M/S Allied Motors Ltd vs M/S Bharat Petroleum Corp.Ltd

Allied Motors Ltd. ... Appellant

Versus

Bharat Petroleum Corp. Ltd. ... Respondent

J U D G M E N T

Dalveer Bhandari, J.

1. Leave granted.

2. This appeal is directed against the judgment dated 11th

August, 2009 delivered in Letters Patent Appeal No.296 of

2009 by the Division Bench of the High Court of Delhi

upholding the judgment dated 6th May, 2009 passed by the

learned Single Judge in Writ Petition (Civil) No.2927 of 2005.

3. The main issue which arises for adjudication in this

appeal pertains to the termination of the dealership of the

appellant in an illegal and arbitrary manner.

2 4. According to the appellant, it had been operating the

petrol pump for the last 30 years and during this period it was

given 10 awards from time to time declaring its dealership as

the best petrol pump in the entire State of NCT of Delhi. On a

number of occasions, samples of the appellant were tested by

the respondent-Corporation and on each occasion its samples

were found to be as per the specifications.

5. According to the appellant, it had maintained highest

standards and norms of an excellent petrol pump, yet, the

respondent-Corporation, in a clandestine manner, terminated

its dealership in the most arbitrary manner and in total

violation of the principles of natural justice.

6. It was further urged by the appellant that its dealership

was terminated without even issuing any show cause notice

and/or giving an opportunity of hearing to it. The termination

of dealership was contrary to the mandatory procedural

provisions of law. According to the appellant, the said

termination was mala fide, arbitrary and illegal.

7. It may be pertinent to mention that in the morning of 15th

May, 2000, an unauthorized police officer accompanied by the

3

officials of the respondent conducted a raid at the appellant's

petrol pump. According to the appellant, the raid was illegal

as an unauthorized police officer could not conduct a search

and seize the samples of the appellant.

8. The appellant urged that the samples taken in this raid

were in complete violation of the mandatory procedural

provisions of law as provided under the Motor Spirit and High

Speed Diesel (Regulation of Supply and Distribution and

prevention of Malpractices) Order, 1999 (hereinafter referred to

as "Order"). The appellant while reproducing the relevant

provisions of law has submitted as under:-

(a) Clause 4 of the said Order provides for power of search

and seizure. Sub-Clause (A) of the section authorizes

any police officer not below the rank of the Deputy

Superintendent of Police (for short, DSP) duly authorized

or any Officer of the concerned Oil Company not below

the rank of Sales Officer to take samples of the products

and/or seize any of the stocks of the product which the

officer has reason to believe has been or is being or is

about to be used in contravention of the said Order.

9. In the present case, however, the samples were collected

in complete violation of the aforesaid provisions. The Police

official who had conducted the raid and collected the samples

4

was admittedly below the rank of DSP. This is also recorded

in the Metropolitan Magistrate's order dated 27.5.2002 passed

in FIR No.193 of 2000 wherein it is stated as under:

"In the present case the search and

seizure was conducted by an

unauthorized police officer of the rank of

Inspector which is totally contrary to the

mandatory provisions of the said Clause

4."

(b) Sub-Clause (B) of Clause 4 of the said Order provides

that while exercising the power of seizure under Clause 4

(A) (iv) the authorised officer shall record in writing the

reasons for doing so, a copy of the which shall be given to

the dealer.

10. According to the appellant, in the present case, no such

reasons in writing were provided.

(c) Clause 5(2) of the said Order lays down the procedure for

sampling of product which provides that "the Officer

authorised in Cl. 4 shall take, sign and seal six samples of

1 litre each of the Motor Spirit or 2 of 1 lit. each of the

High Speed Diesel, 2 samples of the Motor Spirit (or one of

High Speed Diesel) would be given to the Dealer or

transporter or concerned person under acknowledgement

with instruction to preserve the sample in his safe custody

till the testing or investigations are completed, 2 samples

of MS (and/or one of HSD), would be kept by the

concerned Oil Company or department and the remaining

5

two samples of MS (and/or one of HSD) would be used for

laboratory analysis."

