Holding

The 1981 fair‑price shop scheme, with its preference for consumers' cooperative societies, is constitutionally valid and does not violate Articles 14 or 19(1)(g).

Summary

The Madhya Pradesh Government, under the Essential Commodities Act, replaced its 1960 scheme of running fair‑price shops through retail dealers with a 1981 scheme that appointed agents, giving preference to consumers' cooperative societies, to distribute foodstuffs at fair prices. Petitioners challenged the scheme as violative of Articles 14 and 19(1)(g) of the Constitution, alleging it created an arbitrary monopoly in trade and infringed their right to carry on the food‑grain business. The Supreme Court held that the scheme does not infringe the petitioners' trade rights, that preference to cooperative societies is a permissible classification with a rational relation to the objective of equitable distribution, and that there is no fundamental right to be appointed as a fair‑price shop agent. The Court affirmed that the scheme was a valid exercise of executive power under Article 162 and was not arbitrary, irrational or irrelevant. Consequently, the Special Leave Petitions were dismissed.

Issues considered

Whether the 1981 scheme giving preference to consumers' cooperative societies violates Article 14 of the Constitution.
Whether the scheme infringes the freedom of trade guaranteed under Article 19(1)(g).
Whether the preference creates a monopoly in trade in favour of cooperative societies.
Whether the scheme is arbitrary, irrational or irrelevant in the context of the Constitution.

Legislation cited

Constitution of Indias. Art 14, s. Art 162, s. Art 19(1)(g)
Essential Commodities Act, 1955s. s.3
Madhya Pradesh Foodgrains (Licensing) Order, 1964
Madhya Pradesh Foodstuffs (Distribution) Control Order, 1960

Subjects

Constitutional lawArticle 14Article 19(1)(g)Equality before lawFreedom of tradeFair price shopsCooperative societiesPublic distribution systemEssential Commodities ActArbitrariness

Judgment

A 750

MADHYA PRADESH RATION VIKRETA SANGH
SOCIETY & ORS. ETC. ETC.

v.
8
STATE OF MADHYA PRADESH & ANR.
'f
September 22, 1981

[R.S. PATHAK AND A.P. SEN, JJ.]
c
Constitution of India, 1950, Art, 14, and Madhya Pradesh (Foodstuffs)
Civil Supplies Public Distribution Scheme, !981-Distribution of foodstuffs at fair
prices-Scheme of running fair price shop through retail dealers-Replacement
-
of-Fair price shops by agents appointed by Government with preference to co·
optrative societies-Such Seheme whether valid.

D Art. 14-Concept of equality-Equality before law-Unequal treotn1ent of
equals-Whether permissible-Advocates whether can form consumer's cooperative
society.

The Madhya Pradesh Foodstuffs (Distribution) Control Order, 1960, "'as
promulgated by the State Government, in exercise- of the powers conferred by
section 3 read with s. 5 of the Essential Commodities Act, 1955, to enable the
E State Government to distribute foodstuffs at fair prices through fair price shops.
Jn 1977, the State Government decided to appoint unemployed graduates as
retail dealers of Government fair price shops. The whole system of distribution
of foodstuffs at fair price shops to the consumers coUapsed due to flagrant
violations of the Control Order by the retail dealers.

F In July 1980, the Govern1nent decided that the fair· price shops should be
run by consumers' cooperative societies. Pursuant to this 1 on October 31, 1980,
the Stat~ Government an1ended the Control Order by deleting the provisions
relating to fair price shops through retail dealers and providing for running of
the fair price shops under a Government scheme. On March 20, 1981, the
State Government pron1ulgated the Madhya Pradesh (Foodstuffs) Civil Supplies
Public Distribution Scheme, 1981, replacing the earlier Scheme. The Scheme
G envisaged allotment of shops to the public by inviting applications from it by
notification, giving preference to co-operative societies. The important feature
of the Sche1ne was that the fair price shops \Vere to be run under the direct
control and supervision of the Collector and that the fair price shop-keeper was
required to keep sufficient stocks of foodstuffs to prevent hardship and inconveni-
ence to the consumers.
H
The petitioners filed writ petitions in the High Court, contending that the
introduction of the new schen1e for running of Government fair price shops by
M.P.R. VIKRETA SA1'GH v. M.P. STATE \ 751

agents to be appointed under a G0ver·.1ment scheme, giv;ng preference to co- A
operative societies, in replacement of the earlier Scheme .bf running fair price
.' shops through retail dealers, was violative of Arts. 14 and 19 (l) (g) of the Consti-
tution. The contention was rejected and the writ po;:titions dismissed.

