ORDER
K. Govindarajan, J.
1. The petitioner-association aggrieved against the order passed by the 1st respondent in G.O.Ms.No. 292, Co-operation, Food and Consumer Protection (B1) Department, dated 21.12.1998 and the consequential proceedings of the 2nd respondent dated 21.12.1998, has filed the above writ petition.
2. According to the petitioner, its members are mainly engaged in the cultivation of paddy for their livelihood. The paddy so produced by them was being sold to the paddy dealers without any restriction.
3. Under the impugned orders, the 1st respondent government introduced the monopoly system of procurement in Cauvery Delta area, which has been described specifically in the said order. According to the said order, the paddy in those areas shall be purchased only by the Tamil Nadu Civil Supplies Corporation Ltd., on behalf of the 1st respondent, and there shall be no purchase of paddy/rice from the whole sale dealer in the above areas. With respect to the price, according to the said order, for fine variety, it is fixed at Rs. 440 per quintal and for grade 'A' variety it is fixed at Rs. 470 per quintal. Besides the above, a sum of Rs. 50 as cash incentive per quintal of paddy has been decided to be paid to the farmers who deliver paddy to the government through the District. Purchase Centres in the monopoly procurement areas. The said order came into force immediately, i.e., with effect from 21.12.1998 and the same will be in force upto and inclusive of 30th June, 1999. Pursuant to the said Government Order, the 2nd respondent in the proceedings dated 1.12.1998 instructions in that regard.
4. To substantiate the grounds taken in the writ petition, the learned Senior Counsel appearing for the petitioner has submitted that the implementation of monopoly procurement only in the areas specified in the notification is nothing but discriminatory and arbitrary and so it is violative of Article 14 of the Constitution of India. According to the learned senior counsel, even according to the Government statistics, paddy is being cultivated and production of the same is also more in every part of the State. All the farmers growing paddy form one category and so farmers particular areas alone could not be singled out and notified as monopoly procurement areas, while other farmers who are cultivating paddy have been given liberty to sell the same to the dealers and to transport outside the State after measuring 100% for procurement. The learned Senior Counsel has also submitted that it is incorrect to state that the farmers in the Cauvery Delta Areas are now able to produce more paddy, and so the reasons stated in the counter to sustain the impugned orders cannot be correct, and the other reasons stated therein for such classification also have no basis, and cannot be substantiated. According to the learned senior counsel, such classification between the farmers of Cauvery Delta Areas and other areas is totally unrealistic and unreasonable. The learned senior counsel has further submitted that the respondents have not taken into consideration of the other areas where the farmers are cultivating paddy in large quantity both the production and productivity basis. It is his further submission that even assuming that if there is basis for such classification it has no nexus to the object to be achieved. The object for monopoly procurement of paddy is for public distribution system. But the 1st respondent has permitted the other farmer to sell the paddy even outside the State after measuring 100%.
5. With respect to the price fixed in the impugned proceedings, the learned senior counsel appearing for the petitioner has submitted that the same has been fixed without reference to the actual cost incurred by the farmers to cultivate the paddy. According to him, if the agriculturists of the petitioner-association are allowed to sell the paddy to the dealers, they can get more price, and so such fixation of price is nothing but arbitrary.
6. The learned Additional Advocate General, appearing for the 1st respondent, and the learned Senior Counsel Mr. G. Masilamani, appearing for the 2nd respondent have submitted that the said classification is on the basis of the surplus paddy available in the said areas, and, referring to the counter, it was argued that the reasons have been set out for selecting the areas mentioned in the notification for such monopoly procurement and as to why the other areas are not selected. According to them, the areas mentioned in the notification form themselves as a separate category, as paddy is available in surplus for sale. If in the said surplus areas any discrimination is contemplated according to them, the petitioner can raise objections. According to the respondents, in other areas, there is no surplus paddy and so the question of monopoly procurement in other areas would not arise. It is also submitted that the farmers of the Cauvery Delta Areas are not compel led to sell the paddy to the 1st respondent, and if they want to sell, they have to do so only to the 1st respondent, and the wholesale dealers are prohibited from purchasing the paddy/rice from the said areas. It is also specifically submitted by them that the retail dealers are not prohibited from dealing with the paddy in the said areas, and when such classification is based on reasonings, the petitioner cannot challenge the same.
7. With respect to the price, it is submitted that the same has been fixed on the basis of the price fixed by the Government of India. The said price has been fixed on the basis of the recommendation of the Agricultural Price Commission to the Government of India, and the State Government is also paying a sum of Rs. 50 more per quintal. According to the respondents, the 1st respondent is granting areas subsides including free power supply to the farmers.
