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tracts wherever possible and hence in future blaze should be auctioned for tapping only on wage contract basis.

Now there were certain forests in Reasi and Ramban Divisions of the State which were difficult of access on account of their distance from the roads and so were some forests in the Poonch Division near the line of actual control. So far as the forests in the Rea i Division were concerned, there were 6,08,115 blazes which were attempted to be given for tapping in the year 1976-77 on royalty contract basis without load but out of them only 1,28,856 blazes were taken by one Prem Kumar Sood and that too on a royalty of only Rs. 2.55 per blaze, as against royalty of about Rs. 6/- per blaze obtained by the State in other inaccessible areas by giving contract on royalty basis with load of 3 Kg. per blaze. Moreover, these 1,28,856 blazes were situate in the lower reaches of inaccessible forests and no contractors could be found for taking tapping contracts, even on the basis of royalty without load, for blazes in the higher regions of the inaccessible areas. The same 1,28,856 blazes were again put-up for auction for the year 1977-78, but no bidders came forward to take a contract even on royalty without load basis. Then for the year 1978- 79, out of these 1,28,856 blazes, 72,951 blazes were once again put-up for auction and though these were situate in less inaccessible areas than the rest of the blazes, the response was most discouraging and no one came forward to make a bid for taking the contract even on royalty basis without load. The result was that practically no tapping was done from these 6,08,115 blazes in the forests of the Reasi Division upto 1979-80. There were also some new blazes marked in the forests of the Reasi Division for the year 1979-80 and out of them, 4,20,340 blazes were in areas which were inaccessible on account of their being at a distance of 8 to 40 k.ms. from the roadside. Even out of the old 6,08,115 blazes there were 3,10,674 blazes which were situate in the same category of inaccessible areas. So far as the forests in the Ramban Division are concerned, there were 1,24,400 blazes which were equally inaccessible "due to long lead upto coupe boundaries and transit depots" and the position in regard to 3,30,300 blazes which were under tapping in Poonch Division, was also similar to that of the inaccessible areas in Reasi and Ramban Divisions with the additional handicap of their being situate along the line of actual control. There were thus in all about 11,85,414 blazes in the Reasi, Ramban and Poonch Divisions which were in inaccessible areas and having regard to the high cost of extraction and collection of resin as also the scarcity of trained labour in those areas, it was not possible to give out these blazes by auction on wage contract basis. The past experience showed that even on the basis of royalty without load, contractors were not forth-coming for taking contracts in respect of blazes in the inaccessible areas of the Reasi Division and giving out of the aforesaid blazes in the Reasi, Ramban and Poonch Divisions on wage contract basis was, therefore, almost an impossible proposition. The Chief Conservator of Forests and other forest officers accordingly decided at their meeting of December 9, 1978 that these blazes could not be tapped through wage contract because "apart from the total non-availability of local labour in these areas, cost of production due to long lead upto coupe boundaries and transit depots would be prohibitive" and all such areas should, therefore, be excluded from tapping wage contracts.

It appears that J & K Resin Contractors Association (hereinafter referred to as the association) came to know sometime in October, 1978 that the 2nd respondents had approached the State Government and there was a proposal to allot to them "certain resin coupes on royalty system of 10 years" on the basis that they would install a factory for manufacture of resin and turpentine at Jammu with sizable investment. The association thereupon addressed a letter to the Chief Minister in October, 1978 complaining against giving of contract to an outside party by private negotiations and pleading that contract, whether on royalty basis or otherwise, should be given only by open auction. It is significant to note that no offer was made by the association in this letter to set up a resin-based industrial unit in the State and the only plea was that tapping contract should not be given by private negotiations to a non-state party, but should be given only by open auction. Since the decision was taken at the meetings of 9th December, 1976 and 26th December, 1978 that blazes in the inaccessible areas Reasi, Ramban and Poonch Divisions should not be given on wage contract basis, they were excluded from the auctions held by the State and the association, therefore, addressed a letter dated 22nd January 1979 to the Chief Conservator of Forests requesting him to include these blazes in the auctions. This was followed by another letter dated 5th February, 1979 addressed by the association to the Forest Minister where the request for inclusion of these blazes in the auctions was repeated by the association. The association also pleaded with the Forest Minister that instead of adopting the wage contract method for giving out blazes for tapping contracts, "The system of royalty contract with increased load" should be continued in the forests divisions including Reasi, Ramban and Poonch. The same request was repeated by the association in a letter dated 8th March, 1979 addressed to the Chief Minister. There was obviously no reply to these communications since it had already been decided that tapping of blazes in the accessible chir forests should be done only through wage contracts and 11,85,414 blazes in the inaccessible areas of Reasi Ramban and Poonch Divisions should be allotted to some private party, which was prepared to set-up a factory for manufacture of resin, turpentine and other derivatives in the State.

