Jharkhand High Court
The Tata Power Company Limited Through ... vs Jharkhand Urja Vikas Nigam Limited ... on 19 November, 2015
Author: Rongon Mukhopadhyay
Bench: Rongon Mukhopadhyay
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W. P. (C) No. 2437 of 2015
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1.THE TATA POWER COMPANY LIMITED, a
company registered under the Indian Companies
Act, 1956, having its registered office at Bombay House,
24 Homi Mody Street, Mumbai-400 001, through its
Authorised Signatory-cum-Head Corporate Legal,
namely, Arun Bapat, son of Late S. V. Bapat, resident
of 403, Vijay Tower, Bhaskar Colony, Naupada, Thane
(West), District Thane (Maharashtra)-400 602
2.TATA POWER JAMSHEDPUR DISTRIBUTION LIMITED
(earlier known as TP POWER DISTRIBUTION LIMITED)
a company, registered under the Indian Companies Act,
1956, having its registered office at C/o The Tata Power
Company Limited, Corporate Centre, A-Block, 34-Sant
Tukaram Road, Carnac Bunder, Mumbai-400 009,
though its Authorised Signatory-cum-Chief Executive
Officer, namely, Vivek Singla, son of Late S. C. Singla,
resident of D-12/3, Model Town, PO Model Town,
PS Model Town, District Delhi - 110009 ... ... Petitioners
Versus
1.Jharkhand Urja Vikas Nigam Limited, through its
Chairman-cum-Managing Director, having its office at
Engineering Building, H.E.C., Dhurwa, PO & PS Dhurwa,
District Ranchi-834004 (Jharkhand)
2.Jharkhand Bijli Vitran Nigam Limited (a distribution
Company), through its Managing Director, having
its office at Engineering Building, H.E.C., Dhurwa,
PO & PS Dhurwa, District Ranchi-834004 (Jharkhand)
3.Chief Engineer (C & R), Jharkhand Bijli Vitran Nigam
Limited having its office at Engineering Building,
H.E.C., Dhurwa, PO & PS Dhurwa, District Ranchi
834004 (Jharkhand) ... ... Respondents
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CORAM : HON'BLE MR. JUSTICE RONGON MUKHOPADHYAY
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For the Petitioners : Mr. Sumeet Gadodia, Advocate
For the Respondents : Mr. Ajit Kumar, Senior Advocate
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CAV on 03.08.2015 Pronounced on 19.11.2015
The prayer made in this writ application by the petitioners are as
follows:
(A) For issuance of an appropriate writ, order or direction,
including writ in the nature of certiorari, for
quashing/setting aside Letter no. 605 dated 06.05.2015
issued under the authority of the Respondent No. 2
-2-
whereby and whereunder, Distribution Franchisee
Agreement (for short 'DFA') dated 05.12.2012 entered into
by and between the petitioners and the respondent -
Jharkhand Bijli Vitran Nigam Limited, formerly part of
Jharkhand State Electricity Board, for appointment of
Distribution of Franchisee to undertake the work of
electricity supply in Jamshedpur Circle (franchisee area)
has been terminated;
(B) For issuance of further appropriate writ, order or direction,
including writ in the nature of mandamus, directing the
respondents to hand over the business operation of
franchisee area to the Petitioner no. 2 - Company, being
the Distribution Franchisee appointed pursuant to the
agreement dated 05.12.2012 after reworking the base
year and the capital expenses and operation expenses,
which is required to be changed reflecting the present
current situation as per mutually agreed terms;
(C) For issuance of further appropriate writ, order or direction,
including writ in the nature of certiorari, for
quashing/setting aside the Expression of Interest (for short
'EOI') invited under the authority of the Respondent No. 2
in the month of May, 2015 for selection of input base
distribution franchisee for Jamshedpur Circle; &
(D) For any other relief or reliefs for which the petitioners are
legally entitled in the facts and circumstances of the case.
2. Narration of the facts as per the averments made in the writ
application are that, the petitioners are Companies registered under
the Indian Companies Act, 1956. The petitioner no. 1 is a Tata group
company having wide experience in various fields of business and has
four decades of experience in Jamshedpur with adequate available
infrastructure, experience and expertise to undertake work of
distribution franchisee. The petitioner no. 2 - company has been
incorporated as a special purpose vehicle company after the petitioner
no. 1 was declared a successful bidder in respect of Request for
Proposal (for short 'RFP') invited by the then Jharkhand State
Electricity Board for appointment of Distribution Franchisee in the
Jamshedpur Circle. Earlier, the petitioner no. 2 - company was known
-3-
as M/s. T. P. Power Distribution Ltd. which has subsequently been
changed to Tata Power Jamshedpur Distribution Ltd. After the
unbundling of erstwhile Jharkhand State Electricity Board in terms of
the provision contained in the Electricity Act, 2003. Jharkhand Urja
Vikas Nigam Ltd. (hereinafter referred to as the 'JUVN') came into
existence holding the shares of the three newly recognised company
namely, Jharkhand Urja Utpadan Nigam Ltd., Jharkhand Urja
Sancharan Nigam Ltd. and Jharkhand Bijli Vitran Nigam Ltd. The
erstwhile Jharkhand State Electricity Board in order to improve
operational efficiency and quality of service provided to its consumers
intended to bring in management expertise through Public Private
Participation in the field of distribution of electricity and in terms of such
intention as well as the provisions of the Electricity Act, 2003, a RFP
document was published by the Board in the month of April 2012
inviting applications for appointment of Distribution Franchisee for
Ranchi, Jamshedpur and Dhanbad Circles. Being interested, the
petitioner no. 1 participated in the bids with respect to Jamshedpur
Circle only and was ultimately declared the successful bidder for
Jamshedpur Circle. As regards, Ranchi Circle, Calcutta Electric
Supply Company was declared the successful bidder whereas for
Dhanbad Circle, the entire bidding was cancelled. A Letter of Intent
was issued by the Board to the petitioner no. 1 for its appointment as
distribution franchisee for Jamshedpur Circle vide letter no. 1976 dated
09.10.2012. In terms of the RFP document which required incorporation by the successful bidder of special purpose vehicle company for carrying out the work of Distribution Franchisee, the petitioner no. 2 company was incorporated for the said purpose. In terms of the RFP document, a Distribution Franchisee Agreement (hereinafter referred to as the 'DFA') for distribution of electricity for Jamshedpur Circle was executed by and between the petitioners and the then Jharkhand State Electricity Board on 05.12.2012.
3. It is the case of the petitioners that the petitioners were all along diligent in making the efforts to comply with the conditions precedent under the agreement, but on account of the delay and latches on the part of the respondents, some of the conditions precedent could not be fulfilled. The petitioners have stated in details the steps which had been taken for fulfillment of the conditions precedent -4- including infrastructure roll out plan, appointment of independent auditor and other conditions. It is also the case of the petitioners that after the change of government in the State, a letter dated 03.07.2014 was sent by the Department of Energy to the Chairman-cum-Managing Director of respondent no. 1 - company wherein a direction has been issued to the respondent no. 1 - company to take a decision for cancellation of DFA executed by them in respect of Ranchi and Jamshedpur Circle and to take steps for retendering. Being aggrieved by the said communication dated 03.07.2014, the successful bidder of Ranchi Circle namely, CESC Ltd. along with its special purpose vehicle company so constituted prayed for stay of the operation of the said communication and in the order dated 22.07.2014 passed by this Court, it was observed that if the Nigam is contemplating to take any decision pertaining to the DFA, it shall not be influenced by the decisions of the State Government. Pursuant to the order dated 22.07.2014 passed by this Court, a meeting of the Board of Directors of respondent no. 2 - company was held on 05.08.2014 wherein it was decided to take the opinion of the senior legal advisor of the company on the issue relating to Distribution Franchisee for Ranchi and Jamshedpur Circle and thereafter to issue show-cause notice to the franchisee as per the advice. The decision of Board of Directors in its meeting dated 05.08.2014 notwithstanding, a letter dated 25.02.2015 was served upon the petitioners in which its office bearers were directed to appear before the respondent no. 2 and discuss the issue regarding handing over of the distribution network to the petitioner no.
2. The meeting was duly attended to and in course of the meeting, it was expressed on behalf of the petitioners that they intend to go ahead with the DFA subject to the condition that the base price for the year is changed as the capital expenses and operational expenses had to be reworked to reflect the current day situation. However, without responding to the offer of the petitioner no. 1 intending to stick with the DFA on the condition of making certain changes in the parameters, a letter dated 06.05.2015 was issued by the respondent no. 2 whereby and whereunder the DFA dated 05.12.2012 entered into by and between the petitioner no. 1 and the respondents with respect to appointment of Distribution Franchisee for undertaking the work of -5- distribution of electricity supply in Jamshedpur Circle was terminated which prompted the petitioners to prefer the present writ application.
4. Heard Mr. Sumeet Gadodia, learned counsel for the petitioners and Mr. Ajit Kumar, learned senior counsel for the respondents.
