Supreme Court of India
HINDUSTAN PAPER CORPORATION LTD.versusGOVERNMENT OF KERALA & OTHERS
- Citation
- 1986 INSC 82
- Decided
- 16 April 1986
- Disposal
- Appeal(s) allowed
- Bench
- E S VENKATARAMIAH
Holding
Section 6 of the Kerala Forest Produce (Fixation of Selling Price) Act, 1978 is constitutionally valid and may be exercised in the public interest to exempt government companies and co‑operative societies, and the High Court’s decision striking it down is set aside.
Summary
The Kerala Forest Produce (Fixation of Selling Price) Act, 1978 fixed minimum prices for forest produce and prohibited sales below those prices. Section 6 of the Act allowed the State Government, in the public interest, to exempt sales to Central or Kerala Government companies and to co‑operative societies (up to 10 cubic metres) from the price floor. Two private sector companies challenged the constitutional validity of Section 6 and a notification granting exemption to Hindustan Paper Corporation Ltd. and two Kerala government companies, alleging violation of Article 14 and unfair discrimination. The High Court struck down Section 6 as unconstitutional, but the State Government later contended that the provision was valid. The Supreme Court held that Section 6 is a valid legislative classification, permissible under Article 14, and may be exercised in the public interest, setting aside the High Court’s decision and upholding the exemption. Consequently, the writ petitions were dismissed and the appeals were allowed.
Issues considered
- The constitutional validity of Section 6 of the Kerala Forest Produce (Fixation of Selling Price) Act, 1978.
- Whether exemption of government companies from the price floor violates Article 14 of the Constitution.
- Whether the exemption can be granted only in the public interest and is not unfettered.
- Whether clause (b) of Section 6, permitting exemptions to co‑operative societies, is valid.
- The validity of the notification granting exemption to Hindustan Paper Corporation Ltd. and other government companies.
Legislation cited
- Constitution of Indias. Article 14, s. Article 19(6)(ii)
- Kerala Co-operative Societies Act, 1969
- Kerala Forest Act, 1961
- Kerala Forest Produce (Fixation of Selling Price) Act, 1978s. Section 5, s. Section 6
- Kerala Private Forests (Vesting and Assignment) Act, 1971s. Section 3
Subjects
Constitutional lawArticle 14Article 19(6)(ii)ExemptionGovernment companiesForest producePublic interestClassificationPrice fixationKerala Act
Judgment
581
HINDUSTAN PAPER CORPORATION LTD. A
v.
GOVERNMENT OF KERAIA & OTHERS
APRIL 16, 1986
[E,S, VENKATARAMIAH AND M,P, TIIAKKAR, JJ,] B
Constitution of India, 1950 - Article 19(6)(ii) -
, Governmant owned industry Necessity for grant of
concessions.
Kerala Forest Produce (Fixation of Selling Price) Act,
1978 - Section 6 - Constitutional validity of - Action of C
1" State Governrent exemptiag Governmant companies from operation
.>. of section 5 of the Act - Whether valid and legal.
The Kerala Forest Produce (Fixation of Selling Price)
Act, 1978 was enacted with the object of providing for the
procedure to be followed in fixing the selling pri<:<!s of D
certain important forest produce, for the prohibition of the
sale of such forest produce at less than the prices so fixed
and for matters incidental or ancillary thereto. The Act
,,._ governs only those forests which are considered as "reserved
forests" within the meaning of Kerala Forests Act, 1961 and
forests vested in the Government under s, 3 of the Kerala E
- -~
Private Forests (Vesting and Assignment) Act 1971,
Section 6 provides that the Government may in public
interest, by Notification in the Gazette, exempt the sale of
any forest produce (a) to any company owned by the Central
~ Government or the Government of Kerala, and (b) not exceeding F
10 cubic meters, to any co-operative society registered or
deemed to be registered under the Kerala Co-operative
Societies Act, 1969 from the provisions of s. 5 subject to
such conditions and restrictions as may be specified in the
Notification.
