Skip to content


Shitla Prasad Vs. M. Saidullah and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtAllahabad High Court
Decided On
Case NumberCivil Misc. Writ No. 6539 of 1974
Judge
Reported inAIR1975All344
ActsConstitution of India - Article 226; Uttar Pradesh Sugar Control Order, 1966
AppellantShitla Prasad
RespondentM. Saidullah and ors.
Appellant AdvocateSudhir Chandra Agarwal, Adv.
Respondent AdvocateStanding Counsel and ;Dhruv Narain, Adv.
Excerpt:
constitution - relief against termination of contract - article 226 of the constitution of india - contract entered into with district magistrate for sale of levy sugar - terminated as per agreement no right of petitioner infringed to invoke relief under article 226 - may file proper suit for infringement of contractual rights. - - accordingly, the district magistrate, after getting certain enquiries made, passed an order on 15-10-1974, directing that petitioner's licence as well as the agreement entered into by him be cancelled. accordingly he made a report on 3rd october, 1974, exonerating the petitioner completely and recommended that the petitioner be given the regular quota for being supplied through his shop. :-at best the petitioner's grievance might be that there has been a.....h.n. seth, j.1. this petition under article 226 of the constitution has come up before this bench for reconciling the apparent conflict of judicial opinion in this court vide pahari sahu v. district magistrate, varanasi, civ. misc. writ no. 5057 of 1973, decided on 30-8-1973 (all) and state v. om prakash, spl. appeal no. 2 of 1973, decided by the lucknow bench of this court on 13-2-1973 (all), in the light of the supreme court decision in the case s. chandra sekharan v. tamil nadu government, air 1974 sc 1543.2. the petitioner sitla prasad claims that as a result of agreements entered into between him and the district magistrate pratapgarh, he was appointed as authorised retail distributor under the provisions of the u. p. foodgrains distribution order and the u. f sugar control order,.....
Judgment:

H.N. Seth, J.

1. This petition under Article 226 of the Constitution has come up before this Bench for reconciling the apparent conflict of judicial opinion in this Court vide Pahari Sahu v. District Magistrate, Varanasi, Civ. Misc. Writ No. 5057 of 1973, decided on 30-8-1973 (All) and State v. Om Prakash, Spl. Appeal No. 2 of 1973, decided by the Lucknow Bench of this Court on 13-2-1973 (All), in the light of the Supreme Court decision in the case S. Chandra Sekharan v. Tamil Nadu Government, AIR 1974 SC 1543.

2. The petitioner Sitla Prasad claims that as a result of agreements entered into between him and the District Magistrate Pratapgarh, he was appointed as authorised retail distributor under the provisions of the U. P. Foodgrains Distribution Order and the U. F Sugar Control Order, 1966, for sale of Government Foodgrains and levy sugar. Terms of the agreement, on which he was so appointed, are contained in the form of declaration (Annexure 1 to the writ petition). It appears that some complaints with regard to distribution of levy sugar by the petitioner, were received by the District Authorities. Accordingly, the District Magistrate, after getting certain enquiries made, passed an order on 15-10-1974, directing that petitioner's licence as well as the agreement entered into by him be cancelled. He directed the District Supply Officer to take immediate steps to appoint some other person in place of the petitioner and till such appointment was made, to attach the quota which was to be distributed through petitioner's shop to the nearest shop. Thereafter the District Supply Officer, by his letter dated 22nd October, 1974 informed the petitioner that his agreements in respect of cheap foodgrain and retail sugar shop had been cancelled under Clauses 18 and 16 of the respective agreements. The petitioner then filed the present petition and challenged the validity of the order of the District Magistrate Pratapgarh, cancelling his fair price foodgrains and levy sugar shop, as communicated to him by the Dist. Supply Officer, on 22-10-1974. He urged that the order was vitiated because of the mala fide of the District Magistrate and also because while cancelling petitioner's fair price shop, the District Magistrate did not afford him an opportunity to meet the allegations on which his shop was going to be cancelled and acted in contravention of the principles of natural justice.

3. In the counter-affidavit filed on behalf of the respondents, it has been made clear that although in the communication made by the District Supply Officer on 22nd October, 1974, it was stated that petitioner's agreement in respect of his shop for supplying cheap GovernmentFoodgrains had been cancelled, but in fact the District Magistrate did not make any order cancelling any agreement entered into with the petitioner, under the provisions of U. P. Foodgrains Distribution Order, 1966. The District Magistrate merely directed cancellation of petitioner's agreement under the U. P. Sugar Control Order, 1966. The respondents further clarified that the petitioner did not hold any sugar licence and there was no question of cancelling any such licence held by him. Any reference to sugar licence, in District Magistrate's order dated 15-10-1974, was redundant. In view of the clarification made by the respondents the controversy in the present writ petition was confined to the question whether or not the District Magistrate was justified in cancelling petitioner's agreement with regard to distribution of sugar and whether any grievance in respect thereof can be agitated in a petition under Article 226 of the Constitution.