5. Mr. Sumeet Gadodia, learned counsel for the petitioners while making an elaborate argument to strengthen the case of the petitioners has firstly referred to the Distribution Franchisee Agreement for distribution of power for Jamshedpur Circle which would be frequently referred to by him as well as by the learned senior counsel for the respondents as the various provisions enumerated in the agreement forms the basis of argument by both the sides. Reference has been made to Article 5.1 A of the DFA which is with respect to implementation of Restructured Accelerated Power Development and Reforms Programme (RAPDRP) wherein responsibilities were upon the Distribution Franchisee for preparation of detailed project report for implementation of Part B Programme in consultation with JSEB. It was also the responsibility of the Distribution Franchisee for timely implementation of such projects and the progress of the project had to be intimated to JSEB on a monthly basis. This Article further envisages duties upon JSEB to set up a joint monitoring mechanism along with the Distribution Franchisee to ensure both timely implementation as per plans and course corrections, if any. Submissions have been advanced that the duties and responsibilities of the Distribution Franchisee and the JSEB has been clearly demarcated which reveals that in order to complete the project successfully it had to be a mutually concerted and cooperated effort from both the parties. Learned counsel has thereafter referred to Article 5.6.5(B) and (C) which is with respect to consumer complaint handling and consumer services and the entire consumer complaint handling procedure on approval by the Jharkhand State Electricity Regulatory Commission had to be complied with by the Distribution Franchisee. Article 6 of the DFA deals with metering and measurement at input point and it was the Distribution Franchisee who was to install and operate the check metering system in accordance with this article and Central Electricity Authority (Installation and Operation of Meters) Regulations, 2006. The miscellaneous provisions have been referred to in Article 9 of the DFA and Article 19.3 and 19.4 -6- have been taken note of by the learned counsel for the petitioners which relates to the respective rights of the parties and performance or compliance with their respective obligations under the agreement. Learned counsel for the petitioners has also referred to appendix 1 of the DFA which gives the details of distribution infrastructure of Jamshedpur Circle for the financial year 2010-11 and the said details were subject to verification through joint audit. Learned counsel for the petitioners while referring to few of the provisions of the DFA has tried to lend focus on the fact that for successful completion of the project responsibilities and duties cast upon the petitioners as well as the respondents were mutually inclusive. The subsequent cancellation of the DFA by issuance of the impugned letter dated 06.05.2015 was 'malice in law' on the part of the respondents. To further bolster the contention of the petitioners that the entire action of the respondents were indeed a 'malice in law', he has referred to the supplementary counter affidavit filed on behalf of the respondents which contain various communications as well as the minutes of meetings held between the representatives of both the sides on several occasions. He has also made reference to the minutes of meeting held on 01.07.2013 wherein discussions were made about the intimation given by the independent auditor about the billing date of Jamshedpur Circle which was available for the period April 2010 to October 2010 in the Txt format which opens in Notepad only. Discussions were also made about the actual time which shall be taken by the independent auditor to complete the assigned work relating to opening level of AT & C losses and collection efficiency and determination of average tariff for the base year of 2010-11. The meeting dated 12.07.2013 was held to discuss the progress made by the independent auditor as well as with respect to the issues related to handing over of distribution network to the Distribution Franchisee in Ranchi and Jamshedpur Circle. Learned counsel has also referred to the letter dated 15.07.2013 which is an internal communication of the respondents and which related to handing over of the billing data in soft copy to M/s. Ernest & Young for the year 2010-11. The issue of progress made by the independent auditor as well as handing over of distribution network to Distribution Franchisee in Ranchi and Jamshedpur Circle was once again the subject-matter of the meeting held on 26.07.2013. Constitution of the -7- meeting dated 12.07.2013 was done, as would be evident from the letter dated 30.07.2013 for examining the proposal submitted by the Distribution Franchisee on the issue of taking over the distribution network of Jamshedpur Circle pertaining to field level issues such as installation of input meter at interface point and other field level issues. Further meeting followed and in the meeting dated 24.09.2015, the petitioner no. 1 on the difficulty of change of data in the required format had offered assistance in the conversion process and the IT personnel of the petitioner no. 1 was requested to look into the issue and find out whether it is possible to convert the data in desired format or not. The issue of metering as well as other issues were discussed in the meeting held on 12.11.2013 and it was insisted upon by the petitioner no. 1 that JSEB should take a practical decision regarding installation of interface meters. Further meeting followed as difficulties had arisen with respect to finalisation of methodology for final input price, but the main hindrance was the component to be taken in the amount collected. The independent auditor was directed to submit the initial report incorporating the methodology for calculation of collection efficiency and was to submit a report and it was decided that the Committee had come to an amicable settlement after going through the report submitted by the independent auditor. Learned counsel for the petitioners continuing with his argument has submitted that through letter dated 13.01.2014 issued by JUVNL, an Electrical Executive Engineer of the company was authorised to visit Bhiwandi, Maharashtra to study the input metering complaint as adopted by the distribution licencee as exchange/interface point for the purpose of energy accounting along with other aspect like organisational chart/working of Distribution Franchisee Cell etc. The fees of auditor was to have been increased owing to the delay in project for which the petitioner no. 1 was requested for extension of the contract of the independent auditor and revision of his fees. Reference has also been made to the minutes of meeting held on 03.04.2014 wherein a direction has been given to constitute a meeting to conduct testing of feeders by a third party and calibration of interface meters along with the metering unit by a third party to which both the Distribution Franchisees had showed their willingness. Learned counsel submits that till that point of time, everything was functioning smoothly and regular discussion -8- between both the parties were going on in order to fulfill the terms and conditions of DFA and the first ominous sign of the threat, the DFA was facing came to the fore upon issuance of letter dated 03.07.2014 by the Energy Department, State of Jharkhand addressed to the Chairman-cum-Managing Director, JUVNL. The order dated 22.07.2014 passed in W.P.(C) No. 3358 of 2014 wherein challenge was made to the letter dated 03.07.2014 by which it was directed that the Jharkhand Bijli Vitran Nigam Ltd., if it is contemplating to take any decision in the matter of agreement in question shall not be influenced by the decision of the Government which thwarted to an extent the eminent danger of cancellation of the DFA. Learned counsel submits that in spite of the order dated 22.07.2014 passed in W.P.(C) No. 3358 of 2014, a meeting was held on 05.08.2014 and the alleged irregularities committed in the tender process for selection of input base Distribution Franchisee for Ranchi and Jamshedpur Circle, it was decided to take the opinion of the senior legal advisor of the company and thereafter issue show-cause notice to the Franchisee as per the advice. In spite of taking such a stringent stand without there being any necessity to do so which can be termed as an oppressive, arbitrary and illegal action on the part of respondents, the petitioner no. 1 - company was once again communicated by letter dated 25.02.2015 issued by the Jharkhand Bijli Vitran Nigam Ltd. for seeking the presence of officials of the petitioner no. 1 - company to discuss the issued related to handing over the distribution network to the Distribution Franchisee. Response was given by the petitioner no. 1 to adhere to the terms and conditions of the DFA, but in view of the long delay in implementing the projects, the base year of 2010-11 had to be reworked to 2013-14 to reflect the current day situation. It has been submitted by the learned counsel for the petitioners that the entire acts as enumerated above would reveal that there has been full cooperation from the side of the petitioners to ensure that the project sees the light of the day. The respondents as would be revealed from the minutes of the innumerable meetings held between the representatives of both the sides had made discussions and had taken certain steps in trying to get the project implemented, but the issuance of the letter dated 03.07.2014 changed the entire scenario ultimately leading to cancellation of DFA vide impugned letter dated 06.05.2015. The -9- learned counsel for the petitioners submits that the petitioners did not have any premonition about impending letter of termination dated 06.05.2015 as the entire acts on the part of the respondents did suggest an element of camaraderie as the teething problems and nitty- grities of the work to be undertaken were duly being sorted out. The subsequent act of the respondents as has been submitted by the learned counsel for the petitioners was actuated with malice and therefore can be held to be a 'malice in law'. In this context, learned counsel for the petitioners has referred to the judgment in the case of "State of A. P. and others Vs. Goverdhanlal Pitti" reported in (2003) 4 SCC 739 and in the case of "Ravi Yashwant Bhoir Vs. District Collector, Raigad and others" reported in (2012) 4 SCC 407.
6. Mr. Sumeet Gadodia, learned counsel for the petitioners has next harped upon the fact that the entire acts on the part of the respondents in issuing the letter of termination dated 06.05.2015 was in violation of the principles of natural justice. It has been submitted that Article 2.1.8 and Article 2.1.9 are the only Articles to be exercised for terminating the DFA. In case of termination of the agreement if the fault lies with the Distribution Franchisee, the earnest money has to be forfeited and if it is the fault on the part of the respondents in not fulfilling the conditions precedent, the earnest money has to be refunded. Learned counsel for the petitioners has submitted that Article 16 of the DFA deals with event of default and termination, but the stage of invoking of Article 16 had not arrived. It has been submitted that discretion of the respondents as has been mentioned in Article 2.1.8 does not give dictatorial powers to the respondents to terminate the agreement at its whims. The entire chronology of events show the cooperation on the part of the petitioners to fulfill the condition precedent and to start the operation and distribution of electricity in Jamshedpur Circle and without giving any notice or a show-cause of its impending decision to terminate the agreement clearly reveals that the respondents have violated the principles of natural justice. The respondents being the instrumentalities of State cannot forego the liberty of a party to reply to the cause before taking such a harsh decision. In this context, learned counsel for the petitioners has referred to a judgment in the case of "Sahara India (Firm) Lucknow Vs. Commissioner of Income Tax, Central I and -10- another" reported in (2008) 14 SCC 151, in the case of "Gorkha Security Services Vs. Government (NCT of Delhi) and others"
reported in (2014) 9 SCC 105.
7. Mr. Sumeet Gadodia, learned counsel for the petitioners has referred to the impugned letter dated 06.05.2015 as well as the counter affidavit filed on behalf of the respondents and has stated that the respondents have tried to supplement the reasoning which have been given in the impugned letter dated 06.05.2015. It has been stated that the respondents cannot improve their stand or travel beyond the letter in trying to justify the issuance of the impugned letter of termination and in this context reference has been made to the judgment in the case of "Mohinder Singh Gill and Another Vs. The Chief Election Commissioner, New Delhi and others" reported in (1978) 1 SCC
405.
