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Kiritkumar Gandalal Shah Vs. Indian Oil Corporation Ltd. - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtGujarat High Court
Decided On
Case NumberSpecial Civil Appln. No. 1580 of 1982
Judge
Reported inAIR1983Guj235; (1983)2GLR1102
ActsConstitution of India - Articles 12, 14 and 226
AppellantKiritkumar Gandalal Shah
RespondentIndian Oil Corporation Ltd.
Appellant Advocate N.R. Oza, Adv.
Respondent Advocate G.N. Shah, Adv.
DispositionPetition allowed
Cases ReferredKasturi Lal v. State of J.
Excerpt:
.....of india - petition seeking direction to respondent to grant dealership to petitioner - every public servant having power in democratic structure must perform duty in just and fair manner in public interest and not arbitrarily or with caprice - power exercised in question highly unjust without considering meaning of word 'power' - petition allowed with direction to respondent to grant dealership to petitioner. - - after full inquiries and considering the financial capacity and capacity for storage, it was unanimously resolved and recommended by the said committee that the petitioner should be appointed as a dealer for the said region. the petitioner had a godown at makarpura near national highway, and had also an office with telephone communication, and ultimately the name of..........by private corporations and individuals by way of lease or licence. all these mean growth in the government largess and with the increasing magnitude and range of governmental functions as we move closer to a welfare state, more and more of our wealth consists of these new forms. some of these forms of wealth may be in the nature of legal rights but the large majority of them are in the nature of privileges. but on that account, can it be said that they do not enjoy any legal protection? can they be regarded as gratuity furnished by the state so that the state may withhold, grant or revoke it at its pleasure? is the position of the government in this respect the same as that of a private giver? we do not think so. the law has not been slow to recognise the importance of this new kind.....
Judgment:
ORDER

S.L. Talati, J.

1. The respondent, Indian Oil Corporation Limited, is a Government of India undertaking, and is engaged in distribution of Kerosene and light diesel Oil (L.D.O.), and it has the sole monopoly in allotment of dealership and distributorship of kerosene and L. D. O. The respondent is the State within the meaning of Art. 12 of the Constitution.

2. The respondent Company in May, 1979 gave an advertisement in Several Newspapers for appointment of dealer for Baroda-Sankheda region in Baroda district for kerosene and L. D. O. Applications were invited from public for appointment of dealer for kerosene and L. D. O. in Baroda-Sankheda region. About 70 or 80 persons ' applied in response to that advertisement. The advertisement required certain educational qualifications, business capacity, capacity to Secure sales and management, and it further provided that the person whose parents, husband or wife, brother or sister, sons or daughters, if any of them have got dealership then such persons should not apply for getting dealership. After scrutiny of the applications which were received, interviews were held at Ahmedabad on 27-9-1979. Several persons including the petitioner were called for interview. The committee of four persons was appointed for selecting a person to whom dealership can be granted. After full inquiries and considering the financial capacity and capacity for storage, it was unanimously resolved and recommended by the said committee that the petitioner should be appointed as a dealer for the said region. The petitioner had a godown at Makarpura near National Highway, and had also an office with telephone communication, and ultimately the name of the petitioner was unanimously recommended by the Committee of four persons. After the recommendation was made by the Committee, the Senior Sales Officer Mr. Shrivastav verified the contents of the application and also verified the financial capacity of the petitioner, collected all the documents from the petitioner including the income-tax returns of the petitioner for the last three years. He also endorsed the unanimous recommendation made by the Committee, The petitioner learnt that he Was the sole person for dealership for Baroda-Sankheda-region, Uitimately the papers were forwarded, to the regional office for approval. The petitioner reliably learnt that the regional office at Bombay also approved 'the granting of dealership to the petitioner. However, the petitioner was not appointed.

According to the petitioner, he was also informed by the Senior Sales Manager that the petitioner was the only person selected for dealership and, therefore, the petitioner could not be denied for appointment of dealership,

3. Thereafter the Senior Sales Officer Mr. Deshmukh of Ahmedabad, visited the petitioner's place and again made inquiries which had already been made previously and on inquiry the petitioner learnt that some anonymous applications were made by the interested parties who could not get dealership to the effect that one Shri Deepak Shah, a partner of J. C. Shah and Co., who had dealership for kerosene and L. D. O. in Baroda was related to or at any rate was a fast friend of the petitioner. According to the petitioner, Shri Deepak Shah was not related, to him, and he was not his fast friend. He only knew him. According to the petitioner, his statement was recorded, and the petitioner in his statement made it clear that he had no relationship with Shri Deepak Shah. The petitioner also learnt that the statement of Shri Deepak Shah was also recorded, and he also clearly stated that he was not related to the petitioner. Somehow, the petitioner was not granted dealership. The petitioner probably thought that on account of some strained relationship of Shri Deepak Shah and some higher-up in the office, he was not granted dealership. Ultimately the respondent issued another advertisement and fixed interviews on 11-4-1982 at Ahmedabad for selecting a person for granting dealership of kerosene and L. D. O. As a result, the petitioner filed the present petition on 13-4-1982, and obtained an interim mandatory order directing the respondent not to hold interviews and praying for a writ of mandamus under Article 226 of the Constitution of India, and sought directions against the respondent to grant dealership to the petitioner for kerosene and L. D. O. for Baroda-Sankheda region in pursuance of the advertisement given in May, 1979.