8. As stated earlier in the impugned order dated 21.12.1998, the 1st respondent has directed that 'the monopoly system of procurement be implemented in the Delta Areas viz., the entire Thanjavur, Thiruvarur and Nagapattianm Districts, Chidambaram and Kattumannarkoil taluks of Cuddalore District, Tiruchirapalli, Srirangam, Musiri, Lalgudi and Manachanallur taluks of Tiruchirapalli district, Kulithalai taluk of Karur District, Ariyalur and Udayarpalayam taluks of Peramblur District, Alangudi, Aranthangi and Avudayarkoil taluks of Pudukkottai District with immediate effect and that the entire surplus in these areas shall be purchased only by the Tamil Nadu Civil Supplies Corporation and that there shall be no purchase of paddy/rice by any private wholesale trader in the above areas'. The abovesaid notification came into effect immediately on 21.12.1998 and it will be in operation upto and inclusive of 30th June, 1999. As per the said notification, if the farmers want to sell their paddy in those areas, they have to sell the same only through the Tamil Nadu Civil Supplies Corporation which is so authorised on behalf of the 1st respondent. The private wholesale traders have been restrained from purchasing such paddy/rice. The said notification was issued taking into consideration of the need for maintaining uninterrupted supply of rice under the public distribution system and also taking into consideration of the central pool allocation and availability of stock with the Tamil Nadu Civil Supplies Corporation.
9. It is not a new step taken by the 1st respondent to issue such a notification. Such notifications were issued earlier for a specified period. The Tamil Nadu Paddy and Rice (Licencing Regulation and Disposal of Stock) Order, 1968 was issued by the State Government, exercising powers under Section 3 of the Essential Commodities Act, 1955, which empowered the State Government to impose and collect upto 50% of the stock by way of levy on all purchase of paddy/rice made by the traders on payment of price notified from time to time by the Government of Tamil Nadu. In the year 1981, the State Government decided to enforce levy on the traders with effect from 1.1.1981 and to collect levy at 40% on the purchase of paddy and rice by the dealers. The same was increased to 50% from Kuruvai season 1981. The 1st respondent under G.O.Ms.No. 42, Food and Co-operation Department dated 221.1.1983 issued orders for purchase of the entire marketable surplus of paddy in the composite Thanjavur District by the Government through the Tamil Nadu Civil Supplies Corporation as its agent. On 16.2.1983 the 1st respondent issued another notification in G.O.Ms.No. 84, Food & Co-operation Department extending the provisions made with regard to composite Thanjavur District to Chidambaram and Kattumannarkoil taluks in composite South Arcot District and Musiri, Kuzhithalai, Lalgudi and Tiruchi Taluks of composite Tiruchirapalli District. The scheme was extended from time to time till 1993 in Cauvery Delta area, besides 50% traders levy in the remaining part of the State of Tamil Nadu till 29.1.1992. From 1993 to 1996 Samba season, the system of parallel procurement was in vogue. Again the system of monopoly procurement was introduced for Kuruvai 1996 and Samba 1997 seasons. From 1997 Kuruvai season upto 20.12.1998 the system of parallel procurement was in operation. Thereafter the impugned notification has been issued.
10. From the above, it is very clear though monopoly procurement and parallel procurement systems were adopted as stated above, there is no compulsion on the farmers in the said areas to sell the paddy to the 1st respondent. The prohibition is only to the wholesale dealers, not to purchase the paddy and rice from the said areas. If the farmers of the said areas want to sell the paddy produced by them for any reason, they have to sell the same only to the Tamil Nadu Civil Supplies Corporation as stated in the said notification.
11. The main attack on the said notification is based on the classification of area, namely, Cauvery Delta areas, for the purpose of monopoly procurement, leaving the other paddy cultivable areas in the State of Tamil Nadu, which is unreasonable, discriminatory and offends Article 14 of the Constitution of India.
12. Same contentions were raised while challenging Clause 3 (1-A) of the Tamil Nadu Paddy (Restriction on Movement) Order, 1982, as amended by G.O.Ms.No. 293, Food & Co-operation Department, dated 11.5.1983. After considering the submissions made by the learned Counsel appearing for the writ petitioner therein and the learned Advocate General appeared for the State, the learned Judges have held, in State of Tamil Nadu v. K. Ramanathan 1984 W.L.R. 128, that the said clause of the Tamil Nadu Paddy (Restriction on Movement) Order, 1982 was valid. The learned senior counsel appearing for the petitioner herein while explaining the said decision has submitted that such conclusion was arrived at only because of the admission made by the learned Counsel appearing for the writ petitioner in that case regarding the production of paddy in Thanjavur District. The learned senior counsel appearing for the petitioner has relied on the following portion in the said decision in support of his submission:
The fact that the State has been subjected to conditions of drought for more than two years is a matter of which judicial notice can be taken. It cannot be disputed that Thanjavur District produce the largest quantity of paddy in the State than any other district. In fact the learned Counsel for the petitioner himself referred to the district as the granary of the State. We are not very much concerned with the mathematical accuracy of the quantum of production of paddy in Thanjavur District and the other districts in the State. Once we are satisfied that the District of Thanjavur procures the maximum quantity of paddy available in the State, it is only reasonable to assume that the grounds urged by the learned Advocate General in support of the validity of the amended Clause 3(1-A) have to be accepted. We are satisfied that the classification is reasonable and it bears a nexus to the object sought to be achieved.
