1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5565 OF 2009

INDIAN OIL CORPORATION LTD. & ORS. …APPELLANTS

VERSUS

SHASHI PRABHA SHUKLA & ANR. …RESPONDENTS

J U D G M E N T

AMITAVA ROY, J.

1.The Indian Oil Corporation Limited (hereafter to be

referred to as the “IOC/Corporation”) and its

functionaries, in this appeal seek to overturn the

judgment and order dated 04.10.2004 rendered by the

High Court of Judicature at Allahabad in Civil Misc.

Petition No. 34886 of 1998, thereby directing the

Corporation to convert the dealership of a petrol pump

initially allotted in favour of the respondent No.1

(hereafter to be referred to as the “respondent”) under

the discretionary quota of the Departmental Minister

2

concerned to one under its (appellant) circular

No.67-2/2K4 dated 12.02.2004 and restraining it as

well from interfering with the possession of the

respondent of the installation premises. As the

sequence of events would unfold, the attendant facts

do project a distressing state of affairs in the matter of

distribution of State largesse, seemingly motivated by

irrelevant considerations, deliberate defaults and

casual disregard to binding judicial adjudications of a

Constitutional Court.

2.We have heard Mr. Annam D.N. Rao, learned counsel

for the appellants and Mr. Tripurari Ray, learned

counsel for the respondent No. 1 . Though served, but

none has filed vakalatnama on behalf of respondent

No. 2.

3.First the skeletal facts, to facilitate the desired grip of

the issues to be addressed. The respondent herein,

claiming to be an unemployed graduate but actively

involved in activities pertaining to rural development

and welfare of women, but without any regular source

3

of livelihood, applied to the then Minister of Petroleum,

Government of India, New Delhi for being sanctioned a

petrol pump under his Special Discretionary Quota on

the National Highway, Phutahia Chauraha, Tehsil and

District Basti, U.P. The application was considered for

allotment of a retail outlet dealership on

compassionate ground and was forwarded for

necessary follow-up action to the Direction

(Marketing), Indian Oil Corporation, Bombay on

08.08.1985. In deference to the said communication,

the Corporation issued a Letter Of Intent (LOI) on

04.10.1995 for a retail outlet dealership in motor spirit

and high speed diesel oil on the National Highway at

Phutahia Chauraha, District Basti under “A” category.

Thereafter a lease deed was executed on 16.09.1996

between the respondent and the

appellant/Corporation for a period of 30 years at a

monthly rent of Rs.1650/- payable to the former by

the latter w.e.f. 01.03.1996 and was made renewable

at the option of the parties. It was inter alia agreed

4

that the appellant/Corporation would develop the

retail outlet and provide the same to the respondent

with certain facilities, such as, a suitable plot of land

duly developed as an outlet with office building,

storage, tank and pump, air facility etc.

4.The pleaded stand of the respondent in this regard

however is that though the dealership was declared to

be under “A” category, for which as per the norms, the

appellant/Corporation was required to provide the

infrastructure including land, in her case on its

persuasion and insistences, she had to purchase the

necessary land and make further investments to

make it fit for the installation by expending more than

Rs.14 lakhs, against which she was to receive a

nominal monthly lease rent of Rs.1650/-. She also

expressed her grievances with regard to the allotments

of the supplies made to her from time to time,

resulting in heavy financial loss to her in business.

5.Be that as it may, this grant of dealership to the

respondent came to be impeached along with other

5

grants in a public interest litigation being Writ

Petition(C) No.4003 of 1995 before the High Court of

Delhi by the Center for Public Interest Litigation, in all

questioning allotment of 179 retail outlets (petrol

pumps), 155 LPG distributorship and 45 SKO/LDO

dealerships from January 1993 till 1996 by the

Departmental Minister under his discretionary quota

and upon complete adjudication of the issues with the

participation of the parties involved, the proceeding

was disposed of by the judgment and order dated

29.08.1997. It was held in a sense, on a scrutiny of the

files/records produced before the Court that those

reflected unexplained surge of favourtism in the matter

of distribution of the aforementioned public

contracts/distributorships/ dealerships. Vis-a-vis the

award in favour of the respondent, it was held thus:

“A retail on National Highway Phutahia

Chauraha, Teh. & Distt. Basti, UP, has been

allotted to Smt. Shashi Prabha Shukla on her

undated application on the ground that the

applicant is unemployed graduate with keen

interest in activities relating to rural

development and welfare of women and has no

6

regular source of livelihood. From the

application it appears that the applicant is

resident of district Sultanpur, UP. The

allotment in her favour has also been made in

a casual manner as is the case in respect of

allotments in other cases noticed above. We

were told by the learned counsel for the

applicant that the applicant is president of

Youth Congress. Be that as it may, we feel that

the allotment in favour of this applicant is no

better than other allotments noticed by us.

This petrol pump is also non operational.”

