2017 (12) TMI 1806 - SC - Indian Laws

Supreme Court overturns High Court ruling on dealership cancellation, orders new process.

The Supreme Court set aside the High Court's judgment directing a new dealership to the Respondent, affirming the cancellation of the dealership. The ... Conversion of dealership of a petrol pump initially allotted in favour of the Respondent No. 1 under the discretionary quota of the Departmental Minister concerned - allotment of the retail outlet dealership to the Respondent on compassionate ground by the Departmental Minister for Petroleum from his Special Discretionary Quota - 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 - HELD THAT:- 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 been pursued, if the competent authority fails to adduce any ground supporting the validity of its conduct - 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. 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 the present case, the dealership of the Respondent had been cancelled being vitiated by favoritism 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 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. 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. The Corporation after completing this exercise would submit a report before this Court for further orders, if necessary - Appeal allowed. Issues Involved:1. Validity of the dealership allotment to the Respondent.2. Compliance with judicial directives regarding the re-auction of dealership.3. Rights and obligations concerning the lease of the land.4. The legal implications of the Corporation's actions post-cancellation of the dealership.5. Entitlement of the Respondent to a new dealership under the Corporation's policy.Detailed Analysis:1. Validity of the dealership allotment to the Respondent:The dealership was initially allotted to the Respondent under the discretionary quota of the Departmental Minister. This allotment, along with others, was challenged in a public interest litigation (PIL) before the High Court of Delhi, which found the allotments to be vitiated by favoritism and directed their cancellation. The judgment emphasized that the allotments were made 'in a casual manner' and were 'prompted by extraneous considerations.'2. Compliance with judicial directives regarding the re-auction of dealership:The High Court of Delhi directed that the cancelled dealerships be re-auctioned, specifying that the new location should be in close proximity to the existing one and that the original allottees could participate in the auction. The Corporation issued an advertisement for re-auction but failed to comply with the directive to identify a new location close to the existing one. The advertisement and subsequent corrigendum did not specify the exact new location, thereby violating the judicial mandate.3. Rights and obligations concerning the lease of the land:The Respondent had leased the land to the Corporation for the dealership. Upon cancellation of the dealership, the Corporation argued that the lease still subsisted, allowing them to induct a new dealer on the same land. The High Court of Allahabad rejected this argument, holding that the lease could not subsist independently of the dealership. The Court emphasized that the Respondent, as the landowner, had the right to reclaim her land, and the Corporation could not use it for a new dealership without her consent.4. The legal implications of the Corporation's actions post-cancellation of the dealership:The Corporation's actions, including issuing the advertisement for re-auction without specifying a new location, were found to be in contempt of the judicial directives. The High Court of Allahabad observed that the Corporation's stance was 'patently wrong' and 'contumaciously irreverent.' The Supreme Court concurred, noting that the Corporation's approach undermined the rule of law and suggested possible ulterior motives to benefit the Respondent.5. Entitlement of the Respondent to a new dealership under the Corporation's policy:The High Court of Allahabad directed the Corporation to award a new dealership to the Respondent under its policy dated 12.02.2004. The Supreme Court, however, found this direction to be erroneous. It held that awarding a new dealership to the Respondent would perpetuate the undue benefit initially granted through favoritism. The Court emphasized that the Respondent should not be allowed to enjoy the premium of the illegality and arbitrariness that marked the original allotment.Conclusion:The Supreme Court set aside the High Court of Allahabad's judgment directing the award of a new dealership to the Respondent. It reiterated that the dealership stood cancelled effective 01.12.1997 and directed the Corporation to take immediate steps to this effect. The Corporation was also instructed to initiate a fresh process for awarding a new dealership in compliance with legal and constitutional norms. Additionally, the Court ordered an in-house inquiry to fix the liability of the errant officials and report back within two months, warning of contempt proceedings for non-compliance. The appeal was allowed with no costs.