the Arbitration and Conciliation Act,= Single Judge dismissing the application filed under Section 8 of the Arbitration and Conciliation Act, 1996 (the ‘Act’) by holding that the agreements between the parties are not inter-connected with the principal agreement dated 05.03.2012 and therefore, the parties cannot be referred to arbitration as per the decision in Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya and another (2003) 5 SCC 531.= both parties have consciously proceeded with the commercial transactions to commission the Photovoltaic Solar Plant at Dongri, Raksa, District Jhansi, U.P. The first respondent has proceeded to procure the materials, entered into agreement with Juwi India for engineering, installation and commissioning and the sale and purchase agreement with Astonfield, were all the conscious steps taken in the commercial understanding to commission the Solar Plant at Dongri, Raksa, District Jhansi, U.P. Even though Juwi India and Astonfield are not parties to the main agreement - Equipment Lease Agreement (14.03.2012), all the agreements/contracts contain clauses referring to the main agreement. It is the duty of the Court to impart the commercial understanding with a “sense of business efficacy” and not by the mere averments made in the plaint. The High Court was not right in refusing to refer the parties on the ground of the allegations of fraud levelled in the plaint. 34. It is only where serious questions of fraud are involved, the arbitration can be refused. In this case, as contended by the appellants 29 there were no serious allegations of fraud; the allegations levelled against Astonfield is that appellant no.1 - Ameet Lalchand Shah misrepresented by inducing the respondents to pay higher price for the purchase of the equipments. There is, of course, a criminal case registered against the appellants in FIR No.30 of 2015 dated 05.03.2015 before the Economic Offences Wing, Delhi. The appellant no.1 – Ameet Lalchand Shah has filed Criminal Writ Petition No.619 of 2016 before the High Court of Delhi for quashing the said FIR. The said writ petition is stated to be pending and therefore, we do not propose to express any views in this regard, lest, it would prejudice the parties. Suffice to say that the allegations cannot be said to be so serious to refuse to refer the parties to arbitration. In any event, the Arbitrator appointed can very well examine the allegations regarding fraud. 35. Main agreement - Equipment Lease Agreement (14.03.2012) for leasing and commissioning of Solar Plant at Dongri, Raksa, District Jhansi, Uttar Pradesh contains arbitration clause (Clause 29). As discussed earlier, other three agreements - two agreements between Rishabh and Juwi India (01.02.2012) and Sale and Purchase Agreement (05.03.2012) between Rishabh and Astonfield are integrally connected with the commercial understanding of commissioning the Solar Project at Dongri, Raksa, District Jhansi, Uttar Pradesh and to resolve the dispute 30 between the parties, they are to be referred to arbitration. The order of the High Court declining to refer the parties to arbitration cannot be sustained and is liable to be set aside.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4690 OF 2018
(Arising out of SLP(C) No.16789 of 2017)
AMEET LALCHAND SHAH AND OTHERS …Appellants
Versus
RISHABH ENTERPRISES AND ANOTHER ...Respondents
J U D G M E N T
R. BANUMATHI, J.
Leave granted.
2. This appeal arises out of the judgment dated 17.04.2017 passed by
the Delhi High Court in FAO(OS) (COMM) No.85 of 2017 in and by which
the Division Bench affirmed the order of the Single Judge dismissing the
application filed under Section 8 of the Arbitration and Conciliation Act,
1996 (the ‘Act’) by holding that the agreements between the parties are
not inter-connected with the principal agreement dated 05.03.2012 and
therefore, the parties cannot be referred to arbitration as per the decision
in Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya and another (2003)
5 SCC 531.
3. Brief facts which led to filing of this appeal are as follows:-
1
On 01.02.2012, the first respondent – Rishabh Enterprises (the
‘Rishabh’), the sole proprietorship concern of the second respondent –
Dr. A.M. Singhvi entered into two agreements with M/s Juwi India
Renewable Energies Pvt. Ltd. (Juwi India) namely:- (i) Equipment and
Material Supply Contract for purchase of power generating equipments to
the tune of Rs.8,89,80,730/-; and (ii) Engineering, Installation and
Commissioning Contract for installation and commissioning of the Solar
Plant for Rs.2,20,19,270/-. Both these agreements contain arbitration
clause.
4. The first respondent - Rishabh entered into Sale and Purchase
Agreement dated 05.03.2012 with the second appellant company –
Astonfield Renewables Private Limited (Astonfield) for purchasing CIS
Photovoltaic products to be leased to appellant No.3 – Dante Energy Pvt.
Ltd. (Dante Energy) to be installed at the Solar Plant at Dongri, Raksa,
District Jhansi, Uttar Pradesh. As per the agreement, these products
were valued for Rs.25,16,00,000/-. The second appellant – Astonfield
received Rs.21,40,49,999/- from the respondents under various cheques
issued by the Rishabh. This agreement dated 05.03.2012 does not
contain the arbitration clause. According to the appellants, an amount of
Rs.10,00,00,000/- by cash was paid back to the sons of Dr. A.M. Singhvi
i.e. Rs.2,50,00,000/- to Mr. Avishkar Singhvi and Rs.7,50,00,000/- to
2
Mr. Anubhav Singhvi. An Equipment Lease Agreement (ELA) dated
14.03.2012 was entered into between the Rishabh and Dante Energy
whereby Dante Energy agreed to pay the Rishabh Rs.13,50,000/- as
lease rent for March, 2012 and from April, 2012 onwards, the said rent
payable was Rs.28,26,000/-. The Solar Plant at Jhansi has been
commissioned and energized on 16.03.2012.
5. Gist of the agreements are as under:-
S.No. DATE OF
CONTRACT
CONTRACTING
PARTY
PURPOSE OF CONTRACT ARBITRATION
AGREEMENT
1. 01.02.2012 Rishabh
Enterprises
entered into two
agreements with
M/s. Juwi India
Renewable
Energies Pvt.
Ltd.
(i) Rishabh to purchase
power generating
equipments -
Rs.8,89,80,730/-
(ii) Engineering, Installation
and commission of the
plant at Jhansi -
Rs.2,20,19,270/-
Both agreements
contain arbitration
clause - Parties
agreed that the seat
of arbitration shall be
at Bombay
2. 05.03.2012 Rishabh entered
into agreement
with M/s. Aston
Renewables
Pvt. Ltd.
(appellant no.2)
(i) Purchasing CIS
Photovoltaic products to
be leased to Dante Energy
(Appellant no.3) for
energizing solar plant
installed at Jhansi -
Rs.21,40,49,999/-
This agreement
does not contain
arbitration clause.
3. 14.03.2012 Rishabh entered
into agreement
with M/s. Dante
Energy Pvt. Ltd.
(appellant no.3)
Dante agreed to pay
Rs.13,50,000/- as lease rent
for the equipment for March,
2012 and from April, 2012
onwards, Rs.28,26,000/- per
month.
This agreement
contains arbitration
clause. Parties have
agreed that the seat
of arbitration shall be
at Bombay.
6. Dispute arose between the parties when respondents alleged that
appellant No. 3 – Dante Energy has defaulted in payment of rent and that
Astonfield committed fraud by inducing the Rishabh to purchase the
Photovoltaic products by investing huge amount. The respondents have
3
also alleged that the appellants have committed misrepresentation and
criminal breach of trust so far as the equipments procured and leased to
Dante Energy. The respondents have also filed a criminal complaint
before the Economic Offences Wing at Delhi against the appellants,
based on which, FIR No. 30 of 2015 was registered. The appellants
have filed writ petition bearing CWP No.619 of 2016 before the High
Court of Delhi seeking quashing of the said FIR which is sub judice.
There was also an enquiry by the Income Tax Authorities seeking
explanation from the appellants regarding transfer of money to the sons
of Dr. A.M. Singhvi i.e. Rs.2,50,00,000/- to Mr. Avishkar Singhvi and
Rs.7,50,00,000/- to Mr. Anubhav Singhvi. Appellant No.1 – Ameet
Lalchand Shah was summoned by the Income Tax Authorities seeking
explanation with regard to transfer of the said money to the sons of Dr.
A.M. Singhvi.
7. Owing to the dispute between the parties, appellant No.3 – Dante
Energy issued notice dated 13.02.2016 invoking arbitration clause and
nominated Justice Sujata Manohar, former Judge, Supreme Court of
India as the Arbitrator. The respondents namely the Rishabh and its sole
proprietor preferred a Civil Suit (Commercial) No.195 of 2016 before the
High Court on 11.03.2016 against all the appellants levelling various
allegations including fraud and misrepresentation. In the suit, multiple
4
reliefs were claimed:- (i) for a declaration that Sale and Purchase
Agreement dated 05.03.2012; Equipment and Material Supply Contract,
Engineering, Installation and Commissioning Contract both dated
01.02.2012 and Equipment Lease Agreement dated 14.03.2012 are
vitiated by serious fraud committed by the appellants and that the
agreements are void; (ii) for recovery of a sum of Rs.32,22,80,288/-
which the appellants are jointly and severely liable to pay to the
respondents; (iii) to pay a sum of Rs.19,31,74,804/- as the interest on the
aforesaid amount of Rs.32,22,80,288/- at the rate of 18% per annum
from the date of the agreement i.e. 01.02.2012 till the date of the
realization; and (iv) to pay arrears of lease rent.
8. On receipt of notice and summons in the suit, the
appellants/defendants preferred application I.A. No.4158 of 2016 under
Section 8 of the Act seeking for reference of the dispute between the
parties to arbitration pertaining to all the four agreements. The appellants
sought for reference to arbitration of all the four agreements by
contending that the Sale and Purchase Agreement (05.03.2012) is the
main agreement and that other three agreements are inter-connected as
they are executed between the same parties and the obligations and the
performance of the terms of the agreements are inter-connected viz.
commissioning of the Photovoltaic Solar Plant at Dongri, Raksa, District
5
Jhansi, U.P. The respondents Rishabh and Dr. A.M. Singhvi resisted the
application by contending that the suit is for declaration that the
agreements are vitiated due to fraud and misrepresentation and while so,
the matter cannot be referred to arbitration. It was further averred that
the suit is neither concerned about the agreement dated 01.02.2012 with
Juwi India nor concerned about Equipment Lease Agreement
(14.03.2012); whereas the suit is concerned about the false assurances
and fraud played by the appellants Ameet Lalchand Shah and Dante
Energy regarding which a criminal case has also been registered and
hence, the dispute is not referable to arbitration.
9. The learned Single Judge by order dated 15.03.2017 dismissed the
application filed under Section 8 of the Act holding that the Equipment
Lease Agreement (14.03.2012) between Rishabh and Dante Energy
cannot be treated as the mother/principal agreement and the agreements
between the respondents and Astonfield and Juwi India cannot be said to
be ancillary agreements to the same. The learned Single Judge further
held that not only the respondents accuse the appellants of fraud but
appellants also accuse the respondents of fraud, concealment and
suppression of material facts and that there was also a registration of a
criminal case based on the complaint filed by the respondents and also
the enquiry by the Income Tax Authorities regarding transfer of
6
Rs.10,00,00,000/- to the sons of Dr. A.M. Singhvi and when there are
such serious issues between the parties, they cannot be referred to
arbitration.
10. Being aggrieved by the dismissal of the application, the appellants
preferred appeal before the Division Bench which came to be dismissed.
The Division Bench pointed out the difference in the language between
Section 8 and Section 45 of the Act and after referring to Chloro
Controls India Private Limited v. Severn Trent Water Purification Inc.
and others (2013) 1 SCC 641, observed that Sukanya Holdings was
not overruled. The Division Bench further pointed out that in spite of
amendment brought in under Section 8, since the main/principal
agreement–Sale and Purchase Agreement (05.03.2012) does not contain
an arbitration clause, the matter cannot be referred to arbitration. After
referring to A. Ayyasamy v. A. Paramasivam and others (2016) 10
SCC 386, the Division Bench held that in view of serious allegations of
fraud, arbitration of such dispute is excluded.
11. We have heard Mr. Shanti Bhushan, learned senior counsel
appearing for the appellants and Mr. Kapil Sibal, learned senior counsel
appearing for the respondents. Upon consideration of the rival
submissions, the following points arise for consideration in this appeal:-
7
1. Whether all the four agreements viz. – (i) Equipment and
Material Supply Contract (01.02.2012) between Rishabh and
Juwi India; (ii) Engineering, Installation and Commissioning
Contract (01.02.2012) between Rishabh and Juwi India;
(iii) Sale and Purchase Agreement (05.03.2012) between
Rishabh and Astonfield; and (iv) Equipment Lease Agreement
(14.03.2012) between Rishabh and Dante Energy are interconnected
to refer the parties to arbitration though there is no
arbitration clause in the Sale and Purchase Agreement
(05.03.2012) between Rishabh and Astonfield?