We may first clear the ground by stating a few undisputed facts. The practice which was being followed by the State until the year 1979-80 was to give out blazes in the chir forests either on wage contract basis or on royalty basis with or without load. The result was that about 50 per cent of the resin extracted used to be taken away by the contractors and the balance of 50 per cent remained with the State which the State partly made available to its own factories and small scale units in the State and partly sold by auction and out of the quantity auctioned the bulk was purchased by manufacturers having factories in Hoshiarpur. It appears' that from about 1975 onwards the State embarked upon a policy of industrialisation and in furtherance of this policy, it decided some time in the later half of 1978, that from the year 1979-80, no resin should be allowed to he exported outside the State territories and that it should be made available for being utilised only in industries set up within the State. But this measure by itself was not enough, because so long as contracts for extracting resin were given on royalty basis with or without load, a sizable quantity of resin extracted would go into the hands of the contractors and would not become available to the State for fulfilling its commitments. The State, therefore, decided as a matter of policy to replace royalty contracts by wage contracts wherever possible and to auction blazes for tapping only on wage contracts basis. But, as pointed out above, there were certain forests in Reasi, Ramban and Poonch Divisions which were difficult of access on account of their distance from the roads and some of the forests in Poonch Division were near the line of actual control and consequently it was found impracticable to give them for tapping on wage contract basis. It was difficult to give them for tapping even on the basis of royalty without load and the maximum that could be obtained for a part of the blazes in the Reasi, Division in the year 1976-77 was royalty of Rs. 2.55 per blaze without load. It was, therefore, decided by the State to exclude about 11,85,414 blazes in the Reasi, Ramban and Poonch Divisions from tapping through wage contract and they were kept out of the auctions held by the State. The Association undoubtedly made representations requesting the State to include these blazes in the auctions, but as is evident from the letters dated 5th February 1979 and 8th March 1979 addressed respectively to the Forest Minister. and the Chief Minister, the emphasis of the Association was that the system of working should be changed from wage' contract to royalty contract" and that these blazes should be put to auction on royalty basis. The State obviously, in view of its policy, could not accede to this request made on behalf of the Association and since, having regard to past experience. it was felt that it would be futile to offer these blazes for tapping through wage contract, the State was not unjustified in not including them in the auctions. Now the second respondents offered to set up a factory for manufacture of resin, turpentine oil and other derivatives in the State and requested to State to make allotment of resin annually for this purpose on the same terms and conditions on which allotment was proposed to be made to Camphor and Allied Products Ltd. and Prabhat General Agencies. The State, in view of its policy of Industrialisation, was interested in the setting up of the factory by the second respondents, particularly since the second respondents had two factories for manufacture of resin, turpentine oil and other derivatives and they possessed larger experience in processing of resin and reprocessing, of resin, turpentine oil and other derivatives. But, having regard to the commitments already made by it, it was not possible for the State to make any definite allotment of resin to the second respondents. The State, however, had these blazes in the Reasi, Ramban and Poonch Divisions which it was finding impracticable to tap through wage contract and the State, therefore, decided to give them for tapping to the second respondents on certain terms and conditions, so that the second respondents could if they were prepared to tap these blazes in inaccessible areas, secure an assured supply of 3500 metric tones of resin for the purpose of the factory to be set up by them within the State. It was in these circumstances that the impugned order dated 27th April 1979 came to be passed by the State.

