such directive to the municipal corporations and other public corporations, panchayat samithes and gram panchayats which are local authorities. The circular is quite destructive of the corporate status of those public corporations and also local authorities. It is admitted that the circular was not purported to hafe been issued under any statutory power. Further the authorities mentioned above were directed to purchase the product of the 2nd respondent without going through the tender formalites. Admittedly the product is costlier compared with the product of the petitioner. Assuming it is superior in quality it is not proper for the Government to direct that irrespective of its price, all the public authorities should purchase the product of the 2nd respondent. In fact courts have interdicted the proceedings when the purblic authorites granted contracts and made purchases on private bargain without following the procedure envisaged under different enactments and staturoty Rules. Courts havedeprecated the method of adopting the adhoc procedure in selling the Governmet property or granting contracts to the public without proper advertisements to prevent any waste of public money. We cannot see any justification to dispense with the tender system altogether irrespective of the need of the several public corporations and local authorities even though the 2nd respondent company is a Government company. Further we are not satisfied that the last clause in the impugned order cures the infirmity as it only states that specific permissin in this regard will hafve to be obtained from the Government before purchasing of the goods. Hence we are of the opinin that in he absence of any legal authority the Government cannot issue the impugned order and thus prevent the legitimate trade of the petitioners and other manufacturers in the entire public sector of the State of Andhra Pradesh.
7. We shall now notice the legal position whether this situation created by the impugned order can be challenged by the petitioners. We take up first two contentions of the counsel to gether. In thewell known Textbooks cae Ram Jawaya v. State of Punjab, : [1955]2SCR225 Mukherjea, Chief Justice held that the specific legislation may indeed be necessary if the Government require certain powers in addition to what they possess under ordinary law in order to carry on the particular trade or business. It is no doubt held that the language of Art. 162 of the Consitution clearly indicates that the power of the State executive to extend to matters upon which the State legislature is competent to legislate and not confine to mattes over which the legislation has been passed already. This dicta was elucidated in two subsequent caes. In State of M. P., v. Thakur Bharat Singh, AIR 1967 SC 1170 it was held that where the rights of a citizen were prejudically affected, executive action could be justified only if it was supported by authority of law and Shah J., observed that 'All executive action which operates to the prejudice of any person must have the authority of law to support it, and the terms of Art. 358 of the Consitutio do not detract from that rule. Again Subba Rao, Chief Justice in Satwant Singh v. A. P. O., New Delhi, : [1967]3SCR525 where a refusal of a pass port by the executive was challenged observed :
'The doctrine of equality before the law is the necessary corollary to the high concept of the rule of law accepted by the Consitution of India. One of the aspects of rule of law is that every executive action, if it is to operate to the prejudice of any person must be supported by some legislatie authority.'
This is reiterated in Naraindas v. Stae of M. P., : [1974]3SCR624 wherein Bhagwati, J., held that by entering into competition with the citizens the Government did not infringe their rights and the Stae Government could prescribe text books in exercise of its executive so long it did not infringe the righs of any one. This view was again emphasised by R. S. Pathak, J. In Bishamber Dayal Chandra Mohan v. State of U. P., : [1982]1SCR1137 holding that 'The quintessence of our Consitution is the rule of law. The State or its executive officers cannot interfere with the rights of other unless they can point to some specific rule of law which authorises their acts.' However in that case the power of the executive to issue a teleprinter message was justified as such a directive was meant to subserve the object of the provisions of the Essential Commodities Act. Hence we see that when the rights of a citizen are affected by an intervention of the State activity, it can be justified only by a statutoy power. It is not disputed that the impugned G. O., is only administrative order without reference to the statutory power. It is also well settled that even a purely administrative order or other act may also come within the sweep of Art. 14. Such action can be challenged as offending Art. 14 of the Consitution. (Vide Railway Board v. Observer Publications), : 1973CriLJ458 .
