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Judgment
P. Jyothimani, J.—This writ appeal is directed against the order of the learned Single Judge dated 18.12.2007 passed in W.P.No.28758 of
2007, dismissing the same.
The license to run a petroleum outlet at Alangudi Road, Pudukkottai was granted to one Mrs.Sumathi for a period of one year from 2002-2003
and it was subsequently renewed. It appears that she was not able to continue to run the outlet and therefore, she proposed to sell the land, which
was purchased by the appellants, who are mother and son respectively.
It is the case of the appellants that, after the purchase, they have applied to the second respondent/Corporation and based on an interview, a
contract was entered into between the Corporation and the appellants, originally, for one year 2004-2005, which was renewed for the years
2005-2006 and 2006-2007 and was subsequently renewed for a period of six months, valid up to 30.9.2007. During the subsistence of the
contract, the second respondent has issued a notice on 11.7.2007, terminating the contract with effect from 10.8.2007. It was aggrieved over the
said order of termination of the contract, the appellants have filed the writ petition.
Considering the submissions made on behalf of the appellants that (i) what was granted to the appellants was not a license, but a permission, and
when the same was renewed, the termination of contract, before the expiry of renewed period without any reason or fault on the appellants, would
amount to denial of principles of natural justice; and (ii) there has not been equal bargaining power between the parties and therefore, the
termination of license was arbitrary, the learned Single Judge, by relying upon one of the Clauses of the agreement, namely Clause 48, which
provides for such termination of contract even before the expiry of the period without assigning any reason, has, ultimately, dismissed the writ
petition holding that there is no legitimate expectation and that there is no vested right conferred on the appellants to continue the permission or
license.
The admitted fact remains that the land to an extent of 7185 sq.ft. belonged to one Mrs.Sumathi, to whom the second respondent has granted
license to run a petroleum outlet in the year 2003. It was the case of the appellants in the writ petition that in the year 2004, the first appellant has
applied for grant of dealership for petroleum retail outlet in favour of the second appellant at Annavasal Road, owned by her. It is their case that,
when such application was pending, the first respondent has invited the second appellant for an interview for award of license to run petroleum
outlet. It is the case of the appellants that the first respondent has advised that the above said Mrs.Sumathi is running a unit, which has become sick
and not viable due to improper management, and the second appellant can purchase the land from her and it was based on the said promise, it was
stated that the second appellant has purchased the above said land from Mrs.Sumathi.
It is also stated that, in the meantime, the first respondent has also advised the appellants to take the place on contract basis. Thereafter, the
contract was stated to have been awarded to the second appellant by letter dated 8.3.2004, effective from 31.3.2004 for one year. It was
renewed from 1.4.2004 to 31.3.2006 and it was thereafter renewed for a further period of one year 1.4.2006 to 31.3.2007, which was
subsequently renewed for six months, valid up to 30.9.2007. As stated above, before the expiry of the period, a notice of termination was issued
on 11.7.2007, terminating the contract with effect from 10.8.2007.
A reference to the order passed by the second respondent dated 8.3.2004 addressed to the second appellant shows that the second appellant
has been selected as Maintenance and Handling Contractor for operation of its COCO at Pudukkottai. Therefore, it was not a license or
dealership granted to the second appellant by the second respondent, but only a contract for maintenance and handling of their COCO outlet.
After the purchase of the land from Mrs.Sumathi, who has originally leased out the property to the second respondent for a period of fifteen
years, since the said previous owner Sumathi has written to the second respondent about the sale of property to the second appellant, it appears
that the above said contract has been awarded by the second respondent to the second appellant.
The contract, which was entered into between the second appellant and the second respondent, itself is captioned as a ""Contract for
Maintenance and Handling"". The contract is for the purpose of selling the petroleum products of the second respondent, more particularly, Petrol,
Diesel, lubricants and such other petroleum products and also to render services as per the said contract and for the purpose of the same. It was
with a desire to engage a contractor to operate the outlet for retail sale of the said products, the second appellant was appointed as a Maintenance
and Handling contractor.
Clause 48 of the said contract, which is as follows, makes it clear that the agreement may be terminated at the option of either party by giving
one month''s notice in writing and without assigning any reason. It also states that, in case of breach of contract, the second respondent reserves its
right to terminate the contract immediately, which means without notice.
The agreement will be for a period of ONE YEAR effective from 31.3.2006 to 30.3.2007 subject to the renewal by the year 2007 at the
Company''s option at the same rates, and on the same terms and conditions as are herein contained. Without prejudice to the aforesaid, this
Agreement may be terminated at the option of either party by giving at least one month''s notice in writing to the other party, without assigning any
reason whatsoever. In case of breach of contract, the Company reserves the right to terminate this Agreement forthwith. Unless otherwise
mentioned or renewed in writing this Agreement stands automatically terminated at the end of the agreement period. If any information given by the
M & H Contractor in his application for appointment shall be found to be untrue or incorrect, in material respect, the Company reserves the right
to terminate this Contract forthwith.
(emphasis supplied)
Clause 51 of the said agreement, which is as follows, provides for resolution of dispute by arbitration process.
Any dispute or difference of any nature whatsoever or regarding any right, liability, act, omission on account of any of the parties hereto arising
out of or in relation to this Agreement or any interpretation of any Clause or provision hereof shall be referred to the sole arbitration of the Head of
the Region, of the Company, or of some officer of the Company who may be nominated by the Head of the region. The M & H Contractor will
not be entitled to raise any objection to any such arbitrator on the ground that the arbitrator is an office of the Company. In the event the arbitrator
to whom the matter is originally referred to is transferred or vacates his office or is unable to act for any reason the Head of the Region as aforesaid
at the time of such transfer, vacating of office or inability to act, shall designate another person to act as an arbitrator in accordance with the terms
of the Agreement. Such person shall be entitled to proceed with the reference from the point at which it was left by his predecessor. It is also a
term of this Agreement that no person other than the Head of the Region or a person nominated by him/her shall act as sole arbitrator hereunder.
