Case Note & Summary
The Supreme Court of India considered an appeal arising from a common judgment of the Kerala High Court dated February 1996, which upheld two executive circulars issued by the State of Kerala. The first circular dated 19 May 1995, issued by the Secretary to the Government of Kerala, directed that under the Comprehensive Coconut Development Programme and similar agricultural schemes, pumpsets would be supplied in eight specified districts exclusively by the Kerala Agro Industries Corporation (KAICO) and the Regional Agro Industries Corporation (RAIDCO), while in the remaining districts supply would be by private dealers along with these two agencies. The second circular dated 30 March 1989, issued by the Registrar of Co-operative Societies, directed all Land Development Banks, District Co-operative Banks, and Service Co-operative Banks in Kerala to patronise RAIDCO to the fullest extent in preference to private dealers and to ensure that at least 75% of agro machinery purchases under financed schemes were made through RAIDCO. The appellants, private dealers in pumpsets, challenged these circulars as violative of Articles 14 and 19(1)(g) of the Constitution. They contended that the circulars imposed unreasonable restrictions on their fundamental right to carry on trade or business by compelling farmers in the eight districts to purchase only from KAICO and RAIDCO, thereby creating a monopoly and reducing their market. They argued that any restriction on fundamental rights must be imposed by statute or statutory regulation and not by executive instructions, relying on Kharak Singh v. State of U.P. They also contended that the government's action in distributing largesse (financial assistance) must conform to non-arbitrary standards and could not discriminate between farmers of different districts, relying on Ramana Dayaram Shetty v. International Airport Authority of India. The respondent State of Kerala, through the Additional Solicitor General, argued that the circulars did not regulate or control the business of private dealers and had only an indirect effect on trade, which does not offend Article 19(1)(g), citing Viklad Coal Merchant Patiala v. Union of India. The State maintained that the government was merely providing financial assistance to farmers and could attach conditions to such assistance, and that private dealers had no fundamental right to be selected as suppliers. The Court was called upon to decide whether executive instructions could impose restrictions on fundamental rights, whether the circulars created an unreasonable restriction on trade, and whether they were arbitrary and discriminatory under Article 14. The legal principles cited by the parties included the requirement that restrictions on Article 19(1)(g) rights must be backed by law, that government action in distributing largesse must be non-arbitrary, and that indirect effects on trade may not constitute a violation of fundamental rights. The final decision and ratio decidendi are not available in the truncated text provided.
Issue of Consideration
Whether the impugned circulars dated 19.5.1995 and 30.3.1989 infringe the fundamental right to carry on trade or business under Article 19(1)(g) of the Constitution; whether the circulars are arbitrary, discriminatory, and violative of Article 14 by creating a monopoly in favour of RAIDCO and KAICO and discriminating between farmers of different districts; whether executive instructions, as opposed to statutory law, can impose restrictions on fundamental rights under Article 19(1)(g) and Article 21; whether the government's action in granting largesse (financial assistance schemes) must conform to non-arbitrary standards and cannot discriminate among beneficiaries
Law Points
- Executive instructions cannot impose restrictions on fundamental rights unless backed by statutory law
- reasonable restrictions under Article 19(1)(g) can be imposed only by law
- government largesse must be distributed without arbitrariness or discrimination
- indirect effect on trade does not necessarily violate Article 19(1)(g)
- classification must be based on intelligible differentia
