Judgment:
B.C. Varma, J.
1. The order in this petition shall also govern the disposal of Miscellaneous Petition No. 278 of 1986 Uogendra Lal Wadhawa and 2 Ors. v. State of M.P. and 6 Ors.). Miscellaneous Petition No. 324 of 1986 (Sy ed Barkat Ali and Anr. v. State of M.P. and 6 Ors.) and Miscellaneous Petition No. 2381 of 1986 (Pritpal Singh and 25 Ors. v. State of M.P. and 2 Ors.) as they raise a common question of law for decision.
2. All the petitioners are dealers in charcoal. They have brought the charcoal under valid transit passes from the forest area and have stacked the same at different places for transport outside the State of Madhya Pradesh by rail. Petitioners in Miscellaneous Petition No. 324 of 1986 alone are purchasers of charcoal from those traders who have transported it from the forest. AH the petitioners had been transporting charcoal outside the State of Madhya Pradesh through Railway wagons. By order dt. 7-9-1981, the Government issued an order to the Chief Conservator of Forests t Production), on the basis of a Cabinet decision taken on 10-5-1981, creating a complete ban on movement of fire wood purchased in auction, from the forest department to place outside the State of Madhya Pradesh. It was contemplated that the concerned officers should at the time of auction of fire wood notify such a condition. Accordingly the Railway authorities were intimated not to allot wagons for transport of fire wood outside the State without 'no objection certificate' by an authorised officer. This order of the State Government was communicated to all the Conservators of Forests. By order No. 557/10/3/82, dated 24-2-1982, the State Government also imposed a similar ban on transport of coal purchased from the forest department outside the State of M.P. The Railway authorities were also informed and directed not to allot wagons for transport of coal outside the State of M.P. Certain persons aggrieved by the ban so created in respect of transport of fire wood outside the State of Madhya Pradesh after 31st Dec., 1981, questioned this restriction as illegal and offending their fundamental right under Article 19(1)(g) of the Constitution as also offending their right of inter-State trade under Article 301 of the Constitution before this Court through a writ petition which was registered as Misc. Petn. No. 5 of 1981. The decision in that petition was rendered on 15-3-1982. It was held :
'In cases, however, where no such condition was inserted in the auction notices the Government has no authority whatsoever under any law to ban the movement of fire wood outside the State. Section 41 of the Forest Act, 1927, which confers power to make rules to regulate the transit of forest produce also contains no power to prohibit the movement of forest produce. A rule made prohibiting movement of forest produce, would be violative of Article 301 of the Constitution and would not be protected by Article 304(b).'
For this conclusion, the Division Bench relied upon a decision of the Supreme Court in State of Mysore v. H. Sanjeeviah, AIR 1967 SC 1189. In ultimate conclusion, the order of the State Government dt. 17-9-1981 and following it the order of the Chief Conservator of Forests dt. 31-10-1981 were held to be totally unsupported by any law and were held invalid in so far as they related to the fire wood purchased in auctions held by 17th Sept.. 1981 which auctions contained no restriction as to the movement of fire wood outside the State. During the course of the judgment, it was observed that the Court in that case was concerned only with such auctions where there was either express or implied condition that the purchasers would be free to transport the coal so purchased outside the State or where there was no condition either way. The Court expressly said that it was not necessary to express any opinion on the question whether if such a condition were imposed, it will violate Article 19(1)(g) or Article 301 of the Constitutioa It was also mentioned that no law made by the State has been brought to the notice of the Court authorising the State to issue an order banning the transport of fire wood outside the State.
3. It appears that because of this decision not only the fuel wood but also charcoal was permitted to be transported outside the State of Madhya Pradesh. It may, however, be noticed that even prior to the delivery of judgment by this Court, the Chief Conservator of Forests after receiving the Government's order dated. 17th Sept., 1981, issued directions to the Conservators of Forests by its letter dated 31st Oct., 1981 that it be made a necessary condition of auction that the fuel wood shall not be permitted to be taken outside the State of Madhya Pradesh. The Railway authorities were also directed to be informed. Then by another order dt. 3-2-1982 when the State Government notified its intention to create a similar ban on transport of charcoal, the Chief Conservator of Forests directed the Conservators of Forests to include a similar condition of auction in respect of coal also. It, however, appears that in spite of it, coal purchased from forest department in public auction was permitted to be transported outside the State of Madhya Pradesh, either because the condition banning transport of charcoal outside the State of Madhya Pradesh was not incorporated as condition of auction sale or because no heed was paid to this restriction. However, now the Railway authorities have refused to accept the indents for wagons to transport charcoal outside the State of Madhya Pradesh. The petitioners in all these petitions have been prohibited to transport charcoal outside the State of Madhya Pradesh and Railway authorities have refused to allot wagons for that purpose. The claim is that the action of the Railway authorities and the forest department in restraining transport of charcoal outside the State of Madhya Pradesh is illegal and unauthorised.
