Gauhati High Court
N.V. Marketing Pvt. Ltd. And Anr. vs State Of Arunachal Pradesh And Ors. on 21 June, 2002
Equivalent citations: (2003)2GLR686
Author: I.A. Ansari
Bench: I.A. Ansari
JUDGMENT I.A. Ansari, J.
1. Being adventurist by nature, man has, generally, opted to take risks. Being unable to bring under control his instinct for greed, man has been indulging in adventurist activities, which may make him own worldly materials. Thus, a combined instinct of adventurism and greed has always drawn man to gambling and betting. Though detested from time immemorial, gambling and betting have continued, sometimes, on account of man's failure to win over his instinct of adventurism and greed and, sometimes, at the initiative taken by others to draw man to gamble in order to reap benefits. Lottery has been one of such forms of gambling since 100 B.C. It was Cheung Leung of China's Hun Dynasty, who created game of lottery of keno to raise funds for his army in the year 100 B.C. By drawing his war-tired people to indulge in this game of chances, he not only made them contribute to his army, but also helped fund the Great Wall of China. As a game of chance, lottery became nothing but a kind of gambling. Unable to bear the resultant ruinous effects on human families, a hue and cry was raised against organized private lotteries. The State had to become alive to the situation. Thus, began banning of lotteries by States, which brought the subject of lottery for an effective decision to the precincts of the Courts.
2. In the State of Haryana v. Suman Enterprises and Ors., (1994) 4 SCC 217, while dealing with banning of private lotteries by some States, the Apex Court held that the concept of lottery organized by a State would require certain basic and essential concommitants to be satisfied, because members of the public, when investing their money in such a lottery, proceed on a trust and on certain assumptions as to genuineness, bona fides, safety, security, etc. If some of the basic functions characterising a State organized lottery are delegated or abdicated by State, this public trust, according to the Apex Court, will stand impaired. The Apex Court, therefore, while laying down some guidelines for running of lotteries, observed and held as follows :
"These, prima facie, appear to us to be the minimum characteristic of a lottery which can be claimed to be 'organized' by the State. If the basic and essential features indicated above are ensured, it might be possible to raise a presumption that the lottery is one that could be said to have been 'organized' by the State itself and not one merely authorised by the State under which the so called 'agent' himself organises the lottery."
3. Acting upon the guidelines so issued by the Apex Court, the Lotteries (Regulation) Act, 1998 (hereafter referred to as "the said Act"), came into force for enabling States to organize lotteries in accordance with the guidelines and conditions precedent laid down in Suman Enterprises (supra). No wonder, therefore, that in order to remove lottery completely from being treated as a gambling or betting. Section 2(6) of the said Act defines lottery as a scheme for the distribution of prizes by lot or chance to those persons, who participate in the chances of receiving prizes by purchasing tickets. The definition of lottery, contained in Section 2(b), also clarifies that it is immaterial in what form and by what name a lottery is run.
4. With the above preferatory remarks, let me, now, come to, and deal with, the present writ petition. Briefly stated, writ petitioners case runs as follows : The petitioner is a private Limited Company with the petitioner No. 2 as its director. By an agreement executed, on 10.10.1997, between petitioner No. 1 and the Government of Arunachal Pradesh, the petitioner No. 1 was appointed as distributor in respect of Arunachal Pradesh State Lottery for a period of five years. Thereafter, by orders, dated 18.9.2001 and 21.9.2001, the respondent No. 1 extended the said agreement for another period of five years with some additional terms and conditions appended to the original agreement, dated 10.10.1997, clearly laying down that the Petitioner No. 1 was appointed as sole distributor for selling of all Arunachal Pradesh Lottery tickets throughout India for another period of five years with effect from 10.10.2002 to 9.10.2007. The respondent No. 1 has been organizing lottery since long through the petitioner No. 1 Company and after receiving the extension as aforesaid, the petitioners, acting upon the agreement, dated 10.10.1997, appointed their stockists, agents, sub-agents, etc., and created huge network for distribution and sale of lottery tickets organized, conducted and run by the State of Arunachal Pradesh throughout the country and, in the process, provided employment, directly as well as indirectly, to 2000 persons, whose livelihood depends on lottery. Even after coming into force of the Lotteries (Regulation) Act, 1998 and the Rules framed under the said Act known as the Arunachal Pradesh State Lotteries Rules, 2001 (hereinafter referred to as the said Rules of 2001), the petitioners have been selling and distributing as sole distributor lottery tickets of the lotteries organized, conducted and run by the State of Arunachal Pradesh in strict compliance of not only the provisions of the said Act and Rules, but also in accordance with the terms and conditions of the agreement, dated 10.10.1997. The petitioners have, however, on 1.3.2002, come to know, on receipt of a copy of caveat application No. 295/02 filed in this Court, that the respondent No. 4 had submitted a proposal to the Government of Arunachal Pradesh for being appointed as