G
On March 9, 1979, the respondent-State Government
published a Notification exempting the appellant-company, the
Kerala State Bamboo Corporation Ltd. and the Travancore
Private Industries Ltd. from the provisions of s.5 4nd fixed
the price below which forest produce covered by the Act could
not be sold. H
582 SUPREME COURT REPORTS [1986] 2 S.C.R.
A
Two private sector companies filed writ petitions under
Art, 226 questioning the constitutional validity of s,6 and ~
the Notification granting exemption in favour of the
appellant-company and two Government owned companies, The
petitions were opposed alleging that s.6 of the Act was
constitutionally valid. At the hearing of the petitions, the
Additional Advocate--{;eneral appearing for the respondent-State
Government conceded that s. 6 of the Act was unconstitutional.
B
The High Court, therefore, held that s. 6 of the Act was
violative of Art. 14 and struck down the same as well as the ~
Notification.
c
The appellant-company filed appeals to this Court.
Though no appeal was filed by the State Government, at the ;,,-
hearing the counsel for respondent-State Government stated -r
-
that the concession made by the counsel for the State before
the High Court, was incorrect and supported the validity of s.
....
6 of the Act and the Notification granting exemption.
Allowing the appeals,
D
HELD: 1. The decision of the High Court that s. 6 of the
Kerala Forest Produce (Fixation of Selling Price) Act, 1978
was violative of Art. 14 of the Constitution is liable to be
set aside, [595 C) -fl
E
2. Section 6 of the Act confers the power on the State
Government to grant exemption from the provisions of s. 5 of
the Act. The power conferred under s. 6 is not unfettered, The
Government can grant the exemption only in the public ~
interest. Such exemption can be granted only to a company
owned by the Central Government or the Government of Kerala. -~
F
[590 0-E)
3. Under cl. (b) of s.6 any sale of forest produce not
exceeding 10 cubic meters effected in favour of any
co-operative society registered or deemed to be registered
under the Kerala Co-operative Societies Act 1969 may be
G
exempted from s. 5 of the Act by the State Government. [590 E)
4. While issuing the notification granting exemption it
is open to the State Government to impose appropriate
conditions and restrictions. The State Government has to bear
H
in mind the entire policy and the object of the Act before
exercising its power under s. 6. [590 F-C)
H.P. CORPN, v. GOVT. OF KERALA [VENKATARAMIAH, J,] 583
S. So far as consumers of forest produce who are not A
• granted any exemption under s. 6 are concerned any sale of
forest produce in their favour cannot be effocted at a price
less than the price notified under s, 3 of the Act. The
notified price has to be fixed on the basis of the
recollllll!ndation of the Expert Colllllittee constituted under s.4
and the Expert CoDIDittee is required to take into B
consideration the market price of the forest produce, the cost
of regenerating and maintaining the forest produce in cases
·~ where regeneration is necessary after selling the forest
produce and such other materials as may be prescribed. Section
5 provides that the forest produce covered by the Act shall
not be sold at a price less than the price which is determined
on the basis of various factors, therefore, the consumers C
"t cannot have any grievance. They cannot claim that they 1111st be
shown any concession and that the forest produce should be
~ · made available to them at a price which would be lower than
the market prices, Even when it is stated that any company
owned by the Central Government or the Government of Kerala or
a co-operative society may be supplied forest produce without D
the constraint contained in. s. 5, it does not mean that the
forest produce would be made available to them at throw-away
prices. It is reasonable to expect that the price payable for
• the forest produce in question by the Government companies or
co-operative societies would be determined after negotiations
having regard to the public interest. [591 F-11; 592 A-<:] E
r 6. In almost all the statutes by which the fiscal or
economic interests of the State are regulated provision for
-. granting exemption in appropriate cases would have necessarily
to be there and the power to grant exemption is invariably
~ conferred on the Government concerned. [592 C-D] F
7. It has now become a well-recognised and
constitutionally accepted legislative practice to incorporate
provisions conferring the powers of exemption on the
Government in such statutes. Such exemptions cannot ordinarily
be granted secretly. A Notification would have to be issued G
and published in the Gazette and it would be subject to the
., scrutiny by the Legislature. The power can be exercised only
in the public interest as provided by the section itself. The
validity of provisions conferring the power of exemption has
been consistently upheld by this Court. [592 E-F]
