appeal seek to overturn the judgment and order dated 04.10.2004 rendered by the High Court of Judicature at Allahabad in Civil Misc. Petition No. 34886 of 1998, thereby directing the Corporation to convert the dealership of a petrol pump initially allotted in favour of the respondent No.1 (hereafter to be referred to as the “respondent”) under the discretionary quota of the Departmental Minister 2 concerned to one under its (appellant) circular No.67-2/2K4 dated 12.02.2004 and restraining it as well from interfering with the possession of the respondent of the installation premises.-Adverting to the facts of the case, to recapitulate, the dealership of the respondent had been cancelled being vitiated by favourtism due to exercise of fanciful discretion of the Departmental Minister, which was neither approved nor condoned. Nevertheless, the Corporation visibly did not act in terms of the judgment and order of the High Court of Delhi in initiating the fresh process for auction. This led to the challenge to the faulty advertisement dated 05.10.1998 and the corrigendum dated 13.10.1998, the operation whereof to start with was stayed and thereafter the respondent was permitted to continue with the dealership and eventually she was directed to be awarded a fresh dealership by converting the 39 existing dealership under its policy dated 12.02.2004. The dealership of the respondent having been cancelled w.e.f. 01.12.1997, though the operation of the auction notice and the corrigendum thereto had been stayed and she had been allowed to run the outlet, we fail to comprehend as to how all these could be construed to signify that her dealership did subsist from the date of the impugned judgment and order. There was thus no scope for conversion of the existing dealership to a new dealership as ordered. In addition thereto, we are of the unhesitant opinion that the direction to award the new dealership under the prevalent policy dated 12.02.2004, having regard to the backdrop of adjudication undertaken by the Delhi High Court would amount to perpetuation of the undue benefit, earlier bestowed on her by a method held to be illegal, dubious, arbitrary and transgressive of public interest.

1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5565 OF 2009
INDIAN OIL CORPORATION LTD. & ORS. …APPELLANTS
VERSUS
SHASHI PRABHA SHUKLA & ANR. …RESPONDENTS
J U D G M E N T
AMITAVA ROY, J.
1. The Indian Oil Corporation Limited (hereafter to be
referred to as the “IOC/Corporation”) and its
functionaries, in this appeal seek to overturn the
judgment and order dated 04.10.2004 rendered by the
High Court of Judicature at Allahabad in Civil Misc.
Petition No. 34886 of 1998, thereby directing the
Corporation to convert the dealership of a petrol pump
initially allotted in favour of the respondent No.1
(hereafter to be referred to as the “respondent”) under
the discretionary quota of the Departmental Minister
2
concerned to one under its (appellant) circular
No.67-2/2K4 dated 12.02.2004 and restraining it as
well from interfering with the possession of the
respondent of the installation premises. As the
sequence of events would unfold, the attendant facts
do project a distressing state of affairs in the matter of
distribution of State largesse, seemingly motivated by
irrelevant considerations, deliberate defaults and
casual disregard to binding judicial adjudications of a
Constitutional Court.
2. We have heard Mr. Annam D.N. Rao, learned counsel
for the appellants and Mr. Tripurari Ray, learned
counsel for the respondent No. 1 . Though served, but
none has filed vakalatnama on behalf of respondent
No. 2.
3. First the skeletal facts, to facilitate the desired grip of
the issues to be addressed. The respondent herein,
claiming to be an unemployed graduate but actively
involved in activities pertaining to rural development
and welfare of women, but without any regular source
3
of livelihood, applied to the then Minister of Petroleum,
Government of India, New Delhi for being sanctioned a
petrol pump under his Special Discretionary Quota on
the National Highway, Phutahia Chauraha, Tehsil and
District Basti, U.P. The application was considered for
allotment of a retail outlet dealership on
compassionate ground and was forwarded for
necessary follow-up action to the Direction
(Marketing), Indian Oil Corporation, Bombay on
08.08.1985. In deference to the said communication,
the Corporation issued a Letter Of Intent (LOI) on
04.10.1995 for a retail outlet dealership in motor spirit
and high speed diesel oil on the National Highway at
Phutahia Chauraha, District Basti under “A” category.
Thereafter a lease deed was executed on 16.09.1996
between the respondent and the
appellant/Corporation for a period of 30 years at a
monthly rent of Rs.1650/- payable to the former by
the latter w.e.f. 01.03.1996 and was made renewable
at the option of the parties. It was inter alia agreed
4
that the appellant/Corporation would develop the
retail outlet and provide the same to the respondent
with certain facilities, such as, a suitable plot of land
duly developed as an outlet with office building,
storage, tank and pump, air facility etc.
4. The pleaded stand of the respondent in this regard
however is that though the dealership was declared to
be under “A” category, for which as per the norms, the
appellant/Corporation was required to provide the
infrastructure including land, in her case on its
persuasion and insistences, she had to purchase the
necessary land and make further investments to
make it fit for the installation by expending more than
Rs.14 lakhs, against which she was to receive a
nominal monthly lease rent of Rs.1650/-. She also
expressed her grievances with regard to the allotments
of the supplies made to her from time to time,
resulting in heavy financial loss to her in business.