8. Reverting back to the DFA more specifically to Article 2 which deals with the conditions precedent and which forms the main plank of dispute between both the sides, it has been submitted that Article 2.1.1 relates to submission of performance guarantee and the Distribution Franchisee was required to submit and maintain valid for the terms of the agreement of performance guarantee to the satisfaction of the respondents in the form of an irrevocable and unconditional standby bank guarantee. The bank guarantee was to be made initially followed for a period of 1 year from the effective date in terms of Article 11.1 of the DFA. Effective date has been defined in Article 1 of the DFA which means from the date of handing over of the business operation of franchisee area by the JSEB to the Distribution Franchisee pursuant to the agreement after the respective conditions precedent have been satisfied/fulfilled by the parties. Learned counsel submits that the purport of the Article 2.1.1 and Article 11.1 and the definition of effective date as per Article 1 of the DFA would clearly reveal that the bank guarantee was to be furnished immediately before handing over of the assets pursuant to the DFA dated 05.12.2012. The stage for furnishing bank guarantee did not arrive as the assets were never handed over to the petitioners. Although it is clear from a respective reading of the Articles mentioned that only upon handing over of the assets, the bank guarantee has to be furnished immediately, but even otherwise if there was any misconception on the -11- part of the respondents the petitioners should have been asked about furnishing of the bank guarantee and whether the same was to be furnished before or after handing over of the assets to the Distribution Franchisee. In support of this analogy, learned counsel for the petitioners has referred to the judgment in the case of "Rashmi Metaliks Ltd. and another Vs. Kolkata Metropolitan Development Authority and others" reported in (2013) 10 SCC 95. Continuing with his arguments on the completion of condition precedent mention has been made about the infrastructure roll out plan, appointment of independent auditor, calibration of meters etc. There seems to be a clear cut evidence reflecting mutual cooperation from both the sides and in fact according to the learned counsel for the petitioners except the final report of the independent auditor, no other condition precedent was left to be fulfilled.
9. The next limb of the argument which has been adopted by the learned counsel for the petitioners is with respect to the termination of the agreement/contract which was completely contrary to public interest. In this context, he has referred to AT & C losses for Jamshedpur Circle for the base year 2010-11 which was 32.82% and which was increased in the year 2014-15 to 41.3%. It has been submitted that the AT & C losses had increased by leaps and bounds from the time DFA was entered into till the expression of interest which has been floated by the respondents for appointing a Distribution Franchisee for Jamshedpur Circle. The time consumption of appointing a new Distribution Franchisee will be considerable as the entire things including AT & C losses identified as per the base year 2014-15 has to be reflected and the entire operation and structural modifications has to be started afresh and this according to the learned counsel for the petitioners would affect the public at large and therefore the issue of public importance has been completely overlooked by the respondents in terminating the DFA. Reference in this context has been made to the judgment in the case of "S. J. Coke Industry Pvt. Ltd. Vs. C.C.L. Ltd." delivered by the Hon'ble Supreme Court on 08.04.2015.
10. Learned counsel has submitted that the contract which was entered into by and between both the sides was a statutory contract and in this context he has referred to Electricity Act, 2003 and the -12- definitions of a Board at Section 2 (7), distribution licencee at Section 2 (17) and franchisee at Section 2 (27) in order to submit that all are enabling definitions. He has further referred to Section 12 which deals with authorised persons to transmit supply etc. of Electricity and Section 14 which envisages the grant of licence to transmit electricity as a transmission licencee to distribute electricity as a distribution licencee or to undertake trading in electricity as a electricity trader. It has been submitted that Section 14 of the Electricity Act, 2003 makes the Board a deemed licencee and by virtue of the enabling provisions, the Board steps into the shoes of a distribution licencee. In this context he has referred to Clause A and B of the DFA to substantiate his argument with respect to Section 14 of the Electricity Act, 2003. The distribution licencee which the respondents are or which JSEB were prior to its unbundling had entered into a contract with the Distribution Franchisee and the same is a statutory contract in the realm of public law. To support his contention, learned counsel has referred to the judgments in the case of "Air India Statutory Corporation and others Vs. United Labour Union and others" reported in (1997) 9 SCC 377; case of "Union of India and another Vs. S. B. Vohra and others" reported in (2004) 2 SCC 150; case of "Verigamto Naveen Vs. Govt. of A.P. and others" reported in (2001) 8 SCC 344; case of "Noble Resources Ltd. Vs. State of Orissa and another" reported in (2006) 10 SCC 236; case of "Popcorn Entertainment and another Vs. City Industrial Development Corporation and another" reported in (2007) 9 SCC 593 and case of "ABL International Ltd. and another Vs. Export Credit Guarantee Corporation of India Ltd. and others" reported in (2004) 3 SCC 553.
11. Mr. Ajit Kumar, learned senior counsel appearing on behalf of the respondents has tried to controvert the elaborate and meticulous argument advanced on behalf of the learned counsel for the petitioners by making a reference initially to the Electricity Act, 2003 by submitting that the earlier enactments on the subjects that is, the Electricity Act, 1910 and Electricity Act, 1948 had many fallacies and shortcomings and in order to overcome the same, the Electricity Act, 2003 was enacted. He has referred to Section 14 of the Electricity Act, 2003 which deals with the grant of licence and has further referred to 6th proviso to Section 14 while submitting that it was incumbent upon the -13- Distribution Franchisee to complete all the formalities/requirements necessary for grant of licence. It has been submitted that even after expiry of more than 2 years from the date of entering into the DFA, the condition precedent was not fulfilled by the Distribution Franchisee ultimately leading to issuance of the impugned letter of termination of the DFA dated 06.05.2015. Learned senior counsel has referred to the letter issued on behalf of the petitioners dated 02.03.2015 in reference to the letter issued on behalf of Jharkhand Bijli Vitran Nigam Ltd. dated 25.02.2015 and has submitted that the tenor and purport of the letter dated 02.03.2015 suggests that the petitioners have altogether abandoned the project. The said letter demonstrates at paragraph 6 and 7 that the entire infrastructure was dismantled and the same would have to be recreated if it is ultimately decided to go ahead with the project. The learned senior counsel attacking the said letter dated 02.03.2015 further submits that a condition was put forward by the petitioners to change the base year from 2010-11 which was initially agreed upon in the agreement to 2013-14. The conclusion as per the learned senior counsel which can be drawn from the reading of the letter dated 02.03.2015 suggests that it was the petitioners which had virtually requested the respondents to cancel the DFA. Referring to the DFA, learned senior counsel submits that the basic requirement prior to handing over of the assets to the Distribution Franchisee was of fulfillment of the conditions precedent and since the performance guarantee in terms of Article 2.1.1 of the DFA was not furnished/submitted, in spite of lapse of a considerable long period of time, it was within the purview and jurisdiction of the respondents to terminate the DFA. Article 2.1.2 which relates to infrastructure roll out plan was submitted much later by the Distribution Franchisee and the calibration of meter in terms of Article 2.1.4 seems not to have been complied with in view of the letter dated 02.03.2015 which enunciates that the meter was removed. No justification or excuse has been given as to why the meter was removed and if at all the meters were installed, there is no way out to know whether the same were actually installed or not. Therefore, such factual aspects is clearly a disputed question of fact and is thus not amenable to writ jurisdiction. Submission has also been advanced to the effect that Article 2.1.8 had been invoked in view of the continuous delay of the projects on the part -14- of the petitioners in not complying with the conditions precedent and since the said Article reveal about the termination of the agreement at the discretion of the respondents, the question of issuance of show- cause notice prior to exercising of such discretion is a non requirement in terms of the agreement. The meetings which were held between both the sides would suggest that there was full cooperation on the part of the respondents in order to try and remove the various anomalies and obstructions which may have cropped up, but as it seems from the minutes of the meeting as well as from the various correspondences, the petitioners were never interested in fulfilling their part of the agreement and if at all they were interested to undertake the work the conditions precedent would have been fulfilled. The excuse of the petitioners of not submitting the bank guarantee in spite of repeated extensions on the part of the respondents on the basis that the same would be dependent upon the report of the independent auditor does not hold much ground as in terms of Article 2.1.3.5, the average tariff for the base year shall not be changed if the variance is less than 10%. The other limb of argument of the learned counsel for the petitioners with respect to submission of performance guarantee vis-a-vis effective date, the same has been countered by the learned senior counsel for the respondents by submitting that nowhere from the reading of either Article 2.1, Article 11.1 or the definition of effective date as per Article 1 of the DFA does suggest that only after the assets are handed over to the Distribution Franchisee, the bank guarantee has to be furnished. Therefore, the first and foremost step which the learned senior counsel for the respondents has much stressed upon is of complying with the conditions precedent and that too the submission of performance guarantee by way of bank guarantee. It has been submitted that the agreement which was entered into by and between the petitioners and respondents is not a statutory contract and a pure contractual agreement can be a subject of scrutiny only before the Civil Court as such aspects or disputes cannot be looked into or interfered with in view of the limited jurisdiction of a writ court.
12. Learned senior counsel controverting the arguments of learned counsel for the petitioners with respect to 'malice in law' has submitted that such argument does not have any basis and the entire action on the part of the respondents in terminating the DFA cannot be termed to -15- be a 'malice in law' in view of the response which was submitted by the petitioners dated 02.03.2015. It has been reiterated that the said letter is a ploy on the part of the petitioners as conditions has been imposed with respect to change of base year, so as to enable the project being undertaken by the petitioners. Even such prayer of change of base year as made in the writ application is misconceived as the terms of the contract cannot be altered. It has therefore been submitted that the letter of termination dated 06.05.2015 was justifiably issued as the prologue leading to cancellation of DFA would suggest. Learned senior counsel has stated about the development which had occurred during the intervening period and has submitted that several new consumers have taken connections, the units have increased and the base year input point and areas have also changed and in order to rework the same, there will be utter confusion and therefore after cancellation of the DFA, a fresh tender has been floated. In support of his contentions, learned senior counsel has referred to the judgments in the cases of "Ratnagiri Gas and Power (P) Ltd. Vs. RDS Projects Ltd." reported in (2013) 1 SCC 524; "Radhakrishna Agarwal Vs. State of Bihar" reported in (1977) 3 SCC 457; "State of Bihar Vs. Jain Plastics and Chemicals Ltd." reported in (2002) 1 SCC 216;
"Orissa Agro Industries Corpn. Ltd. Vs. Bharati Industries"
reported in (2005) 12 SCC 725; "Rajasthan State Industrial Development & Investment Corpn. Vs. Diamond & Gem Development Corpn. Ltd." reported in (2013) 5 SCC 470; ""National Highways Authority of India Vs. Ganga Enterprises" "
reported in (2003) 7 SCC 410; & "Kisan Sahkari Chini Mills Ltd. v. Vardan Linkers" reported in (2008) 12 SCC 500.
13. Mr. Sumeet Gadodia, learned counsel for the petitioners has given a terse reply to the contention of the learned senior counsel for the respondents while submitting that no tender has been floated, rather an Expression of Interest (EOI) has been floated. It has been submitted that if the base year is not reworked, it will be impossible to reduce the AT & C losses.
