Kurshed Sharfudeen & Ors. v. IBP Company Limited & Ors.

JUDGMENTP.JYOTHIMANI,J.This writ appeal is directed against the order of the learnedSingle Judge dated 18.12.2007 passed in W.P.No.28758 of 2007,dismissing the same.2. The license to run a petroleum outlet at Alangudi Road,Pudukkottai was granted to one Mrs.Sumathi for a period of one yearfrom 2002-2003 and it was subsequently renewed. It appears that shewas not able to continue to run the outlet and therefore, sheproposed to sell the land, which was purchased by the appellants, whoare mother and son respectively. 3. It is the case of the appellants that, after the purchase,they have applied to the second respondent/ Corporation and based onan interview, a contract was entered into between the Corporation andthe appellants, originally, for one year 2004-2005, which was renewedfor the years 2005-2006 and 2006-2007 and was subsequently renewedfor a period of six months, valid up to 30.9.2007. During thesubsistence of the contract, the second respondent has issued anotice on 11.7.2007, terminating the contract with effect from10.8.2007. It was aggrieved over the said order of termination ofthe contract, the appellants have filed the writ petition.4. Considering the submissions made on behalf of the appellantsthat (i) what was granted to the appellants was not a license, but apermission, and when the same was renewed, the termination ofcontract, before the expiry of renewed period without any reason orfault on the appellants, would amount to denial of principles ofnatural justice; and (ii) there has not been equal bargaining powerbetween the parties and therefore, the termination of license wasarbitrary, the learned Single Judge, by relying upon one of theclauses of the agreement, namely Clause 48, which provides for suchtermination of contract even before the expiry of the period withoutassigning any reason, has, ultimately, dismissed the writ petitionholding that there is no legitimate expectation and that there is novested right conferred on the appellants to continue the permissionor license.5. The admitted fact remains that the land to an extent of 7185sq.ft. belonged to one Mrs.Sumathi, to whom the second respondenthas granted license to run a petroleum outlet in the year 2003. Itwas the case of the appellants in the writ petition that in the year2004, the first appellant has applied for grant of dealership forpetroleum retail outlet in favour of the second appellant atAnnavasal Road, owned by her. It is their case that, when suchapplication was pending, the first respondent has invited the secondappellant for an interview for award of license to run petroleumoutlet. It is the case of the appellants that the first respondent https://hcservices.ecourts.gov.in/hcservices/ has advised that the above said Mrs.Sumathi is running a unit, whichhas become sick and not viable due to improper management, and thesecond appellant can purchase the land from her and it was based onthe said promise, it was stated that the second appellant haspurchased the above said land from Mrs.Sumathi.6. It is also stated that, in the meantime, the first respondenthas also advised the appellants to take the place on contract basis.Thereafter, the contract was stated to have been awarded to thesecond appellant by letter dated 8.3.2004, effective from 31.3.2004for one year. It was renewed from 1.4.2004 to 31.3.2006 and it wasthereafter renewed for a further period of one year 1.4.2006 to31.3.2007, which was subsequently renewed for six months, valid up to30.9.2007. As stated above, before the expiry of the period, anotice of termination was issued on 11.7.2007, terminating thecontract with effect from 10.8.2007. 7. A reference to the order passed by the second respondent dated8.3.2004 addressed to the second appellant shows that the secondappellant has been selected as Maintenance and Handling Contractorfor operation of its COCO at Pudukkottai. Therefore, it was not alicense or dealership granted to the second appellant by the secondrespondent, but only a contract for maintenance and handling of theirCOCO outlet.8. After the purchase of the land from Mrs.Sumathi, who hasoriginally leased out the property to the second respondent for aperiod of fifteen years, since the said previous owner Sumathi haswritten to the second respondent about the sale of property to thesecond appellant, it appears that the above said contract has beenawarded by the second respondent to the second appellant. 9. The contract, which was entered into between the secondappellant and the second respondent, itself is captioned as a"Contract for Maintenance and Handling". The contract is for thepurpose of selling the petroleum products of the second respondent,more particularly, Petrol, Diesel, lubricants and such otherpetroleum products and also to render services as per the saidcontract and for the purpose of the same. It was with a desire toengage a contractor to operate the outlet for retail sale of the saidproducts, the second appellant was appointed as a Maintenance andHandling contractor.10. Clause 48 of the said contract, which is as follows, makes itclear that the agreement may be terminated at the option of eitherparty by giving one month's notice in writing and without assigningany reason. It also states that, in case of breach of contract, thesecond respondent reserves its right to terminate the contractimmediately, which means without notice. https://hcservices.ecourts.gov.in/hcservices/ "48. The agreement will be for a period of ONE YEAReffective from 31.3.2006 to 30.3.2007 subject to therenewal by the year 2007 at the Company's option at thesame rates, and on the same terms and conditions as areherein contained. Without prejudice to the aforesaid,this Agreement may be terminated at the option of eitherparty by giving at least one month's notice in writingto the other party, without assigning any reasonwhatsoever. In case of breach of contract, the Companyreserves the right to terminate this Agreementforthwith. Unless otherwise mentioned or renewed inwriting this Agreement stands automatically terminatedat the end of the agreement period. If any informationgiven by the M & H Contractor in his application forappointment shall be found to be untrue or incorrect, inmaterial respect, the Company reserves the right toterminate this Contract forthwith."