another sole distributor in respect of the lottery tickets of the lotteries organized, conducted and run by the Government of Arunachal Pradesh and the said proposal has already been accepted by the State respondents on 25.2.2002, whereas under clause 4 of the agreement, dated 10.10.1997, aforementioned, State respondents are duty bound to get distributed and sold all their lottery tickets through petitioner No. 1 Company only. The act of accepting proposal of the respondent No. 4 for appointment as another distributor for sale and distribution of Arunachal Pradesh State lottery is arbitrary, illegal, unfair, unreasonable and contrary to the agreement, dated 10.10.1997, and extension thereof by orders, dated 18.9.2001 and 21.9.2001. It was legitimate expectation on the part of the petitioners that the State respondents would allow them to distribute and sell all Arunachal Pradesh State Lottery tickets during the subsistence of the said agreements, but the respondents have arbitrarily accepted the proposal offered by the respondent No. 4 in violation of not only clause 4 of the agreement, dated 10.10.1997, aforementioned, but also contrary to the provisions of Rule 4 of the Rules of 2001. As the petitioners have no equally efficacious alternative remedy available to them, they have approached this Court seeking issuance of appropriate writ/s and/or direction/s on the respondents. The petitioners have also sought quashing of the acceptance of the proposal of the respondent No. 4 by State respondents for appointment of respondent No. 4 as another sole distributor of Arunachal Pradesh State Lottery and for direction to the State respondents not to give effect to the proposal, dated 25.02.2002, of the respondent No. 4.
5. Before proceeding any further, it may be noted that on an application made by the petitioners, an interim order was passed directing the parties to maintain status quo, as on 6.3.2002, with regard to appointment of respondent No. 4 as distributor for selling of Arunachal Pradesh State Lottery. However, by order, dated 25.4.2002, passed in Misc. Case No. 83 (AP) 2002, the interim direction, so passed as aforesaid, was vacated allowing respondent No. 4 to operate his own business in terms of the agreement, dated 27.2.2002.
6. Resisting reliefs sought in the writ petition, the respondent Nos. 1 to 3 have filed their affidavit-in-opposition, their case being, in brief, as follows : Since Arunachal Pradesh is a small State having insufficient source of revenue. State lottery department is treated as one of the revenue-earning departments. It has been noticed that the State revenue-earnings from lottery department has gone down considerably from the year 1998 to 2001. Hence, to increase its revenue, the State has decided to appoint respondent No. 4 as another distributor for marketing of its lotteries for five years with the help of agreement, dated 25.2.2002. The writ petition is not maintainable inasmuch as clause 16 of the agreement, dated 10.10.1997, aforementioned provides for making reference of such dispute to arbitration. No illegality has been committed by the State in appointing respondent No. 4 as another distributor for selling its lottery tickets inasmuch as the agreement, dated 10.10.1997, has not been rescinded as a result of agreement entered into between the State and respondent No. 4 on 25.2.2002. For augmenting its revenue, the State is free to adopt the policy of appointing another distributor for selling its lottery tickets inasmuch as the said Rules of 2001 envisage appointment of more than one distributor for distribution and sale of lottery tickets. The appointment of respondent No. 4 as another distributor has not, in any way, curtailed the distributorship rights of the petitioners and hence, the petitioners have failed to make out any case for interference under Article 226.
7. As far as respondent No. 4 is concerned, it has also keenly contested the case by filing affidavit, its case being, in brief, thus : The writ petitioners cannot claim exclusive monopoly of the lottery business as sole distributor for sale of lottery tickets of the lotteries organized, conducted and run by the State of Arunachal Pradesh. Permitting such monopoly to continue will be in violation of Article 14. The agreement, dated 10.10.1997, aforementioned nowhere foresees appointment of the writ petitioner as sole distributor. As the said Act and the said Rules of 2001 contemplate appointment of more than one distributor for selling lottery tickets, appointment of respondent No. 4 as another distributor is valid and none of the provisions of tie Act and/or the Rules create any impediment in this regard. In pursuance of the agreement signed between respondent No. 4 and the State of Arunachal Pradesh, on 27. 2.2002, respondent No. 4 has obtained bank guarantee to the tune of Rs. 50 lakhs, which has become operative with effect from 4.3.2002. This apart, respondent No. 4 has already appointed stockists and selling agents all over India investing huge amount of money. As the respondent No. 4 has been one of the pioneers in dealing with the lotteries of various States for the last five years, the State respondents have appointed respondent No. 4 as a distributor for increasing their revenue, the appointment being fully consistent with the provisions of the said Act and the said Rules of 2001 and the same is, in no way, contrary to the agreement, dated 10.10.1997, and/or extrusion thereof by orders, dated 18.9.2001 and 21.9.1981, aforementioned. The respondent No. 4 has, therefore, prayed for dismissing the writ petition emphasising that the dispute, if any, deserves to be referred to arbitration instead of interference by writ Court.
