State of Nagaland and Others vs Union of India (UOI) and Others

M. Sharma, J.—This Court by order dated 13.10.97 while issuing notice of motion in Civil Rule No. 4986 of 1997 suspended the operation of the impugned Ordinance, viz. Lotteries (Regulation) Ordinance, 1997, as an interim measure, and the matter was ordered to be listed on 2.12.97 for admission.

During pendency of this Civil Rule similar petitions have been filed by different State Governments and M/s. N.V. Marketing Pvt. Limited and others viz. Civil Rules 5002/97, 5003/97, 5831/97 and 996/97 and in the said Civil Rules also similar interim orders have been passed. Against he interim orders so passed by this Court on 13.10.97 and 23.10.97 State of Uttar Pradesh approached the Hon''ble Supreme Court by filing petitions (Special Leave to Appeal (Civil) CC 8497-8499/97) challenging the orders of this Court. Before the Supreme Court three questions were raised on behalf of the State of Uttar Pradesh i.e. (i) in view of Article 131 of the Constitution these writ petitions should not have been entertained by this Court, (ii) no part of the cause of action has arisen within the jurisdiction of this Court, and (iii) Gujarat High Court has already expressed its view on the matter and dissented from the view expressed by this Court, therefore, the writ petitions involving other State Governments should not have entertained by this Court. The Hon''ble Supreme Court, however, after hearing the parties, without passing any order on the SL Ps by order dated 12.11.97 directed the Petitioner (State of U.P.) to take all the points before this Court on 2.12.97, when the case was to be taken up for hearing. Accordingly, all these writ petitions were taken up on 2.12.97 for admission.

As these Civil Rules involve common questions of law and facts, I propose to pass a common order/judgment in all these cases.

During pendency of the above cases, Petitioners filed Miscellaneous applications (Misc. Cases 912/97 and 920/97 in C.R. 4986/97 and 5002/97) for impleading the Joint Secretary to the Govt. of India, Ministry of Home Affairs; the National Capital Territory of Delhi; and State of U.P. as Respondents. M/s. N.V. Marketing Pvt. Ltd. and M/s. N.V. International also filed misc. applications (Misc. Cases 993/97 in C.R. 5002/97 and 1002/97 in C.R. 5003/97) for impleading them as writ Petitioners in the said Civil Rules. I heard the learned Counsel for the Petitioners as well as learned Counsel for the Respondents. Learned Counsel for Union of India and Additional Advocate General, U.P., vehemently opposed to the prayer made by the Petitioners in respective miscellaneous cases. Upon hearing the Counsel for the parties and on perusal of the objects filed by the Respondents, I felt they are necessary parties and accordingly the prayer is allowed, and the objections raised by the counsel for the Respondents were rejected.

Before proceeding further, brief facts of the case are stated as follows:

Petitioner-States are engaged in the business of organising State Lotteries and according to them the earnings from the lottery business is a main source of revenue of the Petitioner-States. State organised Lottery falls within Entry 40 of list I of the Constitution, Petitioners have been organising the lotteries in conformity with the guidelines laid down by the Apex Court in State of Haryana Vs. Suman Enterprises and Others, and one of the conditions was that the State may if it thinks proper sell the tickets directly or through Distributors, Agents, Sub-agents, stockists etc. It is stated that the Petitioner-States have evolved a scheme in order to distribute maximum amount being 90-92% of face value of tickets as prize money to its customers through single digit/instant lotteries. The bulk of the business of the Petitioners and other State constitute single digit/instant lotteries. Compared to the schemes floated by the Petitioners, the State of Sikkim operates only weekly lotteries, wherein the prize money to the extent of 20- 24% of the face value of the tickets is distributed amongst the customers. The necessity for the Petitioners to engage itself into the business of State Organised Lottery is for the economic resources. Petitioners-States derive considerable income from sale of lotteries in other affluent parts of the country to augment its revenue. It has been further stated that income from forest and lottery constitutes a major portion of their total revenue receipts, and any attempt to prohibit the lotteries of the Petitioners-States is likely to have adverse effect on the welfare schemes launched by the Petitioner States.

On 17th July, 1997, the Parliament of India. Rajya Sabha Secretariat, invited views of individuals institutions and organisations with respect to regulating the trade of lotteries through a Central Legislation in terms of entry 40 of the Union List in the VI Ith Schedule of the Constitution and Mr. Som Pal, MP was appointed as the Chairman of the Committee. The said Committee is still considering and deliberating on the subject and the report is awaited. In the meantime, on 1.10.97 the President of India in exercise of his powers under Article 123(1) of the Constitution of India promulgated the Ordinance, i.e. Lotteries (Regulation) Ordinance, 1997, for short "the Ordinance", whereby the business of the Petitioner States was restricted by Sections 3,4 and 5 of the said Ordinance. Power was also given to State Governments to prohibit the sale of lotteries of other States by virtue of Section 5 of the said Ordinance. According to the Petitioner-States the restrictions placed by the Ordinance are unreasonable restrictions on the Petitioners'' right to carry on the trade or business. The restriction imposed by the said Ordinance reduced the economic resources of the Petitioner-States and it would adversely affect the life and livelihood of the people of the Petitioner-States. Hence these writ petitions.