But that is not the only reason for the Division Bench to reject the case of the petitioner therein. While dealing with the classification, the learned Judges have further held as follows:
It is now well settled that Article 14 of the Constitution of India forbids class legislation, but does not forbid classification. Permissible classification must satisfy two conditions, viz., (1) it must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group; and (2) the differentia must have rational relation to the object sought to be achieved by the statute in question. Even a single individual may be in a class by himself on account of some special circumstances or reasons applicable to him and not applicable to others. A law may be constitutional even though it relates to a single individual who is in a class by himself. Further, in permissible classification mathematical nicety and perfect equality are not required. The decision of the Supreme Court in M.A. Parsheed v. State of Kerala (1975) 2 S.C.W.R. 71, is authority for the proposition that a classification based on geographical situation is permissible provided it is reasonable. In that case, the State of Kerala issued a notification prohibition the production of fibre from coconut husks by the use of machinery in the District of Trivandrum, Quilon and Alleppey. One of the contentions by which the validity of the notification offended Article 14 of the Constitution on the ground that a similar notification was not made applicable to other eight Districts in Kerala, the Supreme Court rejected the argument based on Article 14 of the Constitution. The Supreme Court held that the classification was reasonable and bore a nexus to the object sought to be achieved by the impugned notification.
The Divisions Bench also has rejected the submission of the learned Counsel appearing for the petitioner therein to the effect that the producers of paddy in the other districts could get better price while the farmers of Thanjavur district could only get lesser price than the cost price.
13. The learned senior counsel appearing for the petitioner has submitted that now the situation has changed, and in other areas the productivity of paddy is much higher than the one in the Cauvery Delta areas, and so the 1st respondent cannot specify the Cauvery Delta area alone as surplus as surplus marketable areas for the purpose of monopoly procurement.
14. From the above, I am able to see the grievance of the petitioner is that the monopoly procurement of paddy/rice has not been extended to other areas. But in the counter and other materials produced before the court, the 1st respondent has come forward with the clear facts as to why they are not able to extend the monopoly procurement to other areas. In the counter, it is stated as follows:
'In other Districts (i.e., non-monopoly area),
(a) paddy growing areas are generally only in small patches with inadequate and often unreliable irrigation potential leading to irregular paddy cultivation;
(b) The entire production of paddy/rice is much below the requirement of the people of the area;
(c) Tamil Nadu in its entirety is deficit in rice production and depends on arrival of paddy/rice from other States. This is because the food situation in districts, other than Cauvery Delta area is poor, fragile and uncertain due to lack of adequate water resources and irrigation facilities;
(d) In such a situation, to impose monopoly procurement throughout the State is unnecessary and unwarranted;
(e) It is necessary to encourage the flow of paddy/rice from outside the State to the deficit areas while maintaining very comfortable levels of paddy/rice stock with the Government.
The facts stated in the counter as set out above, have been substantiated by producing statistics. The learned senior counsel appearing for the petitioner also has relied on some statistics to establish his case that the production and productivity in other areas are more than the production and productivity in the Cauvery Delta areas. Even if it is so, it can be with respect to the entire area in the Districts. As stated in the counter, in other Districts (i.e., non-monopoly areas), the paddy growing areas are only in small patches, and there is no surplus marketable production in those areas. When the learned Senior Counsel appearing for the petitioner referred to Sub-clause (ii) to Clause (3) of the impugned notification with respect to the levy of 100% for the movement of paddy/rice outside the State, the learned Additional Advocate General appearing for the 1st respondent has submitted that so far no farmers cultivating paddy other than the Cauvery Delta areas measure 100% so as to enable them to move the paddy outside the State. On the basis of the said submission, the learned Additional Advocate General has submitted that there is no surplus production of paddy in those areas to measure 100% and so by extending the monopoly procurement system in those areas, no purpose could be achieved. In view of the abovesaid facts, and in view of the facts mentioned in the counter, the fact as to why the respondent have selected the Cauvery Delta areas for monopoly procurement can be well appreciated, and so such classification has to be construed only as reasonable and on an intelligible differentia.