6.On the basis of the findings recorded, which were held

as well to be violative of the relevant guidelines of this

Court on this issue and found to be prompted by

extraneous considerations, the assailed allotments

were directed to be cancelled and the following was

ordered:

“(1) Those who have commissioned the Petrol

Pumps/LPG/SKO, Distributorship and are

running the same shall stop operating the

Petrol Pumps etc. as the case may be, with

effect from 1st December 1997. The

Government of India/concerned Oil

Corporation shall take over the Petrol Pump

premises or distributorship premises from

these persons on 1st December 1997. The

concerned Oil Corporation shall have the

market value of the land (if it belongs to the

allottee) and/or the construction thereon

determined in a fair and just manner forthwith.

7

(2) The right to run the Petrol Pumps and/or

Distributorship taken over by the

Government/Oil Corporation concerned shall be

disposed of by way of public auction to be held,

if feasible, before 1st December 1997, so that as

far as possible, the public may not suffer or the

suffering is for minimal period. The original

allottee may also participate in the auction. The

Petrol Pump Distributorship shall be allotted to

the highest bidder who shall run it on original

terms and conditions. He shall have all the

rights in respect of the land and construction

thereon as the original allottee had on the

date of auction, subject, however, to payments

as determined by the Government/Oil

Corporation/concerned authority being made by

the highest bidder. Out of the auction money

the value of the land and construction, if

payable to the original allottee and as

determined by the Oil Corporation shall be paid

to the original allottee and the remaining

amount remitted to Prime Minister's Relief

Fund. If the successful bidder is the original

allottee he shall pay the difference between the

auction money and the value of the land and

construction as determined by the Oil

Corporation.

(3) In case any of the allottee whose allotment

has been ordered to be cancelled and who was

running business from land owned by him and

he. is unwilling to sell part with the land on

which the Petrol Pump/Distributorship is

being run, he shall intimate this fact to

Secretary, Ministry of Petroleum within two

weeks. In such a case the right to open Petrol

Pump/Distributorship, as the case may be

within the close proximity of the existing

8

location, as may be determined by the Oil

Corporation concerned, depending upon the

facts and circumstances of each case and the

need of the public, shall alone be auctioned

with a stipulation that the highest bidder

would arrange for the land/superstructure for

running the Petrol Pump/Distributorship. In

such an eventually, all connections hitherto

with the distributor whose allotment has been

cancelled shall be transferred to the

establishment of the highest bidder.

(4) The Ministry of Petroleum is directed to file

compliance report by 15th December, 1997.”

7.The above quote would yield the following salient

features of the peremptory directives:

a)The concerned petrol pumps/LPG/SKO Distributors

would stop operation on and from 01.12.1997.

b)The Government of India/all concerned Corporations

would take over the petrol pump premises or

distributorship premises on 01.12.1997.

c)The concerned Oil Corporation would have the market

value of the land, if it belongs to the allottee and/or

the construction thereon determined in a fair and just

manner forthwith.

d)The right to run the petrol pumps and/or

9

distributorships taken over by the Government/all

Corporations concerned shall be disposed of by public

auction to be held, if feasible, before 01.12.1997 so

that as far as possible, the public may not suffer or the

suffering is for a minimum period.

e)The original allottee be permitted to participate in the

auction.

f)Out of the auction money, the value of the land and

construction, if payable to the original allottee and as

determined by the all Corporations shall be paid to the

original allottee and the remaining amount would be

remitted to the Prime Minister’s Relief Fund.

g)If the successful bidder is the original allottee, he shall

pay the difference between the auction money and the

value of the land and constructions as determined by

the Corporation.

h)In case, any allottee whose allotment has been ordered

to be cancelled and who had been running business

from the land owned by him is unwilling to sell/part

with the land on which the petrol

10

pump/distributorship is being run, he would intimate

this fact to the Secretary, Ministry of Petroleum within

two weeks. In such a case, the right to open petrol

pump/distributorship, as the case may be, within the

close proximity of the existing location, as may be

determined by the Oil Corporation concerned,

depending upon the facts and circumstances of each

case and the need of the public shall alone be

auctioned with a stipulation that the highest bidder

would arrange for the land/super structure for

running the petrol pump/distributorship.

i)All connections hitherto with a distributor, whose

allotment had been cancelled, would be transferred to

the establishment of the highest bidder.

j)The Ministry of Petroleum was required to file

compliance report by 15.12.1997.

8.The Corporation accordingly on 13.10.1997, issued a

notice to the respondent intimating her that the

dealership agreement between the parties at the close

of the business hours on 30.11.1997 would be treated

11

as terminated and that she would not be entitled to

operate the outlet on and from 01.12.1997. It was also

conveyed that w.e.f. 01.12.1997, neither she nor her

agents/employees and/or representatives would be

entitled to enter the retail outlet premises. It was

clarified that all these would be without prejudice to

any other claim the Corporation might have against

her under the terms of the dealership agreement and

in law.

