- (1.) B. P. Jeevan Reddy, C. J. This writ petition calls in question the validity of a letter dated 30th November, 1990 written by the Secretary to Government of U. P. addressed to heads of Government departments, public corporations and other local bodies. Through this letter, the Secretary to Government conveyed the decision of the Government that all the departments of the Government, public corporations and other local authorities in the State should obtain the electronic goods specified in the letter from M/s. Uptron (India) Ltd. , alone. M/s. Uptron (India) Ltd. , is a company incorporated under the Companies Act owned and controlled by the Government of U. P. and engaged in the manufacture of electronic goods. The first petitioner M/s. International Data Management Ltd. is a public limited company having its registered office at New Delhi and engaged inter alia in manufacture and sale of electronic goods mentioned in the impugned letter. The petitioners challenge the validity of the said letter on several grounds, namely, violation of Arts. 19 (1) (g) and 301 of the Constitution of India. It is also alleged that the impugned decision of the Government is also violative of the equality clause enshrined in Art. 14 of the Constitution. Case of the Petitioner: The first petitioner has its factory at Bombay. It is one of the leading manufacturers of Mainframe Computers, mini-computers and other electronic goods. Its business is spread over the entire country including the State of U. P. The second petitioner is a partnership firm registered with the Registrar of Firms of U. P. while the third petitioner is a citizen of India. The first petitioner carries on its business through petitioner Nos. 2 and 3. The departments of the Government, public corporations and local authorities are increasingly purchasing and using electronic goods for a more efficient discharge of their functions and so does the Government of U. P. It has set apart Rs. 3. 50 crores during the current financial year for purchase of computers and other electronic equipments. These purchases were hitherto made on a rate contract system. The rate contracts were determined by the Commissioner and Director of Industries after inviting tenders. In response to the tender notices dated 20th September, 1990, called by the Commissioner and Director of Industries, U. P. petitioners submitted their tenders for approval and determination of rate contract for supply of computers and other electronic goods. The fourth respondent (M/s/ Uptron India Ltd.) and several other manufacturers and dealers submitted their tenders which were finalised on 16th February, 1991. The fourth respondent (M/s. Uptron India Ltd.), however, declined to supply goods at the rates so approved while the petitioners and other manufacturers were prepared to do so. When the petitioner contacted the departments of the Government for supply of the said goods it was apprised of the impugned Government decision. The petitioners were told that they would purchase their requirements only from M/s. Uptron (India) Ltd. and from no one else. By the impugned decision the Government of U. P. has created monopoly in favour of M/s. Uptron (India) Ltd. which is violative of the fundamental right guaranteed to the petitioners by Art. 19 (1 ). It is equally violative of the guarantee enshrined in Arts. 301 and 14 of the Constitution and is liable to be quashed. M/s. Uptron (India) Ltd. , is not a department of Government. It is one of the several manufacturers of electronic goods in the country. It could not alone be preferred over other manufacturers, more particularly when it is not prepared to supply the goods at the approved rates but proposes to charge higher rates. Strong reliance is placed by the learned counsel for the petitioners on a decision of a bench of Andhra Pradesh High Court in Mahindra and Mahindra Ltd. v. State of Andhra Pradesh, AIR 1986 Andh Pra 332.