H
584 SUPREME COURT REPORTS [1986] 2 s.c.R.
A State of llo!lbay and Another v. F.N. Balsara (1951]
s.c.R. 682, relied upon. ~
8. The 'Government undertakings and companies form a
class by themselves since any profit that they may make would
in the end result in the benefit to the members of the general
public. The profit, if any, enriches the public coffer and not
B the private coffer. The role of industries in the public
sector is very sensitive and critical from the point of view
of national economy. Their survival very often depends upon
...
the budgetary provision and not upon private resources which
c
are available to the industries in the private sector. They
are of ten established to break the power of strangulation on
economy which the industries in private sector may have ..
-
developed and may be using to choke the industrial growth of -f
the country. An exemption or a concession might provide them . .;
some breathing time or settling down time. It may be treated
as a subsidy at the worst. This appears to be the policy
behind Article 19(6)(11) of the Constitution. In appropriate
D cases in order to place an industry owned by the Government on
an enduring basis in the national interest, some concession
may have to be shown to it. [592 H; 593 A-D]
9. The action of the State Government in exempting the "'*
Government Companies from the operation of s.5 does not in the
E instant case amount to the exclusion of the industries in the
private sector from their business nor does it deny the usual
supplies of forest produce used as raw-materials by these
industries. The Government is not shown to be taking any undue
-
advantage of the mnopoly it enjoys as the owner of the ¥ '
forests and the position it holds as the sole supplier in
F forest produce in fixing the minimum prices in order to ...,;
preserve the national wealth from being wasted away. There- 1 ,.
fore, it cannot be said that the provision is either arbitrary
or unreasonable even though the Government industries may be
rivals in trade to the industries in the private sector.
[593 E-G]
G
Sher Singh v. Union of India & Ors., [1984] 1 s.c.R.
464; Vikl.ad Coal Merchant, Patiala & Ors. v. Union of India & ,. ..
Ors., [ 1984] 1 S.C.R. 657 and Fatebchand Hinnatlal & Ors. v.
State of Maharashtra etc., [1977] 2 s.c.R. 828, relied upon.
H State of Rajastban v. !iJkanchand & Ors., [1964] 6 s.C.R.
903, referred to.
H.P. CORPN. v. GOVT. OF KERALA [VENKATARAMIAH, J, ) 585
~ ~ 10, Preference shown to Government companies under s. 6 A
of the Act cannot be considered to be discriminatory as they
stand in a different class altogether and the classification
made between the Government companies and others for the
purposes of the Act is a valid one. Same is the case with the
class which gives power under s.6 of the Act to the Government
to exempt sales of forest produce in favour of co-operative B
societies upto the limit mentioned therein. [594 E-F)
--.
P,V, Sivarajan v. ?be Union of Iodia and Am:., [1959)
Suppl, 1 S,C,R, 779 and Orient Weaving Mills (P) Ltd. y, ?be
' Union of Iodia, [1962) Suppl. 3 S,C,R, 481, relied upon,
.'t 11. In the instant case, the writ petitioners on whom C
the burden lay have not given any valid reason as to why it
-~ · should be held that impugned notification was not in the
public interest. In the absence of material it cannot be held
that the impugned notification was not in the public interest.
[595 C-D)
D
CIVIL APPELLATE JURISDICTION Civil Appeal No, 1871-76
of 1981.
From the Judgment and Order dated 15.4.1981 of the
Kerala High Court in O.P. Nos. 6, 7, 1005 1153, 1154 and 1345
E
-
of 1981.