4. The Deputy Divisional Manager Mr. V. Lobe, filed an affidavit-in-reply to the petition. This stated in the reply affidavit that inquiries were made by the officers of the respondent in respect of the proposed appointment of the petitioner as a dealer and the relationship/ association of the petitioner with M/s. J. C. Shah & Company, and it is further stated, that after all relevant facts the respondent decided not to appoint the petitioner as a dealer. It is further stated that the respondent denied that the petitioner had satisfied all the conditions as alleged. It is further stated as under:--

'It is submitted that irrespective of the fact that the petitioner has satisfied such conditions or not the question of appointment of dealership is a matter of confidence between the respondent and the dealer, and the assessment by the respondent arid various relevant and material factors pertaining to a proposed dealer, including his ability, competence resources etc. to efficiently and effectively work as a dealer of the respondent.'

It was further stated that the committee had only recommendatory powers, and for various administrative reasons no decision could be taken in respect of the appointment of a dealer on the basis of the interviews held by the selection committee On 27-9-1979 who have responded to the advertisement issued in May, 1979. According to the respondent they had decided in July, 1981 not to approve the appointment in favour of the petitioner. They produced circulars to show as to who has the power to grant dealership.

5. Now it is clear from the reply that it is not the case of the respondent that M/s. J. C. Shah & Co. or Mr. Deepak Shah are relatives, as contemplated by the advertisement. Further though it is stated that it is a matter of confidence between the respondent and the dealer and it is further stated that various relevant and material factors pertaining to a proposed dealer including his ability, competence, resources etc. to efficiently and effectively work as a dealer of the respondent are required to be considered. It is not stated as to whether the petitioner was unable, incompetent or had no resources or was not efficient or had any disqualification attached to him which could be suggested that he would not be able to work effectively as a dealer of the respondent, Though it is stated that there were various administrative reasons not a single reason is stated. It is stated that relevant facts were considered, but it is not stated as to which fact went against the petitioner. Now, therefore, in the reply affidavit it is not denied as a fact that the name of the petitioner was not recommended, by the Committee. It is also not denied that Shri Shrivastav and Shri Deshmukh were satisfied on seeing the income-tax returns etc. that the petitioner was financially capable to have the dealership. The respondent perhaps had no reason not to grant dealership to the petitioner, and, therefore, they could not state as to what prompted them to issue new advertisement or what prompted them to reject or not to grant dealership to the petitioner, though Mr. Deepak Shah was not related to the petitioner, though he was otherwise competent and financially sound. Therefore, it is clear that the respondent only has one case, and that case is that the Committee is a recommendatory committee and a particular officer of the respondent had the power to grant dealership and that power is exercised.

6. It is clear that the respondent does not understand the meaning of the word ''power'. Where any public officer is given a power, it is only an enabling power which gives him an authority to exercise that power. Wow when a person gets an authority to exercise power, it only means that he is endowed with a duty which casts upon him to work in a democratic structure in such a way that at the time of performing his duty he exercises his power in the interest of the society. If that is well understood, it would mean that that power is to be exercised in such a way that it is not only fair but it is never arbitrary or with whim or caprice or a power which a person enjoys, where the government is dictatorial. Every public servant who has been given power in a democratic structure must understand that he is given a particular duty which he has to perform fairly in a just manner in public Interest and in order that he may be able to act justly, fairly and in public interest, what he does is called exercise of power which in fact is a performance of duty. I may refer to two cases only.