11. The appellant urged that in the present case, samples

were allegedly taken from 6 sources. Therefore, the

respondent Corporation as per the provision should have

taken 36 samples (6 samples from each of the source) and

handed over 12 samples (2 from each of the 6 sources) to the

appellant, being the dealer, under acknowledgement. The

respondent Corporation however, neither took 36 samples, nor

did it hand over the prescribed number of 12 samples to the

appellant. This is clear from the counter affidavit filed by the

respondent in Writ Petition (C) No.7382 of 2001 placed on

record. It is clearly stated in the counter affidavit filed by the

respondent Corporation that it is pertinent to state that two

samples from each of the tanks containing adulterated

products were drawn by the answering respondent in the

presence of the police officials of the crime branch and the

representative of the appellant as well.

12. Out of these two samples, one sample was retained by

the crime Branch of Delhi Police and another by the

respondent, Bharat Petroleum Corporation Limited (for short

6

BPCL). It has, therefore, been clearly admitted that only 2

samples as opposed to 6 samples were drawn from each tank

and that no sample was handed over to the appellant.

Furthermore, the learned counsel appearing for the

respondent in the proceedings before the Division Bench in

LPA No.296 of 2009, has specifically admitted, as is also

recorded in page 8 of the impugned order that "there was no

receipt of two samples from each source being handed over to

appellant". It is also relevant to state that in all previous

representations made by the appellant to the respondent and

previous writ petitions filed, the respondent has never denied

the averment that 2 samples were not handed over to the

appellant.

(d) Clause 5(3) of the said Order provides that "Samples shall

be taken in clean glass or aluminium containers. Plastic

containers shall not be used for drawing samples."

13. According to the appellant, in the present case, plastic

containers were used for drawing samples in complete

violation of the said provision. This is also recorded in the

Metropolitan Magistrate's order dated 27.5.2002 wherein it is

stated that in Clause 5 of the order it was specifically

7

legislated that the sample shall be taken in clean glass or

aluminium containers and plastic containers would not be

used for drawing out the samples. But in clear contravention

to the mandatory provisions, plastic containers were used by

the police officer while drawing samples. From the file, it is

clear that sample Nos.7, 8 and 9 were drawn from the car of

the complainant in plastic containers by the police and

therefore, the report on the basis of the samples taken in the

plastic containers cannot be relied upon at all.

(e) Clause 5(4) of the said Order provides that "The sample

label should be jointly signed by the officer who has

drawn the sample, and the dealer or transporter or

concerned person or his representative and the label

shall contain information as regards the product, name

of retail outlet, quantity of sample, date, name and

signature of the officer, name and signature of the dealer

or transporter or concerned person or his representative."

According to the appellant, this was not done.

14. The Metropolitan Magistrate's order dated 27.5.2002

passed in FIR No.193 of 2000 specifically records as follows:

"The law being as noticed above, it is very clear that

the search and seizure is bad in law and is in

contravention of mandatory provisions of the

Essential Commodities Act and contravention of

8

Motor Spirits (High Speed Diesel Act) and in any

case the prosecution cannot establish its case

against any of the accused and accused persons are

liable to be discharged on this very ground and no

charge should be framed... There is no evidence

whatsoever to show that petrol supplied was

adulterated or not."

15. The appellant referred to section I (c) of Chapter 6 of the

Guidelines of 1998 which provides as follows:

"Wherever samples are drawn, either pursuant to

random checks or where adulteration is suspected,

3 sets of signed and sealed samples (6x1 ltr of MS

and 3x1 ltr of HSD) should be collected from the

RO, out of which one set should be kept with the

dealer, one with the company and the third to be

sent for laboratory resting within 10 days. For the

sample kept with the dealer, proper

acknowledgement will be obtained and the dealer

will be instructed to preserve the same in his safe

custody till the testing/investigation are completed."

16. According to the appellant, it is clear that the samples

were collected in violation of mandatory procedure of law as

provided under the said Order and therefore the termination

order passed on the basis of test reports of samples so

collected is completely illegal and liable to be set aside.

17. The appellant relied on the case of Harbanslal Sahnia

and Another v. Indian Oil Corporation Ltd. and Another

(2003) 2 SCC 107, wherein the Indian Oil Corporation

9

terminated the dealership of Harbanslal Sahnia on the basis

that the sample drawn from the petrol pump did not meet the

standard specification. This Court found that two government

orders providing for the procedure for taking samples had

been violated and in view of the same found that the failure of

the sample taken became irrelevant and non-existent fact

which could not have been relied upon for terminating

dealership, and quashed the order terminating the dealership

and restored possession. It is submitted that the fact that two

samples were not left with the appellant is not only a violation

of the mandatory principles of law but also of fair play and

natural justice as the appellant is deprived of its valuable right

to contest the veracity of the test reports. This provision of law

is the single most important check on arbitrary action by the

respondent.