Dr. Y.S. Chitale, M. Ramchandran, Mrs. Shanta Vasudevan,
'l< P. Parameswaran and A.S. Nambiar for the Appellant.
r.s. Krishnallllrthy Iyer and P.K. Pillai for the
Respondents. F
The Judgment of the Court was delivered by
VEliKATA1!AMlAH, J, In these appeals by special leave we
are concerned with the question of constitutional validity of
section 6 of the Kerala Forest Produce (Fixation of Selling G
~
Price) Act, 1978 (Act 29 of 1978) (hereinafter referred to as
'the Act')
The appellant Hindustan Paper Corporation Ltd. is a
company owned by the Central Government carrying on the
H
586 SUPREME COURT REPORTS (1986] 2 s.c.R.
A business of manufacturing newsprint at its factory in the )I.
State of Kerala. Before its factory was established an
agreement was entered into between the appellant Hindustan
Paper Corporation Ltd. and the Government of Kerala on October
7, 197 4 under which the Government of Kerala agreed to grant '
to the appellant the right of free use of water from the
Muvattupuzha river for the purpose of manufacturing newsprint
B and also to make available annually to the appellant 1,50,000
tonnes of eucalyptus wood. The Government of Kerala further ~
agreed to keep reserved from the date of agreement the State
c
plantations of eucalyptus grandis in Pamba, Kottayam,_Punalur,
Thenmalai and Trivandrum Forest Divisions as constituted then
for the appellant and not to permit harvesting of eucalyptus
wood and reeds by other parties and for the regeneration of -f'
.
-
the forest in the areas, the Chief Conservator of Forests,
Kerala State was required in consultation with the appellant.,.
to prepare and implement a scientific management plan which
would include fireprotection and epidemic control programmes.
The appellant agreed to pay to the Government of Kerala
D
royalty for the raw materials supplied to the appellant at the
rate of Rs. 11 per tonne of green wood of eucalyptus grandis
and eucalyptus tereticornis (both with 50 per cent moisture)
and at the rate of Rs.12 per tonne of green reeds with 50 per
cent moisture. There were several other conditions in the ._
agreement with which we are not concerned in these cases.
E After the above agreement was entered into the appellant
established its factory. The Punalur Paper Mills Ltd. and the
CMalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. which were
companies in the private sector had also established their "t"
factories in the State of Kerala which consumed forest produce
as raw-material, The Kerala State Bamboo Corporation Limited
F and the Travancore Plywood Industries Limited which were owned
by the Government of Kerala were also carrying on business in
the State of Kerala.
In the year 1978 the Act was passed by the Kerala
Legislature with the object of providing for the procedure to
G be followed in fixing the selling prices of certain important
forest produce, for the prohibition of the sale of such forest
produce at less than the prices so fixed and for matters + """'
incidental or ancillary thereto. The Act was also intended to
provide for the proper regeneration and maintenance of the
forests in the State. The Act governs only those forests which
H
H.P. CORPN. V• GOVT. OF KERALA [VENKATARAMIAH, J,] 587
; are considered as reserved forests within the meaning of A
Kerala Forest Act, 1961 and forests vested in the Government
under section 3 of the Kerala Private Forests (Vesting and
Assignment) Act, 1971. It provides for the determination of
the selling price of certain forest produce specified in
clause (c) of section 2 of the Act. Section 3 of the Act
requires the Government to notify in the Gazette before the B
end of each financial year the selling price of every forest
._.produce for the following financial year. The notified
price has to be fixed by the Government after taking into
consideration the recommendations of the Expert Committee
consisting of the officers mentioned in sect:lon 4(2) of the
Act. Sub-section (3) of section 4 of the Act requires the
-~ Expert Committee to make its recommendation having regard c
· inter alia to the market price of the forest produce, the cost
• ·ot; regenerating and maintaining the forest produce in cases
where regeneration is necessary after selling the forest
produce; and such other matters as may be prescribed. Section
5 is the crucial section in the Act. It reads as follows :
D
"5, Forest produce to be sold at price not less
than the selling price -
(1) After the date of the publication of the noti-
fication under sub-section (2) of section 3, no
forest produce shall be sold by the Government or E
- any forest officer at a pri.ce which is less than
the selling price of that forest produce.
(2) The sale of any forest produce in contravention
of sub-section (1) shall be null and void and shall
not be enforceable in a court of law." F
There is no prohibition of sale of forest produce at
prices higher than the prices mentioned in the notification.
