Holding

The Court held that the State's resin quota allocations were arbitrary, lacked a rational basis under the industrial policy, and therefore violated Article 14.

Summary

The petitioners, small‑scale resin manufacturers, applied to the Jammu & Kashmir government for allotment of resin under the State's industrial policy but were denied, while other applicants (respondents 4‑16) received quotas despite many not being formally registered. The petitioners claimed this differential treatment violated Article 14 of the Constitution. The State argued that the allocations were made to achieve balanced regional development as per its 1978 industrial policy. The Court examined whether the classification and allotment were based on a rational nexus to the policy's objectives and found that the State failed to explain the basis for favouring the respondents, rendering the allocation arbitrary and violative of Article 14. Consequently, the orders granting resin quotas to the respondents (except five) were quashed and the State was directed to allot the material to the petitioners, with a modest cost award.

Issues considered

Whether the allocation of resin quotas to certain respondents and denial to the petitioners amounts to arbitrary discrimination violating Article 14 of the Constitution.
Whether the State's industrial policy provides a rational and intelligible classification justifying the differential allotment.
Whether the classification lacks a reasonable relation to the policy's objectives, rendering it unconstitutional.

Subjects

Article 14Equality before lawIndustrial policyQuota allocationResinArbitrary discriminationJammu and KashmirSmall scale industry

Judgment

... 841

OM PRAKASH SUD ETC. ETC. A
v.
STATE OF J & K & ORS. ETC. ETC.
February 16, 1981
[R. S. PATHAK, 0. CHINNAPPA REDDY AND BAHARUL ISLAM, JJ.]
B

Constitution of India 1950, Article 14-Allotment of resin-Industrial
pa/icy decision of State-Object of-Balanced economic and regional deve-
lopment of State--Selection of quota seekers-Article 14 wltetlier violated.

The petitioners in their writ petitions to this Court alleged that they were C
carrying on small scale industries for the manufacture of resin and turpentine
oil and that they applied to the Government for allotment of resin for their
industries but the Government referring to their policy decision of March 20,
1978 refused to make any allotment, "'1d that they purchased raw material
from the open market and managed to run their industries. They further
alleged that while they were refused allotment of supply of raw-materials,
the State, respondent No. 1 made allotments to respondent nos. 4 to 16 D
although most of them were not even formally resistered at the time of
111llking tho impugned orders of allotment and that they were consequently
adversely discriminated against, while respondent nos. 4 to 16 were favoured
and as such the impugned orders of allotment were liable to be struck down
as violative of Article 14 of the Constitution of India.

The State, respondent No. 1 contested the writ petition, denied the E
material allegations of the petitioners and alleged th<>t the allocations were
made in conformity with the State Industrial Policy decision of securing the
balanced economic and regional development of the State: that there wa~ a
preponderance of industries in the Jammu Region, and that the industries
of the petitioners as well as respondent nos. 4 t'o 16 were also functioning
in that region. Allotments of resin were made districtwise, 110 applications
were received and considered and aUotment was made to respondents nos. 4 F
to 16.

On the question whether the orders Of the 1st respondent allotting quotas
of resin to respondent nos. 4 to 16 were arbitrary and violative of Article 14
of the Constitution.

HELD: l(i) Respondent No. 1 has not explained as to bow and on G
what basis if any, the allotments were made by the impugned orders in
.. favour of the new allottees respondent nos. 4 to 16 whose industries were
located in the Jammu region. [847 CJ
'
(ii) Although the State Government has taken reli•nce on the State
" Industrial Policy decision, it does not appear to have followed it in practice,
' except in the cases of five respondents. No reasonable basi1 bad been H
adopted in making the allotments in favour of the new allottoes and denying
the allotments to tho petitionol'I. [849 E-FJ
A
842 SUPREME COURT REPORTS [1981] 2 S.C.R.

2. The rule of equality does not mean mathematical equality. It permits
of practical inequalities. What is needed is that the selection of quota
-
seckeJS as in the instant case should have a rational rela•tion to the object
sought to be achieved in the industrial policy decision of the State. If the
selection or differentiation is arbitrary and lacks a rational basis it offends
Article 14. [849 DJ
B 3. "Equaolity before the Law" or "equal protection of the laws'' within
the meaning of Article 14 of the Constitution of India means absence Of
any arbitrary discrimination by the law or in. their administration. No undue '
favour to one or hostile discrimination to another should be shown. A classi·
fication is reasonable when it is not an arbitrary selection but rests on
differences pertinent to the subject in respect of which the classification is
made. The classification permissible must be based on some real and subs-
C tantial distinction, a just and reasonable relation to the objects sought to be
attained and cannot be made arbitrary and without any substantial basis.
[848 H-849 A]

State of West Bengal v. Anwar Ali, [1952] SCR 284 referred to.

