Citation Codes

Equivalent Citations

citation codes

Case Number

W.P No. 21813 of 1989

Advocates

Mr. K.R.D Karanth & Mr. A. Mahabaleshwara Bhat for Petitioner

Judges

Chandrakantaraj Urs, J.

Acts

Industrial Development Regulation Act, 1957.

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Smart Summary

Judgment Summary

Factual and Procedural Background

The petitioner is the Dharwar Co-operative Milk Producers Societies Union Ltd., represented by its Managing Director. The petitioner challenged activities of the 5th respondent, Sri Krishna Milk Private Ltd., alleging that the 5th respondent was carrying on activities similar to those carried on by the petitioner in an area covered by a Letter of Understanding involving the National Dairy Development Board, the Union of India and the State Government.

The petitioner filed a writ petition seeking the following reliefs:

Call for records from the 2nd respondent pertaining to Provisional Registration Certificate No. 0012-00254;
Quashing of the Provisional Registration Certificate No. 0012-00254 issued by the Assistant Director, District Industries Centre, Sirsi Sub-Division, Sirsi;
A writ of mandamus restraining Respondents 1 to 3 or their subordinates from issuing a permanent registration certificate as a Small Scale Industry or a licence to manufacture milk foods to the 5th respondent;
A writ of mandamus directing Respondents 1 to 3 to take action to prevent the 5th respondent from collecting raw milk from milk producers and from manufacturing milk foods in the district of Uttara Kannada.

Mr. Dayanand Karanth, counsel for the petitioner, relied on the Letter of Understanding (Annexure B), particularly paragraph 3.8 which states: “The State Government shall take action not to promote or permit any activity/organisation in the Project Area which will be detrimental to, or inconsistent with, the objectives of Operation Flood III programmes in the Project Area.”

The petition alleged that the petitioner and affiliated societies had expended large amounts in reliance on the Letter of Understanding and that the 5th respondent’s offering of higher prices to milk producers in the same geographic area (Uttara Kannada District, Yellapur Taluk) was disrupting the supply of milk to the petitioner’s manufacturing units.

The learned judge (Chandrakantaraj Urs, J.) considered arguments on promissory estoppel, constitutional rights (Article 19(1)(g), Article 19(6), Article 14), the justiciability of Directive Principles (Article 39(b)), and statutory regulation under the Industrial Development Regulation Act, 1957. The petition was dismissed as misconceived.

Legal Issues Presented

Whether the Court should quash the Provisional Registration Certificate No. 0012-00254 issued to the 5th respondent.
Whether a writ of mandamus should be issued restraining authorities from issuing permanent registration/licence to the 5th respondent or directing authorities to prevent the 5th respondent from collecting raw milk and manufacturing milk foods in the district.
Whether the doctrine of promissory estoppel can be invoked against the State (based on the Letter of Understanding) to prevent a private company (the 5th respondent) from competing in the same area.
Whether a rival trader (the petitioner) has locus standi to challenge another trader’s unlicensed operation under statutes such as the Industrial Development Regulation Act, 1957, by invoking constitutional writ jurisdiction (Articles 226 / 32).
Whether Article 39(b) (a Directive Principle) can be invoked as a basis to compel exclusive control or distribution of material resources (milk) in favour of the petitioner.

Arguments of the Parties

Petitioner's Arguments

Reliance on the Letter of Understanding (Annexure B), especially paragraphs 3.5–3.8 and notably paragraph 3.8, which the petitioner said obliged the State Government not to permit activities in the Project Area inconsistent with Operation Flood III objectives.
That large amounts were expended by the petitioner and affiliated societies in reliance on the Letter of Understanding, creating an expectation (promissory estoppel) that the State would protect the specified area from competing organisations.
That the milk producers in the defined/specified areas were expected to supply milk exclusively to member societies of the petitioner, which then supply the petitioner for manufacture of milk products (pasteurised milk, frozen milk, ice cream, milk powder, etc.). The 5th respondent’s higher price offering was diverting milk away from the petitioner’s societies and affecting the petitioner’s manufacturing operations.
Invocation of promissory estoppel to prevent the State from allowing the 5th respondent to operate as a rival in the same area.
Submission that the 5th respondent was carrying on an industry that is a scheduled industry under the Industrial Development Regulation Act, 1957, and therefore the State was obliged to prevent the 5th respondent from operating without a licence.
Reference to Article 39(b) of the Constitution to support the proposition that material resources should be distributed so as to subserve the common good, as part of the petitioner’s claim to protect the milk producers and cooperative field in the Project Area.