15. The learned Senior Counsel appearing for the petitioner has further relied on the decision in Shashikant Laxman Kale v. Union of India : [1990]185ITR104(SC) , to sustain the argument regarding discrimination. In the said decision, while dealing with the scope of Article 14 of the Constitution, the Apex Court has held as follows:
The classification must not be arbitrary but must be rational, that is to say, it must not only be based on some qualities or characteristics which are to be found in all the persons grouped together and not in others who are left out but those qualities or characteristics must have a reasonable relation to the object of the legislation. In order to pass the test, two conditions must be fulfilled, namely, (1) that the classification must be founded on an intelligible differentia which distinguishes those that are grouped together from other, and (2) that differentia must have a rational relation to the object sought to be achieved by the Act.
Here the reason for selecting Cauvery Delta areas as the monopoly procurement areas has been clearly set out in the counter and so the said classification cannot be said to be arbitrary but based on some qualities or characteristics.
16. While dealing with 'Regulation' and 'Prohibition', the Apex Court in the decision in K. Ramanathan v. State of Tamil Nadu : [1985]2SCR1028 , has held as follows:
The predominant object of the Act, as reflected in the preamble is to provide, in the interests of the general public, for the control of the production, supply and distribution of, and trade and commerce in, certain essential commodities. It is a piece of socio-economic legislation enacted in the national interest to secure control over the production, supply and distribution of, and trade and commerce, in, essential commodities. The various Control Orders issued by the Central Government under Sub-section (1) of Section 3 of the Act or by the State Governments under Section 3 read with Section 5 have introduced a system of checks and balances to achieve the object of the legislation i.e., to ensure equitable distribution and availability of essential commodities at fair prices. Special public interest in an industry e.g., that it is engaged in the production of a commodity vitally essential to the community, may justify the regulation of its production, supply and distribution and its trade and commerce, provided such regulation is not arbitrary and has a rational nexus with the object sought to be achieved.
The power to regulate or prohibit the production, supply and distribution of, and trade and commerce in, essential commodity may be exercised in innumerable ways. One of the ways in which such regulation or control over the production, supply and distribution of, and trade and commerce in, an essential commodity like foodstuffs may be exercised by placing a ban on inter-State or intra-State movement of foodstuffs to ensure that the excess stock of foodstuffs held by a wholesale dealer, commission agent or retailer is not transported to places outside the State or from one district to another with a view to maximise the procurement of such foodstuffs from the growers in the surplus areas for their equitable distribution at fair prices in the deficit areas. The placing of such ban on export of foodstuffs across the State or from one part of the State to another with a view to prevent outflow of foodstuffs from a State which is a surplus State prevents the spiral rise in prices of such foodstuffs by artificial creation of shortage by unscrupulous traders. But such control can be exercised in a variety of ways otherwise than by placing compulsory levy on the producers, for example, by fixing a controlled price for foodstuffs, by placing a limit on the stock of foodstuffs to be held by a wholesale dealer, commission agent, or retailer, by prohibiting sales except in certain specified manner, etc. These are nothing but regulatory measures.
17. As pointed out by Mr. Masilamani, learned Senior Counsel appearing for the 2nd respondent, in Asgarali Nasarali v. State of Bombay : 1957CriLJ605 , the Apex Court has set out the principles underlying Article 14 of the Constitution, holding as follows:
The principles underlying Article 14 of the Constitution have been completely thrashed out in the several decisions of this Court are this. The earliest pronouncement of this Court on the meaning and scope of Article 14 was made in the case of Charanjit Lal Chowdhury v. Union of India : [1950]1SCR869 . The principles enunciated in that case were summarized by Fazal Ali, J., as follows in State of Bombay v. F.N. Balsara A.I.R. 1951 S.C. 818 : : [1951]2SCR682 The presumption is always in favour of the constitutionality of an enactment, since it must be assumed that the legislature understands and correctly appreciates the needs of its own people, that its laws are directed to problems made manifest by experience and its discriminations are based on adequate grounds.
(2) The presumption may be rebutted in certain cases by showing that on the face of the statute, there is no classification at all and no difference peculiar to any individual or class and not applicable to any other individual or class, and yet the law hits only a particular individual or class.
(3) The principle of equality does not mean that every law must have universal application for all persons who are not by nature attainment or circumstances in the same position, and the varying needs of different classes of persons often require separate treatment.
(4) The principle does not take away from the State the power of classifying persons for legitimate purpose.
(5) Every classification is in some degree likely to produce some inequality, and more production of inequality is not enough.
(6) If a law deals equally with members of a well-defined class, it is not obnoxious and it is not open to the charge of denial of equal protection on the ground that is has not application to other persons.
(7) While reasonable classification is permissible, such classification must be based upon some real and substantial distinction bearing a reasonable and just relations to the object sought to be attained, and the classification cannot be made arbitrarily and without any substantial basis.