8. The order aspect of the case is hat every citizen has a right to carry on the trade and the State in its multiffavirous activities is itself a great trader, manufacturer and industrialist and it cannot act arbitrarily in giving jobs or entering not contracts or granting other forms of largess to whomsoever it likes. This is one of the well settled facets of Art. 14 of the Consitution as laid down by the Supreme Court. It is enough if we refer to Kasturi Lal v. State of J & K, : [1980]3SCR1338 wherein Bhagwati J., following the earlier principle laid down by him in Rama Dayaram Shetty v. The Internatinal Air Port Authority of India, : (1979)IILLJ217SC , observed :
'The discretion of the Government has been held to be not unlimited in that the Government cannot give largess inits arbitrary discretion or at its sweet will or on such terms as it chooses in its absolute discretion. There are two limitatinos imposed by laaw shich structure and control the discretion of the Government in this behalf. The first is in regard to the terms on which largess may be granted and the other, in regard to the persons who may be recipients of such largess.'
and it is further observed that :
'Every activity of the Government has a public element in it and it must, therefore, be informed with reason and guided by public interest. Every action taken by the Governent must be in public interest; the Government cannot act arbitrarily and without reason and if it does, its action would be liable to be invalidated. If the Government awards a contract or leases out or otherwise deals with its property or grants any other largess, it would be liable to be tested for its validity on the touchstone of easonableness and public interest andif it fails to satisfy either test, it would be unconsitutional and nvalid.'
It is clear when a itizen complains about the unfavourable treatement, and discriminatino agains thim the court has to see who is the recipient of such largess and the terms of such largess and such action can be justified to be reasonable and in the public interest. In Rasibihari v. State of Orissa, : [1969]3SCR374 the Supreme Court held that 'Exclusion of all persons interested in the trade, who were not in the previous year licensees was exfacie arbitrary it had no direct relation to the object of preventing exploitation of pluckers and growers of kendu leaves, nor had it any just or reasonable relation to securing the full benefit from the trade to the State.' We have already noticed that if rights of a citizen are denied the Stae must be armed with a law. In Kharak Singh v. State of U. P., : 1963CriLJ329 it is observed by Rajagopala Ayyanagar, J., 'the only manner in which this violation of the fundamental right could be defended would be by justifying the impugned action by reference to a valid law, i.e., be it a statute, a statutory rule or a statutory regulation.'
9. No doubt we held it writ petition No. 7626/85 that the 2nd respondent consitutes a class by itself under Art. 14 for the purpose of earning exemption of a concessino of tax and the classification justifies the object of giving such protection as new entrant. But we do not find such nexus even if we treat the 2nd respondnet as a class by itself being a Government company. It is not reasonable to deny the entire market in public sector to other manufacturers, and the classification of the 2nd respondent as a class by itself cannot justify for this purpose of excluding all other manufacturers and deny them the benefit of the entire market in the public sector. Hence the impugned order is clearly hit by Art. 14 and cannot be justified by executive action. It is neither reasonable nor can be justified on the ground of public interest. Hence we are clearly of the opinion that the impugned order has no sanction of law behind it as it is hit by Art. 14 and we accept the contention of the petitioners in this regard.
10. We shall take pu the last contention that the impugned order violates Art. 301 of the Consitution of India. It is necessary to look to Art. 301 and the relevant portion of Art. 304.
'Art. 301. Subject to the other provisions of this Part, tradt, trade, commerce and intercourse throughout the territory of India shall be free.
Art. 304. Notwithstanding anything in Art. 301 or Art. 303, the Legislature of a State may by law -
(a) XX XX XX XX XX
(b) impose such reasonable restrictions on the freedom of trade, comerce or intercourse with or within that State as may be required in the public interest;
Provided that no Bill or amendment for the purpose of Cl. (B) shall be introduced or moved in the Legislature of a State without the previous sanction of the President.'