(emphasis supplied)11. Clause 51 of the said agreement, which is as follows,provides for resolution of dispute by arbitration process. "51. Any dispute or difference of any nature whatsoeveror regarding any right, liability, act, omission onaccount of any of the parties hereto arising out of orin relation to this Agreement or any interpretation ofany clause or provision hereof shall be referred to thesole arbitration of the Head of the Region, of theCompany, or of some officer of the Company who may benominated by the Head of the region. The M & HContractor will not be entitled to raise any objectionto any such arbitrator on the ground that the arbitratoris an office of the Company. In the event thearbitrator to whom the matter is originally referred tois transferred or vacates his office or is unable to actfor any reason the Head of the Region as aforesaid atthe time of such transfer, vacating of office orinability to act, shall designate another person to actas an arbitrator in accordance with the terms of theAgreement. Such person shall be entitled to proceedwith the reference from the point at which it was leftby his predecessor. It is also a term of this Agreementthat no person other than the Head of the Region or aperson nominated by him/her shall act as sole arbitratorhereunder. The award of the arbitrator so appointedshall be final, conclusive and binding on all parties tothe Agreement, subject to the provisions of theArbitration & Conciliation Act, 1996 and the Rules madethereunder or any statutory modification or re-enactmentthereof and for the time being in force." https://hcservices.ecourts.gov.in/hcservices/ (emphasis supplied)12. It is not in dispute that after the expiry of contractperiod on 31.3.2007, the same was extended by the second respondentin favour of the second appellant up to 30.9.2007.13. By a termination letter dated 11.7.2007, the secondrespondent has given one month's notice, as per clause 48 of theabove said agreement, stating that the contract stands terminatedwith effect from 10.8.2007, which is as follows:"We hereby give one month's notice w.e.f. 11.07.07 asper Clause No.48 of the M&H agreement executed on9.6.2006, and terminate the M&H Contract awarded to youfor our COCO at Sy.No.152/4B, Pudukottai NorthPanchayat, Alangudi Road, Pudukottai. Necessaryinstruction for the safe handover of the COCO to ourCompany Officials will be adivsed by our Dy.Manager(S),Madurai. Please be advised that your contract standsterminated on 10.8.2007."14. On the above said undisputed factual background, the primarycontention raised by the learned counsel for the appellants, againstthe said termination order, is that:(i) the termination order is discriminatory andviolative of Article 14 of the Constitution of India;(ii) the order terminating the contract is a colourableexercise of power, since the intention of the secondrespondent, after terminating the contract, is to giveit to a third party, which cannot be permitted, as underthe contract, there is a clause for renewal and, infact, the second respondent has renewed the contract fornearly three terms; and(iii) the termination is hit by the principles ofpromissory estoppel, by which the learned counsel meansthat it was at the instance of the first respondent, thesecond appellant has purchased the property anddeveloped the property with a hope that the contractwill be continued.15. As far as the maintainability of the writ petition incontractual matters, it is the contention of the learned counsel forthe appellants that for termination of contract if no reasons areadduced, then the writ petition will be maintainable. 16. According to the learned counsel for the appellants, in caseswhere the parties have unequal bargaining powers, arbitrariness hasto be checked only by this Court under Article 226 of theConstitution of India and in this regard, he would rely upon the https://hcservices.ecourts.gov.in/hcservices/ judgment of the Supreme Court in United India Insurance CompanyLimited v. Manubhai Dharmasinhbhai Gajera and Others, JT 2008 (5) SC457 and Delhi Development Authority and Another v. Joint ActionCommittee, Allottee of SFS Flats and Others, [2008] 2 SCC 672. 17. To substantiate his contention that even in respect ofcontractual matters, if there is discrimination, this Court caninterfere, the learned counsel for the appellants would rely on thedecisions of the Supreme Court in Ramana Dayaram Shetty v. TheInternational Airport Authority of India and Others, AIR 1979 SC1628, M/s.Dwarakadas Marfatia & Sons v. Board of Trustees, BombayPort, AIR 1989 SC 1642 and Shrilekha Vidyarthi v. State of U.P., AIR1991 SC 537.18. The learned counsel for the appellants would rely upon thedecision of the Supreme Court in Narendra Kumar Maheswari v. Union ofIndia, AIR 1989 SC 2138 to substantiate his contention that in caseof irrationality and irrelevancy the interference by this Court ispermissible.19. He would also rely upon the judgment of the Supreme Court inState of Arunachal Pradesh v. Nezone Law House, [2008] 5 SCC 609 tocontend that in the absence of any reason, which is given in theorder of termination, especially when it is not in dispute that thesecond respondent is going to let the outlet to only a third party, awrit petition would lie.20. To substantiate his contention about legitimate expectation,the learned counsel for the appellants would rely upon the decisionof the Supreme Court in Ibrahimpatnam Taluk Vyavasaya Collie Sanghamv. K.Suresh Reddy and Others, JT 2004 [6] SC 70 and Beg Raj Singh v.State of U.P. and Others, [2003] 1 SCC 726.21. On the other hand, it is the submission of Mr.Abdul Saleem,learned counsel appearing for the respondents, that what was given tothe second appellant was not a dealership, but only a servicecontract for maintenance and handling and that was also only on atemporary and adhoc basis, pending the regular dealership contract tobe awarded to the persons as per law. 22. It is the submission of the learned counsel for therespondents and also not in dispute that the previous ownerMrs.Sumathi has leased the land to the second respondent for a periodof fifteen years from 18.7.2003 for running an outlet. Based onthat, in fact, the second respondent has given a contract of serviceto the husband of Mrs.Sumathi, Mr.Nandagopal, for a period of sixmonths from 1.10.2003 to 1.4.2004. It was thereafter, when thesecond appellant has applied, the contract was given to him, whichwas renewed up to 30.9.2007. That was originally given by the Indian https://hcservices.ecourts.gov.in/hcservices/ Oil Corporation, which has subsequently merged with the secondrespondent.23. It is also his contention that it has been the specific caseof the respondents that at no point of time they have insisted theappellants to purchase the property from Mrs.Sumathi and the purchaseof land by the second appellant from the said Mrs.Sumathi on 24.7.06was on his own volition. It is also his case that what was purchasedby him was only land, whereas the infrastructure has already beenprovided by the second respondent and therefore, it is not correct tostate as if the appellants, after the purchase of land, have spentsubstantial amount for the purpose of improvement.24. It is also his submission that a clause in the contract,which states that the maintenance and handling contractor shouldinform the Company at least thirty days in advance of the expiry ofthe license or permission to enable the company to renew, relates tothe other statutory authorities like the Fire Department, etc., whogrant permission for the purpose of running the retail outlet forpetroleum products.25. The learned counsel for the respondents submits that thisbeing a contract given only for a limited period, and the respondentshaving never promised anything to the appellants, the plea oflegitimate expectation raised by the appellants is unsustainable.26. He would also submit that after purchase of the property, byletter dated 12.8.2007, the first appellant has, in fact, terminatedthe lease agreement with the second respondent/Corporation. This willprove that the appellants case of legitimate expectation has nobasis. He would also submit that even in a suit filed by theappellants against the Corporation, it was never whispered by theappellants that the Corporation has insisted the appellants topurchase the land from Mrs.Sumathi.27. It is his further submission that, after dismissal of thewrit petition, the contract for Maintenance and Handling has alreadybeen awarded to one Manikammal.28. The learned