18. According to the appellant, these samples were taken in

violation of the mandatory provisions of law. The test reports,

given on 16.5.2000, formed the basis for the termination of the

appellant's dealership. The termination was in clear violation

of the procedures prescribed by law. The termination was also

in violation of mandatory Marketing Discipline Guidelines and

10

the prescribed procedures. The termination was also in

violation of the principles of natural justice and fairplay.

According to the appellant, this is clear from the following

facts:-

a) Clause (d) of Section 1 of the Marketing Disciplines provides

that: If the samples is certified to be adulterated, after

laboratory test, a show cause notice should be served on

the dealer and explanation of the dealer sought within 7

days of the receipt of the show cause notice. Thus under

the said provision seven days is to be given to the dealer to

provide an explanation and only if explanation is found

unsatisfactory can appropriate action be taken. In the

instant case, however, no show cause notice was given and

no opportunity was given to the appellant to provide any

explanation. Instead appellant's dealership was summarily

terminated on the very date the alleged test reports

certifying the sample to be adulterated was received i.e.

16.5.2000, the very next day after the samples were taken.

It is relevant to state that the premeditated nature and mala

fide of the test reports was writ large as the test reports on

11

the basis of which the appellant's dealership was allegedly

terminated itself indicated "terminated dealer".

b) Clause (d) of Section 1 of the Marketing Discipline

Guidelines further provides that if the explanation of dealer

is not satisfactory, the Company should take action as

follows:

a. Fine of Rs.1 lakh and suspension of sales and

supplies for 45 days in the first instances;

b. Termination in the second instance.

19. It is thus clear from the above provision that the

Guidelines prescribe termination only in case of second

instance of adulteration of Motor Spirits. It is an admitted

case that this was the first instance of alleged adulteration of

Motor Spirits.

20. One of the grounds taken by the respondent-Corporation

for termination in its letter dated 16.5.2000 was that "in the

past also a product sample collected from the retail outlet was

found to have failed specification." This earlier offence in

respect of the "product sample" referred to in the order of

16.5.2000, was, however, in respect of lube sample and not

12

petrol/MS. This is clear from the Delhi High Court's order

dated 9.9.2004 passed in WP (C) No.7382 of 2001, which

records respondent Corporation's counsel's submission in that

respect as below: "It was also emphasized that there was a

past history where inspection of the outlet had been carried

out on 12.12.1998 and Lubes samples were collected which

were found off-specifications."

21. It is also submitted that a previous alleged case of off-

spec lube, does not make the first alleged case of motor spirit

adulteration, a second offence of motor spirit adulteration.

Off-spec lube is not a case of adulteration which is clear from

the definition of "adulteration" set out in the Marketing

Discipline Guidelines which defines "adulteration" as "the

introduction of any foreign substance into motor spirit/high

speed diesel illegally or unauthorizedly." Lube falls into a

completely different category and is in a separate chapter in

the Marketing Discipline Guidelines being Chapter 7 as

contrasted from Chapter 6 which deals with "Adulteration of

Product". Chapter 7 of the said guidelines separately provides

for prevention of irregularities at retail outlet in respect of

13

lubes. Clause 9 of the said Chapter provides the following

punishments in case of sales of adulterated lubes.

a. Suspension of sales and supplies of all

products for 15 days along with a fine of

Rs.20,000/- in the first instance.

b. Suspension of sales and supplies for 30 days

along with a fine of Rs.50,000/- in the second

instance.

c. Termination in the third instance.

22. Thus while the guidelines provide for termination of

dealership in the second instance of adulteration of petrol/MS,

the punishments prescribed for adulteration of lubes provides

for termination only in case of third instance.

23. Further, the fourth note provided at the end of this

Chapter 6 provides as under:

"In case, two or more irregularities are detected at

the same time at the same RO, action will be taken

in line with what is listed in MDG under the

relevant category for each irregularity."

24. According to the appellant, the respondent has clearly

acted in violation/contravention of, or at the very least in

departure from, the Motor Spirits High Speed Diesel Order and

the Marketing Discipline Guidelines and has also acted

14

contrary to the principles of natural justice and fair play both

in respect of taking samples which formed the basis of

termination, as also in respect of the termination of

dealership.