In the Special Leave P~titions to this Court, it was contended that although
there was no objection to a State monopoly in trade, the action of the Govern-
ment should not be arbitrary, irrational and irrelevant, and that arbitrariness was B
• writ large in the formulation of the Scheme inasmuch as there was selection of
co-operative societies of all descriptions to run the fair price shops and therefore
the Scheme was, in fact, not being implemented to carry out its professeJ
object.

-
Dismissing the Special Leave Petitions,
c
HELD : 1. The Scheme in no way infringes the petitioners' right to carry
on their trade in foodgrains. They are free to carry on business as wholesale or
retail dealers in foodgrains by taking out licences under the Madhya Pradesh
Foodgrains (Licensing) Order, 1964. There is no fundamental right in any one to
be appointed as an agent of a fair price shop under a Government Scheme. [758FJ

Sarkari Sasta Anaj Vikreta Sangh, Tehsil Ban1atra and Or.r. v. State of D
Madhya Pradesh and Ors. WP No. 4186 of 01 decided on August 25, 1981 and
R.D. Shelly v Airport Authority, [1979] 3 SCR 1014 at 1042 referred to.

2. The question whether fair pri..:e shops in the State under a Government
Scheme should be directly run by the Government through the instrumentality of
consumers' cooperative societies as its agents or by retail dealers to be appointed
by the Collector is essentially a matter of policy with which the Court is not
concerned. (758 CJ

3. The wider concept of equality before the Jaw and the equal protection
of laws is that there shall be equality an1ong equals. Even among equals there
can be unequal treatment based on an inteUigible differentia having a rational
relation to the objects sought to be achieved. Consumers' cooperative societies
form a distinct clasS by themselves. (757 E·F] F
4. The impugned scheme neither suffers from arbitrariness nor is it irratio-
nal to the object sought to be achieved. It was evolved in exercise of the execu-
• tive power of the State Government under Art. 162 of the Constitution after the
earlier Scheme was found unworkable as a result of flagrant violations of the
provisions of the Control Order by unscrupulous retail dealers. Entrusting the
distribution of foodstuffs to consumers' cooperative societies was an inevitable G
step which was taken by the Government in the interest of the general public.
Giving preference to the consumers' cooperative societies could not be said to be
arbitrary, irrational or irrelevant. The Scheme lays down detailed guidelines
regulating the manner of grant or refusal of such applications. [756 H-757 E]

CIVIL APPELLATE JURISDICTION : Special Leave Petition H
(Civil) Nos. 4034, 4350, 4270, 4536·38 and 5074 of 1981.
752 SUPREME COURT REPORTS [1982] ] S.C.R

A From the judgment and order dated the 13th April, 1981 of
the Madhya Pradesh High Court at Jabalpur in Misc. Petition
Nos. 723/80, 874/80, 797/80, 833/80, 91/81, 169/81 and 91/81 res- I •
pectively.

Swaraj Kaushal for the petitioners in SLP Nos. 4270/81 and
B 4350/81.

S.S. Khanduja for the petitioners in SLP Nos. 4536-38/81 and
5074/81.

A.K. Sen, V.S.. Dabir, Dr. N. M. Ghatate and S. V. Deshp.inde

-
C for the petitioners in SLP No. 4034/81.

Gopal Subramanium, D.P. Mohanty and R.A. Shrojj for the
Respondents in SLP Nos. 4270/81, 4350/81, 4536-38/81 and
5074/81.

D Gopal Subramnium, D.P. Mohanty and S.A. Shrojj; for the
Respondent in SLP No. 4034/81.

The Order of the Court was delivered by

SEN, J. The only question involved in this and the connected Special
Leave Petitions directed against a judgment of the Madhya Pradesh
E High Court is whether the Madhya Pradesh (Food-stuffs) Civil
Supplies Public Distribution Scheme, 1981, formulated by the State
Government under sub-cl.(d) of cl. 2 of the Madhya Pradesh Food-
suffs (Distribution) Control Order, 1960, introducing a new scheme
for running of Government fair price shops by agents to be appointed
under a Government scheme giving preference to cooperative socie-
F ties, in replacement of the earlier scheme of running such fair price
shops through retail dealers appointed under cl. 3 of the Order, is
violative of Arts. 14 and 19 (I) (g) of the Constitution.
•
To give a short resume. The Madhya Pradesh Foodstuffs
G (Distribution) Control Order, 1960 (hereinafter called the 'Control
Order') was made by the State Government in exercise of the powers
conferred bys. 3 of the Essential Commodities Act, 1955, read with
Government of India, Ministry of Food and Agriculture (Depart-
of Food), Order No. GSR 1088 dated Noveoiber 15, 1958, to pro-
H vide for distribution of foodstuffs at fair prices under a Government
Scheme. The scheme of the Control Order is that with a view to
M.P.R. VJKRETA SANGH v. M.P. STATE (Sen, J.) 753