The award of the arbitrator so appointed shall be final, conclusive and binding on all parties to the Agreement, subject to the provisions of the
Arbitration & Conciliation Act, 1996 and the Rules made thereunder or any statutory modification or re-enactment thereof and for the time being
in force.
(emphasis supplied)
It is not in dispute that after the expiry of contract period on 31.3.2007, the same was extended by the second respondent in favour of the
second appellant up to 30.9.2007.
By a termination letter dated 11.7.2007, the second respondent has given one month''s notice, as per Clause 48 of the above said agreement,
stating that the contract stands terminated with effect from 10.8.2007, which is as follows:
We hereby give one month''s notice w.e.f. 11.07.07 as per Clause No. 48 of the M&H agreement executed on 9.6.2006, and terminate the M&H
Contract awarded to you for our COCO at Sy.No. 152/4B, Pudukottai North Panchayat, Alangudi Road, Pudukottai. Necessary instruction for
the safe handover of the COCO to our Company Officials will be adivsed by our Dy.Manager(S), Madurai. Please be advised that your contract
stands terminated on 10.8.2007.
On the above said undisputed factual background, the primary contention raised by the learned Counsel for the appellants, against the said
termination order, is that:
(i) the termination order is discriminatory and violative of Article 14 of the Constitution of India;
(ii) the order terminating the contract is a colourable exercise of power, since the intention of the second respondent, after terminating the contract,
is to give it to a third party, which cannot be permitted, as under the contract, there is a Clause for renewal and, in fact, the second respondent has
renewed the contract for nearly three terms; and
(iii) the termination is hit by the principles of promissory estoppel, by which the learned Counsel means that it was at the instance of the first
respondent, the second appellant has purchased the property and developed the property with a hope that the contract will be continued.
As far as the maintainability of the writ petition in contractual matters, it is the contention of the learned Counsel for the appellants that for
termination of contract if no reasons are adduced, then the writ petition will be maintainable.
According to the learned Counsel for the appellants, in cases where the parties have unequal bargaining powers, arbitrariness has to be
checked only by this Court under Article 226 of the Constitution of India and in this regard, he would rely upon the judgment of the Supreme
Court in United India Insurance Co. Limited v. Manubhai Dharmasinhbhai Gajera and Ors. JT 2008 (5) SC 457 and Delhi Development
Authority, N.D. and Another Vs. Joint Action Committee, Allottee of SFS Flats and Others, .
To substantiate his contention that even in respect of contractual matters, if there is discrimination, this Court can interfere, the learned Counsel
for the appellants would rely on the decisions of the Supreme Court in Ramana Dayaram Shetty Vs. International Airport Authority of India and
Others, , Dwarakadas Marfatia & Sons v. Board of Trustees, Bombay Port AIR 1989 SC 1642 and Kumari Shrilekha Vidyarthi and Others Vs.
State of U.P. and Others, .
The learned Counsel for the appellants would rely upon the decision of the Supreme Court in Narendra Kumar Maheshwari Vs. Union of
India (UOI) and Others, to substantiate his contention that in case of irrationality and irrelevancy the interference by this Court is permissible.
He would also rely upon the judgment of the Supreme Court in State of Arunachal Pradesh Vs. Nezone Law House, Assam, to contend that
in the absence of any reason, which is given in the order of termination, especially when it is not in dispute that the second respondent is going to let
the outlet to only a third party, a writ petition would lie.
To substantiate his contention about legitimate expectation, the learned Counsel for the appellants would rely upon the decision of the Supreme
Court in Ibrahimpatnam Taluk Vyavasaya Collie Sangham Vs. K. Suresh Reddy and Others, and Beg Raj Singh Vs. State of U.P. and Others, .
On the other hand, it is the submission of Mr. Abdul Saleem, learned Counsel appearing for the respondents, that what was given to the
second appellant was not a dealership, but only a service contract for maintenance and handling and that was also only on a temporary and adhoc
basis, pending the regular dealership contract to be awarded to the persons as per law.
It is the submission of the learned Counsel for the respondents and also not in dispute that the previous owner Mrs.Sumathi has leased the land
to the second respondent for a period of fifteen years from 18.7.2003 for running an outlet. Based on that, in fact, the second respondent has given
a contract of service to the husband of Mrs.Sumathi, Mr.Nandagopal, for a period of six months from 1.10.2003 to 1.4.2004. It was thereafter,
when the second appellant has applied, the contract was given to him, which was renewed up to 30.9.2007. That was originally given by the
Indian Oil Corporation, which has subsequently merged with the second respondent.
It is also his contention that it has been the specific case of the respondents that at no point of time they have insisted the appellants to purchase
the property from Mrs.Sumathi and the purchase of land by the second appellant from the said Mrs.Sumathi on 24.7.06 was on his own volition. It
is also his case that what was purchased by him was only land, whereas the infrastructure has already been provided by the second respondent
and therefore, it is not correct to state as if the appellants, after the purchase of land, have spent substantial amount for the purpose of
improvement.
It is also his submission that a Clause in the contract, which states that the maintenance and handling contractor should inform the Company at
least thirty days in advance of the expiry of the license or permission to enable the company to renew, relates to the other statutory authorities like
the Fire Department, etc., who grant permission for the purpose of running the retail outlet for petroleum products.
The learned Counsel for the respondents submits that this being a contract given only for a limited period, and the respondents having never
promised anything to the appellants, the plea of legitimate expectation raised by the appellants is unsustainable.