18. The Apex Court in Ram Krishna Dalmia v. Justice Tendolkar : [1959]1SCR279 , has also enunciated and set out the principle to apply Article 14 of the Constitution, and held as follows:
The principle enunicated above has been consistently adopted and applied in subsequent cases. The decisions of this Court further established:
(a) that a law may be constitutional even though it relates to a single individual if, on account of some special circumstances or reasons applicable to him and not applicable to others, that single individual may be treated as a class by himself:
(b) that there is always a presumption in favour of the constitutionality of an enactment and the burden is upon him who attacks it to show that there has been a clear transgression of the Constitutional principles;
(c) that it must be presumed that the legislature understands and correctly appreciates the need of its own people, that its laws are directed to problems made manifest by experience and that its discrimination are based on adequate grounds;
(d) that the Legislature is free to recognise degrees of harm and may confine its restrictions to those cases where the need is deemed to be the clearest;
(e) that in order to sustain, the presumption of constitutionality the court may take into consideration matters of common report, the history of the times and may assume every state of facts which can be conceived existing at the time of legislation; and
(f) that while good faith and knowledge of the existing conditions on the part of a Legislature are to be presumed, if there is nothing on the face of the law or the surrounding circumstances brought to the notice of the court on which the classification may reasonably be regarded as biased, the presumption of constitutionality cannot be carried to the extent of always holding that there must be some undisclosed and unknown reasons for subjecting certain individuals or corporations to hostile or discriminating legislation.
The above principles will have to be constantly borne in mind by the court when it is called upon to adjudge the constitutionality of any particular law attacked as discriminatory and violative of the equal protection of the laws.
19. The Apex Court in Anakapalle Co-op. Agrl. & Ind. Society Ltd. v. Union of India : [1973]2SCR882 , has held that while classifying zones on geographical-cum-agro economic consideration, any discrimination was made, it cannot be challenged as it would give rise to such discrimination as would attract Article 14 of the Constitution.
20. Even in the decision is Sri Krishna Rice Mills v. Jt. Director, Food (1974) 1 S.C.R. 418, while dealing with notification notifying certain areas in Andhra Pradesh fixing maximum price at which rice/paddy shall be sold to the Government, the Apex Court has held as follows:
The next attack on the orders passed under the Act is that they violate Article 14 of the Constitution inasmuch as they relate only to certain districts in the State of Andhra Pradesh and not to others. The short answer to this contention is that the districts to which the orders applied are surplus rice producing districts in the State of Andhra Pradesh and that is why the orders were confined to those districts. It was unnecessary to apply the orders to other districts for the control of price in these districts would economically result in stabilising prices in other districts of the State also. These districts therefore, obviously form a class by themselves and fixation of maximum price in these districts would subserve the purpose of Section 3(1) of the Act. The argument based on Article 14 therefore must be repelled.
21. While considering the constitutional validity of a legislature regarding economic action on the basis of Article 14 of the Constitution, in R.K. Garg v. Union of India A.I.R. 1981 S.C. 2138, their Lordships have held as follows:
Now while considering the constitutional validity of a statute said to be violative of Article 14, it is necessary to bear in mind certain well established principles which have been evolved by the Courts as rules of guidance in discharge of its constitutional function of judicial review. The first rule is that there is always a presumption in favour of the Constitutionality of a statute and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles. This rule is based on the assumption, judicially recognised and accepted, that the legislature understands and correctly appreciates the needs of its own people, its laws are directed to problems made manifest by experience and its discrimination are based on adequate grounds. The presumption of Constitutionality is indeed so strong that in order to sustain it, the court may take into consideration matters of common knowledge, matters of common report the history of the times and may assume every state of facts which can be conceived existing at the time of legislation.
Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person than Holmes, J., that the legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or straight jacket formula and this is particularly true in case of legislation dealing with economic matters, where having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. The Court should feel more inclined to give judicial defence to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felietously expressed than in Morey v. Doud (1957) 354 U.S. 457, where Frankfurter, J said in his inimitable style:
In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The legislature after all has the affirmative responsibility. The Courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events self limitation can be seen to be the path to judicial wisdom and institutional prestige and stability.
The court must always remember that 'legislation/is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry' that exact wisdom and nice adaption of remedy are not always possible and that 'judgment is largely a prophecy based on merge and uninterpreted experience'. Every legislation particularly in economic matters is essentially economic and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experiment economic legislation but on that account alone it cannot be struck down as invalid. The court cannot, as pointed out by the United States Supreme Court in Secy. of Agriculture v. Central Roig. Refining Co. (1950) 94 L.Ed. 381, be converted into tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation which may be made by those subject to its provisions and to provide against such distortions and abuses. Indeed, howsoever great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The court must therefore adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the legislature in dealing with complex economic issues.