9.Meanwhile, the respondent had on 23.09.1997

intimated the Ministry of Petroleum, Government of

India, New Delhi that she was not interested to sell or

part with the land on which the petrol pump

distributorship was underway. She also filed SLP (C)

No. 19872 of 1997 before this Court challenging the

judgment and order dated 29.08.1997, which was

disposed of on 20.10.1997 leaving her at liberty, as

prayed for, to seek a review before the High Court.

Incidentally, the review petition filed by her was

dismissed on 07.11.1997, whereupon she

12

unsuccessfully assailed the same in a fresh special

leave petition before this Court, which too was

dismissed on 28.11.1997. Thus, the judgment and

order dated 29.08.1997 of the Delhi High Court

attained finality and eventually the retail outlet was

closed and the facilities were taken over by the

Corporation w.e.f 01.12.1997.

10. The respondent No.1 however in response to the

notice dated 13.10.1997, did call upon the Corporation

to return the land in the same condition as it had been

given to it within 15 days, stating further that failing

which, it would be required to pay rent @ Rs.

50,000/- per month for use and occupation of the

premises and also damages from 23.02.1996.

11. The Corporation thereafter issued an

advertisement dated 05.10.1998 to auction the outlet

hitherto allotted to the respondent. Certain excerpts of

the said advertisement being of decisive significance

are extracted hereinbelow:

“Pursuant to the direction of the Hon’ble High

13

Court, Delhi by its order dated 29

th

August,

1997 as clarified/modified by its further order

dated 11.09.1998 in Writ Petition No.4003 of

1995 between Centre for Public interest

litigation and Union of India, Government

Approved Auctioneers, will auction the right to

get appointed as dealer of a company

controlled outlet of M/s. Indian Oil

Corporation Ltd. Situated at the place

mentioned in the schedule hereunder on the

terms and condition Ltd.

x x x x x x x x

x x x x x x x

6. Terms and conditions covering the terms on

which the property is being auctioned and the

conduct of the auction may be obtained upon

payment of Rs.500/- (Rs.Five Hundred only)

by demand draft or pay order drawn in favour

of M/s. Indian Oil Corporation Ltd., (M.D.)

payable at Allahabad from the Divisional office

of Indian Oil Corporation Ltd. at 5

th

floor,

Indira Bhawan, Civil Lines, Allahabad –

211001 (U.P.) on any working day between

10.30 a.m. and 4.00 p.m. The detailed terms

and conditions of auction are displayed on the

notice Board of the above Divisional office.

SCHEDULE

Last date for submission of applications to

participate in the bid 22

nd

October, 1998.

Date of displaying list of eligible bidders: 28

th

October, 1998

Date of auction/time of auction will be display

on the notice board at our Divisional Office,

Indian Oil Corporation Ltd. (M.D.), 5

th

Floor

14

Indira Bhawan Civil Lines, Allahabad – 211001

(U.P.)

Venue of Property: NH Phutahia Chauraha,

Place: Basti (U.P.)”

12. As the advertisement would reveal, it did contain

a categorical reference of the judgment and order

dated 29.08.1997 of the Delhi High Court, pursuant to

which the same had been made to auction the right of

a dealer of the company controlled outlet, situated at

the place mentioned at NH Phutahia Chauraha, Place:

Basti (U.P.). Subsequent thereto, by a corrigendum

dated 13.10.1998, the word “property” appearing in

Clause 6 was in essence substituted by the word

“dealership”, as would be evident from the extract of

the said corrigendum:

“In item 6 of the said notice for auction for

retail outlet of M/s. Indian Oil Corporation Ltd.

situated at NH Phutahia Chauraha, Basti

(U.P.) may be read as follows:

The word PROPERTY shall also be substituted

by the word DEALERSHIP. It is further

clarified that in case of company controlled

retail outlets only license to operate the

dealership will be substituted with the word

15

DEALERSHIP in the terms and conditions and

its Annexures being sold from our office at

Allahabad.

Other terms and conditions shall be applicable

as per earlier advertisement.”

13. Mentionably, no other record has been laid before

this Court to further elaborate on the terms and

conditions of the proposed auction.

14. To reiterate, the High Court of Delhi in its

rendition dated 29.08.1997, vis-à-vis the cases where

the allottee, whose allotment had been cancelled, was

unwilling to sell/part with a land on which the petrol

pump/distributorship was being operated, had

directed the Corporation to auction the right to open

petrol pump/distributorship within the close proximity

of the existing location, as may be determined by it,

depending upon the facts and circumstances of each

case and the need of the public with the stipulation

that the highest bidder would arrange for the

land/super structure for running the petrol

16

pump/distributorship. To put it differently, in the

eventuality where the allottee was not willing to

sell/part with the land on which the petrol

pump/distributorship was operational, the

Corporation was obligated in law to ensure the

following steps in re-auctioning the right to open petrol

pump/distributorship:

(i)Determine a location in the close proximity of the

existing location depending upon the facts and

circumstances of each case and the need of the

public.