distributing food-stuffs at fair prices through fair price shops, the A
, ' Collector would, under the 'Government Scheme', appoint any per-
son as a retail dealer in respect of foodstuffs under cl. 3 of the
Control Order. The Control Order was designed to enable the State
Government to distribute foodstuffs at fair prices through fair price
shops. In 1977, as a matter of policy it was decided to appoint
unemployed graduates as retail dealers of Government fair price B
shops. The whole system of distribution of foodstuffs at fair price
shops to the consumers, however, collapsed due to flagrant viola-
' tions of the Control Order by the retail dealers. It was found that the
shops were opened well after the appointed time, shops were closed
well before the time, the consumers were not able to obtain their
ration easily and very often the traders would withhold the foodstuffs c
in stock and refuse to sell the same to the consumers, causing serious
inconvenience and harassment to them. Another great drawback
which the Government experienced was that stocks which were
required to be lifted by the traders were not lifted within the time
and more often than not the stocks would become wasted and
0
rendered useless.

In July 1980, the Chief Minister called a Conference of high
officials including the Director, Civil and Food Supplies and the
Collectors of various districts. The Collectors narrated their experi-
E
ence about the unsatisfactory manner of working of the then
existing system of running fair price shops through retail dealers and
spoke of the plight of the poor consumer. There was a meaningful,
close and in-depth discussion at the Conference and in the light of
the experience gained, the Government decided that it was necessary
,
to replace the existing system of running fair price shops through F
retail dealers by the Government directly running these fair price
• shops through agents appointed by the Collector. It was also
decided that these fair price shops should be run by consumers'
coorerative societies. In the wake of the changes to be brought
about, the State Government, on October 31, 1980, accordingly
amending the Control Order by deleting the provisions relating to G
running of fair price shops through retail dealers and providing for
running these shops under a Government scheme. The expression
'fair price shop' has been defined by the newly added clause 2 (bb) to
mean a shop set up by the Government under the Government
Scheme. On March 20, 1981, the State Government promulgated H
the Madhya Pradesh (Foodstuffs) Civil Supplies Public Distribu-
tion Scheme, 1981.
754 SUPREME COURT REPORTS [1982] I s.c.R.

A Under the impugned scheme, the Collector, by virtue of cl. 3,
I ,
was to establish fair price shops. In establishing the fair shops, the
Collector was to follow certain guidelines. These are : (a) that a shop
should be established for each area with a population of 2,000 and
the consumers should not be required to travel more than 5 Km, for
purchasing foodstuffs, (b) in the urban areas for the purpose of
B demarcation of areas, a Ward or a Mohalla is a unit and in rural
areas, the Panchayat is a unit, (c) the location of fair price shop
shall be, as far as possible, in the centre of such area, for meeting
the requirements of the residence for which it is established.
Clause 4 provided that the fair price shops would be allotted by the
Sub Divisional Officer and the allottee will have no legal ownership
c over the fair price shops. Then a set of guidelines was also issued for
the purpose of regulating the manner of allotment of fair price
shops. In making the allotment of fair price shops, cooperative
societies were to be given top priority. In the event ofa cooperative
society in the area expressing its inability in writing to run a fair
price shop, or if there was no such cooperative society in existence in
D such an area, the fair price shop may be allotted to others. The
allotment of a fair price shop was to be made after publication of
a notifiication inviting applications for allotment from the public.
The applications received were to be scruitinised on merits and the
one who fulfilied the maximum qualifications shall be allotted the
shop. Another set of principles was laid down dealing with the
E manner of working of fair price shops, but they are matters of detail. .-
One important feature is that the faire shops are to be run under
the direct control and supervision of the Collector and the other
important feature is that the fair price shop keeper was required to
keep sufficient stocks of foodstuffs as specified by the State Govern-
ment or the Collector in that behalf, to prevent hardship and Incon-
venience to the consumers.
•
The validity of the impugned scheme has been unheld by this
Court in Sarkari Sasta Anoj Vikreta San?h, Tehsil Bamatra and Ors.
v. State of Madhya Pradesh and Ors. decided on August 26, 1981.
G The main challenge was that the scheme created a monopoly in trade
in favour of cooperative societies and was thus violative of Arts. 14
and I 9 (!) (g) of the Constitution. This Court, agreeing with the
High Court, rejected the contention in view of Manna/a/ Jain v. State
of Assam and Ors.(') In that case, the questinn was whether cl. 5 (e)
H ~·
(!) [ 1962] 3 SCR 936.
M.P.R. VIKRETA SANGH v. M.P. STATE (Sen, J.) 755