14. In order to appreciate the elaborate and structured arguments advanced by both the sides, it will be apt to refer to the Electricity Act, 2003 as the entire process for appointment of a Distribution Franchisee flows from the provision of the Act. The preamble of the Electricity Act, -16- 2003 reflects that the Act was enacted to slight the loss relating to generation, transmission, distribution, trading and use of electricity and generally for taking measures conducive to develop the electricity industry, promoting competition therein, protecting interest of consumers and supply of electricity to all areas, rationalisation of electricity tariff, ensuring transparent issues regarding subsidies, promotion of efficiency and environmental benign issues, constitution of Central Electricity Authority, Regulatory Commission and establishment of Appellate Tribunal and matters connected therewith or incidental thereto. Section 2 of the Act relates to definition and for the purposes of the present case, the definition of a Board as in Section 2(7), a distribution licencee as in Section 2(17) and franchisee as in Section 2(27) are quoted hereinbelow:
2(7) "Board" means a State Electricity Board, constituted before the commencement of this Act, under sub-section (1) of section 5 of the Electricity (Supply) Act, 1948 (54 of 1948); 2(17) "distribution licensee" means a licensee authorised to operate and maintain a distribution system for supplying electricity to the consumers in his area of supply; 2(27) "franchisee" means a person authorised by a distribution licensee to distribute electricity on its behalf in a particular area within his area of supply.
15. Section 12 of the Act deals with authorised persons to transmit supply etc. of electricity and it clearly envisages that no person shall transmit electricity or distribute electricity or undertake trading in electricity unless he is authorised to do so by a licence issued under Section 14 or is examined under Section 13 of the Act. Section 14 of the Act deals with grant of licence and which reads thus:
14. Grant of licence - The Appropriate Commission may, on an application made to it under section 15, grant a licence to any person -
(a) to transmit electricity as a transmission licensee; or
(b) to distribute electricity as a distribution licensee; or
(c) to undertake trading in electricity as an electricity trader, in any area as may be specified in the licence:
16. The provisions which have been referred to above reveals that the distribution licencee is not required to obtain any separate licence -17- from the concerned State Commission and it is the distribution licencee which can authorise a person to act as a franchisee to distribute electricity on its behalf within its area of supply. Therefore, by virtue of enabling provisions of the Act, the Electricity Board or the various companies which have been created after unbundling of the Board, steps into the shoes of a distribution licencee. Since erstwhile JSEB was bestowed with the legal status of the distribution licencee, a Request for Proposal was published by the then JSEB inviting applications for appointment of Distribution Franchisee for various Circles and the petitioner no. 1 having bid for Jamshedpur Circle was declared to be a successful bidder and pursuant thereto the Distribution Franchisee Agreement was entered into by and between the petitioners and the erstwhile JSEB. Article 1 of the DFA defines various terms and since the term effective date assumes significance in view of the submission/non-submission of the performance guarantee by way of bank guarantee, it would be necessary to refer to the same and which is quoted as under:
Effective Date "shall mean the date of handing over of business operations of Franchisee Areas by JSEB to the Distribution Franchisee pursuant to which Agreement after the respective conditions precedent have been satisfied/fulfilled by the Parties."
17. Article 2 of the DFA deals with the conditions precedent and the conditions subsequent. The conditions precedent which have to be satisfied by the Distribution Franchisee and JSEB has been articulated in Article 2.1.1, 2.1.2, 2.1.3 and 2.1.4. Article 2.1.1 deals with submission of performance guarantee and the same reads as under:
2.1.1 Submission of Performance Guarantee The Distribution Franchisee shall submit and maintain valid for the term of this Agreement, a Performance Guarantee to the satisfaction of JSEB in the form of an irrevocable and unconditional standby Bank Guarantee (BG) from any nationalised bank or ICICI bank, IDBI bank, Axis bank, HDFC bank for an amount equivalent to estimated amount payable to JSEB by Distribution Franchisee based on thrice the monthly average of Energy Input at Input Points in Franchisee Area in the Base Year and Input Rates quoted by the Distribution Franchisee for first year of Franchisee term and to be renewed in line with Article 11 of the DFA, each year upto one (1) year after the Expiry of the Franchisee term."-18-
18. Article 2.1.2 relates to infrastructure roll out plan, Article 2.1.3 is with respect to completion of audit of various parameters and it includes within its folds the appointment of an independent auditor in mutual consultation with the Distribution Franchisee and the distribution licencee. Article 2.1.4 deals with calibration of meters. Article 11 deals with how the bank guarantee shall be governed and Article 11.1 states that the bank guarantee shall be initially valid for a period of one year from the effective date. Submission of the performance guarantee in the form of an irrevocable bank guarantee do not specify an amount and the same is dependent on the audit. Article 2.1.3.5 deals with determination of average tariff for the base year which states that if a variance of more than 10% is detected by the independent auditor between the figures given in the RFP document and the final figures arrived at by the independent auditors, the input price of the successful bidder shall be adjusted as per the decision of the independent auditor. Article 2.1.1, Article 11.1 and the definition of effective date at Article 1 of the DFA would have to be read in unison, but even then it does not reflect that the bank guarantee had to be furnished prior to handing over of the assets to the Distribution Franchisee. The bank guarantee is valid for a period of one year from the effective date and the effective date is the date of handing over of the business operations to the Distribution Franchisee after the respective conditions precedent have been satisfied. The contentions of the learned senior counsel for the respondents with respect to fulfilling the conditions precedent before the business operations were to be handed over to the Distribution Franchisee seems not to have a foundational basis for such argument. The conditions precedent of submission of bank guarantee was subject to various parameters and until and unless the said parameters were fulfilled with the active and joint cooperation of all the stake holders including the independent auditor, the question of submission of bank guarantee prior to handing over of the business operations to the Distribution Franchisee pales into insignificance. It is therefore held that one of the reasons which have been assigned in the impugned letter dated 06.05.2015 of non- fulfillment of the conditions precedent obligations is in view of the circumstances enumerated above does not reflect the true picture and cannot be a basis for terminating the DFA. Moreover, if indeed there -19- was some confusion, although it does not seem so on going through the various provisions enumerated above, it was also incumbent for the authorities to have said so in clear terms which they did not. This analogy has been considered by the Hon'ble Supreme Court in the case of "Rashmi Metaliks Ltd. and another Vs. Kolkata Metropolitan Development Authority and others" (supra) wherein it was held as follows:
17. "So far as Clause (j) of the detailed notice inviting E-tender No. 01/KMDA/MAT/CE/2013-2014 dated 10-5-2013 emanating from the office of the Chief Engineer is concerned, it seems to us that contrary to the conclusion in the impugned judgment, the clause is not an essential element or ingredient or concomitant of the subject NIT. In the course of hearing, the income tax return has been filed by the appellant Company and scrutinised by us. For Assessment Year 2011-2012, the gross income of the appellant Company was Rs 15,34,05,627, although, for the succeeding Assessment Year 2012-2013, the income tax was nil, but substantial tax had been deposited.
18. We think that the income tax return would have assumed the character of an essential term if one of the qualifications was either the gross income or the net income on which tax was attracted. In many cases this is a salutary stipulation, since it is indicative of the commercial standing and reliability of the tendering entity. This feature being absent, we think that the filing of the latest income tax return was a collateral term, and accordingly the Tendering Authority ought to have brought this discrepancy to the notice of the appellant Company and if even thereafter no rectification had been carried out, the position may have been appreciably different. It has been asserted on behalf of the appellant Company, and not denied by the learned counsel for the respondent Authority, that the financial bid of the appellant Company is substantially lower than that of the others, and, therefore, pecuniarily preferable."
19. Both the learned counsel have referred to the minutes of the meetings as well as the various communications and which have been brought on record by the learned senior counsel for the respondents.
Plethora of meetings held between representatives of both the sides would suggest that the only issue which fell for consideration was the issue of handing over of operations to the Distribution Franchisee in Ranchi and Jamshedpur Circle. Without going into a detailed discussion about the meetings, only a reference is being made of the -20- caption of some of the meetings which would sufficiently explain the purport and intentions on behalf of both the sides.
Minutes of meeting held on 08.05.2013 in the office chamber of Chairman, JSEB to discuss the issue of handing over of operations to DFs in Ranchi and Jamshedpur Circle.
Minutes of meeting held on 28.05.2013 in the Conference Room of Board Headquarters to discuss the issue of checklist submitted by independent Auditor & issue related to handing over of Distribution Network to DFs in Ranchi and Jamshedpur Circle. . Minutes of meeting held on 01.07.2013 in the Conference Room of Board Headquarters to discuss the Progress made by Independent Auditor & issues related to handing over of Distribution Network to DFs in Ranchi and Jamshedpur Circle.
Minutes of meeting held on 12.07.2013 in the office Chamber of Hon'ble Chairman, Board Headquarters to discuss the Progress made by Independent Auditor & issues related to handing over of Distribution Network to DFs in Ranchi and Jamshedpur Circle.
Minutes of meeting held on 26.07.2013 in the Conference Hall, Board Headquarters headed by Hon'ble Chairman to discuss the Progress made by Independent Auditor & issues related to handing over of Distribution Network to DFs in Ranchi and Jamshedpur Circle.
Minutes of meeting held on 03.04.2014 in the office chamber of CMD, JUVNL to discuss the issue of Distribution Franchisee.
20. The minutes of the various meeting undertaken would project the bonehomie existing between both the sides and the cooperative attitude between them. The entire scenario changed once the Department of Energy, Government of Jharkhand issued a letter addressed to the Chairman-cum-Managing Director, JUVNL dated 03.07.2014 giving a direction for canceling the entire tender process for Ranchi and Jamshedpur Circle on the ground of irregularities which had been committed. Even at that stage, the respondents which had undertaken the entire process of floating the request for proposal and ultimately selecting the Distribution Franchisee did not have any doubt or did not raise any issue or question with respect to alleged irregularities in the tender process and in fact in W.P.(C) No. 5224 of 2012 preferred by the Direct Media Distribution Ventures Pvt. Ltd., an 21- unsuccessful participant, the Board had candidly refuted the allegations of any irregularities or malpractices. The letter dated 03.07.2014 issued by the Energy Department, State of Jharkhand prompted the respondents to convene a meeting and the decision which was taken is as follows:
"The Board discussed the matter and decided to take opinion by senior legal advisor of the Company on the issue and thereafter issue show cause notice to the franchisee as per the advice."