(ii)Such location, as determined on the above factors,

alone to be auctioned with the stipulation that the

highest bidder would arrange for the land/super

structures for running the petrol

pump/distributorship.

15. The unambiguous precept in the above premise,

as contained in the judgment and order dated

29.08.1997 thus did cast a duty on the Corporation as

a condition precedent for the re-auction, to determine

17

a location within the close proximity of the existing

location, contingent on the facts and circumstances of

each case and the need of the public. In clear terms

therefore the Corporation was required to undertake

this conscious exercise, it being clear that the location

for the re-auction has to be essentially different from,

though in proximity of the existing location.

16. The advertisement dated 05.10.1998 along with

the corrigendum however do not disclose the exact

location for which the re-auction was notified, the

venue of the site being “NH Bhutahia Chauraha, Place:

Basti (U.P.)” and wholly identical to the one of the

existing location of the respondent. No attempt has

been made to draw our attention to any initiative

taken by the Corporation in compliance of the

directives contained in the judgment and order dated

29.08.1997 of the Delhi High Court to identify the

location as required for the fresh auction.

17. The respondent however launched her assailment

against the advertisement dated 05.10.1998 and the

18

corrigendum dated 13.10.1998, this time before the

High Court of Judicature at Allahabad pleading the

same to be violative of the directions contained in the

judgment and order dated 29.08.1997 and also in

violation of her fundamental rights under Articles 14,

19(1)(g) of the Constitution of India. The High Court of

Judicature at Allahabad in the first instance by its

order dated 29.10.1998 stayed the operation of the

auction notices and subsequent thereto, by its order

dated 17.12.1998 directed the Corporation to permit

the respondent to run the dealership of petroleum in

the petrol pump of Phutahia Chauraha, District Basti

until the auction was held and finalized. Eventually,

by the impugned judgment and order, noticing that

the proposed auction had not taken place and that

consequently the respondent had been permitted to

run the retail outlet since 1998, directed the

Corporation, in view of its new policy dated

12.02.2004, to award fresh dealership to the

respondent thereunder and further restrained it from

19

interfering with her possession of the petrol pump

premises in question.

18. As the impugned judgment would demonstrate,

the High Court, while traversing the relevant facts,

took note of the pleaded stand of the Corporation

before it that the lease executed by the respondent

vis-à-vis the land in question did subsist, cancellation

of the dealership notwithstanding, and therefore she

was not entitled for the possession thereof and that it

had the right to induct some other dealer through the

proposed auction to operate the agency from the land

of the respondent. The High Court, while readily

dismissing this plea of the Corporation on the

touchstone of Article 300A of the Constitution of India

held that as the dealership was cancelled by the

intervention of the Delhi High Court, it was not open

for the Corporation to assert that the lease deed

executed by her in its favour did subsist thereafter in

the eye of law. Having propounded thus, the High

Court observed that because of the non-removal of the

20

fixtures, machineries and apparatus etc. from the land

by the Corporation and because of its unlawful stand

precipitating the litigation before it, the respondent

was sought to be denied the benefit of the use of land

in question for which she was permitted, by the

interim order dated 17.12.1998, to continue with the

dealership till the auction was held and finalized.

Taking note of the fact that no auction had taken place

and that the respondent had been permitted to run

the retail outlet since 1998, the High Court provided

that fresh dealership be awarded to her under the new

Policy dated 12.02.2004 of the Corporation, which

contemplated such allotments to land owners and

their nominees from within the family, directly as well

as through advertisement for locations outside

government approved marketing plans. The High

Court did also record that the entitlement of the

respondent was also cognizable in view of the fact that

she had been running the present retail outlet without

any complaint for a long period. To reiterate, the High

21

Court thus directed the Corporation to award fresh

dealership under the said policy by converting the

earlier dealership thereunder within one month and

also further restrained it from interfering with the

respondent's possession over the petrol pump

premises in question. This determination is the subject

matter of scrutiny in the present appeal.

19. Mr. Rao has insistently argued that the

dealership of the respondent having been cancelled by

the ruling dated 29.08.1997 of the Delhi High Court

which had attained finality, no direction for fresh

dealership to her under any circumstances could have

been made and thus the same being patently

erroneous, the impugned judgment and order is liable

to be set aside. According to the learned counsel, the

advertisement dated 05.10.1998 and the corrigendum

dated 13.10.1998, if cumulatively read, are in

meticulous compliance of the directions to that effect

as contained in the judgment and order dated

29.08.1997 and thus the Corporation ought to have

22

been permitted to undertake the process to its logical

end. The learned counsel for the Corporation when

confronted with the omissions in the advertisement

and absence of materials on record to authenticate

that the exercise required to be undertaken by the

Corporation for identifying a location in the proximity

of the existing location was pursued, had no

convincing explanation therefor.