7. One ease is Ramana v. I. A. Authority of India, AIR 1979, SC 1628. In para. 11 it is stated as follows:--

'11. Today the Government, in a welfare State is the regulator and dispenser of special services and provider of a large number of benefits, including jobs contracts, licences, quotas, mineral rights etc. The Government pours forth wealth, money, benefits, services, contracts, quotas and licences. The valuables dispensed by Government take many forms, but they all share one characteristic. They ar.e steadily taking the place of traditional forms of wealth. These valuables which derive from relationships to Government are of many kinds. They comprise social security benefits, cash grants for political sufferers and the whole scheme of State and local welfare. Then again, thousand of people are employed in the State and the Central Government and local authorities. Licences are required before one can engage in many kind of business or work. The power of giving licences means power to withhold them and this gives control to the Government or to the agents of Government on the lives of many people. Many individuals and many more businesses enjoy largess in the form of Government contracts. These contracts often resemble subsidies. It is 'virtually impossible to lose money on them and many enterprises are set up primarily to do business with Government. Government owns and controls hundreds of acres of public land valuable for mining and other purposes. These resources are available for utilisation by private corporations and individuals by way of lease or licence. All these mean growth in the Government largess and with the increasing magnitude and range of governmental functions as we move closer to a welfare State, more and more of our wealth consists of these new forms. Some of these forms of wealth may be in the nature of legal rights but the large majority of them are in the nature of privileges. But on that account, can it be said that they do not enjoy any legal protection? Can they be regarded as gratuity furnished by the State so that the State may withhold, grant or revoke it at its pleasure? Is the position of the Government in this respect the same as that of a private giver? We do not think so. The law has not been slow to recognise the importance of this new kind of wealth and the need to protect individual interest in it and with that end in view, it has developed new forms of protection. Same interests in Government largess, formerly regarded as privileges, have been recognised as rights while others have been given legal protection not only by forging proceedural safeguards but also by confining/structuring and checking Government discretion in the matter of grant of such largess. The discretion of the Government has been held to be not unlimited in that the Government cannot give or withhold largest in its arbitrary discretion or at its sweet will. It is insisted as pointed out by Professor Reich in an especially stimulating article on 'The New Property' in 73 Yale Law Journal 733, 'that Government action be based on standards that are not (sic) on unauthorised? The Government cannot be permitted to say that it will give jobs or enter into contracts or issue quotas or licences only in favour of those having grey hair or belonging to a particular political party or professing a particular religious faith. The Government is still the Government when it acts in the matter of granting largess and it cannot act arbitrarily. It does not stand in the same position as a private individual.'

The second case is the case of Kasturi Lal v. State of J. & K., AIR 1980 SC 1992. The observations made in paras 11, 14 and 15 of that judgment are required to be quoted:

'Where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or granting other forms of largess, the Government cannot act arbitrarily at its sweet will. There are two limitations imposed by law which structure and control the discretion of the Government in this behalf. The first is in regard to the terms on which largess may be granted and the other, in regard to the persons who may be recipients of such largess. Unlike a private individual the State cannot act as it pleases in the matter of giving largess and, it cannot choose to deal with any person it pleases in its absolute and unfettered discretion.

Every activity of the Government has a public element in it and it must therefore be informed with reason and guided by public interest. If the Government awards a contract or leases out or otherwise deals with its property or grants any other largess, it would be liable to be tested for its validity on the touchstone of reasonableness and public interest and if it fails to satisfy either test, it would be unconstitutional and invalid.

It must follow as a necessary corollary that the Government cannot act in a manner which would benefit a private party at the cost of the State; such an action would be both unreasonable and contrary to public interest. The Government, therefore, cannot, for example give a contract or sell or lease-out its property for a consideration less than the highest that can be obtained for it, unless of course there are other consideration which render it reasonable and in public interest to do so. Such considerations may be that some Directive Principle is sought to be advanced or implemented or that the contract or the property is given not with a view to earning revenue but for the purpose of carrying out a welfare scheme for the benefit of a particular group or section of people deserving it or that the person who has offered a higher consideration is not otherwise fit to be given the contract or the property.

There may be an infinite variety of considerations which may have to be taken into account by the Government in formulating its policies and it is on a total evaluation of various considerations which have weighed, with the Government in taking a particular action, that the Court would have to decide whether the action of the Government is reasonable and in public interest.

One basic principle which must guide the Court in arriving at its determination on this question is that there is always a presumption that the Governmental action is reasonable and in public interest and it is for the party challenging its validity to show that it is wanting in reasonableness or is not informed with public interest. This burden is a heavy one and it has to be discharged to the satisfaction of the Court by proper and adequate material. The Court cannot lightly assume that the action taken by the Government is unreasonable or without public interest. But where it is so satisfied, it would be a plainest duty of the Court under the Constitution to invalidate the governmental action. This is one of the most important functions of the Court and also one of the most essential for preservation of the rule of law. It may be pointed out that this ground of invalidity, namely, that the governmental action is unreasonable or lacking in the quality of public interest, is different from that of mala fides though it may, in a given case, furnish evidence of mala fides.'

8. Considering the two authorities cited above, considering the facts stated in the petition and also considering the affidavit of Shri V. Lobo, the only possible conclusion is that the power which is exercised is exercised in most arbitrary manner. It is highly unjust and it is exercised without understanding the meaning of the word 'power' which is to be given in this democratic structure. I hope the officers of the Indian Oil Corporation Limited will understand, that they are not the officers of any private Corporation and the kerosene and L.D.O. is not the properly .of any private individual but they belong to the State and when it is a monopoly it is expected that the power given to them is exercised in such a way that citizens from this monopolistic concern expect, just and fair play at their hands. If this is understood in its right spirit I hope such a thing will never happen again.

9. With these remarks the petition is allowed, and the respondent is directed to grant dealership to the petitioner for kerosene and L. D. O. for Baroda-Sankheda region in pursuance of the advertisement given in May, 1979 by the respondents. Rule is made absolute with costs.


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