NEW BIHAR BIRI LEAVES CO. & ORS. v. STATE OF BIHAR & ORS

Citation: [1981] 2 S.C.R. 417

Court: Supreme Court of India

Bench: R.S. SARKARIA, R.S. PATHAK

Case summary

-The common question that has been seriously • pressed itito argument in this batch of writ petitions and criminal appeal mentioned in the title, relates to the constitutiopal validity of certain Rules framed under the State of Bihar under the Bihar Kendu • Leaves (Control of...

Judgment text

• NEW BIHAR BIRI LEAVES CO. & ORS. v. STATE OF BIHAR & ORS. lam/pry 6, 1981 [R. s. SARKARIA AND R. s. PATHAK, JJ. ] 1J I Constitution of India 1950, Articles 19(6) clauses (i) & (ii)-Clauses I whether distinct and separate-Law covered by the clauses whether to satisfy the test of reasonableness. ~ Article 19(1) (g)-Citizen's right to enter into contract with State-Whether fundamental right can be enforced though contractual. Bihar Ke11du Leaves (Control of Trade) Act 1973 & Bihar Ken. du Leaves (Control of Trade) Rules, 1973-Clause 13 and Clause 4(bb) of agreement • prescribed by rules-Whether unreasonable and violative of Articles 14 and 19. Kendu leaves used in the manufacture of bidis are grown oo forest produce in several States. On March 10, 1972 the State of Bihar issued the Bihar Kendu Leaves (Control of Trade) Ordinance, 1972, which was replaced by the Bihar Kendu Leaves (Control of Trade) Act, 1973.

The purpose was to create a State monopoly in the matter of sale of Kendu leaves to the manufacturers· of bidis to regulate the trade in relation to the grower of Kendu plants and their collection and sale through the agency of the State to the registered manufacturers of bidis. Section 4, empowered the State Government for the purpose of purchase and sale of Kendu leaves on its behalf, to appoint agents in respect of different units. Section 9 provided that the authorised aSents will be bound to accept delivery of all those Kendu leaves which are fit for the purpose of mannfacture of bidis. In exercise of its ru. Ie-. making powers the State Government notified the Bihar Kendu LeavOB (Control of Trade) Rules, 1972, which was continued by Section 23 of the Act even after the repeal of the Ordinance. Provisions regarding the disposal of Kendu leaves were made in Rule 9.

Sub-rule (I) ~ -provided that Kendu leaves collected or likely to be collected shall be sold r- or otherwise disposed of by tender on terms and conditions spocified in the Tender Notice. The Tender was required by sub-rule (2) to be advertised in newspapers. Sub-role (9) provided that the successful tenderer or success- • ful bidder shall be appointed as purchaser and the entire quantity of Kendu leaves collected or likely to be collected or such lesser quantity out of it as may be offered to him by the State shall be purchased by him on terms and conditions in the agreement to be executed by the purchaser. Sub-rule (10) required the purchaser to execute an Agreement in Form 'M' within 15 days of the receipt of the order o:E appointment.

By a Notification dated January 16, 1974 the Rules were amended and sub-clause (bb) after clause 4(b) was added in Form 'M' of the Agreement which provided that the purchaser shall not raise any objection against the quality of Kendu leaves or shortage of leaves. Condition 13 of the Tender Notice was a1so incorporated in the statutory Agreement, Form 'M' providing • that for every unit a minimum royalty will be 'payable by the purchaser,' and that this amount shall be payable by the tenderer even if by the end of the season, the price of Kendu leaves at the offered rate, collected und delivered to the purchaser, fell short of this amount, the amount being payable before the leaves are utilized or taken out and if not paid, realisable as arrears of land revenue.

In their writ petitions the petitioners who were carrying on trade in ~en~u leaves, assailed the Rules framed under the Act and clause ,13 and clause 4(bb) of the Tender Notice and the Statutory Agreement and the notices of demand issued demanding royalty in respect of the undelivered quantity of Kendu: • leaves. " ..

It was contended that : (i) the provisions and conditions contained in clause 4(bb) and clause 13 amount to an unreasonable restriction on freedom to • carry on trade or business in Kendu leaves guaranteed under Article 19(I) {g) of the Constitution and that they are not within the protection of sub-clause (ii) i)l the second part of clause (6) of Article 19; (ii) that the provisions in { their immediate operation and effect, are harsh, unconscionable, arbitrary, unfair and oppressive, thereby violating Article 14, (ill) the foreclosure of the right of the purchaser to refuse delivery Oil the ground of the \eaves offered, not being of requisite quality, is inconsistent and ultra vires of the proviso to Section 9(1) of the Act and (iv) that the auctions are held in January, while the Agents are not appointed till March or April, the plucking season, and consequently, no reasonable estimate of the expected yield is possible.

The respondents argued that (i) there is a paucity of skilled people who could be employed as Agents and the prevailing practice is that the persons appointed as Agents, are sponsored by the purchasers and that the terms of' the Agreement, taken as a whole are not one-sided, (il) if a person voluntarily takes upon himself under the terms of a contract, such risks and chances of benefit, he has no right in the, event of suffering a loss to be compensated for it even under the ordinary law in a suit, much less the Court of writ jurisdiction can grant any such relief, ,(iii) the right to enter into a contract on parti· cular terms with the State is not a fundamental right, (iv) as the petitioners bad not paid amounts required to be adjusted against the remuneralion of the Agents they are not entitled to relief under Article 32, and (v) the provisions l(' are directly and essentially related to the operation of monopoly and, as such are wtihin the protection of sub-cloose (ii) of claus (6) of Art 19.

Dismissing the petitions and appeal HFLD: !. The condition in 4(bb) in the Tender Notices and the statutory agreement is couched in peremptory, drastic and absolute language, not qua1ified by any words showing that the bar envisaged in it will be attracted only in cases where the purchaser bas had an earlier_ opportunity to raise his objec· tion but failed to do so, or, where he had on an earlier occasion raised such an objection which was heard and overruled by the competent Forest Officer. Condition 4(bb) therefore is inconsistent with and repugnant to Section 9(1), • proviso of the Act which contains a built-in-warranty, that the Kendu leaves offered would be fit for manufacture of bidis; that is to say, the leaves would be of merchantable quality and as such, invalid. [4420-H] • BIR! LEAYES V. BIHAR 419 2.