20. Controverting the above, the learned counsel for

the respondent emphatically urged that in the

attendant facts and circumstances, though the

judgment and order dated 29.08.1997 of the Delhi

High Court had attained finality, the operative

direction to the Corporation to convert the existing

dealership into a new dealership under the policy

dated 12.02.2004 is unassailable and therefore no

interference in this appeal is called for. While imputing

that, the Corporation though required in cases of

dealership under category ‘A’, to provide the whole

infrastructure including the land, in the case of the

23

respondent, she was asked to make the arrangement

therefor on her own investments, the learned counsel

maintained that the advertisement dated 05.10.1998,

even if read with the corrigendum dated 13.10.1998

was apparently not in compliance of the directions of

the Delhi High Court and, therefore could not have

been given effect to. According to him, the auction had

thus been rightly stayed by the Allahabad High Court

whereafter the respondent was permitted to operate

the dealership and eventually taking note of the

prevalent policy dated 12.02.2004, the Corporation

had been rightly directed to convert her existing

dealership to a fresh dealership thereunder. It was

urged as well that the plea of the

appellant/Corporation that cancellation of the

dealership notwithstanding, the lease did subsist and

that it was entitled in law to hold a fresh auction for

the land of the respondent, was wholly untenable and

violative of the mandate of Article 300A, as held by the

Allahabad High Court.

24

21. The recorded facts and the rival assertions have

received our due consideration. The genesis of the

instant appraisal is indeed traceable to the allotment

of the retail outlet dealership to the respondent on

compassionate ground by the Departmental Minister

for Petroleum from his Special Discretionary Quota. As

hereinbefore stated, on the recommendation of the

said authority, the Corporation awarded the

dealership. This award along with identically placed

allotments, on judicial scrutiny, were directed to be

cancelled in the public interest litigation initiated by

the Center for Public Interest Litigation before the High

Court of Delhi which, by its judgment and order dated

29.08.1997, on the ground that those were vitiated

not by mere aberrations or arbitrariness, but by

uncontrolled display of favouritism. The rendition by

the High Court of Delhi in the facts and circumstances

of the cases before it, was assuredly to secure

administrative probity, transparency, objectivity and

fairness in the matter of distribution of State largesse

25

and public contracts. This decision, to reiterate, has

become final and binding on the parties. As noted

hereinabove, the Corporation in flagrant defiance and

disregard to the judicial mandate of a Constitutional

Court did not only issue the advertisement dated

05.10.1998 with the corrigendum on 13.10.1998

without either determining or specifying the exact

location for the site of dealership in the proximity of

the earlier site of the respondent, instead did take up

an incomprehensible plea that the cancellation of the

dealership notwithstanding, the lease of the land of the

respondent with it did subsist and that it was entitled

in law to induct the new dealer through the auction

process initiated, to the same location. The underlying

objective in issuing the direction to determine and

specify a location in the proximity of the existing site

was with the avowed purpose of avoiding confrontation

and possible litigation and also to ensure smooth and

uninhibited supply of petrol and HSD from the new

outlet at the fresh venue.

26

22. In the facts of the present case, we subscribe to

the view of the High Court of Allahabad that with the

termination of the dealership, the lease between the

parties also stood extinguished and therefore, the

respondent being the owner of the land and she

having expressed her disinclination to sell or part with

it, the Corporation by no means could have

contemplated to award the new dealership to a third

party on her land. On this clear premise, the failure of

the Corporation to act in terms of the directions

containing in the judgment and order of the Delhi High

Court and in contending that the land of the

respondent was available for commissioning the new

dealership is patently wrong besides being

contumaciously irreverent and abusively

non-compliant thereof. The approach and attitude of

the Corporation in making the advertisement dated

05.10.1998 with the corrigendum dated 13.10.1998

and in taking the apparently untenable stand that

notwithstanding the cancellation of the dealership of

27

the respondent, her land was available for the new

process, is thus visibly militative of the rule of law

besides being destructive of the salutary objective with

which the High Court of Delhi had directed

cancellation of the dealership/distributorship of the

respondent along with others, being vitiated by the

vice of nepotism and favourtism. This we say, as

having regard to the progression of events, we are left

with the impression, in view of the persistent

omissions and commissions of the Corporation, that it

is not unlikely that all these might have been

strategised to eventually benefit the respondent in the

long run. The pleaded stand of the Corporation that

despite the cancellation of the dealership of the

respondent, her land was still available, flies in the

face of the determination to the contrary as recorded

in the judgment and order dated 29.08.1997 and only

reflects the pre-determined mind of its functionaries

for reasons unknown, though inferable. It is really

incomprehensible as to how in spite of such explicit

28

and clear observations and directions of the High

Court of Delhi in its judgment and order dated

29.08.1997, either such a stand could have been

taken or the fresh auction process could have been

initiated without undertaking the initiatives required

for specifying/identifying the new location. To

reiterate, no material has been placed before us to

demonstrate to the contrary. This is more so, as in the

advertisement dated 05.10.1998, there is a reference

of the judgment and order dated 29.08.1997 of the

Delhi High Court. A bare perusal of this document

would show the venue to be “NH Phutahia Chauraha

place: Basti (UP)”, the same as of the dealership of the

respondent.