He would also submit that after purchase of the property, by letter dated 12.8.2007, the first appellant has, in fact, terminated the lease
agreement with the second respondent/Corporation. This will prove that the appellants case of legitimate expectation has no basis. He would also
submit that even in a suit filed by the appellants against the Corporation, it was never whispered by the appellants that the Corporation has insisted
the appellants to purchase the land from Mrs.Sumathi.
It is his further submission that, after dismissal of the writ petition, the contract for Maintenance and Handling has already been awarded to one
Manikammal.
The learned Counsel for the respondents also relied on the decisions of the Supreme Court in Director General of Foreign Trade, Ministry of
Commerce and Another Vs. R.B. and Sons and Another, to substantiate his contention that, even if the contract is terminated, the right of the
appellants is to only claim damages.
He would also submit that the appellants have no vested interest, since what was granted is adhoc arrangement of giving job work and he
would rely upon the judgments of the Supreme Court in Mrs. Sanjana M. Wig Vs. Hindustan Petro Corporation Ltd., and ABL International Ltd.
and Another Vs. Export Credit Guarantee Corporation of India Ltd. and Others, .
We have heard the learned Counsel for the appellants as well as the respondents and also perused the various records, including the order of
the learned Single Judge, which is questioned before us.
On the factual matrix, as enumerated above, it is clear that what was granted by the second respondent to the second appellant was not
petroleum dealership by following the provisions of the relevant law. Simply because the second appellant has applied for regular dealership and
even assuming that an interview has been conducted for that, so long as such regular dealership has not been conferred on him, it cannot be said
that the second appellant has any right of dealership in respect of the sale of the petroleum products of the second respondent.
On the other hand, as per the contract, which has been granted, as stated above, it is clear that what was given to the second appellant was
only contract in respect of the sale of petroleum products of the second respondent/Company, including service and maintenance of the outlet
situated in the land, which originally belonged to one Mrs.Sumathi.
In the context that Mrs.Sumathi has leased out the said land to the second respondent for fifteen years and based on that lease, the second
respondent has put up various infrastructure for the purpose of making the place as a petroleum outlet; and that the second appellant was only
given a contract of maintenance and handling, it is not possible to accept the contention of the learned Counsel for the appellants as if, after
purchase of the property from Sumathi, they have spent huge amount for developing the said land.
Equally, it is not possible to accept the contention of the learned Counsel for the appellants that the second appellant was forced to purchase
the property from Mrs. Sumathi, at the advise of the first respondent. On the categoric stand taken by the first respondent that such an advise has
never been given and in the absence of any document or any other acceptable evidence to that effect, the contention in that regard has to be totally
rejected.
What has, therefore, been granted as a contract is only a contract to render maintenance and service by sale of petroleum products of the
second respondent and that appears to be on adhoc basis, subject to the final decision by the second respondent in awarding regular dealership as
per law. In such a situation, the relationship between the second respondent and the appellants is purely contractual and the question of any
statutory obligation on the part of the second respondent, under any law, does not arise.
The Clause in the agreement, which is relied upon by the learned Counsel for the appellants, in Clause (1)(r), which states as follows, can be
only taken to mean that the second respondent desires the second appellant to inform in advance of the expiry date of the licenses and permissions
in order to enable the second respondent to renew and that, by itself, does not confer any right on the second appellant to have permanent renewal
of the contract.
1(r). The M & H Contractor will inform the Company at least 30 days in advance of the expiry date of the Licenses, permissions, etc. of the retail
outlet to enable the Company to renew the same.
This being a contract in simplicitor between the second appellant and the second respondent, it has no statutory force whatsoever. Even in
cases where there is a breach of contract, the remedy open to the appellants is not certainly by way of filing a writ petition under Article 226 of the
Constitution of India.
In fact, the Clause in the contract, especially Clause 48, enumerated above, makes it very clear that, even during the continuance of the period
of contract, it is open to any one of the parties to the contract to terminate the contract, for which the only requirement is giving one month''s notice
in writing. In fact, it makes it clear that no reason need be assigned for the purpose of terminating the contract, by giving thirty days notice. It is only
in cases where there is a breach of contract, termination can be made immediately. In the present case, inasmuch as the second respondent has
given such notice of thirty days, as contemplated under Clause 48, there is absolutely no scope to contend that such termination letter should give
reasons. Apart from the fact that, under the terms of the contract between the second appellant and the second respondent, no reason need be
assigned and, therefore, the termination order cannot be said to be illegal, it can never be contended that in spite of such specific Clause under the
contract reason should be assigned.
On the factual situation, as stated above, and in the absence of any statutory obligation that has been imposed on the second respondent in
respect of the adhoc contract for maintenance and handling, it cannot be held that the second respondent, being a public authority, should give
proper reason even for the purpose of terminating the contract. It is true that the second respondent, being a public authority performing the
function of sale of petroleum products, which is certainly public in nature, is bound by the principles of natural justice and fair play in cases of
awarding contracts, for example, while awarding contract of dealership, no discrimination can be exercised for the purpose of picking and
choosing an individual dealer as a dealer and equally opportunity must be given to all, but, in cases where the terms of contract are violated, we do
not think that the principles of natural justice can be raised in a writ petition under Article 226 of the Constitution of India.