22. While dealing with similar set of facts and the scope of Mysore Vanaspati Dealers Licensing Order, the Division Bench of Karnataka High Court in the decision in Manjashetty v. State A.I.R. 1972 Mys. 138, has held as follows:
Shri Narasimha Murthy next submitted that the notification issued under Sub-clause (3) of Clause 1 is liable to be struck down as offending Article 14 of the Constitution. It is clear from the notification that the order has been made applicable only to the specified places in each district of the State, It is, therefore, obvious that the order does not apply to areas not covered by the notification. The submission of Sri Narasimha Murthy is that there is no rational basis for applying the order to the places specified in the Notification and excluding from its applicability the other areas. The stand taken by the State is that a reasonable and rational classification has been made for the purpose of application of the order on the basis of population and business, which classification has a nexus to the object of the order; The impugned order prohibits persons carrying on business as dealers in Vanaspati except in accordance issued by the licensing authority. The order makes provision for the grant of licenses, deposit or security as well as for punishing contravention of the conditions of licence. The object of the order is to prevent hoarding of the Vanaspati which is an essential commodity and to make the said commodity freely and regularly available to the consumers. The object will be achieved by applying the order to places where business of buying and selling Vanaspati is carried on. The extent of regulation in a case like this has necessarily to depend on the extent of the evil sought to be remedied. It cannot be doubted that the extent of the mischief of hoarding depends on the extent of population and business at criteria, for classification for the applicability of the order is reasonable and rational having regard to the object sought to be achieved. That there are some places whose population is slightly more than the population of the places specified in the Notification is not by itself sufficient to hold that the classification has been made arbitrarily inasmuch as what has been taken into consideration for classification is not only on the population of the places, but also the extent of business. Besides, the petitioners have not placed any material to. show that places having larger business in Vanaspati than the places specified in the notification have been excluded. There is, therefore, no force in the contention that the Notification, offends Article 14 of the Constitution.
23. Even in the decision in Ram Kripal v. State of U.P. : AIR1975All183 , the learned Judge, while testing the validity of the order issued in similar circumstances applying Article 14 of the Constitution, has held as follows:
The first ground on which the aforesaid order has been challenged is that it violates Article 14 of the Constitution. It was pointed out that the aforesaid order has been made applicable to only a few districts of the State of Uttar Pradesh including Moradabad where the petitioners carry on their trade and since it has not been made applicable to the remaining districts, those who carry on their trade in the districts mentioned in the order have been discriminated, It was also pointed out that a similar order had been issued in the year 1973 which included the district of Kanpur too but in the order issued this year Kanpur has been added. According to learned Counsel there no rational basis on which only some of the districts are picked up for purposes of the application of the order. In so far as the submission of learned Counsel for the petitioners that in the order of the year 1973 Kanpur has included and has been deleted; in the order in question, it has been pointed out on behalf of the respondents that the English version of the Gazette seems to have inadvertently omitted Kanpur as one of the districts to which the order is applicable. A copy of the Hindi version of the Gazette was shown to me which includes Kanpur also. Be that as it may, in my opinion the order cannot be struck down on this ground. It is well recognised that a classification made on geographical ground is reasonable. As would appear from the preamble of the order the purpose for issuing it was to maintain the supplies of liquid milk and to secure its equitable distribution and availability in certain areas, In the counter-affidavit filed by Ashok Kumar in Writ Petition No. 2285 of 1974 it has been stated that the restrictions imposed by the order were with a view to ensure adequate supply of milk to the public during the lean summer months. It would be seen that the order is to remain in force only from April 2, 1974, to August 14, 1974 unless withdrawn earlier. It is apparent that the State Government was of opinion that in the districts to which this order has been made applicable it would not be possible to maintain the supply of liquid milk and to secure its equitable distribution and availability unless the restrictions contained in the order were imposed. In Twyford Tea Company Ltd. v. State of Kerala : [1970]3SCR383 , it was held that to be able to succeed in the charge of discrimination a person must establish conclusively that persons equally circumstanced have been treated unequally and vice versa. In Dantuluri Ram Raju v. State of Andhra Pradesh : [1972]2SCR900 , relying upon the aforesaid case, it was held that burden is on a person complaining of discrimination and for this purpose it is necessary to prove not possible inequality but hostile unequal treatment. The petitioners have not furnished any material to indicate that those who were carrying on similar trade as that of the petitioners in the districts to which the order has not been made applicable were similarly circumstanced, namely, that the availability of liquid milk in those districts too was identical to the district to which the order has been made applicable. Consequently, the complaint of discrimination on the score cannot succeed.
