Allowed

The Andhra PRadesh Film Chamber of Commerce v. The Government of Andhra Pradesh, rep.by its Principal

Telangana HC27 Feb 2012WP/6565/2009

Case brief

AI extract

What is this about?

Single-member bench quashed Government Order entrusting online cinema ticket booking to sole agency GEPL, holding it ultra vires statute, violating Article 14 by creating artificial monopoly without tender, and contravening Rule 17-A's requirement for multiple agencies.

What did the court decide?

G.O.Ms. No.110 dated 19.02.2009 set aside as ultra vires and violative of Article 14.

The Andhra PRadesh Film Chamber of… — Pension and Retirement Benefits | Telangana HC (2012)

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*** THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN**

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+ WRIT PETITION NOs. 4430, 5474, 6086, 6565 of 2009; 19020 AND 20357, 25403 OF 2011

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% Dated 27-02-2012

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W.P. NO.4430 OF 2009:

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# Beyond Basiks Infotech Pvt. Ltd., 203, G.V.S. Towers, Domalguda, Hyderabad, represented by its Managing Director Raj B. Tadla.

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…. Petitioner

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Vs.

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$ State of Andhra Pradesh, represented by the Principal Secretary, Home (General-A) Department, A.P. Secretariat, Hyderabad. And 3 others

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…. Respondents

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! Counsel for the petitioner: Sri P. Kamalakar

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^ Counsel for respondents : G.P. for Home;

<GIST:

> HEAD NOTE:

? Citations:

[1] AIR 1957 AP 513

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2 AIR 1966 SC 1081 3 AIR 1979 AP 259 4 1999(5) ALD 693 5 AIR 1936 PC 253 6 AIR 1960 SC 576 7 AIR 1964 SC 358 8 AIR 1969 SC 267 9 AIR 2000 SC 2281 10 (1962) 3 SCR 936 11 AIR 1984 AP 75 12 AIR 1970 SC 228 13 (1971) 3 SCC 705

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14 (1999) 6 SCC 247 15 AIR 1955 SC 549 16 (1974) 4 SCC 788 17 (2005) 1 SCC 679 18 (1963) 2 SCR 73 19 (1964) 4 SCR 99 20 2011 (2) ALD 163 21 1966 Supp SCR 311 22 (1969) 1 SCC 414 23 AIR 1967 SC 1305 24 (1955) 1 SCR 1045 25 (1959) SCR 279 26 (2002) 2 SCC 333 27 (2009) 7 SCC 561 28 (1962) 1 SCR 862 29 AIR 1979 SC 1628 30 AIR 1985 SC 1147 31 (2010) 3 ALD 505 (DB) 32 (2009)6 SCC 171 33 AIR 1980 SC 1992 34 Judgment in Writ Petition (Civil) No.423 of 2010 dated 02.02.2012 35 2007 (2) AWC 1366 36 AIR 2000 SC 3313 37 (1986) 4 SCC 566 38 2001 (3) ALD 216 (DB) 39 AIR 1996 SC 2462 40 (1972) 2 SCC 788 41 (2007) 6 SCC 44 42 2003(3) ALD 212 (DB) 43 (2003) 4 SCC 289 44 (1995) 6 SCC 515 45 AIR 1986 SC 180 46 AIR 1951 SC 230 47 2005(9) SCC 686 48 2008(7) SCC 748

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THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION NOs. 4430, 5474, 6086, 6565 of 2009; 19020 AND 20357, 25403 OF 2011

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COMMON ORDER:

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Except in W.P.Nos.20357 and 25403 of 2011, G.O.Ms. No.110 Home (General-A) Department dated 19.2.2009 is under challenge in all the other Writ Petitions which form part of this batch. While the relief sought for in W.P. No.20357 of 2011 is to declare the action of the respondents in not considering the petitioner’s request for grant of an on-line licence, and in preventing them from conducting their business as an on-line agency, as arbitrary and illegal; the relief sought for in W.P. No.25403 of 2011 is to declare the action of the respondents in interfering with the business carried on by the petitioner in conducting on-line booking through e-ticketing system of tickets in respect of theatres within the State of Andhra Pradesh, and in insisting on a separate licence, as arbitrary and illegal. However both Sri S.Niranjan Reddy, Learned Counsel for the petitioner in W.P. No.20357 of 2011, and Sri P.Sriraghuram, Learned Counsel for the

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petitioner in W.P. No.25403 of 2011, would submit that it would be suffice for disposal of these two Writ Petitions also if this Court were to restrict its examination to the validity of G.O.Ms. No.110 dated 19.2.2009.

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2. The Andhra Pradesh Cinemas (Regulation) Rules, 1970 (hereinafter called the “Rules”) were amended by G.O.Ms. No.47, Home (General-A) Department dated 10.3.2006 whereby an online booking system was statutorily introduced in the State of Andhra Pradesh. Proposals were received from five agencies to operate the online ticket booking system in cinema theatres in the State of Andhra Pradesh. Galaxy Entertainers Private Ltd, (hereinafter called GEPL), also submitted a proposal to the Government on 5.2.2004 expressing interest in operating the online ticket booking system. The Government, vide G.O.Ms. No.48 Home (Gen A) Department dated 10.3.2006, accorded permission to GEPL to operate the said online ticket booking system. In view of adverse newspaper reports, G.O.Ms. No.48 dated 10.3.2006 was cancelled by G.O.Rt. No.837 Home (Gen A) Department dated 4.5.2006. Thereafter the Government issued G.O.Rt.No.1966, Home (General-A) Department dated 21.11.2006 constituting a committee, as computerized ticketing in cinema theatres in the State of A.P. would facilitate disclosure of sales volumes so as to prevent tax evasion; this system would bring transparency in ticket booking, and improvement in the entertainment tax collection system; and thereby black marketing of cinema tickets would be prevented to a great extent. The Government deemed it proper, therefore, to entrust the same to a suitable agency for selecting and short listing firms to operate such a system after duly examining their technical expertise, financial background etc. The Committee, constituted by G.O.Rt. No.1966, Home (General-A) Department dated 21.11.2006, was

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required to finalize agencies for providing the on-line cinema ticket booking system in cinema halls in the State of Andhra Pradesh. The committee was directed to examine in detail the scheme for its implementation either through a single agency or through multiple agencies. Thereafter the Committee submitted its report making 29 recommendations for implementation of the on-line ticket booking system. It recommended multiple agencies. The Government, by G.O.Rt. No.1571, Home (General-A) Department, dated 25.8.2008, constituted another committee to examine whether to have a centralized single state level operating system with one agency instead of multiple agencies, and to consider the representations received by it. The three member Committee heard the President, A.P. Film Chambers of Commerce, the Hyderabad State Film Chambers of Commerce, the Telugu Film Producers Council and five online ticket agencies including GEPL, and submitted its report dated 3.11.2008 to the Government. It is seen from the said report that the Home Department had forwarded the applications, along with the proposals and representations submitted by eight agencies including three trade bodies, for scrutiny and examination; the representatives of the trade bodies were heard on 25.09.2008; the trade bodies stated that the service charges, payable to the agency, would be a burden on the cine-goer; they desired the system to be fool-proof, exhibitors be allowed to introduce the system on their own, and the system be implemented at the behest of the theatre owners. The Committee report also notes that proposals were received from five agencies for implementing the on-line ticket booking system. The Committee considered the proposals made by each of these five agencies. While determining the service charges, and the period of operation, the Committee took into consideration the cost of setting up infrastructure

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at the theatres; payment to retail outlet stores for selling tickets; the cost of setting up telephone operators for selling tickets over phone; cost of setting up central infrastructure for maintaining information of all ticket sales across the State; and the cost of maintaining the web portal. Based on the information placed before it, the Committee was of the view that a service charge of Rs.6/- per ticket would enable the agency to break-even over a period of 7 to 10 years.