In Harbanslal Sahnia and Another Vs. Indian Oil Corpn. Ltd. and Others, , relied upon by the learned Counsel for the appellants, the Hon''ble
Supreme Court was dealing about the termination of dealership of petroleum products, on the basis that the sample taken in the outlet was not
satisfied and matching with the standard specifications. On the facts of that case, finding that the sample test was carried out in violation of the
instructions contained in the Government Orders, the termination of dealership was set aside, holding that even in contractual matters the High
Court has jurisdiction under Article 226 of the Constitution of India in three instances, viz., (i) to enforce fundamental rights; (ii) failure of principles
of natural justice; and (iii) order becomes wholly without jurisdiction. The operative portion of the said judgment reads as follows:
So far as the view taken by the High Court that the remedy by way of recourse to arbitration Clause was available to the appellants and
therefore the writ petition filed by the appellants was liable to be dismissed is concerned, suffice it to observe that the rule of exclusion of writ
jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case, in spite of availability of
the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies: (i) where the writ petition seeks
enforcement of any of the fundamental rights; (ii) where there is failure of principles of natural justice; or (iii) where the orders or proceedings are
wholly without jurisdiction or the vires of an Act is challenged. See Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and Others,
The present case attracts applicability of the first two contingencies. Moreover, as noted, the petitioners� dealership, which is their bread and
butter, came to be terminated for an irrelevant and non-existent cause. In such circumstances, we feel that the appellants should have been allowed
relief by the High Court itself instead of driving them to the need of initiating arbitration proceedings.
(emphasis supplied)
In fact, the Hon''ble Supreme Court has relied upon the earlier judgment in Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and
Others, , wherein the Supreme Court has held that alternate remedy is a rule of discretion and not one of compulsion. But, in the present case, the
order of termination has nothing to do with the either the principles of natural justice, as termination without notice is permissible under the contract,
or with the principles of equality guaranteed under the Constitution of India, and therefore, the said judgment is not applicable to the facts and
circumstances of the present case.
The judgment of the Supreme Court rendered in United India Insurance Co. Limited v. Manubhai Dharmasinhbhai Gajera and Ors. JT 2008
(5) SC 457, relied upon by the learned Counsel for the appellants relates to insurance cover as per the Rule under Insurance Rules, 1939, by
which the respondent before the Supreme Court, who suffered a coronary disease and was admitted in the Escorts Heart Institute and Research
Centre and underwent Angioplasty, made a claim which was allowed by the United India Insurance Company Limited, on the basis that the
mediclaim policy started in 1995 was renewed by paying requisite premium. It appears that once again the respondent had to undergo Angioplasty
in 2001, which was also reimbursed by the Insurance Company. Thereafter, in respect of a minor operation also the medical expenses were
reimbursed. However, the fourth time, when the respondent underwent a by-pass surgery, the Insurance Company has not admitted the same and
the claim of renewal of insurance was also refused on the ground ""High Claim Ratio"". It was in those circumstances, when a plea was raised on
behalf of the insurance company that insurance being contractual in nature, the writ petition before the High Court was not maintainable, the
Supreme Court has held as follows:
One important facet of the matter which must also be taken note of is duty on the part of a State to act fairly. Such a fair dealing is expected at
the hands of a State within the meaning of Article 12 of the Constitution of India. Strong reliance has been placed by Mr.Parekh on the decision of
this Court in Mahabir Auto Stores and others Vs. Indian Oil Corporation and others, and Kumari Shrilekha Vidyarthi and Others Vs. State of
U.P. and Others, . There cannot be any doubt whatsoever that Article 14 of the Constitution of India which encompasses within its fold,
obligations on the part of the State to act fairly which operates also in the contractual field but the said principle would be applicable more in a case
where bargaining power is unequal or where the contract is not a negotiated one and/or is based on the standard form contracts between unequals.
Some of these decisions, however, had been taken into consideration in Assistant Excise Commissioner and Others Vs. Issac Peter and Others,
whereupon strong reliance has been placed by the learned Solicitor General. Therein, inter alia, it was held:
Learned Counsel for Respondents then submitted that doctrine of fairness and reasonableness must be read into contracts to which State is a
party. It is submitted that the State cannot act unreasonably or unfairly even while acting under a contract involving State power. Now, let us see,
what is the purpose for which this argument is addressed and what is the implication? The purpose, as we can see, is that though the contract says
that supply of additional quota is discretionary, it must be read as obligatory � at least to the extent of previous year''s supplies � by applying
the said doctrine. It is submitted that if this is not done, the licensees would suffer monetarily. The other purpose is to say that if the State is not able
to so supply, it would be unreasonable on its part to demand the full amount due to it under the contract. In short, the duty to act fairly is sought to
be imported into the contract to modify and alter its terms and to create an obligation upon the State which is not there in the contract. We must
confess, we are not aware of any such doctrine of fairness or reasonableness. Nor could the learned Counsel bring to our notice any decision
laying down such a proposition. Doctrine of fairness of the duty to act fairly and reasonably is a doctrine developed in the administrative law field
to ensure the Rule of Law and to prevent failure of justice where the action is administrative in nature. Just as principles of natural justice ensure fair
decision where the function is quasi-judicial, the doctrine of fairness is evolved to ensure fair action where the function is administrative. But it can
certainly not be invoked to amend, alter or vary the express terms of the contract between the parties. This is so, even if the contract is governed
by statutory provisions, i.e., where it is a statutory contract � or rather more so. It is one thing to say that a contract � every contract � must
be construed reasonably having regard to its language. But this is not what the licensees say. They seek to create an obligation on the other party to
the contract, just because it happens to be the State. They are not prepared to apply the very same rule in a converse case, i.e., where the State
has abundant supplies and wants the licensees to lift all that stocks. The licensees will undertake no obligation to lift all those stocks even if the
State suffers-loss. This one-sided obligation, in modification of express terms of the contract, in the name of duty to act fairly, is what we are
unable to appreciate.