24. From the abovesaid decision, it is very clear that two conditions have to be satisfied, namely, the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and that differentia must have a rational relation to the object sought to be achieved by the statute. As held in Ram Krishna Dalmia v. Justice Tendalker : [1959]1SCR279 , there cannot be any dispute that the classification must be founded on different basis namely, geographical, or according to objects or occupations or the like. What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration. Though Article 14 of the Constitution is shining star among the fundamental right which guarantees equality to every citizen and equal protection of laws to all persons, it is well recognised that a classification which is reasonable and for, legitimate purpose can be made. Moreover, production of some degree of inequality in such classification is also recognised. A classification based on geographical features is constitutionally valid. The test of reasonableness has to be viewed in the context of the issues which the State has been facing.
25. Moreover, the classification has been made in this case with reference to the areas in which marketable surplus paddy is available and the non-surplus areas of paddy. The materials submitted by the respondents would clearly prove that the Cauvery Delta areas have been identified as areas of producing surplus paddy for a number of years. Such conclusion has been arrived at on the basis that the farmers in those areas are selling sufficient quantity of paddy in the market. Availability of marketable surplus of paddy in the Cauvery Delta areas is not in dispute. From the counter I am able to see that the said practice has been in vogue for a long number of years. According to the respondents, though in other areas paddy is being cultivated, is not marketable surplus. As held by the Apex Court, even if such classification produces some inequality it is not enough to hold that such classification is unreasonable and arbitrary. I need not go into the actual quantum of paddy produced both in Cauvery Delta areas and the other areas for the purpose of testing arbitrariness. Since the classification, namely, the Cauvery Delta area is based on certain facts and the same has been substantially distinguishable from other areas as stated in the countermand the Cauvery Delta area itself forms a class, such classification cannot therefore be said to be arbitrary and without any basis.
26. The petitioner-association has come forward with the plea that in other areas the farmers are producing more paddy, and relied on statics of the Government for the year 1994 regarding such production, but the materials submitted by the petitioner are not sufficient to show that the paddy produced in those areas are available in surplus. It is not the case of petitioner that the Cauvery Delta areas are not the areas having marketable surplus. Only because paddy is available in surplus to sell, the farmers are selling it. Further, it is specifically stated in the counter that though the Cauvery Delta areas distributed in rural administrative taluks and districts, they are geographically compact and contiguous areas bearing similar agricultural features besides Serving as single paddy production belt for purpose of smooth procurement from the farmers and as they are effectively achieve the object for which the monopoly procurement is notified. Though the learned senior counsel for the petitioner has submitted that even in other areas of the State the compact areas are available, he is not in a position to substantiate the same on the basis of materials. The learned senior counsel is able to rely on the statistics only with respect to the total production of paddy in other districts, but not with respect to particular area in the District.
27. As stated earlier, the farmers in the Cauvery Delta areas are not being compelled to sell the paddy to the 1st respondent. But the restriction is not to sell the same to the wholesalers. Moreover, in this case, though the petitioner-association has come forward with the grievance about the monopoly procurement of paddy by the 1st respondent, it has not grievance about the purchase of paddy by the 1st respondent as there is no dispute about selling of paddy by the members of the petitioner-association after harvest of paddy. The real grievance of the petitioner as I understood from the affidavit and from the argument of the learned senior counsel appearing for the petitioner is that the members of the petitioner-association are not able to get good price for the paddy which they are going to sell to the 1st respondent.
28. For such restriction, sufficient reasons have been given by the respondents in the counter. So, from the abovesaid facts, it is very clear that the classification, classifying the Cauvery Delta areas as one classes is on an intelligible differentia, which distinguishes clearly the farmers located in other areas in the State and so such classification is on rational basis. So, the case of the petitioner on the basis of Article 14 of the Constitution cannot be sustained and the same has to be rejected.
29. With respect to the price, the learned senior counsel appearing for the petitioner has submitted that the petitioner, in view of the said notification, is able to get lesser market pried for the paddy than the price available to the farmers in the other areas of the State. But, unfortunately, the petitioner has not given any such price particulars regarding the market price. In the counter it is specifically stated that the price for the paddy fixed in the said notification is on the basis of the price fixed by the Central Government and also taking into consideration of the yield, labour charges, fertilizers and other inputs. The minimum Support Price is fixed, on the basis of the recommendation of the agricultural, Price Commission, Government of India. Besides, the State Government is also giving 50/- per quintal as the price allowance. The Apex Court, while dealing with the power of the court to decide the question regarding fixation of price, in the decision in M/s. Shri Sitaram Sugar Co. Ltd. v. Union of India : [1990]1SCR909 , has held as follows:
Judicial review is not concerned with matters of economic policy, The court does not substitute its judgment for that of the legislature or its agents as to matters within the province of either. The court does not supplant the 'feel of the expert' by its own views. When the legislature acts within the sphere of its authority and delegates power to an agent, it may empower the agent to make findings of fact which are conclusive provided such findings satisfy the test of reasonableness. In all such cases, Judicial inquiry is confined to the question whether the findings of fact are reasonably based on evidence and whether such findings are consistent with the laws of the land. As stated by Jagannatha Shetty, J., in Gupta Sugar Works : [1988]1SCR577 .
the court does not act like a chartered accountant nor acts like an Income Tax Officer. The court is not concerned with any individual case or any particular problem. The court only examines whether the price determined was with due regard to consideration provided by the statute. And whether extraneous matters have been excluded from determination.