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3. On the question whether to have a single or multiple agencies the Committee opined that, keeping in view the amount of coordination needed between various stake holders – particularly exhibitors, agencies and the cinegoers, the convenience of all the three parties should be factored in as appropriate; guidelines may be based upon mutual agreement between the government and the agency undertaking implementation, after reviewing the results from time to time; the arguments in favour of a single agency grossly outweighed the arguments in favour of multiple agencies; as long as the single on-line agency and the interface was clear, and a proper scale up model was followed and a service fee set up, the few problems/set-backs for a single agency could be addressed. On an overall view, the Committee felt that it was a clear advantage in going with a single agency. The Committee examined the set up costs and the recurring costs and opined that a minimum period of 10 years was needed for the agency to break even, and the initial period of license to be granted to the operating agency could be extended by another five years.

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4. Among the five non-trade body representationists, the Committee held in favour of GEPL. The reasons which weighed in their favour were that GEPL was earlier awarded the contract for a period of 15 years; the contract was in operation for close to 3 months; GEPL had

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significantly invested in the project this year; their model had both the requirements of booking over the internet as well as booking over phone; this made it a very friendly model for the cine-goer; their model had a two hour window for releasing the unsold tickets and a membership model; and their model conformed to all the basic guidelines set forth for the online ticket booking system.

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5. M/s Beyond Basiks Infotech Pvt. Ltd. (the petitioner in W.P. No.4430 of 2009), had submitted a representation for grant of an online-booking licence for the year 2008 and, as the licence was not granted, they filed W.P. No.17744 of 2008 before this Court. The said Writ Petition was disposed of, by order dated 26.8.2008, directing respondents 2 and 3 therein to pass appropriate orders. The 2^nd respondent, by order dated 16.9.2008, rejected the petitioner’s application holding that the Government had not formulated and communicated the terms and conditions envisaged in Rule 17-A of the Rules. M/s Beyond Basiks Infotech Pvt. Ltd., by their representation dated 20.9.2008, again requested the 2^nd respondent to accord permission. They filed W.P. No.21723 of 2008 and, by order in W.P.M.P. No.28354 of 2008 dated 23.10.2008, interim directions were passed permitting them to continue sale of online cinema tickets subject to the terms and conditions imposed for the previous years. 6. Based on the recommendations and the feasibility report of the Committee dated 3.11.2008, and as the committee had recommended a single agency, the Government, in the exercise of its powers under Section 11(2)(a) of the Act and Rule 17-A of the Rules, issued G.O.Ms. No.110, Home (General-A) Department dated 19.2.2009 permitting GEPL to operate the online ticket booking system in the State of A.P. in a phased manner, initially for a period of 10 years which could be extended, with mutual consent, by another 5 years.

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7. Oral submissions were made on behalf of the petitioners, in this batch of Writ Petitions, by Sri E.Manohar, Learned Senior Counsel, and Sri P.Sriraghuram, Sri S.Niranjan Reddy, Sri O.Manohar Reddy, Sri K.Durga Prasad and Sri K.Raghavacharyulu. The Learned Advocate-General put forth his submissions on behalf of the State Government, and Sri S.Sriram, Learned Counsel, on behalf of GEPL. Written arguments were also submitted.

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8. It is convenient to deal with the contentions put forth by counsel on either side under different heads.

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I. IS G.O.Ms.No.110 DATED 19-02-2009 ULTRAVIRES SECTIONS 4 AND 5 OF THE ACT AND RULE 17-A OF THE RULES?

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9. It is contended on behalf of the petitioners that the orders of the Government in G.O.Ms.No.110 dated 19.2.2009, according permission to GEPL to operate the online booking system in the entire State for a period of 10 years, is without jurisdiction and is ultravires Sections 4 and 5 of the Act and Rule 17A of the Rules; neither the Act nor the Rules enable the Government to exercise the original power of the primary authority, even though that authority has to be authorized by the Government itself; the licencees are entitled for renewal of their licence if there is no breach of the conditions of the licence by them; the Government had exceeded its jurisdiction in issuing directions to the licensing authorities not to renew the existing licence, and not to permit online ticket booking agencies after expiry of the existing licence/permission; Section 5(2), a general power conferred on the Government to give directions, cannot be construed as an original power to grant a licence; the permission accorded to GEPL is, in effect, the grant of a licence by the Government; neither Sections 5 or 11(2)(a) nor Rule 17-A confer power on the Government to grant permission/licence; so far the Government has neither authorized any

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person nor has it determined the terms and conditions as prescribed in Section 11(2)(a) of the Act or Rule 17-A of the Rules; the impugned G.O. is an executive order and, as it is in conflict with the statutory rules, it is illegal; Rule 17A does not enable the licensing authority to grant licence only to one person; the State cannot usurp the authority of the licensing officer in exercise of its powers of “control”; the impugned G.O, which grants licence for a period of 10 years, is contrary to Rule 13; and the Government does not have the power to issue directions contrary to Sections 4 and 5 of the Act and, in any event, in relation to matters not stipulated by or provided under the Act and the Rules.

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10. On the other hand, both the Learned Advocate-General and Sri S. Sriram, Learned Counsel for GEPL, would submit that Rule 17-A enables the Government to grant an on-line licence to any one person subject to fulfilment of the prescribed terms and conditions; Rule 17A provides for a scenario wherein there could be a single on-line agency for the entire State; the multiple operators scenario under Rule 17-A can happen only if there are individual operators in a part of the State; in the absence of a notification being issued under the proviso to Section 4 of the Act, notifying an authority for the entire State to grant an online licence, the Government is itself entitled to exercise the power conferred by the Act on the authority; the power under Section 5(2) encompasses the power to issue quasi- legislative general directions to the primary licensing authority; the power of “control” also includes the power to issue directions to fill the vacuum or gaps in the rules; there being no authority notified for the entire State as a unit and, since the licensing authorities are competent to grant licence only for a District, the impugned G.O. was issued; and, in the impugned G.O., directions were issued to the licensing authority to act in accordance

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with the conditions stipulated therein.

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11. Section 4 of the A.P. Cinemas (Regulation) Act, 1955 (for brevity “the Act”) stipulates that the District Collector shall be the authority having power to grant licences under the Act (the licensing authority). Under the proviso thereto the Government is empowered, by notification, to constitute for the whole or any part of the State such other authority, as it may specify in the notification, to be the licensing authority for the purposes of the Act. In the exercise of its powers under Section 4, the Government issued notifications earlier constituting the Commissioner of Police, Hyderabad as the licencing authority for Hyderabad, and the Commissioner of Police, Cyberabad to be the licencing authority for the Cyberabad area.

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12. Section 5(1) of the Act prohibits the licensing authority from granting a licence under the Act unless it is satisfied that (a) the rules made under the Act have been substantially complied with; and (b) adequate precautions have been taken in the place, in respect of which the licence is to be given, to provide for the safety of the persons attending exhibitions therein. Section 5(1)(a) requires the licensing authority to satisfy himself that the Rules made under the Act have been substantially complied with. Section 5(2) provides, subject to Section 5(1) of the Act and to the control of the Government, that the licensing authority may grant licences under the Act to such persons as that authority thinks fit, and on such terms and conditions and subject to such restrictions as it may determine. Section 5(3) enables the Government, from time to time, to issue directions to licencees generally or to any licencee in particular for the purpose of regulating the exhibition of any film or a class of films. Since the dispute, in the present case, relates to the grant of an “on line licence”, it is not necessary for this Court to examine the scope of the power of the

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Government to issue directions under Section 5(3) of the Act. Section 7(1) enables any person, aggrieved by the decision of the licensing authority refusing to grant licence or permission under the Act, to prefer an appeal to the Government. Section 7-A (1) confers power of review on the Government which can be exercised either suo motu or on the application received from any “interested” person. Section 11 of the Act enables the Government, by notification, to make rules for carrying out the purposes of the Act and, under Sub-Rule (2)(a) thereof, such Rules may provide for the terms, conditions and restrictions, if any, subject to which licences and permissions may be granted under the Act.