2. Whether reference of the dispute between the parties to
arbitration is to be refused on the ground of allegations of fraud
levelled against the appellants by the respondents in the plaint
or whether the agreements ought to be taken as commercial
undertaking of the parties “with a sense of business efficacy”
as held in Ayyasamy case?
12. First, the Rishabh entered into two agreements with Juwi India
dated 01.02.2012:- (i) Equipment and Material Supply Contract; and (ii)
Engineering, Installation and Commissioning Contract. The first
agreement-Equipment and Material Supply Contract (01.02.2012)
contains arbitration clause (Clause 19.4). The second agreement –
8
Engineering, Installation and Commissioning Contract (01.02.2012) also
contains arbitration clause (Clause 25). Sale and Purchase Agreement
(05.03.2012) between Rishabh and Astonfield for Rs.25,16,00,000/- does
not contain the arbitration clause. The fourth agreement namely
Equipment Lease Agreement (14.03.2012) between Rishabh and Dante
Energy contains arbitration clause (Clause 29). A careful perusal of all
the four agreements that is:- (i) Equipment and Material Supply Contract;
(ii) Engineering, Installation and Commissioning Contract; (iii) Sale and
Purchase Agreement; and (iv) Equipment Lease Agreement shows that
all the four agreements were for the single purpose to commission 2
MWp Photovoltaic Solar Plant at Dongri, Raksa, District Jhansi, Uttar
Pradesh to be purchased by Rishabh and leasing the equipments to
Dante Energy.
13. The averments in the plaint also prima facie indicate that all the
four agreements are inter-connected and that appellant No.1 – Ameet
Lalchand Shah is stated to be the promoter and controlling man of both
Astonfield as well as Dante Energy. We may usefully refer to the relevant
averments in the plaint which read as under:-
“Defendant No.1, Mr. Ameet Lalchand Shah, is the Promoter of
the Defendant Nos. 2 and 3 Companies. Through his other
group companies, Defendant No.1 is also the controlling
shareholder of Defendant Nos. 2 and 3. He is involved in
running the day to day affairs of the said companies and it is
9
on his instructions and directions and under his overall
control and dictation that the said companies are run. He is
the co-founder and the co-chairman of the “Astonfield Group”
consisting of various companies incorporated both outside of
and in India (www.astonfield.com). Defendant No.1 is the main
brain behind the serious fraud that has been perpetuated upon the
Plaintiffs and the prima donna, mind, body, soul and controlling
entity of all other defendants to this suit. If the corporate veil is
lifted by this Hon’ble Court (and, this is an appropriate case for
lifting of the corporate veil), it will be found that it is, in fact,
Defendant No.1 only who is the real entity behind all the other
defendants and it is on his directions that the others have made,
played their respective roles in and/or participated in the
transactions in question……. Further, Defendant No.1 has also
been corresponding with the plaintiffs on behalf of Defendant Nos.
2 and 3. ……… The said Defendant No.1 is also responsible for
running the day to day affairs of this Company which is run on
his directions and under his control. Defendant No.2 entered
into a Sale and Purchase Agreement with the Plaintiffs, the
transaction under which is vitiated by serious fraud. ……”
Though there are two agreements, individual parties to the Sale and
Purchase Agreement (05.03.2012) and the Equipment Lease Agreement
(Dante Energy) are one and the same,. Though Juwi India is not the
defendant, as discussed infra, Equipment and Material Supply Contract
and Engineering, Installation and Commissioning Contract with Juwi India
itself were for the purpose of commissioning Photovoltaic Solar Plant at
Dongri, Raksa, District Jhansi, Uttar Pradesh.
14. The clauses in the Equipment and Material Supply Contract
(01.02.2012) between Rishabh and Juwi India clearly indicate that the
Rishabh has entered into Lease Agreement with Dante Energy and that
the Rishabh proposes to source Photovoltaic products/panels etc. and
similar Solar Power generating equipments for onward lease of those
10
goods to Dante Energy. The following clauses in the said Equipment and
Material Supply Contract would clearly establish the link of Equipment
and Material Supply Contract with the main Lease Agreement with Dante
Energy:-
“This Equipment and Material Supply contract is between
M/s Rishabh Enterprises………….. (the ‘Client’)
AND
Juwi India Renewable Energies Private Limited ……..(the
‘Supplier’)
Whereas:-
A. The Client (Rishabh) is entering into Lease Agreement
with M/s Dante Energy Pvt. Ltd. (‘Lessee’) and the
Lessee (Dante Energy) has necessary authorizations to
develop, own, operate and commercially exploit a 2
MWp thin-film photovoltaic solar plant at Dongri, Raksa,
District-Jhansi, UP (Plant Site), transmission line from
power plant to the Grid Substation, bay extension work at
the Grid Substation, including all of the infrastructure and
relevant installations required to connect the electricityproducing
equipment to the distribution/transmission grid at
the Grid Substation in UP, India (the ‘Facility’).
B. The Client (Rishabh) proposes to source Photovoltaic
Products/Panels, Inverters, Transformers and similar
solar power generating equipments, etc. for sale of
goods to the Client (Rishabh) and the Client (Rishabh)
will onward lease these goods to M/s Dante Energy Pvt.
Ltd. (Lessee).
C. The Client (Rishabh) wishes to engage the Supplier (Juwi
India) for supply of Equipment (as defined below) and
materials with respect to the development of the Solar Park.
D. The M/s Dante Energy Private Limited (Lessee) will have the
right to inspect the respective goods to be sourced by the
Client (Rishabh) and based on the confirmation from the M/s
Dante Energy Private Limited (Lessee), the respective goods
will be purchased by the Client (Rishabh) for onward sale to
M/s Dante Energy Private Limited (Lessee) and will be
consigned to the project site.
11
E. The Supplier (Juwi India) is aggregable to supply the
Equipment and Materials to the Client (Rishabh) in
accordance with the terms of this Contract.”
15. Likewise, clauses in the agreement for Engineering, Installation
and Commissioning Contract between Rishabh and Juwi India
(01.02.2012) also clearly indicate that the agreement was entered into for
the purpose of commissioning Photovoltaic Solar Plant at Dongri, Raksa,
District Jhansi, Uttar Pradesh. Clause (A) of the agreement that the
Rishabh has entered into Equipment Lease Agreement with M/s Dante
Energy (Lessee) reiterates that the second agreement with Juwi India for
engineering, installation and commissioning is integrally connected with
Equipment Lease Agreement (14.03.2012). The relevant clauses in the
agreement read as under:-
“This Engineering, Installation and Commissioning Contract
Agreement is between
M/s Rishabh Enterprises……….. (the ‘Client’)
AND
Juwi India Renewable Energies Pvt. Ltd………(the ‘Contractor’)
Whereas:-
A. The Client (Rishabh) is the owner of certain Photovoltaic
products/Panels, Inverters, Transformers and similar
solar power generating equipments etc. and is entering
into an Equipment Lease Agreement with M/s Dante
Energy Pvt. Ltd. (Lessee).
B. The Lessee (Dante Energy) has necessary authorizations
to develop, own, operate and commercially exploit a 2
MWp thin-film photovoltaic solar plant at Dongri, Raksa,
District-Jhansi, UP (Plant Site), transmission line from
12
power plant to the Grid Substation, bay extension work at
the Grid Substation, including all of the infrastructure and
relevant installations required to connect the electricityproducing
equipment to the distribution/transmission grid at
the Grid Substation in UP, India (the ‘Facility’).
C. The Client (Rishabh) proposes to purchase the Client’s
Equipment as required by the Lessee (Dante Energy) for
onward lease to the Lessee (Dante Energy).
D. The Lessee (Dante Energy) requires the services for design,
engineering, construction, erection, testing, commissioning
and handing over of the Facility to the Client (Rishabh) and
accordingly the Client (Rishabh) has agreed to identity the
competent Contractor (Juwi India) for undertaking the
above work.
E. The Contractor (Juwi India) has represented to the Client
(Rishabh) and the Lessee (Dante Energy) that the
Contractor (Juwi India) has the requisite experience,
expertise, resources and skills for undertaking and
performing all the activities and services required for design
engineering, construction, erection, testing, commissioning
and handing over of the Facility and has submitted an offer
to the Client (Rishabh) in response to the Technical
Specifications as set out by the Client (Rishabh).
F. Based on the offer submitted by the Contractor (Juwi India)
and relying on the Contractor’s representations and
warranties herein, and on the concurrence and approval of
the Lessee (Dante Energy), the Client (Rishabh) wishes to
appoint the Contractor (Juwi India) to undertake the
Services and (except for purchase of the Client’s
Equipments) to perform all the activities and services
required for design, engineering, construction, erecting,
testing, commissioning and handing over of the Facility
and the Contractor (Juwi India) has agreed to such
appointment and to undertake such other duties and
obligations as mentioned in this Contract.”
The above clauses in the very commencement of the agreement with
Juwi India dated 01.02.2012 clearly state that the agreement itself was
for the purpose of commissioning Photovoltaic Solar Plant at Dongri,
Raksa, District Jhansi, Uttar Pradesh for which Dante Energy (Lessee)
has necessary authorizations. The above quoted clauses in the
13
Engineering, Installation and Commissioning Contract (01.02.2012)
establish that this agreement is inter-connected with Equipment Lease
Agreement (14.03.2012) with Dante Energy.
16. Equally, the Sale and Purchase Agreement (05.03.2012) between
M/s Astonfield and Rishabh is also for the purpose of onward leasing of
goods to Dante Energy as seen from the following clauses:-
“Sale and Purchase Agreement
Astonfiled Renewable Pvt. Ltd. ……….. (Seller) AND Rishabh
Enterprises…….. (Buyer) agree to sell and to purchase the
following products, which are required for onwards leasing of goods
by the Buyer (Rishabh) to Dante Energy Private Limited.……………
(Lessee) under the terms and conditions stated below
(Transaction), effective as of the date of last signature below
(Effective Date):-
1. Buyer:Rishabh Enterprises
2. Seller: Astonfield Renewables Private Limited
3. Transaction: The parties agree that this Transaction shall be
governed by this Sale and Purchase Agreement and its
apendices.
The products under this Agreement shall be used for the 2
MWp grid connected solar PV power project being set up by the
Lessee (Dante Energy) at Dongri, Raksa, District-Jhansi, Uttar
Pradesh (Plant Site)
The Buyer (Rishabh) is purchasing the above goods for
onward supply/lease to lessee (Dante Energy). Lessee (Dante
Energy) will have the right to inspect the respective goods and
based on the confirmation from the Lessee (Dante Energy), the
respective goods will be purchased by the Buyer (Rishabh) for
onward sale to Lessee (Dante Energy) and will be consigned to
the Project Site.”
Though the Sale and Purchase Agreement (05.03.2012) does not have
any arbitration clause, by the above clauses, it is clearly linked with the
14
main agreement - Equipment Lease Agreement (14.03.2012). Sale and
Purchase Agreement was entered into between Astonfield and Rishabh
only for the purpose of onward transmission of leasing of the goods by
Rishabh to Dante Energy. There is no merit in the contention that the
Sale and Purchase Agreement is not connected with the Equipment
Lease Agreement with Dante Energy.
17. Equipment Lease Agreement (14.03.2012) between Rishabh and
Dante Energy is only a follow-up of all the above three agreements as is
clear from the various clauses in the Equipment Lease Agreement. The
relevant clauses of Equipment Lease Agreement (14.03.2012) are as
under:-
“Equipment Lease Agreement
M/s Rishabh Enterprises………. (Lessor) AND M/s Dante
Energy Pvt. Ltd……….. (Lessee) is setting up a 2 MWp grid
connected solar PV power project at Dongri, Raksa, DistrictJhansi,
Uttar Pradesh (Plant Site)……
Whereas the Lessor (Rishabh) is the owner of certain
Photovoltaic products/Panels, Inverters, Transformers and
similar solar power generating equipments etc. (herein
referred to as “Equipments”), more particularly described in
the First Schedule hereunder written.
And whereas the Lessee (Dante Energy) has necessary
authorizations to develop, own, operate and commercially exploit a
2 MWp thin-film photovoltaic solar plant on the Site (“SPY Power
Plant”), transmission line from power plant to the Grid Substation,
bay extension work at the Grid Substation, including all of the
15
infrastructure and relevant installations required to connect the
electricity-producing equipment to the distribution/transmission grid
at the Grid Substation in Jhansi, Uttar Pradesh, India as specified in
the Second Schedule (“Facility”) and for this purpose, they are in
requirement of the Equipments as mentioned in the First Schedule
hereunder written.