Section 7 of the Act provides that 10 per cent of the amount
obtained by the sale of forest produce after the commencement
of the Act, subject to such rules as may be made under the G
Act, should be set apart for being utilised for the
' -t develoµnent of forests. Section 8 enables the Government to
make rules for the purpose of carrying into effect the
provisions of the Act. We are concerned in these cases with
the validity of section 6 of the Act which reads thus :
H
588 SUPREME COURT REPORTS [1986] 2 s.c.R.
A "6. Exemption - The Government may, in the public ;..
interest, by notification in the Gazette, exempt
the sale of any forest produce -
(a) to any company owned by the Central Government
or the Government of Kerala;
B (b) not exceeding ten cubic meters, to any
co-operative society registered or deemed to be~
registered under the Kerala Co-operative Societies
Act, 1969 (21 of 1969)
from the provisions of section S, subject to such
c conditions and restrictions as may be specified in -t'
the notification."
The Act came into force on its publication, i.e., on
September 26, 1978. On March 9, 1979 the Government of Kerala
published a notification exempting the appellant, i.e.,
D Hindustan Paper Corporation Ltd., the Kerala State Bamboo
Corporation Limited and the Travancore Plywood Industries
Limited from the provisions of section 5 of the Act. The
relevant part <)f the Notification and the Explanatory Note
attached to it ~re given below : _.,.
-
E "No. G.O. (MS) 100/79/AD Dated, Trivandrum
9th March, 1979
S.R.O. No. 313/79:,- In exercise of the powers ¥'
conferred by section 6 of the Kerala Forest Produce
(Fixation of Selling Price) Act, 1978 (29 of 1978),__J
F the Government of Kerala, being satisfied that it 7
is necessary so to do in the public interest,
hereby exempt the sale of any forest produce to the
Kerala Newsprint Project under the Hindustan Paper
Corporation, the Kerala State Bamboo Corporation
and the Travancore Plywood Industries, Punalur from
G the provisions of section 5 of the said Act.
By order of the Governor +·
K.V. Vidhyadharan
Additional Secretary to Govt.
H
H.P. CORPN. V• GOVT. OF KERAIA [VENKATARAMIAH, J,] 589
A
EXPIANATORY NOTE
After Government have notified selling price of
Forest Produce under section 3 of Act 29 of 1978,
Forest Produce cannot be sold at prices less than
the selling price. Under section 6 of the Act, B
Government can exempt in public interest, by
Notification, the sale of any Forest Produce to
companies owned by the Central Government, by
Government of Kerala. As Kerala Newsprint Project,
Bamboo Corporation and the Tranvancore Plywood
Industries, Punalur are undertakings of the Central
Government and the Government of Ker ala c
respectively, it is considered expedient to exempt
these from the provisions of section 5 of the Act.
The Notification is intended to achieve the above
purpose.''
The State Government issued the Notification under D
section 3 of the Act fixing the price below which forest
produce covered by the Act could not be sold. Aggrieved by the
Notification granting exemption to the Government companies,
the two companies in the private sector, namely, Punalur Paper
'-'Mills Limited and the Gwalior Rayon Silk Manufacturing (Wvg.)
Co. Ltd. filed writ petitions in the High C',ourt questioning E
the constitutional validity of section 6 and the Notification
granting exemption thereunder in favour of the appellant
Hindustan Paper Corporation Ltd. and two other companies owned
by the Government of Kerala. The writ petitions were opposed
~ by the Government of Kerala, the appellant Hindustan Paper
_ Corporation Ltd., the Kerala State Bamboo Corporation Ltd. and
F
'-the Tranvancore Plywood Industries Ltd. In the
counter-affidavit filed on behalf of the Government of Kerala
the contentions urged by the petitioners in the writ petitions
were refuted and the State Government took the stand that
section 6 of the Act was constitutionally valid. At the
hearing of the writ petitions before the High Court, the
G
Additional Advocate General who appeared for the State
Government conceded that in his opinion section 6 of the Act
_.was unconstitutional. Perhaps what he meant was that he was
not able to offer any good answer to the contentions urged by
the other side in support of the challenge to the
constitutionality of the concerned provision. A reference to H
590 SUPREME COURT REPORTS [19861 2 s.c.R.
A
this concession which was neither here nor there is found at ~
the end of paragraph 22 of the judgment of the High Court. The
High Court held that sec, 6 of the Act was violative of Art.
