R.M. Sahai, J. - (1.) HOW statutory authorities in exercise of wide general power conferred on them cannot but act in the manner provided in Statute or rules, otherwise the action becomes vulnerable even if it' is in good faith is demonstrated by this petition filed by a licencee under Industrial (Development and Regulation) Act, 1951 (for brevity INDRA) against the order dated 5th August, 1988 passed by Additional Milk Commissioner under U.P. Milk Act of 1976. Why was the order passed and what prompted petitioner to seek protection of this Court may be narrated in brief. When the company was established in 1960, by petitioner's predecessor, to manufacture 4000 tonnes of milk food annually under a licence granted by Government of India under IDRA as milk Food had been declared to be of public importance by the Union, the Central Dairy Farm, (hereinafter referred as CDF), a State Government undertaking producing butter, ghee, and piggery was already in existence. It appears to have been principal consumer of cream, a by product produced by petitioner. Whether the supply was made under some agreement entered between petitioner and CDF as a condition precedent for its establishment or it was done as mutual understanding between two commercial entities guided by rule of demand and supply and availability of surplus could not be established by any positive material by either of the parties. But from two letters sent by General Manager CDF in 1962 and 1963 this much is clear that dispute about quantity to be supplied end price to be paid existed even then. However, in 1976 U.P. Milk Act was enacted to provide for regulation and control of production, supply and distribution of milk and its conversion into milk products. Section 11 of the Act required any person setting up a dairy or milk processing unit to obtain a licence. Whether a licencee under IDRA was also required to obtain licence and if so then in respect of same item namely, milk food, or different item is defined as milk product and on what condition shall be adverted to latter but the petitioner obtained a licence under Section 11(2) of the Act in 1979, which was granted without any condition or restriction on manufacture of ghee or use of cream. But when the licence was renewed in 1984 -85 the licencing authority imposed a restriction that petitioner shall not manufacture more then 60 tonnes of ghee and that also for its staff. This was the first prick, the frequency and intensity of which increased with every renewal. Even though petitioner objected to such restriction and challenged the order by way of appeal but neither yielded any result and when next renewal was done the permission to manufacture open 60 tonnes of ghee was withdrawn. Direction was also issued to collect 1, 16, 666 kg. of milk per day instead of 35,000 tonnes per annum or an average of 1, 16, 666 kgs. per day. Although the restrictions were on increase but they appear to have been within tolerable limits and were challenged by way of appeal which to date could not be decided on pretext that petitioner did not pursue them. Before referring to the final and last order it will not be out of place to mention that the dispute, both in respect of supply of cream and payment of its price with CDF used to be resolved by mutual agreement arrived in presence of officers of Animal Husbandry and letter by officials of under milk Act as well. For instance in 1967 the petitioner acknowledged undoubted value of CDF being in close proximity which took enormous quantities of supplies of cream whenever there was major surplus even at the cost of inconvenience and financial risk. Yet it informed CDF that it shall have first option on cream if it was beyond their own ghee manufacture. In 1988 the difference between the two was resolved in a meeting held by officers of two organisations and it was agreed that CDF shall lift approximately 70% of cream available for sale on average monthly price paid by outsiders to petitioner. Similar meetings were held in 1982, 1983, 1985 and September 7, 1987. In the last meeting the price of cream was fixed at 59% allocated to fat and 40% SNF which is described as two axis formula. Claim of CDF for damages and petition for interest was rejected. Before resumption of supplies of cream to CDF was to pay Rs. 39 lakhs and odd. In respect of production and supply of cream it was agreed that petitioner shall supply four metric tonnes of fat per day to CDF in each month of October, November, December, January and February and three tonnes in August, September, March' and April, and surplus over and above it could be disposed of by petitioner as legally permissible. Future payment was to be made by CDF in cash. Resumption of supply of cream was to commence from September 8, 1987 provided CDF made payments etc. In case of default, CDF was required to pay 18% interest and it was left open to petitioner to discontinue supplies and dispose of entire cream in accordance with law. But even the ink had not dried on the agreement and the CDF on very next day informed that formula of price fixation was not correct it was followed by another letter dated September 21, raising dispute about supply of cream and insisting that full cream produced by petitioner should be supplied to CDF. But for the time being it was agreeable to accept four and three tonnes in the months mentioned in the agreement. This letter was replied on November, 3, 1987 and attention was drawn to agreement arrived on September 7, 1987. Claim of entire supply of cream was refuted and it was insisted that in case any cream was supplied over and above agreed amount that it would be on market price without any guarantee of quality etc. Letter exchange went on and in July 1988 CDF claimed over payment due to erroneous application of price formula. And then came the impugned letter of Additional Commissioner determining price of cream at 52% fat and 48% SNF resulting in reducing the price of cream. The petitioner was further directed to supply 4 tonnes of cream each day every month. And the Dairy Officer was directed not to issue any permit to export any cream. Therefore, what started in 1984 -85 as partial 'restriction on manufacture of ghee in course of four years ended in total prohibition of manufacturing ghee, collection of 1,16,666 kgs. of milk per day instead of average per day collection, fixation of price of cream on ratio of 52% allocated to fat as compared to 59% in 1987, supply of 4 tonnes of cream every day and total prohibition on export of cream provoking petitioner to assail the action of opposite parties not only as arbitrary, unreasonable but wholly illegal and unfounded as the provisions of Milk Act being ultra vires, the Central Act, the order was not only liable to be quashed, but direction is sought to restrain opposite parties from imposing any restriction.