5. Be that as it may, this grant of dealership to the
respondent came to be impeached along with other
5
grants in a public interest litigation being Writ
Petition(C) No.4003 of 1995 before the High Court of
Delhi by the Center for Public Interest Litigation, in all
questioning allotment of 179 retail outlets (petrol
pumps), 155 LPG distributorship and 45 SKO/LDO
dealerships from January 1993 till 1996 by the
Departmental Minister under his discretionary quota
and upon complete adjudication of the issues with the
participation of the parties involved, the proceeding
was disposed of by the judgment and order dated
29.08.1997. It was held in a sense, on a scrutiny of the
files/records produced before the Court that those
reflected unexplained surge of favourtism in the matter
of distribution of the aforementioned public
contracts/distributorships/ dealerships. Vis-a-vis the
award in favour of the respondent, it was held thus:
“A retail on National Highway Phutahia
Chauraha, Teh. & Distt. Basti, UP, has been
allotted to Smt. Shashi Prabha Shukla on her
undated application on the ground that the
applicant is unemployed graduate with keen
interest in activities relating to rural
development and welfare of women and has no
6
regular source of livelihood. From the
application it appears that the applicant is
resident of district Sultanpur, UP. The
allotment in her favour has also been made in
a casual manner as is the case in respect of
allotments in other cases noticed above. We
were told by the learned counsel for the
applicant that the applicant is president of
Youth Congress. Be that as it may, we feel that
the allotment in favour of this applicant is no
better than other allotments noticed by us.
This petrol pump is also non operational.”
6. On the basis of the findings recorded, which were held
as well to be violative of the relevant guidelines of this
Court on this issue and found to be prompted by
extraneous considerations, the assailed allotments
were directed to be cancelled and the following was
ordered:
“(1) Those who have commissioned the Petrol
Pumps/LPG/SKO, Distributorship and are
running the same shall stop operating the
Petrol Pumps etc. as the case may be, with
effect from 1st December 1997. The
Government of India/concerned Oil
Corporation shall take over the Petrol Pump
premises or distributorship premises from
these persons on 1st December 1997. The
concerned Oil Corporation shall have the
market value of the land (if it belongs to the
allottee) and/or the construction thereon
determined in a fair and just manner forthwith.
7
(2) The right to run the Petrol Pumps and/or
Distributorship taken over by the
Government/Oil Corporation concerned shall be
disposed of by way of public auction to be held,
if feasible, before 1st December 1997, so that as
far as possible, the public may not suffer or the
suffering is for minimal period. The original
allottee may also participate in the auction. The
Petrol Pump Distributorship shall be allotted to
the highest bidder who shall run it on original
terms and conditions. He shall have all the
rights in respect of the land and construction
thereon as the original allottee had on the
date of auction, subject, however, to payments
as determined by the Government/Oil
Corporation/concerned authority being made by
the highest bidder. Out of the auction money
the value of the land and construction, if
payable to the original allottee and as
determined by the Oil Corporation shall be paid
to the original allottee and the remaining
amount remitted to Prime Minister's Relief
Fund. If the successful bidder is the original
allottee he shall pay the difference between the
auction money and the value of the land and
construction as determined by the Oil
Corporation.
(3) In case any of the allottee whose allotment
has been ordered to be cancelled and who was
running business from land owned by him and
he. is unwilling to sell part with the land on
which the Petrol Pump/Distributorship is
being run, he shall intimate this fact to
Secretary, Ministry of Petroleum within two
weeks. In such a case the right to open Petrol
Pump/Distributorship, as the case may be
within the close proximity of the existing
8
location, as may be determined by the Oil
Corporation concerned, depending upon the
facts and circumstances of each case and the
need of the public, shall alone be auctioned
with a stipulation that the highest bidder
would arrange for the land/superstructure for
running the Petrol Pump/Distributorship. In
such an eventually, all connections hitherto
with the distributor whose allotment has been
cancelled shall be transferred to the
establishment of the highest bidder.
(4) The Ministry of Petroleum is directed to file
compliance report by 15th December, 1997.”
7. The above quote would yield the following salient
features of the peremptory directives:
a) The concerned petrol pumps/LPG/SKO Distributors
would stop operation on and from 01.12.1997.
b) The Government of India/all concerned Corporations
would take over the petrol pump premises or
distributorship premises on 01.12.1997.
c) The concerned Oil Corporation would have the market
value of the land, if it belongs to the allottee and/or
the construction thereon determined in a fair and just
manner forthwith.
d) The right to run the petrol pumps and/or
9
distributorships taken over by the Government/all
Corporations concerned shall be disposed of by public
auction to be held, if feasible, before 01.12.1997 so
that as far as possible, the public may not suffer or the
suffering is for a minimum period.
e) The original allottee be permitted to participate in the
auction.
f) Out of the auction money, the value of the land and
construction, if payable to the original allottee and as
determined by the all Corporations shall be paid to the
original allottee and the remaining amount would be
remitted to the Prime Minister’s Relief Fund.