ORIGINAL JURISDICTION : Writ Petition Nos. 3464-65, 5908 &
3231 of 1980.
D
(Under Article 32 of the Constitution)
S. N. Kacker, K. N. Bhatt and Surendara Raju for the Petitioners in
W. P. Nos. 3464-65/80 and 5908/80. •
Soli J. Sorabjee, E. C. Agarwala, R. Satish and V. K. Pandita for
E the Petitioner in WP 3231/80.
L. N. Sinha, Att Genl and Altaf Ahmed fur R. 1. in WPs 3464-
65/80.
Y. S. Chitaley and Vineet Kumar for R. 14 in WP 3231/80 and
for R. 2 in WPs 3464-65 /80.
R R. P. Bhatt ;md N. R. Chaudhary for R. 4 in WP 3464/80.
P. R. Mridul and Naunit Lal for R. 7 in WP 3231/80 and for R. 2 ~ ..
in WP 3464-65 /80.
Anil Dev Singh and Ashok Grover for R. 15 in WP 3231/80 and
R. 3 in WPs 3464-65/80
G S. K. Bhattacharya and Suresh Sethi for RR. 6 and 12 in WP 3464-
65 /80.
Satish Vij for R. 15 in WP 3464-3465/80. •,
S. Balakrishnan and S. K. Bhattacharya for R. 16 in WP No. 3231/
80.
H The Judgment of the Court was delivered by
BAHARUL ISLAM, J.-'By these writ petitions under Article 32 of
the Constitution the petitioners have challenged the orders of the
- OM PRAKASH V. J. & K. (Islam, /.) 843

first respondent (the State of Jammu and Kashmir) allotting quotas of A
resin to respondents. According to the petitioners these orders deny-
ing similar treatment to them are arbitrary and violative of Article
14 of the Constitution of India.
2. The material facts in the four petitions are similar. The indust-
' ries of which the petitioners are partners are admittedly small scale in- B
• dustries for the manufacture of resin and turpentine oil. The indust-
ries of the petitioners' in Writ Petitions Nos. 3465 of 1980 and 3231
of 1980 were provisionally registered but revalidated for· short periods.
The industry of the petitioner in Writ Petition No. 3464 of 1980 was
provisionally registered, revalidation was applied for but was not gran-
ted. The industry of the petitioner in.Writ Petition No. 5908 o!f 1980 C
was formally registered. It appears that the petitioners were applying
to the Government for allotment of resin as well as raw material for
their industries but the Government referring to their policy decision of
March 20, 1978 refused to make any allotment of Oleo resin to them.
The petitioners i,n Writ Petition Nos. 3464 and 5908 of 1980 have
alleged that they purchased raw-material from the open market and D
somehow managed their industries to run for a certain period.
3. Resin is admittedly a forest product extracted from "Chir trees".
It has been alleged that only three States of India, namely, Himachal
Pradesh, Uttar Pradesh and Jammu and Kashmir have Chir forests.
The petitioners have alleged that the State of Himachal Pradesh and E
Uttar Pradesh stopped selling resin for the last several years in view of
establishment of factories in public and joint sectors and that the State
of Jammu and Kashmir was selling resin by public auction. Sometime
after October 1978 the State of Jammu and Kashmir, it has been fur-
ther alleged, virtually created monopoly in favour of three existing
industrial units and committed to supply them about 17,000 M. T. of F
resin for long time to come. There is a public sector unit in J ammu
which consumes about 3,000 tons of resin per year. Several small
scale industries, according to petitioners, were assured supply of resin
even as late as 1979 notwithstanding the Government's aforesaid indust-
rial policy. In such a situation, being unable to procure raw-materials
for their industries, the petitioners approached the relevant authorities G
including the Deputy Minister of Industry and the Chief Minister of
• Jammu and Kashmir for allotment of raw-materials but to no avail.
' (For the sake of convenience we shall hereinafter refer only to the res-
pondents and Annexures in W. P. No. 3231of1980). The petitioners
further allege that while they we.re refused allotment of supply of raw- H
• materials, respondent No. 1 made allotments to respondents No. 4 to
16 (hereinafter called "allottee respondents") although most of them
A
844 SUPREME COURT REPORTS [1 q81] 2 S.C.R.

