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CASE NO.:

Transfer Case (civil) 80 of 2002

Transfer Case (civil) 82 of 2002

Transfer Case (civil) 83 of 2002

Transfer Case (civil) 84 of 2002

Transfer Case (civil) 85 of 2002

Transfer Case (civil) 86 of 2002

Transfer Case (civil) 87 of 2002

Transfer Case (civil) 88 of 2002

Transfer Case (civil) 90 of 2002

Transfer Case (civil) 91 of 2002

Transfer Case (civil) 417-423 of 2002

PETITIONER:

Onkar Lal Bajaj etc. etc.

RESPONDENT:

Union of India & Anr. etc. etc.

DATE OF JUDGMENT: 20/12/2002

BENCH:

Y.K. Sabharwal & H.K. Sema.

JUDGMENT:

J U D G M E N T

[With Contempt Petition (C) No.556/2002 IN TP (C) Nos.417-

423/2002]

[With T.C. (C) Nos. 100-109 of 2002]

Y.K. Sabharwal, J.

The marketing of petroleum products has been quite a lucrative

business. The four public sector oil companies - Indian Oil Corporation

Limited (IOC), Bharat Petroleum Corporation Limited (BPC), Hindustan

Petroleum Corporation Limited (HPC) and IBP Company Limited (IBP)

control the marketing of the said products. We are concerned with the

marketing of petrol and diesel, Superior Kerosene Oil (SKO), Light Diesel

Oil (LDO) and Liquefied Petroleum Gas (LPG). The challenge in these

matters is to the validity of the order of the Government of India dated 9th

August, 2002 whereby all allotments made with respect to retail outlets,

LPG distributorships and SKO-LDO dealerships on the recommendations

of the Dealer Selection Boards (DSBs) since 1st January, 2000 were

decided to be cancelled.

In past also allotments of retail outlets for petroleum products were

cancelled by this Court after coming to the conclusion that the allotments

made were arbitrary, on account of political connections/motivation and

extraneous considerations. The tainted allotments were also cancelled by

various orders of High Court of Delhi. The allotments which were on

merits and not tainted were not ordered to be cancelled. It is a matter of

co-incidence that exactly seven years ago i.e. in August, 1995 on the front

page of Indian Express a news item appeared regarding the grant of retail

outlets for petrol pumps on account of political and other connections.

Now, in August 2002, i.e., exactly seven years later again news item

appeared on the front page of same newspaper about allotments to the

near and dear ones of the political functionaries attributing the same on

account of political considerations. In Common Cause, A Registered

Society v. Union of India & Ors. [(1996) 6 SCC 530], this Court

observed that for these allotments, a transparent and objective

criteria/procedure has to be evolved based on reason, fair play and non-

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arbitrariness.

Always, many have been in race for getting these

dealerships/distributorships. From September 1977, a uniform procedure

for selection of persons for appointment as dealers/distributors applicable

to all the public sector oil marketing companies was introduced by the

Government. The dealers were earlier selected from amongst the

applicants by a selection committee comprising senior officials of the oil

companies. The applications were invited from interested persons by

advertising the available dealerships in the newspapers.

In the year 1983, the Central Government constituted two member

Oil Selection Boards comprising of a retired High Court Judge as

Chairman and a retired Civil Servant as a member. In the year 1990, one

prominent member of public importance was also included in the said

boards. In January 1993, the composition of the Oil Selection Board was

a retired High Court Judge as Chairman and a representative of

Scheduled Castes/Scheduled Tribes/Other Weaker sections and a

prominent public figure as members. The name of the board was later

changed to 'Dealer Selection Board'. The guidelines were updated and

notified in October 2000 by Ministry of Petroleum and Natural Gas in*

terms of Office Memorandum dated 9th October, 2000. According to these

guidelines, the DSBs have the following composition :

"i) A retired judge of a High Court/

retired District Judge/retired

Additional District Judge/retired

Officer who had held an

Equivalent Judicial post - Chairman

ii) An Officer of the concerned Oil

Company not below the rank of

Deputy General Manager or

Chief Manager depending on

Availability - Member

iii) An officer of another Oil Company

not below the rank of Deputy

General manager or Chief

Manager depending on

availability - Member"

The guidelines provide detailed procedure for selecting candidates

for appointment as dealers/distributors. A total of 59 DSBs were

constituted in June-July 2000 and afterwards. These DSBs were

entrusted the task of selections for the retail outlets, LPG distributorships

and SKO-LDO dealerships. The guidelines also provide for reservations

in each of the dealership/distributorship categories for the applicants

belonging to Scheduled Castes/Scheduled Tribes, defence personnel,

para military/Police/Government personnel, outstanding sports persons,

freedom fighters and physically handicapped. Each of these categories

as also in the remaining 50% for open categories, 33% of the

dealerships/distributorships were reserved for women.

The dealerships/distributorships sites for marketing of petrol/diesel

or LPG or SKO-LDO are of two types Company Owned and Dealer

Operated (CODO) and Dealer Owned and Dealer Operated (DODO).

Under the former category, the land, superstructure standing thereon and

other facilities such as underground product tanks, dispensing units, other

ancillary equipments etc. are owned by the oil companies and business

operations are carried on by the dealer/distributor and under the latter

category, the land is either owned or held on lease hold rights by the

dealers/distributors. The superstructure, except the product tanks,

dispensing units and other ancillary equipment in the case of petrol/diesel

retail outlets and cylinders and regulators in the case of LPG, is owned by

the dealers/distributors. In the case of dealership/distributorship allotted

to the candidates belonging to Schedules Castes/Scheduled Tribes and

widows over 40 years of age, the land and the superstructure thereon are

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owned by the oil companies, expenditure on which is made from a fund

created and maintained by the oil companies known as the Corpus Fund.