Heard Mr. Shanti Bhushan, Senior Counsel for the Petitioner in Civil Rule No. 4986/97, Mr. P.K. Goswami, Senior Counsel for Petitioners in Civil Rules 5002/97, 5003/97 and 5831/97 and Mr. G.N. Sahewalla, Counsel for the Petitioner in Civil Rule 996/97. Also heard Mr. K.N. Choudhury, Senior Central Government Standing Counsel for the Union of India and Mr. A.K. Goel, Additional Advocate General, Uttar Pradesh for the State of Uttar Pradesh. Taking into consideration the importance and the questions involved in these Civil Rules, I heard the matter at length on various dates.

At the outset Mr. Shanti Bhushan, Senior Counsel advanced his argument on the preliminary objections raised by the learned Additional Advocate General of UP and Senior Central Government Standing Counsel regarding the maintainability of the writ petitions under Article 226 of the Constitution in view of the provisions of the Article 131. Mr. Shanti Bhushan has submitted that in the writ petition Petitioner Nos. 2 and 3 are private parties and they are the agents/distributors of Petitioner No. 1 State and that the rights of these private parties have been recognised by the Apex Court in the case of State of Haryana v. Suman Enterprises (supra). In this case, the Apex Court dealt with the classification of State organised lotteries wherein an executive order was issued by the State of Tamil Nadu prohibiting lotteries of other States within the State of Tamil Nadu. One of the grounds challenged was that the said order was violative of Entry 40 List I of the 7th Schedule of the Constitution. Entry 34 of the List II provides for Betting and Gambling and Entry 40 of List I provides for Lotteries organised by the Government of India or the State. In paragraph 3 of the judgment the Apex Court laid down guidelines of the State organised lotteries, which runs thus:

...the first of those requirements is that the tickets which bear the imprint and logo of the State must be printed by/or directly at the instance of the State Government so as to ensure their authenticity and genuineness and further to ensure that any possibility of duplication of the tickets and the sale of fake tickets is provided against and rendered impossible. Secondary, the State itself must sell the tickets though, if it thinks necessary or proper so to do, through a sole distributor or a selling agents or several agents or distributors under terms and conditions regulated by the argument reached between the parties. The sale proceeds of the tickets either sold in retail or wholesale shall be credited to the funds of the Government.

In view of the above, I hold that the private co-Petitioners have interest, who are the distributors/agents of the Petitioner-States and they are necessary parties in the writ petitions. Admittedly, this fact has not been countered by the contesting Respondents and more particularly the Union of India in their affidavit stated that they have no comment to offer.

Mr. Shanti Bhushan relying on the case of State of Bihar Vs. Union of India and Another, has submitted regarding the applicability of Article 131 that similar view has been taken by the Apex Court, wherein it has been held that in case of private citizen, a firm or a corporation, is arrayed as party, then the original jurisdiction of the Apex Court under Article 131 cannot be invoked Paragraphs 3 and 11 of the judgment on which the learned Counsel relied on are quoted below:

There is no scope for suggesting that a private citizen, a firm or a corporation can be arrayed as party by itself on one side and one or more States including the Government of India on the other. Nor is there anything in the article which suggests a claim being made by or preferred against a private party jointly or in the alternative with a State or Government of India. The framers of the Constitution appear not to have contemplated the case of a dispute in which a private citizen, a firm, or a corporation is in any way involved as a fit subject for adjudication by this Court under its exclusive original jurisdiction by Article 131.

...the legal right which is the subject of dispute must arise in the context of the Constitution and the Federalism, it sets up. However, there can be no doubt that so far as the parties to the dispute are concerned, the framers of the Constitution did intend that they could only be constituent units of the Union of India and the Government of India itself arrayed on one side or the other singly or jointly with another Unit or the Government of India.

Learned Counsel for the Petitioner further placed reliance on the decision of the Apex Court in the case of Union of India and Others Vs. State of Mysore, In this case, State of Mysore filed writ petition under Article 226 seeking leave to quash a demand raised by the Inspector of Central Excise for payment of excise duty on its products. One of the questions raised was - the High Court has no jurisdiction to entertain the same as the dispute between the Union of India and the State Government fell within the jurisdiction of the Supreme Court under Article 131. In this case the Supreme Court maintained the same view holding that a dispute of such nature is not within the domain of the Apex Court under Article 131 of the Constitution. Further reliance was placed on the decision of the Apex Court in Union of India (UOI) Vs. State of Rajasthan, wherein their Lordships held that if a trader or a businessman carried on business not incidental to the ordinary functions of the Government then the dispute of such a nature cannot be decided exclusively by the Apex Court under Article 131 of the Constitution. Relevant portions of paragraphs 12 and 13 are quoted hereunder:

...any dispute which may arise between a State in the capacity of an employer in a factory, a manufacturer of goods subject to excise duty, a holder of a permit to run a stage carriage, a trader or businessman carrying on business not incidental to the ordinary functions of Government, a consumer of Railway services etc. like any other private party on the one hand and the Union of India on the other cannot be construed as a dispute arising between the State and the Union in discharge of their respective executive powers attracting Article 131 of the Constitution. It could never have been the intention of the framers of the Constitution that any ordinary dispute of this nature would have to be decided exclusively by the Supreme Court.

...It may be noticed that the jurisdiction of the Supreme Court under Article 131 of the Constitution is subject to the other provisions of the Constitution. Under Article 298 of the Constitution the executive power of the Union and of each State extends to the carrying on of any trade or business and to the acquisition, holding and disposal of property and the making of contracts for any purpose.