g) If the successful bidder is the original allottee, he shall
pay the difference between the auction money and the
value of the land and constructions as determined by
the Corporation.
h) In case, any allottee whose allotment has been ordered
to be cancelled and who had been running business
from the land owned by him is unwilling to sell/part
with the land on which the petrol
10
pump/distributorship is being run, he would intimate
this fact to the Secretary, Ministry of Petroleum within
two weeks. In such a case, the right to open petrol
pump/distributorship, as the case may be, within the
close proximity of the existing location, as may be
determined by the Oil Corporation concerned,
depending upon the facts and circumstances of each
case and the need of the public shall alone be
auctioned with a stipulation that the highest bidder
would arrange for the land/super structure for
running the petrol pump/distributorship.
i) All connections hitherto with a distributor, whose
allotment had been cancelled, would be transferred to
the establishment of the highest bidder.
j) The Ministry of Petroleum was required to file
compliance report by 15.12.1997.
8. The Corporation accordingly on 13.10.1997, issued a
notice to the respondent intimating her that the
dealership agreement between the parties at the close
of the business hours on 30.11.1997 would be treated
11
as terminated and that she would not be entitled to
operate the outlet on and from 01.12.1997. It was also
conveyed that w.e.f. 01.12.1997, neither she nor her
agents/employees and/or representatives would be
entitled to enter the retail outlet premises. It was
clarified that all these would be without prejudice to
any other claim the Corporation might have against
her under the terms of the dealership agreement and
in law.
9. Meanwhile, the respondent had on 23.09.1997
intimated the Ministry of Petroleum, Government of
India, New Delhi that she was not interested to sell or
part with the land on which the petrol pump
distributorship was underway. She also filed SLP (C)
No. 19872 of 1997 before this Court challenging the
judgment and order dated 29.08.1997, which was
disposed of on 20.10.1997 leaving her at liberty, as
prayed for, to seek a review before the High Court.
Incidentally, the review petition filed by her was
dismissed on 07.11.1997, whereupon she
12
unsuccessfully assailed the same in a fresh special
leave petition before this Court, which too was
dismissed on 28.11.1997. Thus, the judgment and
order dated 29.08.1997 of the Delhi High Court
attained finality and eventually the retail outlet was
closed and the facilities were taken over by the
Corporation w.e.f 01.12.1997.
10. The respondent No.1 however in response to the
notice dated 13.10.1997, did call upon the Corporation
to return the land in the same condition as it had been
given to it within 15 days, stating further that failing
which, it would be required to pay rent @ Rs.
50,000/- per month for use and occupation of the
premises and also damages from 23.02.1996.
11. The Corporation thereafter issued an
advertisement dated 05.10.1998 to auction the outlet
hitherto allotted to the respondent. Certain excerpts of
the said advertisement being of decisive significance
are extracted hereinbelow:
“Pursuant to the direction of the Hon’ble High
13
 Court, Delhi by its order dated 29th
 August,
1997 as clarified/modified by its further order
dated 11.09.1998 in Writ Petition No.4003 of
1995 between Centre for Public interest
litigation and Union of India, Government
Approved Auctioneers, will auction the right to
get appointed as dealer of a company
controlled outlet of M/s. Indian Oil
Corporation Ltd. Situated at the place
mentioned in the schedule hereunder on the
terms and condition Ltd.
x x x x x x x x
x x x x x x x
6. Terms and conditions covering the terms on
which the property is being auctioned and the
conduct of the auction may be obtained upon
payment of Rs.500/- (Rs.Five Hundred only)
by demand draft or pay order drawn in favour
of M/s. Indian Oil Corporation Ltd., (M.D.)
payable at Allahabad from the Divisional office
of Indian Oil Corporation Ltd. at 5th floor,
Indira Bhawan, Civil Lines, Allahabad –
211001 (U.P.) on any working day between
10.30 a.m. and 4.00 p.m. The detailed terms
and conditions of auction are displayed on the
notice Board of the above Divisional office.
SCHEDULE
Last date for submission of applications to
participate in the bid 22nd October, 1998.
Date of displaying list of eligible bidders: 28th
October, 1998
Date of auction/time of auction will be display
on the notice board at our Divisional Office,
Indian Oil Corporation Ltd. (M.D.), 5th Floor
14
Indira Bhawan Civil Lines, Allahabad – 211001
(U.P.)
Venue of Property: NH Phutahia Chauraha,
Place: Basti (U.P.)”
12. As the advertisement would reveal, it did contain
a categorical reference of the judgment and order
dated 29.08.1997 of the Delhi High Court, pursuant to
which the same had been made to auction the right of
a dealer of the company controlled outlet, situated at
the place mentioned at NH Phutahia Chauraha, Place:
Basti (U.P.). Subsequent thereto, by a corrigendum
dated 13.10.1998, the word “property” appearing in
Clause 6 was in essence substituted by the word
“dealership”, as would be evident from the extract of
the said corrigendum:
“In item 6 of the said notice for auction for
retail outlet of M/s. Indian Oil Corporation Ltd.
situated at NH Phutahia Chauraha, Basti
(U.P.) may be read as follows:
The word PROPERTY shall also be substituted
by the word DEALERSHIP. It is further
clarified that in case of company controlled
retail outlets only license to operate the
dealership will be substituted with the word
15
DEALERSHIP in the terms and conditions and
its Annexures being sold from our office at
Allahabad.