The guidelines dated 9th October, 2000 were issued, as stated

therein, to provide transparent, uniform, fair and faster procedure for

selection of suitable candidates as dealers/distributors. The educational

qualifications for reserve categories, other than freedom fighters and

outstanding sport persons, were matriculation or recognized equivalent.

The educational qualifications were, however, not applicable for freedom

fighters and outstanding sport persons. The guidelines also provide that

the gross income of the candidate should not exceed Rs.2,00,000/- per

annum in the previous financial year. The income for this purpose will

include that of self, spouse and dependent children. If the candidate is

dependent on parents, then their income was also to be taken into

consideration for computing total income. A candidate having income of

more than Rs.2,00,000/- per annum is disqualified under the guidelines. It

seems that with a view to minimize the scope of interference and keep

secret, as far as possible, a clause in the guidelines was incorporated

stating that the nomination of the oil company officer as a member of DSB

for a round of selection at a particular location will be made by the

Executive Director or Director (Marketing) of the concerned oil company

not earlier than 48 hours from the date of starting the interviews at a

particular location. In respect of the tenure of Chairman, the guidelines

provide that it will be for a period not exceeding two years, further,

however, providing that the Chairman shall hold office during the pleasure

of the Government and his services can be dispensed with even before

the expiry of the tenure without giving any notice and without assigning

any reason. Norms for evaluating the candidates to judge their inter se

suitability for all categories have also been provided. One of the

guidelines is that after completion of the interviews, board shall not

adjourn till such time the merit panel is finalized. It is also provided that

the DSB shall recommend to the oil companies a panel of maximum three

names for a particular dealership/distributorship immediately after the

interviews are over. The merit panel will be finalized, signed and handed

over by the Chairman, DSB in a sealed envelope to the non-member

secretary or the officer deputed by him who will forward the merit panel to

the Regional Executive Director/General Manager of the concerned oil

company within 24 hours. A time frame for selection of

dealer/distributorship of 145 days from the date of advertisement has

been set out in the guidelines providing that within 129 days from the

notice of advertisement, the selection shall be made and remaining 16

days, as provided therein, for forwarding the panel to the oil company,

submitting of field investigation report by the oil company and issue of LOI

after completion of the field investigation report. A mechanism for

grievance redressal system has also been provided for to consider the

complaints against selection of dealers/distributors.

The guidelines laid down a detailed procedure. Despite the

guidelines, according to the media report, certain allotments were on

account of political patronage. In these matter, the guidelines can

never be a foolproof and it depends on those who have to follow the

same. The real question to be considered in these matters is

whether on account of controversy regarding alleged tainted

selections of certain applicants, can the entire selections of all

applicants of all categories made by all selection boards from

January 2000 be annulled.

The DSBs, under the aforesaid guidelines, till date of their

dissolution, i.e., 9th May, 2002, against a total number of 7000

dealerships/distributorships, advertised 5641 locations out of which merit

panels were published for 3760 locations. The letters of intent (LOI) were

issued to 3546 successful applicants. The agreements were signed

between oil companies and LOI holders in 2248 cases. These are

operational outlets. The remaining LOI holders were in process of

completing requisite formalities when the impugned order was issued.

On 2nd August, 2002, Indian Express carried, on its front page, a

story with certain names attributing political patronage in grant of

dealership/distributorship. The newspapers also carried editorials. The

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insinuations made were that the allotments were made to the Members of

Parliament, Assembly, party workers of political party in power, their

relatives etc. The resignation of Minister for Petroleum and Natural Gas

was sought by political parties in opposition. The questions were raised

on the floor of the Parliament. The proceedings of the House were also

stalled.

In view of the controversy, review was done by the Prime Minister

on 5th August,, 2002 in which the Deputy Prime Minister, Minister for

Petroleum and Natural Gas, Minister for Parliamentary Affairs participated

amongst others. In view of the controversy regarding the allotments, the

Prime Minister directed the Ministry of Petroleum and Natural Gas to

initiate steps to cancel all allotments made with effect from January 2000

till date.

The press release issued by Press Information Bureau and sent to

the oil marketing companies reads as under :

"The Hon'ble Prime Minister today reviewed the

allotment of Petrol Pump and LPG Gas and

Kerosene Agencies by public sector Oil

Companies.

It was emphasized that all allotments had

been made on the recommendations of

Dealership Selection Boards which are headed by

retired Judges. However, since a controversy

has arisen with regard to these allotments, the

Prime Minister has directed the Ministry of

Petroleum & Natural Gas to initiate steps to

cancel all allotments made with effect from

January 2000 till date. All concerned petrol

pumps and LPG and Kerosene agencies will be

auctioned on the basis of Competitive Bidding.

Modalities for the Re-allotment on competitive

bidding shall be finalized by the concerned

Ministry. However, the allotments made to the

families of Kargil Martyrs shall remain unaffected

by this."

The effect of the aforesaid decision was the cancellation of all the

merit panels numbering 3760 that had been prepared by the DSBs after

considering thousands, if not lacs, of applications and after interviewing

thousands of applicants. All those selected by the DSBs, except 214, had

been issued LOI. As earlier noticed, in 2248 cases agreements had been

executed between oil companies and LOI holders. This means that 2248

dealerships/distributorships were already operational.