25. The appellant referred to the decision in Bharat Filling

Station and Another v. Indian Oil Corporation Ltd. 104

(2003) DLT 601 wherein the Delhi High Court specifically

referred the Market Discipline Guidelines. Relevant part of the

judgment is reproduced as under:-

"As noted above, IOC, whenever enters into

dealership agreement, executes memorandum of

agreement which lays down standard terms and

conditions. These conditions, inter alia, include

provisions for termination of the dealership as well.

It is provided that the agreement can be terminated

by giving required notice. It may however be

mentioned that at the same time in order to ensure

that such agreements with the dealers are worked

out in a systematic manner and the respondent IOC

does not invoke the termination clause arbitrarily,

Government of India has issued Marketing

Discipline Guidelines.

26. The appellant also referred to the decision of this Court

in Ramana Dayaram Shetty v. International Airport

Authority of India and Others (1979) 3 SCC 489, wherein

this Court held that "it is well settled rule of administrative law

15

that an executive authority must be rigorously held to the

standards by which it professes its actions to be judged and it

must scrupulously observe those standards on pain of

invalidation of an act in violation of them." It is submitted

that the respondent was bound to act in accordance with the

Marketing Discipline Guidelines.

27. It is further submitted that in the case of Ramana

Dayaram Shetty (supra), this Court held that "the

Government cannot act arbitrarily at its sweet will and, like a

private individual, deal with any person it pleases, but its

action must be in conformity with standard or norm which is

not arbitrary, irrational or irrelevant. The power or discretion

of the Government in the matter of grant of largesse including

awards of jobs, contracts, quotas, licenses etc. must be

confined and structured by rational, relevant and non-

discriminatory standard or norm and if the Government

departs from such standard or norm in any particular case or

cases, the action of the Government would be liable to be

struck down unless it can be shown by the Government that

the departure was not arbitrary, but was based on some valid

16

principle which in itself was not irrational, unreasonable or

discriminatory."

28. The appellant further submitted that in the present case

the respondent has departed from the standard norms laid

down in the Marketing Discipline Guidelines and the standard

norms of natural justice and fairplay and that such departure

was clearly arbitrary, irrational, unreasonable and

discriminatory.

29. The appellant urged that the respondent Corporation

terminated the dealership without even issuing show-cause

notice and/or providing any opportunity of hearing. The

termination is clearly in violation of the principles of natural

justice.

30. The appellant also asserted that the termination was

mala fide is further strengthened by the fact of an internal

email of the respondent dated 3 days after the raid on May 18,

2000 stating that "the samples were taken as complaint

samples but the comments on the test result were given due to

reasons explained to you over the phone."

17 31. It is also stated that another email dated 22nd May, 2000

recorded that "Delhi Territory had drawn samples regularly

from the retail outlet. All 10 samples drawn in 1999-2000

were found on spec." Despite this, the dealership had already

been terminated the very day after the raid.

32. The appellant also urged that the order of the Delhi High

Court in Writ Petition (Civil) No.7382 of 2001 dated 9.9.2004

directed the respondent to give a show cause notice, personal

hearing and pass a reasoned order. It was not given and the

appellant was constrained once again to approach the High

Court who then directed the respondent to grant the appellant

a personal hearing at a higher level. The action of the

respondent is mala fide which is reflected from the fact that at

various stages the respondent-Corporation has tried to

improve its case by supplanting reasons in support of the

termination. This is clear from the following facts:

i. The first notice dated 16.5.2000 terminating

the dealership points out the following three

grounds for termination:

a. One of the samples during the raid and

taken from the laboratory testing had

failed specification of U.L.P.

18

b. In the past also a product sample

collected from the retail outlet was found

to have failed specification; and

c. Breach of agreement between the parties

vide which the appellant had covenanted

not to adulterate petroleum products.

ii. Despite the fact that termination order was

quashed by the High Court vide its order dated

9.9.2004 passed in W.P. (C) No.7328 of 2001,

with specific direction to the respondent to give

the appellant personal hearing and pass a

reasoned order, the respondent Corporation

vide letter 22.11.2004 confirmed the original

order of termination without granting the

appellant an opportunity of hearing. Further

despite Court's specific order to treat the

original termination order dated 16.5.2005 as

the show-cause notice, the respondent added

additional grounds of termination and

terminated the dealership on these grounds in

addition to the grounds taken in 16.5.2000.