23. It is no longer res integra that a public authority,

be a person or an administrative body is entrusted

with the role to perform for the benefit of the public

and not for private profit and when a prima facie case

of misuse of power is made out, it is open to a court to

draw the inference that unauthorized purposes have

29

been pursued, if the competent authority fails to

adduce any ground supporting the validity of its

conduct.

24. The following extract from the Halsbury’s Laws of

England, Fourth Edition, Vol.1(1) Administrative Law

provide the foundation of these observations:

“A public authority may be described as a

person or administrative body entrusted

with functions to perform for the benefit of the

public and not for private profit. Not every

such person or body is expressly defined as

public authority or body, and the meaning of a

public authority or body may vary according to

the statutory context.”

25. In re, the duties, responsibilities and obligations

of a public authority in a system based on rule of law,

unfettered discretion or power is an anathema as every

public authority is a trustee of public faith and is

under a duty to hold public property in trust for the

benefit of the laity and not for any individual in

particular. The following excerpts from the Foulkes

30

Administrative Law, 7

th

Edition at page 174

provide the elaborate insight:

“A true trust exists when one person, the

trustee, is under a duty to hold the trust

property vested in him for the benefit of other

persons, the beneficiaries. The term ‘trust’ is,

however, used in a much wider sense. We may

speak of government being ‘entrusted’ with

power, of Parliament as the trustee which the

nation has authorized to act on its behalf.

The purpose of the use of the concept in such

contexts is of course to emphasize that the

powers and duties of such bodies should be

exercised not for the advancement of their own

interest, but that of the others, to underline

their obligation to others.

26. The distinction between the power of a public

authority and a private person has since been

succinctly brought about in the following quote from

the celebrated work “Administrative Law”, Tenth

Edition by H.W.R. Wade and C.F. Forsyth:

“The common theme of all the authorities so

far mentioned is that the notion of absolute or

unfettered discretion is rejected. Statutory

power conferred for public purposes is

conferred as it were upon trust not absolutely

– that is to say, it can validly be used only in

the right and proper way which parliament

when conferring if is presumed to have

31

intended. In a system based on rule of law,

unfettered governmental discretion is

contradictory in terms …....………………

The powers of public authorities are therefore

essentially different from those of private

persons. A man making his will may, subject

to any rights of his dependants, dispose of his

property just as he may wish. He may act out

of malice or a spirit of revenge, but in law this

does not affect his exercise of his power. In the

same way a private person has an absolute

power to allow whom he likes to use his land,

to release a debtor, or, where the law permits,

to evict a tenant, regardless of his motives.

This is unfettered discretion. But a public

authority may do none of these things unless it

acts reasonably and in good faith and upon

lawful and relevant grounds of public interest.”

27. In Akhil Bhartiya Upbhokta Congress vs.

State of M.P.

1

, this Court was seised as well with the

nature of the norms to be adhered to for allotment of

land, grant of quotas, permits, licenses etc. by way of

distribution thereof as State largesse. The following

observations provide the guiding comprehension:

65. What needs to be emphasised is that the

State and/or its agencies/instrumentalities

cannot give largesse to any person according

to the sweet will and whims of the political

entities and/or officers of the State. Every

1

(2011) 5 SCC 29

32

action/decision of the State and/or its

agencies/instrumentalities to give largesse or

confer benefit must be founded on a sound,

transparent, discernible and well-defined

policy, which shall be made known to the

public by publication in the Official Gazette

and other recognised modes of publicity and

such policy must be implemented/executed by

adopting a non-discriminatory and

non-arbitrary method irrespective of the class

or category of persons proposed to be

benefited by the policy. The distribution of

largesse like allotment of land, grant of quota,

permit licence, etc. by the State and its

agencies/instrumentalities should always be

done in a fair and equitable manner and the

element of favouritism or nepotism shall not

influence the exercise of discretion, if any,

conferred upon the particular functionary or

officer of the State.

66. We may add that there cannot be any

policy, much less, a rational policy of allotting

land on the basis of applications made by

individuals, bodies, organisations or

institutions dehors an invitation or

advertisement by the State or its

agency/instrumentality. By entertaining

applications made by individuals,

organisations or institutions for allotment of

land or for grant of any other type of largesse

the State cannot exclude other eligible persons

from lodging competing claim. Any allotment

of land or grant of other form of largesse by

the State or its agencies/instrumentalities by

treating the exercise as a private venture is

liable to be treated as arbitrary, discriminatory

and an act of favouritism and/or nepotism

violating the soul of the equality clause

33

embodied in Article 14 of the Constitution.