(2.) TAKING up the constitutional challenge first the principal argument raised by learned counsel for petitioner was that Milk Food having been specified in Schedule I of IDR Act, the State of U.P. did not have any power to enact a law, on the same subject. The submission appears to be devoid of any substance. An industry the control of which by Union is declared by Parliament by law to be expedient in public interest is relegated to entry 52 of List I of the VII Schedule, but, 'when however, it came to the products of the controlled industries comprised in entry 52 of List I, trade and commerce in, and production, supply and distribution of these goods became the subject -matter of entry 33 of List III and both Parliament and State Legislature had jurisdiction to legislate in regard there to Tika Ramji v. State of U.P. : A.I.R. 1956 S.C. 676. Since the Central and State Legislature are entitled to legislate in regard to subject of production, supply, and distribution of Milk Food the argument of lack of Legislative competence is out of context. But the issue that arises is if the provision of State enactment are invalid or void being repugnant to any provision in the Central enactment? A.I.R. 1983 S.C. 1088. A State law is said to be repugnant to Central law when its provisions encroach or clash with any provision in the Central Act. That is if the field is already occupied by Central enactment then the provisions in the State Act to that extent shall become repugnant. 'But if both the legislations deal with separate and distinct matters though of a cognate and allied character repugnant does not arise (2 supra). What was urged was that since price fixation, export, licencing etc. of Milk Food is governed by IDRA the State Legislature could not regulate the same and the action of opposite parties in exercise of power under Milk Act was without jurisdiction. The submission ignores the width of expression production supply, and distribution used in entry 33. It includes even price (2) fixation or provision to regulate export etc. Therefore, what survives to be examined is if in this regard the field is occupied, Sec. 11(2) of IDR Act no doubt empowers the Central Government to impose conditions while granting the licence. And in exercise of this power conditions were imposed as well. But they did not relate to price fixation or export of the milk food. It could be done under Section 18G by a notified order issued by Government of India. But since no order was issued the State could exercise this function and the action would not be bad. But Section 11 of I.D.R. Act provides that any person establishing a new industrial undertaking after commencement of the Act shall do so in accordance with a licence issued in that behalf by Central Government. Therefore, the State legislature could not make a law which may provide for taking out a licence or registration of an industry which by virtue of its specification in Schedule I of I.D.R. Act is taken out of entry 24 of List II of VII schedule and becomes subject matter of entry 52 of List I. Consequently section 11 of the Milk Act requiring a dairy or processing unit to obtain a licence could not apply to an industrial undertaking which had obtained a licence under I.D.R. Act. Much argument was, however, advanced on sub -section (3) of Section 11 of the Milk Act, which reads as under: Notwithstanding anything contained in such Sections 1 and 2 a milk processing unit licenced under the Industrial (Development and Regulation) Act, 1951 shall not be refused licence under this Act, if it makes an application in the prescribed manner and complies with the prescribed conditions and furnishes such security and pays such fee as may be prescribed. Does it require a unit licenced under I.D.R. Act to obtain yet another licence under this Act? It cannot as if the provision is interpreted to mean that a licencee shall have to obtain a licence for the same purpose for which it had been granted licence under I.D.R. Act then the provision shall become invalid on principle of occupied field. At the same time, the state legislature being competent to enact on the same subject to the extent, it does not encroach upon any provision under central act, the provision in the Act of action in pursuance of it to the extent it does not clash shall neither be invalid nor ultra vires. From a perusal of licence issued under I.D.R. Act it is clear that the petitioner, was not only granted licence but numerous conditions were imposed controlling its activities. The only field left for State Government was to impose conditions for collection of milk. It is thus obvious that the claim of opposite parties that by, virtue of sub -section (2) of Section 11 Jain v. Union of India, (1970) 2 S.C.W.R. 59 they were entitled to issue licence for production of milk food and impose such condition as in their opinion was just and proper cannot be accepted.
(3.) WHAT then is the scope of Section 11(3). In other words what would be the field of operation of State Government under this sub -section. Two things stand out clearly, one that it is a non obstante clause and its rigour has been made more intense by taking out discretion of licencing authority due to use of expression, shall not be refused licence under this Act, which licence shall not be refused? Obviously not the licence for the purpose a licence has been granted under I.D.R. Act. Therefore, it has to be licence other than that issued under I.D.R. Act if apart from milk food a licence intends to manufacture any milk product within meaning of the expression defined under the Act it shall have to obtain a licence under this Act. And an application for grant of licence for such item cannot be refused. The apprehension of opposite parties that such construction shall defeat the objective of provision appears to be devoid of any merit. A construction other than this may lead to unwarranted consequents and clothe the authority under milk Act with arbitrary power. It can be demonstrated by this case itself. For instance the huge amount of cream produced by petitioner can not be consumed and since it cannot be retained except for short duration say twenty four to forty eight hours it has to be put to some use, namely producing of ghee etc. For this purpose the petitioner is required to take out a licence under the Milk Act. And if the application is made it cannot be rejected. Otherwise the petitioner shall have to remain on mercy of the authorities under Milk Act whose action may result in rendering the unit economically unviable. Therefore subsection 3 of Section 11 cannot be relied and it cannot be urged that" it was incumbent upon petitioner to obtain a licence under Milk Act for manufacture of Milk Food.;