A formal order was, however, issued by the Government of India,

Ministry of Petroleum and Natural Gas on 9th August, 2002. That order

reads as under :

"The Government has recently reviewed the

allotments made since January 2000 of Petrol

Pumps, LPG distributorships and SKO LDO

dealerships of Public Sector Oil Companies. The

allotments were recommended by the Dealer

Selection Boards as per Government's guidelines

dated 9th October, 2000. However, a controversy

has arisen with regard to the allotments. The

issue was raised in the Parliament. The

functioning of the DSBs and their

recommendations were also discussed. In view

of this Government reviewed the matter. Having

considered the facts and circumstances as also to

ensure fair play in action, the Government in the

public interest have now decided that all

allotments made with respect to retail outlets.

LPG distributorships and SKO LDO dealerships

on the recommendations of the Dealer Selection

Boards since 1st January 2000 be cancelled. It

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has further been decided that all annulled petrol

pumps, LPG distributorships and kerosene

dealerships may be auctioned on the basis of

competitive bidding.

2. You may, in view of the above, take

necessary action in the matter to :

(a) cancel all the petrol pumps LPG

distributorships and kerosene dealerships

made on the recommendations of DSBs

since 1.1.2000 forthwith.

(b) make alternate arrangements to that

consumers are not put to any difficulties till

the appointment of new dealers/distributors

and

(c) settle the above petrol pumps, LPG

distributorships and kerosene dealerships

on the basis of auction through competitive

bidding modalities for which be worked out

by the Government.

3. The above decision will not be applicable to

the allottees under Operation Vijay scheme."

Number of writ petitions were filed in various High Courts

challenging the legality of the order dated 9th August, 2002.

A transfer petition was filed by the Union of India in this Court.

Considering that the impugned order affects large number of dealers and

distributors all over the country which led to filing of numerous writ

petitions in different High Courts, this Court on 28th August, 2002

observed that the legal points in issue should be expeditiously decided by

transfer of representative cases to this Court for adjudication. The Court,

therefore, directed the transfer of certain writ petitions from the High

Courts of Delhi, Rajasthan, Madhya Pradesh, Bombay and Gujarat to this

Court. In respect of 2248 dealerships/distributorships, status quo as on

9th August, 2002 was directed to be maintained. It was directed that they

shall continue to operate the dealerships/distributorships in accordance

with the terms of contracts/agreements entered into between them and

the oil companies concerned. In respect of 1298 cases where LOI had

been issued but retail outlet/gas agencies had not been commissioned,

this Court directed that the said LOI shall not be allotted or transferred to

any person during the pendency of the petitions. In terms of orders dated

10th November, and 22nd November, 2002, certain other writ petitions filed

in the High Courts wherein allottees were of the category whose cases

had been highlighted in the newspaper were transferred as another

category of representative cases. A large number (over 2300)

intervention applications have been filed by different category of persons,

i.e., (1) those with whom agreements have been entered into by the oil

companies; (2) those to whom the LOIs have been issued by the oil

companies but outlets have not been commissioned; and (3) those who

are on select panel but LOIs have not been issued.

We have heard learned counsel for the petitioners and interveners

in support of their challenge to the impugned order and learned Solicitor

General in defence thereof.

The entire matter triggered of as a result of media exposure. As

already noticed, the front page of Indian Express carried the lead story on

2nd August, 2002 attributing political patronage in grant of allotments on

political considerations. The newspaper for 2nd August published a list of

61 allottees from Maharashtra with their names and the alleged political

connections and the positions held by the allottees and their relatives.

The newspaper of 3rd August, 2002 carried the names of 34 allottees from

Punjab and Himachal Pradesh with their political positions and/or

connections. The newspaper of 4th August carried similar news in respect

of 21 allottees from the State of Haryana. The newspaper of 5th August,

carried the similar particulars in respect of 44 allottees from the State of

Uttar Pradesh. The first name published was that of one Aparna Misra

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alleging that her husband is a relative of the Prime Minister and the

address given is the same as that of the Prime Minister's residence in

Lucknow.

Thus, upto 5th August, the newspaper carried the names of 160

allottees from the States of Maharashtra, Punjab, Himachal Pradesh,

Haryana and Uttar Pradesh attributing political patronage in their selection

by the DSBs. The decision to cancel all allotments was also taken on 5th

August, 2002, as earlier noticed. The effect of the decision was on 3760

persons whose merit panels had been published by the DSBs. The only

reason for cancellation on 5th August was that a 'controversy' had been

raised relating to the allotments. Although, the media exposure hinted of

more such names but only 160 names had been published in Indian

Express upto the date of the decision to cancel the allotments. It does not

appear that the Government had with it on 5th August, the basic facts as

to the total number of the persons that had been selected; total number of

dealerships/distributorships which were operational; number of cases

where LOI had been issued but agreements on completion of formalities

had not yet been entered into; the different categories of the selected

candidates and categories of those 160 allottees open or reserved and

which of the reserved category. In short, it seems that the Government

did not have with it the necessary data so as to consider the impact of en

bloc cancellation directed on 5th August, 2002 on account of a

'controversy' raised pertaining to few cases. The 'controversy' that had

been raised upto 5th August was in respect of less than 5% of the total

numbers of merit panel published. Between 6th and 9th August, Indian

Express carried the particulars of alleged tainted allottees numbering 104.

Between 10th August and 24th August, the particulars of 153 such

allottees were published. The total number of the alleged tainted allottees

that has been published in Indian Express is 417 which is little over 10%

of the total selections made.

