Allied Motors Ltd. Vs.
Bharat Petroleum Corp. Ltd.
Jurisdiction Civil Appeal No. 11200 of 2011 Arising out of SLP (Civil) No.31535
J U D G M E N T
Dalveer Bhandari, J.
appeal is directed against the judgment dated 11th August, 2009 delivered in
Letters Patent Appeal No.296 of 2009 by the Division Bench of the High Court of
Delhi upholding the judgment dated 6th May, 2009 passed by the learned Single
Judge in Writ Petition (Civil) No.2927 of 2005.
main issue which arises for adjudication in this appeal pertains to the
termination of the dealership of the appellant in an illegal and arbitrary
to the appellant, it had been operating the petrol pump for the last 30 years
and during this period it was given 10 awards from time to time declaring its
dealership as the best petrol pump in the entire State of NCT of Delhi. On a
number of occasions, samples of the appellant were tested by the
respondent-Corporation and on each occasion its samples were found to be as per
to the appellant, it had maintained highest standards and norms of an excellent
petrol pump, yet, the respondent-Corporation, in a clandestine manner,
terminated its dealership in the most arbitrary manner and in total violation
of the principles of natural justice.
was further urged by the appellant that its dealership was terminated without
even issuing any show cause notice and/or giving an opportunity of hearing to
it. The termination of dealership was contrary to the mandatory procedural
provisions of law. According to the appellant, the said termination was mala
fide, arbitrary and illegal.
may be pertinent to mention that in the morning of 15th May, 2000, an
unauthorized police officer accompanied by the officials of the respondent
conducted a raid at the appellant's petrol pump. According to the appellant,
the raid was illegal as an unauthorized police officer could not conduct a
search and seize the samples of the appellant.
appellant urged that the samples taken in this raid were in complete violation
of the mandatory procedural provisions of law as provided under the Motor
Spirit and High Speed Diesel (Regulation of Supply and Distribution and
prevention of Malpractices) Order, 1999 (hereinafter referred to as
"Order"). The appellant while reproducing the relevant provisions of
law has submitted as under:-(a) Clause 4 of the said Order provides for power
of search and seizure. Sub-Clause (A) of the section authorizes any police
officer not below the rank of the Deputy Superintendent of Police (for short,
DSP) duly authorized or any Officer of the concerned Oil Company not below the
rank of Sales Officer to take samples of the products and/or seize any of the
stocks of the product which the officer has reason to believe has been or is
being or is about to be used in contravention of the said Order.
the present case, however, the samples were collected in complete violation of
the aforesaid provisions. The Police official who had conducted the raid and
collected the samples 4was admittedly below the rank of DSP. This is also
recorded in the Metropolitan Magistrate's order dated 27.5.2002 passed in FIR
No.193 of 2000 wherein it is stated as under: "In the present case the
search and seizure was conducted by an unauthorized police officer of the rank
of Inspector which is totally contrary to the mandatory provisions of the said
Clause 4."(b) Sub-Clause (B) of Clause 4 of the said Order provides that
while exercising the power of seizure under Clause 4 (A) (iv) the authorised
officer shall record in writing the reasons for doing so, a copy of the which
shall be given to the dealer.
to the appellant, in the present case, no such reasons in writing were
provided.(c) Clause 5(2) of the said Order lays down the procedure for sampling
of product which provides that "the Officer authorised in Cl. 4 shall
take, sign and seal six samples of 1 litre each of the Motor Spirit or 2 of 1
lit. each of the High Speed Diesel, 2 samples of the Motor Spirit (or one of
High Speed Diesel) would be given to the Dealer or transporter or concerned
person under acknowledgement with instruction to preserve the sample in his
safe custody till the testing or investigations are completed, 2 samples of MS
(and/or one of HSD), would be kept by the concerned Oil Company or department
and the remaining 5 two samples of MS (and/or one of HSD) would be used for
appellant urged that in the present case, samples were allegedly taken from 6
sources. Therefore, the respondent Corporation as per the provision should have
taken 36 samples (6 samples from each of the source) and handed over 12 samples
(2 from each of the 6 sources) to the appellant, being the dealer, under
acknowledgement. The respondent Corporation however, neither took 36 samples,
nor did it hand over the prescribed number of 12 samples to the appellant. This
is clear from the counter affidavit filed by the respondent in Writ Petition
(C) No.7382 of 2001 placed on record. It is clearly stated in the counter
affidavit filed by the respondent Corporation that it is pertinent to state
that two samples from each of the tanks containing adulterated products were
drawn by the answering respondent in the presence of the police officials of the
crime branch and the representative of the appellant as well.