It is true that in a landmark judgment of the Hon''ble Supreme Court in Delhi Development Authority, N.D. and Another Vs. Joint Action
Committee, Allottee of SFS Flats and Others, , the Supreme Court has given the true meaning for the word ""State"" under Article 12 of the
Constitution of India and also held that reasonableness and fairness is the heart and soul of Article 14 of the Constitution of India in the following
words:
While acting as ""State"" within the meaning of Article 12 of the Constitution of India, it is imperative that DDA, while implementing its statutory
power, upholds the fundamental rights of the citizens and strives hard to give effect to the directive principles of the State policy. We, however,
cannot also shut our eyes to the fact that in terms of Article 37 of the Constitution of India whereas the provisions of Part III are justiciable, the
provisions of Part IV are not. Only when an action of the State is taken to give effect to any of the provision of Part IV of the Constitution of India
which is not otherwise ultra vires the Constitution or offends the principles embodied in Part III of the Constitution of India, the same may be
upheld, having regard to the provisions contained in Part III thereof. The action of the State, therefore, must at the first instance be adjudged on the
touchstone of the principles of fundamental rights and then the provisions contained in the parliamentary Act, the regulations framed thereunder as
also the terms of the contract entered into by and between the parties.
We may or may not agree with the submission of learned Counsel for the appellants that the right of housing arising out of such a scheme is a
fundamental right within the meaning of Articles 19(1)(e) and 21 of the Constitution of India, but there cannot be any doubt whatsoever that the
action of State must satisfy the principal requirements of Article 14 viz. treating persons similarly situated equally and grant of equal protection to
them. Reasonableness and fairness is the heart and soul of Article 14 of the Constitution of India. Keeping the aforementioned principles in mind,
we may consider the points involved herein.
While that being the law, as established by the Supreme Court, we do not agree that on the facts and circumstances of the present case, even
assuming that the termination of contract for maintenance and handling by the second respondent is not valid in law, it is permissible to file a writ
petition under Article 226 of the Constitution of India.
Again in the judgment in ABL International Ltd. and Another Vs. Export Credit Guarantee Corporation of India Ltd. and Others, , the
Supreme Court has held that in the presence of arbitration clause, which is an effective alternate remedy, Article 226 of the Constitution of India is
not the answer. In the said judgment, it was held as under:
This judgment again, in our opinion, does not help the first respondent in the argument advance on its behalf that in contractual matters remedy
under Article 226 of the Constitution does not lie. It is seen from the above extract that in that case because of an arbitration Clause in the
contract, the Court refused to invoke the remedy under Article 226 of the Constitution. We have specifically inquired from the parties to the
present appeal before us and we have been told that there is no such arbitration Clause in the contract in question. It is well known that if the
parties to a dispute had agreed to settle their dispute by arbitration and if there is an agreement in that regard, the courts will not permit recourse to
any other remedy without invoking the remedy by way of arbitration, unless of course both the parties to the dispute agree on another mode of
dispute resolution. Since that is not the case in the instant appeal, the observations of this Court in the said case of State of U.P. and others Vs.
Bridge and Roof Co. (India) Ltd., are of no assistance to the first respondent in its contention that in contractual matters, writ petition is not
maintainable.
Similarly, the judgment of the Supreme Court in Dwarkadas Marfatia and Sons Vs. Board of Trustees of the Port of Bombay, , wherein when
the Port Trust, which was the owner of the property, attempted to evict a private tenant in the Port Trust property, it was held that such action
must be for a public purpose, Port Trust being a public authority. The relevant portion of the said judgment is as follows:
When the State, the local bodies and public authorities which are ""State"" within the meaning of Article 12 are exempted from purview of Rent
Control Legislation, the basis of exemption is that such bodies would not be actuated by any profit making motive so as to unduly enhance the
rents or eject the tenants from their respective properties as private landlords are or are likely to be. They would not act for their own purpose as
private landlords do, but must act for public purpose. It, therefore, follows that the public authorities which enjoy this benefit without being
hidebound by the requirements of the Rent Act must act for public benefit.
The said judgment is distinguishable on facts and circumstances of the present case, wherein there is a termination Clause in the terms of the
contract.
The further contention that the bargaining power between the appellants and the respondents, under the contract, is unequal and therefore, the
writ petition should be maintained, has no meaning. It is true that while entering into such contract either for dealership or for services, the standard
forms are maintained by the second respondent and the persons, who are awarded contract, are made to sign in the terms of the contract, which is
adhesive in nature and is termed as cohesive contract. It is not the case of the appellants that they were compelled by the second respondent to
sign the papers, without knowing the contents. On the other hand, for the appellants, to have such a contract, it was only optional and if only they
agree to the terms of the standard forms of contract, they can become a party to the contract and there is absolutely no compulsion. The
appellants, having known about the terms of the contract, especially Clause 48, have deliberately entered into the contract and therefore, it cannot
be said that they are having inferior bargaining power and hence, the writ petition under Article 226 of the Constitution of India should lie.
The judgment of the Supreme Court in Kumari Shrilekha Vidyarthi and Others Vs. State of U.P. and Others, , also has no application to the
facts of the present case. That was a case relating to the en bloc removal of all District Government Counsel in the State by the State Government,
which was held to be arbitrary and offending Article 14 of the Constitution of India. The Supreme Court, while observing that a public element is
involved, held that, even though it is the contention of the State that the appointment of Government Counsel is contractual in nature, the existence
of public element was sufficient to attract Article 14 of the Constitution of India, and it was further held that even if the terms of contract provide
for termination of the Counsel, without assigning any cause, the termination of an appointment in the absence of any cogent reasons in furtherance
of the object for which the power was given, was held to be arbitrary and opposed to public policy. In the present case, there is absolutely no
public element involved in the termination of contract.