counsel for the respondents also relied on thedecisions of the Supreme Court in Director General of Foreign Tradev. R.B. & Sons, 2004 [5] CTC 696 to substantiate his contention that,even if the contract is terminated, the right of the appellants is toonly claim damages.29. He would also submit that the appellants have no vestedinterest, since what was granted is adhoc arrangement of giving jobwork and he would rely upon the judgments of the Supreme Court inSanjana M.Wig v. Hindustan Petro Corporation Ltd., 2005 [5] CTC 292 https://hcservices.ecourts.gov.in/hcservices/ and ABL International Ltd. v. Export Credit Guarantee Corporation ofIndia Limited, [2004] 3 SCC 553.30. We have heard the learned counsel for the appellants as wellas the respondents and also perused the various records, includingthe order of the learned Single Judge, which is questioned before us.31. On the factual matrix, as enumerated above, it is clear thatwhat was granted by the second respondent to the second appellant wasnot petroleum dealership by following the provisions of the relevantlaw. Simply because the second appellant has applied for regulardealership and even assuming that an interview has been conducted forthat, so long as such regular dealership has not been conferred onhim, it cannot be said that the second appellant has any right ofdealership in respect of the sale of the petroleum products of thesecond respondent. 32. On the other hand, as per the contract, which has beengranted, as stated above, it is clear that what was given to thesecond appellant was only contract in respect of the sale ofpetroleum products of the second respondent/Company, includingservice and maintenance of the outlet situated in the land, whichoriginally belonged to one Mrs.Sumathi. 33. In the context that Mrs.Sumathi has leased out the said landto the second respondent for fifteen years and based on that lease,the second respondent has put up various infrastructure for thepurpose of making the place as a petroleum outlet; and that thesecond appellant was only given a contract of maintenance andhandling, it is not possible to accept the contention of the learnedcounsel for the appellants as if, after purchase of the property fromSumathi, they have spent huge amount for developing the said land. 34. Equally, it is not possible to accept the contention of thelearned counsel for the appellants that the second appellant wasforced to purchase the property from Mrs.Sumathi, at the advise ofthe first respondent. On the categoric stand taken by the firstrespondent that such an advise has never been given and in theabsence of any document or any other acceptable evidence to thateffect, the contention in that regard has to be totally rejected. 35. What has, therefore, been granted as a contract is only acontract to render maintenance and service by sale of petroleumproducts of the second respondent and that appears to be on adhocbasis, subject to the final decision by the second respondent inawarding regular dealership as per law. In such a situation, therelationship between the second respondent and the appellants ispurely contractual and the question of any statutory obligation onthe part of the second respondent, under any law, does not arise. https://hcservices.ecourts.gov.in/hcservices/

36. The clause in the agreement, which is relied upon by thelearned counsel for the appellants, in Clause (1)(r), which states asfollows, can be only taken to mean that the second respondent desiresthe second appellant to inform in advance of the expiry date of thelicenses and permissions in order to enable the second respondent torenew and that, by itself, does not confer any right on the secondappellant to have permanent renewal of the contract."1(r). The M & H Contractor will inform the Company atleast 30 days in advance of the expiry date of theLicenses, permissions, etc. of the retail outlet toenable the Company to renew the same."37. This being a contract in simplicitor between the secondappellant and the second respondent, it has no statutory forcewhatsoever. Even in cases where there is a breach of contract, theremedy open to the appellants is not certainly by way of filing awrit petition under Article 226 of the Constitution of India.38. In fact, the clause in the contract, especially Clause 48,enumerated above, makes it very clear that, even during thecontinuance of the period of contract, it is open to any one of theparties to the contract to terminate the contract, for which the onlyrequirement is giving one month's notice in writing. In fact, itmakes it clear that no reason need be assigned for the purpose ofterminating the contract, by giving thirty days notice. It is onlyin cases where there is a breach of contract, termination can be madeimmediately. In the present case, inasmuch as the second respondenthas given such notice of thirty days, as contemplated under Clause48, there is absolutely no scope to contend that such terminationletter should give reasons. Apart from the fact that, under theterms of the contract between the second appellant and the secondrespondent, no reason need be assigned and, therefore, thetermination order cannot be said to be illegal, it can never becontended that in spite of such specific clause under the contractreason should be assigned.39. On the factual situation, as stated above, and in the absenceof any statutory obligation that has been imposed on the secondrespondent in respect of the adhoc contract for maintenance andhandling, it cannot be held that the second respondent, being apublic authority, should give proper reason even for the purpose ofterminating the contract. It is true that the second respondent,being a public authority performing the function of sale of petroleumproducts, which is certainly public in nature, is bound by theprinciples of natural justice and fair play in cases of awardingcontracts, for example, while awarding contract of dealership, nodiscrimination can be exercised for the purpose of picking andchoosing an individual dealer as a dealer and equally opportunitymust be given to all, but, in cases where the terms of contract areviolated, we do not think that the principles of natural justice can https://hcservices.ecourts.gov.in/hcservices/ be raised in a writ petition under Article 226 of the Constitution ofIndia.40. In Harbanslal Sahnia and Another v. Indian Oil CorporationLimited and Others, [2003] 2 SCC 107, relied upon by the learnedcounsel for the appellants, the Hon'ble Supreme Court was dealingabout the termination of dealership of petroleum products, on thebasis that the sample taken in the outlet was not satisfied andmatching with the standard specifications. On the facts of thatcase, finding that the sample test was carried out in violation ofthe instructions contained in the Government Orders, the terminationof dealership was set aside, holding that even in contractual mattersthe High Court has jurisdiction under Article 226 of the Constitutionof India in three instances, viz., (i) to enforce fundamental rights;(ii) failure of principles of natural justice; and (iii) orderbecomes wholly without jurisdiction. The operative portion of thesaid judgment reads as follows:"7. So far as the view taken by the High Court that theremedy by way of recourse to arbitration clause wasavailable to the appellants and therefore the writpetition filed by the appellants was liable to bedismissed is concerned, suffice it to observe that therule of exclusion of writ jurisdiction by availabilityof an alternative remedy is a rule of discretion and notone of compulsion. In an appropriate case, in spite ofavailability of the alternative remedy, the High Courtmay still exercise its writ jurisdiction in at leastthree contingencies: (i) where the writ petition seeksenforcement of any of the fundamental rights; (ii) wherethere is failure of principles of natural justice; or(iii) where the orders or proceedings are wholly withoutjurisdiction or the vires of an Act is challenged. (SeeWhirlpool Corpn. v. Registrar of Trade Marks, [1998] 8SCC 1) The present case attracts applicability of thefirst two contingencies. Moreover, as noted, thepetitioners’ dealership, which is their bread andbutter, came to be terminated for an irrelevant and non-existent cause. In such circumstances, we feel that theappellants should have been allowed relief by the HighCourt itself instead of driving them to the need ofinitiating arbitration proceedings."