The scheme of the Bihar Act and the Rules and Forms including that of the impugned condition 13 was designed remove the deficiencies, infirmi- • ties and vices pointed out in Rashbihari's Panda v. State of Orissa [1969] 3 S. C.. R. 374. The impugned condition 13 satisfied the test of reasonableness under the first part of Articles 19(6). The contention, that in actual operation, the impugned provision (clause 13) creates a n1onopoly in favour of a class of middlemen consisting of 'Agents' and purchasers, and enables them to earn unduly large profits at the cost of the public or pluckers and growers is not acceptable. [4390-H, 440A-B] 3. (i). Clause (6) of Article 19 falls into two parts, indicating that the two parts of the clause are intended to be distinct and separate. The words "reasonable restrictions" which find pivotal mention in the first part, have not been repeated in the second part which omission makes.

it clear that a law covered by sub-clause (ii) is not required to satisfy the test of reasonableness under the first part of the clause and no objection to have validity of such a law is tenable on the ground that it infringes the right guaranteed under Article l9(l)(g). Sub-clause (ii) is thus an exception to the main substantive provision in clause (1) of the Article. (4310-H, 432A-BJ 3(ii). The basic and essential features which are directly and immediately connected with the creation of the State monopoly are found in the body of the Act itself. The provisions incorporated in the Forms of Tender Notice and Agreement are merely subsidiary or incidental prov1s1ons, therefore, do not fall within the protection of sub-clause (ii) in the second part of Article 19(6). [432E-F] • 3(iii).

\Vhere the business to be carried on by a citizen is in a commodity, the sale of which is a State monopoly,- conditioned by some statutory terms, (analogous to the impugned conditions) which in operation, have a direct and immediate impact on the fundamental freedom of the citizen guaranteed under Article 19(1) (g), the citizen cannot enter into a contract with the Government for purchase of such a commodity except on the statutory terms laid down by the seller-State. The Tender Notice and the Agreement \Vhich the purchasers enter into with the Government, although couched in statutorv Forms, are therefore, not bereft of their contractual character. [432G-H, 433A & C] 4. The minimum royalty or price payable being fixed on the basis of 75 ~r cent of the estimated annual yield in standard bags from the unit multiplied "9' ~Y the rates offered and accepted. Such an estimate, is made on the basis of the average actual yield from that unit for the preceding three years.

Such an estimated yield is notified and published in the Tender Notices every year. Purchasers in the trade, know beforehand as to what they are bidding for, and • - they are generally persons who have been in the trade for several years and, as such have a special knowledge of forming their own estimate-s of the expect· ted yield and the chances of profit and loss from that particular nnit in a particular year. [433F-OJ 5. As the chances of profit and risks of loss are evenly divided between the seller-state and the purchasersi it cannot be said that the impugned condition in clause 13 of the Tender Notice and the Agreement is manifestly nnreasonable. The impugned condition 13 is a restriction imposed in the general public interest. [434B-C] 6.

Although the Act alld the Rules contemplate that the Agents appointed by the qovernment will be under its foll control and liable to compensate • the Government for any shortage, damage or loss caused in collection or delivery or any defect in the quality of the leaves collected, to the Government, • yet, in actual practice, the real position is that the Agents are generally persons sponsored by and otherwise, deeply interested in the purchasers. [435B-C] 7. The agents are to be appointed every year at short notice when the plucking season is at hand and as there is a dearth of suitable· persons having adequate experience. and skill of work as efficient agents, the Government is dril'en into a situation in which they have to appoint persons sponsored by the j purchasers as Agents.

The rules framed under the Act envisage a strict and exclusive control of the Government over the Agents and iheir activities, and provide for their liability to compensate the Government for the loss occasioned by their misconduct or neglect. The condition in condition 13 far from I • t creating a monopoly in the trade in favour of middlemen, operates as an -'1 ~ ironclad safeguard against leakage of the public revenue by assuring a mini- • mum return to the public exchequer from the sale of Kendu leaves. The. provision is aimed to secure the full benefit from the trade to the State leaving chances of making reasonable, marginal profit to the purchasers. [435C-D. 439B-E] ' 8. It is a fundamental principle of general application th.

1t if a person of his own accord, accepts a contract on certain terms and works out the contract, he cannot be allowed to adhere to and abide by some of the: terms of the contract which proved advantageous to him and repudiate the other terms of the same contract which might be disadvantageous to him. The maxim is qui approbat non reprobat. A party to an instrument or transaction cannot take advantage of one part of a document or transaction and reject the resL [441E·Hl Verschures Crean1eries Ltd. v. Hull & Netherlands Steamship Co. [1921] 2 K. B.. 608 and Douglas Menzies v. Umphelby [1908] A. C. 224 at p. 232 referred to. In the instant case the petitioners had by offering highest bids at public auctions or by Tenders, accepted and Vlo'orked out the contracts in; the past but are now resisting the demands or other action, arising out of the impugned condition 13 on the ground that this condition is violative of Articles 19(1){g) and 14 of the Constitution.

The impugned conditions though bearing a statutory complexion, retain their basic contractual character. Though a person coo. not be debarred from enforcing his fundamental rights on the ground of estoppel or waiver, the principle which prohibits a party to a transaction from approbating a part of its conditions and reprobating the rest, is different from ... the doctrine of estoppel or waiver. [442A-C] • ORIGINAL JURISDICTION : Writ Petitions Nos. 2222-2252/77 & 121 to 125/79, 405 & 441174, 46 & 47/75. ~ (Under Article 32 of the Constitution. ) AND CRIMINAL APPEAL No. 300 OF 1974. • Appeal by Special Leave from the Judgment and Order dated 14-2-1974 of the Patna High Court in Criminal Writ Jurisdiction No. 68/73. BIRl LEAVES v. BIHAR (Sarkaria, !. ) 421 • F. S. Nlitiman, Anil B. Devan, J. B. Dadachanji, K. J. John, l. ,S. Sinha and Tarini Prasad for the Petitioners in WPs. Nos. 121-125/1 79, 2222-2252/77 & 46-47175. Y. S. Chitale, K. K. Sinha and S. K. Sinha for the Petitioners in W.