And whereas the Lessee (Dante Energy) being desirous of
obtaining from the Lessor (Rishabh) on lease the specified nature
of Equipments more particularly described in the First Schedule
hereunder written, has approached the Lessor (Rishabh) and has
requested the Lessor (Rishabh) to lease out the Equipments to the
Lessee (Dante Energy) on the terms, covenants and conditions
herein contained/specified.
…………
Article 4
Delivery, Commencement and disbursement:
(i) It is expressly understood by the Lessee (Dante Energy) and
Lessor (Rishabh) that in the present case, the respective
Equipments are being sourced from the supplier of Solar
Photovoltaic Modular-located in the State of Maharashtra i.e.
Astonfield Renewables Private Limited and supplier of other
solar power generating equipments like inverters,
transformers, etc. in the State of Karnataka i.e. Juwi India
Renewable Energies Private Limited. These goods have
been inspected by the Lessee (Dante Energy) and are found
suitable for its commercial use of the same.
(ii) Pursuant to this lease agreement, the respective
Equipments, will be purchased by the Lessor (Rishabh) from
the respective Supplier and accordingly, the Equipments will
be consigned directly to the project site in the State of Uttar
Pradesh. Accordingly, in the present case, the delivery of
respective Equipments will be effected by Endorsement of
the consignment Note in the favour of Lessee (Dante
Energy) by the Lessor (Rishabh).
………
(v) Irrespective of how and by whom the delivery is
effected, it is hereby agreed that the entire risk, cost or
any outgoing pertaining to the said delivery and
installation shall be at the cost and risk of the Lessor
(Rishabh).”
The above extracted clauses clearly demonstrate that all the four
agreements are inter-connected. Clause (v) in Article 4 in the Equipment
16
Lease Agreement that delivery and installation shall be at the cost and
risk of Rishabh (Lessor) is clearly linked with the Engineering, Installation
and Commissioning Contract between Rishabh and Juwi India.
18. The High Court placed reliance upon Sukanya Holdings for
dismissal of the application filed under Section 8 of the Act. In Sukanya
Holdings, the suit was filed for dissolution of the partnership firm and
accounts and inter alia challenged the conveyance deed executed by the
partnership firm in favour of M/s West End Gymkhana Limited. An
application filed under Section 8 of the Act was opposed by respondent
No.1 thereon by contending that the subject matter of the suit was not
between the contracting parties and that the reliefs claimed are not only
against respondents No. 1 and 2 who are the contracting parties but are
claimed against the remaining twenty-three parties who are the
purchasers/tenants of disputed flats. This Court held that if all the parties
to the suit are not parties to the agreement then the matter cannot be
referred to arbitration since there is no provision in the Act for partly
referring the dispute to arbitration. This Court noted that the buyers were
not parties to the arbitration agreement and that the non-signatories
cannot be referred to arbitration. In Sukanya Holdings in paras (15) and
(16), this Court held as under:-
17
“15. The relevant language used in Section 8 is: “in a matter which
is the subject of an arbitration agreement”. The court is required to
refer the parties to arbitration. Therefore, the suit should be in
respect of “a matter” which the parties have agreed to refer and
which comes within the ambit of arbitration agreement. Where,
however, a suit is commenced — “as to a matter” which lies outside
the arbitration agreement and is also between some of the parties
who are not parties to the arbitration agreement, there is no
question of application of Section 8. The words “a matter” indicate
that the entire subject-matter of the suit should be subject to
arbitration agreement.
16. The next question which requires consideration is — even if
there is no provision for partly referring the dispute to arbitration,
whether such a course is possible under Section 8 of the Act. In our
view, it would be difficult to give an interpretation to Section 8 under
which bifurcation of the cause of action, that is to say, the subjectmatter
of the suit or in some cases bifurcation of the suit between
parties who are parties to the arbitration agreement and others is
possible. This would be laying down a totally new procedure not
contemplated under the Act. If bifurcation of the subject-matter of a
suit was contemplated, the legislature would have used appropriate
language to permit such a course. Since there is no such indication
in the language, it follows that bifurcation of the subject-matter of an
action brought before a judicial authority is not allowed.”
19. Mr. Sibal, learned senior counsel for the respondents submitted
that the High Court rightly relied upon Sukanya Holdings as it relates to
Part-I of the Act that the parties who are not signatories to the arbitration
agreement (in this case, Astonfield under Sale and Purchase Agreement)
cannot be referred to arbitration. It was further submitted that Chloro
Controls arises under Part-II of the Act and was rightly distinguished by
the High Court and Sukanya Holdings was not overruled by Chloro
Controls and hence, the appellants cannot rely upon Chloro Controls.
It was contended that the Sale and Purchase Agreement (05.03.2012)
under which huge money was parted with, is the main agreement having
18
no arbitration clause cannot be referred to arbitration. It was submitted
that the subject matter of the suit cannot be bifurcated between the
parties to arbitration agreement and others.
20. In Chloro Controls, this Court was dealing with the scope and
interpretation of Section 45 of the Act - Part-II of the Act and in that
context, discussed the scope of relevant principles on the basis of which
a non-signatory party also could be bound by the arbitration agreement.
Under Section 45 of the Act, an applicant seeking reference of disputes
to arbitration can either be a party to the arbitration agreement or any
person claiming through or under such party. Section 45 uses the
expression “….at the request of one of the parties or any person claiming
through or under him…..” includes non-signatory parties who can be
referred to arbitration provided they satisfy the requirements of
Sections 44 and 45 read with Schedule I of the Act. In para (73) of
Chloro Controls, this Court held as under:-
“73. A non-signatory or third party could be subjected to arbitration
without their prior consent, but this would only be in exceptional
cases. The court will examine these exceptions from the touchstone
of direct relationship to the party signatory to the arbitration
agreement, direct commonality of the subject-matter and the
agreement between the parties being a composite transaction. The
transaction should be of a composite nature where performance of
the mother agreement may not be feasible without aid, execution
and performance of the supplementary or ancillary agreements, for
achieving the common object and collectively having bearing on the
dispute. Besides all this, the court would have to examine whether
a composite reference of such parties would serve the ends of
19
justice. Once this exercise is completed and the court answers the
same in the affirmative, the reference of even non-signatory parties
would fall within the exception afore-discussed.” (Underlining
added)
21. In a case like the present one, though there are different
agreements involving several parties, as discussed above, it is a single
commercial project namely operating a 2 MWp Photovoltaic Solar Plant
at Dongri, Raksa, District Jhansi, Uttar Pradesh. Commissioning of the
Solar Plant, which is the commercial understanding between the parties
and it has been effected through several agreements. The agreement –
Equipment Lease Agreement (14.03.2012) for commissioning of the
Solar Plant is the principal/main agreement. The two agreements of
Rishabh with Juwi India:- (i) Equipment and Material Supply Contract
(01.02.2012); and (ii) Engineering, Installation and Commissioning
Contract (01.02.2012) and the Rishabh’s Sale and Purchase Agreement
with Astonfield (05.03.2012) are ancillary agreements which led to the
main purpose of commissioning the Photovoltaic Solar Plant at Dongri,
Raksa, District Jhansi, Uttar Pradesh by Dante Energy (Lessee). Even
though, the Sale and Purchase Agreement (05.03.2012) between
Rishabh and Astonfield does not contain arbitration clause, it is integrally
connected with the commissioning of the Solar Plant at Dongri, Raksa,
District Jhansi, U.P. by Dante Energy. Juwi India, even though, not a
party to the suit and even though, Astonfield and appellant No.1 – Ameet
20
Lalchand Shah are not signatories to the main agreement viz. Equipment
Lease Agreement (14.03.2012), it is a commercial transaction integrally
connected with commissioning of Photovoltaic Solar Plant at Dongri,
Raksa, District Jhansi, U.P. Be it noted, as per clause(v) of Article 4,
parties have agreed that the entire risk, cost of the delivery and
installation shall be at the cost of the Rishabh (Lessor). Here again, we
may recapitulate that engineering and installation is to be done by Juwi
India. What is evident from the facts and intention of the parties is to
facilitate procurement of equipments, sale and purchase of equipments,
installation and leasing out the equipments to Dante Energy. The dispute
between the parties to various agreements could be resolved only by
referring all the four agreements and the parties thereon to arbitration.
22. Parties to the agreements namely Rishabh and Juwi India:- (i)
Equipment and Material Supply Agreement; and (ii) Engineering,
Installation and Commissioning Contract and the parties to Sale and
Purchase Agreement between Rishabh and Astonfield are one and the
same as that of the parties in the main agreement namely Equipment
Lease Agreement (14.03.2012). All the four agreements are interconnected.
This is a case where several parties are involved in a single
commercial project (Solar Plant at Dongri) executed through several
agreements/contracts. In such a case, all the parties can be covered by
21
the arbitration clause in the main agreement i.e. Equipment Lease
Agreement (14.03.2012).
23. Since all the three agreements of Rishabh with Juwi India and
Astonfield had the purpose of commissioning the Photovoltaic Solar Plant
project at Dongri, Raksa, District Jhansi, Uttar Pradesh, the High Court
was not right in saying that the Sale and Purchase Agreement
(05.03.2012) is the main agreement. The High Court, in our view, erred
in not keeping in view the various clauses in all the three agreements
which make them as an integral part of the principal agreement namely
Equipment Lease Agreement (14.03.2012) and the impugned order of the
High Court cannot be sustained.
Amendment to Section 8 of the Arbitration and Conciliation Act, 1996
24. Arbitration and Conciliation (Amendment) Act, 2015 has brought in
amendment to Section 8 to make it in line with Section 45 of the Act. In
view of the observation made in Sukanya Holdings, Law Commission
has made recommendation for amendment to Section 8 of the Act.
Consequent to 2015 Amendment Act, Section 8 is amended as under:-
“8. Power to refer parties to arbitration where there is an
arbitration agreement. - (1) A judicial authority before which an
action is brought in a matter which is the subject of an arbitration
agreement shall, if a party to the arbitration agreement or any
person claiming through or under him, so applies not later than
when the date of submitting his first statement on the substance of
the dispute, then, notwithstanding any judgment, decree or order of
22
the Supreme Court or any court refer the parties to arbitration
 unless it finds that prima facie no valid arbitration agreement exists.
(2) The application referred to in sub-section (1) shall not be
entertained unless it is accompanied by the original arbitration
agreement or a duly certified copy thereof
Provided that where the original arbitration agreement or a certified
copy thereof is not available with the party applying for reference to
arbitration under sub-section (1), and the said agreement or
certified copy is retained by the other party to that agreement, then,
the party so applying shall file such application along with a copy of
the arbitration agreement and a petition praying the Court to call
upon the other party to produce the original arbitration agreement
or its duly certified copy before that Court.
(3) Notwithstanding that an application has been made under
sub-section (1) and that the issue is pending before the judicial
authority, an arbitration may be commenced or continued and an
arbitral award made.
25. “Principally four amendments to Section 8(1) have been introduced
by the 2015 Amendments - (i) the relevant "party" that is entitled to apply
seeking reference to arbitration has been clarified/amplified to include
persons claiming "through or under" such a party to the arbitration
agreement; (ii) scope of examination by the judicial authority is restricted
to a finding whether "no valid arbitration agreement exists" and the nature
of examination by the judicial authority is clarified to be on a "prima facie"
basis; (iii) the cut-off date by which an application under Section 8 is to be
presented has been defined to mean "the date of" submitting the first
statement on the substance of the dispute; and (iv) the amendments are
expressed to apply notwithstanding any prior judicial precedent. The
proviso to Section 8(2) has been added to allow a party that does not
23
possess the original or certified copy of the arbitration agreement on
account of it being retained by the other party, to nevertheless apply
under Section 8 seeking reference, and call upon the other party to
produce the same.” (Ref: Justice R.S. Bachawat’s Law of Arbitration
and Conciliation, Sixth Edition, Vol. I (Sections 1 to 34) at page 695
published by LexisNexis).
26. Amendment to Section 8 by the Act, 2015 are to be seen in the
background of the recommendations set out in the 246th Law
Commission Report. In its 246th Report, Law Commission, while
recommending the amendment to Section 8, made the following
observation/comment:-
“LC Comment: The words “such of the parties…. to the arbitration
agreement” and proviso (i) of the amendment have been proposed
in the context of the decision of the Supreme Court in Sukanya
Holdings Pvt. Ltd. v. Jayesh H. Pandya and Anr. (2003) 5 SCC 531,
- in cases where all the parties to the dispute are not parties to the
arbitration agreement, the reference is to be rejected only where
such parties are necessary parties to the action – and not if they
are only proper parties, or are otherwise legal strangers to the
action and have been added only to circumvent the arbitration
agreement. Proviso (ii) of the amendment contemplates a two-step
process to be adopted by a judicial authority when considering an
application seeking the reference of a pending action to arbitration.