(emphasis supplied)In fact, the Hon'ble Supreme Court has relied upon the earlierjudgment in Whirlpool Corporation v. Registrar of Trade Marks, [1998]8 SCC 1, wherein the Supreme Court has held that alternate remedy isa rule of discretion and not one of compulsion. But, in the presentcase, the order of termination has nothing to do with the either theprinciples of natural justice, as termination without notice ispermissible under the contract, or with the principles of equality https://hcservices.ecourts.gov.in/hcservices/ guaranteed under the Constitution of India, and therefore, the saidjudgment is not applicable to the facts and circumstances of thepresent case.41. The judgment of the Supreme Court rendered in United IndiaInsurance Company Limited v. Manubhai Dharmasinhbhai Gajera andOthers, JT 2008 (5) SC 457, relied upon by the learned counsel forthe appellants relates to insurance cover as per the Rule underInsurance Rules, 1939, by which the respondent before the SupremeCourt, who suffered a coronary disease and was admitted in theEscorts Heart Institute and Research Centre and underwentAngioplasty, made a claim which was allowed by the United IndiaInsurance Company Limited, on the basis that the mediclaim policystarted in 1995 was renewed by paying requisite premium. It appearsthat once again the respondent had to undergo Angioplasty in 2001,which was also reimbursed by the Insurance Company. Thereafter, inrespect of a minor operation also the medical expenses werereimbursed. However, the fourth time, when the respondent underwenta by-pass surgery, the Insurance Company has not admitted the sameand the claim of renewal of insurance was also refused on the ground"High Claim Ratio". It was in those circumstances, when a plea wasraised on behalf of the insurance company that insurance beingcontractual in nature, the writ petition before the High Court wasnot maintainable, the Supreme Court has held as follows: "41. One important facet of the matter which must alsobe taken note of is duty on the part of a State to actfairly. Such a fair dealing is expected at the hands ofa State within the meaning of Article 12 of theConstitution of India. Strong reliance has been placedby Mr.Parekh on the decision of this Court in MahabirAuto Stores & Ors. v. Indian Oil Corporation & Ors., JT1990 (1) SC 363:[1990] 3 SCC 752 and Kumari ShrilekhaVidyarthi & Ors. v. State of U.P. & Ors., JT 1990 (4) SC211: [1991] 1 SCC 212. There cannot be any doubtwhatsoever that Article 14 of the Constitution of Indiawhich encompasses within its fold, obligations on thepart of the State to act fairly which operates also inthe contractual field but the said principle would beapplicable more in a case where bargaining power isunequal or where the contract is not a negotiated oneand/or is based on the standard form contracts betweenunequals. Some of these decisions, however, had beentaken into consideration in Asstt. Excise Commissionerv. Issac Peter, JT 1994 (2) SC 140 : [1994] 4 SCC 104whereupon strong reliance has been placed by the learnedSolicitor General. Therein, inter alia, it was held:"26. Learned Counsel for Respondents thensubmitted that doctrine of fairness andreasonableness must be read into contracts to https://hcservices.ecourts.gov.in/hcservices/ which State is a party. It is submitted thatthe State cannot act unreasonably or unfairlyeven while acting under a contract involvingState power. Now, let us see, what is thepurpose for which this argument is addressedand what is the implication? The purpose, aswe can see, is that though the contract saysthat supply of additional quota isdiscretionary, it must be read as obligatory –at least to the extent of previous year'ssupplies – by applying the said doctrine. Itis submitted that if this is not done, thelicensees would suffer monetarily. The otherpurpose is to say that if the State is not ableto so supply, it would be unreasonable on itspart to demand the full amount due to it underthe contract. In short, the duty to act fairlyis sought to be imported into the contract tomodify and alter its terms and to create anobligation upon the State which is not there inthe contract. We must confess, we are notaware of any such doctrine of fairness orreasonableness. Nor could the learned Counselbring to our notice any decision laying downsuch a proposition. Doctrine of fairness ofthe duty to act fairly and reasonably is adoctrine developed in the administrative lawfield to ensure the Rule of Law and to preventfailure of justice where the action isadministrative in nature. Just as principlesof natural justice ensure fair decision wherethe function is quasi-judicial, the doctrine offairness is evolved to ensure fair action wherethe function is administrative. But it cancertainly not be invoked to amend, alter orvary the express terms of the contract betweenthe parties. This is so, even if the contractis governed by statutory provisions, i.e.,where it is a statutory contract – or rathermore so. It is one thing to say that acontract – every contract – must be construedreasonably having regard to its language. Butthis is not what the licensees say. They seekto create an obligation on the other party tothe contract, just because it happens to be theState. They are not prepared to apply the verysame rule in a converse case, i.e., where theState has abundant supplies and wants thelicensees to lift all that stocks. Thelicensees will undertake no obligation to lift https://hcservices.ecourts.gov.in/hcservices/ all those stocks even if the State suffers-loss. This one-sided obligation, inmodification of express terms of the contract,in the name of duty to act fairly, is what weare unable to appreciate."42. It is true that in a landmark judgment of the Hon'ble SupremeCourt in Delhi Development Authority and Another v. Joint ActionCommittee, Allottee of SFS Flats and Others, [2008] 2 SCC 672, theSupreme Court has given the true meaning for the word "State" underArticle 12 of the Constitution of India and also held thatreasonableness and fairness is the heart and soul of Article 14 ofthe Constitution of India in the following words:"42. While acting as “State” within the meaning ofArticle 12 of the Constitution of India, it isimperative that DDA, while implementing its statutorypower, upholds the fundamental rights of the citizensand strives hard to give effect to the directiveprinciples of the State policy. We, however, cannot