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13. In exercise of the powers conferred under Section 6 and Section 11(1) of the Act, the Rules were made and published in the A.P. Gazette on 27.8.1970. It is these Rules which were amended, and the amendments notified, in G.O.Ms. No.47, Home (General-A) dated 10.3.2006. Rule 2(t) defines an “on-line licencee” to mean a person who has obtained a licence, for booking tickets under the on-line system, under Rule 17-A of the Rules. Rule 11-A (f) requires a declaration to be made by the applicant, for grant of a cinema licence, to the effect that the person/firm has completed all arrangements to provide a booking office at the licenced premises to those persons who have obtained an on-line licence to sell tickets through telephone multi-point locations and internet or emerging technologies, kiosks (manned or unmanned). Rule 11-C(1) requires the person, in whose favour an “on-line” licence has been granted under Rule 17-A, to sell tickets only at the permitted licenced booking offices through telephone, multi-point locations and internet or emerging technologies and other counters, kiosks (manned or unmanned) except in the last class of admission for which booking shall be in the theatre premises

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only. The second proviso thereto stipulates that at least 50% of the tickets shall be reserved for sale by the cinema licencee in the licenced booking office at the cinema theatre in the current counters. Rule 11-C(3) provides that the division of tickets, that are to be sold by the cinematography licencee and the on-line licencee, shall be made with equal comfort and convenience to the cine-goers. Rule 12-A (c)(i) requires every application for renewal of a cinema licence to be accompanied by a declaration to the effect that the licencee has completed all arrangements to provide a booking office at the licenced premises to those persons who have obtained permission to sell tickets through telephone multipoint locations and internet or emerging technologies, kiosks (manned or unmanned). Rule 17-A reads as under:

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“Not withstanding anything contained in the Rules, the officer authorised by the Government for grant of cinema licence shall be authorized for issue of on-line licence to any person/agency to book not exceeding 50% of the total on-line tickets through telephone of multipoint locations and internet or emerging technologies and other counters, kiosks (manned or unmanned) through out the State or in any part thereof, on such terms and conditions and subject to such restrictions as may be determined by the Government from time to time in this behalf.”

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14. G.O.Ms. No.110 dated 19.2.2009, (the order impugned in these Writ Petitions), records that the government, after a detailed examination of the recommendations of the committee report dated 3.11.2008, after careful examination of the issue and in exercise of the powers conferred under Section 11(2)(a) of the Act and Rule 17-A of the Rules, had accorded permission to GEPL to operate the on-line ticket booking system in the State in a phased manner initially for a period of 10 years. Phase I related to theatres located in the GHMC area, and areas in Visakhapatnam, Vijayawada, Guntur, Tenali, Tirupati, Kakinada, Rajahmundry, Eluru, Ongole and Warangal. Phase II relates to theatres located in all the District Headquarters and major towns. The Commissioner of Police, Hyderabad and the

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Commissioner of Police, Cyberabad were directed to entrust the theatres under their control for on-line ticketing to GEPL. The licensing authorities were also directed not to renew the existing licence/permission of on-line ticket booking agency, if any, after expiry of such existing licence/permission, unless there was a Court direction to that effect.

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15. Clause (2) of the Annexure to G.O.Ms. No.110 dated 19.2.2009 requires GEPL to operate the system as per the directions given thereunder. Clause (2) contains 20 such directions. Clause (3) of the said annexure stipulates that on-line ticketing permission shall be subject to imposition of any further terms and conditions as deemed fit by the Government from time to time. The directions in the annexure to G.O.Ms. No.110 dated 19.2.2009 are conditions imposed on GEPL, and not the terms and conditions or directions issued by the Government to the licensing authority in the exercise of its powers of control under Section 5(2) of the Act.

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16. Rule 17-A starts with a non-obstante clause and authorizes the officer, authorised by the Government for grant of a cinema licence, to issue an on-line licence. The said rule restricts grant of licence to any person/agency to book not exceeding 50% of the total “on-line tickets”. The Rule also authorises the licencing authority to grant licence either throughout the State or in a part thereof. On a conjoint reading of the second proviso to Rule 11-C(1) and Rule 17-A, it is evident that atleast 50% of the tickets are reserved for sale by the cinema licencee in the licenced booking office at the cinema theatre in the current counters; and not more than 50% of the total “online tickets” can be booked by the agency which has been granted “online licence”. As at least 50% of the total cinema tickets are to be sold by the cinema licencee at the cinema theatre, it is only from out of the

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remaining extent, (which cannot exceed 50% of the total tickets for a show), can each on-line licencee book tickets, that too not exceeding 50% of the total on-line tickets. Even among the total on-line tickets, (which cannot constitute more than 50% of the total tickets), only 50% thereof can be booked by an agency which has been issued an on-line licence. Rule 17-A envisages at least two, if not more, on-line agencies to be granted a licence to book the “total on-line tickets” which constitute less than 50% of the total tickets of a particular show. Inherent in the Rule is the requirement of issuing on-line licences to more than one person/agency as no person or agency can be authorised to book more than 50% of the total “on-line tickets”. The contention, urged on behalf of respondents, that Rule 17-A enables the Government to grant licence to any one person subject to fulfillment of terms and conditions does not, therefore, merit acceptance. Though grant of licence under Rule 17-A is to be on such terms and conditions, and subject to such restrictions, as may be determined by the Government from time to time, the Government has neither stipulated any terms and conditions nor has it determined any restrictions for the grant of an “on-line” licence till date.

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17. While Section 5(1) places fetters on the power of the licensing authority to grant a licence, Section 5(2) empowers him to grant a licence under the Act to such persons as he thinks fit on such terms and conditions and such restrictions as may be determined. The power of the licensing authority, under Section 5(2) of the Act, to grant a licence is subject to the provisions of Section 5(1), and to the control of the Government. As noted hereinabove Section 5(1)(a) requires the licencing authority to satisfy himself that the Rules made under the Act have been substantially complied with. It is necessary, therefore, to examine the scope and ambit of the words “subject to the control of

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the Government” used in Section 5(2) of the Act.

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18. In Karnati Rangaiah v. A. Sultan Mohiddin and Brothers^[1] , a

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Division bench of this Court held:

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“……….It is to be noticed that the Statute expressly provides that the grant of licences by the licensing authority to such persons as it thinks fit, is subject to the control of the State Government. The power of control extends over the whole range of the power to grant licences and the word " control " has a very wide connotation. In our view, the Statute does not in any way delimit the ambit of controlling power. Such control may take the shape of either general or particular instructions. It cannot be said that the District Magistrate is the statutory authority solely entrusted with the power to grant or refuse a licence…………..”

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“………….The words, in section 5(3) " to such persons as it thinks fit " and "such terms and conditions, and. . . . such restrictions as it may determine" do not, in our opinion, necessarily detract from the power of the State Government to give directions to the licensing authority in regard either to the "persons" or to the "terms, conditions and restrictions". This control over the exhibition of cinematograph films is conceived in the interest of 'safety, convenience, morality and welfare of the public', to use a phrase of the Supreme Court in the cited decisions, and as such made subject to the over-all supervision of the State Government. ……….” (emphasis supplied)

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19. The view taken by the Division bench, in Karnati Rangaiah¹ , on the scope of the Government’s “power of control” was held by the Supreme Court, in the State of Punjab v. Hari Kishan Sharma^[2] , not to represent the true legal position under the relevant provisions of the Act. As the scope and ambit of Section 5(3) of the Cinematograph Act, 1918 fell for consideration in “Hari Kishan Sharma² ” it is useful to read Section 5(3) of the Cinematograph Act, 1918 in juxta-position with

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Section 5(2) of the A.P. Cinema (Regulation) Act, 1955.

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Section 5(3) of the Cinematograph Act, 1918	Section 5(2) of the A.P. Cinema Regulation Act
5(3) Subject to the foregoing	5(2) Subject to the foregoing
provisions of this section, and to the	provisions of this section and to the
control of the (Provincial Government),	control of the Government, the licensing
the licensing authority may grant	authority may grant licences under this
licences under this Act to such persons	Act to such persons as that authority
as it thinks fit, and on such terms and	thinks fit and on such terms and
conditions and subject to such	conditions and subject to such
restrictions as it may determine.	restrictions as it may determine.

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20. As Section 5(3) of the Cinematograph Act is in parimateria with Section 5(2) of the A.P. Cinema (Regulation) Act, and as the Supreme Court in Hari Kishan Sharma² held that the view taken by the Division bench, in Karnati Rangaiah¹ , did not represent the true legal position under the relevant provisions of the Act, the submission, that the word “control” has a very wide connotation and the power of control extends over the whole range of the power to grant licences, does not merit acceptance.