The amendment envisages that the judicial authority shall not refer
the parties to arbitration only if it finds that there does not exist an
arbitration agreement or that it is null and void. If the judicial
authority is of the opinion that prima facie the arbitration agreement
exists, then it shall refer the dispute to arbitration, and leave the
existence of the arbitration agreement to be finally determined by
the arbitral tribunal. However, if the judicial authority concludes that
the agreement does not exist, then the conclusion will be final and
not prima facie. The amendment also envisages that there shall be
24
a conclusive determination as to whether the arbitration agreement
is null and void.
(2) The application referred to in sub-section (1) shall not be
entertained unless it is accompanied by the original arbitration
agreement or a duly certified copy thereof or a copy accompanied
by an affidavit calling upon the other party to produce the original
arbitration agreement or duly certified thereof in circumstances
where the original arbitration agreement or duly certified copy is
retained only by the other party.
LC Comment: In many transactions involving Government bodies
and smaller market players, the original/duly certified copy of the
arbitration agreement is only retained by the former. This
amendment would ensure that the latter class is not prejudiced in
any manner by virtue of the same” (Ref: 246th Law Commission
Report, Government of India)
27. The language of amendment to Section 8 of the Act is clear that
the amendment to Section 8(1) of the Act would apply notwithstanding
any prayer, judgment, decree or order of the Supreme Court or any other
Court. The High Court laid emphasis upon the word ".....unless it finds
that prima-facie no valid agreement exists". The High Court observed
that there is no arbitration agreement between Astonfield and Rishabh.
After referring to Sukanya Holdings and the amended Section 8 and
Section 45 of the Act, the High Court pointed out the difference in
language of Section 8 and Section 45 of the Act. The High Court
distinguished between Sukanya Holdings and Chloro Controls, and
observed that Sukanya Holdings was not overruled by Chloro
Controls. In para (23) of the impugned judgment, it was held as under:-
"23. ......The change in Section 8 is that the Court is to - in cases
where arbitration agreements are relied on- to refer the disputes in
the suit, to arbitration, "notwithstanding any judgment, decree or
25
order of the Supreme Court or any Court, refer the parties to
arbitration unless it finds that prima facie no valid arbitration
agreement exists". The Court is of opinion that Sukanya is not per
se overruled, because the exercise of whether an arbitration
agreement exists between the parties, in relation to the disputes
that are the subject matter of the suit, has to be carried out. If there
are causes of action that cannot be subjected to arbitration, or the
suit involves adjudication of the role played by parties who are not
signatories to the arbitration agreement, it has to continue because
"prima facie no valid arbitration agreement exists" between such
non parties and others, who are parties."
28. Re: contention: allegations of fraud disable an arbitration:- Yet
another ground based on which the High Court declined to refer the
parties to arbitration is the allegations of fraud levelled by
respondents/plaintiffs in their plaint against Astonfield and appellant no.1.
The High Court held that the respondents levelled allegations of fraud
against the appellants which raise serious triable issues of fraud and
hence, the matter cannot be referred to arbitration.
29. According to the respondents, it is not a case where “fraud is
alleged merely to disable an arbitration”. Mr. Sibal, learned senior
counsel for respondents contended that the plaint is based on the
averments that from inception, the intention of appellants/defendants was
to cheat the respondents and the respondents were made to part with
large sums of money on the basis of the misrepresentation made by the
appellants. It was submitted that alternative prayer in the plaint will not
convert the fraud suit to a regulatory suit because of alternative prayer
since alternative prayer – ‘lease rental’ has been projected only as an
26
alternative remedy. Placing reliance upon Arundhati Mishra (Smt) v. Sri
Ram Charitra Pandey (1994) 2 SCC 29, it was submitted that it is
settled law that it is open to the parties to raise mutually inconsistent
pleas and the relief could be granted on the alternative plea so raised.
30. Refuting the above contentions, Mr. Shanti Bhushan, learned
senior counsel for the appellants placed reliance upon Ayyasamy case
to contend that there are no serious allegations in the plaint to decline
reference of the matter to arbitration. It was submitted that mere
allegations of fraud were not sufficient to detract from the performance of
the obligation of the parties in terms of the agreement and refer the
matter to arbitration.
31. Under the Act, an arbitration agreement means an agreement
which is enforceable in law and the jurisdiction of the arbitrator is on the
basis of an arbitration clause contained in the arbitration agreement.
However, in a case where the parties alleged that the arbitration
agreement is vitiated on account of fraud, the Court may refuse to refer
the parties to arbitration. In Ayyasamy case, this Court held that mere
allegation of fraud is not a ground to nullify the effect of arbitration
agreement between the parties and arbitration clause need not be
avoided and parties can be relegated to arbitration where merely simple
allegations of fraud touched upon internal affairs of parties is levelled.
27
Justice A.K. Sikri observed that it is only in those cases where the Court
finds that there are serious allegations of fraud which make a virtual case
of criminal offence and where there are complicated allegations of fraud
then it becomes necessary that such complex issues can be decided only
by the civil court on the appreciation of evidence that needs to be
produced. In para (25) of Ayyasamy case, Justice Sikri held as under:-
“25…..Therefore, the inquiry of the Court, while dealing with an
application under Section 8 of the Act, should be on the aforesaid
aspect viz. whether the nature of dispute is such that it cannot be
referred to arbitration, even if there is an arbitration agreement
between the parties. When the case of fraud is set up by one of the
parties and on that basis that party wants to wriggle out of that
arbitration agreement, a strict and meticulous inquiry into the
allegations of fraud is needed and only when the Court is satisfied
that the allegations are of serious and complicated nature that it
would be more appropriate for the Court to deal with the subjectmatter
rather than relegating the parties to arbitration, then alone
such an application under Section 8 should be rejected.”
32. While concurring with Justice Sikri, Justice D.Y. Chandrachud
pointed out that the duty of the Court is to impart “sense of business
efficacy” to the commercial transactions pointing out that mere
allegations of fraud were not sufficient to decline to refer the parties to
arbitration. In para (48) of Ayyasamy case, Justice D.Y. Chandrachud
held as under:-
“48. The basic principle which must guide judicial decisionmaking
is that arbitration is essentially a voluntary assumption of
an obligation by contracting parties to resolve their disputes
through a private tribunal. The intent of the parties is expressed in
the terms of their agreement. Where commercial entities and
persons of business enter into such dealings, they do so with a
28
knowledge of the efficacy of the arbitral process. The
commercial understanding is reflected in the terms of the
agreement between the parties. The duty of the court is to
impart to that commercial understanding a sense of business
efficacy.” (Underlining added)
33. When we apply the aforesaid principles to the facts of the present
case, as discussed earlier, both parties have consciously proceeded with
the commercial transactions to commission the Photovoltaic Solar Plant
at Dongri, Raksa, District Jhansi, U.P. The first respondent has proceeded
to procure the materials, entered into agreement with Juwi India for
engineering, installation and commissioning and the sale and purchase
agreement with Astonfield, were all the conscious steps taken in the
commercial understanding to commission the Solar Plant at Dongri,
Raksa, District Jhansi, U.P. Even though Juwi India and Astonfield are not
parties to the main agreement - Equipment Lease Agreement
(14.03.2012), all the agreements/contracts contain clauses referring to
the main agreement. It is the duty of the Court to impart the commercial
understanding with a “sense of business efficacy” and not by the mere
averments made in the plaint. The High Court was not right in refusing to
refer the parties on the ground of the allegations of fraud levelled in the
plaint.
34. It is only where serious questions of fraud are involved, the
arbitration can be refused. In this case, as contended by the appellants
29
there were no serious allegations of fraud; the allegations levelled against
Astonfield is that appellant no.1 - Ameet Lalchand Shah misrepresented
by inducing the respondents to pay higher price for the purchase of the
equipments. There is, of course, a criminal case registered against the
appellants in FIR No.30 of 2015 dated 05.03.2015 before the Economic
Offences Wing, Delhi. The appellant no.1 – Ameet Lalchand Shah has
filed Criminal Writ Petition No.619 of 2016 before the High Court of Delhi
for quashing the said FIR. The said writ petition is stated to be pending
and therefore, we do not propose to express any views in this regard,
lest, it would prejudice the parties. Suffice to say that the allegations
cannot be said to be so serious to refuse to refer the parties to arbitration.
In any event, the Arbitrator appointed can very well examine the
allegations regarding fraud.
35. Main agreement - Equipment Lease Agreement (14.03.2012) for
leasing and commissioning of Solar Plant at Dongri, Raksa, District
Jhansi, Uttar Pradesh contains arbitration clause (Clause 29). As
discussed earlier, other three agreements - two agreements between
Rishabh and Juwi India (01.02.2012) and Sale and Purchase Agreement
(05.03.2012) between Rishabh and Astonfield are integrally connected
with the commercial understanding of commissioning the Solar Project at
Dongri, Raksa, District Jhansi, Uttar Pradesh and to resolve the dispute
30
between the parties, they are to be referred to arbitration. The order of
the High Court declining to refer the parties to arbitration cannot be
sustained and is liable to be set aside. The four agreements namely:- (i)
Equipment and Material Supply Contract (01.02.2012) between Rishabh
and Juwi India; (ii) Engineering, Installation and Commissioning Contract
(01.02.2012) between Rishabh and Juwi India; (iii) Sale and Purchase
Agreement (05.03.2012) between Rishabh and Astonfield; and (iv)
Equipment Lease Agreement (14.03.2012) between Rishabh and Dante
Energy and the parties thereon are referred to arbitration.
36. As per the terms of Equipment Lease Agreement (14.03.2012),
appellant No.3 - Dante Energy has to pay lease rentals of Rs.13,67,500/-
for the month of March, 2012 and with effect from April, 2012 to pay
lease rentals of Rs.28,26,000/- per month for a period of fifteen years.
Learned Senior Counsel for respondents, Mr. Sibal has submitted that
appellant No.3 - Dante Energy has not paid the rentals as per the terms
and conditions of Equipment Lease Agreement. Mr. Sibal has also drawn
our attention that Astonfield Solar Rajasthan Pvt. Ltd. has transferred
99.99% of its shares to ARRL (Mauritius) Ltd. (Holding Company) and
Ameet Lalchand Shah has only one share (0.01%). Our attention was
also drawn to Astonfield Solar Gujarat Pvt. Ltd., which has also
transferred 99.99% of its shares to ARRL (Mauritius) Ltd. (Holding
31
Company) and that Ameet Lalchand Shah has only one share (0.01%). It
was also submitted that the appellant No.1 - Ameet Lalchand Shah was
subsequently removed from the Board of Directors of Astonfield Solar
Gujarat Pvt. Ltd. by the shareholders by EGM dated 17.12.2016. We do
not propose to go into the merits of this contention; however, keeping in
view that Astonfield has transferred its shareholdings qua Rajasthan and
Gujarat Solar Power units, in our view, the interest of the respondents is
to be protected till the matter is resolved by the arbitrator by directing the
appellants to pay the arrears of lease rent and also to pay the future
lease rent for the equipments at the rate of Rs.28,26,000/- per month.
37. The impugned order of the High Court is set aside and this appeal
is allowed. All the aforesaid four agreements and the parties thereon are
referred to arbitration. By notice dated 13.02.2016, appellants have
nominated Justice Sujata Manohar, former Judge of the Supreme Court
of India as their Arbitrator. We leave it open to the parties as to the
choice of the Arbitrator. If the parties are not in a position to arrive at
consensus as to the Arbitrator, the parties shall approach the appropriate
High Court for appointment of the Arbitrator. Appellants are jointly and
severely liable to pay the arrears of lease rent and also to pay the future
lease rent for the equipments of the PV Solar Power Plant at Dongri,
Raksa, District Jhansi, Uttar Pradesh at the rate of Rs.28,26,000/- per
32
month till the disposal of the arbitration proceedings. Such payment of
lease rent shall be without prejudice to the contentions of both parties
and shall be subject to the final outcome of arbitration proceedings.
Since parties are referred to arbitration, commercial Suit No.85 of 2017
filed by the respondents on the file of Delhi High Court shall stand
disposed of. No cost.
.…….…………...………J.
 [RANJAN GOGOI]
…………….……………J.