alsoshut our eyes to the fact that in terms of Article 37 ofthe Constitution of India whereas the provisions of PartIII are justiciable, the provisions of Part IV are not.Only when an action of the State is taken to give effectto any of the provision of Part IV of the Constitutionof India which is not otherwise ultra vires theConstitution or offends the principles embodied in PartIII of the Constitution of India, the same may beupheld, having regard to the provisions contained inPart III thereof. The action of the State, therefore,must at the first instance be adjudged on the touchstoneof the principles of fundamental rights and then theprovisions contained in the parliamentary Act, theregulations framed thereunder as also the terms of thecontract entered into by and between the parties.43. We may or may not agree with the submission oflearned counsel for the appellants that the right ofhousing arising out of such a scheme is a fundamentalright within the meaning of Articles 19(1)(e) and 21 ofthe Constitution of India, but there cannot be any doubtwhatsoever that the action of State must satisfy theprincipal requirements of Article 14 viz. treatingpersons similarly situated equally and grant of equalprotection to them. Reasonableness and fairness is theheart and soul of Article 14 of the Constitution ofIndia. Keeping the aforementioned principles in mind, wemay consider the points involved herein." https://hcservices.ecourts.gov.in/hcservices/ While that being the law, as established by the Supreme Court, we donot agree that on the facts and circumstances of the present case,even assuming that the termination of contract for maintenance andhandling by the second respondent is not valid in law, it ispermissible to file a writ petition under Article 226 of theConstitution of India.43. Again in the judgment in ABL International Ltd. v. ExportCredit Guarantee Corporation of India Limited, [2004] 3 SCC 553, theSupreme Court has held that in the presence of arbitration clause,which is an effective alternate remedy, Article 226 of theConstitution of India is not the answer. In the said judgment, itwas held as under:"14. This judgment again, in our opinion, does not helpthe first respondent in the argument advance on itsbehalf that in contractual matters remedy under Article226 of the Constitution does not lie. It is seen fromthe above extract that in that case because of anarbitration clause in the contract, the Court refused toinvoke the remedy under Article 226 of the Constitution.We have specifically inquired from the parties to thepresent appeal before us and we have been told thatthere is no such arbitration clause in the contract inquestion. It is well known that if the parties to adispute had agreed to settle their dispute byarbitration and if there is an agreement in that regard,the courts will not permit recourse to any other remedywithout invoking the remedy by way of arbitration,unless of course both the parties to the dispute agreeon another mode of dispute resolution. Since that isnot the case in the instant appeal, the observations ofthis Court in the said case of State of U.P. v. Bride &Roof Co. (India) Limited, [1996] 6 SCC 22 are of noassistance to the first respondent in its contentionthat in contractual matters, writ petition is notmaintainable."44. Similarly, the judgment of the Supreme Court inM/s.Dwarakadas Marfatia & Sons v. Board of Trustees, Bombay Port, AIR1989 SC 1642, wherein when the Port Trust, which was the owner of theproperty, attempted to evict a private tenant in the Port Trustproperty, it was held that such action must be for a public purpose,Port Trust being a public authority. The relevant portion of thesaid judgment is as follows:"When the State, the local bodies and public authoritieswhich are "State" within the meaning of Article 12 areexempted from purview of Rent Control Legislation, thebasis of exemption is that such bodies would not beactuated by any profit making motive so as to undulyenhance the rents or eject the tenants from their https://hcservices.ecourts.gov.in/hcservices/ respective properties as private landlords are or arelikely to be. They would not act for their own purposeas private landlords do, but must act for publicpurpose. It, therefore, follows that the publicauthorities which enjoy this benefit without beinghidebound by the requirements of the Rent Act must actfor public benefit."The said judgment is distinguishable on facts and circumstances ofthe present case, wherein there is a termination clause in the termsof the contract.45. The further contention that the bargaining power between theappellants and the respondents, under the contract, is unequal andtherefore, the writ petition should be maintained, has no meaning.It is true that while entering into such contract either fordealership or for services, the standard forms are maintained by thesecond respondent and the persons, who are awarded contract, are madeto sign in the terms of the contract, which is adhesive in nature andis termed as cohesive contract. It is not the case of the appellantsthat they were compelled by the second respondent to sign the papers,without knowing the contents. On the other hand, for the appellants,to have such a contract, it was only optional and if only they agreeto the terms of the standard forms of contract, they can become aparty to the contract and there is absolutely no compulsion. Theappellants, having known about the terms of the contract, especiallyclause 48, have deliberately entered into the contract and therefore,it cannot be said that they are having inferior bargaining power andhence, the writ petition under Article 226 of the Constitution ofIndia should lie.46. The judgment of the Supreme Court in Shrilekha Vidyarthi v.State of U.P., AIR 1991 SC 537, also has no application to the factsof the present case. That was a case relating to the en bloc removalof all District Government Counsel in the State by the StateGovernment, which was held to be arbitrary and offending Article 14of the Constitution of India. The Supreme Court, while observingthat a public element is involved, held that, even though it is thecontention of the State that the appointment of Government Counsel iscontractual in nature, the existence of public element wassufficient to attract Article 14 of the Constitution of India, and itwas further held that even if the terms of contract provide fortermination of the counsel, without assigning any cause, thetermination of an appointment in the absence of any cogent reasons infurtherance of the object for which the power was given, was held tobe arbitrary and opposed to public policy. In the present case,there is absolutely no public element involved in the termination ofcontract.47. Similarly, the judgment in Union of India v. HindustanDevelopment Corporation, AIR 1994 SC 988 relates to issuance of https://hcservices.ecourts.gov.in/hcservices/ governmental contracts and also fixation of price and in that regard,the Supreme Court, in the elaborate judgment, has held that it mustbe reasonable, especially when the Government is trading with thepublic, as follows:"9. It must be mentioned at this stage that the validityof the conditions in the tender as such are notquestioned. Consequently the Government had the right toeither accept or reject the lowest offer but that ofcourse, if done on a policy, should be on some rationaland reasonable grounds.In the present case, as