The additional grounds were:

a. Loss of Market Share in 1997.

b. Non-availability of density record during

routine mobile inspection on 28.4.1998

and 30.5.1995;

c. Failure to meet specifications during a

routine inspection on 12.12.1998;

d. Two complaints received in 1997.

33. The appellant submitted that it is pertinent to note that

all the grounds pertain to a period prior to the termination of

the dealership in 2000 and hence were known to the

19

respondent even at the time it issued its termination order

dated 16.5.2000. Despite the same these were taken as

grounds for the first time in the year 2004 making it

abundantly clear that these grounds were added as an after

thought only with a view to improve its case of termination.

34. The appellant further urged that in the order dated

16.5.2000 it was simply stated that one of the samples drawn

had failed specification of ULP without clarifying which ULP

specification it had failed. However, as per the order dated

22.11.2004, the ULP specification that the samples were said

to have failed were in respect of Research Octane Number and

ASTM distillation which were co-incidentally the only two tests

that IIP Dehradun had not carried out when the samples were

sent to IIP Dehradun pursuant to Delhi High Court's order

dated 6.12.2000 passed in W.P. (Crl.) No.877 of 2000. In fact

since these two tests were not carried out by IIP Dehradun in

its order dated 22.11.2004, the test reports were not

considered as being irrelevant.

35. The appellant further urged that the mala fide intention

of the respondent is clearly evident that even at the stage of

final disposal and two years after the filing of the present

20

special leave petition, the respondent has made serious effort

to improve its case by filing a supplementary affidavit dated

19.8.2011, vide which the respondent has sought to allege for

the first time that it handed over requisite number of samples

to the appellant. The supplementary affidavit states that

"Samples of products were collected from five tanks of

petrol/motor spirit. From each of the five tanks of

petrol/motor spirit, six sets of samples in aluminium bottles

(i.e. total of thirty 30 sample bottles) were taken. In addition

to this, six samples in aluminium bottles were taken from the

tank lorry which was found to be decanting petrol/motor spirit

in the underground tanks for petrol/motor spirit. As such,

the total number of samples taken in bottles were 36. Out of

the 36 sample bottles collected, 12 were retained by the BPCL,

12 were handed over to the dealer and 12 were sent for testing

to the specified laboratory.

36. The appellant further submitted that the said averment is

completely false and contradictory to its own pleadings before

the High Court in WP (C) No.7382 of 2001 produced on record

by the respondent itself with the counter filed by it in the

present proceedings. It is stated that "it is pertinent to state

21

that two samples from each of the tanks containing

adulterated products were drawn by the answering respondent

in the presence of the police officials of crime branch and

representative of the petitioner as well. Out of these two

samples one sample was retained by the crime branch of Delhi

Police and the other by BPCL."

37. The appellant further submitted that it is also pertinent

to mention that in the proceedings before the Division Bench

of the High Court in LPA No.296 of 2009 the learned counsel

appearing for the respondent Corporation has specifically

admitted and is also recorded in page 8 of the impugned order

that "there was no receipt of two samples from each of source

being handed over to the appellant-petitioner."

38. The appellant submitted that it is clear that the

termination of the dealership by the respondent Corporation

was pre-determined and mala fide and hence liable to be set

aside.

39. On behalf of the respondent, Shri Arjun Hira, General

Manager (Retail), North, Bharat Petroleum Corporation Ltd.,

has filed an affidavit before this Court refuting the allegation

22

that the termination of the agency was predetermined or mala

fide. The respondent Corporation submitted that because of

adulteration in the petrol, the respondent-Corporation had

taken swift action in order to save its reputation. The

respondent-Corporation referred to clause 10(g) of the DPSL

Agreement dated 28.1.1971 which reads thus:

"Not to adulterate the Petroleum products supplied

by the Company and at all times to take all

reasonable precautions to ensure that the Motor

Spirit or H.S.D. is kept free from water, dirt and

other impurities and served from the pumps in such

conditions."

40. The respondent-Corporation submitted that the

termination was in line with the terms and conditions of the

Agreement entered into between the parties and the breach of

trust has been committed by the appellant. It is also

mentioned that since the respondent-Corporation had not

received any response to the letter dated 16.5.2000 it was

assumed that the appellant had accepted the wrong deeds and

had no grievances.