14 of the Constitution and struck it down along with the
Notification. No appeal was filed by the State Govt. The above
appeals are filed by the Hindustan Paper Corporation Ltd. the
appellant herein which is one of the beneficiaries of the
B
Notification granting exemption. But, at the hearing of these
appeals in this Court the learned counsel for the Governmentl,:-
of Kerala stated that the concession made by the learned
counsel for the State before the High Court was incorrect, and
supported the validity of section 6 of the Act and the
Notification granting exemption issued thereunder.
c
These appeals are filed against the judgment of the Rig.~
Court after obtaining the leave of this Court under Article·•
136 of the Constitution. Section 6 of the Act has already been
set out above. It confers the power on the State Government to
D
grant exemption from the provisions of section 5 of the Act.
The power conferred under section 6 of the Act is not
unfettered. The Government can grant the exemption only in the
public interest. Such exemption can be granted only to a
company owned by the Central Government or the Governmant of
Kerala. There is also, however, a provision in clause (b) of ill
E section 6 of the Act, which ununderstandably has also been
struck down by the High Court, even though its validity has
not been express~y challenged. Under this provision any sale
of forest produce not exceeding ten cubic meters effected in
favour of any co-operative society registered or deemed to be
registered under the Kerala Co-operative Societies Act, 1969 ¥
F
may be exempted from section 5 of the Act by the State Govern-
ment. While issuing the notification granting ex.emption it is...(
open to the State Governmant to impose appropriate conditions
and restrictions. The State Government, of course, has to bear
in mind the entire policy and object of the Act before exerci-
sing its power under section 6 of the Act. At the outset it
G
should be observed that the decision of the High Court to the
extent it has quashed clause (b) of section 6 of the Act which
gave power to the State Government to exempt the sale of any
forest produce in small quantities not exceeding 10 cubic t
meters to any co-operative society is liable to be set aside
straightaway without anything more as there was no challenge
H
to that part of the section at all and the High Court has not
H.P. CORRI. v. rovr. OF KERAIA [VENKATARAMIAH, J.] 591
~at all scrutinized the constitutional validity of this A
provision.
The reasons given by the High Court for quashing section
6 of the Act are these :
(1) if the Government is given a power to sell the B
produce at a lower price than the notified rate to
the Government companies it will enable the
Government to cripple or in slow degrees to
eliminate the other consumers in the field. This
conferment of power on the state Government is
discriminatory and unreasonable,
c
(2) a Government company is as such a legal entity
as any other entity. It is a commercial corporation
acting on its own behalf and all consumers of the
forest produce should have an equal opportunity to
get the goods. The Government company could not,
therefore, be given any favour, D
(3) there is no nexus between the object to be
achieved by the Act and the exemptl.on to be granted
in favour of the Government companies, and
E
-
(4) the submission made by the Additional Advocate
General to the effect that he could not support the
validity of section 6 of the Act.