stated above, there is no trading activitydone by the second respondent with the appellants, except grantingcontract on adhoc basis for the purpose of maintenance and handlingof its retail outlet.48. The judgment in New India Assurance Co. Ltd. v. Nusli NevilleWadia, [2008] 3 SCC 279 relates to Public Premises (Eviction ofUnauthorised Occupants) Act, 1971, wherein the unauthorised occupantsof public premises, who may be treated as trespassers, continued inoccupation despite the cessation of contract of service. It was heldthat for evicting them fairness and reasonableness on the part ofpublic authorities, being the landlords, must be followed and itrequires the implementation of the requirement of Article 14 of theConstitution of India, as follows:"51. Except in the first category of cases, as has beennotice by us hereinbefore, Sections 4 and 5 of the Act,in our opinion, may have to be construed differently inview of the decisions rendered by this Court. If thelandlord being State within the meaning of Article 13 ofthe Constitution of India is required to prove fairnessand reasonableness on its part in initiating aproceeding, it is for it to show how its prayer meetsthe constitutional requirements of Article 14 of theConstitution of India. For proper interpretation notonly the basic principles of natural justice have to beborne in mind, but also principles of constitutionalisminvolved therein. With a view to read the provisions ofthe Act in a proper and effective manner, we are of theopinion that literal interpretation, if given, may giverise to an anomaly or absurdity which must be avoided.So as to enable a superior court to interpret a statutein a reasonable manner, the court must place itself inthe chair of a reasonable legislator/ author. So done,the rules of purposive construction have to be resortedto which would require the construction of the Act insuch a manner so as to see that the object of the Act isfulfilled, which in turn would lead the beneficiaryunder the statutory scheme to fulfill its constitutional https://hcservices.ecourts.gov.in/hcservices/ obligations as held by the Court inter alia in AshokaMarketing Ltd. v. Punjab Bank, [1990] 4 SCC 406."49. In Kerala Samsthana Chethu Thozhilali Union v. State ofKerala and Others, [2006] 4 SCC 327, the Supreme Court has dealt withthe case of the federation of trade union of toddy tappers andworkers in toddy shops situated in the State of Kerala. When thesale of arrack was banned in Kerala, a policy decision was taken bythe Labour and Rehabilitation Department of the State of Kerala thatthe workers, who had been engaged in manufacture, import, export,transport, sale and possession of arrack, should be rehabilitated.When the rehabilitation process was questioned, it was contended onbehalf of the Government that after taking over by the Government, itbecomes the domain of the State to impose conditions for grantinglicence for sale of toddy and therefore, the State merely parts witha privilege, which was exclusively vested in it and in that view ofthe matter, if in terms of the policy decision of the State, arrackworkers were to be rehabilitated, it would direct employment ofunemployed arrack workers and while doing that a condition can beimposed. In that context, when the argument was advanced on thebasis of "take it or leave it", the Supreme Court has held as follows:"58. “Take it or leave it” argument advanced by MrChacko is stated to be rejected. The State while partingwith its exclusive privilege cannot take recourse to thesaid doctrine having regard to the equity clauseenshrined under Article 14 of the Constitution. TheState in its dealings must act fairly and reasonably.The bargaining power of the State does not entitle it toimpose any condition it desires."The facts involved in the present case are not relating to any schemefor rehabilitation. As stated above, it is purely a contract insimplicitor in respect of the period of running of contract formaintenance and handling, which is given by way of permission by thesecond respondent to the appellants and therefore, there is noquestion of any rehabilitation involved in this case.50. The reliance placed by the learned counsel for the appellantson the judgment of the Supreme Court rendered in State of ArunachalPradesh v. Nezone Law House, [2008] 5 SCC 609 to substantiate hiscontention that doctrine of promissory estoppel will apply to thefacts of the case on hand is not tenable. In the said judgment, theHon'ble Supreme Court, relying upon various English judgments andwith approval, has held that doctrine of promissory estoppel hasassumed importance in recent years, while observing that the saidprinciple has been evolved on the principles of equity to avoidinjustice. It is not known as to how, on the facts and circumstancesof the present case, the said celebrated concept of promissoryestoppel is applicable, especially in the circumstances that it isthe specific case of the respondents that they have never directed https://hcservices.ecourts.gov.in/hcservices/ the second appellant to purchase the land from Mrs.Sumathi and alsoin the circumstance that even when Mrs.Sumathi has leased out theland to the second respondent, all infrastructure has been put up bythem and therefore, there was actually no need for the secondappellant to spend any amount to put up any structure. That apart,when the terms of the contract are very clear that the contract ofservice can be terminated without assigning any reason, there is noquestion of any promissory estoppel or applicability of theprinciples of legitimate expectation.51. Moreover, the second appellant, who has now chosen to stateas if the first respondent has compelled him to purchase the propertyfrom Mrs.Sumathi and therefore, he has purchased it with a hope thatthe contract of maintenance and handling will continue and also spenthuge amount of money, has not chosen to take such a stand in the suitfiled by him against the second respondent before the PrincipalDistrict Munsif, Pudukkottai in O.S.No.451 of 2008 for the relief ofeviction of the second respondent, on the basis that the leasegranted to the second respondent has been terminated by the secondappellant. In the pleading in the said suit, the second appellanthas stated as follows:"Due to sickness and inability to maintain theundermentioned property, the said Sumathi sold the sameto the plaintiff through a sale deed dated 24.7.2006.The plaintiff had intimated the said sale to thedefendants."When the second appellant has terminated the lease in respect of theland, which was purchased from Mrs.Sumathi, and granted in favour ofthe second respondent and has approached the Civil Court for thepurpose of eviction, certainly, he cannot question the validity ofthe termination of the contract by the second respondent in respectof maintenance and handling.52. The observation made by the Supreme Court in IbrahimpatnamTaluk Vyavasaya Collie Sangham v. K.Suresh Reddy and Others, JT 2004[6] SC 70 that "Every man has the legitimate expectation regarding aset of things or facts, which have continued over a period of time,to have become settled so that he can plan his future course ofaction on the basis of such acceptable situation. Unsettling suchfacts after long delay upsets not only his entire programme but alsoaffects in the long run the society itself.", was in the context of avalidation certificate issued in the year 1974 in favour of thevendors