Other terms and conditions shall be applicable
as per earlier advertisement.”
13. Mentionably, no other record has been laid before
this Court to further elaborate on the terms and
conditions of the proposed auction.
14. To reiterate, the High Court of Delhi in its
rendition dated 29.08.1997, vis-à-vis the cases where
the allottee, whose allotment had been cancelled, was
unwilling to sell/part with a land on which the petrol
pump/distributorship was being operated, had
directed the Corporation to auction the right to open
petrol pump/distributorship within the close proximity
of the existing location, as may be determined by it,
depending upon the facts and circumstances of each
case and the need of the public with the stipulation
that the highest bidder would arrange for the
land/super structure for running the petrol
16
pump/distributorship. To put it differently, in the
eventuality where the allottee was not willing to
sell/part with the land on which the petrol
pump/distributorship was operational, the
Corporation was obligated in law to ensure the
following steps in re-auctioning the right to open petrol
pump/distributorship:
(i) Determine a location in the close proximity of the
existing location depending upon the facts and
circumstances of each case and the need of the
public.
(ii) Such location, as determined on the above factors,
alone to be auctioned with the stipulation that the
highest bidder would arrange for the land/super
structures for running the petrol
pump/distributorship.
15. The unambiguous precept in the above premise,
as contained in the judgment and order dated
29.08.1997 thus did cast a duty on the Corporation as
a condition precedent for the re-auction, to determine
17
a location within the close proximity of the existing
location, contingent on the facts and circumstances of
each case and the need of the public. In clear terms
therefore the Corporation was required to undertake
this conscious exercise, it being clear that the location
for the re-auction has to be essentially different from,
though in proximity of the existing location.
16. The advertisement dated 05.10.1998 along with
the corrigendum however do not disclose the exact
location for which the re-auction was notified, the
venue of the site being “NH Bhutahia Chauraha, Place:
Basti (U.P.)” and wholly identical to the one of the
existing location of the respondent. No attempt has
been made to draw our attention to any initiative
taken by the Corporation in compliance of the
directives contained in the judgment and order dated
29.08.1997 of the Delhi High Court to identify the
location as required for the fresh auction.
17. The respondent however launched her assailment
against the advertisement dated 05.10.1998 and the
18
corrigendum dated 13.10.1998, this time before the
High Court of Judicature at Allahabad pleading the
same to be violative of the directions contained in the
judgment and order dated 29.08.1997 and also in
violation of her fundamental rights under Articles 14,
19(1)(g) of the Constitution of India. The High Court of
Judicature at Allahabad in the first instance by its
order dated 29.10.1998 stayed the operation of the
auction notices and subsequent thereto, by its order
dated 17.12.1998 directed the Corporation to permit
the respondent to run the dealership of petroleum in
the petrol pump of Phutahia Chauraha, District Basti
until the auction was held and finalized. Eventually,
by the impugned judgment and order, noticing that
the proposed auction had not taken place and that
consequently the respondent had been permitted to
run the retail outlet since 1998, directed the
Corporation, in view of its new policy dated
12.02.2004, to award fresh dealership to the
respondent thereunder and further restrained it from
19
interfering with her possession of the petrol pump
premises in question.
18. As the impugned judgment would demonstrate,
the High Court, while traversing the relevant facts,
took note of the pleaded stand of the Corporation
before it that the lease executed by the respondent
vis-à-vis the land in question did subsist, cancellation
of the dealership notwithstanding, and therefore she
was not entitled for the possession thereof and that it
had the right to induct some other dealer through the
proposed auction to operate the agency from the land
of the respondent. The High Court, while readily
dismissing this plea of the Corporation on the
touchstone of Article 300A of the Constitution of India
held that as the dealership was cancelled by the
intervention of the Delhi High Court, it was not open
for the Corporation to assert that the lease deed
executed by her in its favour did subsist thereafter in
the eye of law. Having propounded thus, the High
Court observed that because of the non-removal of the
20
fixtures, machineries and apparatus etc. from the land
by the Corporation and because of its unlawful stand
precipitating the litigation before it, the respondent
was sought to be denied the benefit of the use of land
in question for which she was permitted, by the
interim order dated 17.12.1998, to continue with the
dealership till the auction was held and finalized.