P. Nos. 405 & 441/74 and Cr!. A. No. 300/74. Lal Narain Sinha, Attorney General of India, Ram Balak Mahto, and U. P. Singh for the Respondents Nos. 1-2 in all W. Ps. and Appeal. Miss A .. Subhashini for Respondent No, 3 in WP Nos. 2222-2252/ 17. The Jlldgme'. nt of the Court was delivered by SARKAJUA, J. -The common question that has been seriously • pressed itito argument in this batch of writ petitions and criminal appeal mentioned in the title, relates to the constitutiopal validity of certain Rules framed under the State of Bihar under the Bihar Kendu • Leaves (Control of Trade) Act, 1973 (hereinafter referred to as the 'Act') p:irticularly clause 13, clause 4 (bb) of the Tender Notice and of the sμtutory Agreement notified by the Bihar Government in the Bihar Government Gazette,. and the notices of demand issued under the impugned provisions demanding "royalty" from tl1e petitioners in respect pf the undelivered quantity of Kendu leaves.

All these writ petitions will be disposed of by this common judgment. The basic question being common, it will suffice to state the facfs giving rise to Writ Petitions 2222 to 2252 of 1977, filed by the NejV Bihar Bidi Leaves Co. The petitioners in all these writ petitions are either firms or individuals: carrying on trade in Kendu leaves in the State of Bihar. However, Retitioner No. 31 is an association of traders in Kendu leaves, of which the other petitioners are members. K~ndu leaves are grown as forest produce in several States, including the States of Bihar, Orissa, Andhra Pradesh, Maharashtra, Gujarat, Madhya Pradesh and a part of Uttar Pradesh. Under the old system in Bihar, the right to pluck and extract Kendu leaves from a forest: coupe carved out by the Forest Department, was auctioned by the S~ate Government. dn March 10, 1972, while the State of Bihar was under the Presitlent's rule, the Governor of Bihar issued the Bihar Kendu Leaves (Control of Trade) Ordinance, 1972.

The provisions of this Ordlimnce were continued under successive Ordinances and ultimately repl~ced by the aforesaid Act of 1973. This Act created State mono- II poly: in the matter of sale of Kendu leaves to the manufacturers of 11-~7 SCI/ SJ • • bidis. Its purpose is to regulate this trade in relation to the grower :if Kendu plants and the collection and sale of the same through the agency of the State to the registered manufacturers of bidis. Under its scheme, a specified area of Kendu leaves is divided into units. The 'grower' is defined as 'a grower who holds lands on which Kenda ' ! plants grow or who is in possession of such lands under a lease or otherwise, and includes the State Government. ' Under Section 3, the State Government may, by notification in the Official Gazette, declare any area to be a specified area for the purposes of the Act and divid_e every such specified area into such number of units as it may deem fit.

'Unit' means a sub-division of a specified area consti- • tuted under Section 3. Under Section 4, the State Government may, -1 for the purpose of purchase and sale of Kendu leaves on its behalf, • appoint agents in respect of different units and any such agent may be appointed in respect of more than, any one unit but not more than three units. The terms, conditions and the procedure ior appointment • of agents have been prescribed by the Rules framed under the Act, which we sh•ll presently notice. Section 5 places restriction on purchase or transport of Kendu leaves. Section 8 mandates the Forest_ ~- Officer incharge of a Division to set up in each unit a number of depots.

Section 9 is important and its material part runs as under: "(I) The State Government or its authorised officer or agent shall purchase Kendu leaves offered for sale and deliver at the depot during the bus_iness hours at the rates fixed under Section 7: Provided that it shall be open to the State Government or its authorised officer or agent, for reasons to be communicated in writing, to refuse to purchase or accept delivery of any Kendu leaves which, in their opinion, are not fit for the purpose of manufacture of bidis. '' It will be seen that the proviso to sub-section (1) contains a built-in -~ warranty inasmuch as it says that the authorised agents will be bound to accept delivery of all those Kendu leaves which, in their opinion, ~ are fit for the purpose! of manufacture of bidis. In other words, the Kendu leaves to be purchased by the authorised agents of thel Government must be of merchantable quality.

• The next relevant provision is to be found in Section 11 which is as follows "(1) Every manufacturer of bidis within the State shall • get himself registered within such period on payment of such fee and in such manner as may be prescribed. ,. BIRI LEAVES v. BIHAR (Sarkaria, !. ) 423 (2) Every manufacturer of bidis within the State registered under sub-section (I) shall furnish a declaration • in snch form by such date and in such manner as may be prnscribed. " Section 12 provides that Kendu leaves purchased by the State Government or by its authorised officer or agent, shall be disposed of in such manner as the State Government may direct. Section 20 of the Act gives the State Government the power to make rules subject to the conditions of previous publication, to carry out all or any of the purposes of this Act.

Sub-section (2) of that Section provides that -"Such rules may provide for all or any of the following matters, { · namely:- "(a) procedure to be followed in making appointment of a~nts; • (b) to (d) ............ , (e) the manner of registration under Section 1O; {f) the manner of registration, the period within which such registration shall be made and the fee payable thereof under sub-section (1) of Section 11 ; (g) form of declaration, authority to whom, date by which and the manner in which the . ckclaration shall be furnished under sub-section (2) of Section 11; (h) " In exercise of its powers under the then extent Ordinance analogous to those under Section 20, the State Government of Bihar notified the Bihar Kendu Leaves (Control of Trade) Rules, 1972 (for short the 'Rules'). These rules were, as already noticed, continued by ~lion 23 of the Act, event after the repeal of the Ordinance con- ' cemed. Rule 2(8) defines 'Purchaser' to mean a person to whom Kendu - .