We are not suggesting, for the present, that allotments to allotments

to all or any of the persons whose names have been published in the

Indian Express have been made due to political connections or patronage

but assuming it is so, would it justify the cancellation of allotments of all

those on published merit panel in respect of whom, there is no such

insinuation. Is the number of the alleged tainted allottees of such a

magnitude that the fair play demanded cancellation of all en masse? Did

anybody apply mind as to whether the insinuations of political

connection/patronage were at least prima facie of any substance? Is such

a drastic action, on the facts and circumstances of the case, not arbitrary,

whimsical and, thus, unsustainable? The answer to these questions would

help in determining the legality of the impugned order dated 9th August,

2002.

Mr. Kirit Rawal, learned Solicitor General, candidly admitted that

none of individual cases was examined and gone into before decision was

taken on 5th August, 2002/9th August, 2002.

Learned counsel representing the petitioners and also learned

counsel representing interveners submit that the en masse cancellation of

allotments is clearly an arbitrary exercise of executive power without any

justification therefor. The impugned order is contended to be wholly

arbitrary and unconstitutional being violative of Article 14 of the

Constitution of India.

On the other hand, learned Solicitor General contends that, in fact,

the course of action adopted by the Government, in the present case, is

worthy of commendation and calls for no intradiction. The impugned

decision, learned counsel submits, was taken with a view to ensure

probity in public life as doubts over fairness of selection of certain

candidates had been raised, the proceedings of the Parliament had been

stalled on account of the controversy and, therefore, the Government, in

order to uphold probity in governance, ensure fair play in action and in

larger public interest, took a decision to cancel all allotments of retail

outlets, SKO-LDO dealerships and LPG distributors made since January

2000 by the public sector oil companies on the basis of recommendations

made by the DSBs except the cases of allotment made under the special

scheme for allotment of retail outlet dealerships/LPG distributorships to

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the widows/next of kin of the defence personnel killed in action in "OP

Vijay" (Kargil) under the recommendations received from Director General

(Settlement), Ministry of Defence, Government of India and not through

DSBs. Counsel contends that it was further decided that all annulled

retail outlet dealerships, LPG distributorships and SKO-LDO dealerships

would be auctioned on the basis of competitive bidding.

Learned Solicitor General also contends that for the enforcement of

contractual rights, the writ petition is not the appropriate remedy.

Reference was made to the terms of the agreement entered into between

the dealers/distributors and the oil companies after selection. The

contention is that the agreements could be cancelled without assigning

any reason and for redressal of the alleged illegality in cancellation of the

agreements, the resort to the writ jurisdiction was not permissible and was

ill-founded.

The petitions, it is contended, are nothing but a disguise suits under

the Specific Relief Act despite the fact that contract would not be

enforceable even under the said Act. Thus, it is contended, that the

petitioners have no legal right that can be enforced under Article 226 of

the Constitution of India.

There is no merit in the contentions of learned Solicitor General. It

is evident from the facts that the cancellation of the agreements is not for

violation of any term thereof. The cancellation is on account of a policy

decision taken by the Government as noticed hereinbefore. The

cancellation is not on account of any uniform reason applicable to all the

selectees or those who have been issued LOIs or with whom agreements

have been entered into except that in respect of few others and not this

class of petitioners, media exposure was made. In the present case, on

principle, there would be no difference in respect of those selectees who

have been issued the LOIs but are awaiting the execution of the

agreement on completion of formalities. The execution of agreement is

not being denied on account of any ineligibility of any such LOI holders or

any discrepancy having been found in what was required to be fulfilled by

them. We are not concerned with any such individual case. Therefore,

the cases of LOI holders are no different in comparison to those cases

where agreements have been entered into. Similar is the position of

those who are on published merit panels and were awaiting issue of LOIs

by the oil companies when the impugned decision was taken. For the

present controversy, they are all in same position except those who may

come in the category of alleged tainted class which aspect we would deal

later.

Article 14 guarantees to everyone equality before law. Unequals

cannot be clubbed. The proposition is well settled and does not require

reference to any precedent though many decisions were cited. Likewise,

an arbitrary exercise of executive power deserves to be quashed is a

proposition which again does not require support of any precedent. It is

equally well settled that an order passed without application of mind

deserves to be annulled being an arbitrary exercise of power. At the

same time, we have no difficulty in accepting the proposition urged on

behalf of the Government that if two views are possible and the

Government takes one of it, it would not be amenable to judicial review on

the ground that other view, according to the Court, is a better view.

The decision in The Bihar School Examination Board v. Subhas

Chandra Sinha & Ors. [(1970) 1 SCC 648] has been relied upon by

learned Solicitor General in support of the contention that allotments

could en masse be legally cancelled without individually examining each

case and without affording an opportunity to all concerned to represent

their cases. Paras 12 and 13 on which reliance has been placed read :

"12. These figures speak for themselves.

However, to satisfy ourselves we ordered that

some answer books be brought for our inspection

and many such were produced. A comparison of

the answer books showed such a remarkable

agreement in the answers that no doubt was left

in our minds that the students had assistance

from an outside source. Therefore, the

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conclusion that unfair means were adopted

stands completely vindicated.