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21. The primary authority to grant or refuse permission is the licensing authority which may grant or refuse to grant the permission applied for. But such a permission granted by the licensing authority is made by the Act subject to the control of the State Government. The words “subject to control” confers both appellate as well as revisional jurisdiction on the State Government, and also empowers it to issue quasi - legislative general directions to the primary licensing authority. But over and beyond that, those words do not confer any power on the State Government. They would not empower the State Government to exercise an original jurisdiction. What is made “subject to the control” of the Government is neither action nor inaction of the permitholder, but the action of the licensing authority. The Section provides for control by the State Government over the licensing authority and its activity, and not over the permit-licence-holder. If the Section is construed as State control extending to, and covering the activity of the permit licence-holder, it would to that extent supplant the primary authority with the State Government. Thereby the revisional or appellate quasi-judicial power of the State Government would be turned into an original power. This interpretation would upset the hierarchical two-tier system of power set up by the Act. While exercising the power of control the Government cannot directly deal

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with the permit holder and his conduct. (D. Satyanarayana v. Govt. of A.P .^[3] ) . The power of control vested in the Government, under subsection (2) of Section 5 of the Act, springs into action only when there is vaccum in the Rules made by the Government in exercise of the powers under Section 11 of the Act. (Nataraj Theatre v. Govt. of Andhra Pradesh^[4] ) .

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22. The control of the Government contemplated by Section 5(2) may justify the issue of general instructions or directions which may be legitimate for the purpose of the Act, and these instructions and directions may necessarily guide the licensing authority in dealing with applications for licences. The said control may involve the exercise of revisional power after an order has been passed by the Licensing Authority. In the context in which the control of the Government has been provided for by Section 5(2), it would be permissible to hold that the said control can be exercised generally before applications for licences are granted, or particularly by correcting individual orders if they are found to be erroneous. The Government cannot, however, assume for itself the powers of the Licensing Authority which have been specifically provided for by Section 5(1) and (2) of the Act. To hold that the control of the Government would justify their taking away the entire jurisdiction and authority from the Licensing Authority is to permit the Government, by means of its executive power, to change the statutory provisions in a substantial manner; and that position clearly is not sustainable. (Hari Kishan Sharma² and Nataraj Theatre⁴ ). 23. G.O.Ms. No.110 dated 19.2.2009 is not referable to Section 5(2) of the Act firstly because GEPL has alone been granted an on-line licence for the entire State of A.P. to the exclusion of all others; such entrustment of total “on-line” tickets to a single agency is ultra vires

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Rule 17-A which stipulates that less than 50% of the total on-line tickets can be entrusted to any one agency; and secondly because the Government cannot usurp the powers of the licensing authority under Section 4 and 5 of the Act, and grant a licence on its own accord to GEPL. The submission that, in the absence of a notification under the proviso to Section 4 of the Act notifying an authority for the entire State to grant an online licence, the Government itself is entitled to exercise the power conferred by the Act on the licensing authority does not merit acceptance. The proviso to Section 4 of the Act enables the Government, by notification, to constitute an authority to be the licencing authority for the purposes of the Act. While the Government has the power, under the aforesaid proviso, to notify the licencing authority for the entire State, it cannot take advantage of its own lapse and contend that, having failed to appoint the authority to grant on-line licences for the entire State, they are entitled to grant the on-line licence on their own accord. Where the legislation or the Rules prescribe a mode for the exercise of power, that power can be exercised only in that manner and in none other. (Nazir Ahmed v. King Empero r^[5] ; Ballabhdas Agarwala v. J.C. Chakravarth i^[6] ; State of U.P. v. Singhara Singh^[7] ; Gujarat Electricity Board v. Girdharlal Motila l^[8] a n d Haresh Dayaram Thakur v. State of Maharashtra^[9] ) .

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24. All that the Government is entitled to do, in the exercise of its powers of control, is to issue quasi-legislative general instructions or directions to the primary licencing authority, and not to substitute or supplant itself for the primary licencing authority. The impugned G.O.Ms. No.110 dated 19.2.2009, issued by the Government permitting GEPL to operate the on-line ticket booking system in the entire State of

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A.P. for a period of 10 years, is without jurisdiction and is ultra vires Sections 4 and 5 of the Act and Rule 17-A of the Rules. The impugned G.O. must therefore be, and is, accordingly, set aside.

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II. DOES G.O.Ms. No.110 DATED 19.02.2009, WHEREBY GEPL HAS BEEN CONFERRED MONOPOLY RIGHTS, VIOLATE ARTICLE 19(1)(g) AND 14 OF THE CONSTITUTION OF INDIA?

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25. It is contended on behalf of the Petitioners that no person can be excluded from carrying on business, and any such exclusion would be in violation of Article 19(1)(g) of the Constitution of India; the Government lacked jurisdiction to accord monopoly rights in favour of GEPL contrary to the Act and the Rules; as selective accord of exclusive rights on GEPL to book tickets “on-line” for the entire State violates the rights of the petitioners, and others similarly situated, the action of the Government is arbitrary, illegal, unreasonable and in violation of Articles 14 of the Constitution of India; creation of monopoly rights in favour of GEPL is against public interest; in appointing a single agency for a long period of 10 years, extendable for a further period of five years, the Government has created a class and thereby aspiring licencees, who are also entitled to be considered for grant of licence under Sec.4 of the Act, have been excluded; the impugned G.O. is discriminatory; selection of GEPL, and conferring monopoly status on them, does not have any nexus with the purported objects of the Act; Rule 17(A) does not enable or admit of monopoly; just like cinematography licences under Rule 11(A), Rule 17(A) enables on-line licences to be granted to more than one person; and it is intrinsically provided therein that there cannot be a monopoly. 26. On the other hand it is contended on behalf of the respondents that all the petitioners herein are companies and not citizens and a complaint by them, of violation of Article 19 of the Constitution of India,

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would not be entertained by this Court; as Rule 17-A is not under challenge in these Writ Petitions, it is not open to the petitioners to contend that adherence to Rule 17-A by the Government has resulted in monopoly status being conferred on GEPL; the Government has placed a cap on the service charges which can be collected by the agency; that itself would remove one of the characteristics of a monopoly; Section 11 (2)(a) of the Act and Rule 17(A) of the Rules empower the State Government to impose conditions or restrictions subject to which a licence or permission can be granted to exhibitors; the petitioners have no right to insist that either the District Collector or any other authority should grant them a licence or permission to sell cinema tickets online; the petitioners have no right, much less a fundamental right, to carry on a particular business i.e., selling of cinema tickets either online or otherwise; the impugned G.O. does not create a monopoly in GEPL as only 50% of the tickets are permitted to be sold online; the petitioners, being non-citizens, do not have a fundamental right under Article 19(1)(g) of the Constitution of India; by operation of law and the policy of the State, the right to be granted a licence can be regulated and restricted; having regard to the nature of the right, and also the subject matter, the State preferred a single online agency to multiple operators, and the same is valid in law; canalization of agencies for operating under a statute, and entrustment or selection of an agency authorized under a statute, (which is not under challenge per se), does not amount to violation of the fundamental right of other operators under Article 19(1)(g) of the Constitution, and does not amount to creation of a monopoly; restrictions on a fundamental right under Article 19 can be imposed by law which includes intra-vires subordinate legislation; and restrictions on the fundamental right under Article 19(1)(g) can also be by way of

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an administrative order passed under Article 162 of the Constitution. 27. It is no doubt true that the right to the grant of a licence can be regulated and restricted by legislation-plenary or subordinate. Section 11(2)(a) enables the Government, by notification, to make rules which may provide for terms and conditions and restrictions, if any, subject to which licences and permissions may be granted under the Act. The terms, conditions and restrictions, subject to which licenses and permissions may be granted under the Section 11(2)(a) of the Act, can be prescribed only by rules made by the Government by way of a notification. The rules which the Government has made, in exercise of its powers under Section 11, are the A.P. Cinema (Regulation) Rules, 1970 which has been amended in G.O.Ms. No.47 dated 10.03.2006. The only rule, which prescribes the terms, conditions and restrictions for the grant of an “online licence” is Rule 17-A. The said Rule does not empower the Government either to grant a licence or accord permission for an agency to sell cinema tickets “on-line”. While the Government has the power to issue general directions to the licensing authority, in exercise of its powers of control under Section 5(2), the power to issue such directions are always subject to the provisions of the Act and the Rules. Even if it be considered necessary to issue directions in matters which are governed by statutory provisions, the directions cannot be so made or utilised as to override statutory provisions, as such a method would destroy the very basis of the rule of law, and strike at the very root of orderly administration of law. (Mannalal Jain v. State of Assa m^[10] ) .

