Decided on November 24,1988


Referred Judgements :-


Cited Judgements :-



R.A.MEHTA - (1.)The petitioner-Firm was an authorised dealer of petroleum products of respondent-Corporation since 1964. The last of such dealership agreement is of 2-8-1976. During the working of the dealership a sample of petrol sold at the petitioners petrol pump was taken on 22 and was subjected to the laboratory test. The test report received on 30-10-1981 showed that the petrol sold at the petitioners petrol pump was adulterated. By the letter dated 10-11-1981 an explanation was called for and the supplies of the petroleum products were suspended. On 1-7-1982 a notice was issued to the petitioner to show cause as to why the dealership of the petitioner should not be terminated. The petitioner filed his reply on 7-7-1982 He also filed the present petition on 28-9-1980 praying that the respondent Corporation be directed to resume the supplies of the petroleum products and restrain the Corporation from terminating the arrangement with the petitioner-Firm. The respondent had filed an affidavit-in-reply dated 8-10-1982. Thereafter by an interim order dated 2-11-1982 this Court (Coram: A. M. Ahmadi J.) issued an interim direction. That order in its entirity is as follows:
" It appears that certain guidelines have been issued by the Ministry of Petroleum vide Annexure A to the petition Similar guidelines also appear to have been issued by the respondent vide Annexure F to the affidavit-in-rejoinder. of course. the case of the respondent is that no such directive is issued by the Ministry and that the said directives have come into operation at a subsequent date.
The sample was collected on 22nd July 2981 and the test report dated 30/10/1981 indicated adulteration. As such the suspension order was issued on 10 November 1981 Since th then the sale has been suspended. Show cause notice was served on the petitioner on 1/07/1982 and the reply thereto was filed on 7/07/1982 Even though the suspension order is of 10/11/1981 the petition was filed on 21st Sept 1982 In view of the guidelines directives issued by the Ministry of Petroleum Annexure A adopted by the respondent by Annexure T for the first lapse the retail outlet is required to be suspended for is days and if there is a second lapse the dealership agreement may even be terminated. After the show cause notice end the reply thereto it appears that the respondent has not taken any decision presumably because of the institution of the present petition. Be that as it may the respondent is by this interim order directed to take a decision within four weeks from today and in doing so the respondent may treat the present petition as the petitioners representation to the respondent. The respondent will make a speaking order specifically stating whether this Is a case of first lapse or a second lapse. If the respondent takes a decision to terminate the dealership agreement the implementation of that decision will be made effective fifteen days after the decision is communicated and placed on the record of the petition. Further orders will be passed after expiry of the period allowed to the respondent to take a decision on merits S. O. to 30/11/1982.
(2.)Thereafter the respondent-Corporation passed an order terminating the petitioner s dealership on 24-11-1982. The petition was amended on 13-12-1982.
(3.)It may also be mentioned that after the order of termination of dealership and the amendment of the petition several preliminary contentions were raised at the time of admission of the petition before the learned single Judge. One preliminary contention upheld by the learned single Judge was that the relationship between the parties was governed by the contract and that excluded the writ petition and consequently the writ petition was dismissed on the ground of no jurisdiction. The petitioner had preferred Letters Patent Appeal No. 98 of 1984 which came to be allowed by the judgment reported in [1987 (1)1] 28(1) GLR 375. The Division Bench considered that apart from the contract which incorporated contingency of termination of dealership on account of the misconduct of thE dealer the Division Bench emphasized the peculiar feature of the guidelines or executive instructions which were issued for guiding the discretion of the authorities of various petroleum companies owned by the Government and the contention of the petitioner was that the respondent-Corporation is an instrumentality of the State within the moaning of Art. 12 of the Constitution of India and it bad passed the impugned order of termination of dealership in violation of the executive instructions issued by Ministry of Petroleum Central Government which are binding to all petroleum companies and therefore the impugned order is contrary to the mandatory directions of the Central Government and is patently arbitrary and therefore it violates the mandate of Art. 14 of the Constitution of India. The Division Bench observed that this type of grievance cannot be styled as falling wholly within the domain of contractual rights and obligations of the respective parties under the dealership agreement and such instructions issued by the Petroleum Ministry are totally de hors the dealership contract between the parties and it cannot be suggested that these executive instructions issued by the Ministry of Petroleum flow from any contractual source. The Division Bench held that in fact the dealer has no contract whatsoever with the Petroleum Ministry. If these binding instructions are committed breach of and if that breach adversely affects any citizen of India grievance can be made under Art. 226 of the Constitution of India on the ground that such instrumentality has behaved in an arbitrary manner by not following the executive instructions of its principal which are binding on it. The Division Bench held that such a challenge against the authority of State like the respondent-Corporation cannot be shut out from the scrutiny of the Court under Art. 236 of the Constitution of India and such a challenge cannot be said to be raising purely a question of broach of contract based only on the contractual rights and obligations and which would be foreign to the scope of proceedings under Art. 226 of the Constitution. The Division Bench also considered the case of Radhakrishnan v. State of Bihar AIR 1977 SC 1496 wherein three categories of writ petitions between contracting parties were considered: (1) promissory estoppel (2) where the contract tendered into between the person aggrieved and the State is in exercise of a statutory power under certain Act or Rules framed thereunder and the petitioner alleges a breach on the part of the State and (3) purely a non statutory purely contractual case for breach of contrast. The petitioner had claimed that his case would fall within the second category whereas the Corporation had contended that his case would fall within the third category. However the Division Bench came to the conclusion that neither second or third category would be attracted and the present case would be he entirely a new category which would run as under:
"Where a contract is entered into between the instrumentality of the State which h is State within the meaning of Art. 12 of the Constitution and a private Party and the grievance of the private party to the contract is that the contract i.e terminated in an arbitrary manner by such instrumentality of the State acting contrary to the binding executive instructions issued by the principal viz the Government and which results in arbitrary exercise of power by the instrumentality of the State violating the guarantee of Art. 14 of the Constitution".
The Division a ash held that such a new category would fall in line with categories 1 and 2 enumerated by the Supreme Court in Radhakrishnans case (supra) and hence the L. P. A. was allowed and the Writ Petition was admitted. That is now heard and is being disposed of on merits by this judgment.

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