and vendees, which were sought to be cancelled by the JointCollector, by exercising the suo motu powers under Section 50-B ofthe Andhra Pradesh (Telangana Area) Tenancy and Agricultural LandAct, 1950, especially in the circumstance that various authorities,including Tahsildar, Special Tahsildar and Authorised Officer under https://hcservices.ecourts.gov.in/hcservices/ the Act have held that the validation certificates cannot be setaside.53. Again the judgment rendered in Beg Raj Singh v. State of U.P.and Others, [2003] 1 SCC 726 relates to the grant of mining lease,which ought to have been given as per the Government Order for threeyears, but by mistake the State Government has given it for one year.The Supreme Court, taking note of the fact that the lessee spent hugeamount in making the mining area approachable and therefore, he hadlegitimate expectation that he would be entitled to operate miningfor three years as per the policy of the Government, by applying theprinciples of legitimate expectation, permitted the petitionertherein to operate mine for the remaining period, by taking the leaseperiod as three years. That was a statutory contract given under theprovisions of the Act, which can never be compared to the presentcontext of the case.54. On the other hand, as correctly submitted by the learnedcounsel for the respondents, a Division Bench of this Court presidedover by Markandey Katju, C.J., as he then was, andN.V.Balasubramanian,J., in Director General of Foreign Trade v. R.B.& Sons, 2004 [5] CTC 696, held that, even in respect of a licence forexport, the Court can never direct the period of licence or lease tobe extended, in the following words:"7. In our opinion, a Court cannot direct extension ofperiod of a licence, lease or other grant where it isfor a fixed period. For instance, if a licence or leaseis granted for the period from 1.1.2004 till 31.12.2004,the Court cannot direct that the period of the licenceor lease should be extended beyond 31.12.2004 merelybecause for Appellate Tribunal art of this period, thelicensee or lessee was prevented, for reason beyond hiscontrol, to operate. If the licensee or lease wasprevented to operate for a part of the period of thelicence or lease, then his remedy is to get refund ofproportionate amount of licence or lease fee orcompensation for any damage he might have suffered, butthe period of licence or lease cannot certainly beextended by the Court."55. In Ramana Dayaram Shetty v. The International AirportAuthority of India and Others, AIR 1979 SC 1628, which was relatingto the grant of tender for running restaurant and snack bar in theAirport, one of the condition being having experience of five years,it was held that, by choosing such persons for granting tender, theauthority, which is an instrumentality of the State, cannotdiscriminate people and choose at their whims and fancies and it wasin that context the Supreme Court has come down against the arbitraryconduct of the Governmental authorities in discriminating people https://hcservices.ecourts.gov.in/hcservices/ regarding the grant of contracts in the following words:"20. Now, obviously where a corporation is aninstrumentality or agency of Government, it would, inthe exercise of its power or discretion, be subject tothe same constitutional or public law limitations asGovernment. The rule inhibiting arbitrary action byGovernment, which we have discussed above, must applyequally where such corporation is dealing with thepublic, whether by way of giving jobs or entering intocontracts or otherwise, and it cannot act arbitrarilyand enter into relationship with any person it likes atits sweet will, but its action must be in conformitywith some principle which meets the test of reason andrelevance.21. This rule also flows directly from the doctrine ofequality embodied in Article 14. it is now well settledas a result of the decisions of this Court inE.P.Royappa v. State of Tamil Nadu, [1974] 2 SCR 348 :AIR 1974 SC 555 and Maneka Gandhi v. Union of India,[1978] 1 SCC 248 : AIR 1978 SC 597 that Article 14strikes at arbitrariness in State action and ensuresfairness and equality of treatment. It requires thatState action must not be arbitrary but must be based onsome rational and relevant principle which is non-discriminatory: it must be guided by any extraneous orirrelevant consideration, because that would be denialof equality. The principle of reasonableness andrationality which is legally as well as philosophicallyan essential element of equality or non-arbitrariness isprojected by Article 14 and it must characterise everyState action, whether it be under authority of law or inexercise of executive power without making of law. TheState cannot, therefore act arbitrarily in entering intorelationship, contractual or otherwise with a thirdparty, but its action must conform to some standard ornorm which is rational and non-discriminatory."The said direction of the Supreme Court is, certainly, not applicableto the facts and circumstances of the present case for the reasonthat it is not even the case of the second appellant that anydiscrimination has been made among the persons to be chosen ascontractors for maintenance and handling. The allegation that, aftertermination of the contract, the second respondent is going to awardthe said contract to the third parties and therefore, there isnothing wrong if the second respondent continues the contract withthe appellants, has no legal basis. Even otherwise, it is the caseof the second respondent that the second respondent is processinggrant of permanent dealership as per law, since large number of https://hcservices.ecourts.gov.in/hcservices/ applications are pending. In such view of the matter, it is notpossible to accept the contention of the learned counsel for theappellants, as if there has been any discrimination.56. In Sanjana M.Wig v. Hindustan Petro Corporation Ltd., 2005[5] CTC 292, while explaining about the plenary jurisdiction of theHigh Court under Article 226 of the Constitution of India, theSupreme Court has held that the lis involved must be of public lawcharacter and by relying on the judgment in Whirlpool Corpn. v.Registrar of Trade Marks, referred supra, held that under threecircumstances the jurisdiction under Article 226 of the Constitutionof India can be enforced, as follows:"12. The principal question which arises forconsideration is as to whether a discretionaryjurisdiction would be refused to be exercised solely onthe ground of existence of an alternative remedy whichis more efficacious. Ordinarily, when a dispute betweenthe parties requires adjudication of disputed questionof facts wherefor the parties are required to leadevidence both oral and documentary which can bedetermined by a domestic forum chosen by the parties,this Court may not entertain a writ application. SeeM/s.Titagarh Paper Mills Ltd. v. Orissa StateElectricity Board and Another, 1975 (2) SCC 436 andM/s.Bisra Stone Lime Co. Ltd. etc. v. Orissa StateElectricity Board and Another, AIR 1976 SC 127.13. However, access to justice by way of public lawremedy would not be denied when a lis involves publiclaw character and when the forum chosen by the partieswould not be in a position to grant appropriate relief.14. A Division Bench of this Court in ABL InternationalLtd. & Anr. v. Export Credit Guarantee Corporation ofIndia Limited & Ors. JT 2003 (1) SC 300, observed thatin certain cases even a disputed question