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28. The meaning of the word “regulation” in the Shorter Oxford Dictionary is "the act of regulating" and the word "regulate" is given the meaning "to control, govern, or direct by rule or regulation". The word "regulation" is a word of broad import comprehending all

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facets not only specifically enumerated in the Act but also embraces within its fold powers incidental to the “regulation”. The legislature cannot delegate its power to make a law but it can make a law delegating the power to determine some facts, or state of things, upon which the law makes or intends to make its own action depend. The law having laid down the broad principles of its policy, the Legislature can then leave the details to be supplied by the administrator bearing in mind the need to adjust to the rapidly changing circumstances. (D.K.V. Prasada Rao v. Govt. of A.P .^[11] ; Indu Bhushan Bose v. Rama Sundari Deb i^[12] ) . Though it is in the realm of a private contract, when persons undertake the business or occupation of exhibiting cinematography, or matters incidental thereto, it is "clothed with a public interest" as the cine-going public acquire a direct interest in having easy access of admission into the theatres. Thereby the business ceases to be "Juris Privati", tends to a common charge, and becomes a thing of public interest and use. It becomes necessary to override the private rights of persons and property so as to effectuate the public order for the general welfare of the citizens. When private property is affected with a public interest, it ceases to be "juris privati", and is clothed with a public interest when used in a manner affecting the community at large. A common law regulation of trade or business may be changed by Statute. While the right of property created by common law cannot be taken away, the law itself, as a rule of conduct, may be changed at the will of the Legislature, unless prevented by constitutional limitations. Such restriction or regulation must also not fall foul of any of the provisions of the Constitution. (D.K.V. Prasada Rao¹¹ ).

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29. The question which necessitates examination is whether the

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impugned G.O. is in violation of the fundamental rights conferred under Article 19(1)(g) and Article 14 of the Constitution of India. Creation of monopoly rights on a citizen would undoubtedly violate Article 19(1)(g) of the Constitution of India unless the State is able to satisfy that it is a reasonable restriction under Article 19(6). If the State confers monopoly rights on a citizen it would be indefensible and impermissible, and would be an infraction of the inviolable provisions of the Constitution. (State of Rajasthan v. Mohan Lal Vyas^[13] ) . Policy restrictions, which partially affect the prospects of a company, cannot be equated with the creation of a monopoly. (Indian Drugs & Pharmaceuticals Ltd. v. Punjab Drugs Manufacturers Assn .^[14] ;

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Ram Jawaya Kapur v. State of Punjab^[15] and Naraindas v. State o f M.P^[16] ) . In cases where the notice inviting tender is open to response by all, even if one single manufacturer is ultimately selected for a region or the entire State, it cannot be said that the State has created a monopoly in favour of a private party. Selecting one manufacturer through a process of open competition is neither creation of a monopoly nor is it in violation of Article 19(1)(g) of the Constitution read with clause (6) thereof. (Assn. of Registration Plates v. Union

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of India^[17] ) . Where the effect of a policy direction to the licensing authorities, issued in the exercise of a statutory power, has resulted in the creation of a monopoly in favour of a person, it may be “a reasonable restriction” on the exercise of the rights conferred by subclause (g) of Article 19(1) in the interest of the general public under clause (6) of Article 19. (Daya v. Joint Chief Controller of Imports

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and Exports^[18] ) . In Indian Drugs & Pharmaceuticals Ltd.¹⁴ the Supreme Court held that a monopoly, as contemplated under Article

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19(6) of the Constitution, is something to the total exclusion of others; creation of a small captive market in favour of a State-owned undertaking out of a larger market cannot be termed as creation of a monopoly as contemplated under Article 19 of the Constitution, more so when this captive market consists only of State-owned hospitals and dispensaries.

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30. The contention urged on behalf of the respondents is that all the petitioners (in these batch of Writ Petitions) are companies incorporated under the Companies Act, and are not citizens; and as the fundamental right under Article 19(1)(g) is guaranteed only to citizens, the petitioners cannot be heard to contend that their fundamental right under Article 19(1)(g) of the Constitution of India is violated. A corporation may have a nationality in accordance with the country of their incorporation, but that does not necessarily confer citizenship on them. There cannot be citizens of this country who are neither to be found within the four-corners of Part II of the Constitution or within the four-corners of the Citizenship Act. These two provisions are exhaustive of the citizens of this country, Part II deals with citizens on the date the Constitution came into force, and the Citizenship Act deals with citizens thereafter. Citizens of this country can only be natural persons. That corporations may be nationals of the country, for purposes of international law, will not make them citizens of this country for the purposes of municipal law or the Constitution. The word “citizen” used in Article 19 of the Constitution is in the same sense in which it was used in Part II of the Constitution. A Corporation cannot be said to be a citizen either by itself or by taking it as the aggregate of citizens. Nationality of a corporation is a different concept not to be confused with citizenship of natural persons. The word “citizen” in Article 19(1) (f) and (g) refers to a natural person. (State Trading

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Corpn. of India, Ltd. v. CT O^[19] ; Nalanda Educational Society, Kondapur v. Govt. of A.P .^[20] ) . The company, being an artificial legal person, cannot claim the benefit of the provisions of Article 19(1) (g) of the Constitution. The company is not a citizen and has no fundamental right under Article 19. (Barium Chemicals Ltd. v. Company Law Board^[21] ) . If the corporation is to be regarded as a separate entity from its members, and not merely as an association of individuals, it is not permissible to tear the veil aside to determine the citizenship of the members, and then to give the corporation the benefit of Article 19 of the Constitution. (State Trading Corpn. Of India Ltd.¹⁹ ). In the instant case, the shareholders have neither joined the Writ Petition as parties nor is there a plea that the fundamental rights of such shareholders are violated. All the petitioners in these batch of Writ Petitions are companies incorporated under the Companies Act and, as they are not citizens, they are not entitled for the protection of Article 19(1)(g) of the Constitution.

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31. The petitioners would, however, contend that since GEPL has been singled out for favourable treatment, and has been granted an on-line agency for the entire State of A.P, the said order violates Article 14 of the Constitution of India. Any scheme where the offer is open only to a limited class of persons effectively shutting out all others is ex facie discriminatory and imposes unreasonable restrictions upon the right of persons, other than those who belong to the limited class, to carry on business. The scheme would violate the fundamental right under Article 14 as it gives rise to a monopoly in the trade to certain traders, and singles out other traders for discriminatory treatment. (Rashbihari Panda v. State of Orissa^[22] ) . In order to pass the test of

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a permissible classification under Article 14 two conditions must be fulfilled, namely, (i) the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and (ii) the differentia must have a rational relation to the object sought to be achieved. In order to accept a classification as permissible, and not hit by Article 14, the measure in question will have to pass these twin tests. Before a classification of one individual can be sustained as valid, this Court must be satisfied that there is a reasonable basis for grouping the individual as a class by himself, and such reasonable basis must appear either on the face of the order or must be deducible from other surrounding circumstances or matters of common knowledge. If no such reasonable basis of classification appears or is deducible from the surrounding circumstances, the classification will have to be struck down as an instance of naked discrimination. (Dimapati Sadasiva

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Reddi, Vice-Chancellor, Osmania University v. Chancello r^[23] ; Budhan Choudhry v. State of Biha r^[24] ; Ram Krishna Dalmia v. Shri Justice S.R. Tendolka r^[25] ) .