 [R. BANUMATHI]
New Delhi;
May 03, 2018
33

The principles of damages in public law have to, however, satisfy certain tests. In Nilabati Behera v. State of Orissa5 , it was observed that public law proceedings serve a different purpose than private law proceedings. In that context, it was observed as under: “The purpose of public law is not only to civilize public power but also to assure the citizen that they live under a legal system which aims to protect their interests and preserve their rights. Therefore, when the court molds the relief by granting ‘compensation’ in proceedings under Articles 32 or 226 of the Constitution seeking enforcement or protection of fundamental rights, it does so under the public law by way of penalising the wrongdoer and fixing the liability for the public wrong on the State which has failed in its public duty to protect the fundamental rights of the citizen. The payment of compensation in such cases is not to be understood, as it is generally understood in a civil action for damages under the private law but in the broader sense of providing relief by an order of making ‘monetary amends’ under the public law for the wrong done due to breach of public duty, of not protecting the fundamental rights of the citizen. The compensation is in the nature of ‘exemplary damages’ awarded against the wrong doer for the breach of its public law duty and is independent of the rights available to the aggrieved party to claim compensation under the private law in an action based on tort, through a suit instituted in a court of competent jurisdiction or/and prosecute the offender under the penal law.”- On a conspectus of the aforesaid facts including the number of pilgrims for whom the petitioners would have been entitled to arrange the Hajj pilgrimage, an amount of Rs.5 lakh per petitioner would be adequate compensation for the loss suffered by them and sub-serve the ends of justice. We are conscious of the fact that there is no quantification based on actual loss, but then the award by us is in the nature of damages in public law. The amount for each of the petitioners be remitted by the respondents within two months from the date of this order failing which the amount would carry interest @ 15 per cent per annum apart from any other remedy available to the petitioners. It will be open to the respondents to recover the amount of damages and costs from the delinquent officers responsible for passing such unsustainable orders.

 REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION (CIVIL) NO.631 OF 2016
UNITED AIR TRAVEL SERVICES
Through ITS PROPRIETOR
A.D.M. ANWAR KHAN ….PETITIONER
Versus
UNION OF INDIA
Through SECRETARY
(MINISTRY OF EXTERNAL AFFAIRS) ….RESPONDENT
WITH
Writ Petition (Civil) No.636 of /2016
Writ Petition (Civil) No. 634 of 2016
Writ Petition (Civil) No. 934 of 2016
Writ Petition (Civil) No. 941 of 2016
Writ Petition (Civil) No. 938 of 2016
Writ Petition (Civil) No. 11 of 2017
Writ Petition (Civil) No. 94 of 2017
1
J U D G M E N T
SANJAY KISHAN KAUL, J.
1. A batch of writ petitions raises the issue of Private Tour
Operators (for short ‘PTOs’) who are, inter alia conducting the travel
business for Hajj and Umrah being disqualified for grant of
registration for the year 2016 for the Hajj pilgrimage. The prayer is for
quashing the identical communications dated 27.7.2016 issued by the
respondent rejecting the application of the petitioners for registration
and allocation of quota for the Hajj 2016 on the ground that they have
not complied with certain clauses of the policy for the PTOs as laid
down by this Court.
2. The issue relating to the Hajj policy and the registration of these
PTOs has resulted in two judicial pronouncements by this Court in
Union of India v. Rafique Shaikh Bhikan1
 and Al Ismail Haj Tour v.
Union of India2
. The policy presented on behalf of the Government
was approved by this Court with slight modifications and was annexed
as Appendix-I to the order in Union of India v. Rafique Shaikh
1(2013) 4 SCC 699
2(2016) 15 SCC 246
2
Bhikan3
 case referred to aforesaid to be called as ‘Policy for Private
Tour Operators for hajj 2013 – 2017’. The policy was to remain valid
for a period of five years and was not to be questioned in any court or
authority. The petitioners were all eligible to be qualified as PTOs for
the year 2015 for Hajj pilgrimage but in the process of draw of lots
dated 7.8.2015, luck did not favour them and they thus did not get
quota. The relevant extract of the policy is as under:
“Appendix I
Ministry of External Affairs
(Gulf and Haj Division)
***
Registration of Private Tour Operators — Haj 2013
The Government of Saudi Arabia has notified that Private Tour
Operators (PTOs) registered with the Government of India and
involved in the preparation of the Haj Pilgrimage will be eligible
for grant of Haj group visas subject to fulfilment of other terms
and conditions as laid down by the Saudi Authorities.
2. Applications are invited from eligible PTOs for registration
for Haj 2013. The eligibility criteria are at Annexures A and B.
The applications must be submitted in the prescribed format
(Annexure C) directly to MEA or any other agency appointed by
it.
3(supra)
3
3. It is to be noted that the Government of Saudi Arabia has
stipulated that effective Haj 2013, a PTO should facilitate at
least 150 pilgrims. Accordingly, the PTO Policy has been
reframed. For registration and allotment of quota of Haj seats for
Haj 2013, interested PTOs may apply under the following two
categories:
Category I PTOs registered with MEA and facilitated Hajis
at least for 7 Haj operations or more.
Category II PTOs registered with MEA and facilitated Hajis
for at least for 1 to 6 Haj operations and PTOs
which have facilitated at least 50 umrah pilgrims
in a year for any five years.
4. 70% of the overall quota of seats will be allocated to eligible
PTOs under Category 3(I) and 30% to eligible PTOs under
Category 3(II). Distribution of seats among qualified PTOs will
be done as follows:
(a) 70% of the Haj 2013 PTO seats (31,500) will be allocated to
eligible PTOs under Category 3(I) at the rate of 150 seats per
PTO. In case the number of PTOs exceeds 210, the allocation of
seats will be done on draw of lots. If the number of qualified
PTOs is less than 210, each PTO will be allocated 150 seats and
surplus seats, if any, will be distributed equally among them.
(b) 30% of Haj 2013 PTO seats (9000) will be allocated to
eligible PTOs under Category 3(II) at the rate of 150 seats per
qualified PTO. If the number of qualified PTOs exceeds 90, the
allocation of seats will be done by draw of lots. In case the
number of PTOs is less than 90, each PTO will be allocated 150
seats. Balance seats, if any, will be transferred to Category I and
distributed equally among them. A qualified PTO which fails to
get selected under the draw of lots in any year will be allocated
150 seats in the ensuing year without qurrah if it remains a
qualified PTO.
4
5. This Policy is expected to remain valid for five years 2013-
2017 unless there are substantive developments which affect it.
The allocation of seats to qualified PTOs in each category will
be done every year on the basis of the overall quota of PTO seats
specified in the Annual India-Saudi Arabia Haj Agreement and
the number of qualified PTOs remaining in each category. The
policy envisages cross-category upward movement of PTOs
from Category II to Category I. A qualified PTO shall remain
qualified unless it is otherwise disqualified either by the
Government of India or by the Government of Saudi Arabia for
valid reasons. It is to be noted that the PTOs who do not wish to
take a minimum of 150 Hajis or are unable to do so, need not
apply.
6. Last date for receipt of applications which should be
addressed to the MEA or any other agency appointed by it.
(emphasis supplied)
3. In terms of the aforesaid policy since the qualified PTOs
exceeded 90, a draw of lots was held. Further, since the petitioners
were not successful in the draw of lots, they were entitled, under clause
4(b) of the policy aforesaid, to be allocated 150 seats in the ensuing
year without Qurrah if they remain qualified as PTOs. We may note at
this stage that as per the submissions advanced, in view of certain
changes in the policy of the Saudi Government, the number of seats to
be allocated for 2016 would have been 50.
4. It is also apparent from the Press Release of 7.8.2015 giving the
5
list of PTOs who have qualified but did not get quota, that the
petitioners figured in the said list.
5. On 29.4.2016, the Ministry of External Affairs published the
norms for registration of PTOs for Hajj 2016. Para 3 of this reads as
under:
“3. All the terms and conditions laid down in Annexure A & B
will also apply on PTOs that qualify under Category-II by virtue
of facilitating a minimum of 50 Umrah pilgrims in a year for any
5 years, but with the exception of the terms and conditions
contained under Clause (vii), (x), (xi) and (xii) of Annexure A.
In addition, these PTOs are also required to submit the proof of
payment made through banking or any other authorised channels
towards purchase of tickets and hiring of accommodation in
Makkah and Madinah in respect of Umrah pilgrims facilitated
by them in support of their claim.”
6. The aforesaid, thus, provided that persons like the petitioners
who had qualified for the year 2015 but were not successful in the
draw of lots would have the benefit of exemption of terms and
conditions contained in clauses (vii), (x), (xi) and (xii) of Annexure A.
7. For purposes of completion of record, we enumerate
hereinbelow the said clauses of Annexure A:
“ANNEXURE-A
Terms and Conditions for Registration of
Private Tour Operators (PTOs) for Haj-2016
6
Each PTO should establish that it is a genuine and established
Tour Operator having experience in sending tourists/pilgrims
abroad for which it should produce the following documents:
Sl. No. Terms and Conditions
vii Proof of payment made through banking (Bank
Statement) or other authorized channels towards
purchase of tickets and hiring of accommodation in
Makkah/Madinah for the financial year 2013-14
(Haj2013) or 2014-15 (Haj 2014). Payments towards
purchase of tickets, hiring of accommodation for
pilgrims in Makkah/Madinah, by any other means,
would not be accepted.
x Copies of Registration Certificate issued to the PTO
in support their aim-wise and PTO-wise.
xi Contract for hiring of buildings for pilgrims and
“Tasreeh” together with English translations PTO
category wise. (Please enclose rental receipts and a
copy of lease deed, duly signed with the Saudi owners
for Haj.
xii Copy of Munazzim Card and relevant Haj visa pages
of the Passport of the Proprietor/Owner.
8. The petitioners, however, faced identical rejection letters of
26.7.2016 (sent through e-mail dated 27.7.2016), the contents of which
are as under:
“Subject: Intimation regarding non-allocation of quota to Private
Tour Operators (PTOs) for Haj-2016.
Dear Sirs,
This has reference to your application regarding registration for
Haj 2016.
7
2. On scrutiny of your application submitted for Haj-2016, your
firm has not been found eligible for registration and allocation of
quota for Haj 2016 on the following grounds:
PTO has not complied with clause vii, x, xi and xii of Annexure
A of PTO.
Policy as laid down by Hon’ble Supreme Court for any one of
the Haj year.
3. Your ineligibility for registration and allocation of quota for
Haj 2016, however, does not prejudice your right to debar you
from applying for registration for Haj 2017 on the basis of the
required conditions for Haj 2017.”
9. A bare perusal of the aforesaid letter would show that the reason
cited for disqualification was non-compliance of the very clauses of
which exemption had been granted to the petitioners.
10. Learned Additional Solicitor General appearing for the
respondents could not dispute the aforesaid position but sought to
canvas that the reasons were wrongly communicated in the rejection
letter, and there was actually, some other reason for the rejection. The
aforesaid plea can hardly be countenanced in view of the reasons
referred to and communicated.
11. Learned counsel for the petitioner has, thus, rightly drawn our
attention to the Constitution Bench judgment of this Court in
8
Mohinder Singh Gill v. Anr. v. The Chief Election Commissioner,
New Delhi & Ors.4
 to submit that such a plea cannot be accepted. We
may note that this is a well settled legal position in many judicial
pronouncements of this Court, but it is not necessary to revert to the
same. In para 8 of the aforesaid judgment, V.R. Krishna Iyer, J, in his
inimitable style states as under:
“8. The second equally relevant matter is that when a statutory
functionary makes an order based on certain grounds, its validity
must be judged by the reasons so mentioned and cannot be
supplemented by fresh reasons in the shape of affidavit or
otherwise. Otherwise, an order bad inthe beginning may, by the
time it comes to Court on account of a challenge, get validated
by additional grounds later brought out. We may here draw
attention to the observations of Bose, J. in Gordhandas Bhanji:
“Public orders, publicly made, in exercise of a statutory
authority cannot be construed in the light of explanations
subsequently given by the officer making the order of
what he meant, or of what was in his mind, or what he
intended to do. Public orders made by public authorities
are meant to have public effect and are intended to affect
the actings and conduct of those to whom they are
addressed and must be construed objectively with
reference to the language used in the order itself.
Orders are not like old wine becoming better as they grow
older.”
12. The aforesaid legal position, thus, makes the stand of the
4(1978) 1 SCC 405
9
respondent unsustainable, resulting in the quashing of the impugned
letters of rejection.
13. The question, however, rises what relief can be granted in such a
situation. The passage of time has made certain reliefs infructuous.