were not even formally registered at the time of making the impugned
-
orders of allotment.
The petitioners contend that in the circumstances they were adver-
sely discriminated against while respondents Nos. 4 to 16 were favour-
ed and as such the impugned orders are liable to be struck down as
B violative of Article 14 of the Constitution of India.
4. The impugned orders have been annexed as Annexures N to
Z-1. The letter of allotment (Annexure 'X') in favour of M/s. Sud
Pine Industries (respondent No. 27) is in the following terms:-
"Sub : Supply of resin to M/s. Sud Pine Inc!ustries Kun-
c wani for their factory at Talab Jammu.
Govermnent Order No. 175 DIC/1980 dated 30-5-1980.
In partial modification of Government order No. 2. DIC of 1979
dated 20-1-1979 sanction is accorded to the SU[lply of crude (oleo)
resin 700 tonnes per annum by the Forest Deptt. to Ml s. Sud Pine
D Industries for their factory at Kunjwani Talab Jammu on the terms
and conditions specified in the above said order. The supply of resin
shall be subject to its being reviewed by the Govermnent with due
regards to its availability from year to year.
By order of the Govt. of J &K.
E
Sd/-
(Sheikh Ghulam Rasool)
Secretary to Government."
F
The orders as per annexures L to W in favour of respondents 17 to 26
are identical in material parts. It will be sufficient if the material por-
tion of Annexure N is quoted. It runs thus.
"Sanction is accorded to the supply of crude (oleo)
resin by the Forest Department to M/s. Kashmir R & T
G Works, Srinagar, for their factory at Srinagar, subject to the
terms and conditions of the agreement to be entered into bet-
ween the Forest Department and the party and on the follow-
t
ing specific conditions : -
1. The Forest Department will supply Crude (oleo)
H resin @ 700 TPA to the firm from the date the Unit
is formally registered subject to its being reviewed with •
due regard to its availability from year to year;
OM PRAKASH v. J. & K. (Islam, J.) 845

2. The resin will be supplied @ Rs. 320/- per quintal, A
unless otherwise reviewed on year to year basis.
3. The cost of empty tin will be charged @ Rs. 5/- per
tin in addition to the above rate;
4. By order of the Government at Jammu and Kashmir.
B
Sd/- Sheikh Ghulam Rasool
• Secretary to Government."
(emphasis added)
5. n is obvious that the industries of these respondents were not
formally registered at the time of the impugned orders of allotment. c
6. The State of Jammu and Kashmir (Respondent No. 1) have filed
a counter affidavit. They have not denied the material allegations of
the petitioners but they say that the allocations have been made in
order to implement the industrial policy of the State Government as
enunciated in a "Report of the Development Review Committee, Jammu D
and Kashmir" a committee headed by Shri L. K. Jha, the Governor of
the State. Respondent No. 1 has quoted from the report the 'Goals'
of the industrial policy which read :
"The balanced economic development of the State will
obviously, be one of the foremost concerns of the Government. E
They would like to emphasis maximum self-sufficiency and
self-reliance consistently with the need to promote the re-
quisite and desirable degree of inter-dependence with other
parts of the country. The objective will be to secure the most
prudent and beneficial utilization of the natural resources and
skills peculiar to this State; to achieve the maximum possible F
rate of economic growth, consistently with the need to secure
a degree of balanced regional development as well as balance
between the rural areas and the urban, to maximise State per
capita income, and to generate the maximum employment
potential.
G
Many areas of the State are as cut off, isolated and poor
as they were at the dawn of independence. We have to
improve the living standards in these specially backward areas
' for whom in terms of the quickost mode of transportation,
Srinagar is more distant than the State is from Kerala.
Many sections of the community similarly, like Sche- H
• duled Castes; Guiara and Bakarwalas and other hackward
class need to be assisted in their speedy uplift.
846 SUPREME COURT REPORTS [1981] 2 S.C.R

A Ladakh needs 11 visible acceleration of the tempo of its
development so that our people in this far flung and difficult
frontier area can realise the full fruits of development in the
shorte~! possible time."