8. I have carefully perused the entire record including the agreement, dated 10.10.1997, aforementioned and the orders, dated 18.9.2001 and 21.9.2001, granting extension thereof. I have heard, at length, Mr. P.K. Goswami, learned Senior counsel for the petitioners, and Mr. A.M. Mazumdar, learned Senior counsel for the respondent No. 4. I have also heard Mr. P.K. Musahari, learned State Government Counsel.
9. Assailing the act of appointment of the respondent No. 4, Mr. Goswami has taken me through the said Act and the said Rules of 2001 and have contended, inter alia, that after coming into force of the said Act, all private lotteries stand banned and no lottery can, now, be run without authority of the State. Every State, according to Mr. Goswami, has been given option under Section 4 of the said Act to either conduct lottery through its own machinery or through appointment of distributor/s and/or selling agent/s. The State of Arunachal Pradesh, submits Mr. Goswami, chose to appoint petitioner No. 1 as its sole distributor for distribution and sale of all its lotteries. Such an appointment of the petitioner No. 1 vide agreement, dated 10.10.1997, is not at all emphasizes Mr. Goswami, contrary to the said Act or the; Rules inasmuch as the Act as well as the Rules have left it to the policy discretion of the State concerned how to run its own lotteries. Having received the appointment as the distributor for all the lotteries conducted organised and run by the State of Arunachal Pradesh, petitioners have, submits Mr. Goswami, created a huge nation-wide network of their own stockists, selling agents, etc., investing huge amount of money and in such a situation, the act of appointment of respondent No. 4 as another distributor of the Arunachal Pradesh State lotteries, without any intimitation to, or consent of, the petitioners is contrary to the terms and conditions of the agreement, dated 10,10.1997, as well as extension thereof by orders, dated 18.9.2001 and 21.8.2001. The act of appointment of respondent No. 4 by the State respondents is, in fact, contends Mr. Goswami, nothing, but an arrogant act of the State, which will not only have ruinous impact on the financial condition of the petitioners and deprive those, who are depending on the business of the petitioners, of their only source of livelihood, but that such arbitrary act of the State is against the principles of natural justice, which warrant interference by this Court under Article 226.
10. Controverting the above Submissions made on behalf of the petitioners, Mr. Mazumdar, tracing the origin of lotteries, has stressed upon the fact that the lottery may be adopted as a means of earning . revenue and since in the case of Arunachal Pradesh State Lottery, there was decline in the sale of lottery tickets from 1998 to 2001, the State Government had no option, but to look for additional distributors, which is, according to Mr. Mazumdar, neither inconsistent with the provisions of the said Act or the Rules nor can such efforts be construed as violation or any of the principles of natural justice or of terms and conditions contained in the agreement, dated 10.10.1997, and/or extension thereof by orders, dated 18.9.2001 and 21.9.2001, aforementioned.
11. Elaborating his above contention, Mr. Mazumdar has submitted, that every lottery is run under a name distinct and different from the other. The agreement, dated 10.10.1997, shows, contends Mr. Mazumdar, that the Government of Arunachal Pradesh has agreed to allow writ petitioners to act as distributor in respect of only those lotteries, which the State allows the writ petitioners to run. Similarly, in the case of the respondent No. 4, the respondent No. 4 has submitted to the State about 150 different schemes for running of lotteries under different names and if the respondent No. 4 discharges functions of a distributor in respect of those schemes, which have been so accepted and approved by the State, the writ petitioners can have no just grievances at all, for, points out Mr. Mazumdar, the writ petitioners will remain at liberty to run those schemes of the lotteries, which the petitioners have got approved by the department concerned. There is, contends Mr. Mazumdar, no conflict of interest between the petitioners and respondent No. 4 inasmuch as the area of business activities of the two being distinct and different, writ petitioners can not raise hue and cry that before appointing respondent No. 4 as another sole distributor, State respondents ought to have given notice to the petitioners and/for that the act of appointment of respondent. No. 4 by State respondents is against the principles of natural justice. Mr. Mazumdar has insisted that the agreement, dated 10.10.1997, aforementioned nowhere uses the expression "sole distributor" and the expression "sole distributor", contends Mr. Mazumdar, was sought to be imported into the agreement, dated 10.10.1997, for the first time, by order, dated 18.9.2001, and, later on, reiterated by order, dated 21.9.2001. However, even if one were to construe that the petitioner No. 1 is the sole distributor, the fact remains, contends Mr. Mazumdar, that the sole distributorship of petitioner No. 1 remained confined to the running of only those schemes of lotteries, which the State respondents had accepted and/or approved, and it shall not necessarily mean nor should it be stretched to mean that the State is not free to run, with the help and support of any other person or any persons, schemes of lotteries other than the ones, which the petitioners have running.
