Licensing preference for co-operative societies is valid, but monopoly-driven refusal of licence violates equality and trade freedom.

Clause 5(e) of the Assam Foodgrains (Licensing and Control) Order, 1961 was upheld as intra vires section 3 of the Essential Commodities Act, 1955 because it only allowed the licensing authority to treat co-operative status as one relevant factor, with a rational nexus to equitable distribution and fair prices. However, the refusal of a licence on the basis of executive instructions designed to exclude private dealers and create a monopoly for co-operative societies was inconsistent with the Order, discriminatory, and contrary to Articles 14 and 19. The impugned licensing action was therefore invalid, and reconsideration according to law was required.

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Issues: (i) Whether clause 5(e) of the Assam Foodgrains (Licensing and Control) Order, 1961, was ultra vires section 3 of the Essential Commodities Act, 1955. (ii) Whether the refusal of a licence to the petitioner, based on a policy of monopoly in favour of co-operative societies, violated Articles 14 and 19 of the Constitution.

Issue (i): Whether clause 5(e) of the Assam Foodgrains (Licensing and Control) Order, 1961, was ultra vires section 3 of the Essential Commodities Act, 1955.

Analysis: Section 3 of the Essential Commodities Act, 1955 authorises regulation of production, supply, distribution, trade and commerce in essential commodities for maintaining or increasing supplies and for securing equitable distribution at fair prices. Clause 5(e) merely permits the licensing authority to consider whether the applicant is a co-operative society as one relevant factor. The preference contemplated by the clause has a rational connection with the statutory object because co-operative societies may, in appropriate local conditions, assist procurement and distribution at fair prices. It does not, on its language, create a monopoly.

Conclusion: Clause 5(e) was intra vires the Essential Commodities Act, 1955.

Issue (ii): Whether the refusal of a licence to the petitioner, based on a policy of monopoly in favour of co-operative societies, violated Articles 14 and 19 of the Constitution.

Analysis: The licensing authority did not act on the statutory criteria alone, but followed executive instructions aimed at excluding private dealers and creating a monopoly for co-operative societies. Such a course was inconsistent with clause 5 of the 1961 Order, which allows only preference in appropriate cases and not monopoly. Administration of the licensing power on that basis amounted to discriminatory treatment and an impermissible exercise of power contrary to the governing law. The impugned order therefore offended the guarantees of equality and freedom of trade.

Conclusion: The refusal of licence was unconstitutional and invalid under Articles 14 and 19.

Final Conclusion: The petitioner succeeded; the impugned licensing order and the consequential grant in favour of the co-operative society were quashed, and the application for licence was required to be reconsidered according to law.

Ratio Decidendi: A statutory licensing provision that permits preference to a co-operative society is valid if it bears a rational nexus to the object of securing supply and fair distribution of essential commodities, but the licensing authority cannot convert that preference into a monopoly by acting on extraneous executive instructions contrary to the statute or order governing the grant of licences.

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