of these two samples, one sample was retained by the crime Branch of Delhi
Police and another by the respondent, Bharat Petroleum Corporation Limited (for
short 6BPCL). It has, therefore, been clearly admitted that only 2 samples as
opposed to 6 samples were drawn from each tank and that no sample was handed
over to the appellant.
learned counsel appearing for the respondent in the proceedings before the
Division Bench in LPA No.296 of 2009, has specifically admitted, as is also
recorded in page 8 of the impugned order that "there was no receipt of two
samples from each source being handed over to appellant".
It is also relevant
to state that in all previous representations made by the appellant to the
respondent and previous writ petitions filed, the respondent has never denied
the averment that 2 samples were not handed over to the appellant.(d) Clause
5(3) of the said Order provides that "Samples shall be taken in clean glass
or aluminium containers. Plastic containers shall not be used for drawing
to the appellant, in the present case, plastic containers were used for drawing
samples in complete violation of the said provision. This is also recorded in
the Metropolitan Magistrate's order dated 27.5.2002 wherein it is stated that
in Clause 5 of the order it was specifically 7legislated that the sample shall
be taken in clean glass or aluminium containers and plastic containers would
not be used for drawing out the samples.
But in clear
contravention to the mandatory provisions, plastic containers were used by the
police officer while drawing samples. From the file, it is clear that sample
Nos.7, 8 and 9 were drawn from the car of the complainant in plastic containers
by the police and therefore, the report on the basis of the samples taken in
the plastic containers cannot be relied upon at all.(e) Clause 5(4) of the said
Order provides that "
The sample label
should be jointly signed by the officer who has drawn the sample, and the
dealer or transporter or concerned person or his representative and the label
shall contain information as regards the product, name of retail outlet,
quantity of sample, date, name and signature of the officer, name and signature
of the dealer or transporter or concerned person or his representative."
According to the appellant, this was not done.
Metropolitan Magistrate's order dated 27.5.2002 passed in FIR No.193 of 2000
specifically records as follows: "The law being as noticed above, it is
very clear that the search and seizure is bad in law and is in contravention of
mandatory provisions of the Essential Commodities Act and contravention of 8
Motor Spirits (High Speed Diesel Act) and in any case the prosecution cannot establish
its case against any of the accused and accused persons are liable to be
discharged on this very ground and no charge should be framed... There is no
evidence whatsoever to show that petrol supplied was adulterated or not."
appellant referred to section I (c) of Chapter 6 of the Guidelines of 1998
which provides as follows: "Wherever samples are drawn, either pursuant to
random checks or where adulteration is suspected, 3 sets of signed and sealed
samples (6x1 ltr of MS and 3x1 ltr of HSD) should be collected from the RO, out
of which one set should be kept with the dealer, one with the company and the
third to be sent for laboratory resting within 10 days. For the sample kept
with the dealer, proper acknowledgement will be obtained and the dealer will be
instructed to preserve the same in his safe custody till the
testing/investigation are completed."
to the appellant, it is clear that the samples were collected in violation of
mandatory procedure of law as provided under the said Order and therefore the
termination order passed on the basis of test reports of samples so collected
is completely illegal and liable to be set aside.
appellant relied on the case of Harbanslal Sahnia and Another v. Indian Oil
Corporation Ltd. and Another (2003) 2 SCC 107, wherein the Indian Oil
Corporation terminated the dealership of Harbanslal Sahnia on the basis that
the sample drawn from the petrol pump did not meet the standard specification.