The time period for conducting Hajj tours for 2016 as well as 2017 is
over. Thus, even the alternative relief prayed for 2017 has become
infructuous. In three of the writ petitions, i.e., WP (C) Nos.631/2016;
634/2016 & 636/2016, there is a specific alternative plea for
compensation to the petitioners for the loss accrued due to non-grant of
registration for the Hajj of 2016. While there is no such specific plea
in the other writ petitions, given the identical situation, we are of the
view that the same principle ought to be applied in all these cases. The
petitioners cannot be left remediless. The mindless action of the
respondents in rejecting the eligibility of the petitioners for the year
2016 on the very grounds on which they were exempted necessitates
that the petitioners should be entitled to damages in public law so that
they are compensated, at least, to some extent for not having been able
to carry on with their business on account of illegal action of the
respondents.
10
14. The principles of damages in public law have to, however,
satisfy certain tests. In Nilabati Behera v. State of Orissa5
, it was
observed that public law proceedings serve a different purpose than
private law proceedings. In that context, it was observed as under:
“The purpose of public law is not only to civilize public power
but also to assure the citizen that they live under a legal system
which aims to protect their interests and preserve their rights.
Therefore, when the court molds the relief by granting
‘compensation’ in proceedings under Articles 32 or 226 of the
Constitution seeking enforcement or protection of fundamental
rights, it does so under the public law by way of penalising the
wrongdoer and fixing the liability for the public wrong on the
State which has failed in its public duty to protect the
fundamental rights of the citizen. The payment of compensation
in such cases is not to be understood, as it is generally
understood in a civil action for damages under the private law
but in the broader sense of providing relief by an order of
making ‘monetary amends’ under the public law for the wrong
done due to breach of public duty, of not protecting the
fundamental rights of the citizen. The compensation is in the
nature of ‘exemplary damages’ awarded against the wrong doer
for the breach of its public law duty and is independent of the
rights available to the aggrieved party to claim compensation
under the private law in an action based on tort, through a suit
instituted in a court of competent jurisdiction or/and prosecute
the offender under the penal law.”
It was also emphasized that it is a sound policy to punish the
wrongdoer and it is in that spirit that the courts have molded the relief
5 (1993) 2 SCC 746
11
by granting compensation in exercise of writ jurisdiction. The
objective is to ensure that public bodies or officials do not act
unlawfully. Since the issue is one of enforcement of public duties, the
remedy would be available under public law notwithstanding that
damages are claimed in those proceedings.
15. The aforesaid aspect was, once again, emphasized in Common
Cause, a Registered Society v. Union of India6
. We may also usefully
refer to N. Nagendra Rao & Co. v. State of A.P.7
qua the proposition
that the determination of vicarious liability of the State being linked
with the negligence of its officer is nothing new if they can be sued
personally for which there is no dearth of authority.
16. In the facts of the present case, the arbitrariness and illegality of
the action of the authority is writ large. The petitioners have been
deprived of their right to secure the quota on a patently wrongful order
passed for reasons, which did not apply to them and for conditions,
which had been specifically exempted. What could be a greater
arbitrariness and illegality? Where there is such patent arbitrariness
and illegality, there is consequent violation of the principles enshrined
6 (1999) 6 SCC 667
7 (1994) 6 SCC 205
12
under Article 14 of the Constitution of India. The facts of the present
case are, thus, undoubtedly giving rise to the satisfaction of parameters
as a fit case for grant of compensation.
17. On a conspectus of the aforesaid facts including the number of
pilgrims for whom the petitioners would have been entitled to arrange
the Hajj pilgrimage, an amount of Rs.5 lakh per petitioner would be
adequate compensation for the loss suffered by them and sub-serve the
ends of justice. We are conscious of the fact that there is no
quantification based on actual loss, but then the award by us is in the
nature of damages in public law.
18. The amount for each of the petitioners be remitted by the
respondents within two months from the date of this order failing
which the amount would carry interest @ 15 per cent per annum apart
from any other remedy available to the petitioners. It will be open to
the respondents to recover the amount of damages and costs from the
delinquent officers responsible for passing such unsustainable orders.
13
19. The writ petitions are allowed in the aforesaid terms with costs
quantified at Rs.10,000 per petition.
..….….…………………….J.
 [J. Chelameswar]
 ...……………………………J.
 [Sanjay Kishan Kaul]
New Delhi.
May 07, 2018.
14

“U.P. Ex-Chief Ministers Residence Allotment Rules, 1997” = The Chief Minister, once he/she demits the office, is at par with the common citizen, though by virtue of the office held, he/she may be entitled to security and other protocols. But allotment of government bungalow, to be occupied during his/her lifetime, would not be guided by the constitutional principle of equality. -Once such persons demit the public office earlier held by them there is nothing to distinguish them from the common man. The public office held by them becomes a matter of history and, therefore, cannot form the basis of a reasonable classification to categorize previous holders of public office as a special category of persons entitled to the benefit of special privileges.- Not only that the legislation i.e. Section 4(3) of the 1981 Act recognizing former holders of public office as a special class of citizens, viewed in the aforesaid context, would appear to be arbitrary and discriminatory thereby violating the equality clause.-we hold that Section 4(3) of the 1981 Act cannot pass the test of Article 14 of the Constitution of India and is, therefore, liable to be struck down. We, therefore, hold that the aforesaid Section 4(3) of the Uttar Pradesh Ministers (Salaries, Allowances and Miscellaneous Provisions) Act, 1981 is ultra vires the Constitution of India as it transgresses the 29 equality clause under Article 14.

1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION (C) NO.864 OF 2016
LOK PRAHARI THROUGH ITS GENERAL SECRETARY ...PETITIONER
 VERSUS
THE STATE OF UTTAR PRADESH & ORS. …RESPONDENTS
J U D G M E N T
RANJAN GOGOI, J.
1. This writ petition under Article 32 of the Constitution of
India raises a challenge to the validity of Section 4(3) of the
Uttar Pradesh Ministers (Salaries, Allowances and
Miscellaneous Provisions) Act, 1981 (hereinafter referred to as
“the 1981 Act”), as amended in 2016.
2. The case has a somewhat chequered history. Suffice
it will be to recapitulate that as former Chief Ministers of the
State of Uttar Pradesh continued to occupy their official
accommodation even after demitting office, in clear breach of
Section 4 of the 1981 Act as it had then existed, a writ petition
was filed before the High Court of Allahabad by the present
petitioner. During the pendency of the said writ petition, a set of
2
Rules namely “U.P. Ex-Chief Ministers Residence Allotment
Rules, 1997” (hereinafter referred to as “the 1997 Rules”) were
framed to provide for allotment of government accommodation
to former Chief Ministers. The writ petition was accordingly
amended to challenge the validity of the provisions of the 1997
Rules. However, the same was closed by the High Court on a
statement made on behalf of the State of Uttar Pradesh that
former Chief Ministers would be henceforth allotted only Type V
bungalows and that too on payment of rent etc.
3. In the aforesaid situation, the present petitioner had
filed Writ Petition (C) No.657 of 2004 (Lok Prahari vs. State of
Uttar Pradesh and others) before this Court challenging the
validity of the aforesaid 1997 Rules. By judgment and order
dated 1st August 20161
, the aforesaid writ petition was answered
by this Court by striking down the 1997 Rules, inter alia, on the
ground that the provision for accommodation for ex-Chief
Ministers as made under the aforesaid 1997 Rules was in direct
conflict with the provisions of Section 4 of the 1981 Act.
Paragraphs 33, 37 and 38 of the said report in Lok Prahari
(supra) would be relevant to notice:
“33. We may now turn to the issue whether the
impugned 1997 Rules are ultra vires Article 14 of the
1
(2016) 8 SCC 389
3
Constitution of India and also repugnant to the
provisions of the 1981 Act. The relevant extract of the
1997 Rules is as under:
“4. Allotment of residence.—A residence on falling
vacant will be allotted by the Estate Officer to such exChief
Minister who has given an application under
these Rules. There will be no right for allotment of a
house outside Lucknow under these Rules.
* * *
6. Period for which allotment subsists.—The
allotment of residence to ex-Chief Ministers shall be
effective only during their lifetime. The allotment shall
be deemed to be automatically cancelled upon the
death of ex-Chief Minister and family members
residing therein will have to invariably hand over the
possession of the residence concerned to the Estate
Department within 3 months from the date of death. If
the family members residing in the residence do not
hand over the possession, recovery rent, damages,
etc. shall be taken under the provisions of the U.P.
Public Premises (Eviction of Unauthorised Occupants)
Act, 1972.”
* * *
* * *
37. If we look at the position of other constitutional
post holders like Governors, Chief Justices, Union
Ministers, and Speaker, etc. all of these persons hold
only one “official residence” during their tenure. The
respondents have contended that in a federal set-up,
like the Union, the State has also power to provide
residential bungalow to the former Chief Minister. The
above submission of the respondent State cannot be
accepted for the reason that the 1981 Act does not
make any such provision and the 1997 Rules, which
are only in the nature of executive instructions and
contrary to the provisions of the 1981 Act, cannot be
acted upon.
38. Moreover, the position of the Chief Minister and the
Cabinet Ministers of the State cannot stand on a
separate footing after they demit their office. Moreover,
4
no other dignitary, holding constitutional post is given
such a facility. For the aforestated reasons, the 1997
Rules are not fair, and more so, when the subject of
“salary and allowances” of the Ministers, is governed
by Section 4(2)(a) of the 1981 Act.”
4. Section 4 of the 1981 Act was amended in the year
2016. Under Section 4(3) brought in by the 2016 Amendment
(U.P. Act No.22 of 2016), former Chief Ministers of the State
became entitled to allotment of government accommodation for
their life time. The validity of the aforesaid Section 4(3), as
amended, has been questioned by the writ petitioner, a
registered body, which claims to be “committed to upholding of
the Constitution and enforcement of the Rule of law”.
5. Section 4 of the 1981 Act as originally enacted and as
amended in the year 2016 by 2016 Amendment is in the
following terms:
Section 4 of the Act, as
originally enacted
Section 4 of the Act, as
amended in the year 2016
by 2016 Amendment (U.P
Act No. 22 of 2016)
4.Residence.-(1) Each
Minister shall be entitled
without payment of any rent
to the use throughout the
term of his office and for
period of fifteen days
thereafter, of a residence at
Lucknow which shall be
furnished and maintained at
4. For section 4 of the
principal Act, the following
sections shall be substituted,
namely:-
4(1) The Chief Minister and
each Minister shall be entitled,
without payment of any rent to
the use, throughout the term
of his office and for a period of
5
public expenses at the
prescribed scale.
(2) Where a Minister has not
been provided with a
residence in accordance with
sub-Section (1), or does not
avail of the benefit of the
said sub section, he shall be
entitled to a compensatory
allowance at the rate of-
(a) three hundred rupees per
month in the case of Deputy
Minister, and
(b) five hundred rupees per
month in any other case.
fifteen days thereafter, of a
residence at Lucknow which
shall be furnished and
maintained at public expense
at the prescribed scale.
(2) Where the Chief Minister
or a Minister has not been
provided with a residence in
accordance with subsection(1)
or does not avail of
the benefit of the said subsection,
he shall be entitled to
a compensatory allowance at
the rate of –
(a) ten thousand rupees per
month in the case of the Chief
Minister, a Minister, a Minister
of State (Independent
Charge) and a Minister of
State;
(b) eight thousand rupees per
month in the case of a Deputy
Minister.
(3) A government residence
shall be allotted to a former
Chief Minister of Uttar
Pradesh, at his/her request,
for his/her life time, on
payment of such rent as may
be determined from time to
time by the Estate
Department of the State
Government.
6. The 1981 Act was amended by the Uttar Pradesh
Ministers and State Legislature, Officers and Members
Amenities Laws (Amendment) Act, 1990 (U.P. Act No.5 of 1990)
(hereinafter referred to as “1990 Amendment”) by insertion of
6
sub-section (1-A) to Section 4 which is in the following terms:
“(1-A) Each Minister for whose use a
residence at Lucknow has been provided
under sub-section (1) shall immediately after
the expiration of the period referred to in that
sub-section, vacate such accommodation and
an officer authorized by the State Government
in this behalf may take possession of the
accommodation and may for the purpose use
such force as may be necessary in the
circumstances.
Explanation – For the purposes of this subsection
‘Minister’ includes a person who has
ceased to be a Minister”, and also includes a
person who was given the status of a Minister.”
7. By another amendment to the 1981 Act by the Uttar
Pradesh Ministers and State Legislature, Officers and Members
Amenities Laws (Amendment) Act, 1997 (U.P. Act No.8 of 1997)
(hereinafter referred to as “1997 Amendment”) Section 4-A was
inserted, which is to the following effect:
“4-A. Special provisions regarding certain
accommodations.- (1) On and from the
commencement of the Uttar Pradesh Ministers
and State Legislature Officers and Members
Amenities Laws (Amendment) Act, 1997, the
State Government may, with a view to
ensuring timely availability of residence to a
Minister under sub-section (1) of Section 4, by
a notified order, specify any type-VI
accommodation or an accommodation in
which a Minister was in occupation at any
time, under the control and Management of
the Estate Department of the State
Government, as Minister’s residence and an
accommodation so specified shall be allotted
to a Minister only and not to any other person.