28. In his work Administrative Law (6th Edn.)

Prof. H.W.R. Wade highlighted the distinction

between powers of public authorities and those of

private persons in the following words:

“The common theme of all the authorities so

far mentioned is that the notion of absolute or

unfettered discretion is rejected. Statutory

power conferred for public purposes is

conferred as it were upon trust, no absolutely

—that is to say, it can validly be used only in

the right and proper way which Parliament

when conferring it is presumed to have

intended. Although the Crown's lawyers have

argued in numerous cases that unrestricted

permissive language confers unfettered

discretion, the truth is that, in a system based

on the rule of law, unfettered governmental

discretion is a contradiction in terms.”

29. While rejecting the theory of absolute discretion,

Lord Reid observed in Padfield v. Minister of

Agriculture, Fisheries and Food

2

:

“… Parliament must have conferred the

discretion with the intention that it should be

used to promote the policy and objects of the

Act; the policy and objects of the Act must be

2

[1968] AC 997

34

determined by construing the Act as a whole

and construction is always a matter of law for

the court. In a matter of this kind it is not

possible to draw a hard and fast line, but if

the Minister, by reason of his having

misconstrued the Act or for any other reason,

so uses his discretion as to thwart or run

counter to the policy and objects of the Act,

then our law would be very defective if persons

aggrieved were not entitled to the protection of

the court.”

30. The role of the Government as provider of services

and benefits to the people was noticed in Ramana

Dayaram Shetty v. International Airport Authority

of India

3

in the following words:

“11. Today the Government in a welfare State,

is the regulator and dispenser of special

services and provider of a large number of

benefits, including jobs, contracts, licences,

quotas, mineral rights, etc. The Government

pours forth wealth, money, benefits, services,

contracts, quotas and licences. The valuables

dispensed by Government take many forms,

but they all share one characteristic. They are

steadily taking the place of traditional forms of

wealth. These valuables which derive from

relationships to Government are of many kinds.

They comprise social security benefits, cash

grants for political sufferers and the whole

scheme of State and local welfare. Then again,

thousands of people are employed in the State

3

(1979) 3 SCC 489

35

and the Central Governments and local

authorities. Licences are required before one

can engage in many kinds of businesses or

work. The power of giving licences means

power to withhold them and this gives control

to the Government or to the agents of

Government on the lives of many people. Many

individuals and many more businesses enjoy

largesse in the form of government contracts.

These contracts often resemble subsidies. It is

virtually impossible to lose money on them and

many enterprises are set up primarily to do

business with the Government. The

Government owns and controls hundreds of

acres of public land valuable for mining and

other purposes. These resources are available

for utilisation by private corporations and

individuals by way of lease or licence. All these

mean growth in the Government largesse and

with the increasing magnitude and range of

governmental functions as we move closer to a

welfare State, more and more of our wealth

consists of these new forms. Some of these

forms of wealth may be in the nature of legal

rights but the large majority of them are in the

nature of privileges.”

31. In the same vein, in Natural Resources

Allocation, In Re

4

, this Court summed up the long

line of judicial enunciations on this theme thus:

“107. From a scrutiny of the trend of decisions it

is clearly perceivable that the action of the State,

whether it relates to distribution of largesse,

grant of contracts or allotment of land, is to be

4

Special Reference No.1 of 2012

36

tested on the touchstone of Article 14 of the

Constitution. A law may not be struck down for

being arbitrary without the pointing out of a

constitutional infirmity as McDowell case has

said. Therefore, a State action has to be tested

for constitutional infirmities qua Article 14 of the

Constitution. The action has to be fair,

reasonable, non-discriminatory, transparent,

non-capricious, unbiased, without favouritism

or nepotism, in pursuit of promotion of healthy

competition and equitable treatment. It should

conform to the norms which are rational,

informed with reasons and guided by public

interest, etc. All these principles are inherent in

the fundamental conception of Article 14. This is

the mandate of Article 14 of the Constitution of

India.”

32. This Court in Center for Public Interest

Litigation and others Vs. Union of India and

others

5

, while examining the challenge to the

allocation of 2G Telecom Services, reflected on the

considerations that should inform the process thereof

and observed thus:

95. This Court has repeatedly held that

wherever a contract is to be awarded or a

licence is to be given, the public authority must

adopt a transparent and fair method for making

selections so that all eligible persons get a fair

opportunity of competition. To put it differently,

5

(2012) 3 SCC 2

37

the State and its agencies/instrumentalities

must always adopt a rational method for

disposal of public property and no attempt

should be made to scuttle the claim of worthy

applicants. When it comes to alienation of

scarce natural resources like spectrum, etc. it is

the burden of the State to ensure that a

non-discriminatory method is adopted for

distribution and alienation, which would

necessarily result in protection of

national/public interest.

33. Jurisprudentially thus, as could be gleaned from

the above legal enunciations, a public authority in its

dealings has to be fair, objective, non-arbitrary,

transparent and non-discriminatory. The discretion

vested in such an authority, which is a concomitant of

its power is coupled with duty and can never be

unregulated or unbridled. Any decision or action

contrary to these functional precepts would be at the

pain of invalidation thereof. The State and its

instrumentalities, be it a public authority, either as an

individual or a collective has to essentially abide by

this inalienable and non-negotiable prescriptions and

cannot act in breach of the trust reposed by the polity

and on extraneous considerations. In exercise of

38

uncontrolled discretion and power, it cannot resort to

any act to fritter, squander and emasculate any public

property, be it by way of State largesse or contracts

etc. Such outrages would clearly be unconstitutional

and extinctive of the rule of law which forms the

bedrock of the constitutional order.

34. Adverting to the facts of the case, to recapitulate,

the dealership of the respondent had been cancelled

being vitiated by favourtism due to exercise of fanciful

discretion of the Departmental Minister, which was

neither approved nor condoned. Nevertheless, the

Corporation visibly did not act in terms of the

judgment and order of the High Court of Delhi in

initiating the fresh process for auction. This led to the

challenge to the faulty advertisement dated

05.10.1998 and the corrigendum dated 13.10.1998,

the operation whereof to start with was stayed and

thereafter the respondent was permitted to continue

with the dealership and eventually she was directed to

be awarded a fresh dealership by converting the

39

existing dealership under its policy dated 12.02.2004.

The dealership of the respondent having been

cancelled w.e.f. 01.12.1997, though the operation of

the auction notice and the corrigendum thereto had

been stayed and she had been allowed to run the

outlet, we fail to comprehend as to how all these could

be construed to signify that her dealership did subsist

from the date of the impugned judgment and order.

There was thus no scope for conversion of the existing

dealership to a new dealership as ordered. In addition

thereto, we are of the unhesitant opinion that the

direction to award the new dealership under the

prevalent policy dated 12.02.2004, having regard to

the backdrop of adjudication undertaken by the Delhi

High Court would amount to perpetuation of the

undue benefit, earlier bestowed on her by a method

held to be illegal, dubious, arbitrary and transgressive

of public interest. In other words, the award of new

dealership to the respondent in the prevailing facts

and circumstances, in our estimate, would amount to

40

allowing the respondent to enjoy the premium of the

illegality and arbitrariness resorted to in granting her

the earlier dealership and reward her as a beneficiary

of unlawful administrative patronage. In our view, the

award of new dealership to the respondent would

wholly undermine the purpose of cancelling her earlier

dealership and annihilate the very objective of

securing transparency, fairness and non-arbitrariness

in the matter of distribution of public contract. In

taking the steps for initiating a fresh process of

auction, to state the least, the defaults and

de-relictions of the Corporation and its functionaries

are writ large and deserve to be strongly deprecated.

The omissions and commissions do have the potential

of suggesting pre-determined perceptions and

motivations in aid of the respondent, resulting in such

disagreeable culmination in her favour. The time lag,

according to us, per se cannot purge the vitiation of

the award of dealership originally granted to the

respondent, to entitle her to the relief granted by the

41

impugned judgment and order, by way of a boon for

the inexplicable faults and remiss in duty of the

functionaries of the Corporation. In supervening public

interest and to uphold the rule of law as well as

imperative of administrative fairness, transparency

and objectivity, we are thus not inclined to sustain the

impugned judgment and order. It is, therefore set

aside so far as it holds that the respondent is entitled

to a new dealership at her location under the Policy

dated 12.02.2014. We hereby reiterate that the

dealership of the respondent at her present location

stands cancelled w.e.f. 01.12.1997. The Corporation

would now take immediate steps to this effect as

permissible in law without fail. The Corporation would

also initiate a fresh process for award of new

distributorship/dealership in the area and at a

location to be determined by it, if it considers it

necessary in public interest strictly in conformity with

law and the constitutionally recognized norms of

transparency, objectivity and fairness.

42

35. In the singular facts and circumstances, we are

greatly anguished and appalled by the manner in

which the Corporation and its functionaries have acted

in the face of the judgment and order dated

29.08.1997 of the Delhi High Court. We have no

hesitation to record that we are left with the

impression that the failures on their part may not be

wholly bona fide. In this view of the matter, we direct

the Corporation to cause an in-house inquiry to be

made to fix the liability of the errant officials on the

issue and decide appropriate action(s) against them in

accordance with law within a period of two months

herefrom. The Corporation after completing this

exercise would submit a report before this Court for

further orders, if necessary. We make it clear that any

breach or non-compliance of this direction would be

per se construed to be a contempt of this Court with

penal consequences as contemplated in law. The

appeal is allowed. No costs.

43

…........................................J.

[N.V. RAMANA]

…........................................J.

[AMITAVA ROY]

NEW DELHI;

DECEMBER 15, 2017.