12. Mr. Mazumdar has submitted that clause 16 of the agreement, dated 10.9.1997, clearly envisages that differences and/or disputes, which arise between the petitioners and State respondents, shall be referred to arbitration and in the context of the facts and circumstances of the present case, the writ petitioners ought to have moved the Government for appointment of arbitrators. Viewed from this angle, the writ petition is, points out Mr. Mazumdar, not maintainable.
13. Mr. Mazumdar has also pointed out that the Rule 23 of the said Rules of 2001 lays down that if any question arises with regard to the interpretation of any of the provisions of the Rules, it is the Governor of the State of Arunachal Pradesh, who has the authority to interpret such provisions. Keeping in view this Rule also, writ petitioners, contends Mr. Mazumdar, instead of approaching this Court, ought to have approached the Governor of Arunachal Pradesh seeking interpretation of the meaning of the expression "sole distributor" used in the Rules. Having not done so, the petitioners shall, now, be precluded, submits Mr. Mazumdar, from pursuing this writ petition.
14. Having heard both sides and upon perusal of the materials on record, what transpires, as already indicated above, is that it was following the decision of the Apex Court in Suman Enterprises (supra) that the said Act of 1998 was enacted by Parliament in exercise of its powers of enactment under List I of the Constitution of India. The Arunachal Pradesh State Lotteries Rules, (which stand referred to as "the said Rules of 2001") have been framed in exercise of the powers vested in the State under Section 12 of the said Act. Section 3 of the said Act puts a blanket ban on the powers of the State to orgnize or conduct or promote any lottery except as provided under Section 4 thereof. Section 4(c) lays down that the State Government may organize, conduct or promote a lottery subject to the conditions, inter alia, that the State Govt. shall sell tickets either itself or through distributors or selling agents.
15. There is no dispute before me that under Section 13 of the General Clauses Act, words, in singular, can be included to mean plural thereof and vice-versa. Looked at from this angle, it is clear that Section 4 of the said Act of 1998 not only authorises States to organize, conduct or promote a lottery, but it also leaves the States to sell lottery tickets itself or through distributor/distributors or selling agent/agents. This, in turn, means that the said Act of 1998 envisages appointment of more than one distributor or selling agent by a State for selling/distributing its lottery tickets,
16. Coming to the said Rules of 2001, I notice that Rule 3 lays down that Arunachal Pradesh State Lottery (hereinafter referred to as "the said State lottery") shall be administered by the Secretary under the administrative control of lottery department of the Government. It is Rule 4, I notice, which provides for appointment of "sole distributor". Rule 4 reads as under :
"The Government may, by floating open tenders or such other manners as deemed appropriate, appoint a person or persons or firm having at least three years experience in running Lotteries as Sole distributor for a period as determined by the government in accordance with the terms and conditions hereinafter provided." (Emphasis is supplied)
17. Abare reading of Rule 4 shows that the Government may appoint one person (natural or juristic) or a group of persons or a firm, having requisite experience in running lotteries, as sole distributor for such period as may be determined by the Government in accordance with the terms and conditions of the said Rules.
18. Rule 6, while laying down as to how relevant agreement for appointment of sole distributor shall be made, states that the agreement made by the Government with any other firm/person shall be expressed in the name and on behalf of the Governor and all instruments for contracts should be signed by such officers authorized to sign instruments on behalf of the Government of Arunachal Pradesh as per the Government (Transaction of Business) Rules, 1987, as amended from time to time. This Rule shows that there can be more than one instrument of contracts for the purpose of running of the said State lottery.
19. The question, now, is whether the instruments of contracts should be only with one distributor as sole distributor or there may be more than one distributor for running of the said State lottery under the Rules ?-
20. My quest for an answer to the above question brings me to the definition of "agreement", contained in Section 2(6) of the Rules, which reads, "Agreement means an agreement signed between the Government of Arunachal Pradesh and sole distributor or printing press, etc., for selling, marketing or printing the lottery tickets of Arunachal Pradesh State Lotteries".