We find it difficult to accept the grounds on which the
I. High Court has held section 6 of the Act to be
runconstitutional. So far as conswners of forest produce who F
are not granted any exemption under section 6 of the Act are
concerned, any sale of forest produce in their favour cannot
be effected at a price less than the price notified under
section 3 of the Act. The notified price has to be fixed on
the basis of the recommendation to be made by the Expert
Committee constituted under section 4 of the Act and the G
Expert Committee is required to take into consideration the
+market price of the forest produce, the cost of regenerating
and maintaining the forest produce in cases where regeneration
is necessary after selling the forest produce and such other
matters as may be prescribed. If section 5 of the Act provides
H
592 SUPREME COURT REPORTS [1986] 2 S.C.R.
A that the forest produce covered by the Act shall not be sold-'
at a price less than the price which is determined on the
basis of the factors referred to above which appear to bequite
relevant they cannot have any grievance. They cannot claim
that they oust be shown any concession and that the forest
produce should be made available to them at a price which
would be lower than the market price. Even when it is stated
B that any company owned by the Central Government or the
Government of Kerala or a co-operative society (subject to t~
limit as regards the quantity of forest produce to be
supplied) may be supplied forest produce without the
constraint contained in section 5 of the Act, it does not mean
that the forest produce would be made available to them at
c throw-away prices. It is reasonable to expect that the price,-'·
payable for the forest ·produce in question by the Government
companies or co-operative societies would be determined after+.
negotiations having regard to the public interest. In almost
all the statutes by which the fiscal or economic interests of
the State are regulated, provision for granting exemption in
D appropriate cases would have necessarily to be there and the
power to grant exemption is invariably conferred on the
Government concerned. The Legislature which is burdened with
heavy legislative and other types of work is not able to find
time to consider in detail the hardships and difficulties that-Ill
are likely to result by the enforcement of the statute
E concerned. It has, therefore, now become a well-recognised and
constitutionally accepted legislative practice to incorporate
provisions conferring the powers of exemption on the
Government in such statutes. Such exemptions cannot ordinarily
be granted secretly. A notification would have to be issued¥
and published in the Gazette and in the ordinary course i':_J
p would be subject to the scrutiny by the Legislature. The powerT
can be exercised only in the public interest as provided by '
the section itself. The validity of provisions conferring the
power of exemption has been consistently upheld by this Court
in a number of decisions commencing with the State of Bombay
and Anr. v. F.N. Balsara, [1951] s.c.R. 682. The next
G question is whether section 6 of the Act which restricts the
power of the Government to grant exemption to companies owned.
by the Central Government or the Government of Kerala and to+ '
co-operative societies only is valid. As far as Government
undertakings and companies are concerned, it has to be held
that they form a class by themselves since any profit that
fl
H. p. CORPN. v. rovr. OF KERAI.A [VENKATARAMIAH, J.) 593
_.they may make would in the end result in the benefit to the A
members of the general public. The profit, if any, enriches
the public coffer and not the private coffer. The role of
industries in the public sector is very sensitive and critical
from the point of view of national economy. Their survival
very often depends upon the budgetary provision and not upon
private resources which are available to the industries in the B
private sector. They are often established to break the power
<lll'of strangulation on economy which the industries in private
sector may have developed and may be using to choke the
industrial growth of the country. Ari exemption or a concession
might provide them some breathing time or settling down time.
It may be treated as a subsidy at the worst. This appears to
1'be the policy behind Article 19(6)(ii) of the Constitution. In c
appropriate cases in order to place an industry owned by the
-'.\Government on an enduring basis in the national interest, some
concession may have to be shown to it. It is neither alleged
nor established that if the exemption is annulled the
petitioners will be richer by a single paise or if it is
retained they will be poorer by a single paise. The only D
purpose hinted at is that if the public sector is made to pay
more, it may use less raw-material which in turn might be
available to the private sector. Not a very laudable purpose
~to say the least of it. The action of the State Government in
exempting the Government companies from the operation of
section S of the Act does not in the instant case amount to E
the exclusion of the industries in the private sector from
their business nor does it deny the usual supplies of forest
produce used as raw-material by these industries as alleged by
"ltthem. The Government is not shown to be taking any undue
.._ ~dvantage of the monopoly it enjoys as the owner of the
\forests and the position it holds as the sole supplier of F
forest produce in fixing the minimum prices in order to
preserve the national wealth from being wasted away. In the
circumstances of this case it cannot be said that the
provision is either arbitrary or unreasonable even though the
Government industries may be rivals in trade to the industries
in the private sector. In Sher Singh v. Qlion of India & G
Ors., [1984) 1 s.c.R. 464 this Court has upheld section 47
-.t(H) of the Motor Vehicles Act, 1939 under which a statutory
preference is shown to a State Transport Undertaking. In
Yik1sd Coal Merchant, Patiala & Ors. v. Qlion of India & Ors.,
[1984) 1 S.C.R. 657, the preference shown to the Government in
H
594 SUPREME COURT REPORTS [1986] 2 s.c.R.
A allotment of railway wagons for transporting coal has been
upheld. Learned counsel for the respondents however depended•
upon the decision of this Court in State of Rajasthan v.