Mr. Shanti Bhusan further submitted that in view of the above decisions of the Apex Court the law enunciated is that where a question with regard to the validity of a legislation is impugned under Article 226, the State Government does not engage itself into a dispute with the Government of India and such a dispute is not covered under Article 131 of the Constitution; that if in such a dispute private parties are also parties, then it does not fall within the meaning of Article 131, that Article 226 of the Constitution is not subject to Article 131 but it is otherwise. The words inserted in the beginning of Article 131 - "Subject to the other provisions of the Constitution" do not exist in the wordings of Article 226 and, therefore, powers of High Court under Article 226 to issue writ impugning validity of an Ordinance etc. stands in a different footing and is amenable to writ jurisdiction of the High Court.

Respondent Union of India and the State of U.P all along have taken the stand that the private parties have no role to play as co-Petitioner in a dispute relating to the issue in the writ petitions and from the nature of the dispute, it falls within exclusive jurisdiction of the Apex Court under Article 131 of the Constitution. Both Mr. Choudhury, standing Counsel appearing for Union of India and Mr. Goel, Additional Advocate General, UP in support of their contentions relied on the same decisions of the Apex Court and they mainly relied on the decisions in State of Karnataka Vs. Union of India (UOI) and Another, and State of Rajasthan and Others Vs. Union of India and Others, Exerting insistence on paras 201 and 202 in the case of State of Karnataka v. Union of India (supra) Mr. Choudhury has submitted that as held by the Apex Court Article 131 requires that the dispute must be one which involves a question on which existence or extent of legal right depends.

For proper appreciation of the line of arguments offered by the learned Counsel for the parties, it will be apposite and expedient to look into the provisions of Article 131 of the Constitution, which I quote hereunder:

Subject to the provisions of the Constitution, the Supreme Court shall, to the exclusion of any other Court, have original jurisdiction in any dispute- (a) between the Government of India and one or more States ; or (b) between the Government of India and any State or States on the side and one or more other States on the other; or

(c) between two or more States, if and in so far as the dispute involves any question (whether of law or fact) on which the existence or extent of a legal right depends;

Provided that the said jurisdiction shall not extend to a dispute arising out of any treaty, agreement, convenant, engagement, ''Sanad'' or other similar instrument which, having been entered into or executed before the commencement of this Constitution, continues in operation after such comments, or which provides that the said jurisdiction shall not extend to such dispute.

From the reading of the provisions in the context of the submissions and counter submissions the question arises herein is - whether a challenge to the promulgation of an Ordinance by the President of India can be classified as a dispute between the Union of India and the other States; and whether the private Petitioners can challenge the Ordinance in the same manner as the States and whether this Court under Article 226 of the Constitution has the jurisdiction to entertain the petition. In State of Kamataka v. Union of India (supra) a suit for declaration was filed by the State of Karnataka against Union of India. One of the questions arose therein - whether the Supreme Court has exclusive Original jurisdiction to entertain such a dispute under Article 131. The Apex Court in this case held that the States acting through its Ministers/officials cannot affect maintainability of a suit under Article 131; that so long the claim is of the State, the fact that a Minister, in exercising govern mental powers, represents the State, can make no difference whatsoever to the maintainability of the suit by the State. In State of Rajasthan v. Union of India (supra) the question was arisen as to the jurisdiction of the Apex Court under Article 131 in respect of declaration sought by the State. It was held therein that the preliminary objection was misconceived as it was based on the assumption that the Plaintiff must assail the legal right in itself. In that case the contention before the Supreme Court was that - there was distinction between a State and a State Government; that the provisions of Article 131 are peculiar one and that only special kind of dispute in which State has got some public interest are amenable to Article 131 and that dispute relating to such nature could not fail within the purview of Article 131 of the Constitution. Mr. Goel, relied on the decision of the Apex Court in State of Bombay v. Md. Chamarbangwale reported in 1957 SC 699 and submitted that the Petitioners have no case to claim fundamental or legal right, as lotteries, as held by the Supreme Court, is not a trade or commerce and, therefore, not entitled to protection under Article 301. In the said case the Apex Court dealt with the Bombay Lotteries Prize Competition Control and Tax Act, which came under the purview of entry 34 List II of 7th Schedule whereas the present matters relate to lotteries organised by the States, which fall under Entry 40 of List-I, hence in my opinion, the submission of Mr. Goel is not sustainable. After 1957, admittedly much development has been made regarding the rights of the States to engage itself into business like State organised lotteries and this right of the State has been recognised by the Supreme Court in the Suman Enterprise (supra). In view of the above discussion, I hold that the decisions cited by the counsel for the Respondents are not applicable in the facts and circumstances of the cases in hand.

In the instant cases, it is seen that the States merely act as Traders carrying on business not incidental to the ordinary function of a Government. Ground of impugnment of Ordinance in question is that the Ordinance effects the power of the State. Mr. Shanti Bhushan strenuously submitted that such a challenge is not incidental to the ordinary function of the Government but effected the right of the State as an Ordinary trader/businessman to carry its business therefore, it cannot be termed as a dispute between the Central Government and the State Governments. It was further submitted that by challenging the provisions of the Ordinance the State Governments or the private parties did not engage themselves in a dispute with the Central Government.