13. This is not a case of any particular

individual who is being charged with adoption of

unfair means but of the conduct of all the

examinees or at least a vast majority of them at a

particular centre. If it is not a question of charging

any one individually with unfair means but to

condemn the examination as ineffective for the

purpose it was held. Must the Board give an

opportunity to all the candidates to represent their

cases? We think not. It was not necessary for

the Board to give an opportunity to the candidates

if the examinations as a whole were being

cancelled. The Board had not charged any one

with unfair means so that he could claim to

defend himself. In these circumstances, it would

be wrong to insist that the Board must hold a

detailed inquiry into the matter and examine each

individual case to satisfy itself which of the

candidates had not adopted unfair means. The

examination as a whole had to go."

The cited decision relates to cancellation of cheating by en masse

copying by the students. The aforequoted observations were made after

examining percentage of the marks obtained and compared with the

average of successful candidates at other centers, as is evident from the

facts noticed in para 11 which reads thus :

"This brings us to the crux of the problem. The

High Court interfered on the ground that natural

justice and fair-play were not observed in this

case. This was repeated to us by the

respondents in the appeal. A mention of fair-play

does not come very well from the respondents

who were grossly guilty of breach of fair-play

themselves at the examinations. Apart from the

reports of the experts, the results speak for

themselves. At the other centers the average of

successful candidates was 50%. At this centre

the examinations had the following percentage :

1. Mother Indian Language .. 94%

2. English .. 70%

3. Social Studies .. 95%

4. Everyday Science .. 90%

5. Elementary Mathematics .. 100%

6. Economics and Civics .. 92%

7. Elementary Physiology & Hygiene .. 96%

8. Geography .. 99%

9. History .. 88%

10.Physics .. 70%

11.Chemistry .. 100%

12.Advance Mathematics .. 99%

13.Sanskrit .. 100%"

Noticing that all the candidates at the centre in question had

obtained marks of more than 90%, the Court came to the conclusion that

the student had assistance from an outside source. The Court had also

examined the answer books. Thus, it was held that the examination was

vitiated by practicing unfair means on a mass scale and, under these

circumstances, it was observed that the Board could not be asked to hold

a detailed enquiry into the matter to satisfy itself as to which of the

candidate had not adopted unfair means and the examination had to go

as a whole. The facts of the present case are altogether different. There

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was no examination of the allegations made in the media and also that

the percentage of alleged tainted allotments was not such so as to come

to the conclusion that there was en masse bungling by the 59 DSBs nor

any such conclusion was reached by the respondents.

The other decision in the case of B. Ramanjini & Ors. v. State of

A.P. & Ors. [2002) 5 SCC 533] cited by learned Solicitor General has

also no relevance for the present controversy. That was a case where it

was found that not only there was scope for mass copying and mass

copying did take place, in addition to leakage of question papers which

was brazenly published in a newspaper and the photocopies of the

question papers were available for sale at a price of Rs.2000/- each and,

under these circumstances, the Government decided to cancel the

examination of the centre in question. This decision is of no assistence

for the present controversy.

Mahabir Auto Stores & Ors. v. Indian Oil Corporation & Ors.

[(1990) 3 SCC 752] was a case where the challenge of the appellant was

to the action of the respondent, Indian Oil Corporation in discontinuing the

supply of all kinds of lubricants to the appellant. One of the contention

raised by the Indian Oil Corporation was that there was no written

agreement with it and there was only an ad hoc arrangement which could

not be enforced, particularly, in a writ jurisdiction. Rejecting the

contention, this Court observed that the respondent's decision can be

impeached on the ground that it is arbitrary or violative of Article 14 on

any of the grounds available in public law field. It was further held that the

action had to be fair and reasonable and that even in the field of public

law, the relevant persons concerned or to be affected, should be taken

into confidence. Whether and in what circumstances that confidence

should be taken into consideration cannot be laid down on any strait-

jacket basis. It depends on the nature of the right involved and nature of

the power sought to be exercised in a particular situation.

Kumari Shrilekha Vidyarthi & Ors. v. State of U.P. & Ors.

[(1991) 1 SCC 212] was a case in which en masse cancellation of panel

of Government Law Officers was questioned before this Court. While

quashing the impugned order, this Court observed that the act of

terminating their appointment in one stroke was without application of

mind. It was further observed that it would be too much to assume that

every Government counsel was required to be replaced in order to

streamline the conduct of the Government cases and indeed, that is not

even the case of the State which itself says that many of them were to be

reappointed. It is not the case of the respondents that most or large

number of selections in the present case were tainted.

In the case in hand, the only reason for the en masse cancellation

was that a 'controversy' had been raised. There was no application of

mind to any case. Admitted none of cases was examined. In Shrilekha

Vidyarthi's case, this Court held that arbitrariness is writ large on the

impugned circular. In the State action public interest has to be the prime

guiding consideration. In Shrilekha Vidhartyi's case, it was held that the

impugned State action was taken with only one object in view, i.e., to

terminate all existing appointments irrespective of the subsistence or

expiry of the tenure or suitability of the existing incumbents and that by

one omnibus order, the appointments of all Government counsel in the

State of Uttar Pradesh were terminated. It was also noticed that no

common reason applicable to all of them justifying their termination in one

stroke on a reasonable ground had been shown. The position is similar in

the present case.

The expressions 'public interest' or 'probity in governance' cannot

be put in a State jacket. 'Public interest' takes into its fold several factors.

There cannot be any hard and fast rule to determine what is public

interest. The circumstances in each case would determine whether

Government action was taken is in public interest or was taken to uphold

probity in governance.