~enehand & Ors., [1964] 6 S.C.R. 903 by which an exemption
granted in respect of debts due to the State or a scheduled
bank from the operation of section 2(e) of the Jagirdar's Debt
Reduction Act, 1937 was held to be in conformity with the
B
object of the Act and so violative of Article 14 of the
Constitution. That case depended on the facts a~
circU111Stances surrounding the statute in question. We may
refer here to the decision of this C.Ourt in Fatehcband
W.-tlal & Ors. v. State of Maharashtra etc., [1977] 2 s.c.R.
828 where it is observed at page 849 thus :
c
"There is no merit in the plea. Liabilities due to~
government to local authorities are not tained with.f,
exploitation of the debtor. Likewise, debts due to
banking companies do not ordinarily suffer from the
overreaching, unscrupulousness or harsh treatment.
D
Moreover, financial institutions have, until
recently, treated the villages and urban worker and
petty farmer as untouchables and so do not figure
in the picture. To exempt the categories above
referred to is reasonable."
E
a.nee preference shown to Government companies under
seet!on 6 of the Act cannot be considered discriminatory as
they stand in a different class altogether and the classifi- -.
cation made between Government companies and others for the
purposes of the Act is a valid one. Same is the case with the~
clause which gives power under section 6 of the Act to the
F
Government to exempt sales of forest produce in favour °!::{'
co-operative societies upto the limit mentioned therein. In,
P.V. Sivarajaa, v. Union of India & Anr., (1959] Suppl. 1
S.C.R. 779 the exemption granted in favour of traders
carrying on export business in a small scale who formed
co-operative societies was upheld. In Orient Weaving Mills (P)
G
I.bl. v. Union of India, [1962] Suppl. 3 s.c.R. 481 this C.Ourt
upheld the exemption granted in favour of power-loom weavers
in a cooperative society from the levy of central excise,
duties. We, do not find any substance in the contention thal
the provision granting exemption in favour of Government
companies and the co-operative societies as stated above is
H
H.P. CORPN. v. GOVT. OF KERAIA [VENKATARAMIAH, J.] 595
unconstitutional. We must, however, express our dis-approval A
.A: of one of the reasons given by the High Court for striking
down section 6 of the Act, namely, "private sector consumers
generally show more concern in the speedy production of goods,
in the finished products and in the sale of them which is in
public interest as well." The above observation is not
warranted and is presumably based on the personal opinion of B
the learned judges. It is misleading and cannot in the circum-
tr stances of the case serve as a prop to support the contention
of the respondents.
- Therefore, the decision of the High Court that section 6
of the Act was violative of Article 14 of the Constitution is
ollll liable to be set aside. We do not also approve of the finding c
~·of the High Court that even assuming that the section was
~·valid, the notification issued thereunder was invalid. It may
be stated here that the writ petitioners on whom the burden
lay have not given any valid reason as to why we should hold
that the impugned notification was not in the public interest.
As mentioned earlier the appellant, Hindustan Paper D
Corporation Ltd. established its factory after entering into
an agreement with the State Government as regards the regular
supply of raw-aaterial from the forests in the State of Kerala
1115 for production of newsprint and that the said factory was
eaploying a large labour force. The other two concerns in
whose favour the exemption is granted by the impugned E
netification are the concerns of Kerala Government itself. We
have no material in this case to hold that the impugned noti-
fication was not in the public interest. We accordingly set
lit aside the finding recorded by the High Court on the validity
•
of the notification also •
F
In the result, we allow the appeals, set aside the
judgment of the High Court and dismiss the writ petitions
filed in the High Court. There shall, however, be no order as
to costs.
G
" A. P. J. Appt.als allowed•
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