I find merit in the submissions of the learned Senior Counsel for the Petitioners and relying on the decisions referred to above, I hold that the instant dispute has arisen between the States in the capacity as a trader carrying on business not incidental to the ordinary function of the Government and the private Co-Petitioners are carrying on their business under the State Government by selling lottery tickets by entering into agreements/contracts with the respective States and, therefore, in my opinion, it cannot attract the provisions of Article 131 of the Constitution. Moreover, in the instant case, private parties are necessary parties as their rights have been recognised in the case of State of Haryana v. Suman Enterprise (supra). Accordingly, I hold that this Court under Article 226 of the Constitution has jurisdiction to entertain these writ petitions as the legal rights of the State as well as the private Co-Petitioners have been effected by the impugned Ordinance.

Regarding the next point of territorial jurisdiction of this Court, I hold that in view of the provisions under Article 226(2) of the Constitution, this Court has jurisdiction over the State of U.P. as part of cause of action has arisen within the territorial limits of this Court. In these cases the Petitioners despatch lottery tickets from respective places of the concerned States to U.P. and other parts of the country and the entries of the lottery tickets (which are goods as decided by the Apex Court in the case reported in H. Anraj Vs. Government of Tamil Nadu, was prohibited by the State of U.P. As the movement of goods (lottery tickets) are prohibited by notification by the State of U.P. certainly a part of cause of action against the State of UP has arisen within the territorial jurisdiction of this Court.

Third objection raised by the State of U.P. was that in view of the Gujarat High Court''s decision in Gujarat Lottery Sellers Association v. State of Gujarat this Court should not have entertained these petitions. Considering the facts and circumstances of the case, I am constrained to hold that the judgment of the Hon''ble Gujarat High Court proceeded on a different aspect and therefore, in my view it is not applicable in the cases in hand, as the Petitioners herein have challenged the Ordinance itself before this Court. Further the writ Petitioners herein were not parties before the Gujarat High Court, wherein the Petitioner was an Association and no point was raised before the Gujarat High Court under Article 298 and other matters which have been raised in these writ petitions. Accordingly, I respectfully distinguish the judgment of the Gujarat High Court proceeded on a different basis and the challenge were totally distinct than the grounds placed before this Court. In exercising the jurisdiction under Article 226 this Court has to decide the grounds raised before this Court.

In view of my above discussion, all the three preliminary objections raised by the State of U.P. as well as Union of India are rejected accordingly.

As stated hereinabove, Mr. Shanti Bhushan and Mr. P.K. Goswami offered extensive submissions on both legal and factual aspects of the matter. Mr. Goswami further submitted that this Court required to dispose of all the writ petitions finally as a final finding is necessary, as in the existing situation, resulting due to dissolution of the Parliament, there might be occasion to repromulgate the Ordinance and in that case, if the matters are disposed of as infructuous due to expiry of the life of the impugned Ordinance by the operation of law, Petitioners interest would be in jeopardy and prejudicing their legal rights.

As I hold all the writ petitions under Article 226 of the Constitution are maintainable I prefer to dispose of the same by a common judgment as all of them relate to same and identical issues.

Issue Rule nisi in all the cases.

Records are already available through Mr. K.N. Choudhury, Sr. C.G.S.C. for Union of India, who referred to and relied upon the same in support of his stand. Parties of both sides have also exchanged affidavits. Parties were impleaded including the State of UP as Respondents and Petitioners in respective writ petitions after hearing their miscellaneous applications.

Coming to the merit of the cases, I have taken up all the grounds raised by the writ Petitioners in their respective writ petitions and Misc. applications filed by the Respondents for vacating the stay.

Petitioners have challenged the Ordinance, first, on the ground that the Ordinance making powers of the President under Article 123 of the Constitution cannot be involved in respect of matters falling within the executive powers and functions of the States under Article 298. Section 5 of the impugned Ordinance is challenged on the same ground that Section 5 is invalid as it amounts to delegation of essential legislative powers; that Section 5 is discriminatory as it confers arbitrary power on the State Government to pick and choose a particular State to prohibit sale of lottery tickets within the territory of the prohibiting State; that Section 5 is violative of Articles 301, 302, 303 and that Section 4(a), (f), (g) and (i) of the impugned Ordinance are unreasonable and violative of Articles 14, 301, 302 of the Constitution of India.

Regarding the power of the State under Article 298 and the power of the President under Article 123, it was submitted on behalf of the Petitioners that the lottery organised by the States is a subject, falls within the exclusive domain of the Parliament. Entry 40 of List I of the 7th Schedule reads as follows:

Lotteries organised by the Government of India or the Government of a State.

After the 7th Amendment, Article 298 reads thus:

Power to carry on trade, etc.- The executive power of the Union and of each State shall extend to the carrying on of any trade or business and to the acquisition, holding and disposal of property and the making of contracts for any purpose; Provided that-

(a) the said executive power of the Union shall, in so far as such trade or business or such purpose is not one with respect to which Parliament may make laws, be subject in each State to legislation by the State; and

(b) the said executive power of each state shall, in so far as such trade or business or such purpose is not one with respect to which the State Legislature may make laws, be subject to legislation by Parliament.