pugned order a huge benefit was conferred on the second respondents at the cost of the State. It is clear from the terms of the impugned order that the second respondents would have to extract at least 5000 metric tones of resin from the blazes allotted to them in order to be entitled to retain 3500 metric tones. The counter affidavit of Ghulam Rasul on behalf of the first respondent and Guran Devaya on behalf of the second respondents show that the estimated cost of extraction and collection of resin from these inaccessible areas would be at the least Rs. 175/ per quintal, though according to Guran Devaya it would be in the neighbourhood of Rs. 200 per quintal, but even if we take the cost at the minimum figure of Rs. 175/ per quintal, the total cost of extraction and collection would come to Rs. 87,50,000/- and on this investment of Rs. 87,50,000/- required to be made by the second respondents the amount of interest at the prevailing bank rate would work out to about Rs. 13,00,000/-. Now, as against this expenditure of Rs. 87,50,000/- plus Rs. 13,00,000/- the second respondents would be entitled to claim from the State in respect of 1500 metric tones of resin to be delivered to it only at the rate sanctioned by the Forest Department for the adjoining accessible forests which were being worked on wage contract basis. It is stated in the counter affidavits of Ghulam Rasul and Guran Devaya and this statement is not seriously challenged on behalf of the petitioners, that the cost of extraction and collection as sanctioned by the Forest Department for the adjoining accessible forests given on wage contract basis in the year 1979-78 was Rs. 114/- per quintal and the second respondents would, thus, be entitled to claim from the State no more than Rs. 114/- per quintal in respect of 1500 metric tones to be delivered to it and apart from bearing the difference between the actual cost of extraction and collection and the amount received from the State at the rate of Rs. 114/- per quintal in respect of 1500 metric tones, the second respondents would have to pay the price of the remaining 3500 metric tones to be retained by them at the rate of Rs. 350/- per quintal. On this reckoning, the cost of 3500 metric tones to be retained by the second respondents would work out at Rs. 474/- per quintal. The result would be that under the impugned order the State would get 1500 metric tones of resin at the rate of Rs. 114/- per quintal while the second respondents would have to pay at the rate of Rs. 474/- per quintal for the balance of 3500 metric tones retained by them. Obviously, a large benefit would accrue to the State under the impugned order. If the State were to get the blazes in these inaccessible areas tapped through wage contract, the minimum cost would be Rs. 175/- per quintal, without taking into account the additional expenditure on account of interest, but under the impugned order the State would get 1500 metric tones of resin at a greatly reduced rate of Rs. 114/- per quintal without any risk or hazard. The State would also receive for 3500 metric tones of resin retained by the 2nd respondents price or royalty at the rate of 474/- per quintal which would be much higher than the rate of Rs. 260/- per quintal at which the State was allotting resin to medium scale industrial units and the rate of Rs. 320/- per quintal at which it was allotting resin to small scale units within the State. It is difficult to see how on these facts the impugned order could be said to be disadvantageous to the State or in any way favouring the second respondents at the cost of the State. The argument of the petitioners was that at the auctions held in December 1978, January 1979 and April 1979, the price of resin realised was as much as Rs. 484/-, Rs. 520/- and Rs. 700/- per quintal respectively and when the market price was so high, it was improper and contrary to public interest on the part of the State to sell resin to the second respondents at the rate of Rs. 320/- per quintal under the impugned order. This argument, plausible though it may seem, is fallacious because it does not take into account the policy of the State not to allow export of resin outside its territories but to allot it only for use in factories set up within the State. It is obvious that, in view of this policy no resin would be auctioned by the State and there would be no question of sale of resin in the open market and in this situation, it would be totally irrelevant to import the concept of market price with reference to which the adequacy of the price charged by the State to the 2nd respondents could be judged. If the State were simply selling resin, there can be no doubt that the State must endeavour to obtain the highest price subject, of course, to any other overriding considerations of public interest and in that event its action in giving resin to a private individual at a lesser price would be arbitrary and contrary to public interest. But, where the State has, as a matter of policy, stopped selling resin to outsiders and decided to allot it only to industries set up within the State for the purpose of encouraging industrialisation, there can be no scope for complaint that the State is giving resin at a lesser price than that which could be obtained in the open market. The yardstick of price in the open market would be wholly inept, because in view of the State policy, there would be no question of any resin being sold in the open market. The object of the State in such a case is not to earn revenue from sale of resin, but to promote the setting up of industries within the State. Moreover, the prices realised at the auctions held in December 1978? January 1979 and April 1979 did not reflect the correct and genuine price of resin, because by the time these auctions came to be held, it had become known that the State had taken a policy decision to ban export of resin from its territories with effect from 1979-80 and the prices realised at the auctions were therefore scarcity prices. In fact, the auction held in April 1979 was the last auction in the State and since it was known that in future no resin would be available for sale by auction in the open market to outsiders, an unduly high price of Rs. 700/- per quintal was offered by the factory owners having their factories outside the State, so that they would get as much resin or the purpose of feeding their industrial units for some time. The counter affidavits show that, in fact, the average sale price of resin realised during the year 1978-79 was only Rs. 433/- per quintal and as compared to this price, the 2nd respondents were required to pay price of royalty at a higher rate of Rs. 474/- per quintal for 3500 metric tones of resin to be retained by them under the impugned order. It is in the circumstances impossible to see how it can at all be said that any benefit was conferred on the second respondents at the cost of the State. The first head of challenge against the impugned order must, therefore, be rejected.