7
(2) The State Government, or an officer
authorized by it in this behalf may, if a person
other than a Minister referred to in sub-section
(1-A) of Section 4 is in occupation of an
accommodation specified as Minister’s
residence under sub-section (1) on the basis
of any allotment order or otherwise, cancel the
allotment order of such person, if any, and by
notice in writing require such person to vacate
the said accommodation within fifteen days
from the date of service upon him of such
notice, and if such person fails to vacate the
said accommodation within the said period, an
officer authorized by the State Government in
this behalf may take possession of the
accommodation and may for the purpose use
such force as may be necessary in the
circumstances”.
8. It will be worthwhile to note at this stage that while
Section 4(1-A) of the 1981 Act has been deleted by the 2016
Amendment Section 4-A continues to remain on the statute
book.
9. Section 4-A(2) of the 1981 Act, extracted above,
visualize that if any person other than the Minister is in
occupation of accommodation specified as Minister’s residence
under sub-section (1) of Section 4-A (Type VI accommodation)
the allotment order of such person shall be cancelled and the
occupant would be required to vacate the said accommodation
within fifteen days from the date of service of notice, failing
8
which, the Authorized Officer would be competent in law to take
possession of the accommodation, if necessary, by use of such
force, as may be required.
10. Having noted the salient features of the provisions of
the 1981 Act the question that arises for determination in the
present proceedings may be summarized as follows:
“Whether retention of official accommodation by the
functionaries mentioned in Section 4(3) of the 1981 Act after
they had demitted office violate the equality clause guaranteed
by Article 14 of the Constitution of India.”
11. The petitioner - body which is a registered society
under the Societies Registration Act, 1860 is represented in
these proceedings by its Secretary Shri S.N. Shukla, who is a
retired I.A.S. Officer. Though Shri Shukla had advanced his
arguments and contentions with great clarity, yet, having regard
to the importance of the question raised we had thought it
proper to take the assistance of Shri Gopal Subramanium,
learned Senior Counsel of this Court and to assist him we had
thought it proper to request Shri Gopal Sankaranarayanan,
learned counsel, a member of the Supreme Court Bar
Association. Both Shri Gopal Subramanium, learned Senior
9
Counsel and Shri Gopal Sankaranarayanan, learned counsel
have rendered their valuable assistance to this Court which
assistance is being acknowledged by the Court at the very
outset of the present order.
12. Though the issue in the present proceeding is strictly
confined to the provisions of the 1981 Act, having regard to the
fact that there may be similar/pari materia provisions in force in
different States/Union Territories and also in the Union we had
thought it proper to inform, through the learned Amicus Curiae,
the law officers of the Union and all the States/Union Territories
of the pendency of the present writ petition and the issues
arising therein. Pursuant thereto, the responses of the Union
and the States of Assam, Bihar, Tamil Nadu and Odisha have
been received. Shri Aman Lekhi, learned ASG has submitted
that the Government Accommodation is provided to former
Presidents, Vice-Presidents, Prime Ministers of the country. The
issue had come up for consideration in this Court in Shiv Sagar
Tiwari vs. Union of India and others2
 wherein this Court has
approved the action taken in the matter of provision of official
accommodation to the aforesaid dignitaries under the extant
Rules in the following manner:
2
(1997) 1 SCC 444
10
“72. Keeping in view the very high
constitutional position occupied by the
President, Vice-President and Prime Minister,
we feel no difficulty in stating that they should
be accommodated in government premises
after demitting of office by them, so that
problem of suitable residence does not trouble
them in the evening of life. What should be the
terms of the same is a matter to be decided by
the Government.”
13. Insofar as the States of Tamil Nadu and Odisha are
concerned, it is clear from the communications received from
the Advocate Generals of the said States by the office of the
learned Amicus Curiae Shri Gopal Subramanium that no
provision for official accommodation to former Chief Ministers
has been made by the said two states whereas in the case of
States of Bihar and Assam such provision has been made by
executive instructions issued by the State under Article 162 of
the Constitution of India.
14. We had thought it proper to request the learned
Amicus Curiae to sound the Advocate Generals of the States on
the pendency of this writ petition to enable the States to render
assistance to the Court in the matter of adjudication of
11
the validity of Section 4(3) of the 1981 Act in view of the fact that
some of the States may have pari materia provisions in force.
No such contest by the States with regard to the validity of the
Section 4(3) of the 1981 Act had been forthcoming except to the
extent mentioned hereinabove on behalf of the Union of India.
We, therefore, proceed to undertake the present exercise which,
we make it clear, is confined to the issue of validity of Section
4(3) of the 1981 Act.
15. It would be appropriate to initiate the discourse by
remembering the preamble to the Constitution of India which is
in the following terms.
WE, THE PEOPLE OF INDIA, having solemnly
resolved to constitute India into a SOVEREIGN
SOCIALIST SECULAR DEMOCRATIC REPUBLIC
and to secure to all its citizens:
JUSTICE, social, economic and political;
LIBERTY, of thought, expression, belief, faith and
worship;
EQUALITY of status and of opportunity;
and to promote among them all
FRATERNITY assuring the dignity of the
individual and the unity and integrity of the
Nation;
IN OUR CONSTITUENT ASSEMBLY this twentysixth
day of November, 1949, DO HEREBY
ADOPT, ENACT AND GIVE TO OURSELVES THIS
12
CONSTITUTION.
16. The preamble to the Constitution of India embodies,
inter alia, the principles of equality and fraternity and it is on the
basis of these principles of equality and fraternity that the
Constitution recognizes only one single class of citizens with
one singular voice (vote) in the democratic process subject to
provisions made for backward classes, women, children, SC/ST,
minorities, etc. A special class of citizens, subject to the
exception noted above, is abhorrent to the constitutional ethos.
17. The resolve of ‘the People of India’ to have a
republican form of Government is a manifestation of the
constitutional philosophy that does not recognize any arbitrary
sovereign power and domination of citizens by the State. The
republican liberty and the doctrine of equality is the central
feature of the Indian democracy.
18. It is, therefore, axiomatic that in a democratic
republican government public servants entrusted with duties of
public nature must act in a manner that reflects that ultimate
authority is vested in the citizens and it is to the citizens that
holders of all public offices are eventually accountable. Such a
situation would only be possible within a framework of equality
13
and when all privileges, rights and benefits conferred on holders
of public office are reasonable, rational and proportionate.
19. It may be necessary herein to recapitulate the Seven
Principles of Public Life Report by Lord Nolan which find
mention in the judgment of this Court in Vineet Narain and
others vs. Union of India and another3
 (paragraph 54). This
Court in paragraph 55 of the report in Vineet Narain (supra)
had observed:
 “These principles of public life are of general
application in every democracy and one is
expected to bear them in mind while
scrutinizing the conduct of every holder of a
public office.”
The seven principles of public life stated in the Report by
Lord Nolan are as follows:
“THE SEVEN PRINCIPLES OF PUBLIC LIFE
Selflessness
Holders of public office should take
decisions solely in terms of the public interest.
They should not do so in order to gain financial
or other material benefits for themselves, their
family, or their friends.
Integrity
Holders of public office should not place
themselves under any financial or other
obligation to outside individuals or
organisations that might influence them in the
performance of their official duties.
Objectivity
3
(1998) 1 SCC 226
14
In carrying out public business, including
making public appointments, awarding
contracts, or recommending individuals for
rewards and benefits, holders of public office
should make choices on merit.
Accountability
Holders of public office are accountable for
their decisions and actions to the public and
must submit themselves to whatever scrutiny
is appropriate to their office.
Openness
Holders of public office should be as open
as possible about all the decisions and actions
that they take. They should give reasons for
their decisions and restrict information only
when the wider public interest clearly
demands.
Honesty
Holders of public office have a duty to
declare any private interests relating to their
public duties and to take steps to resolve any
conflicts arising in a way that protects the
public interest.
Leadership
Holders of public office should promote and
support these principles by leadership and
example.”
20. It would be significant to note that the legislative
anxiety to bring in a classless society, a constitutional
vision, inter alia, found manifestation in the Twenty-sixth
(26th) Amendment to the Constitution of India by which
Articles 291 and 362 were repealed and a new Article 366A
was incorporated, resulting in depriving the Rulers of
Princely States the recognition accorded to them and
15
declaring the abolition of the privy purse. In the resultant
challenge by a co-Ruler of an erstwhile sovereign Indian
State of Kurundwad Jr. this Court in Shri Raghunathrao
Ganpatrao vs. Union of India4 while dealing with the
challenge, inter alia, spoke as follows:
“96. Permanent retention of the privy purse
and the privileges of rights would be
incompatible with the sovereign and republican
form of Government. Such a retention will also
be incompatible with the egalitarian form of our
Constitution. That is the opinion of the
Parliament which acted to repeal the aforesaid
provisions in exercise of its constituent power.
The repudiation of the right to privy purse
privileges, dignities etc. by the deletion of
Articles 291 and 362, insertion of Article 363-A
and amendment of clause (22) of Article 366
by which the recognition of the Rulers and
payment of privy purse are withdrawn cannot
be said to have offended Article 14 or 19(g)
[sic 19(1)(f)] and we do not find any logic in
such a submission. No principle of justice,
either economic, political or social is violated
by the Twenty-sixth Amendment. Political
justice relates to the principle of rights of the
people, i.e. right to universal suffrage, right to
democratic form of Government and right to
participation in political affairs. Economic
justice is enshrined in Article 39 of the
Constitution. Social justice is enshrined in
Article 38. Both are in the directive principles
of the Constitution. None of these rights are
abridged or modified by this Amendment. We
feel that this contention need not detain us any
more and, therefore, we shall pass on to the
next point in debate.”
4 AIR 1993 SC 1267
16
21. An instance of State action inconsistent with the
constitutional goal to secure socio-economic justice was dealt
with by this Court in Victorian Granites (P) Ltd. Vs. P. Rama
 Rao and others5
. In the said case, the state action approving
the assignment of a lease granted to an individual on expiry
thereof in favour of a private Company, at the request of the
outgoing lessee, without any publicity and without inviting
objections from others was explicitly disapproved by this Court
by holding that such a transfer was opposed to the common
good and the constitutional objective of securing socioeconomic
justice which was described as the arch of the
Constitution. Material resources of the community must be
distributed to sub-serve the common good, this Court had
opined.
22. Similarly, in Akhil Bhartiya Upbhokta Congress vs.
 State of Madhya Pradesh and others6
this Court held that:
“48. Part IV contains “directive principles of
State policy” which are fundamental in the
governance of the country and it is the duty of
the State to apply these principles in making
laws. Article 39 specifies certain principles of
policy which are required to be followed by the
State. Clause (b) thereof provides that the
5
(1996) 10 SCC 665
6
(2011) 5 SCC 29
17
State shall, in particular, direct its policy
towards securing that the ownership and
control of the material resources of the
community are so distributed as best to
subserve the common good. Parliament and
legislatures of the States have enacted several
laws and the Governments have, from time to
time, framed policies so that the national
wealth and natural resources are equitably
distributed among all sections of people so
that have-nots of the society can aspire to
compete with haves.”
23. In Akhil Bhartiya (supra), this Court examined the
legality of the action of the Madhya Pradesh Government to
allot twenty acres of land to an Institution on the basis of
application made by the Trust. This Court held that the
distribution of State largesse allocation of land, grant of permit,
licence etc. should always be in a fair and equitable manner. It
was held that the elements of favouritism or nepotism shall not
influence the exercise of discretion by the decision maker.
Observing that every action of the public authority should be
guided by public interest, free from arbitrariness, in para (65), it
was held as under:-
“65. What needs to be emphasised is that the
State and/or its agencies/instrumentalities
cannot give largesse to any person according to
the sweet will and whims of the political entities
and/or officers of the State. Every
action/decision of the State and/or its
agencies/instrumentalities to give largesse or
confer benefit must be founded on a sound,
18
transparent, discernible and well-defined policy,
which shall be made known to the public by
publication in the Official Gazette and other
recognised modes of publicity and such policy
must be implemented/executed by adopting a
non-discriminatory and non-arbitrary method
irrespective of the class or category of persons
proposed to be benefited by the policy. The
distribution of largesse like allotment of land,
grant of quota, permit licence, etc. by the State
and its agencies/instrumentalities should always
be done in a fair and equitable manner and the
element of favouritism or nepotism shall not
influence the exercise of discretion, if any,
conferred upon the particular functionary or
officer of the State.