leaves have been sold by the State Government under Section 12 Under clause (1) of the same Rule, 'Standard bag' means a bag conlaining 1000 standard gaddis of Kendu leaves and where the • standard gaddis are not bagged, reference to standard bag . shall be construed as a reference to 1000 standard gaddis or 50,000 leaves. Under clause (11) , "Standard gaddi" -means a bundle containing 50 Kendn leaves. • Rule 3 provides the manner of appointing agents. The applica- - tion for agency is to be submitted in ·Form "A". This Fonn requires the applicant for appointment as Agent to make a Declaration.. inter aNa, to this effect: • "I/We ........ hereby declare that I/We have read and understood all the provisions of the Bihar Kendu Leaves (Control of Trade) Ordinance, 1972 and the rules made thereunder and the conditions of agency mentioned in the notice issued under rule 3(1) and I/we agree to abide by the same. , I/we have personally inspected the unit No.....

if I/we am/are appointed as an agent for the unit mentioned above, I/we undertake lo purchase from growers and collect from land of State Government and ___, deliver a quantity of Kendu leaves on both counts, which • shall not be less than . . . . . . Standard bags as mentioned in the notice. I/we shall execute the agreement witlt the State Government in Form 'C' within 15 days. t part of clause (6) of n- the said Article~ and in applying that test the voluntary nature of thco contract and the oblig2tions willingly undertaken by the purchaser with all the risks of loss and chances of gain should not be lost sight of; that a purchaser who acts on a -~ntract voluntarily entered into by him is precluded from repudiating some of its conditions which involve risk of loss and to accept those which are advantageous to him . .

In support of the proposition that one who has received the benefits of statute is precluded from attacking the constitutionality of a condition attached by the statute, the learned Attorney-G. cneral has referred to these decisions of the Supreme Court of United States : Berth Fisheries Co. v. Industrial Commission of the Stale of Wisconian('); St. Louis Casting Co. v. Consrmc1ion Co. ('); and United Food Fuel Gas Co. v. Rail Road Commission. (") Jn reply, Mr.

Nariman submits that writ petitions have been filed from 1973 onwards by various purchasers to challeniic the validity of the impugned provisions, as notified every yeat for inviting tenders, in the High Court or in this Court, and from time to time interim ordeT' staying the operation of the impugned provisions have been issued • either by the High Court or this Court; that in \iew of this, it cannot be said that the petitioners are precluded from challenging the validity of the impugned provisions on the ground of acquiescence. waiver or estoppel. It is maintained that fundamental rights cannot be waived, • ,ff ------ (! ) 71 L. Ed, 908 (2) 1923 us 469 (3) 102 us 415 • • BIR! LEAVES v. B! HAR (Sarkaria, l. ) 431 particularly those under Article 14 of the Constitution and the prin- • ciple of estoppel enunciated in the American decisions is not applicable in India. In support of this argument, reference has been made to the decision of this Court in Basheshar Nath v.

The Commissioner of Income-tax, Delhi & fuliasthan & Anr. (') TI1e learned Attqrney-General further submitted that his argument was not to the effect that the petitioners were incompetent to enforce their fundamental right on the ground of waiver or estoppel; but that a person who voluntarily enters into a contract cannof retain the benefit accrued to him thereunder and repudiate the other part of the contract which might have occasioned loss to him; that this prin- ' -ciple is different from that of waiver or estop~l. The first question for consideration is, whether the impugned • provisions fall within the protection of sub-Clause (ii) of Article 19(6) and therefore, it is not necessary for those provisions to satisfy the test of rcasonablene$S under the first p~i:t of clause (6) of the Article.

The relevant part of clause (6) reads thus : "(6) Nothing in sub-clause (g) of the said crause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the general public, r~ason~ble restrictions on the exercise of the right conferred by the said subclause, and, in particular, nothing in the said sub-clause shall affect the operation of any existing law in so far as it relates to, or prevent 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. " It will be seen that clause (6) falls into two parts. The first part commences with the phrase : "Nothing in' sub-clause (g) of the said clause (1) of the Article".

Phmse to the same effect, with the addition of pre-fixed words "and, in particular" are repeated at the • commencement of the second part, also. This indicates that the two parts of the clause are intended to be distinct atid separate. Further, the words "reoasonablc restrictions" which find pivotal mention in the • (l) [1959] Suppl, I S. C. R. ;2s first part, have not been repeated in the second part, which ommission • makes it clear that a law covered by sub-clause (ii) is_ not required to satisfy the test of reasonableness under the first part of the clause and no objection to the validity of such a law is tenable on the ground that it infringeS the right guaranteed under Article 19 (1)(g). Subclause (ii) is thus in the nature of an exception to the main substantive provision in clause ( 1) of the Article. Its! language therefore, which is explicitly restrictive, has to be strictly construed.

The protection of sub-clause (ii) in the second part is, in terms, available te> the law only "in so far as it relates to" the carrying on by the State, or by a Corporation owned or controlled by ! he State, of any trade, • business, industry, or service to the exclusion, complete or partial of the citizens or otherwise. The ambit of the words "in so far as it relates to" in the context of sub-clause (ii) in the second part of , clause (6), came up for consideration before this Court in A kadasi Padha11's case (ibid). Gajendragadkar, J. , as he then was, speaking for the Court, held that only !

hose provisions of the law which are o "integrally and essentially" connected with the creation of the monopoly are protected under the second part of clause (6), but those provisions which are not absolutely essential for creating the monopoly, but are merely incidental, subsidiary or helpful to the operation of the monopoly do not fall under the second part of clause (6) and their validity must be judged, under the first part of Article 19(6). Now, let us apply this test to the provisions which are impugned in the instant case. These provisions are incorporated in the Forms of Tender Notice and the Agreement by Rules framed under \he Act. The basic and essential features which arc directly and immodiately connected with the creation of the State monopoly are to be found in the body of the Act, itself. In any case, the impugned provisions are merely subsidiary or incidental provisions relating to the operation of the monopoly.