4. According to the respondents, petitioner's agreement for selling levy sugar could be revoked under Clause 16 of the agreement (Annexure 1 to the writ petition) which provides that it would be open to the District Magistrate or the Town Rationing Officer to determine the agreement in question at any time without assigning any reason. They denied the allegations of mala fide made against the District Magistrate and took the stand that while cancelling petitioner's agreement the respondents were not obliged to hear him.

5. So far as the question whether the impugned order has been passed arbitrarily and in a mala fide manner is concerned, petitioner's case is that he had been carrying on the business as an authorised retailer in levy sugar for a long time. During this period his shop was regularly inspected by the authorities of the supply office and no illegality or irregularity in the business was ever found or pointed out. No consumer ever made any complaint against him. Villages Singhni and Barend had been included in the area for which the petitioner had been appointed as an authorised retailer. Bal-bhadra Singh and Udai Pal Singh are Pradhans of villages Singhni and Barend. Both the Pradhans belong to the Ruling Congress party and wield a great deal of influence in their own village as also in the district of Pratapgarh. In the month of July, 1974. Balbhadra Singh and Udaipal Singh came to petitioner's shop for purchasing sugar and foodgrains on 25 to 35 ration cards each. The District Supply Officer had issued instructions that no authorised retailer was to sell sugar to one person on more than two ration cards. Accordingly, the petitioner refused to issue sugar and foodgrains to the twoPradhans on the large number of ration cards brought by each of them. The two Pradhans accordingly threatened the petitioner with dire consequences and said that they would see that petitioner's fair price shop for selling Government food-grains did not continue. The two Pradhans then made false complaint to the District Magistrate, with the result the Tehsildar Pratapgarh deputed Supervisor Kanungo to make an enquiry. The Supervisor Kanungo found that the petitioner neither contravened the provisions of the Control Order nor had there been any impropriety or irregularity in his dealings with the public. Accordingly he made a report on 3rd October, 1974, exonerating the petitioner completely and recommended that the petitioner be given the regular quota for being supplied through his shop. The two Pradhans then approached one Sri R. N. Shukla, the President of the District Congress Committee Pratapgarh. Sri R. N. Shukla along with the two Pradhans went and saw the District Magistrate. Shortly thereafter the Sub-Divisional Officer visited petitioner's shop on 14-10-1974 and checked his stock registers but he could not find any irregularity in his dealings. In spite of this the Sub-Divisional Officer seized petitioner's stock and sale register and instructed the petitioner not to sell sugar or foodgrains until further orders. Thereafter, the District Magistrate made the order terminating the agreement. In the circumstances, it is obvious that petitioner's agreement has been terminated by the District Magistrate arbitrarily and in a mala fide manner at the instance of the President of the District Congress Committee and the two Pradhans whom he did not oblige.

6. On behalf of the respondents the facts from which mala fides have been inferred by the petitioner are denied. In the counter-affidavit of the Supply Inspector Ram Charan Misra, it is stated that a number of complaints against the petitioner has been received from the residents of various Nyaya Panchyats. The earlier complaint was received as far back as 19th March, 1974. The Pradhans of Villages Singhani, Barend. Newada and Pipri also lodged a number of complaints on their behalf and on behalf of the residents of their Nyaya Panchayats alleging that the petitioner had been selling sugar in the open market and that the same was not being issued to bona fide card-holders. The District Magistrate by his order dated 24th September. 1974, directed the Sub-Divisional Magistrate, Sadar to enquire into the matter and to submit his report. Similar complaints had also been addressed to the District Supply Officer who sent them to the Tehsildar Sadar for enquiry and report and the Tehsildar in his turn deputed the Supervisor Kanungo to submit a report after inspecting petitioner's shop. The action taken on the complaints made directly to the District Supply Officer was absolutely independent of the action which was being taken by the District Magistrate on the complaints received by him. As directed by the District Magistrate the Sub-Divisional Magistrate inspected petitioner's shop on 14-10-1974 in his presence and detected a number of irregularities in the distribution and sale at levy sugar. He submitted his report to the District Magistrate on 15th October, 1974. The report disclosed facts which indicated that it was not in the public interest to continue the petitioner as an authorised retailer of levy sugar. Accordingly, the District Magistrate made an order on 15th October, 1974, directing that the agreement for sale of levy sugar entered into with the petitioner be cancelled. The District Magistrate too filed a counter-affidavit denying that Sri R. N. Shukla, President of the District Congress Committee influenced him in the matter of cancellation of petitioner's agreement. He stated that Sri K. N. Shukla or the two Pradhans of Villages Singhani and Barend never met him in that connection. He passed the impugned order on the basis of the report of the Sub-Divisional Magistrate which indicated that the petitioner was found to have committed a number of serious irregularities in the sale and distribution of levy sugar. We have absolutely no reason to doubt the statement made by the District Magistrate that he passed the order dated 15th October, 1974 on the basis of the report submitted by the Sub-Divisional Magistrate and not because of any influence exerted upon him by Sri R. N. Shukla, President of the District Congress Committee or the two Pradhans. The only circumstance on which the petitioner relied in the writ petition to establish the plea of mala fides on the part of the district Magistrate was that the petitioner saw Sri R. N. Shukla the President of the District Congress Committee, visiting the house of the District Magistrate along with the two Pradhans of Villages Singhani and Barend and steps to cancel his agreement had been taken even though earlier enquiries made by the Supervisor Kanungo had revealed that petitioner's dealings had been fair and in order. The petitioner could not have any personal knowledge of what conversation took place between the Dist. Magistrate and the President of the Dist. Congress Committee when he visited his residence. He could also not know whether after entering the bungalow of the District Magistrate the President of the District Congress Committee saw the District Magistrate all alone or in the company of the two Pradhans. Merely because on an earlier occasion the Supervisor Kanungo had reported that everything was all right with petitioner's dealing in sugar, it does not mean that the Sub-Divisional Magistrate stated incorrect facts in his report to the District Magistrate made on 15-10-74, In these circumstances, it cannot be said that the petitioner has succeeded in making out a case that the order of the District Magistrate deserves to be quashed on the ground that it was arbitrary or mala fide.