The amended Article 298 has taken away the division of powers on the basis of purpose of execution of disposition and this has been reflected in the case of Ch. Khazan Singh and Others Vs. State of U.P. and Others, , wherein it was held that there is nothing in Article 298 to say that the trade or business to be carried on by a State must be restricted to the area within its territorial jurisdiction and carrying on inter State business cannot be said to be an encroachment upon the executive power of other States. This has empowered the Union or a State to acquire, own and dispose of property irrespective of questions whether the purpose of such acquisition etc. is for its own purpose, or purpose of the Government. The provisions of Article 298 shows that the Union of India shall be competent to carry on business or to make any contract for a purpose within the States'' sphere. The executive power of the Union to carry on such business or to make contract shall be subject to regulation by the respective State within its jurisdiction. On the other hand, proviso (b) to Article 298 deals with the converse case of subjecting the executive power of each State relating to matters under Union List subject to legislation by Parliament. Taking into this argument, Mr. Shanti Bhushan has submitted that Article 298 embodies a relationship, particularly, in view of Centre-State and State to State, in the trade and business matters, but caution to be taken not to restrict/prohibit the power of a particular State or the Union by an Ordinance of the President of the Government under Article 123 and Article 213 of the Constitution.

The stand all along taken on behalf of the Petitioners is that proviso (b) to Article 298 provides that executive power of the State to carry on trade or business in respect of matters covered in the Union List is "subject to legislation by Parliament", therefore, Article 123 gives power to the President to promulgate an Ordinance under Article 123(2), which has the same force and effect as an Act of Parliament; that although the Ordinance may have the same force and effects as an Act of Parliament, it is still not a "legislation by Parliament" within the meaning of Article 298(b). Further contention is that the term legislation by Parliament contemplates legislation by the two Houses or the Parliament assented to by the President of India after following the procedure which is mandatory to be followed under Article 107 to Article 111 of the Constitution. As contended on behalf of the Petitioners, the expression "subject to legislation by Parliament" occurring in Article 298 is sui generis and the same does not find mention in any other Article of the Constitution. In support of this contention, reliance was made on the decision of the Apex Court in The Hingir-rampur Coal Co. Ltd. and Others Vs. The State of Orissa and Others, wherein validity of Orissa Mining Areas Development Fund Act, 1952 was challenged. The ground taken therein was that the State Legislative had no power to legislate as a legislation in this respect was covered under Entry 54 of the List-I and that the said legislation was devoid of legislative competence. That Entry 54 of List-I requires a declaration by Parliament by law; that regulation and development of mines should be under the control of the Union in public interest; if a Central Act which comes into force under Article 372 contained the requisite declaration then it would not be within the competence of the State Legislature to pass an Act in respect of same subject matter. The Apex Court in its judgment held that a declaration by Parliament has to be by the Parliament itself, that a declaration to the same effect by the Central Legislature in 1948 could not regarded as a declaration by the Parliament, even though the Central Legislature was exercising the same Legislative power as the Parliament; and even though such declaration in the Mines Act, 1948 continued to be in force even after 1950 under Article 372 of the Constitution. Their Lordships further held that as there was no declaration by Parliament, the limitation under Entry 54 of List I did not come into operation and unless a declaration is made by Parliament after the Constitution came into force, it will not satisfy the requirements of Entry 54. In support of this contention, counsel for the Petitioners placed reliance on the decisions of the Apex Court in The Chief Inspector of Mines and Another Vs. Lala Karam Chand Thapar etc., , State of Kerala Vs. K.M. Charia Abdullah and Co., and Lt.-Col. Prithi Pal Singh Bedi and Others Vs. Union of India (UOI) and Others, Apparently counsel for the Petitioners have made an attempt to draw an analogy that the Rules may have the same force as an Act by virtue of a Section in the Article, but they are not the provisions of the Act. This point has not been countered by the learned Counsel for the Respondents.

I find merit in the submissions of the counsel for the Petitioners, as Parliamentary Legislation in respect of a matter which effects executive powers of the State under Article 298 is necessary due to the fact that the law has to be debated in both the Houses of the Parliament in order to ascertain the views of the Members of the Council of States who may differ with any legislation when possibility/apprehension of curbing rights of the State to engage itself into a trade or business.

Both the counsel of Union of India and the State of UP sought to rely on Article 367(2) which is an interpretation clause to refute this contention. Article 367 provides that any reference in this Constitution to acts or laws made by the Parliament, shall be construed as including reference to an Ordinance made by the President. In support of this contention both the counsel for the Respondents relied on the decision of the Apex Court in the case of R.K. Garg v. Union of India AIR 1981 SC 2138, wherein their Lordships in para 5 of the judgment referred to Article 367(2) to sustain an Ordinance relating to Tax Laws. In my opinion, this decision is not applicable in the facts and circumstances of the instant cases as the said case has not decided the executive power of the state under Article 298 but was dealing with a situation where Ordinance was promulgated for Special Bearer Bonds (Tax laws), and therefore, there was no occasion for the Hon''ble Supreme Court to deal with the provisions of Article 298(b) of the Constitution. Further, I am of the view that the provisions of Article 367(2) applies only to those provisions of the Constitution which use the expression "Law of or made by Parliament" and not "Legislation by Parliament" which is the expression inserted in Article 298. Further submission in this regard made by Mr. Goel is that an Ordinance has same effect as "a legislation by Parliament" under Article 298 and that once the legislation is made it is immaterial whether the legislation violates any of the provisions of Chapter XIII of Fundamental Rights as the executive power under Article 298 is subject only to legislation and the validity of such legislation cannot be questioned. In my view this submission is also not sustainable in view of the provisions of Article 123(3). An Ordinance may have the same force and effect as an "Act of Parliament", but it is not a "legislation by the Parliament", which is a mandatory requirement for the purpose of imposing any restriction on the executive power of the State under Article 298. The expression "legislation by Parliament" is distinct from the expression "law of Parliament or law made by Parliament".