The impugned provisions, therefore, do not fall within the protection of sub-clause (ii) in the second part ol Article 19(6). The question, however, still remiiins whether the right to enter into a contract with the State on particular terms is a fundamental • right falling within the purview of Article 19 (1)(g) . The learned Attorney-General maintains that it is not. Whatever may be the position with regard to contracts relating < to other matters, where the business to be carried on by a citizen is in II a commodity, the sale of which is a State monopoly, conditioned ·by some statutory terms, analogous to the impugned conditions, which, in operation, have a direct and immediate impact on the fundamental • BllU LEAVES v. BIHAR (Sarkaria, I. ) • freedom of the citizen guaranteed under Article 19 (1) (g), the citizen eannot enter into a contract with the Government for pnrchase of such a commodily except on the statutory terms laid down by the seller-State.

Sale of Kendu leaves for manufacture of bidis being a State monopoly, the petitioners-purchasers could, if they so desired, purchase the Kcndu leaves only in the manner prescribed by the statutory rules on terms and conditions notified in the Tender Notices. Even so, these conditions leave sufficient room to the free volition of the intending purchasers, particularly in the matter of fixing the rates and the minimum price payable for the estimated yield from a particular unit in terms of standard bags. The Tender Notice and the -Agreement which the purchasers enter into with the Government, although couched in statutory Forms, are not bereft of their contractual character, either. Since the impugned provisions do not, as already noticed, fall withi11 the protection of sub-clause (ii) in the second part of clause (6), they must satisfy the test of being a reasonable restriction under the first part of that clause.

The first point in this connection to be determined is, what actually is sold to the purclrasers under the terms of the Tender Notice and the statutory Agreement? Is it an estimated yield of a unit in terms of standard bags which is sold or the actual yield in terms of standard bags offered or delivered? From the scheme of the Rules, particularly Rule 9(9) extracted in a foregoing part of this judgment, it is cle-ar that what is sold to the successful bidder at the annual auction is the entire quantity of Kendu leaves collected or likely to be collected from a particular unit or such lesser quantity out of that unit as may be offered to him by the State or its agent or officer for a particular year at a price m! led 'roy! llty'. The minimum royalty or price payable being fixed on the basis of 75 per cent of the estimated annual yield in standard bags from the unit multiplied by the rates offered and accepted.

Such an estimate, as it appears from the counter-affidavit is made on the basis of the average actual yield from that unit for the preceding three years. Such an estimated yield is notified and published in the Tender Notices every year. Purchasers in the trade, therefore, know before-hand as to what they are bidding for. Purchasers are generally pttsons who have been in the trade for several years and as such, have a specraI knowledge of forming their own estimates of the expegted yield and the chances of profit and loss from that particular unit in a particular year. While it is true that the bidders have to enter into Agreement on the terms and conditions notified by the Government, yet it cannot be lost sight of !

hut in spite of the fact that • the impugned provisions in Condition 13 of the Agreement and the Tender Notice in 1973 and the impugned Condition 4(bb) has been notified annually since the amendment of the statutory Forms in January 1974, the petitioners and their fellowmen in the trade hav~ been offering rates of bids and entering into agreement on the notified terms and conditions, including the impugned provisions. Only a few writpetitions have been filed now and then by certain purchasers who suffered loss, to challenge these impugned provisions sit1ce 1973. In view of the fact that the chances of profit and risks of loss are evenly divided between the seller-State and the purchasers and in the light of the aforesaid historical background, it cannot be said that the im- . pugned condition in clause 13 of the Tender Notice and the Agreement is manifestly unreasonable. The impugned Condition 13 is a restriction imposed in the general public interest.

Fixation of a minimum price on the basis of estimated yield from a particular unit in a particular year operates as an insurance against loss or leakage of public • Revenue due to connivance or collusion between purchasers on the one hand, and the servants and agents of the seller-State on the other. This method also assures a minimum wage to the pluckcrs of the Kendu leaves who, as has been affirmed in the counter-affidavit of the respondent-State, are generally Adivasis or persons belonging to economically backward classes. We are unable to accept the contention of the learned counsel for the petitioners, that the impugned provisions are harsh and unreasonable inasmuch as they obligate the purchasers to pay for the undelivered shortfall of Kendu leaves even where such shortfall is due to the negligence or fraud of the Agent of the Government.

The real position has been explained in the counter-affidavit filed on behalf of the State in Writ Petitions 2222 to 2252 of 1977, thus : "Technically speaking the Agents were appointed by the State Government but the persons so appointed were actually sponsored by the respective purchasers. The Agents were the persons of the purchasers and were loyal to their old masters. This is an incontrovertible fact. In most of the cases the agents got the full amount of their commission and handling charges adjusted towards the purchase price of • the units at the end of collection season. Specific instances are on record that in many cases the Agents were close relatives such as father, sons, brothers of the purchasers. In the case of firms, the Agents were partners in the same firm. In some cases the purchasers and the Agents interchanged their positions. Purchasers became Agents while the latter • BIR! LEAVES v. BIHAR (Sarkaria, J. ) • became purchasers.

This was a common trick of the trade which is still in vogue. • Some of the instances showing the relationship between the petitioners/purchasers and the Agents are tabulated in Annexure 'A' hereto. " n· Although the Act and the Rules noticed earlier contemplate that the Agents appointed by the Government will be under its full control and liable to compensate the Government for any shortage, damage or loss caused in collection or delivery or any defect in the quality of the leaves collected, to the Government, yet, in actual practice, the ,___ real position is that the Agents are generally persons sponsored hy and otherwise, deeply interested in the purchasers. In their counter- ' affidavit, the Government has explained that there is a dearth of suitable persons having adequate experience and skill of work as efficient Agents. The Agents are to be appointed every year at short notice • when the plucking season is at hand.

Circumstances being what they are, the Government is driven into a situation in which they have to appoint persons sponsored by the purchasers as Agents. From this real factual position, viz. , the close bond and rapport between the purchasers and the agents, two inferences arise. First, that at the time of auction, the intending purchasers are in a position to form a reason- 'able estimate of the return which they are likely to have for the year concerned from that particular unit or units for which they offered the rates. Second, that if the purchase price wore to be fixed not on the basis of any estimated annual yield from a particular unit but on the basis of the quantity actually delivered, the risk of loss or leakage of public revenue by reason of fraud and collusion between the purchasers and the agents will manifestly increase. Looked at from this angle also, against the real factual background, the impugned Condition 13 cannot be said to be unreasonable. "t'-- Mr.