21. However, the letter dated 25.02.2015 issued by the Chief Engineer (Commercial and Revenue) Jharkhand Bijli Vitran Nigam Ltd. suggests that the respondents were in respect of the decisions taken in the meeting dated 05.08.2014 had fixed a meeting on 27.02.2015 to discuss the issue relating to handing over of distribution network to the Distribution Franchisee. In the said letter request was also made to prepare a power point presentation regarding the progress made by the Distribution Franchisee. Barring an aberration in the completion process in terms of letter dated 03.07.2014 and the meeting of the respondent dated 05.08.2014, the entire scenario depicts that there has never been an occasion for the respondents to suggest that the petitioners were never interested or they never intended to fulfill the conditions precedent or to take effort to complete the project at the earliest. The letter of termination dated 06.05.2015 seems to have struck the only discordant note amongst the harmonious efforts being made by both the sides. The issuance of the letter of the Energy Department, Government of Jharkhand dated 03.07.2014 and the decision of the Board of Directors on 05.08.2014 leading to termination of the agreement vide letter dated 06.05.2015 seems to have been issued for whatever reasons best known to the respondents. The entire action of the respondents in terminating the agreement has been, as submitted by the learned counsel for the petitioners to be an action which has been fuelled with 'malice in law'. In the case of "State of A.P. & others" (supra) while considering the legal meaning of malice it has been held as follows:
12. "The legal meaning of malice is "ill-will or spite towards a party and any indirect or improper motive in taking an action". This is sometimes described as "malice in fact". "Legal malice" or "malice in law" means -22- "something done without lawful excuse". In other words, "it is an act done wrongfully and wilfully without reasonable or probable cause, and not necessarily an act done from ill feeling and spite. It is a deliberate act in disregard of the rights of others". (See Words and Phrases Legally Defined, 3rd Edn., London Butterworths, 1989.)
13. Where malice is attributed to the State, it can never be a case of personal ill-will or spite on the part of the State. If at all it is malice in legal sense, it can be described as an act which is taken with an oblique or indirect object. Prof. Wade in his authoritative work on Administrative Law (8th Edn., at p. 414) based on English decisions and in the context of alleged illegal acquisition proceedings, explains that an action by the State can be described mala fide if it seeks to "acquire land" "for a purpose not authorised by the Act". The State, if it wishes to acquire land, should exercise its power bona fide for the statutory purpose and for none other."
22. In the case of "Ravi Yashwant Bhoir" (supra), it was held as follows:
47. "This Court has consistently held that the State is under an obligation to act fairly without ill will or malice in fact or in law. Where malice is attributed to the State, it can never be a case of personal ill will or spite on the part of the State. "Legal malice" or "malice in law"
means something done without lawful excuse. It is a deliberate act in disregard to the rights of others. It is an act which is taken with an oblique or indirect object. It is an act done wrongfully and wilfully without reasonable or probable cause, and not necessarily an act done from ill feeling and spite.
48. Mala fide exercise of power does not imply any moral turpitude. It means exercise of statutory power for "purposes foreign to those for which it is in law intended". It means conscious violation of the law to the prejudice of another, a depraved inclination on the part of the authority to disregard the rights of others, where intent is manifested by its injurious acts. Passing an order for unauthorised purpose constitutes malice in law. (See ADM, Jabalpur v. Shivakant Shukla, Union of India v. V. Ramakrishnan and Kalabharati Advertising v. Hemant Vimalnath Narichania.)"
23. Mr. Ajit Kumar, learned senior counsel for the respondents has referred to the case of "Ratnagiri Gas and Power (P) Ltd. Vs. RDS Projects Ltd." reported in (2013) 1 SCC 524, wherein it has been held in paragraph nos. 29 and 38 as follows:
29. "In the case at hand there was no allegation of "malice in fact" against any individual nor was any individual accused of bias, spite or ulterior motive -23- impleaded as a party to the writ petition. Even Mr Sudhir Chandra and Jagdeep Dhankar, learned Senior Counsel appearing for RDS fairly conceded that RDS had not alleged malice in fact against any individual who had played any role in the decision-making process. What according to them was alleged and proved by RDS was malice in law, which did not require impleading of individual officers associated with the decision-making process. We will presently examine whether a case of malice in law had been made out by the respondent RDS. But before we do so we wish to point out that the High Court had in the absence of any assertion in the writ petition and in the absence of the officers concerned recorded a finding suggesting that the officers had acted mala fide. The High Court named the officers concerned and concluded that the integrity of the entire process was suspect. We shall subsequently extract the passage from the impugned judgment where the High Court has even without an assertion of any malice against the officers named in the judgment, recorded a finding which was wholly unjustified in the circumstances of the case especially when the High Court was making out a case for RDS which it had not pleaded when nor were the officers concerned arrayed as parties to the writ petition, in their individual capacities.
30. Coming then to the question whether the action taken by the appellant RGPPL was vitiated by malice in law, we need hardly mention that in cases involving malice in law the administrative action is unsupportable on the touchstone of an acknowledged or acceptable principle and can be avoided even when the decision maker may have had no real or actual malice at work in his mind. The conceptual difference between the two has been succinctly stated in the following paragragh by Lord Haldane in Shearer v. Shields quoted with approval by this Court in ADM, Jabalpur v. Shivakant Shukla: (SCC p. 641, para 317) "317. ... 'Between "malice in fact" and "malice in law"
there is a broad distinction which is not peculiar to any system of jurisprudence. The person who inflicts a wrong or an injury upon any person in contravention of the law is not allowed to say that he did so with an innocent mind. He is taken to know the law and can only act within the law. He may, therefore, be guilty of "malice in law", although, so far as the state of his mind was concerned he acted ignorantly, and in that sense innocently. "Malice in fact" is a different thing. It means an actual malicious intention on the part of the person who has done the wrongful act.'" (Shearer case, AC pp. 813-14)
31. Reference may also be made to the decision of this Court in State of A.P. v. Goverdhanlal Pitti where the difference between "malice in fact" and "malice in law"-24-
was summed up in the following words: (SCC p. 744, paras 12-13) "12. The legal meaning of 'malice' is 'ill will or spite towards a party and any indirect or improper motive in taking an action'. This is sometimes described as 'malice in fact'. 'Legal malice' or 'malice in law' means 'something done without lawful excuse'. In other words, 'it is an act done wrongfully and wilfully without reasonable or probable cause, and not necessarily an act done from ill feeling and spite. It is a deliberate act in disregard of the rights of others.' (See Words and Phrases Legally Defined, 3rd Edn., London, Butterworths, 1989.)
13. Where malice is attributed to the State, it can never be a case of personal ill will or spite on the part of the State. If at all it is malice in legal sense, it can be described as an act which is taken with an oblique or indirect object."
38. We need hardly point out that in cases where the decision-making process is multi-layered, officers associated with the process are free and indeed expected to take views on various issues according to their individual perceptions. They may in doing so at times strike discordant notes, but that is but natural and indeed welcome for it is only by independent deliberation, that all possible facets of an issue are unfolded and addressed and a decision that is most appropriate under the circumstances shaped. If every step in the decision-making process is viewed with suspicion the integrity of the entire process shall be jeopardised. Officers taking views in the decision- making process will feel handicapped in expressing their opinions freely and frankly for fear of being seen to be doing so for mala fide reasons which would in turn affect public interest. Nothing in the instant case was done without a reasonable or probable cause which is the very essence of the doctrine of malice in law vitiating administrative actions. We have, therefore, no hesitation in holding that the findings recorded by the High Court to the effect that the process of annulment of the tender process or the rejection of the tender submitted by RDS was vitiated by mala fides is unsustainable and is hereby set aside. Question 2 is accordingly answered in the negative."
24. In the case of "Ratnagiri Gas and Power Pvt. Ltd." (supra), it was held that the very science of doctrine of 'malice in law' is an action done without a reasonable or probable cause. Therefore, the basic tenor of an action which can be deemed 'malice in law' is one done without reasonable or probable cause. In the instant case at hand as has been elaborately discussed the issuance of the letter of termination of DFA dated 06.05.2015 does not indicate that there has been a -25- reasonable or probable cause leading to termination of such agreement. A plain reading of the various communications and the minutes of meetings as well as reading between the lines do not for an instant suggest that there has been a reasonable or probable cause leading to termination of the agreement. The action of the respondent which is a 'State' within the meaning of Article 12 of the Constitution has not acted in a manner befitting an instrumentality of the State and such act therefore, is an act laced with 'malice in law'.
25. Learned counsel for the petitioners as well as learned senior counsel for the respondents have argued at length with respect to a dispute arising out of a contract and whether a writ petition in such circumstances can be maintainable or not. Various judgments of the Hon'ble Supreme Court have been referred for and against the aforesaid questions and the same are being dealt with hereinunder.
26. Learned counsel for the petitioners has referred to the judgment of "Air India Statutory Corporation and others" (supra), in which it was held as follows:
60. "The public law remedy given by Article 226 of the Constitution is to issue not only the prerogative writs provided therein but also any order or direction to enforce any of the fundamental rights and "for any other purpose". The distinction between public law and private law remedy by judicial adjudication gradually marginalised and became obliterated. In LIC v. Escorts Ltd. this Court (in SCC para 102, p. 344) had pointed out that the difficulty will lie in demarcating the frontiers between the public law domain and the private law field.
The question must be decided in each case with reference to the particular action, the activity in which the State or the instrumentality of the State is engaged when performing the action, the public law or private law character of the question and the host of other relevant circumstances. Therein, the question was whether the management of LIC should record reasons for accepting the purchase of the shares? It was in that fact-situation that this Court held that there was no need to state reasons when the management of the shareholders by resolution reached the decision. This Court equally pointed out in other cases that when the State's power as economic power and economic entrepreneur and allocator of economic benefits is subject to the limitations of fundamental rights, a private Corporation under the functional control of the State engaged in an activity hazardous to the health and safety of the community, is imbued with public interest which the State ultimately proposes to regulate -26- exclusively on its industrial policy. It would also be subject to the same limitations as held in M.C. Mehta v. Union of India.