Respondent No. 1 has given the district wise break-up of the appli-
B cations received from different regions. It is as follows :
Jammu 63
Udaypur 10
Rajouri 1
Poonch 1
Doda 1
Katbua 9 1
c Anantnag 2
Srinagar 11
Outsiders 12

GRAND TOTAL
Applications 110
D
They have also shown the allotments of resin districtwise. The
industries: of the respondents No. 4 to 16 are also small scale indust-
ries. The break-up of the small scale industries as given in Annexure
R.II (in W.P. No. 3464) shows that Jammu has the largest number
of units namely, 10, Second comes Srinagar with 4, then come Udam-
E pur with 3, Kathua (in Jammu Division), Anantnag and Baramul!a (in
Kashmir Division), with one each. Rajouri in Jammu Division has
none. It appears that the industries of the present applicants are also
in the Jammu region and those of respondents No. 4 to 16 also appear
to have been located in the Jammu region. In their affidavit at para 3
respondent No. 1 has stated that all the applications for allocation of
F resin were considered from time to time at various levels by the State
Government and it was decided on May 30, 1980 as follows :
(a) The allotment of resin to the existing unit should
be rationalised;
(b) Applications received from various districts be con-
G sidered for allotment of resin.
The State Government have submitted that they made no promise
of supply of raw-material in favour of any of the petitioners. The peti-
tioners have submitted, in our opinion, correctly, that as there were
already 10 units functioning in small scale sector in the Jammu region
H and inasmuch as the allottee respondents' industries were also located
in the Jammu region, allocations in their favour would be inconsistent
with the Government's industrial policy.
OM PRAKASH V. J. & K. (Islam, J.) 847

7. In the instant case, respondent No. 1 as well as the other A
parties has taken reliance on their industrh1l policy statement as stated
above. We have already quoted the relevant portions of the State
Industrial policy statement. The Government have stated that they
have considered all the 110 applications including those of the peti-
tioners coming from industrialists of different parts of the country.
They have stated, and their statement is corroborated by the docu- B
• menls, that there is preponderance of industries in the Jammu region
and industries of the petitioners as wel! as respondents No. 4 to 16
were also functioning in the same region. Respondent No. 1 has not
explained as to how and on what basis, if any, the allotments were
made by the impugned orders in favour of the new allottees whose
industries were located in the Jammu region.
c
Pawan Kumar Sharma, the petitioner in W.P. No. 3231 of 1980
states that his industry was provisionally · registered under the Provi-
sional Registration Certificate dated 29-1-1976. It was further ex-
tended for further short periods. He says that as there was assurance
from the authorities that raw-materials will be allotted to him after he D
completed the installation of requisite machinery.
The J. K. Resin and Turpentine Industries of petitioner Om Prakash
Snd, was provisionally registered in the year 1975. He was also
approaching the Government from time to time to get allotment of
the raw-materials but got no favourable reaction from the Govern- E
ment. He states that he had already established his factory and got
it insured for a sum of Rs. 6.80 lakhs. He obtained raw-material
from the open market and was running his industry.
Petitioner, Ravindra Dutt of M/s. Dinesh Resin and Turpentines
in W.P. No. 3465 of 1980 alleges that his industry was provisionally ~,
registered on 25-10-1975 which was extended upto April, 1979. Letter
of 31st May, 1979 shows that his industry was later on formally
registered as a small unit. This factory was producing resin and
turpentine out of the resin which he purchased from open auction.
He was approaching the Government from time to time to get requisite
quantity of raw-materials but failed to get it.
G
Petitioner, Shamlal Kapoor, Direclor of Jammu Resin Enterprises
Private Limited, alleges that his industry was formally registered with
the Government of J & K. He alleges that his industry was function-
' ing for a long time and trying to get necessa~y quota of raw-materials
from respondent No. 1. He was approaching the Government to get
requisite quota. Sud Pine Industries, was provisionally registered on H
• 10-3-1978 and formally registered on 10-10-1978. It appears from
Annexure N, in respect of respondent M/s Kashmir R & T Works
848 SUPREME COURT REPORTS [1981] 2 S.C.R.