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32. The following reasons are put forth as necessitating introduction of an “on-line ticket booking system”, and entrusting its operations to a single agency. They are (a) the on-line system will facilitate hasslefree ticket booking for cinema viewing; (b) the project is likely to provide employment; (c) the system will function by levying a service charge which will generate considerable government revenue as service tax; (d) the general public, who purchase tickets waiting in queues for long hours, will be benefited; (e) stampede in cinema theatres, when new movies are released, can be avoided; (f) it would facilitate disclosure of sales volumes, and prevent tax evasion; (g) it

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would bring in transparency and improve tax collection; and (h) blackmarketing of cinema tickets would be prevented thereby. 33. It is wholly unnecessary, for achieving the objects afore mentioned, that the on-line agency for the entire State must be entrusted only to a single agency. As rightly contended by the petitioners, in an on-line ticket booking system a gateway is provided to a server maintained by the theatre where tickets are sold not just through agents but also by the theatres directly through their website ensuring that there is no duplication in issue of tickets, and there is no confusion; this technological feature was not even noticed by the Committee while recommending issue of on-line agency to one entity as they felt that the issue of tickets by more than one agency would result in confusion and duplication; airline tickets with specific seat numbers are sold on the internet through various agents like travelguru.com, yatra.com, cleartrip.com etc. where each on-line agency is connected to the airline server, and no ticket can be issued more than once; and this feature was not taken into consideration by the Committee while recommending grant of privilege of an on-line ticket booking agency only to GEPL. G.O.Ms. No.110, which shuts out all others who are eligible, and confers exclusive privilege of operating an on-line ticket booking system for the entire State only on GEPL, has no relation to the objects afore-mentioned. The impugned G.O. is exfacie discriminatory, and imposes an unreasonable restriction on the right of persons, other than GEPL, to seek grant of an on-line ticket booking agency for the entire State or a part thereof. The impugned G.O. is in violation of Article 14 of the Constitution of India, and must be set aside on this ground also.

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III. SHOULD THE GOVERNMENT HAVE ISSUED A NOTIFICATION INVITING OFFERS FROM ALL THOSE ELIGIBLE?

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34. It is contended on behalf of the petitioners that the Government has not adopted a fair and transparent procedure for identifying deserving appointees/selectees; and such arbitrary choice of a person is ex-facie illegal. On the other hand it is contended on behalf of the respondents that it is not necessary, in every case of grant of licence, that the Government ought to issue a paper notification inviting applications.

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35. The report of the expert committee dated 03.11.2008 makes a distinction between the proposal submitted by GEPL and the proposals submitted by the other four companies. As to whether there are other agencies who would also be able to provide the facilities, which GEPL had agreed to provide, has not been ascertained either by the Government or by the expert committee while making its recommendations. By their failure, to invite applications from all those who are eligible, the Government has effectively shut out all others who may well have satisfied the eligibility criteria for grant of an on-line ticket booking agency.

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36. It is no doubt true that, unless any illegality is committed in the execution of a policy or the same is contrary to law or malafide, a decision bringing about change cannot per se be interfered with by the

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Court. (BALCO Employees' Union (Regd.) v. Union of India^[26] ; Villianur Iyarkkai Padukappu Maiyam v. Union of India^[27] ) . It is, however, well settled that a policy decision notwithstanding, the selection of a particular agency, decided upon in implementing the policy decision, may well be set aside if it infringes Article 14 of the Constitution or some other fundamental right. (Glass Chatons

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Importers and Users' Assn. v. Union of India^[28] ) . The three member committee merely examined the feasibility of the proposals

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submitted by five companies including GEPL, and was satisfied that the proposal submitted by GEPL merited acceptance. The proposal submitted by these five companies was not as a result of an open offer being extended inviting applications from all those eligible. As noted hereinabove limiting the scrutiny only those who had submitted representations on their own accord, and thereby excluding from consideration all those who may well have applied if an advertisement had been issued, is ex-facie discriminatory more so as no reasons are forthcoming in justification of the consideration being limited only to those five companies which had submitted representations on their own accord. There may well have been others, eligible to compete for grant of “on-line licence”, who may not even be aware that the Government was considering proposals to accord permission to a single agency to book tickets online for the entire State. Selection of a person to whom a licence should be granted cannot be left to mere chance as only those with easy and ready access to the corridors of power would be aware that the Government was considering grant of a licence to book tickets “on-line” to a single operating agency throughout the State.

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37. While granting largesse, the action of the Government must conform to standards or norms which are not arbitrary, irrational or irrelevant. Such power or discretion must also be confined and structured by rational, relevant and non-discriminatory standards or norms and, if the Government departs from such standards or norms in any particular case or cases, its action would be liable to be struck down, unless it can be shown that such departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory. (Ramana Dayaram Shetty v. International Airport Authority of India^[29] ; Ram and Shyam Co.

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v. State of Haryana^[30] ; P. Narayana Reddy v. Government of

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Andhra Pradesh^[31] ) . The Executive does not have an absolute discretion. Certain principles have to be followed, public interest being the paramount consideration. (Meerut Development Authority v. Association of Management Studies^[32] ) . For securing the public interest, one of the methods recognised is to invite bids affording an opportunity to all those eligible to submit offers for consideration in an objective manner. Once the State decides to grant any right or privilege to others, there is no escape from the rigour of Article 14. (Meerut Develpment Authority³² ). If the decision in respect of commercial transactions is influenced by extraneous considerations, which ought not to have been taken into account, the ultimate decision is bound to be vitiated even if it is established that such decision had been taken without bias. (Kasturi Lal Lakshmi Reddy v. State of Jammu and Kashmi r^[33] ; P. Narayana Reddy³¹ ).

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38. Wherever a licence is to be given, the public authority must adopt a transparent and fair method for making selections so that all eligible persons get a fair opportunity of competition. The State and its agencies/instrumentalities must always adopt a rational method, and no attempt should be made to scuttle the claim of worthy applicants.

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(Centre for Public Interest Litigation v. Union of India^[34] ) . Transparency in the grant of licences and compliance with Article 14 of the Constitution would, inter alia, be ensured by holding public auction upon issuance of advertisement in well known newspapers. (Nagar Nigam, Meerut v. Al Faheem Meat Exports Pvt. Ltd^[35] ; P. Narayana Reddy³¹ ).

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39. The Government has not followed a fair and transparent procedure in the selection of the “online agency”. Failure on their part to invite applications from all those eligible, and restricting consideration only to those five who had submitted representations, would fall foul of Article 14 of the Constitution of India. It is no doubt true that not resorting to an open invitation to offer would not, in all cases, be deemed to be the result of the exercise of the executive power in an arbitrary manner. Making an exception to the general rule can be justified by the Executive, if challenged in appropriate proceedings. (Netai Bag v. State of West Benga l^[36] ; P. Narayana Reddy³¹ ). But then no reasons are given in the report of the three member committee or in the impugned G.O. or even before this Court as to why the Government chose to adopt this opaque procedure, and why it necessitated departure from the normal rule of extending an open invitation to offer to all those eligible.

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40. Reliance placed on behalf of the respondents on State of M.P.

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v. Nandlal Jaiswa l^[37] ; Assn. of Registration Plates¹⁷ and Villianur Iyarkkai Padukappu Maiyam²⁷ , is misplaced. In Nandlal Jaiswal³⁷ , the Supreme Court held that, when the State Government grants a licence for putting up a new industry, it is not necessary that it should advertise and invite offers; the State Government was entitled to negotiate with those who had come up with an offer to set up such an industry; if the State entered into a contract with such an entrepreneur for providing resources and other facilities for setting up an industry, the contract would not be assailed as invalid so long as the State has acted bona fide, reasonably and in public interest; if the terms and conditions of the contract or the surrounding circumstances showed that the State had acted mala fide or out of improper or corrupt motive

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or in order to promote the private interests of someone at the cost of the State, the Court would undoubtedly interfere and strike down the State action as arbitrary, unreasonable or contrary to public interest; but as long as the State action was bonafide and reasonable, the Court would not interfere merely on the ground that no advertisement was given or publicity made or tenders invited. Unlike in Nandlal Jaiswal³⁷ , the present case does not relate to the establishment of an industry but with the grant of a licence to a single agency to book tickets on-line for the entire State. In the case on hand, proposals submitted by five companies on their own accord was considered, and it was not as if there was only one eligible agency to whom the licence could be granted.