The roll model for governance and decision taken thereof should

manifest equity, fair play and justice. The cardinal principle of

governance in a civilized society based on rule of law not only has to base

on transparency but must create an impression that the decision making

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was motivated on the consideration of probity. The Government has to

rise above the nexus of vested interests and nepotism and eschew

window dressing. The act of governance has to withstand the test of

judiciousness and impartiality and avoid arbitrary or capricious actions.

Therefore, the principle of governance has to be tested on the touchstone

of justice, equity and fair play and if the decision is not based on justice,

equity and fair play and has taken into consideration other matters,

though on the face of it, the decision may look legitimate but as a matter

of fact, the reasons are not based on values but to achieve popular

accolade, that decision cannot be allowed to operate.

Now, before reverting to the contention of learned Solicitor General

that the impugned order was issued in public interest so as to ensure fair

play in action, the factual position of the DSBs may be noticed and a

contention raised by Mr. Nariman on the basis of averments made in T.C.

No.90/2002 be considered.

There were 59 DSBs throughout the country. In bigger States, the

number of DSBs was more. In UP, there were nine such Boards, in

Maharashtra they were four DSBs, five were the boards in Andhra

Pradesh, Madhya Pradesh and Bihar. On 9th May, 2002, when the DSBs

were discontinued, 18 DSBs were chaired by retired High Court Judges

and remaining by retired District or Additional District Judges.

In Transfer Case No.90 of 2002, Mr. Nariman, learned counsel for

the petitioner, contends that the entire exercise of cancellation was a

result of the name of the Prime Minister's relative being involved on

account of which the Prime Minister by a single politically motivated

stroke, ordered en masse cancellation. Reliance has been placed by

learned counsel to the allegations made in para 2.3 which are as under :

"piqued and angered by the expose of the

misdeeds of the Petroleum Ministry in which the

name of the Prime Minister's relative was

involved and the opposition creating a raw in the

Parliament and paralyzing the proceedings in the

Parliament, the Prime Minister in a single

politically motivated stroke ordered cancellation of

as many as 3158 petrol pumps, LPG agencies

and kerosene oil outlets allotted across the

country since January 2000 and directed the third

respondent that the cancelled petrol pumps, LPG

agencies and kerosene oil outlets would all be

auctioned on the basis of competitive bidding and

directed the Petroleum Ministry to work out the

modalities for reallotment. The decision to cancel

the allotments was taken by the Prime Minister at

a meeting attended by the Deputy Prime Minister

L.K. Advani, Finance Minister Jaswant Singh,

Petroleum Minister Ram Naik, Parliamentary

Affairs Minister Pramod Mahajan and Information

and Broadcasting Minister Sushma Swaraj. The

Prime Minister refused to wilt under pressure from

a Section of the party to brazen it out and had

final say deciding on cancellation of all allotments

despite Ram Naik keeping up his more than

brave face that there was no wrong doing at all."

Our attention was also drawn by learned counsel to only reply to

the averment which is to the following effect :-

"With reference to para 2.3.1, 2.3.2, 2.3.3, 2.3.4 and 2.4 of the

petition, it is submitted that the contents therein are the excerpts quoted

from various newspapers and hence need no reply". The submission of

Mr. Nariman is that the averments in para 2.3 are not excerpts from a

newspaper but an assertion of the petitioner and the same having not

been denied shall be deemed to be admitted. It may be that the averment

in para 2.3 is not an excerpt from a newspaper and is an assertion, as

contended by Mr. Nariman but such a general and vague assertion

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without any material in support thereof and which, in fact, is an inference

from newspapers is hardly sufficient to attribute mala fides. The

contention of Mr. Nariman, thus, cannot be accepted.

Reverting now to the contention that the impugned action was in

public interest, it may first to be noticed that when the decision was taken

on 5th August, 2002, the only reason was that a controversy had been

raised about certain allotments. We have earlier noticed that the

guidelines provide for a mechanism to look into the complaint made

against selections. Further, according to the respondents, in respect of

360 complaints made against the Chairmen/Members of the DSBs,

inquiries were conducted by Director General, Anti Adulteration Cell and

out of which 242 cases were recommended to be closed. This means no

substance were found in 242 complaints out of 360; 39 cases were

sub-judice; in 27 cancellation of selection had been recommended and 45

cases had been referred to the Ministry for its decision on various

grounds by Director General and Oil Companies. In addition, in 7 cases,

decision on cancellation of the selection of the first empanelled candidate

had been taken by DSB/oil companies. The effect of the impugned action

is the termination of agreements despite the recommendation of the

closure of the complaints and only for the reason that a 'controversy' had

been raised in relation to some allotments. Further, in some cases, the

challenge to selection had failed in courts. The guidelines, as earlier

noticed, provide for reservation for defence personnel, freedom fighters,

outstanding sports persons, para military/Police/Government personnel,

physically handicapped persons and Scheduled Castes and Scheduled

Tribes. There was no application of mind as to the effect on all these

categories as a result of en masse cancellation.

The contention of the learned Solicitor General that in order to

uphold the probity in governance, ensure fair play in action and in larger

public interest, the Government took a decision to cancel the allotments is

clearly an afterthought besides untenable even otherwise.

The mere reason that a 'controversy' has been raised by itself

cannot clothe the Government with the power to pass such a drastic order

which has a devastating effect on a large number of people. In

governance, controversies are bound to arise. In a given situation,

depending upon facts and figures, it may be legally permissible to resort

to such en masse cancellation where executive finds that prima facie a

large number of such selections were tainted and segregation of good

and bad would be difficult and time consuming affair. That is, however,

not the case. Here the controversy raised was in respect of 5 to 10%, as

earlier indicated. In such a situation, en masse cancellation would be

unjustified and arbitrary. It seems that the impugned order was a result of

panic reaction of the Government. No facts and figures were gone into.