(2.) THE fourth respondent (M/s. Uptron India Ltd.) has filed a counter-affidavit with the following averments: THE fourth respondent (M/s. Uptron (India) Ltd.) is a subsidiary company of U. P. Electronic Company Ltd. , which is a Government company wholly owned and controlled by the State of U. P. Its entire paid up capital of Rs. 31. 02 crores is provided by the State of U. P. It manufactures a wide range of electronic goods and spends a substantial amount on research and development. It markets not only the goods manufactured by it but by its sister companies. For the year 1989-90 its turn-over was Rs. 210 crores. Only a small amount of Rs. 3. 13 crores of this turnover came from the sale of goods manufactured by other companies. It employs a large pool of technical, scientific and other personnel and it has acquired a high reputation for the quality and performance of its products throughout the country. It has entered into several technology transfer agreements with various reputed international companies like Toshiba of Japan, Unisys of U. S. A. , J. S. Telecom of France and many other countries. In 1979, the Uptron (India) Ltd. , was given a status of R and D House by the Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India. Its products have also received several meritorious awards. It has established a large number of service centres all over the country. In Uttar Pradesh it has got twelve factories and a large number of service centres. THE approval of rate contract by the Commissioner and Director of Industries does not amount to a completed contract to purchase goods. It is only approval of rates. Such approval does not bind the Government to purchase goods of any particular manufacturer whose rates may have been approved. It is open to the Government to purchase the goods from any of the manufacturers at those rates. It is denied that the impugned order is the result of any manoeuvering on the part of the fourth respondent. THE impugned order does not create any monopoly in favour of M/s. Uptron (India) Ltd. THE total market of electronic goods in India is Rs. 1391 crores, out of which the share of U. P. Government is only Rs. 3 crores. Even if the petitioners and other manufacturers are excluded from this market of Rs. 3 crores, the remaining market of Rs. 1091 crores is still open to them both in the State of U. P. and all over the country. THE impugned decision of the Government does not also violate Arts. 301 and 14 of the Constitution. A rejoinder affidavit is filed by the petitioners wherein they have denied the fourth respondent's claim of high quality of its products. It is asserted that because of its inferior quality M/s. Uptron (India) Ltd. , has been steadily losing market to other computers. The investment in R and D by the fourth respondent is nothing peculiar to it; every manufacturer does it. Petitioner No. 2 has service centres all over the country including five centres in U. P. The impugned decision of the Government of U. P. practically nullifies the rate contracts. If the electronic goods are purchased only from chosen manufacturers there was no point in inviting tenders for approval of rate contracts or in approving the rate contracts. The products of the fourth respondent carry a price tag which is 30 per cent higher than the price charged by the petitioners and other similar manufacturers. Because it is unable to compete with other manufactures it has pressuriesed the Government of U. P. to take the above decision. As a matter of fact the fourth respondent was earlier disqualified by the Commissioner and Director of Industries. Though the said disqualification withdrawn later, it shows that fourth respondent is not above committing mal-practices. The petitioners' challenge is mainly based on Arts. 19 (1) (g), 301 and 14 of the Constitution. It would be appropriate to examine each of these challenges separately. We shall take up the challenge based on Art. 19 (1) (g) in the first instance.
(3.) ARTICLE 19 (1) (g) guarantees to citizens of India the right "to practice any profession, or to carry on any occupation, trade or business". Clause (6) of Art. 19, however, empowers the State to impose reasonable restrictions on the said right in the interest of general public. In particular the clause declares that "nothing in the said sub-clause shall affect the operation of any existing law in so far as it relates to, or prevents the State from making any law relating to, - (i ). . . . . (ii) the carrying on by the State, or by a corporation owned or controlled by the State, of any trade, business, industry or service, whether to the exclusion, complete or partial, of citizens or otherwise. " The question is whether the decision of the U. P. Government contained in the impugned letter does violate the fundamental rights guaranteed to the petitioners by Art. 19 (1) (g) and if so whether it is saved by clause (6) of the said ARTICLE? The impugned decision does not prohibit the petitioners or other manufacturers of electronic goods from carrying on their manufacturing or business operations in the State of U. P. It does not prohibit any one - not even the departments of the Government, public corporations and local authorities under its control from purchasing the electronic goods manufactured by the petitioners or other manufactuers. It only directs that the Government departments, public corporations and other local authorities under its control should purchase the electronic goods of the nature specified in the impugned letter only from M/s. Uptron (India) Ltd,. which is a subsidiary company of U. P. Electronics Corporation, a company wholly owned and controlled by the State of U. P. Can it be said that by the impugned decision the Government of U. P. has violated the fundamental rights to carry on business guaranteed to the petitioners? The petitioners say, yes. They mainly rely upon the decision of the Supreme Court in the District collector of Hyderabad v. M/s. Ibrahim and Co. , AIR 1970 SC 1275, which in turn refers to and relies upon the case of Mannalal Jain v. State of Assam, AIR 1962 SC 386. It is necessary to examine the ratio of both these cases. We shall first deal with the facts in the case of Ibrahim and Co. (supra ). In the State of Andhra Pradesh, licensing of sugar dealers was regulated by Andhra Pradesh Sugar Dealers Licensing Order, 1963 issued under S. 3 of the Essential Commodities Act, 1955. The respondents in the appeal before the Supreme Court were licensed under that order. The order provided that no person shall carry on business as a dealer of sugar except under and in accordance