State monopoly scheme upheld where amendments, agent appointments and tender choices were not shown to be arbitrary or mala fide.

Amendments to the Orissa Kendu Leaves trade-control regime and the related rules were upheld because they were designed to make the State monopoly operate effectively and were not shown to be arbitrary, discriminatory or mala fide. The possibility of additional agents or purchasers, including nominees or relations of purchasers, did not invalidate the scheme where agents remained bound to buy at fixed rates, collect, store, process and account to Government. The State was not required to accept the highest tender in every case, and the record showed commercial factors rather than fraudulent preference. The challenges therefore failed and the impugned measures survived scrutiny.

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Issues: (i) Whether the amendments to the Orissa Kendu Leaves (Control of Trade) Act, 1961 and the rules framed thereunder, including the provisions relating to additional agents and additional purchasers, were arbitrary, discriminatory or mala fide. (ii) Whether the arrangement permitting agents to function in the State monopoly scheme, including the possibility of nominees or relations of purchasers being appointed as agents, was invalid. (iii) Whether rejection of higher tenders and acceptance of lower tenders in the disposal of Kendu leaves was arbitrary or mala fide.

Issue (i): Whether the amendments to the Orissa Kendu Leaves (Control of Trade) Act, 1961 and the rules framed thereunder, including the provisions relating to additional agents and additional purchasers, were arbitrary, discriminatory or mala fide.

Analysis: The amended provisions were directed to making the State monopoly operate effectively. The power to appoint additional agents and additional purchasers was not bad per se, since the exigencies of the business could require such appointments. The challenge based on the solvency requirement and the discretion given to Government in accepting or rejecting tenders did not establish invalidity in the absence of proof that the provisions were used to defeat the monopoly scheme or to confer private benefit.

Conclusion: The amendments and the impugned rules were held valid and not shown to be arbitrary, discriminatory or mala fide.

Issue (ii): Whether the arrangement permitting agents to function in the State monopoly scheme, including the possibility of nominees or relations of purchasers being appointed as agents, was invalid.

Analysis: An agent under the scheme had to purchase leaves at government-fixed rates, carry out collection, storage and processing, and account to Government under the prescribed terms. The fact that some agents may have been nominees or relations of purchasers did not, by itself, show that the scheme ceased to be a genuine State monopoly or that the agents were not acting for the Government. The materials also did not prove the allegation that contribution to party funds had been demanded as a condition for appointment.

Conclusion: The arrangement was not held invalid, and the attack on the scheme on this ground failed.

Issue (iii): Whether rejection of higher tenders and acceptance of lower tenders in the disposal of Kendu leaves was arbitrary or mala fide.

Analysis: The State was not bound to accept the highest tender in every case. On the record, lower bidders were in some cases asked to raise their bids, and the units were disposed of on considerations such as past experience, clean record, withdrawal of tenders, failure to furnish bank guarantees, or absence of tenders. The counter-affidavit showed a general pattern inconsistent with fraudulent preference or mala fides.

Conclusion: No arbitrary or mala fide exercise of power in the acceptance or rejection of tenders was established.

Final Conclusion: The petitions were devoid of merit and were dismissed with costs, the impugned amendments, rules and tender settlements surviving judicial scrutiny.

Ratio Decidendi: In a State monopoly scheme, administrative provisions and tender choices are valid unless shown to be per se unconstitutional or actually exercised to confer private benefit, discrimination or mala fides.

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