Similarly, the judgment in Union of India and others Vs. Hindustan Development Corpn. and others, relates to issuance of governmental
contracts and also fixation of price and in that regard, the Supreme Court, in the elaborate judgment, has held that it must be reasonable, especially
when the Government is trading with the public, as follows:
It must be mentioned at this stage that the validity of the conditions in the tender as such are not questioned. Consequently the Government had
the right to either accept or reject the lowest offer but that of course, if done on a policy, should be on some rational and reasonable grounds.
In the present case, as stated above, there is no trading activity done by the second respondent with the appellants, except granting contract on
adhoc basis for the purpose of maintenance and handling of its retail outlet.
The judgment in New India Assurance Company Ltd. Vs. Nusli Neville Wadia and Another, relates to Public Premises (Eviction of
Unauthorised Occupants) Act, 1971, wherein the unauthorised occupants of public premises, who may be treated as trespassers, continued in
occupation despite the cessation of contract of service. It was held that for evicting them fairness and reasonableness on the part of public
authorities, being the landlords, must be followed and it requires the implementation of the requirement of Article 14 of the Constitution of India, as
follows:
Except in the first category of cases, as has been notice by us hereinbefore, Sections 4 and 5 of the Act, in our opinion, may have to be
construed differently in view of the decisions rendered by this Court. If the landlord being State within the meaning of Article 13 of the Constitution
of India is required to prove fairness and reasonableness on its part in initiating a proceeding, it is for it to show how its prayer meets the
constitutional requirements of Article 14 of the Constitution of India. For proper interpretation not only the basic principles of natural justice have
to be borne in mind, but also principles of constitutionalism involved therein. With a view to read the provisions of the Act in a proper and effective
manner, we are of the opinion that literal interpretation, if given, may give rise to an anomaly or absurdity which must be avoided. So as to enable a
superior court to interpret a statute in a reasonable manner, the court must place itself in the chair of a reasonable legislator/author. So done, the
rules of purposive construction have to be resorted to which would require the construction of the Act in such a manner so as to see that the object
of the Act is fulfilled, which in turn would lead the beneficiary under the statutory scheme to fulfill its constitutional obligations as held by the Court
inter alia in Ashoka Marketing Ltd. and another Vs. Punjab National Bank and others, .
In Kerala Samsthana Chethu Thozhilali Union Vs. State of Kerala and Others, , the Supreme Court has dealt with the case of the federation of
trade union of toddy tappers and workers in toddy shops situated in the State of Kerala. When the sale of arrack was banned in Kerala, a policy
decision was taken by the Labour and Rehabilitation Department of the State of Kerala that the workers, who had been engaged in manufacture,
import, export, transport, sale and possession of arrack, should be rehabilitated. When the rehabilitation process was questioned, it was contended
on behalf of the Government that after taking over by the Government, it becomes the domain of the State to impose conditions for granting licence
for sale of toddy and therefore, the State merely parts with a privilege, which was exclusively vested in it and in that view of the matter, if in terms
of the policy decision of the State, arrack workers were to be rehabilitated, it would direct employment of unemployed arrack workers and while
doing that a condition can be imposed. In that context, when the argument was advanced on the basis of ""take it or leave it"", the Supreme Court
has held as follows:
""Take it or leave it"" argument advanced by Mr Chacko is stated to be rejected. The State while parting with its exclusive privilege cannot take
recourse to the said doctrine having regard to the equity Clause enshrined under Article 14 of the Constitution. The State in its dealings must act
fairly and reasonably. The bargaining power of the State does not entitle it to impose any condition it desires.
The facts involved in the present case are not relating to any scheme for rehabilitation. As stated above, it is purely a contract in simplicitor in
respect of the period of running of contract for maintenance and handling, which is given by way of permission by the second respondent to the
appellants and therefore, there is no question of any rehabilitation involved in this case.
The reliance placed by the learned Counsel for the appellants on the judgment of the Supreme Court rendered in State of Arunachal Pradesh
Vs. Nezone Law House, Assam, to substantiate his contention that doctrine of promissory estoppel will apply to the facts of the case on hand is
not tenable. In the said judgment, the Hon''ble Supreme Court, relying upon various English judgments and with approval, has held that doctrine of
promissory estoppel has assumed importance in recent years, while observing that the said principle has been evolved on the principles of equity to
avoid injustice. It is not known as to how, on the facts and circumstances of the present case, the said celebrated concept of promissory estoppel
is applicable, especially in the circumstances that it is the specific case of the respondents that they have never directed the second appellant to
purchase the land from Mrs.Sumathi and also in the circumstance that even when Mrs.Sumathi has leased out the land to the second respondent,
all infrastructure has been put up by them and therefore, there was actually no need for the second appellant to spend any amount to put up any
structure. That apart, when the terms of the contract are very clear that the contract of service can be terminated without assigning any reason,
there is no question of any promissory estoppel or applicability of the principles of legitimate expectation.
Moreover, the second appellant, who has now chosen to state as if the first respondent has compelled him to purchase the property from
Mrs.Sumathi and therefore, he has purchased it with a hope that the contract of maintenance and handling will continue and also spent huge amount
of money, has not chosen to take such a stand in the suit filed by him against the second respondent before the Principal District Munsif,
Pudukkottai in O.S. No. 451 of 2008 for the relief of eviction of the second respondent, on the basis that the lease granted to the second
respondent has been terminated by the second appellant. In the pleading in the said suit, the second appellant has stated as follows:
Due to sickness and inability to maintain the undermentioned property, the said Sumathi sold the same to the plaintiff through a sale deed dated
24.7.2006. The plaintiff had intimated the said sale to the defendants.
When the second appellant has terminated the lease in respect of the land, which was purchased from Mrs.Sumathi, and granted in favour of the
second respondent and has approached the Civil Court for the purpose of eviction, certainly, he cannot question the validity of the termination of
the contract by the second respondent in respect of maintenance and handling.