Taking note of the fact that no auction had taken place
and that the respondent had been permitted to run
the retail outlet since 1998, the High Court provided
that fresh dealership be awarded to her under the new
Policy dated 12.02.2004 of the Corporation, which
contemplated such allotments to land owners and
their nominees from within the family, directly as well
as through advertisement for locations outside
government approved marketing plans. The High
Court did also record that the entitlement of the
respondent was also cognizable in view of the fact that
she had been running the present retail outlet without
any complaint for a long period. To reiterate, the High
21
Court thus directed the Corporation to award fresh
dealership under the said policy by converting the
earlier dealership thereunder within one month and
also further restrained it from interfering with the
respondent's possession over the petrol pump
premises in question. This determination is the subject
matter of scrutiny in the present appeal.
19. Mr. Rao has insistently argued that the
dealership of the respondent having been cancelled by
the ruling dated 29.08.1997 of the Delhi High Court
which had attained finality, no direction for fresh
dealership to her under any circumstances could have
been made and thus the same being patently
erroneous, the impugned judgment and order is liable
to be set aside. According to the learned counsel, the
advertisement dated 05.10.1998 and the corrigendum
dated 13.10.1998, if cumulatively read, are in
meticulous compliance of the directions to that effect
as contained in the judgment and order dated
29.08.1997 and thus the Corporation ought to have
22
been permitted to undertake the process to its logical
end. The learned counsel for the Corporation when
confronted with the omissions in the advertisement
and absence of materials on record to authenticate
that the exercise required to be undertaken by the
Corporation for identifying a location in the proximity
of the existing location was pursued, had no
convincing explanation therefor.
20. Controverting the above, the learned counsel for
the respondent emphatically urged that in the
attendant facts and circumstances, though the
judgment and order dated 29.08.1997 of the Delhi
High Court had attained finality, the operative
direction to the Corporation to convert the existing
dealership into a new dealership under the policy
dated 12.02.2004 is unassailable and therefore no
interference in this appeal is called for. While imputing
that, the Corporation though required in cases of
dealership under category ‘A’, to provide the whole
infrastructure including the land, in the case of the
23
respondent, she was asked to make the arrangement
therefor on her own investments, the learned counsel
maintained that the advertisement dated 05.10.1998,
even if read with the corrigendum dated 13.10.1998
was apparently not in compliance of the directions of
the Delhi High Court and, therefore could not have
been given effect to. According to him, the auction had
thus been rightly stayed by the Allahabad High Court
whereafter the respondent was permitted to operate
the dealership and eventually taking note of the
prevalent policy dated 12.02.2004, the Corporation
had been rightly directed to convert her existing
dealership to a fresh dealership thereunder. It was
urged as well that the plea of the
appellant/Corporation that cancellation of the
dealership notwithstanding, the lease did subsist and
that it was entitled in law to hold a fresh auction for
the land of the respondent, was wholly untenable and
violative of the mandate of Article 300A, as held by the
Allahabad High Court.
24
21. The recorded facts and the rival assertions have
received our due consideration. The genesis of the
instant appraisal is indeed traceable to the allotment
of the retail outlet dealership to the respondent on
compassionate ground by the Departmental Minister
for Petroleum from his Special Discretionary Quota. As
hereinbefore stated, on the recommendation of the
said authority, the Corporation awarded the
dealership. This award along with identically placed
allotments, on judicial scrutiny, were directed to be
cancelled in the public interest litigation initiated by
the Center for Public Interest Litigation before the High
Court of Delhi which, by its judgment and order dated
29.08.1997, on the ground that those were vitiated
not by mere aberrations or arbitrariness, but by
uncontrolled display of favouritism. The rendition by
the High Court of Delhi in the facts and circumstances
of the cases before it, was assuredly to secure
administrative probity, transparency, objectivity and
fairness in the matter of distribution of State largesse
25
and public contracts. This decision, to reiterate, has
become final and binding on the parties. As noted
hereinabove, the Corporation in flagrant defiance and
disregard to the judicial mandate of a Constitutional
Court did not only issue the advertisement dated
05.10.1998 with the corrigendum on 13.10.1998
without either determining or specifying the exact
location for the site of dealership in the proximity of
the earlier site of the respondent, instead did take up
an incomprehensible plea that the cancellation of the
dealership notwithstanding, the lease of the land of the
respondent with it did subsist and that it was entitled
in law to induct the new dealer through the auction
process initiated, to the same location. The underlying
objective in issuing the direction to determine and
specify a location in the proximity of the existing site
was with the avowed purpose of avoiding confrontation
and possible litigation and also to ensure smooth and
uninhibited supply of petrol and HSD from the new
outlet at the fresh venue.