A (respondent No. 17), Annexure 0 in respect of M/s. Sun Shine R & T
Industries (respondent No. 18), Annexure Pin respect of M/s. Woolan
Paints and Chemicals Scopore (respondent No. 19) Annexure Q in
respect of Mis. Pine Wood Products Company (respondent No. 20),
Annexure R in respect of M/s. Haji Mast Ali Slaria (respondent No.
21), Annexure S in respect of M/s. Phyto Chemicals (respondent No.
B 22), Annexure T in respect of M/s. New Himalayan Paints and
Chemicals (respondent No. 23), Annexure U in respect of M/s. S. K.
Chemical (respondent No. 24), Annexure V in respect of M/s. •
Rajindra R & T (respondent No. 25) and Annexure W in respect of
M/s. Bharat Paints and Chemicals (respondent No. 26) that the
allotments were made in their favour "from the date the unit is for-
c mally_ registered'.' which shows that industries were not even registered
at the time of the impugned orders of this allotment. Respondent M/s.
Rajindra R & T Industries, Udhampur, appears to stand on a different
footing. He appears to have fulfilled all the conditions required for
allocation of resin in accordance with the policy of the State of J&K.
The industry is an experienced one and thei factory started production
D
of resin and turpentine at Hoshiarpur since 1948. It is a firm regis-
tered under the Indian Partnership Act and has long experience in the
business including resin and turpentine since 1948. The industry set
up a factory in 1970 in the rural industrial estate near Udhampur which
is a backward area. The industry was provisionally registered in 1970
and fonnal registration was granted on 29-2-1974. It applied for
adequate quantities of raw-materials and was allotted only 200 tons
although it had been sanctioned 1500 per ton per annum since 1975.
Respondent M/s. Sud Pine Industries, M/s. Kashmir R&T Works,
Bakshi Resin & Turpentine and M/s. K. C. Soni Bakshi also appear to
be on different footings. It appears from Annexures 'X' and 'Y' that
F the first two indnstries have already been formally registered. They are
existing nnits having already started production. So far as respondent
M/s Bakshi Resin and Turpentine is concerned, it had already set np
factory and started production. It was provisionally registered as early
as 1976 and the unit is located in a backward area. So far as respondent
K. C. Soni Resin & Turpentine is concerned, it was formally registered
G
on 19-4-79. This unit is located in a remote backward area of the
State.
8. "Equality before the Law" or "equal protection of the laws" •
within the meaning of Article 14 of the Constitution of India means '
absence of any arbitrary discrimination by the law or in their adminis-
H tration. No undue favour to one or hostile discrimination to another
should be shown. A classification is reasonable when it is not an •
arbitrary selection but rests on differences pertinent to the subject
OM PRAKASH v. J. & K. (Islam, J.) 849

in respect of which the classification is made. The classification A
permissible must be based on some real and substantial distinction,
a just and reasonable relation to the objects sought to be attained
and cannot be made arbitrarily and without any substantial basis ..
• . ....... (See State of West Bengal v. Anwar Ali(1). The classi-
fication must not be arbitrary but be rational, that is to say, it must
not only be based on some qualities or characteristics which are to B
be found in all the persons grouped together and not in others who
• are left out. Those qualities or characteristics must have a reason-
able relation to the object of the law. In order to pass the test,
two conditions must be fulfilled, namely, (1) that the classification
must be founded on an intelligible differentia . which distinguishes
those that are grouped together from others, and (2) that that C
differentia mnst have a rational relation to the object sought to be
achieved by the Act. The differentia which is the basis of the
classification and the object of the Act are distinct things and
what is necessary is that there must be a nexus between them.
We are not unaware that the rule of equality does not mean
D
mathematical equality and that it permits of practical inequalities.
But what is needed is that the selection of quota seekers as in the
case in hand should have a rational relation to the object sought
to be achieved in the industrial policy decision of the State. If the
selection or differentiation is arbitrary and lacks a rational basis it
offends Article 14. E
9. In the instant case, although the State Government has taken
reliance on the State Industrial Policy decision referred to above,
they do not appear to have followed it in practice, except in the
cases of the five respondents referred to above. In fact no reason-
able basis has been adopted in making the allotments in favonr of
the new allottees and denying allotments to the petitioners. In the F
circumstances the petitions are partly allowed, the impugned orders.
/ , of allotments except in favour of respondents, M/s Rajindra Res~
· and Turpentine Industries, M/s Sud Pine Industries, M/s Kashmir
;R & T Works, M/s Bakshi Resin & Turpentine and .. M/s K. C.
Soni Resin & Tnrpentine are quashed. The petitions are partly
allowed. The Rules are made absolute except as against these five G
respondents. The respondent No. 1, the State of Jammu and Kashmir,
is directed to make the other allotments of the raw-materials to the
• applicants in the light of the observations made above .
' 10. Respondent No. 1 shall pay costs of Rs. 100.00 to each of
the petitioners.
H
• N.V.K. Petition partly allowed.
' (I) [1952] S.C.R. 284
7-214 SCI/81