Without application of mind to any of relevant consideration, a decision

was taken to cancel all allotments.. The impugned action is clearly

against fair play in action. It cannot be held to be reasonable. It is

nothing but arbitrary.

Regarding the probity in governance, fair play in action and larger

public interest, except contending that as a result of media exposure, the

Government in public interest decided to cancel all allotments, nothing

tangible was brought to our notice. On 5th August, 2002 only reason was

that 'a controversy' had been raised. In order dated 9th August, 2002 the

reasons given are that facts and circumstances considered and to ensure

fair play in action and in public interest, it was passed. In counter

affidavit, the aspect of probity in governance has been brought in. Be that

as it may, the fact remains that admittedly, no case was examined, not

even from a prima facie angle to find out whether there was any

substance in the media exposure. None examined the impact that was

likely to result because of en masse cancellation. Many had resigned

their jobs. It was necessary because of such a stipulation in LOI. Many

had taken huge loans. There were many Schedule Casts/Schedule

Tribes, war widows and those whose near relation had died as a result of

terrorist activities. The effect of none was considered. How could all

those large number against whom there was not even insinuation could

be clubbed with the handful of those who were said to have been allotted

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these dealerships/distributorships on account of political connection and

patronage. The two were clearly unequals. The rotten apples cannot be

equated with good apples. Under these circumstances, the plea of

probity in governance or fair play in action motivating the impugned action

cannot be accepted. The impugned order looked from any angle cannot

stand the scrutiny of law.

The solution by resorting to cancellation of all was worse than the

problem. Cure was worse than the disease. The equal treatment to

unequals is nothing but inequality. To put both categories ? tainted and

the rest ? at par is wholly unjustified, arbitrary, unconstitutional being

violative of Article 14 of the Constitution. It is apparent from the

guidelines that the dealerships and distributorships were provided to be

given to the allottees as a welfare measure. Even in respect of open

category there is a limitation for the income of the applicant being not

more than 2 lakhs per annum so as to be eligible for consideration by the

DSBs. The DSBs are required to consider the applications within the

parameters of the guidelines and select the best applicant. If the DSBs in

some cases have selected someone not on merits but as a result of

political connections/considerations and positions of the applicant,

undoubtedly such allotments deserve to be quashed. In Common Cause

case (supra), this Court on examination of the facts held that the

allotment to the sons to the Ministers were only to oblige the Ministers.

The allotments to the Members of the Oil Selection Boards and

their/Chairmen's relations had been done to influence them and to have

favours from them. It was observed that a minister who is the executive

head of the department concerned, when distributing benefits and

largesses In a welfare state in the form of allotment of plots, houses,

petrol pumps, gas agencies, mineral leases, contracts, quotas and

licences etc. has to deal with people's property in a fair and just manner.

He holds all these as a trust on behalf of the people. He cannot commit

breach of the trust reposed in him by the people.

The aforesaid observations would apply with equal if not more force

to DSBs if media exposure that the allotments were made either to the

high political functionaries themselves or their near and dear ones is

correct, the authorities would not only be justified in examining such

cases but it would be their duty to do so. Instead of fulfilling that duty and

obligation, the executive cannot unjustly resort to cancellation of all the

allotments en masse by treating unequals as equals without even prima

facie examining any cases exposed by the media. If hue and cry is made

that certain allotments have been made to sitting Members of Parliament

or their wives or Members of Legislature or their relations, the public,

media and the opposition would be justified in raising eye-brows. It is a

different matter that on independent examination nothing may be found in

those cases. As noticed earlier, 417 names of alleged tainted allotments

appeared in media between 2nd August and 24th August, 2002. As a

representative category, 10 cases were transferred to this Court. The

respondents have given to us particulars of 413 cases which appeared in

Indian Express ? four being not traceable according to them. The

allegations in Transferred Case Nos.100 to 109 are substantially these:

One of the transferred cases relates to allotment of SKO/LDO

dealership at Lal Bangla, Kanpur in open category in favour of the son of

Member of Parliament from ruling party. It is a case where letter of intent

has been issued though agreement was not entered into before the

cancellation and the outlet is not operational. According to the petitioner,

he had made huge investments, purchased land and completed other

formalities and was a graduate of 26 years of age and being son of a

Member of Parliament was not a disqualification. It appears that the

concerned DSB had interviewed 32 applicants. If being the son of

Member of Parliament was not a disqualification, at the same time, it was

also not a qualification. The probity in good governance requires the

examination of such a matter by an independent person so as to clear the

doubts or 'controversy' so as to come to the conclusion whether the

allotment was on merits or as a result of the political connections. The

controversy cannot be resolved or put to rest by burying it under carpet by

cancelling all allotments by treating unequals as equals.

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Another transferred case pertains to allotment of HPC retail outlet

at Khandvi, District Solapur, Maharashtra in favour of the petitioner under

the Scheduled Castes reserved category. The outlet is company owned

dealer operated. 23 applicants were interviewed. The applicant is a wife

of a Member of Parliament of a political party supporting party in power.

The district wherein the outlet has been allotted to the petitioner falls

within the parliamentary constituency of the husband of the petitioner.

The petrol pump is said to be operational. According to the petitioner, she

made huge investments and 16 persons have been employed by her. If

the allotment in her favour is not on merits and is on account of the

applicant being wife of a Member of Parliament, the aforesaid

considerations pleaded by her would be wholly irrelevant. Surely an

independent probe is necessary. Someone has to look into the matter.