This Court found that
two government orders providing for the procedure for taking samples had been
violated and in view of the same found that the failure of the sample taken
became irrelevant and non-existent fact which could not have been relied upon
for terminating dealership, and quashed the order terminating the dealership
and restored possession.
It is submitted that
the fact that two samples were not left with the appellant is not only a
violation of the mandatory principles of law but also of fair play and natural
justice as the appellant is deprived of its valuable right to contest the
veracity of the test reports. This provision of law is the single most
important check on arbitrary action by the respondent.
to the appellant, these samples were taken in violation of the mandatory
provisions of law. The test reports, given on 16.5.2000, formed the basis for
the termination of the appellant's dealership. The termination was in clear
violation of the procedures prescribed by law.
The termination was
also in violation of mandatory Marketing Discipline Guidelines and 10the
prescribed procedures. The termination was also in violation of the principles
of natural justice and fairplay. According to the appellant, this is clear from
the following facts:-
a. Clause (d) of Section
1 of the Marketing Disciplines provides that: If the samples is certified to be
adulterated, after laboratory test, a show cause notice should be served on the
dealer and explanation of the dealer sought within 7 days of the receipt of the
show cause notice. Thus under the said provision seven days is to be given to
the dealer to provide an explanation and only if explanation is found
unsatisfactory can appropriate action be taken.
In the instant case,
however, no show cause notice was given and no opportunity was given to the
appellant to provide any explanation. Instead appellant's dealership was
summarily terminated on the very date the alleged test reports certifying the
sample to be adulterated was received i.e. 16.5.2000, the very next day after
the samples were taken.
It is relevant to
state that the premeditated nature and mala fide of the test reports was writ
large as the test reports on 11 the basis of which the appellant's dealership
was allegedly terminated itself indicated "terminated dealer".
b. Clause (d) of Section
1 of the Marketing Discipline Guidelines further provides that if the
explanation of dealer is not satisfactory, the Company should take action as follows:
a. Fine of Rs.1 lakh and
suspension of sales and supplies for 45 days in the first instances;
b. Termination in the
is thus clear from the above provision that the Guidelines prescribe termination
only in case of second instance of adulteration of Motor Spirits. It is an admitted
case that this was the first instance of alleged adulteration of Motor Spirits.
of the grounds taken by the respondent-Corporation for termination in its letter
dated 16.5.2000 was that "in the past also a product sample collected from
the retail outlet was found to have failed specification." This earlier offence
in respect of the "product sample" referred to in the order of
16.5.2000, was, however, in respect of lube sample and not 12petrol/MS. This is
clear from the Delhi High Court's order dated 9.9.2004 passed in WP (C) No.7382
of 2001, which records respondent Corporation's counsel's submission in that
respect as below:
"It was also emphasized
that there was a past history where inspection of the outlet had been carried
out on 12.12.1998 and Lubes samples were collected which were found off-specifications."
is also submitted that a previous alleged case of off-spec lube, does not make
the first alleged case of motor spirit adulteration, a second offence of motor spirit
adulteration. Off-spec lube is not a case of adulteration which is clear from
the definition of "adulteration" set out in the Marketing Discipline Guidelines
which defines "adulteration" as "the introduction of any foreign
substance into motor spirit/high speed diesel illegally or unauthorizedly."
Lube falls into a
completely different category and is in a separate chapter in the Marketing Discipline
Guidelines being Chapter 7 as contrasted from Chapter 6 which deals with "Adulteration
of Product". Chapter 7 of the said guidelines separately provides for prevention
of irregularities at retail outlet in respect of 13lubes. Clause 9 of the said Chapter
provides the following punishments in case of sales of adulterated lubes. a. Suspension
of sales and supplies of all products for 15 days along with a fine of Rs.20,000/-
in the first instance. b. Suspension of sales and supplies for 30 days along
with a fine of Rs.50,000/- in the second instance. c. Termination in the third
while the guidelines provide for termination of dealership in the second
instance of adulteration of petrol/MS, the punishments prescribed for
adulteration of lubes provides for termination only in case of third instance.
the fourth note provided at the end of this Chapter 6 provides as under: "In
case, two or more irregularities are detected at the same time at the same RO,
action will be taken in line with what is listed in MDG under the relevant
category for each irregularity."