It was further submitted on behalf of the Petitioners that there was an undue haste in promulgating the Ordinance when the matter was placed before a Parliamentary Committee constituted under the Chairmanship of Sri Som Pal, M.P. who has been deliberately on the Central Legislation in respect of lotteries in terms of Entry 40 of List-I of 7th Schedule of the Constitution and the report of the said Committee is awaiting.

Further supporting the point regarding the necessity and requirement of a legislation in respect of lottery business, reference was made to the decision of the Apex Court in the case of H. Anraj and Others Vs. State of Maharashtra, It was contended on behalf of the Petitioners that lottery constitutes a significant portion of the total budgeted revenue of the respective Petitioner-States. Statements have been annexed with the additional affidavits of the Petitioner-States which indicates that receipt from State lottery constitutes the major revenue of the States.

In H. Anraj v. State of Maharashtra (supra) the question arose as to the power under Article 298, wherein the Apex Court held that Article 298 extends executive power of the State to carry on trade or business, even if such trade or business is one with respect to which Parliament may make laws subject to the stipulation that such executive powers of the State shall be subject to parliamentary legislation, that in the absence of Parlimentary legislation no condition can be imposed. Further it was held that executive power by virtue of Article 298 extends to lottery organised by itself, but not to lotteries organised by other States.

In view of the discussions made hereinabove on the basis of the arguments advanced by the parties on the proposition that the Ordinance making power under Article 123 or 213 cannot be exercised in respect of the executive power of the State to carry on trade or business, it is necessary to look into the wordings of the respective Articles.

The term "legislation" means a procedure adopting or enacting a law and unless a procedure satisfies all the requirements of the procedure the legislation is not a "legislation by the Parliament", and, therefore, in my considered view, there is clear cut distinction between the expression "legislation by the Parliament" and "legislation by the President" and the former has to satisfy the requirements of Articles 107 to 111. While the latter need not have to satisfy such requirements. Amended provisions of Article 298 did not use the expression "law of Parliament" or "law made by Parliament" and the wisdom of Parliament did not intend to subject to the powers under Article 298 and the Ordinance making powers of the President under Article 123 of the Constitution. In that view of the matter, I hold that the expression "legislation by Parliament" cannot be equated to an Ordinance, as provisions of Article 367(A) does not indicate so. Further, I find merit in the submission of Mr. Goswami that Article 298 creates special rights and powers to the executives of the Union and the States. The rights emanating from Article 298 has direct relation with Centre-State and State to State relations, and therefore, the expression "legislation by Parliament" connotes the significance in this context, hence, cannot empower either the President or the Governor under Article 123 or 213 to restrict the executive powers of the Union or State. Upon considering the facts and circumstances of the case, in my view, confirment of right to trade under Article 298 is wide and it is the very basis of the federal structure of the Union of India and any process to impede this basic right by promulgation of an Ordinance by President of India would amount to deviation from the intention of the Constitution as per the amended Article 298. In view of the above, I hold that the impugned Ordinance is outside the competence and jurisdiction of the President of India, therefore, it is liable to be struck down, which I accordingly do so.

Next coming to the challenge of the writ Petitioners to the various sections of the Ordinance. I prefer to examine the impugned sections. Let me first examine Section 5 of the said Ordinance, which runs thus:

A State Government may, within the State prohibit the sale of tickets of a lottery organised, conducted or promoted by another State.

As argued by Mr. Shanti Bhushan, the main target of attack of the Petitioners was that Section 5 of the impugned Ordinance delegates essential legislative powers, which is not permissible; this Section is discriminatory, and violative of Articles 301, 302 and 303 of the Constitution. Learned Counsel further submitted that Entry 40 of the List-I of 7th Schedule brings the State organised lotteries within the exclusive domain of the Parliament and that such a function cannot be delegated, unless there is a policy/guidelines, which in this case has been framed and therefore, Section 5 of the impugned Ordinance is bad and invalid on account of delegation of essential legislative powers. In support of this Mr. Shanti Bhushan referred to and relied on the decisions of the Apex Court reported Hamdard Dawakhana and Another, Kalipada Deb and Another, Lakshman Shripati Itpure @ Lakshman Shripati Impore and A.B. Choudhri and Another Vs. The Union of India (UOI) and Others, ; Rajnarain Singh Vs. The Chairman, Patna Administration Committee, Patna and Another, ; Harishankar Bagla and Another Vs. The State of Madhya Pradesh, and A.N. Parasuraman Etc. Vs. State of Tamil Nadu, .