61. The legal right of an individual may be founded upon a contract or a statute or an instrument having the force of law. For a public law remedy enforceable under Article 226 of the Constitution, the action of the authority needs to fall in the realm of public law -- be it a legislative act of the State, an executive act of the State or an instrumentality or a person or authority imbued with public law element. The question requires to be determined in each case. However, it may not be possible to generalise the nature of the action which would come either under public law remedy or private law field nor is it desirable to give exhaustive list of such actions. As held by this Court in Calcutta Gas Co. (Proprietary) Ltd. v. State of W.B. (AIR para 5) that if the legal right of a manager of a company is denuded on the basis of recommendation by the Board of Management of the company, it would give him right to enforce his right by filing a writ petition under Article 226 of the Constitution. In Mulamchand v. State of M.P. this Court had held that even though the contract was void due to non-compliance of Article 229, still direction could be given for payment of the amount on the doctrine of restitution under Section 70 of the Act, since the State had derived benefit under the void contract. The same view was reiterated in State of W.B. v. B.K. Mondal & Sons (AIR at p. 789) and in New Marine Coal Co. (Bengal) (P) Ltd. v. Union of India. In Gujarat State Financial Corpn. v. Lotus Hotels (P) Ltd. a direction was issued to release loan to the respondent to comply with the contractual obligation by applying the doctrine of promissory estoppel. In Mahabir Auto Stores v. Indian Oil Corpn. contractual obligations were enforced under public law remedy of Article 226 against the instrumentality of the State. In Shrilekha Vidyarthi v. State of U.P. contractual obligations were enforced when public law element was involved. Same judicial approach is adopted in other jurisdictions, namely, the House of Lords in Gillick v. West Norfolk and Wisbech Area Health Authority wherein the House of Lords held that though the claim of the plaintiff was negatived but on the anvil of power of judicial review, it was held that the public law content of the claim was so great as to make her case an exception to the general rule.
Similarly in Roy (Dr) v. Kensington and Chelsea and Westminster Family Practitioner Committee the House of Lords reiterated that though a matter of private law is enforceable by ordinary actions, a court also is free from the constraints of judicial review and that public law remedy is available when the remuneration of Dr Roy was sought to be curtailed. In LIC v. Consumer Education and Research Centre this Court held that each case may be examined on its facts and -27- circumstances to find out the nature and scope of the controversy. The distinction between public law and private law remedy has now become thin and practically obliterated."
27. In the case of "Union of India & another" (supra), the view which has been enumerated in the case of "Air India Statutory Corporation and others" (supra) has been reiterated at paragraph no. 22 which reads as under:
22. "The legal right of an individual may be founded upon a contract or a statute or an instrument having the force of law. For a public law remedy enforceable under Article 226 of the Constitution, the actions of the authority need to fall in the realm of public law -- be it a legislative act of the State, an executive act of the State or an instrumentality or a person or authority imbued with public law element. The question is required to be determined in each case having the aforementioned principle in mind. However, it may not be possible to generalize the nature of the action which would come either under public law remedy or private law field nor is it desirable to give exhaustive list of such actions."
28. In the case of "Verigamto Naveen" (supra) while considering the judgment rendered in the case of "Radhakrishna Agarwal"
(supra) which has been cited by the learned senior counsel for the respondents, it was held as follows:
21. "On the question that the relief as sought for and granted by the High Court arises purely in the contractual field and, therefore, the High Court ought not to have exercised its power under Article 226 of the Constitution placed very heavy reliance on the decision of the Andhra Pradesh High Court in Y.S. Raja Reddy v. A.P. Mining Corpn. Ltd. and the decisions of this Court in Har Shankar v. Dy. Excise & Taxation Commr., Radhakrishna Agarwal v. State of Bihar, Ramlal & Sons v. State of Rajasthan, Shiv Shankar Dal Mills v. State of Haryana, Ramana Dayaram Shetty v. International Airport Authority of India and Basheshar Nath v. CIT. Though there is one set of cases rendered by this Court of the type arising in Radhakrishna Agarwal case much water has flown in the stream of judicial review in contractual field. In cases where the decision-making authority exceeded its statutory power or committed breach of rules or principles of natural justice in exercise of such power or its decision is perverse or passed an irrational order, this Court has interceded even after the contract was entered into between the parties and the Government and its agencies. We may advert to three decisions of this Court in Dwarkadas Marfatia & Sons -28- v. Board of Trustees of the Port of Bombay, Mahabir Auto Stores v. Indian Oil Corpn. and Shrilekha Vidyarthi (Kumari) v. State of U.P. Where the breach of contract involves breach of statutory obligation when the order complained of was made in exercise of statutory power by a statutory authority, though cause of action arises out of or pertains to contract, brings it within the sphere of public law because the power exercised is apart from contract. The freedom of the Government to enter into business with anybody it likes is subject to the condition of reasonableness and fair play as well as public interest. After entering into a contract, in cancelling the contract which is subject to terms of the statutory provisions, as in the present case, it cannot be said that the matter falls purely in a contractual field. Therefore, we do not think it would be appropriate to suggest that the case on hand is a matter arising purely out of a contract and, therefore, interference under Article 226 of the Constitution is not called for. This contention also stands rejected."
29. In the case of "Noble Resources Ltd. Vs. State of Orissa and another" (supra) in paragraph nos. 14, 15 and 18, it was held as under:
14. "Respondent 2 is "State" within the meaning of Article 12 of the Constitution of India. Its conduct in all fields including a contract is expected to be fair and reasonable. It was not supposed to act arbitrarily, capriciously or whimsically.
15. It is trite that if an action on the part of the State is violative of the equality clause contained in Article 14 of the Constitution of India, a writ petition would be maintainable even in the contractual field. A distinction indisputably must be made between a matter which is at the threshold of a contract and a breach of contract;
whereas in the former the court's scrutiny would be more intrusive, in the latter the court may not ordinarily exercise its discretionary jurisdiction of judicial review, unless it is found to be violative of Article 14 of the Constitution. While exercising contractual powers also, the government bodies may be subjected to judicial review in order to prevent arbitrariness or favouritism on their part. Indisputably, inherent limitations exist, but it would not be correct to opine that under no circumstances a writ will lie only because it involves a contractual matter.
18. It may, however, be true that where serious disputed questions of fact are raised requiring appreciation of evidence, and, thus, for determination thereof, examination of witnesses would be necessary; it may not be convenient to decide the dispute in a proceeding under Article 226 of the Constitution of India."
-29-30. In the case of "Popcorn Entertainment and another Vs. City Industrial Development Corporation and another" (supra), it was held as follows:
22. "He invited our attention to Whirlpool Corpn.
case wherein this Court has held that there are three clear-cut circumstances wherein a writ petition would be maintainable even in a contractual matter. Firstly, if the action of the respondent is illegal and without jurisdiction, secondly, if the principles of natural justice have been violated, and thirdly, if the appellants' fundamental rights have been violated.
47. We have given our careful consideration to the rival submissions made by the respective counsel appearing on either side. In our opinion, the High Court has committed a grave mistake by relegating the appellant to the alternative remedy when clearly in terms of the law laid down by this Court, this was a fit case in which the High Court should have exercised its jurisdiction in order to consider and grant relief to the respective parties. In our opinion, in the instant case, 3 of the 4 grounds on which writ petitions can be entertained in contractual matter were made out and hence it was completely wrong of the High Court to dismiss the writ petitions. In the instant case, 3 grounds as referred to in Whirlpool Corpn. have been made out and accordingly the writ petition was clearly maintainable and the High Court has committed an error in relegating the appellant to the civil court."
31. In the case of "ABL International Ltd. and another Vs. Export Credit Guarantee Corporation of India Ltd. and others" (supra), a similar question as above had fell for consideration before the Hon'ble Supreme Court which held as follows:
16. "A perusal of this judgment though shows that a writ petition involving serious disputed questions of facts which requires consideration of evidence which is not on record, will not normally be entertained by a court in the exercise of its jurisdiction under Article 226 of the Constitution of India. This decision again, in our opinion, does not lay down an absolute rule that in all cases involving disputed questions of fact the parties should be relegated to a civil suit. In this view of ours, we are supported by a judgment of this Court in the case of Gunwant Kaur v. Municipal Committee, Bhatinda where dealing with such a situation of disputed questions of fact in a writ petition this Court held: (SCC p. 774, paras 14-16) "14. The High Court observed that they will not determine disputed question of fact in a writ petition. But what facts were in dispute and what were admitted could only be determined after an affidavit-in-reply was filed by the State. The High -30- Court, however, proceeded to dismiss the petition in limine. The High Court is not deprived of its jurisdiction to entertain a petition under Article 226 merely because in considering the petitioner's right to relief questions of fact may fall to be determined. In a petition under Article 226 the High Court has jurisdiction to try issues both of fact and law. Exercise of the jurisdiction is, it is true, discretionary, but the discretion must be exercised on sound judicial principles.
When the petition raises questions of fact of a complex nature, which may for their determination require oral evidence to be taken, and on that account the High Court is of the view that the dispute may not appropriately be tried in a writ petition, the High Court may decline to try a petition. Rejection of a petition in limine will normally be justified, where the High Court is of the view that the petition is frivolous or because of the nature of the claim made dispute sought to be agitated, or that the petition against the party against whom relief is claimed is not maintainable or that the dispute raised thereby is such that it would be inappropriate to try it in the writ jurisdiction, or for analogous reasons.
15. From the averments made in the petition filed by the appellants it is clear that in proof of a large number of allegations the appellants relied upon documentary evidence and the only matter in respect of which conflict of facts may possibly arise related to the due publication of the notification under Section 4 by the Collector.