to the appellant, the respondent has clearly acted in violation/contravention of,
or at the very least in departure from, the Motor Spirits High Speed Diesel
Order and the Marketing Discipline Guidelines and has also acted 14contrary to
the principles of natural justice and fair play both in respect of taking samples
which formed the basis of termination, as also in respect of the termination of
appellant referred to the decision in Bharat Filling Station and Another v. Indian
Oil Corporation Ltd. 104 (2003) DLT 601 wherein the Delhi High Court specifically
referred the Market Discipline Guidelines. Relevant part of the judgment is
reproduced as under:- "As noted above, IOC, whenever enters into dealership
agreement, executes memorandum of agreement which lays down standard terms and conditions.
These conditions, inter
alia, include provisions for termination of the dealership as well. It is
provided that the agreement can be terminated by giving required notice. It may
however be mentioned that at the same time in order to ensure that such agreements
with the dealers are worked out in a systematic manner and the respondent IOC does
not invoke the termination clause arbitrarily, Government of India has issued Marketing
appellant also referred to the decision of this Court in Ramana Dayaram Shetty v.
International Airport Authority of India and Others (1979) 3 SCC 489, wherein
this Court held that "it is well settled rule of administrative law 15that
an executive authority must be rigorously held to the standards by which it
professes its actions to be judged and it must scrupulously observe those standards
on pain of invalidation of an act in violation of them." It is submitted
that the respondent was bound to act in accordance with the Marketing
is further submitted that in the case of Ramana Dayaram Shetty (supra), this Court
held that "the Government cannot act arbitrarily at its sweet will and,
like a private individual, deal with any person it pleases, but its action must
be in conformity with standard or norm which is not arbitrary, irrational or
The power or
discretion of the Government in the matter of grant of largesse including
awards of jobs, contracts, quotas, licenses etc. must be confined and structured
by rational, relevant and non-discriminatory standard or norm and if the Government
departs from such standard or norm in any particular case or cases, the action of
the Government would be liable to be struck down unless it can be shown by the
Government that the departure was not arbitrary, but was based on some valid 16principle
which in itself was not irrational, unreasonable or discriminatory."
appellant further submitted that in the present case the respondent has departed
from the standard norms laid down in the Marketing Discipline Guidelines and
the standard norms of natural justice and fairplay and that such departure was clearly
arbitrary, irrational, unreasonable and discriminatory.
appellant urged that the respondent Corporation terminated the dealership without
even issuing show-cause notice and/or providing any opportunity of hearing. The
termination is clearly in violation of the principles of natural justice.
appellant also asserted that the termination was mala fide is further strengthened
by the fact of an internal email of the respondent dated 3 days after the raid
on May 18, 2000 stating that "the samples were taken as complaint samples
but the comments on the test result were given due to reasons explained to you
over the phone."
is also stated that another email dated 22nd May, 2000 recorded that "Delhi
Territory had drawn samples regularly from the retail outlet. All 10 samples drawn
in 1999-2000 were found on spec." Despite this, the dealership had already
been terminated the very day after the raid.
appellant also urged that the order of the Delhi High Court in Writ Petition (Civil)
No.7382 of 2001 dated 9.9.2004 directed the respondent to give a show cause
notice, personal hearing and pass a reasoned order.
It was not given and
the appellant was constrained once again to approach the High Court who then
directed the respondent to grant the appellant a personal hearing at a higher level.
The action of the respondent is mala fide which is reflected from the fact that
at various stages the respondent-Corporation has tried to improve its case by supplanting
reasons in support of the termination. This is clear from the following facts:
first notice dated 16.5.2000 terminating the dealership points out the following
three grounds for termination: a. One of the samples during the raid and taken from
the laboratory testing had failed specification of U.L.P. 18 b. In the past also
a product sample collected from the retail outlet was found to have failed
specification; and c. Breach of agreement between the parties vide which the
appellant had covenanted not to adulterate petroleum products.
the fact that termination order was quashed by the High Court vide its order
dated 9.9.2004 passed in W.P. (C) No.7328 of 2001, with specific direction to
the respondent to give the appellant personal hearing and pass a reasoned order,
the respondent Corporation vide letter 22.11.2004 confirmed the original order of
termination without granting the appellant an opportunity of hearing. Further despite
Court's specific order to treat the original termination order dated 16.5.2005 as
the show-cause notice, the respondent added additional grounds of termination and
terminated the dealership on these grounds in addition to the grounds taken in 16.5.2000.
