Explanation:

Creation of state monopoly is a part of constitutional scheme and is not violative of Article 14

Article 14 
Equality before law The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India Prohibition of discrimination on grounds of religion, race, caste, sex or place of birth

Under Bhikaji Narain's case
"It will be noticed that Clause (6), as amended, was not made retrospective as the amended Clause (2) had been made. The contention of the respondents before us is that although the amending Act, on the authority of our decision in Saghir Ahmad's case (A) (supra) became on and from 26-1-1950 void as against the citizens to the extent of its inconsistency with the provisions of Article 19(1)(g), nevertheless, after 18-6-1951 when Clause (6) was amended by the Constitution (First Amendment) Act, 1951 the amending Act ceased to be inconsistent with the fundamental right guaranteed by Article 19(1)(g): read with the amended Clause (6) of that article, because that clause as it now stands, permits the creation by law" of State monopoly in respect, 'inter alia', of motor transport business and it became operative again even as against the citizens.

Hence option 1st is correct.