of fact can begone into by the Court entertaining a petition underArticle 226 of the Constitution of India, holding:"28. However, while entertaining an objection as to themaintainability of a writ petition under Article 226 ofthe Constitution of India, the Court should bear in mindthe fact that the power of issue prerogative writs underArticle 226 of the Constitution is plenary in nature andis not limited by any other provisions of theConstitution. The High Court having regard to the factsof the case, has a discretion to entertain or not toentertain a writ petition. The Court has imposed uponitself certain restrictions in the exercise of thispower. See Whirlpool Corporation v. Registrar of Trade https://hcservices.ecourts.gov.in/hcservices/ Marks. And this plenary right of the High Court to issuea prerogative writ will not normally be exercised by theCourt to the exclusion of other available remediesunless such action of the State or its instrumentalityis arbitrary and unreasonable so as to violate theconstitutional mandate of Article 14 or for other validand legitimate reasons for which the Court thinks itnecessary to exercise the said jurisdiction."57. On the factual matrix of this case, apart from the fact thatfor the purpose of awarding the contract of maintenance and handlingno public element is involved, as we have enumerated above, there isabsolutely no question of involvement of any breach of fundamentalright or violation of Article 14 of the Constitution of India or theprinciples of natural justice. In the circumstances that theappellants have no vested right to continue to have the contractextended for the purpose of maintenance and handling of the outlet,which was put up by the second respondent, it is not possible toaccept the contention of the learned counsel for the appellants thatthe writ petition is a remedy even in cases where the appellantschoose their right under any provisions of the said contract. It isfor them to work out their remedy, especially when there is anarbitration clause which provides for a settlement of a dispute.Even in cases where there is a breach on the side of the secondrespondent either in premature termination or so on, the remedyavailable to the appellants is by way of damages. Even assuming thatthe appellants have a right of specific performance under thecontract, this is not the forum to ventilate the grievance for suchpure breach of contract. It is no doubt true that under Article 226of the Constitution of India, the plenary jurisdiction of this Courtcan be exercised in cases where the public law character is involved.58. It is true that even in the latest judgment in M/s.KaranatakaState Forest Industries Corporation v. M/s.Indian Rocks, AIR 2009 SC684, the Supreme Court has held that in cases where the State actionis arbitrary, discriminatory and violative of Article 14 of theConstitution of India, writ petition would be maintainable, in thefollowing terms:"40. Although ordinarily a superior Court in exercise ofits writ jurisdiction would not enforce the terms of acontract qua contract, it is trite that when an actionof the State is arbitrary or discriminatory and, thus,violative of Article 14 of the Constitution of India, awrit petition would be maintainable. (See ABLInternational Ltd. v. Export Credit GuaranteeCorporation of India Limited, [2004] 3 SCC 553.)"However, on the facts of the case, since it is found that there wasno violation of Article 14 of the Constitution of India and there isno arbitrariness or discrimination shown by the second respondent, it https://hcservices.ecourts.gov.in/hcservices/ is not possible to enforce the terms of the contract in the presentcase.59. In almost a similar circumstance, the First Bench of thisCourt, presided over by A.P.Shah,CJ, as he then was, and one of us(P.Jyothimani,J.), in the judgment dated 7.6.2007 made in W.A.No.737of 2007, while dealing with Indian Oil Corporation Limited jobcontractorship, as that of the present case, which was for a periodof one year, when the contract was extended on few occasions andsubsequently terminated, it was held that there is no claim ofpermanent dealership and therefore, the principles of natural justicedoes not apply. The Division Bench observed as follows:"In respect of leasing out of the land situated atNo.160, Krishnapuram Village, Gingee Taluk in SurveyNo.104/2A measuring an extent of 22500 sq.ft. for thepurpose of running the petrol bunk, it is the case ofthe appellants that the lease was entered between theappellants' family and the respondent Corporation for 20years, as per the agreement entered in March, 2002. Thefirst appellant was issued with letter of allotment bythe second respondent Corporation on 23.9.2002, whichshould actually expire on 30.9.2003, however, the caseof the appellants is that, it was subsequently extendedupto 30.9.2004. When the notification was issued by thefirst and second respondent on 21.12.2003, invitingapplication for award of retain outlet at Gingee underSpecial Category (OSP), a writ petition was filed by thefirst appellant, which was withdrawn, based on which thethird respondent had issued a letter of indent on28.2.2005 in favour of the second appellant. Areference to the said letter, shows that it is onlyawarding of job contractorship for operating COCO retailoutlet at Gingee from 28.2.2005 to 27.2.2006, i.e., fora period of one year. It is also seen that in the saidproceedings of the third respondent dated 28.2.2005, theperiod of operation will be for one year, upto 27.2.2006or till such date by which a regular dealer isappointed, whichever is earlier. For that, the secondappellant has given an undertaking.2. It is further seen that, by subsequent orderdated 26.2.2006, the second respondent has given furtherperiod of one year to the second appellant with effectfrom 28.2.2006 or till completion of one year or suchdate by which a regular dealer is appointed, whicheveris earlier and to that effect also there has been anundertaking given by the second appellant. In suchcircumstances, when the period of dealership has come toan end as early as 27.2.2007, especially when the secondrespondent has already granted dealership to the 4th https://hcservices.ecourts.gov.in/hcservices/ respondent by way of regular dealership, there is novested right on the part of the appellants to claimpermanent dealership. In view of the same, as rightlypointed out by the learned single Judge, the question ofprinciples of natural justice does not arise.Therefore, the writ appeal fails and the same isdismissed."Thus, looking from any angle, the case of the appellants cannever be accepted. Finding no valid reason to interfere with theorder of the learned Single Judge, this writ appeal is dismissed,however with cost of Rs.10,000/- (Rupees Ten Thousand only) to bepaid by the appellants to the Chief Justice Relief Fund within aperiod of ten days. Consequently, M.P.No.1 of 2008 is closed.Sd/Asst.Registrar/true copy/Sub Asst.Registrarsasi To1. The Divisional Manager IBP Company Limited Madurai Divisional Office Madurai-625 016.2. The Divisional Manager The Indian Oil Corporation Limited Madurai.3. The Divisional Manager The Indian Oil Corporation Limited Ponmeni N.H.7, By-Pass Road Madurai-625 016.1 cc To Mr.M.Palani, Advocate, SR.178821 cc To M/s.Anand, Abdul & Vinodh, Associates, SR.17609Copy to: The Sub Assistant Registrar,Accounts Section,High Court, Madras.W.A.No.495 of 2008RSY(CO)SRA(30/4/2009)