The additional grounds were:
a. Loss of Market Share
b. Non-availability of density
record during routine mobile inspection on 28.4.1998 and 30.5.1995;
c. Failure to meet specifications
during a routine inspection on 12.12.1998;
d. Two complaints
received in 1997.
appellant submitted that it is pertinent to note that all the grounds pertain
to a period prior to the termination of the dealership in 2000 and hence were known
to the respondent even at the time it issued its termination order dated 16.5.2000.
Despite the same these were taken as grounds for the first time in the year 2004
making it abundantly clear that these grounds were added as an after thought
only with a view to improve its case of termination.
appellant further urged that in the order dated 16.5.2000 it was simply stated
that one of the samples drawn had failed specification of ULP without clarifying
which ULP specification it had failed.
However, as per the order
dated 22.11.2004, the ULP specification that the samples were said to have
failed were in respect of Research Octane Number and ASTM distillation which
were co-incidentally the only two tests that IIP Dehradun had not carried out
when the samples were sent to IIP Dehradun pursuant to Delhi High Court's order
dated 6.12.2000 passed in W.P. (Crl.) No.877 of 2000.
In fact since these
two tests were not carried out by IIP Dehradun in its order dated 22.11.2004, the
test reports were not considered as being irrelevant.
appellant further urged that the mala fide intention of the respondent is clearly
evident that even at the stage of final disposal and two years after the filing
of the present special leave petition, the respondent has made serious effort
to improve its case by filing a supplementary affidavit dated 19.8.2011, vide
which the respondent has sought to allege for the first time that it handed
over requisite number of samples to the appellant.
The supplementary affidavit
states that "Samples of products were collected from five tanks of
petrol/motor spirit. From each of the five tanks of petrol/motor spirit, six sets
of samples in aluminium bottles (i.e. total of thirty 30 sample bottles) were
taken. In addition to this, six samples in aluminium bottles were taken from
the tank lorry which was found to be decanting petrol/motor spirit in the underground
tanks for petrol/motor spirit. As such, the total number of samples taken in
of the sample bottles collected, 12 were retained by the BPCL, 12 were handed
over to the dealer and 12 were sent for testing to the specified laboratory.
36. The appellant further submitted that the said averment is completely false
and contradictory to its own pleadings before the High Court in WP (C) No.7382
of 2001 produced on record by the respondent itself with the counter filed by it
in the present proceedings.
It is stated that
"it is pertinent to state 21that two samples from each of the tanks containing
adulterated products were drawn by the answering respondent in the presence of the
police officials of crime branch and representative of the petitioner as well. Out
of these two samples one sample was retained by the crime branch of Delhi
Police and the other by BPCL."
appellant further submitted that it is also pertinent to mention that in the
proceedings before the Division Bench of the High Court in LPA No.296 of 2009
the learned counsel appearing for the respondent Corporation has specifically
admitted and is also recorded in page 8 of the impugned order that "there was
no receipt of two samples from each of source being handed over to the
appellant submitted that it is clear that the termination of the dealership by the
respondent Corporation was pre-determined and mala fide and hence liable to be set
behalf of the respondent, Shri Arjun Hira, General Manager (Retail), North, Bharat
Petroleum Corporation Ltd., has filed an affidavit before this Court refuting the
allegation 22that the termination of the agency was predetermined or mala fide.