The observation made by the Supreme Court in Ibrahimpatnam Taluk Vyavasaya Collie Sangham Vs. K. Suresh Reddy and Others, that
Every man has the legitimate expectation regarding a set of things or facts, which have continued over a period of time, to have become settled so
that he can plan his future course of action on the basis of such acceptable situation. Unsettling such facts after long delay upsets not only his entire
programme but also affects in the long run the society itself."", was in the context of a validation certificate issued in the year 1974 in favour of the
vendors and vendees, which were sought to be cancelled by the Joint Collector, by exercising the suo motu powers u/s 50-B of the Andhra
Pradesh (Telangana Area) Tenancy and Agricultural Land Act, 1950, especially in the circumstance that various authorities, including Tahsildar,
Special Tahsildar and Authorised Officer under the Act have held that the validation certificates cannot be set aside.
Again the judgment rendered in Beg Raj Singh Vs. State of U.P. and Others, relates to the grant of mining lease, which ought to have been
given as per the Government Order for three years, but by mistake the State Government has given it for one year. The Supreme Court, taking
note of the fact that the lessee spent huge amount in making the mining area approachable and therefore, he had legitimate expectation that he
would be entitled to operate mining for three years as per the policy of the Government, by applying the principles of legitimate expectation,
permitted the petitioner therein to operate mine for the remaining period, by taking the lease period as three years. That was a statutory contract
given under the provisions of the Act, which can never be compared to the present context of the case.
On the other hand, as correctly submitted by the learned Counsel for the respondents, a Division Bench of this Court presided over by
Markandey Katju, C.J., as he then was, and N.V. Balasubramanian, J., in Director General of Foreign Trade, Ministry of Commerce and Another
Vs. R.B. and Sons and Another, , held that, even in respect of a licence for export, the Court can never direct the period of licence or lease to be
extended, in the following words:
In our opinion, a Court cannot direct extension of period of a licence, lease or other grant where it is for a fixed period. For instance, if a licence
or lease is granted for the period from 1.1.2004 till 31.12.2004, the Court cannot direct that the period of the licence or lease should be extended
beyond 31.12.2004 merely because for Appellate Tribunal art of this period, the licensee or lessee was prevented, for reason beyond his control,
to operate. If the licensee or lease was prevented to operate for a part of the period of the licence or lease, then his remedy is to get refund of
proportionate amount of licence or lease fee or compensation for any damage he might have suffered, but the period of licence or lease cannot
certainly be extended by the Court.
In Ramana Dayaram Shetty Vs. International Airport Authority of India and Others, , which was relating to the grant of tender for running
restaurant and snack bar in the Airport, one of the condition being having experience of five years, it was held that, by choosing such persons for
granting tender, the authority, which is an instrumentality of the State, cannot discriminate people and choose at their whims and fancies and it was
in that context the Supreme Court has come down against the arbitrary conduct of the Governmental authorities in discriminating people regarding
the grant of contracts in the following words:
Now, obviously where a corporation is an instrumentality or agency of Government, it would, in the exercise of its power or discretion, be
subject to the same constitutional or public law limitations as Government. The rule inhibiting arbitrary action by Government, which we have
discussed above, must apply equally where such corporation is dealing with the public, whether by way of giving jobs or entering into contracts or
otherwise, and it cannot act arbitrarily and enter into relationship with any person it likes at its sweet will, but its action must be in conformity with
some principle which meets the test of reason and relevance.
This rule also flows directly from the doctrine of equality embodied in Article 14. it is now well settled as a result of the decisions of this Court
in E.P. Royappa Vs. State of Tamil Nadu and Another, and Mrs. Maneka Gandhi Vs. Union of India (UOI) and Another, that Article 14 strikes
at arbitrariness in State action and ensures fairness and equality of treatment. It requires that State action must not be arbitrary but must be based
on some rational and relevant principle which is non-discriminatory: it must be guided by any extraneous or irrelevant consideration, because that
would be denial of equality. The principle of reasonableness and rationality which is legally as well as philosophically an essential element of
equality or non-arbitrariness is projected by Article 14 and it must characterise every State action, whether it be under authority of law or in
exercise of executive power without making of law. The State cannot, therefore act arbitrarily in entering into relationship, contractual or otherwise
with a third party, but its action must conform to some standard or norm which is rational and non-discriminatory.
The said direction of the Supreme Court is, certainly, not applicable to the facts and circumstances of the present case for the reason that it is not
even the case of the second appellant that any discrimination has been made among the persons to be chosen as contractors for maintenance and
handling. The allegation that, after termination of the contract, the second respondent is going to award the said contract to the third parties and
therefore, there is nothing wrong if the second respondent continues the contract with the appellants, has no legal basis. Even otherwise, it is the
case of the second respondent that the second respondent is processing grant of permanent dealership as per law, since large number of
applications are pending. In such view of the matter, it is not possible to accept the contention of the learned Counsel for the appellants, as if there
has been any discrimination.
In Mrs. Sanjana M. Wig Vs. Hindustan Petro Corporation Ltd., , while explaining about the plenary jurisdiction of the High Court under
Article 226 of the Constitution of India, the Supreme Court has held that the lis involved must be of public law character and by relying on the
judgment in Whirlpool Corporation v. Registrar of Trade Marks, referred supra, held that under three circumstances the jurisdiction under Article
226 of the Constitution of India can be enforced, as follows:
The principal question which arises for consideration is as to whether a discretionary jurisdiction would be refused to be exercised solely on the
ground of existence of an alternative remedy which is more efficacious. Ordinarily, when a dispute between the parties requires adjudication of
disputed question of facts wherefor the parties are required to lead evidence both oral and documentary which can be determined by a domestic
forum chosen by the parties, this Court may not entertain a writ application. See Titagarh Paper Mills Ltd. v. Orissa State Electricity Board,
(1975) 2 SCC 436 and Bisra Stone Lime Co. Ltd. and Another Vs. Orissa State Electricity Board and Another, .