16. In the present case, in our judgment, the High Court was not justified in dismissing the petition on the ground that it will not determine disputed question of fact. The High Court has jurisdiction to determine questions of fact, even if they are in dispute and the present, in our judgment, is a case in which in the interests of both the parties the High Court should have entertained the petition and called for an affidavit-in-reply from the respondents, and should have proceeded to try the petition instead of relegating the appellants to a separate suit."
19. Therefore, it is clear from the above enunciation of law that merely because one of the parties to the litigation raises a dispute in regard to the facts of the case, the court entertaining such petition under Article 226 of the Constitution is not always bound to relegate the parties to a suit. In the above case of Gunwant Kaur this Court even went to the extent of holding that in a writ petition, if the facts require, even oral evidence can be taken. This clearly shows that in an -31- appropriate case, the writ court has the jurisdiction to entertain a writ petition involving disputed questions of fact and there is no absolute bar for entertaining a writ petition even if the same arises out of a contractual obligation and/or involves some disputed questions of fact.
27. From the above discussion of ours, the following legal principles emerge as to the maintainability of a writ petition:
(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable.
(b) Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.
(c) A writ petition involving a consequential relief of monetary claim is also maintainable.
28. However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power. (See Whirlpool Corpn. v. Registrar of Trade Marks.) And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction."
32. Learned senior counsel has firstly referred to the judgments in the case of "M/s. Radha Krishna Agrawal" (supra) by stating that in a case of breach of contract, no writ or order can be issued under Article 226 of the Constitution of India. It has been submitted that the present case is purely contractual in nature and therefore, applying the ratio of the case of "M/s. Radha Krishna Agrawal" (supra), the writ petition is not maintainable. Learned senior counsel thereafter referred to the judgment in the case of "State of Bihar Vs. Jain Plastics and Chemicals Ltd." reported in (2002) 1 SCC 216, wherein it was held as follows:
6. "The respondent preferred the writ petition before the High Court. The learned Single Judge -32- arrived at the conclusion that the respondent-
Company was unable to supply the PVC fittings on account of failure or the refusal on the part of the appellants to supply the road permits and that the Company cannot be faulted for non-supply of PVC fittings. Hence, the appellants cannot realise or deduct the extra money which they had to spend over purchase of the same. With regard to the adjudication of tangled question of facts in writ jurisdiction, the learned Single Judge observed:
"This Court has not in the present case felt any difficulty in deciding the question of facts on the basis of affidavit evidence, and I have not felt the necessity of evidence of a civil suit in deciding the question of facts which is needed for disposal of the present writ petition."
Finally, the learned Judge directed the appellants to make the due amount of the respondent- Company with interest at the rate of 6%, within six months. The aforesaid order was confirmed in LPA.
7. In our view, it is apparent that the order passed by the High Court is, on the face of it, illegal and erroneous. It is true that many matters could be decided after referring to the contentions raised in the affidavits and counter-affidavits, but that would hardly be a ground for exercise of extraordinary jurisdiction under Article 226 of the Constitution in case of alleged breach of contract. Whether the alleged non-supply of road permits by the appellants would justify breach of contract by the respondent would depend upon facts and evidence and is not required to be decided or dealt with in a writ petition. Such seriously disputed questions or rival claims of the parties with regard to breach of contract are to be investigated and determined on the basis of evidence which may be led by the parties in a properly instituted civil suit rather than by a court exercising prerogative of issuing writs."
33. In the case of "Orissa Agro Industries Corpn. Ltd. Vs. Bharati Industries" reported in (2005) 12 SCC 725, by following the judgment in the case of " Radhakrishna Agarwal" (supra), it was held as follows:
7. "A bare perusal of the High Court's judgment shows that there was clear non-application of mind.
On one hand the High Court observed that the disputed questions cannot be gone into a writ petition. It was also noticed that the essence of the dispute was breach of contract. After coming to the above conclusions the High Court should have dismissed the writ petition. Surprisingly, the High Court proceeded to examine the case solely on the writ petitioner's assertion and on a very curious reasoning that though the appellant Corporation claimed that the value of -33- articles lifted was nearly Rs 14.90 lakhs no details were specifically given. From the counter-affidavit filed before the High Court it is crystal-clear that relevant details disputing claim of the writ petitioner were given. Value of articles lifted by the writ petitioner is a disputed factual question. Where a complicated question of fact is involved and the matter requires thorough proof on factual aspects, the High Court should not entertain the writ petition. Whether or not the High Court should exercise jurisdiction under Article 226 of the Constitution would largely depend upon the nature of dispute and if the dispute cannot be resolved without going into the factual controversy, the High Court should not entertain the writ petition. As noted above, the writ petition was primarily founded on allegation of breach of contract. Question whether the action of the opposite party in the writ petition amounted to breach of contractual obligation ultimately depends on facts and would require material evidence to be scrutinised and in such a case writ jurisdiction should not be exercised. (See State of Bihar v. Jain Plastics & Chemicals Ltd.)
11. In Radhakrishna Agarwal v. State of Bihar the types of cases in which breaches of alleged obligation by the State or its agents can be set up were enumerated. The third category, indicated is where the contract entered into between the State and the person aggrieved is non-statutory and purely contractual and the rights and liabilities of the parties are governed by the terms of the contract and in exercise of executive power of the State. The present case is covered by the said category. No writ order can be issued under Article 226 to compel the authorities to remedy a breach of contract; pure and simple. It is more so when factual disputes are involved."
34. In the case of "Rajasthan State Industrial Development & Investment Corpn. Vs. Diamond & Gem Development Corpn. Ltd." reported in (2013) 5 SCC 470, reference has been made to paragraph nos. 19, 20 & 21 which is quoted as under:
III. Contractual disputes and Writ Jurisdiction
19. "There can be no dispute to the settled legal proposition that matters/disputes relating to contract cannot be agitated nor terms of the contract can be enforced through writ jurisdiction under Article 226 of the Constitution. Thus, the writ court cannot be a forum to seek any relief based on terms and conditions incorporated in the agreement by the parties. [Vide Bareilly Development Authority v. Ajai Pal Singh and State of U.P. v. Bridge & Roof Co. (India) Ltd.] -34-
20. In Kerala SEB v. Kurien E. Kalathil this Court held that a writ cannot lie to resolve a disputed question of fact, particularly to interpret the disputed terms of a contract observing as under: (SCC pp. 298-99, paras 10-11) "10. ... The interpretation and implementation of a clause in a contract cannot be the subject-
matter of a writ petition. ... If a term of a contract is violated, ordinarily the remedy is not the writ petition under Article 226. We are also unable to agree with the observations of the High Court that the contractor was seeking enforcement of a statutory contract. ....
11. ... The contract between the parties is in the realm of private law. It is not a statutory contract. The disputes relating to interpretation of the terms and conditions of such a contract could not have been agitated in a petition under Article 226 of the Constitution of India. That is a matter for adjudication by a civil court or in arbitration if provided for in the contract. ... The contractor should have relegated to other remedies."
21. It is evident from the above that generally the Court should not exercise its writ jurisdiction to enforce the contractual obligation. The primary purpose of a writ of mandamus is to protect and establish rights and to impose a corresponding imperative duty existing in law. It is designed to promote justice (ex debito justitiae). The grant or refusal of the writ is at the discretion of the court. The writ cannot be granted unless it is established that there is an existing legal right of the applicant, or an existing duty of the respondent. Thus, the writ does not lie to create or to establish a legal right, but to enforce one that is already established. While dealing with a writ petition, the court must exercise discretion, taking into consideration a wide variety of circumstances, inter alia, the facts of the case, the exigency that warrants such exercise of discretion, the consequences of grant or refusal of the writ, and the nature and extent of injury that is likely to ensue by such grant or refusal."
35. Reference has also been made to the case of "National Highways Authority of India Vs. Ganga Enterprises" reported in (2003) 7 SCC 410, and to the case of "Kisan Sahkari Chini Mills Ltd. Vs. Vardan Linkers" reported in (2008) 12 SCC 500.
36. On going through the judgments which have been referred to by the respective counsels, it has never been indicated that in all cases arising out of a contractual dispute, no writ under Article 226 of the Constitution of India shall be maintainable.
-35-37. The judgment in the case of "Radhakrishna Agarwal" (supra) has been watered down in the case of "Verigamto Naveen Vs. Govt. of A.P. and others" (supra), wherein it has been held that when a decision making authority exceeds its statutory power or has made breach of principles of natural justice, the same does not preclude the Court from entertaining an application under Article 226 of the Constitution of India. No strict rule or guidelines has been enumerated in any of the judgments cited by the respective counsel as to when the nature of action would come under the public law remedy or private law field. There cannot be a generalised concept with respect to any field of contractual obligation as to when would a writ application under Section 226 of the Constitution of India lie in case of a contractual dispute. When the public law element is involved, the contractual obligations has to be considered, if the the same is resorted to under Article 226 of the Constitution of India. In other way, the distinction between public law and private law remedy is virtually obliterated and their only lies a very thin line for distinguishing it.
38. The entire decision making process leading to cancellation of the termination of agreement is a subject of judicial review and scrutiny and in the facts and circumstances of the present case, the same is amenable to Article 226 of the Constitution of India.
39. Learned senior counsel for the respondents has stressed much that the questions which have been raised by the petitioners are actually disputed questions of fact which cannot be looked into in this writ application. The entire reading of the documents appended to various affidavits filed on behalf of either sides does not lead credence to the contention of the learned senior counsel for the respondents that there are disputed questions of fact.
40. As has been indicated, there does not seem to be any dispute prior to issuance of the letter of Energy Department, Government of Jharkhand dated 03.07.2014 leading to the meeting of the Board of Directors dated 05.08.2014 and after hibernating for about 9 months issuing of letter of termination dated 06.05.2015.
In such circumstances, therefore, the plea of the learned senior counsel for the respondents with respect to maintainability and disputed questions of fact are negated.
-36-41. The scope of the principles of natural justice in view of Article 2.1.8 of the DFA has led to both the sides making contentions in their respective favours.