The respondent Corporation
submitted that because of adulteration in the petrol, the respondent-Corporation
had taken swift action in order to save its reputation. The
respondent-Corporation referred to clause 10(g) of the DPSL Agreement dated
28.1.1971 which reads thus: "Not to adulterate the Petroleum products supplied
by the Company and at all times to take all reasonable precautions to ensure that
the Motor Spirit or H.S.D. is kept free from water, dirt and other impurities
and served from the pumps in such conditions."
respondent-Corporation submitted that the termination was in line with the terms
and conditions of the Agreement entered into between the parties and the breach
of trust has been committed by the appellant. It is also mentioned that since the
respondent-Corporation had not received any response to the letter dated 16.5.2000
it was assumed that the appellant had accepted the wrong deeds and had no
respondent also submitted that the respondent-Corporation did not show any haste
in getting the samples tested. The samples were drawn and tested as per the procedure
laid down and on the receipt of the results indicating the adulteration of products.
Thus, the action contemplated under the provisions of the DPSL Agreement dated
28.01.1971 was taken.
respondent-Corporation denied that the action initiated against the appellant
was in any manner mala fide or manipulated for grabbing the business outlet on the
false pretext. The respondent-Corporation also submitted that reliance cannot be
placed upon the Report submitted by the IIP Dehradun as the tests conducted by them
do not comply the specifications laid down by the Bureau of Indian Standards. Moreover,
the IIP, Dehradun did not conduct the RON Test. Not following the
specifications and conducting of the RON Test was essential for testing the quality
and the specification of the ULP for meeting specifications of the Motor
to the respondent, the report submitted by the IIP, Dehradun is sacrosanct. The
said sample was sent much after the incident of adulteration and the same is not
in accordance with the MS/HSD Control October, 1998 issued by the Government of
the rejoinder affidavit, the appellant reiterated its submissions mentioned in the
petition and denied the allegations levelled in the counter affidavit.
appellant submitted that the accuracy and veracity of the original test report also
comes into question as the results of the independent laboratory, the IIP
Dehradun report indicated no adulteration. In addition, the original test
report on the basis of which the appellant's dealership was terminated can also
not be relied upon in view of the conclusive finding of the Metropolitan Magistrate
that the samples had been taken in violation of mandatory provisions of law.
to the appellant, as per the report submitted by IIP, Dehradun the samples were
not adulterated though the report had not gone into the aspect of RON on account
of which the samples were alleged to have failed the specification. Thus, even assuming,
though not conceding, that there was no test report which conclusively established
that the petrol was not adulterated there was also no test report which conclusively
established that the petrol was in fact adulterated.
appellant urged in the rejoinder that the Metropolitan Magistrate vide his order
dated 27.5.2002 discharged all the accused persons as the Court was satisfied
that prima facie there was no material on record even to frame charges against them.
The order clearly records that the search and seizure carried out was unlawful
and in complete contravention and disregard of the mandatory provisions of law
inasmuch as the raid was conducted by an official below the rank of Sub-Inspector
and the samples were drawn in plastic containers.
The Court also
observed that there was no evidence whatsoever to show that the petrol supplied
was adulterated. The finding of the Metropolitan Magistrate reads thus: "the
law being as noticed above, it is very clear that the search and seizure is bad
in law and is contravention to the mandatory provisions of Essential
Commodities Act and contravention to the Motor Spirits (High Speed Diesel) Act and
in any case the prosecution cannot establish its case against any of the
accused and accused persons are liable to be discharged on this ground alone
and no charges can be framed.
It is very clear that
the search and seizure is bad in law and is in contravention to the mandatory provisions
of Essential Commodities Act and contravention to the Motor Spirits (High Speed
Diesel) Act and in any case the prosecution cannot establish its case against any
of the accused and accused persons are liable to be discharged on this ground alone
and no charges can be framed.
Further, it is an admitted
that that there was no receipt of two samples from each source being handed
over to the petitioner. This is clear evidence of the fact that the samples
were never handed over. In addition, the High Court in its order dated 9.9.2004
held that ".. there is no manner of doubt that the principles of law
applied to the given facts of the present case are squarely covered by the judgment
of the Supreme court in Harbanslal Sahnia's case."
Mukul Rohtagi, learned Senior Advocate appearing for the appellant in support
of his contentions placed reliance on some of the following judgments.