of the Assam Foodgrains (Licensing and Control) Order, 1961, A
which provided for giving preference to cooperative societies created
a monopoly in trade in favour of cooperative societies. On a construe·
ti on of cl. S (e) which merely embodied a rule of preference in favour
of cooperative societies, this Court in 'vfannalal Jain's case(supra) held
that cl. 5 (e) did not have the effect of creating a monopoly in favour
of cooperative societies. In upholding the validity of cl. S (e), the B
Court observed :(1)

We are of the view that by reason of the position which
cooperative societies may occupy in the village economy of
a particular area, it cannot be laid down as a general
proposition that sub-cl. (e) of cl. S of the Control Order, c
1961, is unrelated to the objects mentioned in s. 3 of the
Essential Commodities Act, 1955. There may be places or
areas where cooperative societies are in a better position
for maintaining or increasing supplies of rice and paddy and
even for securing their equitable distribution and availability
at fair prices. D

The Court, therefore, repelled the contention that cl. 5 (e) had
no relation whatever to the objects mentioned in s. 3 of the Act and
went on to say :(')

Sub-cl. (e) of cl. 5, we have already stated, enables the E
licensing authority to give preference to a cooperative

-- society in certain circumstances; but it does not create a
monopoly in favour of cooperative societies. The prefe-
rence given has a reasonable relation to the objects of the
legislation set out in s. 3 of the Act.
F
In the Sarkari Sas/a Anaj Vikreta Sangh case the impugned scheme
was also challenged on various other grounds but the court negati·
ved all the contentions raised and we need not refer to them as they
• are not really relevant for our purposes. Suffice it to say, the
Court pointed out that the scheme had been framed by the State
Government in exercise of its executive function under Art. 162 of G
the Constitution; that under the scheme the fair price shops were to
be run by consumers' cooperative societies; that the scheme was
framed by the State Government in public interest with a view to
securing equitable distribution of foodgrains at fair prices to the
H
(!) [1962) 3 SCR 936 at 949.
,..> ,,...
(2) Ibid at951.
756 SUPREME COURT REPORTS [1982] I S.C.R

consumers, that the rule of preference to cooperative societies does
not create a monopoly in trade and is, therefore, not violative of
the petitioners' fundamental rights under Arts. 14 and 19(l)(g) of I '
the Constitution; and that no one had a fundamental right to be
appointed a Government agent for running a fair price shop which
was a matter of grant of privilege. The validity of the impugned
B 'cheme has, therefore, been upheld in all its aspects.
Jn support of these petitions, learned counsel for the peti-
tioners contends that the real point was not pressed in the Sarkari
Sas/a Anaj Vikreta Sangh's case (supra). He contends that there is
no objection to a State monopoly in trade, the action of the Govern-
c ment should not be arbitrary, irrational and irrelevant. If the
governmental action disclose arbitrariness, it is to be invalidated as
violative of Art. 14. Jn support of the contention, he places reliance
on certain observations of Bhagwati, J. in the Airport Authority
case('). Jn dealing with the question, Bhagwati, J. observed :
It is now well settled ...... that Art. 14 strikes at arbi-
D trariness in State action and ensure fairness and equality of
treatment. It requires that State action must not be arbi-
trary but must be based on some rational and relevant
principle which is non-discriminatory; it must not be
guided by any extraneous or irrelevant considerations,
because that would be denial of equality ...... The State
E connot, therefore. act arbitrarily in entering into relation-
ship, contractual or otherwise with a third party, but its
action must conform to some standard or norm which is
rational and non-discriminatory.
The observations made by Bhagwati, J. in the Airport Authority case
F (supra) have been quoted with approval in Kasturi Lal v. State of
J & K(').
It is true that according to the rule laid down in the Airport
Authority case (supra) if governmental action disclosed arbitrariness,
•
it would be liable to be in validated as offending against Art. 14.
G There can be no quarrel with the principles laid down in that case,
but the difficulty is about the application of those principles to the
facts and circumstances of the present case. We have given a brief
outline of the impugned scheme and it cannot be said that it suffers
from arbitrariness or is irrational to the object sought to be achiev~d.
B
(1) R.D. Shetty v. Airport Authority [1979] 3 SCR 1014 at 1042.
(2J [ 19so1 1 sec 1.
M.P.R. VIKRETA SANGH v. M.P. STATE (Sen, J.) 757