41. The respondent also submitted that the respondent-

Corporation did not show any haste in getting the samples

tested. The samples were drawn and tested as per the

23

procedure laid down and on the receipt of the results

indicating the adulteration of products. Thus, the action

contemplated under the provisions of the DPSL Agreement

dated 28.01.1971 was taken.

42. The respondent-Corporation denied that the action

initiated against the appellant was in any manner mala fide or

manipulated for grabbing the business outlet on the false

pretext. The respondent-Corporation also submitted that

reliance cannot be placed upon the Report submitted by the

IIP Dehradun as the tests conducted by them do not comply

the specifications laid down by the Bureau of Indian

Standards. Moreover, the IIP, Dehradun did not conduct the

RON Test. Not following the specifications and conducting of

the RON Test was essential for testing the quality and the

specification of the ULP for meeting specifications of the Motor

Spirit.

43. According to the respondent, the report submitted by the

IIP, Dehradun is sacrosanct. The said sample was sent much

after the incident of adulteration and the same is not in

accordance with the MS/HSD Control October, 1998 issued by

the Government of India.

24 44. In the rejoinder affidavit, the appellant reiterated its

submissions mentioned in the petition and denied the

allegations levelled in the counter affidavit.

45. The appellant submitted that the accuracy and veracity

of the original test report also comes into question as the

results of the independent laboratory, the IIP Dehradun report

indicated no adulteration. In addition, the original test report

on the basis of which the appellant's dealership was

terminated can also not be relied upon in view of the

conclusive finding of the Metropolitan Magistrate that the

samples had been taken in violation of mandatory provisions

of law.

46. According to the appellant, as per the report submitted

by IIP, Dehradun the samples were not adulterated though the

report had not gone into the aspect of RON on account of

which the samples were alleged to have failed the specification.

Thus, even assuming, though not conceding, that there was

no test report which conclusively established that the petrol

was not adulterated there was also no test report which

25

conclusively established that the petrol was in fact

adulterated.

47. The appellant urged in the rejoinder that the

Metropolitan Magistrate vide his order dated 27.5.2002

discharged all the accused persons as the Court was satisfied

that prima facie there was no material on record even to frame

charges against them. The order clearly records that the

search and seizure carried out was unlawful and in complete

contravention and disregard of the mandatory provisions of

law inasmuch as the raid was conducted by an official below

the rank of Sub-Inspector and the samples were drawn in

plastic containers. The Court also observed that there was no

evidence whatsoever to show that the petrol supplied was

adulterated. The finding of the Metropolitan Magistrate reads

thus:

"the law being as noticed above, it is very clear that

the search and seizure is bad in law and is

contravention to the mandatory provisions of

Essential Commodities Act and contravention to the

Motor Spirits (High Speed Diesel) Act and in any

case the prosecution cannot establish its case

against any of the accused and accused persons are

liable to be discharged on this ground alone and no

charges can be framed.

26

It is very clear that the search and seizure is bad in

law and is in contravention to the mandatory

provisions of Essential Commodities Act and

contravention to the Motor Spirits (High Speed

Diesel) Act and in any case the prosecution cannot

establish its case against any of the accused and

accused persons are liable to be discharged on this

ground alone and no charges can be framed.

Further, it is an admitted that that there was no

receipt of two samples from each source being

handed over to the petitioner. This is clear evidence

of the fact that the samples were never handed over.

In addition, the High Court in its order dated

9.9.2004 held that ".. there is no manner of doubt

that the principles of law applied to the given facts

of the present case are squarely covered by the

judgment of the Supreme court in Harbanslal

Sahnia's case."

48. Mr. Mukul Rohtagi, learned Senior Advocate appearing

for the appellant in support of his contentions placed reliance

on some of the following judgments.

49. In Harbanslal Sahnia and Another (supra), the Court

dealt with the question of termination of dealership by the

Indian Oil Corporation Ltd. In this case, it was asserted before

this Court that dealership has been terminated on irrelevant

and non-existent grounds, therefore, the order of termination

is liable to be set aside. In this case, there has not been

compliance of the procedure. The failure of the sample taken

from appellants' outlet on 11.2.2000 becomes an irrelevant

27

and non-existent fact which could not have been relied on by

the respondent Corporation for cancelling the appellants'

licence.