Harbanslal Sahnia and Another (supra), the Court dealt with the question of termination
of dealership by the Indian Oil Corporation Ltd. In this case, it was asserted
before this Court that dealership has been terminated on irrelevant and non-existent
grounds, therefore, the order of termination is liable to be set aside. In this
case, there has not been compliance of the procedure. The failure of the sample
taken from appellants' outlet on 11.2.2000 becomes an irrelevant and
non-existent fact which could not have been relied on by the respondent Corporation
for cancelling the appellants' licence.
the above case, the Court came to the conclusion that the dealership was terminated
on irrelevant and non-existent cause. The Court while allowing the appeal
quashed and set aside the Corporation's order terminating dealership of the
has been placed on the celebrated judgment of the Privy Council in Nazir Ahmad
v. King Emperor AIR 1936 PC 253 wherein the principle has been enunciated that
where a power is given to do a certain thing in a certain way the thing must be
done in that way or not at all. Other methods of performance are necessarily
has also been placed on decision in Ramana Dayaram Shetty (supra) wherein this
Court has held thus:
"The power or discretion
of the Government in the matter of grant of largesse including award of jobs, contracts,
quotas, licences, etc. must be confined and structured by rational, relevant and
non- discriminatory standard or norm and if the Government departs from such
standard or norm in any particular case or cases, the action of the Government would
be liable to be struck down, unless it can be shown by the Government that the departure
was not arbitrary, but was based on some valid principle which in itself was not
irrational, unreasonable or discriminatory."
this case, the Court held that the action of the respondent was invalid. The acceptance
of the tender was invalid as being violative of equality clause of Constitution
as also of the rule of administrative law inhibiting arbitrary action.
has been placed on Kumari Shrilekha Vidyarthi and Others v. State of U.P. and
Others (1991) 1 SCC 212, the Court observed thus: "48.
......Non-arbitrariness, being a necessary concomitant of the rule of law, it
is imperative that all actions of every public functionary, in whatever sphere,
must be guided by reason and not humour, whim, caprice or personal predilections
of the persons entrusted with the task on behalf of the State and exercise of all
power must be for public good instead of being an abuse of the power."
has also been placed on Karnataka State Forest Industries Corporation v. Indian
Rocks (2009) 1 SCC 150, the Court observed thus: "38. 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. v. Export Credit
Guarantee Corpn. Of India Ltd. (2004) 3 SCC 553).
has also been placed on Gujarat State Financial Corporation v. M/s. Lotus
Hotels Pvt. Ltd. (1983) 3 SCC 379. In this case the Court held that the public
corporation dealing with public cannot act arbitrarily and its action must be in
conformity with some principles which meets the test of reason and relevance.
have heard the learned counsel for the parties at length and have perused the
decisions relied on by the parties.
the instant case, samples were taken on 15th May, 2000. On the very next day i.e.
on 16th May, 2000, without even giving a show-cause notice and/or giving an
opportunity of hearing, the respondent-Corporation terminated the dealership of
the appellant. The appellant had been operating the petrol pump for the respondent
for the last 30 years and was given 10 awards declaring its dealership as the
best petrol pump in the entire State of NCT Delhi. During this period, on a
number of occasions, samples were tested by the respondent and were found to be
as per specifications.
the instant case, the haste in which 30 years old dealership was terminated even
without giving show-cause notice and/or giving an opportunity of hearing clearly
indicates that the entire exercise was carried out by the respondent Corporation
non-existent, irrelevant and on extraneous considerations. There has been a
total violation of the provisions of law and the principles of natural justice.
Samples were collected in complete violation of the procedural laws and in
non-adherence of the guidelines of the respondent Corporation.
consideration of the totality of the facts and circumstances of this case, it becomes
imperative in the interest of justice to quash and set aside the termination
order of the dealership. We, accordingly, quash the same. Consequently, we direct
the respondent-Corporation to handover the possession of the petrol pump and restore
the dealership of petrol pump to the appellant within three months from the
date of this judgment.
appeal is consequently allowed with costs which is quantified at Rs.1,00,000/-
(Rupees one Lakh only) to be paid by the respondent Corporation to the appellant
within four weeks from today.