26
22. In the facts of the present case, we subscribe to
the view of the High Court of Allahabad that with the
termination of the dealership, the lease between the
parties also stood extinguished and therefore, the
respondent being the owner of the land and she
having expressed her disinclination to sell or part with
it, the Corporation by no means could have
contemplated to award the new dealership to a third
party on her land. On this clear premise, the failure of
the Corporation to act in terms of the directions
containing in the judgment and order of the Delhi High
Court and in contending that the land of the
respondent was available for commissioning the new
dealership is patently wrong besides being
contumaciously irreverent and abusively
non-compliant thereof. The approach and attitude of
the Corporation in making the advertisement dated
05.10.1998 with the corrigendum dated 13.10.1998
and in taking the apparently untenable stand that
notwithstanding the cancellation of the dealership of
27
the respondent, her land was available for the new
process, is thus visibly militative of the rule of law
besides being destructive of the salutary objective with
which the High Court of Delhi had directed
cancellation of the dealership/distributorship of the
respondent along with others, being vitiated by the
vice of nepotism and favourtism. This we say, as
having regard to the progression of events, we are left
with the impression, in view of the persistent
omissions and commissions of the Corporation, that it
is not unlikely that all these might have been
strategised to eventually benefit the respondent in the
long run. The pleaded stand of the Corporation that
despite the cancellation of the dealership of the
respondent, her land was still available, flies in the
face of the determination to the contrary as recorded
in the judgment and order dated 29.08.1997 and only
reflects the pre-determined mind of its functionaries
for reasons unknown, though inferable. It is really
incomprehensible as to how in spite of such explicit
28
and clear observations and directions of the High
Court of Delhi in its judgment and order dated
29.08.1997, either such a stand could have been
taken or the fresh auction process could have been
initiated without undertaking the initiatives required
for specifying/identifying the new location. To
reiterate, no material has been placed before us to
demonstrate to the contrary. This is more so, as in the
advertisement dated 05.10.1998, there is a reference
of the judgment and order dated 29.08.1997 of the
Delhi High Court. A bare perusal of this document
would show the venue to be “NH Phutahia Chauraha
place: Basti (UP)”, the same as of the dealership of the
respondent.
23. It is no longer res integra that a public authority,
be a person or an administrative body is entrusted
with the role to perform for the benefit of the public
and not for private profit and when a prima facie case
of misuse of power is made out, it is open to a court to
draw the inference that unauthorized purposes have
29
been pursued, if the competent authority fails to
adduce any ground supporting the validity of its
conduct.
24. The following extract from the Halsbury’s Laws of
England, Fourth Edition, Vol.1(1) Administrative Law
provide the foundation of these observations:
“A public authority may be described as a
person or administrative body entrusted
with functions to perform for the benefit of the
public and not for private profit. Not every
such person or body is expressly defined as
public authority or body, and the meaning of a
public authority or body may vary according to
the statutory context.”
25. In re, the duties, responsibilities and obligations
of a public authority in a system based on rule of law,
unfettered discretion or power is an anathema as every
public authority is a trustee of public faith and is
under a duty to hold public property in trust for the
benefit of the laity and not for any individual in
particular. The following excerpts from the Foulkes
30
Administrative Law, 7th Edition at page 174
provide the elaborate insight:
“A true trust exists when one person, the
trustee, is under a duty to hold the trust
property vested in him for the benefit of other
persons, the beneficiaries. The term ‘trust’ is,
however, used in a much wider sense. We may
speak of government being ‘entrusted’ with
power, of Parliament as the trustee which the
nation has authorized to act on its behalf.
The purpose of the use of the concept in such
contexts is of course to emphasize that the
powers and duties of such bodies should be
exercised not for the advancement of their own
interest, but that of the others, to underline
their obligation to others.
26. The distinction between the power of a public
authority and a private person has since been
succinctly brought about in the following quote from
the celebrated work “Administrative Law”, Tenth
Edition by H.W.R. Wade and C.F. Forsyth:
“The common theme of all the authorities so
far mentioned is that the notion of absolute or
unfettered discretion is rejected. Statutory
power conferred for public purposes is
conferred as it were upon trust not absolutely
– that is to say, it can validly be used only in
the right and proper way which parliament
when conferring if is presumed to have
31
intended. In a system based on rule of law,
unfettered governmental discretion is
contradictory in terms …....………………
The powers of public authorities are therefore
essentially different from those of private
persons. A man making his will may, subject
to any rights of his dependants, dispose of his
property just as he may wish. He may act out
of malice or a spirit of revenge, but in law this
does not affect his exercise of his power. In the
same way a private person has an absolute
power to allow whom he likes to use his land,
to release a debtor, or, where the law permits,
to evict a tenant, regardless of his motives.
This is unfettered discretion. But a public
authority may do none of these things unless it
acts reasonably and in good faith and upon
lawful and relevant grounds of public interest.”
27. In Akhil Bhartiya Upbhokta Congress vs.
State of M.P.
1
, this Court was seised as well with the
nature of the norms to be adhered to for allotment of
land, grant of quotas, permits, licenses etc. by way of
distribution thereof as State largesse. The following
observations provide the guiding comprehension:
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
1
(2011) 5 SCC 29
32
action/decision of the State and/or its
agencies/instrumentalities to give largesse or
confer benefit must be founded on a sound,
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.
66. We may add that there cannot be any
policy, much less, a rational policy of allotting
land on the basis of applications made by
individuals, bodies, organisations or
institutions dehors an invitation or
advertisement by the State or its
agency/instrumentality. By entertaining
applications made by individuals,
organisations or institutions for allotment of
land or for grant of any other type of largesse
the State cannot exclude other eligible persons
from lodging competing claim. Any allotment
of land or grant of other form of largesse by
the State or its agencies/instrumentalities by
treating the exercise as a private venture is
liable to be treated as arbitrary, discriminatory
and an act of favouritism and/or nepotism
violating the soul of the equality clause
33
embodied in Article 14 of the Constitution.