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41. In Assn. of Registration Plates¹⁷ , the Supreme Court held that Article 14 of the Constitution prohibits the Government from arbitrarily choosing a person at its will and pleasure; it has to act reasonably, fairly and in public interest; at the same time, no person can claim a fundamental right to carry on business with the Government; all that he can claim is that in competing for the contract/licence, he should not be unfairly treated and discriminated, to the detriment of public interest; and the Court should be prepared to enforce standards of fairness on the Government in its dealings with tenderers. Unlike in Assn. of Registration Plates¹⁷ , wherein the notice inviting tender was open to response by all, in the present case all those eligible have not even been invited to compete and the proposals of only those five, who had submitted representations on their own accord, were considered.

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42. In Villianur Iyarkkai Padukappu Maiyam²⁷ , the Supreme Court held that when State largesse is decided to be conferred, resort should be had to public auction or by way of inviting tenders. This principle

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would apply in cases where a State asset is sought to be sold or the State purchases goods, and not in dealing with a major issue of economic development. Reliance placed on Villianur Iyarkkai Padukappu Maiyam²⁷ is misconceived. In the said judgment the Supreme Court noted that the existing port at Pondicherry was being developed to meet rapid changes in transport technology and to improve the existing port facilities on a build, operate and transfer basis; the technology for development of the port was not available for the mere asking; and other leading firms and companies were found not suitable to develop the port. It is in such circumstances that the Supreme Court upheld the action of the Government in selecting the developer without taking the tender route. (P. Narayana Reddy³¹ ). 43. The Government’s failure to invite bids/offers from all those eligible to provide “online booking system” for sale of cinema tickets in the State of Andhra Pradesh would render its decision in G.O.Ms. No.110 dated 19.02.2009, in selecting GEPL as the sole agency, arbitrary and in violation of Article 14 of the Constitution of India. The impugned G.O. must also be set aside on this ground. IV POLICY DECISION OF THE GOVERNMENT IN G.O.Ms. No.110 DATED 19.2.2009 – SCOPE OF INTERFERENCE?

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44. It is contended on behalf of the respondents that the Act and the Rules empowered the State Government to introduce the system of selling tickets online; this is a policy decision taken by the State Government in the public interest; the Government has the discretion to decide whether or not to have a single on-line agency for the entire State or multiple operators; the Government issued G.O.Ms. No.110 dated 19.02.2009 accepting the recommendations of the three member committee constituted under G.O.Ms. No.1571 dated 25.08.2008; the Committee, for reasons recorded in its report dated 3.11.2008, had

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recommended grant of online ticket agency to a single operator; in the course of execution of its policy decision, to have a single agency all over the State, the Government had issued consequential direction in two parts in G.O.Ms. No.110 dated 19.2.2009; the said policy decision is in the nature of a guidance to the licensing authority on whether or not to grant a licence to a single agency for the entire State or a part thereof, which power is referable to the “control” of the Government under Section 5(2) of the Act; all the operators desired to secure an online license, but argued in favour of multiple operators for a prescribed area; GEPL was the only agency which argued for a single online agency for the entire State; a policy decision was taken by the Government to grant online agency to a single operator; as GEPL alone could operate as the sole agency consistent with the policy of the State, they were selected as the single on-line agency for the entire State; and G.O.Ms. No.110 dated 19.02.2009 is the policy decision of the Government to grant licence to a single agency for the entire State. 45. Courts do not normally interfere with the policy decisions of the Government. The wisdom in a policy decision of the Government or statutory authorities is not justiciable unless such policy decision is capricious, arbitrary, whimsical so as to offend Article 14 of the Constitution or any statutory or constitutional provision. The only thing to be seen by the Court, when a policy decision is assailed, is whether the policy in question is arbitrary or violative of any mandatory provisions of law. Unless the policy decision is inconsistent with the Constitution or the laws, the Court must exercise jurisdiction with circumspection, particularly where legal and technical issues are intertwined with the policy decisions. (Leaap Forwarders (P) Ltd. v. Commissioner of Central Excise and Customs, Guntu r^[38] ; Tata

¶103

Iron and Steel Co. Ltd. v. Union of India^[39] ; Bennett Coleman &

¶104

Co. v. Union of India^[40] ) . It may be difficult for any court to have adequate material to come to a proper decision whether a particular policy is, on a consideration of all the various factors involved, in the general interests of the public. Even if the necessary material was available it is possible that in many cases more than one view can be taken whether or not a particular policy is in the general interests of the public. In this state of things the burden on the person challenging that the policy of the Government is not in the general interests of the public will be heavy. The Court would proceed on the assumption that the decision is in the interests of the general public unless the contrary is clearly shown. (Glass Chatons Importers and Users' Assn.²⁸ ). It is neither within the domain of the courts nor the scope of judicial review to embark upon an enquiry as to whether a particular public policy is wise or whether a better public policy can be evolved. The court cannot examine the relative merits of different policies and strike it down merely on ground that another policy would have been fairer and better. (Villianur Iyarkkai Padukappu Maiyam²⁷ ).

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46. The Government is entitled to make pragmatic adjustments and policy decisions as may be necessary or called for under the prevalent peculiar circumstances. The court cannot strike down a policy decision taken by the Government merely because it feels that another decision would have been fairer or wiser or more scientific or logical. A policy decision can be interfered with by the court only if such a decision is shown to be patently arbitrary, discriminatory or malafide. (Ram Singh

¶106

Vijay Pal Singh v. State of U.P .^[41] ; Netai Bag³⁶ ; Nandlal Jaiswal³⁷ ). It is true that the Court may even review the policy of the executive if it is clearly demonstrated that such policy is contrary to any

¶107

statutory provision or the Constitution. But the Court cannot consider the relative merits of different policies and decide for itself whether a wiser or a better policy can be evolved. (Statewide Recognized (RTA) Agents Welfare Association v. Govt. of A.P .^[42] ) . There is a presumption that the governmental action is reasonable and in public interest, and it is for the party challenging its validity to show that it is wanting in reasonableness or is not informed with public interest. This burden is a heavy one and it has to be discharged to the satisfaction of the court by proper and adequate material. The court cannot lightly assume that the action taken by the Government is unreasonable or against public interest because there are large number of considerations which necessarily weigh with the Government in taking action. (Villianur Iyarkkai Padukappu Maiyam²⁷ ). The Government has, while taking a policy decision, the right to ‘trial and error’ as long as both trial and error are bona fide and within limits of authority. (BALCO Employees' Union (Regd.)²⁶ ; Netai Bag³⁶ ; Ram Singh Vijay Pal Singh⁴¹ ).

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47. In taking a policy decision - be it formulation or reformulation - principles of natural justice have no role to play. There is no principle of natural justice which requires prior notice and hearing to persons who are generally affected as a class by a policy decision of the Government and particularly in cases where no statutory or constitutional rights are infringed. (Statewide Recognized (RTA) Agents Welfare Association⁴² ). A policy decision can be interfered with by the court only if such decision is shown to be patently arbitrary, discriminatory or mala fide. (Nandlal Jaiswal³⁷ ).

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48. Policy decisions of the Executive cannot fall foul of constitutional provisions or the provisions of a statute or statutory rules. Even if

¶110

G.O.Ms. No.110 Home (General-A) Department dated 19.2.2009, whereby the online booking system for the entire State of Andhra Pradesh was sought to be entrusted to a single agency, is held to be a policy decision, such a policy decision is ultravires Rule 17-A which stipulates two, if not more, agencies to be entrusted with the task of booking tickets “online” in the entire State or a part thereof. 49. A three member committee, which was specifically entrusted the task of examining whether a single agency or multiple agencies should be entrusted with the operations of booking tickets “on-line”, recommended in favour of a single agency. On matters affecting policy requiring technical expertise, the court would leave the matter for the decision of those who are qualified to address the issues. Unless the policy or action is inconsistent with the Constitution and the laws or is arbitrary or irrational or is an abuse of power, the court will not interfere with such matters. (Federation of Railway Officers Association v.