(Underlining is ours)
24. In Sachidanand Pandey and another vs. State of
 West Bengal and others7
, this Court after referring to some of
the available precedents, laid the following principles:-
“40. On a consideration of the relevant cases
cited at the Bar the following propositions may
be taken as well established: State-owned or
public-owned property is not to be dealt with at
the absolute discretion of the executive.
Certain precepts and principles have to be
observed. Public interest is the paramount
consideration. One of the methods of securing
the public interest, when it is considered
necessary to dispose of a property, is to sell
the property by public auction or by inviting
tenders. Though that is the ordinary rule, it is
not an invariable rule. There may be situations
where there are compelling reasons
necessitating departure from the rule but then
the reasons for the departure must be rational
and should not be suggestive of
discrimination. Appearance of public justice is
7
(1987) 2 SCC 295
19
as important as doing justice. Nothing should
be done which gives an appearance of bias,
jobbery or nepotism.”
(Underlining is ours)
25. After Akhil Bhartiya (supra) and Sachidanand
Pandey (supra), in Centre for Public Interest Litigation and
others v. Union of India and others8
, it was held as under:-
“89. In conclusion, we hold that the State is
the legal owner of the natural resources as a
trustee of the people and although it is
empowered to distribute the same, the process
of distribution must be guided by the
constitutional principles including the doctrine
of equality and larger public good.”
26. In Natural Resources Allocation, in Re, Special
 Reference No. 1 of 20129
, while considering the allocation of
2G Spectrum, this Court observed that as natural resources are
public goods, the ‘Doctrine of Equality’ which emerges from the
concepts of justice and fairness must guide the State in
determining the actual mechanism for distribution of natural
resources. Any further detailed reference to the opinion
rendered is being avoided as the principles evolved are in
furtherance of what has been had been laid down earlier, as
noticed above.
8
(2012) 3 SCC 1
9
(2012) 10 SCC 1
20
27. Coming back to the issue in hand a brief look at the
contentions advanced may be appropriate at this stage. The
State of Uttar Pradesh has sought to defeat the writ petition by
contending that the same being under Article 32 of the
Constitution of India a direct infringement of the fundamental
rights of the petitioner must be established which is nowhere
apparent even on a close scrutiny. The writ petition, therefore,
is not maintainable. Alternatively, it has been argued that
infringement of the equality clause under Article 14 of the
Constitution of India is a far cry as there is an intelligible
differentia to justify a separate and exclusive treatment to former
Chief Ministers who form a class of their own.
28. While it is true that Article 32 of the Constitution is to
be invoked for enforcement of the fundamental rights of a
citizen or a non citizen, as may be, and there must be a
violation or infringement thereof we have moved away from the
theory of infringement of the fundamental rights of an individual
citizen or non citizen to one of infringement of rights of a class.
In fact, the above transformation is the foundation of what had
developed as an independent and innovative stream of
jurisprudence called “Public Interest Litigation” or class action.
21
Though evolved much earlier, a Solemn affirmation of the
aforesaid principle is to be found in paragraph 48 of the report in
Vineet Narain (supra) which would be eminently worthy of
recapitulation and, therefore, is extracted below:
“48. In view of the common perception shared
by everyone including the Government of India
and the Independent Review Committee (IRC) of
the need for insulation of the CBI from
extraneous influence of any kind, it is imperative
that some action is urgently taken to prevent the
continuance of this situation with a view to
ensure proper implementation of the rule of law.
This is the need of equality guaranteed in the
Constitution. The right to equality in a situation
like this is that of the Indian polity and not merely
of a few individuals. The powers conferred on
this Court by the Constitution are ample to
remedy this defect and to ensure enforcement of
the concept of equality.”
(Underlining is ours)
29. Along with the aforesaid shift in the judicial thinking
there has been an equally important shift from the classical test
(classification test) for the purpose of enquiry with regard to
infringement of the equality clause under Article 14 of the
Constitution of India to, what may be termed, a more dynamic
test of arbitrariness. The shift which depicts two different
dimensions of a challenge on the anvil of Article 14 is best
demonstrated by a comparative reading of the judgments of this
Court in the case of Budhan Choudhry and others vs. State
22
 of Bihar10, and E.P. Royappa vs. State of Tamil Nadu and
 another.11
30. In Budhan Choudhry (supra), the classical test
based on a reasonable classification to give legitimacy to an act
of differential treatment was expounded in the following terms:
“……It is now well established that while
Article 14 forbids class legislation, it does not
forbid reasonable classification for the
purposes of legislation. In order, however, to
pass the test of permissible classification two
conditions must be fulfilled, namely, (i) that the
classification must be founded on an
intelligible differentia which distinguishes
persons or things that are grouped together
from others left out of the group and, (ii) that
differentia must have a rational relation to the
object sought to be achieved by the statute in
question. The classification may be founded
on different bases; namely, geographical, or
according to objects or occupations or the like.
What is necessary is that there must be a
nexus between the basis of classification and
the object of the Act under consideration. It is
also well established by the decisions of this
Court that Article 14 condemns discrimination
not only by a substantive law but also by a law
of procedure.”
31. The more dynamic version came two decades later in
the case of E.P. Royappa (supra) wherein Bhagwati, J.
expanded the scope of Article 14 of the Constitution of India in
10 AIR 1955 SC 191
11 (1974) 4 SCC 3
23
the following terms:
“85…….From a positivistic point of view,
equality is antithetic to arbitrariness. In fact
equality and arbitrariness are sworn enemies;
one belongs to the rule of law in a republic
while the other, to the whim and caprice of an
absolute monarch. Where an act is arbitrary, it
is implicit in it that it is unequal both according
to political logic and constitutional law and is
therefore violative of Article 14, and if it effects
any matter relating to public employment, it is
also violative of Article 16. Articles 14 and 16
strike at arbitrariness in State action and
ensure fairness and equality of treatment.
They require that State action must be based
on valid relevant principles applicable alike to
all similarly situate and it must not be guided
by any extraneous or irrelevant considerations
because that would be denial of equality.
Where the operative reason for State action,
as distinguished from motive inducing from the
antechamber of the mind, is not legitimate and
relevant but is extraneous and outside the
area of permissible considerations, it would
amount to mala fide exercise of power and that
is hit by Articles 14 and 16. Mala fide exercise
of power and arbitrariness are different lethal
radiations emanating from the same vice: in
fact the latter comprehends the former. Both
are inhibited by Articles 14 and 16.”
32. The evolution of the dynamic facet of Article 14 of the
Constitution of India was carried forward in numerous
pronouncements of this Court of which reference must be
made, illustratively, to Ramana Dayaram Shetty vs.
 International Airport Authority of India and others12;
12 (1979) 3 SCC 489
24
Sharma Transport vs. Govt. of A.P. and others13; Kumari
Shrilekha Vidyarthi and others vs. State of U.P. and others14;
State of Punjab and another vs. Brijeshwar Singh Chahal
 and another15
.
33. Paragraph 23 and 35 of Kumari Shrilekha (supra)
may be extracted with profit only to notice the absolute clarity in
carrying forward the principle laid down by Hon. Bhagwati J., in
Royappa (supra).
“23. Thus, in a case like the present, if it is
shown that the impugned State action is
arbitrary and, therefore, violative of Article 14
of the Constitution, there can be no
impediment in striking down the impugned act
irrespective of the question whether an
additional right, contractual or statutory, if any,
is also available to the aggrieved persons.
…………
35. It is now too well settled that every State
action, in order to survive, must not be
susceptible to the vice of arbitrariness which is
the crux of Article 14 of the Constitution and
basic to the rule of law, the system which
governs us. Arbitrariness is the very negation
of the rule of law. Satisfaction of this basic test
in every State action is sine qua non to its
validity and in this respect, the State cannot
claim comparison with a private individual
even in the field of contract. This distinction
between the State and a private individual in
the field of contract has to be borne in the
13 (2002) 2 SCC 188
14 (1991) 1 SCC 212
15 (2016) 6 SCC 1
25
mind.”
34. The “final” culmination is in Shayara Bano vs. Union
 of India and others16 where two members of the Bench
(Hon’ble R.F. Nariman and Uday Umesh Lalit, JJ.) wrote as
follows:
“101. It will be noticed that a Constitution
Bench of this Court in Indian Express
Newspapers (Bombay) (P) Ltd. v. Union of
India stated that it was settled law that
subordinate legislation can be challenged on
any of the grounds available for challenge
against plenary legislation. This being the
case, there is no rational distinction between
the two types of legislation when it comes to
this ground of challenge under Article 14. The
test of manifest arbitrariness, therefore, as laid
down in the aforesaid judgments would apply
to invalidate legislation as well as subordinate
legislation under Article 14. Manifest
arbitrariness, therefore, must be something
done by the legislature capriciously, irrationally
and/or without adequate determining principle.
Also, when something is done which is
excessive and disproportionate, such
legislation would be manifestly arbitrary. We
are, therefore, of the view that arbitrariness in
the sense of manifest arbitrariness as pointed
out by us above would apply to negate
legislation as well under Article 14.”
35. The above view received support of a third member of
the Constitution Bench (Hon’ble Kurian Joseph, J.)
16 (2017) 9 SCC 1
26
36. In the light of the above views the allocation of
government bungalows to constitutional functionaries
enumerated in Section 4(3) of the 1981 Act after such
functionaries demit public office(s) would be clearly subject to
judicial review on the touchstone of Article 14 of the Constitution
of India. This is particularly so as such bungalows constitute
public property which by itself is scarce and meant for use of
current holders of public offices. The above is manifested by
the institution of Section 4-A in the 1981 Act by the Amendment
Act of 1997 (Act 8 of 1997). The questions relating to allocation
of such property, therefore, undoubtedly, are questions of public
character and, therefore, the same would be amenable for
being adjudicated on the touchstone of reasonable classification
as well as arbitrariness.
37. The present petitioner, as already noticed in the
opening paragraphs of this judgment, had earlier approached
this Court under Article 32 of the Constitution challenging the
validity of the 1997 Rules. Not only the said writ petition was
entertained but the 1997 Rules were, in fact, struck down. In
doing so, this Court had, inter alia, considered the validity of the
1997 Rules in the light of Article 14 of the Constitution of India.
27
The insertion of Section 4(3) by the 2016 Amendment as a
substantive provision of the statute when the 1997 Rules to the
same effect were declared invalid by the Court would require
the curing of the invalidity found by this Court in the matter of
allotment of government accommodation to former Chief
Ministers. The defect found earlier persists. The impugned
legislation, therefore, can very well be construed to be an
attempt to overreach the judgment of this Court in Lok Prahari
(supra).
38. Natural resources, public lands and the public goods
like government bungalows/official residence are public property
that belongs to the people of the country. The ‘Doctrine of
Equality’ which emerges from the concepts of justice, fairness
must guide the State in the distribution/allocation of the same.
The Chief Minister, once he/she demits the office, is at par with
the common citizen, though by virtue of the office held, he/she
may be entitled to security and other protocols. But allotment of
government bungalow, to be occupied during his/her lifetime,
would not be guided by the constitutional principle of equality.
39. Undoubtedly, Section 4(3) of the 1981 Act would have
the effect of creating a separate class of citizens for conferment
28
of benefits by way of distribution of public property on the basis
of the previous public office held by them. Once such persons
demit the public office earlier held by them there is nothing to
distinguish them from the common man. The public office held
by them becomes a matter of history and, therefore, cannot
form the basis of a reasonable classification to categorize
previous holders of public office as a special category of
persons entitled to the benefit of special privileges. The test of
reasonable classification, therefore, has to fail. Not only that the
legislation i.e. Section 4(3) of the 1981 Act recognizing former
holders of public office as a special class of citizens, viewed in
the aforesaid context, would appear to be arbitrary and
discriminatory thereby violating the equality clause. It is a
legislative exercise based on irrelevant and legally
unacceptable considerations, unsupported by any constitutional
sanctity.
40. Consequently, we hold that Section 4(3) of the 1981
Act cannot pass the test of Article 14 of the Constitution of India
and is, therefore, liable to be struck down. We, therefore, hold
that the aforesaid Section 4(3) of the Uttar Pradesh Ministers
(Salaries, Allowances and Miscellaneous Provisions) Act, 1981
is ultra vires the Constitution of India as it transgresses the
29
equality clause under Article 14. The writ petition in question,
therefore, is allowed.
……….................J.
 (RANJAN GOGOI)
……….................J.
(R. BANUMATHI)
NEW DELHI
MAY 07, 2018.