Learned counsel for the petitioners has referred to the judgment in the case of "Sahara India (Firm) Lucknow Vs. Commissioner of Income Tax, Central I and another" (supra), wherein it has been held as follows:
4. "As a common question of law is involved in both the cases and even the background facts are identical, these are being disposed of by this judgment. However, before adverting to the factual matrix, we propose to address ourselves on the aforenoted question of law on which the latter Bench has expressed its reservations. At the outset, we may also note that in Rajesh Kumar, while observing that the principles of natural justice must be held to be implicit in Section 142(2-A) of the Act, the learned Judges finally held as under: (SCC pp. 183-84) "The hearing given, however, need not be elaborate.
The notice issued may only contain briefly the issues which the assessing officer thinks to be necessary. The reasons assigned therefor need not be detailed ones. But, that would not mean that the principles of natural justice are not required to be complied with. Only because certain consequences would ensue if the principles of natural justice are required to be complied with, the same by itself would not mean that the court would not insist on complying with the fundamental principles of law. If the principles of natural justice were to be excluded, Parliament could have said so expressly."
8. There is no gainsaying that recourse to the said provision cannot be had by the assessing officer merely to shift his responsibility of scrutinising the accounts of an assessee and pass on the buck to the special auditor. Similarly, the requirement of previous approval of the Chief Commissioner or the Commissioner in terms of the said provision being an inbuilt protection against any arbitrary or unjust exercise of power by the assessing officer, casts a very heavy duty on the said high-ranking authority to see to it that the requirement of the previous approval, envisaged in the section is not turned into an empty ritual. Needless to emphasise that before granting approval, the Chief Commissioner or the Commissioner, as the case may be, must have before him the material on the basis whereof an opinion in this behalf has been formed by the assessing officer. The approval must reflect the application of mind to the facts of the case.
-37-15. Rules of "natural justice" are not embodied rules. The phrase "natural justice" is also not capable of a precise definition. The underlying principle of natural justice, evolved under the common law, is to check arbitrary exercise of power by the State or its functionaries. Therefore, the principle implies a duty to act fairly i.e. fair play in action. As observed by this Court in A.K. Kraipak v. Union of India the aim of rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. They do not supplant the law but supplement it. (Also see ITO v. Madnani Engg. Works Ltd.)
35. Indubitably, before passing the said orders, no show-cause notice was given to the appellants. On the contrary, it appears from the record that on 9-3-2006, the appellants were required to furnish by 20-3-2006 details/explanation in respect of queries raised vide order-sheet entry dated 16-2-2006 but in the meanwhile the impugned orders were passed on 14-3-2006 itself. It is manifestly clear that when the impugned orders were made the assessing officer had no occasion to have even a glimpse of the accounts maintained by the appellants. Therefore, in the light of the legal position noted above, we have no option but to hold that the impugned orders dated 14-3-2006 are vitiated by the failure to observe the principle audi alteram partem."
42. In the case of "Gorkha Securiity Services Vs. Government (NCT of Delhi) and others" (supra), it has been held as follows:
21. "The central issue, however, pertains to the requirement of stating the action which is proposed to be taken. The fundamental purpose behind the serving of show-cause notice is to make the noticee understand the precise case set up against him which he has to meet. This would require the statement of imputations detailing out the alleged breaches and defaults he has committed, so that he gets an opportunity to rebut the same. Another requirement, according to us, is the nature of action which is proposed to be taken for such a breach. That should also be stated so that the noticee is able to point out that proposed action is not warranted in the given case, even if the defaults/breaches complained of are not satisfactorily explained. When it comes to blacklisting, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action.
22. The High Court has simply stated that the purpose of show-cause notice is primarily to enable the noticee to meet the grounds on which the action is proposed -38- against him. No doubt, the High Court is justified to this extent. However, it is equally important to mention as to what would be the consequence if the noticee does not satisfactorily meet the grounds on which an action is proposed. To put it otherwise, we are of the opinion that in order to fulfil the requirements of principles of natural justice, a show-cause notice should meet the following two requirements viz:
(i) The material/grounds to be stated which according to the department necessitates an action;
(ii) Particular penalty/action which is proposed to be taken. It is this second requirement which the High Court has failed to omit.
We may hasten to add that even if it is not specifically mentioned in the show-cause notice but it can clearly and safely be discerned from the reading thereof, that would be sufficient to meet this requirement."
43. Refuting the contentions of learned counsel for the petitioners with respect to principles of natural justice having not been followed prior to issuance of letter of termination dated 06.05.2015, learned senior counsel for the respondents has referred to the judgment in the case of "Swadeshi Cotton Mill Vs. Union of India" reported in (1981) 1 SCC 664, wherein it has been held as follows:
33. "The next general aspect to be considered is:
Are there any exceptions to the application of the principles of natural justice, particularly the audi alteram partem rule? We have already noticed that the statute conferring the power, can by express language exclude its application. Such cases do not present any difficulty. However, difficulties arise when the statute conferring the power does not expressly exclude this rule but its exclusion is sought by implication due to the presence of certain factors: such as, urgency, where the obligation to give notice and opportunity to be heard would obstruct the taking of prompt action of a preventive or remedial nature. It is proposed to dilate a little on this aspect, because in the instant case before us, exclusion of this rule of fair hearing is sought by implication from the use of the word "immediate" in Section 18-AA(1). Audi alteram partem rule may be disregarded in an emergent situation where immediate action brooks no delay to prevent some imminent danger or injury or hazard to paramount public interests. Thus, Section 133 of the Code of Criminal Procedure, empowers the Magistrates specified therein to make an ex parte conditional order in emergent cases, for removal of dangerous public nuisances. Action under Section 17, Land Acquisition Act, furnishes another such instance. Similarly, action on grounds of public safety, public -39- health may justify disregard of the rule of prior hearing."
44. In the case of "State of Gujarat v. M.P. Shah Charitable Trust"
reported in (1994) 3 SCC 552, paragraph 22 of the judgment reads as follows:
22. "We are unable to see any substance in the argument that the termination of arrangement without observing the principle of natural justice (audi alteram partem) is void. The termination is not a quasi-judicial act by any stretch of imagination; hence it was not necessary to observe the principles of natural justice.
It is not also an executive or administrative act to attract the duty to act fairly. It was -- as has been repeatedly urged by Shri Ramaswamy -- a matter governed by a contract/agreement between the parties. If the matter is governed by a contract, the writ petition is not maintainable since it is a public law remedy and is not available in private law field, e.g., where the matter is governed by a non-statutory contract. Be that as it may, in view of our opinion on the main question, it is not necessary to pursue this reasoning further."
45. In the case of "Ajit Kumar Nag Vs. Indian Oil Corpn. Ltd." reported in (2005) 7 SCC 764, it has been held thus:
44. "We are aware of the normal rule that a person must have a fair trial and a fair appeal and he cannot be asked to be satisfied with an unfair trial and a fair appeal. We are also conscious of the general principle that pre-decisional hearing is better and should always be preferred to post-decisional hearing. We are further aware that it has been stated that apart from Laws of Men, Laws of God also observe the rule of audi alteram partem. It has been stated that the first hearing in human history was given in the Garden of Eden. God did not pass sentence upon Adam and Eve before giving an opportunity to show cause as to why they had eaten the forbidden fruit. (See R. v.
University of Cambridge.) But we are also aware that the principles of natural justice are not rigid or immutable and hence they cannot be imprisoned in a straitjacket. They must yield to and change with exigencies of situations. They must be confined within their limits and cannot be allowed to run wild. It has been stated: " 'To do a great right' after all, it is permissible sometimes 'to do a little wrong'." [Per Mukharji, C.J. in Charan Lal Sahu v. Union of India (Bhopal Gas Disaster), SCC p. 705, para 124.] While interpreting legal provisions, a court of law cannot be unmindful of the hard realities of life. In our opinion, -40- the approach of the Court in dealing with such cases should be pragmatic rather than pedantic, realistic rather than doctrinaire, functional rather than formal and practical rather than "precedential".
46. In the background of judgment which have been referred to by the learned counsels, it is to be seen as to whether principles of natural justice has indeed been followed by the respondents or not. The meeting of the Board of Directors held on 05.08.2014 had decided to take the legal opinion with respect to the alleged irregularities committed in the tender process and thereafter issue show-cause notice to the Distribution Franchisee as per the advice. During the course of argument, learned senior counsel for the respondents had made a reference to the letter dated 25.02.2015 issued by the Chief Engineer (Commercial and Revenue) Jharkhand Bijli Vitran Nigam Ltd. by submitting that the power point presentation which was to be given by the petitioners would show sufficient compliance of the principles of natural justice. Neither can the consideration of words in the letter requesting power point presentation nor from the letter of termination dated 06.05.2015, it can be deciphered that the principles of natural justice had been followed by the respondents. Article 2.1.8 of the DFA gives a discretion to the respondents to terminate the agreement, but the same cannot be read in isolation as the principles of natural justice are ingrained in every State action and even though right to hear to a Distribution Franchisee has not been stated in so many words in Article 2.1.8, but the same does not give a right to the respondents to act in the manner it has acted. The meeting of the Board of Directors dated 05.08.2014 does indicate that there was a initial response to hear the Distribution Franchisee before taking any action, but the subsequent development leading to issuance of letter of termination dated 06.05.2015 does not suggest any prior notice issued to the petitioners. In such circumstances, the impugned letter dated 06.05.2015 being violative of the principles of natural justice is liable to be quashed and set aside. The entire action of the respondents which has been discussed threadbare speaks of an unreasonableness on the part of the respondents in terminating the agreement.
47. As a cumulative result of the discussions made hereinabove, I am inclined to entertain this writ application. Accordingly, the writ application is allowed. The impugned letter of termination dated -41- 06.05.2015 is hereby quashed and the matter is remanded back to the respondent no. 2 to consider the issue of continuing with the petitioners as the Distribution Franchisee for Jamshedpur Circle. In considering the same, the respondents must take into consideration the entire gamut of discussions made on various issues in this writ application. Since the issue of distribution of electricity concerns the public at large and is of great public importance, it is expected that the respondents shall make every endeavour to get the distribution of electricity for Jamshedpur Circle started at the earliest feasible time.
(Rongon Mukhopadhyay, J) Jharkhand High Court at Ranchi The 19th day of November, 2015 R.Shekhar/AFR/Cp.3.