Nariman contended that if the factual position, ~s stated in the counter-affidavit filed on behall of the State, is correct, then the impugned condition 13 will be hit by the ratio of this Court's decisions in Rashbihari Panda etc. v. State of Orissa (ibid) and Akadasi Padhan's case (ibid), bec:iuse in that situation the conclusion would be ineluctable that the monopoly is being worked by the State not for • its exclusive benefit or in the public interest but to benefit a class of profiteers comprised of the purchasers al]d their agents, thereby creating a monopoly within a monopoly. In ord~r to appreciate this contention, it is necessary to notice Rashbihari Panda's case. To regulate trade in Kendu leaves and prevent exploitation of growers and pluckers, the State of Orissa enacted • the Orissa Kendu Leaves (Control of Trade) Act. 1961.

By Section 3 of that Act, which is analogous to Section 3 of the Bihar Act, no • person other than the Government, an authorised officer of the Government, or an agent appointed by the Government, is entitled to purchase or transport Kendu leaves; and under Section 4 of that Act, 8 the Government is authorised to fix the price at which the leaves shall be purchased from the growers by the officer or agent of the Government. Section 10 of that Act provided that the Kelldu leaves purchased shall be sold or disposed of in such manner as the Government may direct, and under Section 11, at least one-half of the net profits derived by the G~vernment is to ~ ~aid to Samitis and Gram Pancha- __. < yats. In Akadas1 Padhan's case (1b1d), a grower of Kendu leaves ' • challenged Sections 3 and 4 and Rule 7 (5) made under that Act on the ground that it contravened his fnndamental right under Articles 14 and 19(1 )(a) and (g) in this Court.

It was heW that Sections 3 and 4 did not infringe Article 19(6) (ii), but the State Government was incompetent to implement the provisions of the Act and give effect to its monopoly, because the agents appointed were not really agents pf the Government but were authorised to carry on trade in the leaves purchased not on behalf of the Government but on their own account, and that it thus gave rise to a monopoly in favour of the agents which was not protected by Article 19(6)(ii) since the Jaw cannot be used by tffe State for the private benefit of agents. After the decision in Ak"'lasi Padhan's case, the Orissa State made some changes in the implementation of its monopoly. fn 1966, it invited tenders from persons desirous of purchasing Kendu leaves purchased by the officers and agents of the Government.

During the years 1966 and 1967, the prices of Kendu leaves ruled very high and when sales were effected by public auction, prices considerably in excess of those at which tenders were accepted were realised. Early in 1968, the State evolved another scheme under which, it offered to renew the licences of those . trad•ors who in the State's view had worked satisfactorily in the pre- "i vioys year and had paid the amounts due from them regularly. The scheme was objected to, and realising that, the scheme arbitrarily ex- ' cluded many persons interested in the trade, a'nd hence was objectionable, the Government decided to invite offers for advance purchases of Kendu leaves but restricted the invitation to those individuals who • had carried out the contracts in the previous year without default and to the satisfaction of the Government that is, the existing contractors w;ore given the exclusive right to make offers to purchase Kendu leaves.

This new method of offering to enter into agreements for advance purchases of Kendu leaves by private offers in preference to open competition, was challenged by writ petitions ill the High Court as ) BIRI, LEAVES v, BIHAR (Sarkaria, J,) 437 violative of the petitioner's fund:i,rnental rights under Articles 14 and 19(1 )(g). Reversing the decision of the High Court, this Court, in appeal, held, The validity of a law by which the Stats- assumed the monopoly to trade in a giwn commodity has to be judged by lhe test whether the entire benefit arising therefrom is to cnure to the State, and the monopoly is not used as a cloak for conferring private benefit upon a limited class of persons. The monopoly of purchasing Kendu leaves under Section 3 ~·· may be held to be valid . if, it be administered only for the • benefit of the State.

Similarly, the right to sell or dispose of Kcndu leaves by the State under Section 10, in such ma·nner as the Government may direct, would be valid if it be exercised in public interest and not to s~rve the private interest' and not to serve the private interests of any person or class of persons. The profit resulting from the sale must be for the public benefit and not for private gain. Section 11 also emphasises the concept that the machinery of sale or disposal of the leaves must also be geared to serve the public interest. If the scheme of disposal creates a class of middlemen who could purchase from the Government at concessioruil rates and earn large profits disproportionate to the nature of the service rendered or duty performed by them, it cannot claim the prot~ti{)n of Article 19(6)(ii) as it is not open to the Government to create a monopoly in favour of third parties from its own monopoly. (Head-note. of the Official Report) )I ..

:it was further held · "The right to make offers bei11g open to a limited class of persons the schemes effectively shut out all other persons carrying on trade in Kendu leaves as well as new entrants into the trade. Both the schemes, evolved by the Government, namely, the one of offering to entt~r into contracts with 4 certain named licencees, and the other of inviting tenders from licencees who had in the previous year carried out their contracts satisfactorily gave rise to a monopoly in the trade in the leaves to certain traders and singled out other traders for discriminating treatment. Therefore, they were violative II of the fundamental right of the Jl'"titioners under Articles 14 and 19(1 )(g) and as the schemes were not 'integrally and • 12-51 SCI/81 ' essentially' conp. ected wi! h the creation of the monopoly, they were not protected by Article 19(6)(ii).

It was further observed that if the only anxiety of the Government was to ensiire due performance by those who submitted tenders, Gov-, ernment could devise adequate safeguards. But the classification based on the circumstance that certrun existing contractors had carried out their obligation in the previous year regularly and to the satisfaction of the Government, is not based on any real and substantial distinction bearing w just and reasonable relation to the objects sought to be achieved namely, the effective execution of the monopoly in public interest, the prevention of exploitation of pluckers and growers of ~ Kendu leaves, or the securing of the fuJJ benefit from the trade, to the • State. On the basis of this reasoning, it was finally held that the scheme could not be supported on the ground that it imposed reasonable restric- • lions, within the meaning of Article 19(6), on the fu. ndamental rights of traders to carry on business in Kendu leaves.

Hence, the plea that the action of the Government was bona fide could not be an effective answer to that challenge. It may be noted that the decision of this Court in Rashbihari's case (ibid) was announced on January 16, 1969. The Bihar Act, with which we are concerned, was passed in 1_973. The Bihar Legislature, therefore could not but be aware of the unconstitutional features pointed out by this Court in the schemes of the Orissa Act and the Rules framed thereunder. Care has been taken by the Bihar Legislature, and the Government to exercise the scheme of the Bihar Act and the Rules and Forms framed or prescribed thereunder, of the vices from which the schemes of Orissa Legisl,ation suffered. This will be clear from a ' cCllD. parative study of the Orissa schemes and the Bihar scheme.

Firstly, under the Orissa schemes, the monopoly was not being worked for the "\ entire benefit of the State or in the general public interest, but was being used as a cloak for conferring private benefit upon a limited class of persons. The offers for purchasing Kendu leaves were restricted to a particular class of contractors and were not open to the general public. This vice does not exist in the Bihar scheme including the scheme of the impugned provisions. The notified estimate annual yield for a unit or units is sold either by inviting tenders from the public by publishing a Tender Notice or by public auction after a similar notice. Any person . who wants to carry on the business of purchasing Kendu leaves .. for the purpose or manufacture of Bidis is entitled to submit his offer in the prescribed Tender Form in response to the public notice inviting tenders, or offer his bid at the auction, if the disposal is by public BIR! LEAVES v. BJJfAR (Sarkaria, J. ) 439 auction.

Secondly, the scheme of disposal envisaged by the impugned provisions of the Orissa Act and the Orissa rules created a class of middlemen who could purchase from the Government at concessional rates and earn large profits disproportionate to the service rendered or duty perfomI_ed by them. In contrast with t)lis, the Bihar scheme in question does not operate to cre'! lte any monopoly in favour of any particular class of purchasers. Nor does the Bihar scheme enable the purchasers to make unduly large profits at the cost of the public revenue or others. Even if the agents, in actual practice, are persons sponsored by the purchasers, then also, the rules_ framed under the Bihar Act envisage a strict and exclusive control of the Government over the Agents and their activities, and provide for their liability to compensate • the Government for the loss occasioned by their mlsconduct or neglect.

Under the impugned Condition 13, the minimum price payable for the unit or units concerned by a purchaser is 75 per cent <JI the notifi- • ed estimated yield from that Ul)jt or units, in terms of standard bags multiplied by the rates or bid offered by the purchaser and accepted by the Government, even if the actual yield from that unit or units falls short of 75 per cent of the estimated yield. This condition far from creating a monopoly in the trade in favour of middlemen, operates as an ironclad safeguard against leakage of the public revenue by assuring a minimum return to the public exchequer from the sale of Kcndu leaves. The provision is aimed to secure the full benefit from the trade to the State leaving chances of making reasonable, marginal profit lo the purchasers. It was observed in Rashbihari's case, that it would be in the interest of Stale to invite tenders in the open market from all persons irrespective of their having taken contracts in the previous year.

This suggestion has been adopted by the scheme of the Bihar Act and the Rules 3ud the Forms of Tender Notice and Agreement prescribed thereunder. )t Some other defects pointed out by this Court in the operation of the < Orissa schemes, were that the Government had not estimated the crop and the prevailing prices of Kendu leaves about the time when offers were made, nor the conditions in the market, nor offers of higher prices and. the likelihood of offerors of higher prices carrying out their obli- . gations. The scheme of the Bihar Act and . the Rules, and Forms inducting that of the impugned condition 13 is designed to remove the deficiencies, infirmities and vices pointed out by this Court in Rash~ bihari's case.

· · · For these reasons, we are unable to accept the contention, that in -it actual operation, the impugned provision (clause 13) creates a moiiopoly in favour of a class of midd/emeh consisting of 'Agents' and pur- ' cbase£S, and enables them to earn unduly l'Jrge profits at the cost of the public or pluckers and growers. • The impugned Condition 13 satisfies the test of reasonableness under the first part of Article 19(6). We, therefore, repel the challenge ·to the validity of that condition on the ground of Article 19 (6). The next question is whether the impugned provisions arc violati"' of the fundamental rights of the petitioners under Article 14 of tht: Constitution. The argument is that these provisions treat unequal·; as equals, even where crying dissimilarities exist and thus their operation results in Procrustean cruelty.

~ The point sought to be made out is that even if the shortfall in the quantity supplied or the substandard nature of the quality offered to the purchaser is solely due to the fraud, negligence or misconduct of • the Agent or sefV'ant of the Government, the Joss due to such shortfall or deficiency in quality must fall on the purchaser, notwithstanding the fact that he {purchaser) was in no way privy or contributory to that fraud, negligence or misconduct of the Agent or Government servant and thus the impugned provisions do not make any discerning distinction between honest purchasers and dishonest purchoasers, but tar those dissimilarly situated classes with one and the same brush. The argu- ment though attractive, does not stand a close examination.

At the time of inviting Tenders in the prescribed Form or inviting: purchasers to bid at the publication, all tendercrs or bidders are treated equally in the sense that they can offer their rates or bids subject to the statutory conditions including the impugned provisions. While accepting the highest Tender of rates per standard bag or the highest bid, it is not possible to classify the purchasers whose offers/bids have been accepted into 'honest' purchasers and 'dishonest' purchasers. Every- "'-, body whose offer or hid is accepted, is assumed to be honest. Secondly, in entering into a contract of purchase of the notified estimated yield in terms of standard bags, the discretion and volition of the tenderer or bidder, also, plays an important part in calculating the minimum price payable for the estimated yield from the particular unit. According to the impμgned Condition 13 of the Tender Notice.

which also forms a part of the prcstribed Form in which tenders are invited, the successful tenderer or bidder whose tender or bid is ~ccepted by the Department, has to pay a minimum royalty. also described as 'revenue' or price, which will be 75 per cent of the notified ! estimated yield iri terms of stanpard bag by the tenderer or bidder. • BIR! LEAVES v. BllIAR (Sarkaria, I. ) Thus, the volition of the purchaser lllso plays a prominent part in lilting the rate or price payable by him. By means of his offer in the Ten<Jer Form p'r by bidding at the auction, the purchaser binds himself to pay this minimum royalty even if by the _end' of the year, the number of bags collected is less than the notified estimated yield, Tli. c' pui:chasers form their own estimates of the expected yield from a!.

pw:ticular unit for a particular year and then make their offers· of' Ii rates in the prescribed Tender Forrn, or when the dis¢sal is by public auction, the purchasers make their bids stlbjeCt to the terms publisJied iu the·Tender or Auction Notices. H, according to the estim_ate of an· f intending purchaser, the unit concerned· is not likely to yield th'e' qlllllltity notified, it is open to him' eitliet not to submit any tehder or ofl'er or rates at all, or not to offer a· bid- or an amount higher' than· that which, according to his own estimate or calculaJion, wpuld be a reas-onabfo price of the bargain.

Iti oilier words, if a person with • his' eyes open tenders the highest riltes per standard bag or offers tlie' highest bid at public auction, as the case may be, of his owti accilril, it will be assumed that he did so because· in his own estimation' the acceptance of the contract at those rates and S'Ubject to the notified terms and condition would afford him a reasonable scppe for making. profit. Furthermore, under the schenie of. the Bihar Act and. RultlB', the sale is not restricted to any particular class of persons as in Rashbihari's case. Anyone who wants to do busi!! ess of purchase of Kendu leaves can submit h'R tender of rates in the prescribed Form, or offer his bid at the auction, as the case may be, subject to the notified con" ditions of th~ Tender Notice/Auction Notice.

If is a fundamental principle of general application that if a pel'Son ofhis own accord, accepts a contract on certain terms and works out • the contract, he cannot be allowed to adhere to and abide by some of F' ~me terms of the contract which proved advantageous to him and' ! rtjindiale the other terms of the same contract which might be disadv~ntagcous to him. The maxim is qui approbat non reprobat, • (due who approbates cannot reprobate). this principle, though originally borrowed from Scots Law, is now firmly embodied in English Common L1W. According ! o it, Ii party to an instfument or • transaction cannot take advantage of one part of a document or trans· acti'on and reject the rest. That is to say, no party can accept and reject the S11me instrument or transaction (Per Scrufton L,J. Verschures Creameries, Lid. v. Hull & Netherlands Steamship Co. ('}; See Douglas Menzies v. Umphelhy('); See also &roud's Judicial Dictionary, Vol. I, page 169, 3rd Edn. ). (I) [192112KB. 608.

• (2) [1908] A. C. 224 at r. 2n. The aforesaid inhibitory principle squarely applies to the cases of those petitioners who had by offering highest bids at public auctions· • or by Tenders, accepted and worked out the contracts in the past but are now resisting the demands or other action, arising out of the im- · pugned Condition 13 on the ground that this condition is violative of Articles 19(1 )(g) and 14 of the Constitution. In this connection, it will bear repetition, here, that the impugned conditions though bear a · statutory complexion, retain $eir basic contractual characte& also. It is true that a person cannoJ be debarred from enforcing his fnnda-· menal rights on the gronnd of estoppel or waiver. But the aforesaid principle which prohibits a party to a transaction from approbating, a: ~ part of its conditions and rep~o'bating the rest, is different from the doctrine of estoppel or waiver) . . For the foregoing reasons, the challege to the impugned Conditi&n No.

13, ou the ·ground of Article 14, also, is unsustainable and is rejected. . Now, we take up the impugned Condition 4(bb). It provides that no objection from the purcha5er with regard to the quantity or quality of the leave in the gaddis (bundles) offered would be tenable. This condition is couched in peremptory, drastic and absolute langu~ · age. It is not qualified by any words showing that the bar envisaged in· it will be attracted only in cases where the purchaser has had an earlier opportunity to raise thi5 objection but failed to do so, or, where he had on an earlier occasion raised such an objection which · was heard and overruled by the competent Forest Officer. We have already noticed that Section 9 (1) , proviso, of the Act contains a bnilt-in-warranty, that the Kendu leaves offered would be fit for manufacture of bldis; that is to say, the leaves would be of mercruint~ able quality.

Condition 4(bb) therefore, is inconsistent with and '· repugnant to Section 9(1), proviso of the Act and, as such, invalid'. It is, therefore, not necessary to test its validity on the ground· of Articles 19 and 14 of the Constitution. • In the light of the above discussion, we would dismiss all the Writ petitions, namely, Writ Petitions 2222 to 2252 of 1977, Writ Petitions 121 to 125 of 1979, Writ Petitions 405 and 441 of 1974, Writ Pe1itions 46 and 47 of 1975, excepting to this extent that the aforesaid clause 4(bb) in the Tender Notices and the statutory Agreement in question. being inconsistent with the proviso to Section 9(I) of the Act, is declared to be invalid. In Criminal Appeal 300 of 1974, the prose<:ution of the appellants for an offence under Section 379, Penal Code has already been quash- • BIRI LEAVES v. BIHAR (Sarkaria, !.

) 443 ed by the High Court by its judgment dated February 14, 1974; but • the Ord~r dated September 11, 1973 of the Sub-Divisional Magistrate, Saheb Ganj, taking cognizance of a case instituted by the Divisional Forest Officer, Dumka, for offences under Section 409, Penal Code and Section 5(2) read with Section 16 of the Bihar Kendu Leaves (Control of Trade) Ordinance (46 of 1973) was not quashed. The main co'ntention of appellant 1, Shankar Prasad Bhagat, was that he received only 650 standard bags as against the notified estimated 1500 bags, and the Condition 13 of the statutory Agreement - under which he was required to pay for the undelivere_d or unoflered quantity of the leaves was unconstitutional. • Since we have held that the aforesaid Condition 13 is valid, this contention must fail. We, therefore, dismiss this appeal. The case shall now go back to the Sub-Divisional Magistrate for disposal in accordance with law.

We advisedly abstain from making any obser· vation with regard to the merits of the case. N. K. A. Petitions and Appeal dismissed. • • "