50. In the above case, the Court came to the conclusion that

the dealership was terminated on irrelevant and non-existent

cause. The Court while allowing the appeal quashed and set

aside the Corporation's order terminating dealership of the

appellants.

51. Reliance has been placed on the celebrated judgment of

the Privy Council in Nazir Ahmad v. King Emperor AIR 1936

PC 253 wherein the principle has been enunciated that where

a power is given to do a certain thing in a certain way the

thing must be done in that way or not at all. Other methods

of performance are necessarily forbidden.

52. Reliance has also been placed on decision in Ramana

Dayaram Shetty (supra) wherein this Court has held thus:

"The power or discretion of the Government in the

matter of grant of largesse including award of jobs,

contracts, quotas, licences, etc. must be confined

and structured by rational, relevant and non-

discriminatory standard or norm and if the

Government departs from such standard or norm in

any particular case or cases, the action of the

28

Government would be liable to be struck down,

unless it can be shown by the Government that the

departure was not arbitrary, but was based on some

valid principle which in itself was not irrational,

unreasonable or discriminatory."

53. In this case, the Court held that the action of the

respondent was invalid. The acceptance of the tender was

invalid as being violative of equality clause of Constitution as

also of the rule of administrative law inhibiting arbitrary

action.

54. Reliance has been placed on Kumari Shrilekha

Vidyarthi and Others v. State of U.P. and Others (1991) 1

SCC 212, the Court observed thus:

"48. ......Non-arbitrariness, being a necessary

concomitant of the rule of law, it is imperative that

all actions of every public functionary, in whatever

sphere, must be guided by reason and not humour,

whim, caprice or personal predilections of the

persons entrusted with the task on behalf of the

State and exercise of all power must be for public

good instead of being an abuse of the power."

55. Reliance has also been placed on Karnataka State

Forest Industries Corporation v. Indian Rocks (2009) 1

SCC 150, the Court observed thus:

"38. Although ordinarily a superior court in

exercise of its writ jurisdiction would not enforce the

terms of a contract qua contract, it is trite that

when an action of the State is arbitrary or

29

discriminatory and, thus, violative of Article 14 of

the Constitution of India, a writ petition would be

maintainable (See: ABL International Ltd. v.

Export Credit Guarantee Corpn. Of India Ltd.

(2004) 3 SCC 553).

56. Reliance has also been placed on Gujarat State

Financial Corporation v. M/s. Lotus Hotels Pvt. Ltd. (1983)

3 SCC 379. In this case the Court held that the public

corporation dealing with public cannot act arbitrarily and its

action must be in conformity with some principles which

meets the test of reason and relevance.

57. We have heard the learned counsel for the parties at

length and have perused the decisions relied on by the parties.

58. In the instant case, samples were taken on 15th May,

2000. On the very next day i.e. on 16th May, 2000, without

even giving a show-cause notice and/or giving an opportunity

of hearing, the respondent-Corporation terminated the

dealership of the appellant. The appellant had been operating

the petrol pump for the respondent for the last 30 years and

was given 10 awards declaring its dealership as the best petrol

pump in the entire State of NCT Delhi. During this period, on

30

a number of occasions, samples were tested by the respondent

and were found to be as per specifications.

59. In the instant case, the haste in which 30 years old

dealership was terminated even without giving show-cause

notice and/or giving an opportunity of hearing clearly

indicates that the entire exercise was carried out by the

respondent Corporation non-existent, irrelevant and on

extraneous considerations. There has been a total violation of

the provisions of law and the principles of natural justice.

Samples were collected in complete violation of the procedural

laws and in non-adherence of the guidelines of the respondent

Corporation.

60. On consideration of the totality of the facts and

circumstances of this case, it becomes imperative in the

interest of justice to quash and set aside the termination order

of the dealership. We, accordingly, quash the same.

Consequently, we direct the respondent-Corporation to

handover the possession of the petrol pump and restore the

dealership of petrol pump to the appellant within three

months from the date of this judgment.

31 61. The appeal is consequently allowed with costs which is

quantified at Rs.1,00,000/- (Rupees one Lakh only) to be paid

by the respondent Corporation to the appellant within four

weeks from today.

................................J.

(Dalveer Bhandari)

................................J.

(Dipak Misra)

New Delhi;

December 16, 2011