4. Learned counsel appearing for the petitioners in all these petitions urged that the restriction has the effect of denying the petitioners their fundamental right guaranteed under Article 19(1)(g) as also the right under Article 301 of the Constitution and the restriction imposed cannot be said to be reasonable. In no case can such a restriction be subordinated to and be incorporated as term of a contract and even if so included must be held as invalid. Advancing this line of argument further, it was submitted that the term cannot be said to be any law made by the State Legislature and if it is made a term of the contract in exercise of power under Article 298 of the Constitution, the State acts in contravention of Article 301 read with Article 304(b), so the action has to be struck down and the term has to be held as void. It is void also because it is not issued by or in the name of the Governor. It was added that the impugned action cannot be supported by resort to the provisions of Article 162 of the Constitution because the exercise of executive powers by the State in the matters with respect to which the legislature of State has power to make laws is also subject to the provisions of Constitution including Article 19(1)(g) and Article 301 of the Constitution. Meeting these arguments, the Additional Advocate General, appearing for the State, submitted that the restriction so imposed and the ban so created prohibiting transport of charcoal outside the State of Madhya Pradesh must be held reasonable because it is aimed at (i) preventing rise of price of charcoal in the State, (ii) making charcoal available in the State at a cheaper rate and (iii) in preserving sufficient quantity of charcoal in the State for consumption and use by the people residing within its territory. It was also submitted that because of this condition in the auction notice, the sale and purchase is at a considerable low price forming good and valid consideration for the contract. Article 162 of the Constitution is called in aid as vesting the executive with necessary authority, in absence of any law made by the legislature of the State, to impose such a ban. The learned Additional Advocate General also submitted that right in the charcoal purchased is created in the purchaser not before it stands transferred to him by sale. When the forest produce (charcoal) is purchased with a condition, all subsequent rights in the property so acquired can be exercised only subject to that condition. The State, as owner of forest produce is at liberty to append such condition while making sale of that property. Those are all the grounds on which the Additional Advocate General supported the impugned action.
5. There can be no denying the fact that the petitioners as Indian citizens have a right to carry on business of purchase and sale of charcoal subject to reasonable restrictions duly imposed. This is guaranteed to them under Article 19(1)(g) of the Constitution. Similarly, they also enjoy a guarantee to trade in this commodity outside the State of Madhya Pradesh under Article 301 of the Constitution which declares that 'trade, commerce and intercourse throughout the territory of India shall be free.....' The legislature of the State is, however, free in terms of Article 304(b) to impose by law such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest. Even so, the bill or amendment for the purposes of Clause (b) of Article 304 shall be introduced or moved in the legislature of the State only with the previous sanction of the President. These provisions make it abundantly clear that the petitioners do have a right to purchase coal from the forest department in the State of Madhya Pradesh. They also have a right to sell it to any person within or outside the State. Reasonable Restrictions can certainly be imposed in exercise of such right in the public interest but this can only be done by the law made by the State Legislature in the manner provided.
6. Besides the State also enjoys certain executive powers. Article 162 of the Constitution declares that subject to the provisions of the Constitution, the executive power of a State shall extend to the matters with respect to which the Legislature of the State has power to make laws. Further, Article 298 prescribes the extent of this executive power and provides that the executive power of the Union and of each State shall extend to the carrying on of any trade or business and to the acquisition, holding and disposal of property and the making of contracts for any purposes. Thus, it is Article 298 which empowers the Government to enter into contract in exercise of its executive power and without any legislative sanction. However, if the Government requires certain powers in addition to which it possesses under ordinary law in order to carry on the particular trade or business, specific legislation may be necessary. It was held in Ram Jawaya v. State of Punjab, AIR 1955 SC 549, that when it is necessary to encroach upon private rights in order to enable the Government to carry on their business, a specific legislation sanctioning such course would have to be passed. But, for the purposes of carrying on the business the Government do not require any additional powers and whatever is necessary for their purpose, they can have by entering into contracts with other people. Such power flows from Article 298. Their Lordships further observed that even if the acts of the executive are illegal in the sense that they are not warranted by law, but no fundamental rights of the petitioners have been infringed thereby, the latter would obviously have no right to complain. Thus, where a petitioner questions the disposal of property and the making of contracts for any purposes by the State, the material question for consideration would be if any fundamental right of the petitioner has been violated by acts of the executive Government while making the contract of disposing of the property. Thus, executive action of the State shall be open to legitimate challenge if while exercising this right to trade the Government choosesto exclude persons by discrimination. (See Erusian Equipment and Chemicals Ltd. v. State of West Bengal AIR 1975 SC 266).