The opinion does not set out detailed adversarial arguments made specifically by Respondents 1–5 in the record excerpt provided; the court's recounting focuses primarily on the petitioner's contentions and the legal analysis rejecting them.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Nagar Rice and Flour Mills v. N. Teekappa Gowda and Brothers, 1970 1 SCC 575	Principle that a rival trader cannot have locus standi to prosecute a petition under Article 226 to restrain another trader carrying on the same trade; where the complainant is promoting commercial interest rather than public interest, courts may refuse relief.	The Court applied this principle to hold that the petitioner cannot extend its locus standi under Article 226 (or Article 32) to deny rights of a rival trader; the petitioner’s claim was characterized as protection of private commercial interest rather than public interest.
Jasbhai Motibhai Desai v. Roshan Kumar, Haji Bashir Ahmed, 1976 1 SCC 671	Consideration/review of locus standi and the limits of a rival’s right to complain about another trader operating without licence.	The Court relied on the analysis in this decision (and related authorities) to reinforce that a rival trader cannot ordinarily invoke public law remedies to advance purely private commercial interests, and that such private interest litigation is not to be treated as public interest litigation.

Court's Reasoning and Analysis

The court proceeded step by step to evaluate the legal basis of the petitioner's claims:

On promissory estoppel: The court explained that promissory estoppel is a judicial doctrine applied between a promisor and a promisee where the promisee is disadvantaged by the promisor’s promise; the court may compel the promisor to perform the promise where demonstrable. However, the court held that promissory estoppel cannot be applied if such application infringes the constitutional rights of others (for example, the 5th respondent's right to carry on trade under Article 19(1)(g)). The court noted that a Letter of Understanding reached “behind the back of the citizens and without their knowledge or consent” cannot be used to deny constitutional rights.
On Article 19(1)(g) and freedom of trade: The court emphasized that the milk producers have the right to sell their produce to the 5th respondent to fetch a higher price; preventing them from doing so would interfere with freedom of trade protected by Article 19(1)(g). The Letter of Understanding cannot have the effect of denying constitutional rights.
On the Industrial Development Regulation Act, 1957: The court rejected the petitioner's argument that a private rival could be restrained by invoking that statute. It noted that the Act itself prescribes consequences (such as prosecution or penalties) for operating without a licence, and that a third party cannot take advantage of the Act to claim rights not found in the statute. The court relied on precedents where rival traders could not seek public law relief against other traders for statutory licensing breaches.
On locus standi and public interest litigation: The court acknowledged enlargement of locus standi in the field of public interest litigation, but distinguished true public interest litigation from private interest litigation. It held that the doctrine of locus standi remains relevant when a private interest (commercial advantage) is sought to be promoted under the guise of public interest; private parties cannot prosecute actions to protect their commercial interests by masquerading them as public interest causes.
On Directive Principles (Article 39(b)): The court observed that Article 39(b) is a Directive Principle of State Policy (in Part IV) and is not enforceable in a court of law. Although the court may use Directive Principles to interpret other constitutional provisions, they do not confer a direct judicially enforceable right allowing petitioners to secure exclusive control of material resources. The court found the petitioner’s reliance on Article 39(b) to support exclusive control over the area's resources to be self-defeating and inconsistent with Article 19 and Article 14.
Conclusion from the foregoing: The court concluded there was no legal right on the part of the petitioner to the reliefs sought. Allowing the petition would improperly create or sustain a monopoly in favour of the petitioner absent any statutory grant or constitutional allowance (Article 19(6) only permits monopoly where Parliament creates it). The petition was therefore dismissed as misconceived.

Holding and Implications

Holding:

THE PETITION IS DISMISSED AS MISCONCEIVED.

Implications:

The petitioner’s requests — to call records, to quash the provisional registration certificate No. 0012-00254, to restrain issuance of a permanent registration or licence to the 5th respondent, and to direct authorities to prevent the 5th respondent from collecting raw milk and manufacturing milk foods in Uttara Kannada — were rejected for lack of any enforceable legal right on the part of the petitioner.
The court held that promissory estoppel derived from a Letter of Understanding cannot be used to override constitutional guarantees (notably freedom of trade under Article 19(1)(g)) or to create exclusivity in favour of a private party where that would infringe third-party rights.
The court applied established precedent limiting the locus standi of rival traders to bring public law remedies to restrain commercial rivals, and it reiterated that Directive Principles such as Article 39(b) are not directly enforceable in court to produce the exclusive control sought by the petitioner.
No broader novel legal principle or binding expansion of law was announced in this opinion beyond the application of the cited precedents and constitutional provisions; the immediate legal consequence is dismissal of the petition and denial of the reliefs sought by the petitioner.