28. In his work Administrative Law (6th Edn.)
Prof. H.W.R. Wade highlighted the distinction
between powers of public authorities and those of
private persons in the following words:
“The common theme of all the authorities so
far mentioned is that the notion of absolute or
unfettered discretion is rejected. Statutory
power conferred for public purposes is
conferred as it were upon trust, no absolutely
—that is to say, it can validly be used only in
the right and proper way which Parliament
when conferring it is presumed to have
intended. Although the Crown's lawyers have
argued in numerous cases that unrestricted
permissive language confers unfettered
discretion, the truth is that, in a system based
on the rule of law, unfettered governmental
discretion is a contradiction in terms.”
29. While rejecting the theory of absolute discretion,
Lord Reid observed in Padfield v. Minister of
Agriculture, Fisheries and Food2
:
“… Parliament must have conferred the
discretion with the intention that it should be
used to promote the policy and objects of the
Act; the policy and objects of the Act must be
2
 [1968] AC 997
34
determined by construing the Act as a whole
and construction is always a matter of law for
the court. In a matter of this kind it is not
possible to draw a hard and fast line, but if
the Minister, by reason of his having
misconstrued the Act or for any other reason,
so uses his discretion as to thwart or run
counter to the policy and objects of the Act,
then our law would be very defective if persons
aggrieved were not entitled to the protection of
the court.”
30. The role of the Government as provider of services
and benefits to the people was noticed in Ramana
Dayaram Shetty v. International Airport Authority
of India3
 in the following words:
“11. Today the Government in a welfare State,
is the regulator and dispenser of special
services and provider of a large number of
benefits, including jobs, contracts, licences,
quotas, mineral rights, etc. The Government
pours forth wealth, money, benefits, services,
contracts, quotas and licences. The valuables
dispensed by Government take many forms,
but they all share one characteristic. They are
steadily taking the place of traditional forms of
wealth. These valuables which derive from
relationships to Government are of many kinds.
They comprise social security benefits, cash
grants for political sufferers and the whole
scheme of State and local welfare. Then again,
thousands of people are employed in the State
3
 (1979) 3 SCC 489
35
and the Central Governments and local
authorities. Licences are required before one
can engage in many kinds of businesses or
work. The power of giving licences means
power to withhold them and this gives control
to the Government or to the agents of
Government on the lives of many people. Many
individuals and many more businesses enjoy
largesse in the form of government contracts.
These contracts often resemble subsidies. It is
virtually impossible to lose money on them and
many enterprises are set up primarily to do
business with the Government. The
Government owns and controls hundreds of
acres of public land valuable for mining and
other purposes. These resources are available
for utilisation by private corporations and
individuals by way of lease or licence. All these
mean growth in the Government largesse and
with the increasing magnitude and range of
governmental functions as we move closer to a
welfare State, more and more of our wealth
consists of these new forms. Some of these
forms of wealth may be in the nature of legal
rights but the large majority of them are in the
nature of privileges.”
31. In the same vein, in Natural Resources
Allocation, In Re4
, this Court summed up the long
line of judicial enunciations on this theme thus:
“107. From a scrutiny of the trend of decisions it
is clearly perceivable that the action of the State,
whether it relates to distribution of largesse,
grant of contracts or allotment of land, is to be
4 Special Reference No.1 of 2012
36
tested on the touchstone of Article 14 of the
Constitution. A law may not be struck down for
being arbitrary without the pointing out of a
constitutional infirmity as McDowell case has
said. Therefore, a State action has to be tested
for constitutional infirmities qua Article 14 of the
Constitution. The action has to be fair,
reasonable, non-discriminatory, transparent,
non-capricious, unbiased, without favouritism
or nepotism, in pursuit of promotion of healthy
competition and equitable treatment. It should
conform to the norms which are rational,
informed with reasons and guided by public
interest, etc. All these principles are inherent in
the fundamental conception of Article 14. This is
the mandate of Article 14 of the Constitution of
India.”
32. This Court in Center for Public Interest
Litigation and others Vs. Union of India and
others5
, while examining the challenge to the
allocation of 2G Telecom Services, reflected on the
considerations that should inform the process thereof
and observed thus:
95. This Court has repeatedly held that
wherever a contract is to be awarded or a
licence is to be given, the public authority must
adopt a transparent and fair method for making
selections so that all eligible persons get a fair
opportunity of competition. To put it differently,
5
(2012) 3 SCC 2
37
the State and its agencies/instrumentalities
must always adopt a rational method for
disposal of public property and no attempt
should be made to scuttle the claim of worthy
applicants. When it comes to alienation of
scarce natural resources like spectrum, etc. it is
the burden of the State to ensure that a
non-discriminatory method is adopted for
distribution and alienation, which would
necessarily result in protection of
national/public interest.