7. We now proceed to consider the other question which was argued before us at some length. According to the petitioner respondent's own case, is that there were serious irregularities in the distribution of levy sugar by the petitioner. He had contravened the directions issued by the authorities as also the terms and conditions of the agreement under which he had been appointed as an unauthorised retailer, to sell levy sugar to consumers.

A Sub-Divisional Magistrate was appointed to visit petitioner's shop and make on the spot enquiry in the presence of the petitioner. Here however, the respondents do not say that the Sub-Divisional Magistrate gave the petitioner any opportunity of explaining any of the allegations made against him. After the Sub-Divisional Magistrate submitted his report to the District Magistrate, the District Magistrate took immediate action by directing cancellations of petitioner's agreement without affording him any opportunity to have his say in the matter. It means that petitioner's agreement has been cancelled for the alleged contravention of the terms and conditions of the agreement as also for not obeying the directions issued by the District Magistrate, i.e., for the reasons mentioned in Clause (19) of the agreement which entails forfeiture of his security deposit. In the circumstances, termination of the agreement is by way of punishment and the same having been done in gross violation of principles of natural justice, is liable to be set aside.

8. In support of his submission, learned Counsel for the petitioner strongly relied upon a Division Bench decision of this Court in Special Appeal No. 2 of 1973, decided by the Lucknow Bench on 13-2-1973 (All). In that case the District Magistrate took action to terminate an agreement, similar to that involved in the present case, on the finding that the dealer concerned had committed serious irregularities. He arrived at this conclusion after getting an enquiry made by a Sub-Divisional Magistrate but without affording an opportunity to the dealer to have his say in the matter. The Division Bench took the view that in the circumstances, the action against the dealer was one under Clause 19 and not under Clause 16of the agreement. Since the action under Clause 19 had been taken by way of punishment, it could not be sustained as there had been violation of principles of natural justice.

9. Learned Counsel for the respondents, however, contends that the right which the petitioner derived under the agreement in question was purely contractual and no relief in respect of such right can be claimed or granted in a petition under Article 226 of the Constitution. In support of this submission he relied upon certain observations made in another Division Bench decision of this Court in Civil Misc. Writ No. 5057 of 1973, decided on 30-8-1973 (All).

10. Learned Counsel for the petitioner attempted to distinguish the decision of this Court in Civil Misc. Writ No. 5057 of 1973, D/- 30-8-1973 (All) and urged that in that case the agreement had been cancelled in exercise of the powers under Clause 16 of the agreement, which enabled the District Magistrate to terminate the same without assigning any reason and not by way of punishment for some fault under Clause 19. Accordingly, the following observations made in that judgment viz.:--

'At best the petitioner's grievance might be that there has been a breach of contract- If that be so the petitioner's remedy if at all might be a suit for damages. This petition under Article 226 of the Constitution in any case is not maintainable.'

do not apply to the facts of the present case. He urged that this distinction between the cancellation of an agreement under Clauses 16 and 19 was clearly brought out by another Division Bench of this Court in the case of Ram Autar Santosh Kumar Ltd. v. B. B. Saksena, Civil Misc. Writ No. 5123 of 1973, decided on 19-10-1973 (All), wherein a similar agreement had been cancelled by the District Magistrate in exercise of the powers conferred upon him by Clause 16 of the agreement. The Bench while approving the decision in Pahari Sahu's case in Civil Misc. Writ No. 5057 of 1973, decided on 30-8-1973 (All) observed, that any contravention of the agreement did not lead to any infringement of petitioner's rights guaranteed by Article 19(1)(g) of the Constitution. It distinguished the decision in Special Appeal No 2 of 1973, decided on 13-2-1973 (All) and pointed out that in that case the District Magistrate had cancelled an agreement relating to distribution of sugar by way of penal action under Clause 19 thereof and that such penal action under that clause could be taken only for the breach of or non-observance of some terms and conditions stipulated in the agreement. There is thus no conflict in the observations made bythe learned Judges in the aforementioned three cases. The decision in cases of Pahari Sahu and Ram Autar are to apply to cases when an agreement is terminated under Clause 16 whereas the cases where agreements are terminated under Clause 19 are to be governed by the decision in Spl. Appeal No. 2 of 1973, D/- 13-2-1973 (All).