7. If the restriction to take out the charcoal purchased from the forest department outside the State of Madhya Pradesh is held as operating to restrict trade, commerce or intercourse, directly or immediately, as distinct from creating some indirect or inconsequential impediment which may be regarded as remote, then it must be held to be in violation of the freedom guaranteed under Article 301 for obviously it is not a restrict ion imposed by any law made by the State legislature. If, on the other hand, the restriction is only a regulatory or compensatory measure, it cannot be regarded as violative of that freedom. Speaking on the subject, the Supreme Court in Bishamber Dayal Chandra Mohan v. State of U.P., AIR 1982 SC 33, ruled :
'It is now well settled that the regulatory, measures or measures imposing compensatory taxes do not come within the purview of the restrictions contemplated by Article 301. The regulatory measures should, however, be such as do not impede the freedom of trade, commerce, and intercourse.'
In that case, one of the conditions of the license to wholesale trader in wheat created limitation on the stock of wheat and provided that the wholesale dealer shall not have in stock at one time more than certain quantity of wheat. This was held to be a regulation validly made. With a view to ensure that the excess stock of wheat over the prescribed limit held by a wholesale dealer, commission agent or a retailer is not transported outside the State or from one district to another, the State Government issued a teleprinter message imposing the requirement for the making of an endorsement by the Deputy Marketing Officer or the Senior Marketing Officers or the physical verification of stock of wheat during the course of transaction at the check-post. It was held that these acts do not amount to 'restriction' on the freedom of trade, commerce or intercourse within the country, i.e., across the State or from one part of the State to another. Such measures were held to be only regulatory to ensure that the excess stock of wheat held by a wholesale dealer, commission agent or a retailer is not transported to a place outside the State or from one district to another. It was further observed that even if these requirements are construed to be a 'restriction' on the inter-State or intra-State trade, the limitation so imposed on the enjoyment of the right cannot be considered to be arbitrary or of an excessive nature. Nor can it be said that such restrictions do not Satisfy the test of reasonableness. It follows from the above observations in Bishamber Dayal Chandra Mohan's case, (AIR 1982 SC 33) (supra) that if the restriction is not mere regulatory nor is a measure imposing compensatory taxes, it cannot be allowed to stand if it envades inter-State or intra-State trade, commerce or intercourse.
8. In Misc. Petn. No. 5 of 1981, decided by a Division Bench of this Court on 15-3-1982, this Court considered the question of restriction imposed upon the certain purchasers of firewood to take it outside the State of Madhya Pradesh. It was observed that the State Government could not bring to the Court's notice any law made by the State legislature by which the State was authorised to issue an order banning the transport of firewood outside the State. It was, therefore, held that in absence of any such law validly made, the Government had no authority whatsoever under any law to ban the movement of firewood outside the State. It was also observed that Section 41 of the Forests Act, 1947 which confers the power to make rules to regulate the transit of forest produce, also contains no power to prohibit the movement of forest produce. The Court observed :
'A rule made prohibiting movement of forest produce would be violative of Article 301 of the Constitution and would not be protected by Article 301(b).'
For this observation, the Court relied upon the decision of the Supreme Court in State of Mysore v. H. Sanjeeviah, AIR 1967 SC 1189. This Court finally held that the orders of the Chief Conservator of Forests in that case which imposed restriction on export of firewood outside the State of Madhya Pradesh did not have any support of law and were held invalid in so far as they related to firewood purchased in auctions which contained no restriction on the movement of firewood outside the State. No decision to the contrary either of this Court or of any other Court was brought to our notice. We could also not be persuaded to take a contrary view.
As regards charcoal as fewest produce, the State Government could not lay before us any law made by the State Legislature authorising the State to issue an order restricting transport of coal outside the State.