The State Government after due deliberation, took a responsible A
decision to run the fair price shops directly, being satisfied that it
was necessary so to do with the object of distributing foodstuffs at
fair prices to the consumers, after taking into consideration the fact
that the earlier experiment of running these shops through retail
dealers was an utter failure. The scheme has been designed by the
State Government by executive action under Art. 162 of the Consti-
B
tution with a view to ensuring equitable distribution of foodstuffs at
fair prices. As already stated, the Court has found in the Sarkari
Sasta Anaj Vikteta Sangh case (supra), the entire system of distribu-
tion of foodstuffs had collapsed and had become wholly unworkable
due to flagrant violations of the provisions of the Control Order by
the retail dealers. The action of the State Government in entrusting
c
the distribution of foodstuffs to consumers' cooperative societies,
though drastic, was an inevitable step taken in the interests of the
general public. The State Government was not bound to give the
-- f
fair price shops to the retail dealers under a Government scheme.
The governmental action in giving preference to consumers' coope-
D
rative societies cannot be construed to be arbitrary, irrational or
irrelevant. The impugned scheme does not confer arbitrary or
uncanalised power ou the Collector in the matter of grant or refusal
of applications for appointment as agents for the purpose of running
fair price shops. The scheme lays down detailed guidelines regula-
ting the manner of grant or refusal of such applications. E
The wider concept of equality before the law and the equal
ptotection of laws is that there shall be equality among equals.
Even among equals there can be unequal treatment based on an
intelligible differentia having a rational relation to the objects sought
to be achieved. Consumers' cooperi.tive societies form a distinct
F
class by themselves. Benefits and concessions granted to them ulti-
mately benefit persons of small means and promote social justice in
accordance with the directive principles. There is an intelligible
differentia between the retail dealers who are nothing but traders
and consumers' cooperative societies. The position would have
been different if there was a monopoly created in favour of the later. G
The scheme only envisages a rule of preference. The formulation
of the scheme does not exclude the retail traders from making an
application for appointment as agents. It is, however, urged that the
impugned scheme is not being implemented as to carry out its
avowed object. It was said that there was arbitrariness in selection
H
of cooperative societies of all descriptions, not necessarily consu-
mers' cooperative societies. There is no merit in the contention
758 SUPREME COURT REPORTS [1982] 1 S.C.R.

A that there was preferential treatment given to cooperative societies
in the matter of allotment of fair price shops. Our attention was
drawn to the fact that a fair price shop has been allotted to Adhi-
vakta (Advocates) Sangh, Jabalpur. Advocates are also consumers
and there is nothing to prevent them from forming a consumers'
cooperative scciety for lawyers as a class if they fulfil the conditions
B laid down in the law. We have no reason to think that the State
Government was not actuated with the best of mtentions in bringing
about a change in the system of distribution of foodstuffs through
fair price shops.

The question whether fair price shops in the State of Madhya
c Pradesh under a Government scheme should be directly run by the
Government through the instrumentality of consumers' cooperative
societies as its agents or by retail dealers to be appointed by the
Collector under cl. 3 of the Control Order, is essentially a matter of
policy with which the Court is not concerned. The learued couusel \ -
for the State reiterated the assurance given in the Sarkar/ Sasta
D Anaj Vikreta Sangh case (supra), as was done by the learned
Advocate General before the High Court, that by the expression
"cooperative societies" in the scheme, the Government intended
and meant "consumers' cooperative societies", and that if by
mistake there was a wrong allotment made to a 'cooperative society'
which was not a "consumers' cooperative society', the Government
E would take steps to cancel the allotment.

The constitutionality of the impugned scheme is also challenged
as abridging Art. 19(l)(g) of the Constitution. The short answer to
the challenge is that the scheme in no way infringes the petitioners'
right to carry on their trade in foodgrains. They are free to carry
F on business as wholesale or retail dealers in foodgrains by taking
out licences under the Madhya Pradesh Foodgrains (Licensing)
Order, J964. There is no fundamental right in any one to be •
appointed as an agent of a fair price shop under Government
Scheme.
G ·· Accordingly, we dismiss the Special Leave Petitions with
costs.

N.V.K. Petitions dismissed.