11. In order to decide the aforesaid point raised on behalf of the petitioner it will be convenient to appreciate the provisions which led to the agreement Annexure 1.

12. Section 3(1) of the Essential Commodities Act provides that if the Central Government is of opinion that it is necessary so to do for maintaining or increasing supplies of any essential commodity or for securing their equitable distribution and availability at fair price, or for securing any essential commodity for the defence of India or the efficient conduct of military operation, it may, by order provide for regulating or prohibiting the production, supply and distribution thereof and trade and commerce therein. Sub-section (2) (f) then provides that without prejudice to the generality of the powers conferred by Sub-section (1), an order made thereunder may provide for requiring any person holding stock of any essential commodities to sell the whole or specified part of the stock to the Central Government or a State Government or to an Officer or agent of such Government or to such other person or class of persons and in such circumstances as may be specified in the order. Section 5 of the Act then provides that the Central Government may by a notified order direct that the power to make orders or issue notifications under Section 3 shall, in relation to such matters and subject to such conditions, if any, as may be specified in the direction, be exercisable also by State Government or authority subordinate thereto. It is not disputed that the Central Government has, by notified order, directed that its power under Section 3 of the Essential Commodities Act is also to be exercised by the State of U. P. and that sugar is an essential commodity in respect of which the State Government could make an order under Section 3 of the Act. One of the objects for which the the State is to make an order under Section 3(2) is to obtain sugar from the producers for supplying the same to the public at a fair price through its own agency. In order to achieve this object, the State of U. P. in exercise of its delegated powers under Section 3 of the Essential Commodities Act 1955 made an order known as U. P. Sugar Control Order, 1966. This order defined levy sugar as sugar sold by a vacuum pan sugar factory in pursuance of a direction issued by the Central Government or by an officer or authority subordinate to that Government under Clause (f) of Sub-section (2) of Section 3 of the Essential Commodities Act 1955 for sale through authorised dealers or authorised retailers. The expression authorised retailers was defined in Clause 2 (a) of the order as meaning a person appointed as such by the District Magistrate to purchase, sell or distribute levy sugar in retail to the consumers. Clause 2 (1) defines 'authorised dealer' as a person licensed under the U. P. Sugar and Gur Dealers Licensing Order 1962 who is authorised by the District Magistrate to sell levy sugar and who has also executed an agreement in this regard. Under Clause 3 of the order an authorised retailer is required not to sell sugar other than levy sugar. This clause further provides that no authorised dealers or authorised retailers shall within their respective areas sell levy sugar at a price higher than that specified by the District Magistrate for sale by wholesale or retail as the case may be. Clause 4 then requires the authorised dealers and authorised retailers to maintain such accounts, and submit statements and returns within such time as may from time to time be required by the District Magistrate. Under Clause 5 they have to display prominently the sale price of sugar according to the grades of sugar in stock with them at the entrance of the place of business or as near as possible thereto. Apart from the aforementioned restrictions mentioned in Clauses 3, 4 and 5 of the order, the Authorised dealers and authorised retailers are free to carry on their business including that in levy sugar in any manner that they like and they can enter into such contract in connection with such business as is permissible under the law. It is significant to note that the U. P. Sugar Control Order 1966 neither lays down the procedure for selecting an authorised retailer or for distributing levy sugar, nor does it lay down the terms and conditions on which such retailers are to supply the levy sugar to the public. The matter has been left to an agreement that may be entered into between the District Magistrate and the person who may agree to purchase, sell or distribute levy sugar. Of course, the contract is not to derogate from the provisions contained in the Sugar Control Order 1966 viz., that authorised retailer so appointed by the District Magistrate will not be in a position to deal in any other type of sugar excepting the levy sugar (Clause 3) and that he will have to keep such registers and submit such statements as the District Magistrate may direct from time to time and also display a price list (Clauses 4 and 5). Thus the rights and obligations of the person appointed as an authorised retailer includingthe right to continue as such would flow only from the contract or agreement that may be entered into at the time of his appointment as authorised retailer and not from any statutory provision. The terms and conditions on which the petitioner was appointed as authorised retailer under the U. P. Sugar Control Order, 1966 and undertook to purchase, sell or distribute levy sugar in retail to the consumers are contained in Annexure '1' to the writ petition. According to the agreement the petitioner was to establish a retail shop in sugar at the place nominated by the authorities and was to indicate therein that the shop was for selling the Government controlled sugar. He was to obtain the sugar from such licensed sugar dealers or godowns of the District Co-operative Societies as may be indicated by the District Magistrate and was to sell the same to the public at the price fixed by the Government. Once the authorised retailer lifted the allotted sugar from a licensed dealer or from the godown of the District Cooperative Society, the same was not liable to be returned in any circumstances. Under Clause 16 of the agreement, the District Magistrate or the Town Rationing Officer was authorised to cancel the agreement at any time without assigning any reason. Clause 18 of the agreement required the authorised retailer to deposit, in the post office savings Bank account, a sum of Rs. 200/- by way of security. This amount was to be returned to the depositor on termination of the agreement unless the same had been forfeited. Clause 19 of the agreement has been in artistically worded and it is difficult to interpret it literally. However, the parties are agreed that the sum and substance of the clause is, that it would be open to the District Magistrate or the Town Rationing Officer to terminate the agreement also in a case where the authorised retailer fails to carry out any direction issued by the District Magistrate or the Town Rationing Officer or contravenes any term of the agreement and in such a case to forfeit the security deposited by the retailer as well. The agreement nowhere provides that before terminating the agreement either under Clause 16 or under Clause 19, the District Magistrate, or the Town Rationing Officer will have to afford an opportunity to the dealer concerned to have his say in the matter.