In the judgemtn delivered by us in W. P. No. 7626 of 1985, D/- 23-1-1986, we have examined the scheme of Part XIII of the Consitution and the object of these consitutional provisions to maintain the economic unity of the country as a whole. We need not repeat them again here. The G. O., creates a kind of monopoly of selling the goods in the entire public sector in Andhra Pradesh in favour of 2nd respondent company. Such an executive act is clearly hit by Art. 301 and is also prohibited by Art. 304(B) unless there is a legislative sanction behind it complying with the Proviso to Art. 304(b). This view is clearly supported by the authority in District Collector, Hyderabad v. Ibrahim & Co., : [1970]3SCR498 . In that case the proceedngs of the State Governmen of Andhra Pradesh ordering the sugarcane quota allotted to twin cities of Hyderabad and Secunderabad shall be given in its entirety to the Greater Hyderabad Consumers Central Co-operative Stores, Ltd., Hyderabad was challenged by the other dealers whose licences were obrogated and who were prevented to carry on the business by such executive flat. Thogu the order was issued when the proclamation of emergency issued under Art. 358 of the Consitution was in force the Supreme Court held the executive action of the State which is invalid otherwise than on the ground of infringement of Art. 19 is not protected by Art. 358. It also held that the order is violative of Art. 301. It observed :
'In the present case the Staet had not assumed a monopoly to deal in sugar. It had granted monopoly to a Central Consumers Co-operative Stores which was not a corporation owned or controlled by the State wihin the meaning of Article 19(6)(ii). The order was challenged on the ground that it trenches upon the freedom of trade and commerce guaranteed by Art. 301 of the Consitution. By Art. 304 even by legislative restrictions on the freedom of trade, commerce, and intercourse with or within the State may only be imposed, if such restrictions are reasonable and are required in the public interest and the Bill or amendment is introduced or moved in the Legislature of a State with the previous sancttin of the President. Obviously the guarantee under Art. 301 cannot be taken away by executive action. The guarantee under Art. 301 which imposes a restriction upon legislative power of the Parliment or the State Legislature and the declaration. There is no reason to think that while placing a restriction upon legislative power the Constitution guaranteed freedom in the abstract and not of the individual.'
In view of the above pronouncement we feel no hesitation in holding that the impugned order is clearly hit by the above Consitutional provisino and is liable to be set aside.
11. The only contention remains to be examined is whether the impugned order also infringes Art. 19(1)(g) of the Consitution. The learned counsel of rthe petitioner urged that the objection that the first petitioner cannot invoke Art. 19(1)(g) being a public limited company and not a citizen is not sustainable and the earlier view of the Supreme Court in S. T. Corporation of India v. Commercial Tax Officer, AIR 1963 SC 1811 is no longer in vogue and in the Bank Nationalisation case, : [1970]3SCR530 the Court accepted the claim of the shareholder to challenge the validity of the Act and his locus standi was not doubted. We are not inclined to accept thi scontention in the broad way it is stated by the learned counsel for the petitioners. No doubt in the Bank Nationalisation case the Supreme Court upheld the right of the shareholder to challenge the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance/Act 1969. The Court took the said view on the ground that the rights of the individual shareholders also are impaired by the impugned legislation. Similar view was taken in Bennet Coleman v. Union of India, : [1973]2SCR757 by adopting the device of tearing the corporate veil. IN that case also the majority view is based upon the ground that although a company is not a citizen the citizen-share holder can enforce their right of free speech as the company is only a medium for expressing their view. Thus unless such individual right of the shareholder is also established it is not possible to hold that the company can invoke the fundamental right under Art. 19(1)(g) of the Consitution. In fact in the present case no such attempt is made except a shareholder is added as party-petitioner in the case. We annot assume impairing the business of the 1st petitioner is impairing the business of the 2nd petitioner also. Such view clearly overlooks the corporate status of the company. Further in State of Gujarat v. Shri Ambica Milla, : [1974]3SCR760 , Mathew, J., referring to the Bank Nationalisaton case and also Bennet Colema v. Union of India, : [1973]2SCR757 held that as a general rule a corporatin is not a citizen for the purpose of Art. 19 and has therefore no fundamental right under that Article. However, the Court proceeded to examine the claim that even without the fundamental rights, an infringement of an ordinary right of every citizen in the country would be sufficient to invoke the pwoer under Art. 226 of the Consitution. Hence we are inclined to accpet the objection on behalf of the State in this regard.
12. However, this doesn to affect the result in favour of the petitioner as he is netitled to succeed on other grounds.
13. Finally, it is necessary to adver to the request of the respondents' counsel Sri T. Ananta Babu that quashing the impugned order absolutely will affect the 2nd respondent as it may be construed as a total bar for purchasing its goods by the Government or public corporations or any patronage by them. We do not see such a situation wuld arise. It is always open to the 2nd respondent to canvass for their goods in the public sector and it is always open to the Governmetn and the public corporations to purchase after following the usuual procedure the goods of the 2nd respondent if they are satisfied that it is advantageous for them to do so. The total prohobition of purchasing the goos beloining to the other manufacturers is the gravamen of the charge in these proceedings and hence we see no legal injury if we quash th impugned order.