However, access to justice by way of public law remedy would not be denied when a lis involves public law character and when the forum
chosen by the parties would not be in a position to grant appropriate relief.
A Division Bench of this Court in ABL International Ltd. and Anr. v. Export Credit Guarantee Corporation of India Limited and Ors. JT 2003
(1) SC 300, observed that in certain cases even a disputed question of fact can be gone into by the Court entertaining a petition under Article 226
of the Constitution of India, holding:
However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the Court
should bear in mind the fact that the power of issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by
any other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a
writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power. See Whirlpool Corporation v. Registrar of Trade
Marks. And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other
available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of
Article 14 or for other valid and legitimate reasons for which the Court thinks it necessary to exercise the said jurisdiction.
On the factual matrix of this case, apart from the fact that for the purpose of awarding the contract of maintenance and handling no public
element is involved, as we have enumerated above, there is absolutely no question of involvement of any breach of fundamental right or violation of
Article 14 of the Constitution of India or the principles of natural justice. In the circumstances that the appellants have no vested right to continue to
have the contract extended for the purpose of maintenance and handling of the outlet, which was put up by the second respondent, it is not
possible to accept the contention of the learned Counsel for the appellants that the writ petition is a remedy even in cases where the appellants
choose their right under any provisions of the said contract. It is for them to work out their remedy, especially when there is an arbitration Clause
which provides for a settlement of a dispute. Even in cases where there is a breach on the side of the second respondent either in premature
termination or so on, the remedy available to the appellants is by way of damages. Even assuming that the appellants have a right of specific
performance under the contract, this is not the forum to ventilate the grievance for such pure breach of contract. It is no doubt true that under
Article 226 of the Constitution of India, the plenary jurisdiction of this Court can be exercised in cases where the public law character is involved.
It is true that even in the latest judgment in Karnataka State Forest Industries Corporation Vs. Indian Rocks, , the Supreme Court has held that
in cases where the State action is arbitrary, discriminatory and violative of Article 14 of the Constitution of India, writ petition would be
maintainable, in the following terms:
Although ordinarily a superior Court in exercise of its writ jurisdiction would not enforce the terms of a contract qua contract, it is trite that
when an action of the State is arbitrary or discriminatory and, thus, violative of Article 14 of the Constitution of India, a writ petition would be
maintainable. See ABL International Ltd. and Another Vs. Export Credit Guarantee Corporation of India Ltd. and Others, .
However, on the facts of the case, since it is found that there was no violation of Article 14 of the Constitution of India and there is no arbitrariness
or discrimination shown by the second respondent, it is not possible to enforce the terms of the contract in the present case.
In almost a similar circumstance, the First Bench of this Court, presided over by A.P. Shah, CJ., as he then was, and one of us (P. Jyothimani,
J.), in the judgment dated 7.6.2007 made in W.A. No. 737 of 2007, while dealing with Indian Oil Corporation Limited job contractorship, as that
of the present case, which was for a period of one year, when the contract was extended on few occasions and subsequently terminated, it was
held that there is no claim of permanent dealership and therefore, the principles of natural justice does not apply. The Division Bench observed as
follows:
In respect of leasing out of the land situated at No. 160, Krishnapuram Village, Gingee Taluk in Survey No. 104/2A measuring an extent of 22500
sq.ft. for the purpose of running the petrol bunk, it is the case of the appellants that the lease was entered between the appellants'' family and the
respondent Corporation for 20 years, as per the agreement entered in March, 2002. The first appellant was issued with letter of allotment by the
second respondent Corporation on 23.9.2002, which should actually expire on 30.9.2003, however, the case of the appellants is that, it was
subsequently extended upto 30.9.2004. When the notification was issued by the first and second respondent on 21.12.2003, inviting application
for award of retain outlet at Gingee under Special Category (OSP), a writ petition was filed by the first appellant, which was withdrawn, based on
which the third respondent had issued a letter of indent on 28.2.2005 in favour of the second appellant. A reference to the said letter, shows that it
is only awarding of job contractorship for operating COCO retail outlet at Gingee from 28.2.2005 to 27.2.2006, i.e., for a period of one year. It is
also seen that in the said proceedings of the third respondent dated 28.2.2005, the period of operation will be for one year, upto 27.2.2006 or till
such date by which a regular dealer is appointed, whichever is earlier. For that, the second appellant has given an undertaking.
It is further seen that, by subsequent order dated 26.2.2006, the second respondent has given further period of one year to the second appellant
with effect from 28.2.2006 or till completion of one year or such date by which a regular dealer is appointed, whichever is earlier and to that effect
also there has been an undertaking given by the second appellant. In such circumstances, when the period of dealership has come to an end as
early as 27.2.2007, especially when the second respondent has already granted dealership to the 4th respondent by way of regular dealership,
there is no vested right on the part of the appellants to claim permanent dealership. In view of the same, as rightly pointed out by the learned single
Judge, the question of principles of natural justice does not arise. Therefore, the writ appeal fails and the same is dismissed.
Thus, looking from any angle, the case of the appellants can never be accepted. Finding no valid reason to interfere with the order of the learned
Single Judge, this writ appeal is dismissed, however with cost of Rs. 10,000/- (Rupees Ten Thousand only) to be paid by the appellants to the
Chief Justice Relief Fund within a period of ten days. Consequently, M.P. No. 1 of 2008 is closed.