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Dharwar Co-Operative Milk Producers Societies Union Ltd. v. State Of Karnataka

Chandrakantaraj Urs, J.:—

The petitioner is the Dharwar Co-operative Milk Producers Societies Union Ltd. represented by its Managing Director. It is aggrieved by the activities of the 5th respondent/Sri Krishna Milk Private Ltd. which is alleged to be carrying on the activities similar to the activities carried on by the petitioner under a letter of understanding reached between the National Dairy Development Board, Union of India and the State Government. In the circumstances, the following reliefs are sought in the Writ Petition:

(a) Call for the records from the 2nd respondent pertaining to the issue of Provisional Registration Certificate bearing No. 0012-00254;

(b) Issue a Writ in the nature of Certiorari or such other appropriate Writ, direction or order quashing the Provisional Registration Certificate, bearing No. 001200254 issued by the Assistant Director, District Industries Centre, Sirsi Sub-Division, Sirsi;

(c) Issue a Writ in the nature of Mandamus restraining Respondents 1 to 3 or their subordinates from issuing permanent registration certificate as a Small Scale Industry or a licence to manufacture milk foods to the 5th respondent; and

(d) Issue a Writ in the nature of Mandamus directing Respondents 1 to 3 to take action to prevent the 5th respondent from collecting raw milk from milk producers and carrying on the manufacture of milk foods in the district of Uttara Kannada.

In support of the reliefs, Mr. Dayanand Karanth, learned Counsel for the petitioner, has asserted that under the Letter of Understanding at Annexure B the Government of Karnataka was desirous of implementing the Operation Flood-Ill Project and as such became a signatory to the Letter of Understanding and held out promises which are found at paragraphs 3.5, 3.6, 3.7 and 3.8 of the Letter of Understanding. The Court's attention was specially drawn to paragraph 3.8 which reads as follows:

“The State Government shall take action not to promote or permit any activity/organisation in the Project Area which will be detrimental to, or inconsistent with, the objectives of Operation Flood III programmes in the Project Area.”

Based on the contents of the Letter of Understanding it is contended by the learned Counsel for the petitioner that huge amounts are expended by the Society in order to achieve the object for which it has been incorporated and the Societies in defined areas are set up. It is only on account of the promises held out by the State in terms of the Letter of Understanding, all the amounts were expended and the petitioner is under compulsion to honour its commitments and extending the doctrine of promissory estoppel this Court must give the relief to the petitioner and prevent the State Government from allowing the 5th respondent to operate in the same area as a rival to the activities of the petitioner. The thrust of the argument is as follows:

In the defined areas assigned to the petitioner the villages who produce milk are required to supply milk exclusively to the Member-Society who in turn supply to the petitioner and it in turn will produce milk products such as pasteurised milk, frozen milk, ice cream, milk powder, etc. The 5th respondent is offering higher price for the milk produced more or less in the same area in Uttara Kannada District, Yellapur Taluk, thereby making it impossible for the Societies affiliated to the petitioner to purchase milk from the milk-producers at the rates paid by the 5th respondent and thereby flow of milk into the manufacturing units of the petitioner has been affected.

2. In other words, what is sought to be established is a right the origin of which is not founded in any law or legislation passed by the legislature, but upon the Letter of Understanding reached without the knowledge of the milk producers in the area.

3. The doctrine of promissory estoppel is a judicial doctrine to be applied between a promisor and a promisee, if the promisee is placed at a disadvantage on account of the promise made by the promisor. The Court in such a case where it is demonstrated or it is demonstrable gives relief and holds responsible the State Government and compel it to perform the promise. But, where application of the doctrine amounts to infringement of the Constitutional rights of others like the 5th respondent, a private limited company, which does more or less the same activity as of the petitioner the doctrine has no application. The milk producers want to sell their produce to the 5th respondent in order to fetch higher price and the petitioner wants to make a mockery of the situation on the freedom of trade guaranteed under Article 19(1)(g) of the Constitution. The Letter of Understanding between any party by whatever name it may go shall not have the effect of denying the constitutional right guaranteed under the provisions of the Constitution. It cannot whittle down the rights when the understanding was reached behind the back of the citizens and without their knowledge or consent. Such a proposition cannot be recognised by the Court. Therefore, on the facts of this case, the petitioner cannot have any foundation to the relief claimed on this doctrine.