14. In the result, the writ petition is allowed, the impugned order is quashed and we make no order as to costs. Advocate's fee Rs. 250/-.
Anjaneyulu, J.
15. I agree with my learned brother that this writ petition should be allowed for the reasons stated by him, but would prefer not to express my opinino on the violation or otherwie of Art. 9(1)(g) of the Consitution.
16. I should also like to add a few observations. In the counter-affidavit filed by the first respondent as also in his arguments Sri. T. Anantha Babu, learned counsel for the second respondent, sought to justify the impugned order on the ground that the light commercial vehicle known as CABSTAR manufactures by the second respondnet is qualitatively far superior to the light commercial vehicles manufactured by the petitioner the long run the CABSTAR vehicle manufactured by the second respondnet will prove to be more economical even though its price is far more than the price of the light commercial vehicle manufactured and sold by the petitioner. It may be pointed out that while the cost of CABSTAR manufactured by the second respondent is about Rs. 1,38,563/- the cost of light commercial vehicle manufactured by the petitioner is Rs. 97,568/-. In support of the above plea the first respondent furnished a big catalogue of particulars relating to specifications of light commercial vehicles and endeavoured to show on comparison that the CABSTAR manufactured by te second respondent is economically more viable and consequently the first respondent was justified n directing all the Government Departments, Companies, Corporations etc., to purchase only the CABSTAR manufactured by the second respondent. A perusal of the record of the first respondent produced by the learned Government Pleader does not show that before issuing the impugned order any investigaton was made by the first respondnet that it is economically more viable to purchae the CABSTAR manufactued by the second respondent. On 13-2-85 the second respondetn addressed a letter to the Principal Secretary to Government in the Department of Indiustries and Commerce requestnig for the 'Issue of a notificatiton to the Government-Departments, Quasi-Government and other Stae Public Sector Organisatoin to go in for CABSTAR of Allwyn Nissan against their requirements of light comercial vehicles and place orders without going thorough the tendering formalities.' It is claimed in the letter addressed by the second respondent that the light commercial vehicle is a much superior product. It is inter alia stated in the letter dt. 13-2-85 of the second respondent that the Government should extend tis suppor tn the formative stages for the new project. It was pointed out that the light commercial vehicle market was having stiff competition which will increase in the immmediate near future with the entrance of DCM Toyoto, Swaraj Mazda, Eicher, Mitsubishi and Telco in addition to the trhre major exisint manufactureers viz., Bajaj Tempo Mahindra & Mahindra and Standard. It does not appear from the record that any action was taken immediately on the aforesaid letter dt. 13-2-85 of the second respondent. Consequently on 11-6-85, the Chairman of the Hyderabad Allwyn Limited, wrote a Demi-official letter to Sri S. Banherjee, Joint Secretary to Chief Minister, by way of reminder. The endorsement on this letter would show that the matter was discussed with the Principal Secretary, Industries & Commerce and the Chairman of Hyderabad Allwyn Limited. It is stated that the Chief Minister agreed to the request and there was a direction to issue instructions accordingly. Based on the above endorsement dt. 13-6-85 on the letter dt. 11-6-85 of the Chairman of the Hyderabad Allwyn Limited, the impugned circular dt. 21-6-85 was issued. These facts would not lend support to the contention urged in the counter-affidavit as well as by the learned counsel for the second respondent that there was an investigation into the economic viability to the purchase of CABSTAR manufactured by th second respondent and upon such investiatin the first respondent was satisfied that it would be in the interests of the Government-Departments and other Quasi-Government Corporatins to purchase at a much high er cost the CABSTAR manufactured by the second respondent as against the low price of light comercial vehicles manufactured by the petitioner and other manufacturers. The impugned memo to the various departments was obviously issued by the Government for the obvious purpose of helping the second respondent from facing 'stiff competition' in the market. The direction of the first respondent through the impugned memo to the Government Departments, etc., to purchase only the CABSTAR thus smacks of arbitrariness violating Art. 14 of the Consitution of India.
17. Petition allowed.