13. Learned Counsel did not invite our attention to any provision which may indicate that any one has any legal or fundamental right to carry on trade in levy sugar. Indeed in the case of AIR 1974 SC 1543, the Supreme Court considered the nature of the right derived by persons appointed to distribute levy sugar under a similar Levy Sugar (Supply Control) Order, 1972, promulgated by the Central Govt., in exercise of its powers under Section 3 of the Essential Commodities Act. It held that the petitioners in that case had no legal right to trade in levy sugar. |On the same principles it can be said that the petitioner in the present case also has no legal right to trade in levy sugar and if his agreement has been unjustifiably terminated the infringement if any is that of a pure and simple contractual right. Whether the contract is terminated under Clause 16 or Clause 19 of the agreement, it still results in cancellation of contract in pursuance of a right flowing from the contract. Such cancellation, if at all infringes merely a contractual right and nothing else. The rights and the liabilities of the person who deals in levy sugar flow from the contract that he enters into with the District Magistrate. Both the Clauses 16 and 19 of the agreement provide that the District Magistrate or the Town Rationing Officer can unilaterally terminate the agreement between the parties. Clause 19 is a clause which we very often come across in various commercial contracts, providing for forfeiture of security deposits in certain contingencies. The liability accruing under the forfeiture clause in such contracts has to be enforced in accordance with the Contract Act. Even if the agreement is cancelled under Clause 19 of the agreement as distinguished from its being determined under Clause 16 of the agreement nevertheless the power to determine the contract under that clause flows from the contract and not from any statute. If that power has been improperly exercised an action for breach of contract would undoubtedly lie.

14. In the case of C. K. Achutan v. State of Kerala, 1959 SC 490, the petitioner held a contract for supplying milk to the Government Hospital at Cannore. Later the District Medical Officer cancelled petitioner's contract for supply of milk and gave it to a Co-operative Society. The petitioner approached the Supreme Court contending that the rights guaranteed to him under Articles 14, 16(1), 19(1)(g) and 31 of the Constitution had been violated. While dealing with the submission made on behalf of the petitioner, the Supreme Court observed that the gist of the matter was the breach, if any, of the contract said to have been given to him which had been cancelled either for good or bad reasons. There was no discrimination because it was perfectly open to the Government, even as it was to a private party to choose, a person to their liking to fulfil the contract which they wished to be performed. When one person was chosen rather than another, no protection of Article 14 could be claimed as the choice of the person to fulfil a particular contract had to be left to the Government. Similarly a contract which is held from Government stands at no different footing from a contract held from a private party. The breach of the contract if any may entitle the person aggrieved to sue for damages or in appropriate cases even for specific performance, but he cannot complain that there has been deprivation of right to practice any profession or to carry on any occupation, trade or business such as is contemplated by Article 19(1)(g), and provision of Article 13 of the Constitution could not be invoked to prevent cancellation of a contract in exercise of the powers conferred by one of the terms of the contract itself. Learned Judges of the Supreme Court further observed:--

'that a contract for supply of milk to a hospital could not be considered to be an employment under the State within the meaning of Article 16 of the Constitution either. Accordingly, the petitioner was not entitled to any relief in a petition under Article 32 of the Constitution.'

It is true that in Achutan's case, the Supreme Court declined to entertain a petition under Article 32 of the Constitution on the ground that the petitioner had not made out a case for invoking its jurisdiction under Article 32 of the Constitution as there was no contravention of any fundamental right guaranteed by the Constitution, but during the course of the judgment it very clearly pointed out that in the case of breach of contract pure and simple, remedy of an aggrieved party is to approach civil courts for damages or for the specific performance thereof and not to invoke the extraordinary jurisdiction of the Courts.