Price fixation is not within the province of the courts, Judicial function in respect of such matters is exhausted when there is found to be a rational basis for the conclusions reached by the concerned authority. As stated by Justice Cardoze in Mississippi Valley Barge Line Company v. United States of America (1983) 292 U.S. 282: 78 Law Ed. 1260,:
The structure of a rate schedule calls in peculiar measure for the use of that enlightened judgment which the commission by training and experience is qualified to form. It is not the province of a court to absorb this function to itself. The judicial functions is exhausted when there is found to be a rational basis for the conclusion approved by the administrative body-
30. Even in the decision in H.S.S.K. Niyami v. Union of India : [1990]3SCR862 , the Apex Court, with respect to similar facts, has held as follows:
What is best for the sugar industry and in what manner policy should be formulated and implemented, bearing in mind the fundamental object of the statute, namely, supply and equitable distribution of essential commodities at fair prices in the best interest of the general public, is a matter for decision exclusively within the province of the Central Government. Such matters do not ordinarily attract the power of judicial review. The fixation of the price and zoning are integral scheme of the notification, without placing the factories in the appropriate zone based on agro-climatic and other economic considerations the proper price fixation cannot be made. So, both the factors are part of the policy decision by the Government in exercise of the statutory powers.
31. It is the case of the respondents that representations were received from certain sections of farmers of Nagai District to the effect that due to the absence of District Purchase Centres in the areas the farmers were forced to sell the paddy at loss, and they had requested to open a number of District purchase centres, with a view to avoid such loss in those regions. Further, the case of the petitioner that it can get more price for the paddy than that of the rate fixed by the 1st respondent cannot be accepted for want of particulars.
32. While dealing with similar issue for fixing the price with respect to essential commodities, the Apex Court in Maharashtra Rajya Sahkari Sakkar Karkhana Sangh Ltd. v. State of Maharashtra (1995) 3 S.C.C. 475, has held as follows:
What was vehemently urged by Dr. Dhavan was that the invidious pricing system resorted to by the sugar factories which were indebted to State Government resulted in forcibly drawing such cane-growers who were not members of any co-operative society, therefore, it was contrary to the statutory equitable pricing system consequent to the compulsory sale under the Act. It was urged that the fixation of price was irrational and unfair as it had no bearing or relation to the yield of the crop or to the predicment of the farmer. The learned Counsel vehemently submitted that any pricing resorted to either by the co-operative societies or by the State Government solely and exclusively in relation to the management of co-operative factories was an extraneous and irrelevant consideration. The learned Counsel urged that since price fixation was not delegated under the 1966 Order any action by the State Government or co-operative societies to resort to price fixation which was unfair and unjust to the non-members was contrary to the Act. The submission proceeded on assumption that the fixation of price was in respect of a commodity which was directed to be compulsorily sold under the orders issued by the Government. As explained earlier the assumption does not appear to be well founded. The entire edifice of the submission was built on the compulsive nature of transaction involved in supply of cane and payment of price. But what was lost sight of was that Section 3(3)(c) could be attracted only if the order issued by the Government could be held to be one under Section 3(2)(f). The submission ignores that economics of pricing in a controlled economy is entirely different from a free market. The equilibrium in the latter is reached by interaction of supply and demand. Its graph keeps on moving up and down governed by the principle of scarcity. But the controlled economy does not operate on demand and supply, The production, distribution and the supply are regulated and controlled by the Government in public interest. Such orders are issued in social interest for the common benefit and fair price for the needy and poor. Legality of such orders cannot be tested on cost structure of free economy or maximum profit theory.
33. For the foregoing reasons, it is clear that since the notification has been issued in the interest of the society and for the common benefit, even if the petitioner has to get lesser price for the paddy, than expected, there could be no question of unreasonableness so as to enable the petitioner to challenge the said notification. As held by the Apex Court, this Court cannot go into the correctness of the amount fixed. No materials also are available before this Court regarding the expenses incurred by the agriculturists to raise the paddy. Moreover, the respondents have explained as to how they have fixed in price for the paddy.
34. In view of the above, I do not find any merits in this writ petition. Accordingly, the same is dismissed. No costs. Consequently, the connected W.M.Ps. are closed.