33. Jurisprudentially thus, as could be gleaned from
the above legal enunciations, a public authority in its
dealings has to be fair, objective, non-arbitrary,
transparent and non-discriminatory. The discretion
vested in such an authority, which is a concomitant of
its power is coupled with duty and can never be
unregulated or unbridled. Any decision or action
contrary to these functional precepts would be at the
pain of invalidation thereof. The State and its
instrumentalities, be it a public authority, either as an
individual or a collective has to essentially abide by
this inalienable and non-negotiable prescriptions and
cannot act in breach of the trust reposed by the polity
and on extraneous considerations. In exercise of
38
uncontrolled discretion and power, it cannot resort to
any act to fritter, squander and emasculate any public
property, be it by way of State largesse or contracts
etc. Such outrages would clearly be unconstitutional
and extinctive of the rule of law which forms the
bedrock of the constitutional order.
34. Adverting to the facts of the case, to recapitulate,
the dealership of the respondent had been cancelled
being vitiated by favourtism due to exercise of fanciful
discretion of the Departmental Minister, which was
neither approved nor condoned. Nevertheless, the
Corporation visibly did not act in terms of the
judgment and order of the High Court of Delhi in
initiating the fresh process for auction. This led to the
challenge to the faulty advertisement dated
05.10.1998 and the corrigendum dated 13.10.1998,
the operation whereof to start with was stayed and
thereafter the respondent was permitted to continue
with the dealership and eventually she was directed to
be awarded a fresh dealership by converting the
39
existing dealership under its policy dated 12.02.2004.
The dealership of the respondent having been
cancelled w.e.f. 01.12.1997, though the operation of
the auction notice and the corrigendum thereto had
been stayed and she had been allowed to run the
outlet, we fail to comprehend as to how all these could
be construed to signify that her dealership did subsist
from the date of the impugned judgment and order.
There was thus no scope for conversion of the existing
dealership to a new dealership as ordered. In addition
thereto, we are of the unhesitant opinion that the
direction to award the new dealership under the
prevalent policy dated 12.02.2004, having regard to
the backdrop of adjudication undertaken by the Delhi
High Court would amount to perpetuation of the
undue benefit, earlier bestowed on her by a method
held to be illegal, dubious, arbitrary and transgressive
of public interest. In other words, the award of new
dealership to the respondent in the prevailing facts
and circumstances, in our estimate, would amount to
40
allowing the respondent to enjoy the premium of the
illegality and arbitrariness resorted to in granting her
the earlier dealership and reward her as a beneficiary
of unlawful administrative patronage. In our view, the
award of new dealership to the respondent would
wholly undermine the purpose of cancelling her earlier
dealership and annihilate the very objective of
securing transparency, fairness and non-arbitrariness
in the matter of distribution of public contract. In
taking the steps for initiating a fresh process of
auction, to state the least, the defaults and
de-relictions of the Corporation and its functionaries
are writ large and deserve to be strongly deprecated.
The omissions and commissions do have the potential
of suggesting pre-determined perceptions and
motivations in aid of the respondent, resulting in such
disagreeable culmination in her favour. The time lag,
according to us, per se cannot purge the vitiation of
the award of dealership originally granted to the
respondent, to entitle her to the relief granted by the
41
impugned judgment and order, by way of a boon for
the inexplicable faults and remiss in duty of the
functionaries of the Corporation. In supervening public
interest and to uphold the rule of law as well as
imperative of administrative fairness, transparency
and objectivity, we are thus not inclined to sustain the
impugned judgment and order. It is, therefore set
aside so far as it holds that the respondent is entitled
to a new dealership at her location under the Policy
dated 12.02.2014. We hereby reiterate that the
dealership of the respondent at her present location
stands cancelled w.e.f. 01.12.1997. The Corporation
would now take immediate steps to this effect as
permissible in law without fail. The Corporation would
also initiate a fresh process for award of new
distributorship/dealership in the area and at a
location to be determined by it, if it considers it
necessary in public interest strictly in conformity with
law and the constitutionally recognized norms of
transparency, objectivity and fairness.
42
35. In the singular facts and circumstances, we are
greatly anguished and appalled by the manner in
which the Corporation and its functionaries have acted
in the face of the judgment and order dated
29.08.1997 of the Delhi High Court. We have no
hesitation to record that we are left with the
impression that the failures on their part may not be
wholly bona fide. In this view of the matter, we direct
the Corporation to cause an in-house inquiry to be
made to fix the liability of the errant officials on the
issue and decide appropriate action(s) against them in
accordance with law within a period of two months
herefrom. The Corporation after completing this
exercise would submit a report before this Court for
further orders, if necessary. We make it clear that any
breach or non-compliance of this direction would be
per se construed to be a contempt of this Court with
penal consequences as contemplated in law. The
appeal is allowed. No costs.
43
…........................................J.
[N.V. RAMANA]
…........................................J.
[AMITAVA ROY]
NEW DELHI;
DECEMBER 15, 2017.