15. In the case of Lekhraj Satram Das Lalvani v. N. M. Shah, Dy. Custodian cum Managing Officer. AIR 1966 SC 334 the Supreme Court considered the question whether a manager appointed for carrying on the business of an evacuee under the provisions of Section 10(2)(b) of the Administration of Evacuee Property Act, if removed from the Managership, could invoke the jurisdiction of a High Court under Article 226 of the Constitution or not. It came to the conclusion that notwithstanding the fact that the appointment of the Manager is made under Section 10(2)(b) of the Administration of Evacuee Property Act, the appointment none-the-less is under a contract and if the contract is terminated, the Manager cannot invoke the jurisdiction of a High Court under Article 226 of the Constitution. In this connection the learned Judges observed thus:

'............ but even on the assumption that the order of the Deputy Custodian terminating the management of the appellant is illegal, the appellant is not entitled to move the High Court for grant of a writ In the nature of Mandamus under Article 226 of the Constitution. The reason is that a writ of mandamus may be granted only in a case where there is statutory duty imposed upon the officer concerned and there is failure on the part of the officer to discharge that statutory obligation. The chief function of the writ is to compel the performance of public duties prescribed by statute and to keep the subordinate Tribunals and officers exercising public function within the limits of their jurisdiction. In the present case the appointment of the appellant as Manager of the Custodian by virtue of his power under Section 10(2)(b) of the 1950 Act is contractual in its nature and there is no statutory obligation as between him and the appellant. In our opinion any duty or obligation falling upon a public servant out of a contract entered into by him as such public servant cannot be enforced by the machinery in a writ under Article 226 of the Constitution.'

This case in our opinion clearly shows that even if an appointment is made in the exercise of a statutory power of entering into a contract, no petition under Article 226 of the Constitution would lie for enforcing the rights flowing from such contract. In the instant case also, even if it be accepted that the Sugar Control Order of 1966, which is a statutory order contemplates the appointment of an authorised retailer, the rights and obligation of an authorised retailer would flow only under the agreement entered into between him and the District Magistrate. Accordingly, as held in Lekhraj Sathram Das's case AIR 1966 SC 334, no petition under Article 226 of the Constitution would lie for enforcement of rights under a contract if the same had been determined in accordance with the terms of the agreement.

16. Learned Counsel for the petitioner placed strong reliance on the decision of the Supreme Court in the case of K. N. Guruswamy v. State of Mysore, AIR 1954 SC 592. In our opinion that decision does not at all help the petitioner's case. In that case the Supreme Court found that the liquor contracts were to be settled in accordance with certain statutory rules. In accordance with those rules, a liquor contract was settled with K. N. Guruswami whose highest bid of Rupees 1,80,000/- a month had been accepted. Subsequently, on an offer made by one Thimmappa, the contract was settled by private negotiation with him on payment of Rs. 1,85,000/- per mensem. The Supreme Court observed that the contract with Thimmappa was not in accordance with statutory rules and that cancellation of contract in favour of K. N. Guruswamy was in the circumstances, also justified. However, the settlement of contract with Thimmappa was contrary to the Rules. Normally the petitioner K. N. Guruswami would have been entitled to a writ for the setting aside of the contract in favour of Thimmappa which was contrary to Rules, which provided that the contract was to be settled by open auction and the petitioner under the Rules had the right to bid and obtain the contract, but in view of delay in disposal of the case, it would not be proper to grant him that relief. K. N. Guruswamy's case nowhere lays down that a petition under Article 226 of the Constitution can be filed for enforcing rights flowing from a contract.

17. Reliance was also placed on the case of Boolchand v. Kurukshetra University, AIR 1968 SC 292 wherein the validity of an order terminating the services of the Vice-Chancellor of the Kurukshetra University had been questioned. While considering the question whether in such circumstances a petition under Article 226 of the Constitution would lie the Supreme Court made the following observations:--

'If the appointment of the Vice-Chancellor gave rise to the relation of master and servant governed by the terms of appointment, in the absence of special circumstances, the High Court would relegate a party complaining of wrongful termination of the contract to a suit for compensation and would not exercise its jurisdiction to issue a high prerogative writ, compelling the University to retain the services of the Vice-Chancellor whom the University does not wish to retain in service. But the office of the Vice-Chancellor is created by the University Act and by his appointment the Vice-Chancellor is invested with statutory powers and authority under the Act. The petition filed by the appellant in the High Court is a confused document. Thereby the appellant did plead that the relation between him and the University was contractual but that was not the whole pleading. The appellant also pleaded with some circumlocution that since he was appointed to the office of Vice-Chancellor which is created by the Statute, the tenure of his appointment could not be determined without giving him an opportunity to explain why Ms appointment should not be terminated. The University Act, the Statute and the Ordinance do not lay down the conditions in which the appointment of Vice-Chancellor may be determined, nor does the Act prescribe any limitation upon the exercise of the power of the Chancellor to determine the employment. But once the appointment is made in pursuance of a statute, though the appointing authority is not precluded from determining the employment, the decision of the appointing authorityto terminate the appointment may be based only upon result of the enquiry held in a manner consistent with the basic concept of justice and fairplay.''