In one case, the allotment of IOC's retail outlet at Udaipur is in

favour of a Member of Parliament of the main political party in opposition.

The contention of the allottee, however, is that she, as a condition of LOI,

resigned her job of Professor from an Educational Institution. No equity

can be claimed on account of any step or action taken to fulfill the

condition of LOI if the selection itself is illegal.

One of the transferred cases concerns 8 allotments in Maharashtra

State. The allegation in the newspaper was that brother of petitioner no.1

is District President of the Ruling Party and was Member of Parliament;

husband of petitioner no.2 is a sitting MLA, petitioner no.3 is sister-in-law

of a sitting MLA, father of petitioner no.4 is a sitting MLA, father of

petitioner no.5 was a President of District Unit of the political party some

years back, petitioner no.6 himself is a sitting MLA, petitioner no.7 and

petitioner no.8 are political workers of the Ruling Party. All the 8

petitioners of course contend that the allotments in their favour were

made on merits and not as a result of political patronage.

The allegation in one of the transferred cases is that the allottee is

son-in-law of a former Member of Parliament whereas in another

transferred case, the allegation is that the allottee is a son of a former

MLA. In these two cases, service report on the petitioners was awaited.

Another transferred case relates to IOC's LPG distributorship. The

allegation is that the allottee was the constituency secretary of the Ruling

Party. LOI has been issued though the outlet is not operational.

According to the petitioner since on merit no.2 was a press reporter his

name has been included with mala fide intentions. Another transferred

case relates to IOC retail outlet at Sawar, Ajmer where the allegation is

about the allottee being son of a party functionary.

In one of the transferred cases the allegation is that the father of

the allottee is an Inspector General of Anti Corruption Cell in Rajasthan

Police.

All the applicants claim that the selection by the DSBs in their

favour was on merits and not on account of any political or other

extraneous consideration. For the present, we are not expressing any

opinion on the question whether the selection of the allottees by the DSBs

in this category of alleged tainted allotments was a result of the political or

other extraneous consideration or the selection was on merits alone. As

already mentioned, these aspects require an independent probe.

The alleged tainted allotments are required to be scrutinized by an

independent committee so as to determine the validity of impugned

circular dated 9th August, 2002 as against such allotments. As already

noticed, 417 names were exposed by the media out of which particulars

of 413 have been provided. We deem it expedient to constitute a

Committee to go into the question whether these allotments were made

on merits or on some extraneous considerations.

In our view, the Government should not have exercised the power

in a manner so as to enable it to escape the scrutiny of allotments

exposed by the media. No arbitrary exercise of power should intervene to

prevent the attainment of justice. Instead of passing the impugned order,

in the context of the facts of the present case, the Government should

have ordered an independent probe of alleged tainted allotments. The

impugned order had the twin effect of (1) scuttling the probe and (2)

depriving a large number of others of their livelihood that had been

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ensured for them after their due selections pursuant to a welfare policy of

the Government as contained in the guidelines dated 9th October, 2000.

The public in general has a right to know the circumstances under which

their elected representatives got the outlets and/or

dealerships/distributorships.

In view of the aforesaid:-

I. We appoint a Committee comprising of Mr. Justice S.C. Agrawal, a

retired Judge of this Court and Mr. Justice P.K. Bahri, a retired judge of

Delhi High Court, to examine the aforesaid 413 cases. We request the

Committee to submit the report to this Court within a period of three

months.

II. The Committee would device its own procedure for undertaking the

examination of these cases. If considered necessary, the Committee may

appoint any person to assist it.

III. We direct the Ministry of Petroleum and Natural Gas, Government

of India and the four oil companies to render full, complete and

meaningful assistance and cooperation to the Committee. The relevant

records are directed to be produced before the Committee within five

days.

IV. We direct the Ministry to appoint a nodal officer not below the rank

of a Joint Secretary for effective working of the Committee.

V. The Central Government, State Government/Union Territories and

all others are directed to render such assistance to the Committee as may

be directed by it.

VI. The oil companies are directed to provide as per Committee's

directions, the requisite infrastructure, staff, transport and make

necessary arrangements, whenever so directed, for travel, stay,

payments and other facilities etc.

VII. In respect of any case if the Committee, on preliminary examination

of the facts and records, forms an opinion that the allotment was made on

merits and not as a result of political connections or patronage or other

extraneous considerations, it would be open to the Committee not to

proceed with probe in detail.

For the reasons aforesaid, the impugned order dated 9th August,

2002 is hereby quashed except in respect of cases referred to the

Committee.

The cases referred to the Committee would be considered on

receipt of the report. However, the interim order dated 28th August, 2002

would continue to apply to these referred cases till further orders. The

said order is further extended to cases where select panel has been

published but letters of intent have not been issued.

Transferred Case Nos 80, 81 to 88, 90 and 91/2002, all intervention

applications therein, I.A. Nos.246-2556 in Transfer Petition (C) Nos.417-

423/2002 and Contempt Petition (C) No.556/2002 in Transferred Petition

(C) No.417-423/2002 are disposed of in terms of this decision.

A copy of the judgment shall be sent to the Registrar Generals of all

the High Courts so that the writ petitions, if any, pending in the High

Courts on similar questions can be disposed of in terms of this judgment.

All matters except Transferred Case Nos.100 to 109 are disposed

of. List Transferred Case Nos.100 to 109 of 2002 after receipt of the

report.