In the case reported in Hamdard Dawakhana and Another, Kalipada Deb and Another, Lakshman Shripati Itpure @ Lakshman Shripati Impore and A.B. Choudhri and Another Vs. The Union of India (UOI) and Others, the vires of the Act as well as Section 3(d) was questioned alleging that the same was delegated legislation and no criteria had been laid down resulting surrender of unguided, uncanalised power to the executive. The Apex Court in the said case held that the impugned provisions of the said section conferred uncanalised, uncontrolled powers to the executive and held to be ultra vires.

In Rajnarain Singh Vs. The Chairman, Patna Administration Committee, Patna and Another, Sections 4,5 and 6 of Bihar and Orissa Municipal Act was challenged and in the said case the Apex Court held that the formalities imposed by the said sections cut across one of the essential features touching the matter of policy and, therefore, is bad.

In the case of Harishankar Bagla and Another Vs. The State of Madhya Pradesh, the Apex Court in similar issue held that the legislature cannot delegate its legislative functions and the legislature must declare its policy of the law and the legal provisions which are to control and guide the officials or the Body in power to execute law.

Similar view was taken by their Lordship in the case reported in A.N. Parasuraman Etc. Vs. State of Tamil Nadu, wherein the question involved related to the vires of the Tamil Nadu Private Educational Institutions (Regulation) Act, 1966. The Act was impugned alleging absence of guidelines for exercise of powers by the delegated authority as a result of which, the authority was in a position to act according to its whims. The Apex Court struck down the Act as invalid holding that the State Government has been vested with unrestricted discretion in the matter of choice of competent authority as also in picking and choosing institution from exemption u/s 22 of the said Act and that due to absence of guidelines to the competent authority, the decision is barred to be arbitrary and discriminatory.

Mr. K.N. Choudhury and Mr. Goel, adopting same line of argument assailed the challenge against vires of the provisions of the Section 5 of the Ordinance. According to them Sections 3,4 and 5 required to be read together and the guidelines indicated in Section 4 have to be followed. Mr. Choudhury summing up both Sections 4 and 5 has submitted that the State can only prohibit lotteries of another State, if that State will not comply with the provisions of Section 4 of the Ordinance, and that Section 5 has not given any blanket power to the State to the lotteries of another State; that the provisions of Section 4 indicated the guidelines which have to be followed by the States and if the States do not follow the provisions of Section 4, then only the prohibition can be imposed u/s 5. Apparently Mr. Choudhury attempted to convince that the guidelines specifically inserted in the clauses of Section 4 and reading all the Sections 3,4 and 5 together, it can be said that States has been given the power with some guidelines and non fulfilment of which, the State can proceed to adopt action u/s 5 of the Ordinance.

In view of the above, the point for consideration is whether Section 5 is liable to be struck down as no guidelines has been specified for the state to act under this Section, which gives scope to the State to follow pick and chose policy with unrestricted conferment of discretion.

A bare perusal of Section 5 of the Ordinance gives the impression that no guidelines has been specified in the section, leaving the same to the entire discretion of the State Government. Mr. Shanti Bhushan, learned Counsel for the Petitioner, discussing the Section 4 alongwith Section 5 has submitted that the impugned Ordinance has not prohibited lottery, but u/s 4(a) a ban has been imposed in single digit lottery and similarly Section 4(f), (g)(i) have put restrictions which are highly unreasonable and no reason has been stipulated therein. Upon considering the submissions of the learned Counsel for the parties, I find merit in the submission of Mr. Shanti Bhushan that in the absence of guidelines to the State Government scope for essential executive functions has been delegated and in that view of the matter provisions of Section is arbitrary. In that view of the matter, I am constrained to hold that this unguided authority has conferred unrestricted discretion to prohibit sale of lottery tickets of one State to another State.

It has been further contended that provisions of Section 4, more specifically Section 4(a), (f), (g) and (i) put unreasonable restrictions and are violative of Articles 14, 301, 302. This contention of the Petitioners has to be considered in the context of the claims of the Respondents that the provisions of Section 4 are required to be considered from the point of public interest which is the prime basis of the Ordinance. In the respective writ petitions and additional affidavits all the Petitioners urged that the prize money distributed in the case of single digit lottery constitutes 90-92% of the face value of the tickets and the bulk of the business of sale of lotteries of the Petitioner-States constitute:"single digit lottery", and that in comparison to the Petitioners-State State of Sikkim distributes only 24% of the total face value of the tickets as prize money. It is, therefore, contended that restriction on single digit lottery u/s 4(a) is not for public interest which apparently seek to prohibit sale of single digit lottery. In support of the viability of the "single digit lottery" the Senior Counsel for the Petitioners have submitted that the Parliament under Article 302 can make a law if it is in public interest, but the documents annexed with the writ petitions clearly show that the restrictions on "single digit lottery"" are not in public interest as under single digit lottery as well as in the instant lottery much more prize money is distributed to the public than the weekly lotteries. Further, it was submitted that Section 4 is violative of Article 14 as the restrictions imposed have no reasonable nexus with the object sought to be achieved and also cannot save public interest under Article 302; and that on similar reasons Section 4(g) permitting only one draw in a week is also unreasonable offending Articles 14, 301 and 302. It has also been argued that there is no justification to provide the place of a draw to be located within the concerned State as provided u/s 4(f). Regarding the unique and peculiar situations of the Petitioner-States, which are situated with bad communication etc. in the NE border of the country having peculiar law and order problems, counsel for the Petitioners have submitted that keeping in view of this peculiar situation, in fact, the prizes cannot be announced in fairness, if draws are held within the Petitioner States. That the Petitioner States have been holding their draws in the premises of their respective Houses in the territory of National Capital Territory of Delhi and therefore, there is no reason forcing the Petitioner-States for holding the draws within their States, and that if these restrictions stand, the rights of the Petitioner-States to do the business of State organised lotteries would be virtually prohibited. Similarly, it has further submitted that Section 4(i) imposes restrictions on bumper draws and, therefore, it is unreasonable and has no nexus with the object sought to be achieved and cannot be saved under Article 302 of the Constitution.