While making the aforementioned observations, the learned Judges of the Supreme Court approved the following observations in the case of Ridge v. Baldwin, 1964 AC 40:--

'So I shall deal first with cases of dismissal. These appear to fall into three classes; dismissal of a servant by his master, dismissal from office held during pleasure and dismissal from an office where there must be something against a man to warrant his dismissal.

The law regarding master and servant is not in doubt. There cannot be a specific performance of a contract of service and the master can terminate the contract with his servant at any time and for any reason or for none. But if he does so in a manner not warranted by contract he must pay damages for breach of contract. So the question in a pure case of master and servant does not at all depend on whether master has heard servant in his own defence. It depends on whether the facts emerging at the trial prove breach of contract.

Then there are many cases where a man holds office at pleasure. Apart from Judges and others whose tenure of office is governed by statute, all servants and officers of the Crown hold office at pleasure and this has been held even to apply to a Colonial Judges: Terrel v. Secy. of State for the Colonies, (1953) 2 QB 482, It has always been held and I think rightly and the reason is clear. As the person having power of dismissal need not have anything against the officer he need not give any reason.

So I come to the third class which includes the present case. There I find an unknown line of authority to the effect that an officer cannot lawfully be dismissed without first telling him what is alleged against him and hearing his defence or explanation.'

18. These observations make it clear that where appointment of a person under a contract is being terminated there is no question of following the principles of natural justice. But an exception has been created in respect of termination of service of a person holding a public office. Even though the service of a person, holding a public office, may be terminable at any time yet when it is being terminated by way of dismissal (punishment) the power to terminate the appointment is to be exercised only for some good reason and after informing the person concerned of the allegations made against him and affording him an opportunity to have his say in the matter. In the instant case, it cannot be said that the petitioner, when he was appointed as authorised retailer, was appointed to hold any public or statutory office. Accordingly, the facts of Boolchand's case AIR 1968 SC 292 (supra) are distinguishable and the petitioner cannot derive any advantage from that decision.

19. The question as to in what cases, before making an order an authority has to adopt a procedure consistent with the principles of natural justice, came up for consideration before the Supreme Court in the case of A. K. Kraipak v. Union of India, AIR 1970 SC 150. In this case the Supreme Court observed thus:--

'The dividing line between an administrative power and a quasi judicial power is quite thin and is being gradually obliterated. For determining whether a power is an administrative power or a quasi judicial power one has to look to the nature of the power conferred, the frame-work of the law conferring that power, the consequences ensuing from the exercise of that power and the manner in which that power is expected to be exercised in a welfare State like India which is regulated and controlled by the rule of laws it is inevitable that the jurisdiction of the administrative bodies is increasing at a rapid rate. The concept of rule of law would lose its vitality if the instrumentality of the State are not charged with the duty of discharging their function in a fair and just manner. The requirement of acting judicially in essence is nothing but a requirement to act justly and fairly and not arbitrarily or capriciously. The procedures which are considered inherent in the exercise of a Judicial power are merely those which facilitate if not ensure a fair and just decision. In recent years the concept of quasi judicial power has been undergoing radical change. What was considered as an administrative power some years back is now being considered as a quasi judicial power. .................. The position as I see it is that the exact limits of the ancient remedy by way of certiorari have never been and ought not to be specifically defined. They have varied from time to time being extended to meet changing conditions. At one time the writ only went to an inferior Court. Later its ambit was extended to statutory Tribunals determining a lis inter partes. Later again it extended to cases where there was no lis in the strict sense of the words, but where immediate or subsequent rights of citizens were affected. The only constant limits throughout were that it was performing a public duty. Private or domestic Tribunals have always been outside the scope of certorari since their authority is derived solely from contractthat is from the agreement of the parties concerned. ..................... We have as it seems to me reached the position when the ambit of certiorari can be said to cover every case in which a body of persons of a public as opposed to a purely private or domestic character has to determine matters affecting subjects provided always that it has a duty to act judicially. Looked at in this way the board, in my judgment, comes fairly and squarely within jurisdiction of this Court.'

20. These observations clearly indicate that in the opinion of the learned Judges of the Supreme Court, a writ of certiorari will issue to secure a procedure consistent with the principles of natural justice, not only in cases of judicial or quasi judicial orders but also in cases of administrative orders affecting the rights of the subjects. It will however exclude from its ambit cases which are governed by a contract pure and simple wherein the rights of the parties flow from a voluntary agreement. Such rights are quite distinct from the obligations and rights which flow as a result of some public obligation on the part of statutory authorities.

