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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

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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

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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

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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

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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

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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.

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(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

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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

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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

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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

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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

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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

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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  5th 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 22nd October, 1998.

Date of displaying list of eligible bidders: 28th 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.),  5th Floor

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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

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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

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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

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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

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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

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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

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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,  7th 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 Food2:

“…  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 India3 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 Re4,  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

others5,  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

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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

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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.  

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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.

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…........................................J. [N.V. RAMANA]

…........................................J. [AMITAVA ROY]

NEW DELHI; DECEMBER 15, 2017.