with the terms and conditions mentioned in the licence granted. It prescribed the procedure for renewal and cancellation of licences. Besides the above order the other statutory order was the Sugar Control Order, 1963 issued by the Central Government under R. 125 (2) of Defence of India Rules, 1962. This order defined a 'recognised dealer' as a person carrying on the business of purchasing, selling or distributing sugar and licensed under the order relating to the licensing of sugar dealers for the time being in force in a State. The order provided for placing restrictions on sale, or agreement to sell or delivery by the producers of sugar for controlling the production, sale and distribution of sugar by the producers or recognized dealers, for regulating the movement of sugar, fixation of its price and allotment of quota and so on. The respondents before the Supreme Court, having been licensed under the said order, were recognized dealers within the meaning of Sugar Control Order, 1963. The Central Government fixed quotas for each State. These quotas were lifted by different licensees and dealers nominated by the State Government on its behalf. On 30th December, 1964 the State Government issued an order directing that the sugar quota allocated to "the twin cities of Hyderabad and Secunderabad" be given in its entirety to the Greater Hyderabad Consumers Central Cooperative Stores Ltd. , Hyderabad. By this order the respondents who were very large in number, were prevented from carrying on their business in sugar. They challenged the validity of the said executive order by way of petitions in the High Court of Andhra Pradesh. The learned single Judge allowed the writ petitions and struck down the said executive order which was confirmed on appeal. The matter was then carried to the Supreme Court. The first ground on which the Supreme Court dismissed the appeal runs thus: The impugned order is not one issued either under the Andhra Pradesh Sugar Dealers Licensing Order, 1963 or under Sugar Control Order, 1963. It is only an executive order, issued by the State Government purporting to be in furtherance of its objective of encouraging co-operative societies. Even so "the order was still unauthorised. Under the Essential Commodities Act, 1955 the State Government had issued an order for distribution of sugar through licensed dealers and the respondents have obtained licences in that behalf. Their licences could only be cancelled after making the enquiry provided under the Sugar Dealers Licensing Order. The respondents were also recognized dealers within the meaning of Sugar Control Order issued by the Central Government. The rights of the respondents could not be taken away by an executive order in a manner substantiallv contrary to the statutory orders. " It is thus apparent that the first ground upon which the Supreme Court upheld the High Court's decision is that while the statutory orders issued by the State Government as well as Central Government conferred upon the respondents the right to deal in sugar, it was taken away by the State Government by issuing an executive order which cannot be done. Not only that, the executive order went further and, in effect transferred the respondents' business to the co- operative society. A monopoly was created in favour of the co-operative society in the matter of dealing in sugar in that district to the exclusion of the respondents. All this without a 'law' within the meaning of Art. 19 (6) read with Art. 13 (3) (a ). The second ground upon which the Supreme Court sustained the High Court's order is to be found in para 12 of the judgment which deals with Art. 301 of the Constitution. The reasoning on this score runs thus: Art. 301 declares the freedom of trade, commerce and intercourse throughout the territory of India free. The declaration is couched in the widest terms and applies to all forms of trade, commerce and intercourse. It is subject to certain restrictions contained in the same chapter including Arts. 304 and 305 of the Constitution. Article 304 (b) empowers the State Government to impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest but a bill for this purpose has to be introduced or moved in the legislature only with the previous sanction of the President. Art. 305, of course, saves the existing laws providing for State monopoly from the purview of Art. 301. To put it in the words of the Supreme Court (at pp. 1278 and 1279 of AIR 1970 SC 1275): "in the present case the State 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 within the meaning of Art. 19 (6) (ii ). The order was challenged on the ground that it trenches upon the freedom of trade and commerce guaranteed by Article 301 of the Constitution. By Article 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 sanction of the President. Obviously the guarantee under Article 301 cannot be taken away by executive action. The guarantee under Art. 301 which imposes a restriction upon legislative power of the Parliament or the State Legislature and the declaration of freedom is not merely an abstract 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 individuals. . . . . . . . . . . . It cannot be inferred that the Constitution imposed restrictions upon Legislative power, but denied to the individuals affected by unauthorised assumption of executive power the right to challenge the exercise of that power. A vital constitutional provision cannot be so construed as to make a mockery of the declared guarantee and the constitutional restrictions on the power of the Legislature. If the power of the State Legislature is restricted in the manner provided by Art. 301, but within limits provided by Arts. 303 to 305, it would be impossible to hold that the State by executive order can do something which it is incompetent to do by legislation. " The second ground thus holds that the freedom of trade, commerce and intercourse guaranteed under Art. 301 cannot be interferred with by a mere executive order when it cannot be done even by a legislative measure except in accordance with Art. 304 (b ). In other words, a law within the meaning of Art. 304 must not only impose restrictions which are reasonable but a bill in that behalf be introduced in the legislature only with the previous sanction of the President. This argument must be understood in the light of the fact that the respondents who were licensed dealers under the Andhra Pradesh Sugar Dealers Licensing Order and who were also recognized dealers within the meaning of Sugar Control Order were totally excluded from the said business by an executive order of the State Government.;