21. In the case of Divisional Forest Officer South Kheri v. Ram Sanehi Singh, AIR 1973 SC 205 certain persons purchased the right to cut timber for the period November 1, 1965 to October 31, 1966 from certain forest lands as a result of an auction held by the Forest Officer. The petitioner claimed that he had removed certain wood from the forest with the consent of the forest authorities before 31st October, 1966. The Forest Officer made an order in respect of that timber on the footing that the same had been removed after 1-11-1966 and that would be considered to be removal for the year 1966. Being aggrieved, the contractor moved the High Court for restraining the Divisional Forest Officer South Kheri from giving effect to the order dated 10-1-1967 directing that the timber purported to have been removed on 29th October, 1966, be considered to be removal of timber after 1st November, 1966. The Supreme Court repelled the argument raised on behalf of the Divisional Forest Officer that as the dispute arose out of the terms of the contract, no petition under Article 226 of the Constitution to enforce a right flowing from the contract lay. It observed that merely because the source of the right which the respondent claims was initially in a contract, it did not mean that in order to obtain relief against any arbitrary and unlawful action on the part of public authority, the person concerned must in all cases resort to a suit and not to a petition by way of a writ. Relying upon its judgment in K. N. Guruswamy AIR 1954 SC 592, the Supreme Court held that a writ petition could be maintained even in a case where action of a public authority invested with statutory powers was challenged so as to entitle a person to relief for breach of contract. Accordingly, if by the purported exercise of statutory powers, even if a right flowing under a contract is affected it may be possible for the person to maintain a petition under Article 226 of the Constitution. In such a case the writ petition is primarily directed against the illegal exercise of statutory power which adversely affects petitioner's contractual rights. While engrafting an exception to the general rule and laying down that a writ can lie even for protecting contractual rights, violated under the purported exercise of a statutory power the case nowhere lays down that a petition under Article 226 of the Constitution would also lie when a party to a contract purports to take action in terms of the contract itself.

22. Learned Counsel for the petitioner then relied upon the decision of the Supreme Court in the case of Erusian Equipment and Chemicals Ltd. v. State of West Bengal, Writ Petns. Nos. 34 of 1974 and 959 of 1973 connected with Civil Appeal No. 318 of 1974, decided on 11-11-1974 = (AIR 1975 SC 266). In that case certain persons were engaged in the business of purchase and export of Cinchona products. They had been entering into contracts with the Government of West Bengal for the purchase of Cinchona. The Government of West Bengal received certain complaints against these persons and it resolved not to deal with these persons till they were cleared of the charges levelled against them. Similarly one person was on the approved list of the Director General, supplies and disposals. Some reports had been received against him regarding shortage of timber. Accordingly, he was black-listed with the result that the Director General of Supplies and Disposals decided not to enter into contract with him. The Supreme Court observed that under Article 298 of the Constitution the executive power of the Union and the State shall extend to the carrying on of any trade and to acquisition, holding and disposal of property and to the making of contracts for any purpose. The State can carry on executive function by making a law or without making a law. The exercise of such powers and function in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal protection of the laws, equality of opportunity should apply to matter of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose persons by discrimination. The order of black-listing has the effect of depriving a person of equality of opportunity in them matter of public contract. The Supreme Court further notices that due to black-listing, the person who was entitled to participate in the purchase of cinchona, has been denied that right The Supreme Court, after taking into consideration the circumstances of the case came to the conclusion that the order of black-listing and the resolution by the Government not to deal with a particular person, resulted in the infringement of such person's fundamental right to be treated equally in the matter of public contracts, and that such deprivation of right could be effected only after following a procedure consistent with the principles of natural justice. In our opinion the ratio of the aforesaid decision of the Supreme Court applies to only such cases where the Government chooses to preclude a person from entering into a public contract for in such a case a fundamental right of the person is going to be affected and if any one wishes to impair that right he has to do it after following the principles of natural justice (if procedure for impairing that right is not laid down by a valid law). The position where a legal contract has been entered into and the same is being terminated in terms thereof is however, quite different. Termination of contract in such a case does not deprive the person concerned from an opportunity to be considered in the matter of public contracts. This distinction has clearly been brought out by the learned Judges of the Supreme Court themselves when they observed.--

'The black-listing order does not pertain to any particular contract. ............'

In the instant case we find that the action has been taken in accordance with the terms of a particular contract that had been entered into by the petitioner, The impugned order does not preclude the petitioner from being considered in the matter of public contracts. Circumstances in which the impugned order has been passed in the present case are materially different from those in which the order of black-listing or a resolution not to deal with particular persons was passed in the case that was before the Supreme Court. We, are, therefore, of opinion that the observations made by the Supreme Court in M/s. Erusian Equipment and Chemicals Ltd. case AIR 1975 SC 266 (supra) do not support the case of the petitioner.

23. In the result we are of opinion that by terminating the agreement the respondents did not interfere with any right of the petitioner which could be secured by filing a petition under Article 226 of the Constitution. Infringement, if any, was that of petitioner's contractualrights which he can, if so advised, secure) in a properly instituted suit.

24. In the result the petition succeeds only to the extent that the order dated 15-10-1974 passed by the District Magistrate in so far as it purports to cancel petitioner's licence is quashed. In other respects that order stands. That order would not affect petitioner's right to carry on his business in foodgrains.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //