State monopoly tender conditions upheld as reasonable, but an absolute bar on quality objections was struck down.

The minimum royalty condition in the kendu leaves tender scheme was treated as a condition of operation, not as one integral to the creation of the State monopoly, so it fell outside Article 19(6)(ii) but was upheld as a reasonable restriction under Article 19(6). The Article 14 challenge also failed because the same tender terms applied to all bidders and the scheme was not arbitrary in its actual operation. However, the absolute bar on objections to quality or shortage of leaves in the standard gaddis conflicted with the statutory warranty under the proviso to Section 9(1) and was held invalid as repugnant to the Act.

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Issues: (i) Whether the minimum royalty condition in the tender notice and statutory agreement was protected by Article 19(6)(ii) or, if not, whether it was a reasonable restriction under Article 19(6) of the Constitution; (ii) whether that condition offended Article 14 of the Constitution; and (iii) whether the condition barring objections to the quality or shortage of leaves in the standard gaddis was valid in view of the proviso to Section 9(1) of the Bihar Kendu Leaves (Control of Trade) Act, 1973.

Issue (i): Whether the minimum royalty condition in the tender notice and statutory agreement was protected by Article 19(6)(ii) or, if not, whether it was a reasonable restriction under Article 19(6) of the Constitution.

Analysis: The protection of Article 19(6)(ii) extends only to provisions that are integrally and essentially connected with the creation of the State monopoly. Conditions governing the manner in which the monopoly is worked, but not essential to its creation, fall outside that protection and must be tested as reasonable restrictions under Article 19(6). The minimum royalty condition was treated as a condition of operation, not as a feature essential to the creation of the monopoly. On the facts, the sale was of the estimated yield of a unit through an open tender or auction open to all, the purchaser knew the notified estimate in advance, and the condition served to secure a minimum return to the State and protect public revenue against leakage or collusion.

Conclusion: The minimum royalty condition was not protected by Article 19(6)(ii), but it was upheld as a reasonable restriction under Article 19(6), against the petitioners.

Issue (ii): Whether that condition offended Article 14 of the Constitution.

Analysis: The challenge under Article 14 failed because all tenderers and bidders were subjected to the same conditions, the purchaser's own volition entered into the price structure, and the scheme did not create a closed class of favoured middlemen as in the earlier Orissa scheme. The Court also applied the principle that a party who accepts and works out a contract cannot accept its beneficial terms and repudiate the burdensome terms. The condition was therefore not arbitrary or discriminatory in its actual operation.

Conclusion: The minimum royalty condition did not violate Article 14 and was upheld against the petitioners.

Issue (iii): Whether the condition barring objections to the quality or shortage of leaves in the standard gaddis was valid in view of the proviso to Section 9(1) of the Bihar Kendu Leaves (Control of Trade) Act, 1973.

Analysis: The proviso to Section 9(1) embodied a built-in warranty that the leaves offered for delivery must be fit for manufacture of bidis. A condition that absolutely prohibited objections to quality or shortage, without qualification, directly conflicted with that statutory warranty. Since the statutory form could not override the Act, the impugned condition was repugnant to the parent provision.

Conclusion: The condition barring objections to quality or shortage in the standard gaddis was invalid and was struck down in favour of the petitioners.

Final Conclusion: The challenges to the minimum royalty scheme failed, but the absolute bar on objections to quality or shortage was inconsistent with the Act and could not stand. The petitions and appeal were therefore disposed of with only limited declaratory relief.

Ratio Decidendi: A provision implementing a State monopoly is protected by Article 19(6)(ii) only if it is integral to the creation of the monopoly; otherwise it must satisfy the test of reasonableness under Article 19(6), and a statutory condition repugnant to the parent Act cannot be sustained.

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