Mr. Choudhury, learned Standing Counsel for Union of India has submitted that certain types of lottery draws in the country have impact on the poor section of the society and on the long pending scrutiny and enquiry it was found that prevalance of the popularly known "single digit and instant lotteries" pushed many to temptation and mind may fancies, especially poor daily wage earners and low income group and to prevent this situation, a Central Legislation was necessary to protect the interest of such sections of the people. Mr. Choudhury has submitted that Respondents made averments on this aspect on the basis of information on record. But I am of the view that no sufficient materials have been placed before me by the Respondent Union of India, as to what reasonable nexus has been sought to be achieved by imposing restrictions on ''single digit lottery''. Apparently, there is every possibility of malpractices which may occur in lotteries, where price is offered on pre-announced numbers, but it cannot be logical to say that malpractices can take place only in single digit lottery and no convincing logic offered nor distinction has been drawn, to show how malpractice occurred in single digit lottery and in weekly lottery. Further, no reasons have been shown why restrictions have been sought to be imposed by Ordinance in the case of single digit lottery only when all the pros and cons of lottery business is pending for enquiry report before a Parliamentary Committee.

In view of the above discussions, I struck down Section 4(a) excluding the words "or on the basis of a single digit" and uphold the restrictions imposed on prizes offered on pre-announced number.

Now coming to Section 4(f), I find merits as discussed above, in the submissions of the counsel for the Petitioners, where peculiar conditions, such as, geographical, political, economical, of the Petitioner-States, were pleaded. This aspect was not countered by the Respondents. All the Petitioner-States have pleaded exemption from the purview of the Ordinance on consideration of those facts. I find it reasonable that these N.E. States require special consideration in view of the fact that for the welfare and development of the areas, income from the lottery business is a tremendous supplement to the State exchequer, where other source of revenue is insignificant. The admitted fact is that even though the Petitioner-States are full fledged States have to depend entirely on central fund, which cannot meet the both ends. Affluent economy status of a State like UP or any other States of the Union is not comparable and their exemption, as submitted by he counsel for the Petitioners, from the restrictions imposed by the Ordinance is necessary.

Similarly Section 4(g) is struck down which provides that no lottery shall have more than one draw in a week as I hold that this Sub-clause (g) has no reasonable basis as to why such restrictions are required to be imposed.

Regarding restrictions imposed u/s 4(i) I hold that those restrictions cannot be said unreasonable. Submission of the counsel for the Petitioners is not sustainable on the ground that the restrictions u/s 4(i) has no effect in the interest of the Petitioner-States and Central Government has the authority to decide the number of draws in case of bumper draws, which has no comparison with single digit or instant lottery.

Mr. Goswami agreeing with the submissions of Mr. Shanti Bhushan further contended that Section 5 of the Ordinance violates the provisions of Articles 301 and 302 of the Constitution. Relying on the decision of the Apex Court reported in H. Anraj Vs. Government of Tamil Nadu, Mr. Goswami argued that lotteries are good and even Parliamentary legislation cannot prohibit sale of goods of the State while permitting sale of lottery tickets of another State within its State; that Section 5 effects movement of goods and, is, therefore, violative of Article 301, that Section 5 is violative of Article 303(1) as power has been given to the States to pick and choose.

As I held hereinabove, Article 303(1) provides that State shall have no power to make any law authorising any preference to one State to another, I reiterate my view that Section 5 confers power to the State to give preference to another state in respect of sale of lottery tickets, and therefore, Section 5 of the Ordinance is violative of Articles 301(1) and 303(1) as these Articles clearly spell out that giving authority of preference over one State to another State is not permissible and both the Parliament and State legislatures have no power to do so.

Regarding the submissions of the learned Counsel for the Petitioners that the Ordinance is malafide, in my opinion, is not sustainable on the ground that allegation of malafide intention in enacting an Act or promulgating an Ordinance by the legislature or the President cannot be imputed and the law in this regard has already been settled by a catena of decisions of the Apex Court.

In view of my above discussions, I hold that the Ordinance making power of the President under Article 123 can not be invoked in respect of matters falling within the executive powers and functions of the State under Article 298; that Section 5 of the Ordinance is invalid as legislative functions are delegated without any guidelines and that Section 5 is violative of Articles 301 and 303 of the Constitution; that Section 4(a) is struck down as being violative of Articles 14, 301 and 302 and consequently Section 4(g) is also struck down as invalid. Further, Section 4(f) is struck down as it imposes unreasonable restrictions without any basis.

In the result, the validity of the impugned Ordinance is struck down to the extent of its applicability to the Petitioner-States including the private co-Petitioners. Petitions are accordingly allowed. Miscellaneous cases are also stand disposed of.

In the facts and circumstances of the case respective parties shall bear their own costs.