9. The question, however, is whether by inserting a condition in the tender notice and then carrying forward it as a term in the contract of sale of charcoal restraining its transport outside the State by the purchasers of such charcoal, the State can be said to have infringed upon the right guaranteed under Article 301 of the Constitution. Defending; this action, the learned Advocate General, appearing for the State, submitted that the object to impose such a term in the contract was to restrict the price hike of charcoal in the State and to make the same available in sufficient quantity to the consumers inside the State. It was also submitted that the term formed a valid consideration of contract as in that event the purchaser was required to pay a lesser price. Whatever be the avowed object prompting the State Government to impose such a restriction in the tender notice and then to incorporate it as a condition in the contract of sale, it undoubtedly imposes a restriction upon the free trade, commerce and intercourse throughout the territory of India. The authority to make such a contract, flows only from Article 298 of the Constitution. The terms of that Article only authorise the State Government to dispose property and make contract for any purposes and is intended to supplement the meaning of 'executive powers' declared under Article 162, the exercise of which is subject to the provisions of the Constitution including Article 301. We fail to see how a right guaranteed under Article 301 of the Constitution and which right cannot be taken away except by law can be taken away by exercise of executive powers including the making of a contract. This constitutional! guarantee could only be taken away in the manner provided, i.e., by law, as envisaged under Article 302 or Article 304, and not otherwise. It is settled law that a constitutional authority cannot do that indirectly what it is not permitted to do directly. If there is a constitutional provision inhibiting the constitutional authority from doing an act such provision cannot be allowed to be defeated by adoption of any subterfuge. That would be clearly a fraud on the constitutional provision. (Sec D (sic) Wadhwa v. State of Bihar, AIR 1987 SC 579). The underlying idea in making trade, commerce and intercourse with, as well as within, the States free undoubtedly was to emphasise the unity of India and to ensure that no barriers might be set up to break the National Unity. Any restriction can be allowed to stand if it is imposed in accordance with Article 304. Such being the State policy underlying Article 301, any term to the contrary even if embodied in a contract, cannot be allowed to be enforced and must be struck down as opposed to the policy underlying Article 301.
10. The above discussion leads us to the conclusion that a term either in the tender notice or in the contract prohibiting the transport of forest produce -- charcoal --from outside the State of Madhya Pradesh must be held to be bad and unenforceable and must be struck down.
11. Learned Advocate General, appearing for the State, relied upon a decision of this Court in Misc. Peta No. 104 of 1985 (B. H. Dave and Company v. State of M.P.) decided on 17-7-1986. That case, in our opinion, is clearly distinguishable on its own facts. There, the purchasers of timber from the State Government for the purposes of manufacturing Veneer entered into a separate agreement with the State Government that biproducts shall not be exported outside the State of Madhya Pradesh. The State Government on its term assured regular supply of timber at a concessional rate. The purchasers did not challenge the term in contract restraining the export of biproducts. However, the purchasers of the biproducts questioned the restriction of transporting the biproducts outside the State of Madhya Pradesh. Negativing the petitioner's contention there, the Court observed that the term safeguarded the transporting of forest produce outside the State which produce was made available to the purchasers at concessional rate and on assurance of regular supply. Even so, the transport outside the State was permitted with the prior permission of the Governor.
The return filed by the State in that case clearly mentioned that the petitioner could transport the articles purchased in open market anywhere as others do. All these facts clearly distinguish the case from the present one. In essence, the measures taken in that case were more regulatory in nature and cannot be said to be strictly restrictions upon free trade, commerce and intercourse. In the present case, no material has been placed on record to show that the sale of coal was at any concessional rate and that regular supply was assured. There is also nothing to indicate that the restriction so imposed was with a view to maintain supply of charcoal in the State of Madhya Pradesh. No data in that behalf was furnished. The measure so taken cannot, therefore, be said even to be regulatory.
12. Yet another decision which needs reference and upon which the learned Advocate General placed great reliance is the one reported in Combined Traders v. State of Tamil Nadu, AIR 1976 Mad 169. That decision certainly takes a view contrary to that we have taken. In that case, what weighed with the learned Judge was the fact that the State Government being the absolute owner of the property was entitled, like any other individual, to sell its property in any manner they like. It was, therefore, held that it was competent for the Government to insert a condition in the contract that the beluegum wood (forest produce in that case) should not be transported outside the district and the auction purchaser would take the property subject to that condition. The view taken, therefore, is that Article 301 of the Constitution of India has no application to a case when the property belongs absolutely to the State Government. With great respect to the learned Judge, we are unable to subscribe to the view so taken. After all by the term in the contract the restriction is in respect of movement of the property in the hands of the purchasers obtained after payment of due consideration. It is the purchasers who are restrained to take that property outside the State which comes to be owned by them after the purchase. In essence, therefore, the restrain is upon movement of the property of the purchasers. True it is that before the purchase the property belonged to the Government but then the restriction is when it passes to and vests in the purchasers. Further the power to make contracts and dispose of the property owned by the State flows only from Article 298, the exercise of which, as we have earlier stated, is controlled by other provisions of the Constitution including Article 301. That being so, we are of the opinion that the decision in Combined Traders' case (supra) does not help the respondent and does not lay down the correct law in view of the various authorities referred to by us earlier.
13. For the aforesaid reasons, the petitions are allowed and the orders dt. 24-2-1982 and 23-9-1985 of the State Government and the order dt. 4-9-1985 of the Divisional Railway Manager, Jabalpur in so far as they relate to the movement of charcoal purchased by the petitioners in public auctions from the forest authorities are hereby quashed. There shall, however, be no order as to costs. Security amount be refunded to the petitioners.