¶111

Union of India^[43] ) . As the Court does not possess the expertise required, determination of the matter should be left to be made by experts appointed by the Government. (Leaap Forwarders (P) Ltd.³⁸ ;

¶112

Sher Singh vs. Union of India^[44] ) . The Court would not substitute its opinion for the one formed by experts in the particular field, and would defer to the wisdom of those who are entrusted with the task of framing the policies. However, when it is clearly demonstrated that the policy framed by the State or its agency/instrumentality and/or its implementation is contrary to public interest or is violative of the constitutional principles, it is the duty of the Court to exercise its jurisdiction in larger public interest, and reject the stock plea of the State that the scope of judicial review should not be exceeded beyond recognised parameters. (Centre for Public Interest Litigation³⁴ ). As

¶113

noted hereinabove, the three member committee failed to notice the widely used feature where airline tickets with specified numbers are issued by several on-line ticket booking agencies. Failure to consider a relevant aspect would vitiate the recommendations of the three member committee, and consequently the decision of the Government in G.O.Ms. No.110 dated 19.2.2009, necessitating exercise of its powers of judicial review by this Court in larger public interest.

¶114

50. As noted hereinabove the recommendation of three member committee, and the decision of the Government (even if it be held to be a policy decision), to entrust the online booking system only to a single agency, and not to multiple agencies, also falls foul of Rule 17-A of the Rules. The submission made on behalf of the respondents that this Court should exercise restraint as the decision is a policy decision does not merit acceptance as the Court is duty bound to interfere if a policy decisions fall foul of constitutional or statutory provisions.

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V. OTHER CONTENTIONS:

¶116

51. Under Rule 13(1), a licence granted under the Act shall be either for 5 years or for one year or temporary. It is evident from Rule 13(1) that no licence can be granted under the Act for a period beyond 5 years. The impugned G.O.Ms.No.110 dated 19.2.2009 which, in effect, grants an “on-line” licence for a period of 10 years is ultra vires Rule 13(1) of the Rules. As rightly pointed out by the A.P. Film Chambers of Commerce, in the affidavit filed by them in support of W.P.No.6565 of 2009, the impugned G.O. does not secure the rights of theater owners as it does not guarantee payment by GEPL, to the concerned theatres, of the amounts received by them on the sale of cinema tickets on-line. As pointed out therein if GEPL sold cinema tickets for one week, and failed to make payment of such sale proceeds, the theatre owners would suffer huge financial loss for

¶117

which nobody took responsibility.

¶118

52. It is contended, on behalf of the respondents, that the petitioners had also submitted proposals to operate the “online cinema ticket booking system” in the State; they had participated in the process of selection; the three-member committee had carefully analyzed all pros and cons of the proposal submitted by each of the petitioners and GEPL; the committee had, thereafter, recommended GEPL; it was not open to the petitioners to contend that the very proposal to operate “online cinema ticket booking system” was not permissible; the petitioner could not blow hot and cold; and, having applied for permission and as they had participated in the process of deliberation and selection, it was not open to them to contend that the Government had no power to introduce online cinema ticket booking system in the State, merely because they were not selected.

¶119

53. The mere fact that petitioners had also submitted their proposals does not preclude them from questioning the impugned G.O. on the ground that it violates Article 14 of the Constitution of India, for it is well settled that fundamental rights cannot be waived (Olga Tellis v.

¶120

Bombay Municipal Corporation^[45] ) . As held hereinabove the impugned G.O.Ms. No.110 dated 19.2.2009 is ultra-vires Sections 4 and 5 of the Act and Rule 17-A of the Rules, and is without jurisdiction. An executive order ultra-vires the provisions of a statute, either plenary or subordinate, or an order passed without jurisdiction is a nullity. Neither acquiescence nor consent can confer jurisdiction on the Government as it lacks inherent jurisdiction to pass the order in G.O.Ms.No.110 dated 19.2.2009. Consent cannot give jurisdiction if a condition which goes to the root of the jurisdiction has not been performed or fulfilled. No consent can give jurisdiction to an authority which it does not possess. (United Commercial Bank Ltd v.

¶121

Workmen^[46] ; Dharma Prathishthanam v. Mahok Construction (P) Ltd .^[47] ) . Where an authority making an order lacks inherent jurisdiction, such order would be without jurisdiction, null, non est and void ab initio as such a defect of jurisdiction of an authority goes to the root of the matter and strikes at its very authority to pass an order. Such a defect cannot be cured even by the consent of the parties. (Deepak

¶122

Agro Foods v. State of Rajastan^[48] ) . For the aforesaid reasons also, the impugned G.O.Ms. No.110 dated 19.2.2009 is liable to be, and is accordingly, set aside. 54. As G.O.Ms. No.110 dated 19.2.2009 is set aside on grounds afore-mentioned, it is wholly unnecessary for this Court to examine whether the three member committee constituted by the Government was only to make its subsequent decision appear reasonable; and whether the reasons given by the Committee, which were relied upon by the Government, are irrational, unreasonable, have no nexus to the objects, and is in violation of Article 14 of the Constitution of India. 55. Viewed from any angle G.O.Ms. No.110 dated 19.2.2009 is liable to be, and is accordingly, set aside as being violative of Article 14 of the Constitution, ultra vires Sections 4 and 5 of the Act and Rules 13(1) and 17-A of the Rules, and as without jurisdiction.

¶123

56. The Writ Petitions are, accordingly, allowed. However, in the circumstances, without costs. Date: 27.02.2012 ____________________________

¶124

Note: L.R. copy to be marked B/o ASP/MRKR

¶125

[1] AIR 1957 AP 513

¶126

[2] AIR 1966 SC 1081

¶127

[3] AIR 1979 AP 259

¶128

[4] 1999(5) ALD 693

¶129

[5] AIR 1936 PC 253

¶130

[6] AIR 1960 SC 576

¶131

[7] AIR 1964 SC 358

¶132

[8] AIR 1969 SC 267

¶133

[9] AIR 2000 SC 2281

¶134

[10] (1962) 3 SCR 936

¶135

[11] AIR 1984 AP 75

¶136

[12] AIR 1970 SC 228

¶137

[13] (1971) 3 SCC 705

¶138

[14] (1999) 6 SCC 247

¶139

[15] AIR 1955 SC 549

¶140

[16] (1974) 4 SCC 788

¶141

[17] (2005) 1 SCC 679

¶142

[18] (1963) 2 SCR 73

¶143

[19] (1964) 4 SCR 99

¶144

[20] 2011 (2) ALD 163

¶145

[21] 1966 Supp SCR 311

¶146

[22] (1969) 1 SCC 414

¶147

[23] AIR 1967 SC 1305

¶148

[24] (1955) 1 SCR 1045

¶149

[25] (1959) SCR 279

¶150

[26] (2002) 2 SCC 333

¶151

[27] (2009) 7 SCC 561

¶152

[28] (1962) 1 SCR 862

¶153

[29] AIR 1979 SC 1628

¶154

[30] AIR 1985 SC 1147

¶155

[31] (2010) 3 ALD 505 (DB)

¶156

[32] (2009)6 SCC 171

¶157

[33] AIR 1980 SC 1992

¶158

[34] Judgment in Writ Petition (Civil) No.423 of 2010 dated 02.02.2012

¶159

[35] 2007 (2) AWC 1366

¶160

[36] AIR 2000 SC 3313

¶161

[37] (1986) 4 SCC 566

¶162

[38] 2001 (3) ALD 216 (DB)

¶163

[39] AIR 1996 SC 2462 [40] (1972) 2 SCC 788 [41] (2007) 6 SCC 44 [42] 2003(3) ALD 212 (DB) [43] (2003) 4 SCC 289 [44] (1995) 6 SCC 515 [45] AIR 1986 SC 180 [46] AIR 1951 SC 230 [47] 2005(9) SCC 686

¶164

[48] 2008(7) SCC 748

The Andhra PRadesh Film Chamber of Commerce v. The Government of Andhra Pradesh, rep.by its Principal

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The Andhra PRadesh Film Chamber of Commerce v. The Government of Andhra Pradesh, rep.by its Principal

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