4. All that is done is that the milk producers in the village want to sell their milk at higher price and it is their right to do business and, if that is interfered with, it amounts to denying social and economic justice to them and even on that ground this Court cannot grant the relief which the petitioner seeks.

5. It was next contended that the 5th respondent is carrying on an industry which is a schedule industry under the. Industrial Development Regulation Act, 1957. Therefore, the State Government is bound to prevent the 5th respondent from carrying on the business without licence.

6. This argument cannot be accepted for two reasons; firstly, the aforementioned Act regulating the setting up of industries has itself made provisions for consequences of carrying on an industry without obtaining a licence. That consequence may be prosecution or imposition of penalty. If that is what the law provides, then 3rd party cannot take advantage of the Act and plead for its right which is not, found in the Act. Yet another reason is, in more than one case particularly in the case of the Nagar Rice and Flour Mills v. N. Teekappa Gowda and Brothers . 1970 1 SCC 575 and in the case of Jasbhai Motibhai Desai v. Roshan Kumar, Haji Bashir Ahmed . 1976 1 SCC 671 the Supreme Court had occasions to examine identical complaint of the trade being carried on by a rival in the business without obtaining licence from the appropriate authority. In the first case mentioned above, the rice mill was run without a licence and another rice mill owner affected thereby made a grievance of it. In that situation the Supreme Court ruled that rival trader cannot have locus standi to prosecute a petition under Article 226 of the Constitution restraining another trader who is in the same occupation or trade and as he is not serving any public interest by bringing to notice a case of breach of law but only promoting his commercial interest, the Court may not grant any relief. In the other case a rival cinema theatre owner complained against another cinema theatre owner running cinema house without obtaining licence from the District Magistrate. In the latter mentioned case a large number of cases have been reviewed on the question of locus standi.

7. The petitioner under Article 226 or Article 32 of the Constitution cannot extend his locus standi and deny the rights of a rival trader. However, Mr. Karanth contended that since the said decisions were rendered long ago, progress has been made in the field of locus standi and therefore this Court may ignore the same in the light of the later decisions. The enlargement of locus standi in the field of public interest litigation is undoubtedly something which this Court should take note of. However, social, economic and political justice cannot be denied to a large sections of public on the technicality of locus standi. But when a private interest is sought to be promoted, the doctrine of locus standi has still relevance notwithstanding the later decisions. Nobody should be permitted to prosecute a private industry in the guise of promoting public interest.

8. Mr. Karanth specially drew the attention of this Court to the fact that as evidenced by the Letter of Understanding at Annexure B, what was sought to be protected was the public interest in the area of the milk producers and the co-operative field.

9. Nobody is prevented by the 5th respondent to supply milk to the Societies of the petitioner in order to defeat the laudable objects of the petitioner/Society. The question is whether the milk producers can be compelled to do so. In that behalf, Article 39 is pressed into service by the petitioner. Article 39(b) of the Constitution provides that the ownership and control of the material resources of the community are so distributed as best to subserve the common good. That Article is found in Part IV of the Constitution the contents of which are not enforceable in a Court of Law, though the Court may derive assistance to interpret other provisions of the Constitution in the light of the directives given under the Constitution.

10. This is self-defeating argument; because the petitioner wants the material resources to be entirely at its disposal. In other words, the petitioner does not want the material resources of the area to be distributed to anyone else. That becomes impermissible under Article 19 of the Constitution to which I have already referred unless the Parliament creates a monopoly in terms of Clause (6) of Article 19 of the Constitution creating a monopoly in favour of itself. By any other dubious means it cannot create monopoly in favour of third party. That is, favouring one in preference to favouring all. That way it is entirely against Article 14 as well.

11. The assistance sought by the learned, Counsel for the petitioner on the basis of the contents of Clause (b) of Article 39 must be understood in the light of the other provisions in the Constitution.

12. In the light of the above discussion and reasons and in the absence of any legal right of the petitioner to obtain the reliefs prayed for, this petition is dismissed as misconceived.

Dharwar Co-Operative Milk Producers Societies Union Ltd. v. State Of Karnataka

Judgment Summary

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioner's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Dharwar Co-Operative Milk Producers Societies Union Ltd. v. State Of Karnataka

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