21. Coupled with the above Section 2(i), I find, while defining the term "sole distributor", lays down, "Sole Distributor" means the firm or party with whom the agreement for distribution of lottery tickets is executed".
22. Corpus Juris Secendum, relied upon by Mr. Goswami, defines; I find, the term "sole" thus : "The term "sole" connotes the "singular" and is, sometimes, held to be a technical word. It is variously defined as meaning only "one and only," alone, being or acting without another, existing or acting without another, isolated, without company, solitary, individual, separate, single. The word "sole" is also defined as meaning acting independently and exclusively and without assistance of any other. In law, the word "sole" means single, unmarried, not having a spouse, unmarried male",
23. A bare reading of the above shows that the term "sole" connotes "one and only", "singular", "solitary" and/or "individual". It logically follows from the above definition of 'sole' that the word 'sole' does not include more than one and, hence, as per the definition Clause 2(i), "sole distributor" will mean only that person or group of persons or firm or party with whom the agreement for distribution of lottery tickets has been entered into and it does not envisage including, within the expression "sole distributor", more than one person or more than one group of persons or more than one firm or party. This aspect of the matter becomes clear from Rule 4, which deals with appointment of sole distributor inasmuch as according to Rule 4, Government may, by floating open tenders or such other manners as deemed appropriate, appoint a person or persons or firm, having, at least, three years experience in running lotteries, as sole distributor for a period as may be determined by the Government in accordance with the terms and conditions of the Rules.
24. A close reading of Rule 4 shows that the Government can appoint either an individual or a group of persons or a firm with requisite experience as sole distributor. Thus, Rule 4 too foresees "sole distributor" as a singular entity in the form of an individual person or a group of persons or a firm. It does not foresee more than one person (natural or juristic) or more than one group of persons or more than one firm within expression "sole distributor".
25. I may pause here to point out that though Mr. Mazumdar has referred to Stroud's Judicial Dictionary of Words and Phrases (Fifth Edition) to show that "sole trustee" means more than one trustee, it needs to be noted that Stroud's Judicial Dictionary defines sole trustee as follows :
"This phrase in Trustee Act 1850 (c. 60), Section 23, included two of more trustees who were solely entitled to any trust property (Re Hartwall 21 L.J. Cs. 384, Re Hyatt 21 Ch.D. 846) See Trustee Act (1925), (c. 19), Section 51."
26. A close reading of the expression "sole trustee" shows that the "sole trustee" includes two or more trustees, who are solely entitled to any trust property. This, in turn, shows that sole trustee really means not only one trusted but also include a group of two or more trustees entitled to any trust property. The meaning of sole trustee given in this dictionary also does not mean, contrary to what Mr. Mazumdar has suggested, more than one person as trustee or more than one group of persons as trustee. Viewed from this angle, sole distributor, if I may reiterate, cannot be deemed to include more than one person or more than one group of persons or more than one firm as sole distributor.
27. Excluding, thus, the possibility that the expression "sole distributor" will mean more than one person or group of persons or firm, let me, now, come to clause 6(3) of the Rules, which, I find, lays down as follows :
"All agreements entered into between the Government and the Sole Distributors, prior to the commencement of these rules, shall, as far as they are not inconsistent with the provisions of these rules be, deemed to have been entered under the corresponding provisions of these rules ; provided that where the existing agreements are inconsistent with these rules, they shall be regulated under the guiding principles of the Lotteries (Regulation) Act, 1998." (Emphasis is supplied)
28. The expression "Sole Distributors", appearing in Rule 6 (3) above, is not, to my mind, a clerical error or accidental slip inasmuch as Rule 16 (1) too, I find, reads, "Lottery tickets shall be issued to the sole distributors or selling agents at a whole sale rate to be determined on the basis of the scheme of each Lottery individually or collectively. The Sole Distributor shall deposit with the government, the sale proceeds of the tickets issued to him in a manner as decided by the Government." (Emphasis is added).
29. Abare reading of Rule 16(3) shows that the lottery tickets can be issued by the State Government to more than one sole distributor depending upon the scheme of each lottery.
30. The question, therefore, is as to how, when the "sole distributor" means one person or one group of persons or one firm, the State Government can issue lottery tickets to more than one "sole distributor" ?
31. The answer to the above crucial question is, I find, contained in the definition of "Lottery" given in Rule 2(g) read with the definition of the word "Scheme" contained in Rule 2(p). According to Rule 2(g), "Lottery means a scheme, in whatever form and by whatever name called, for distribution of prize by lot or chance to those persons participating in the chances of a prize by purchasing tickets or coupons." Rule 2 (p) defines Scheme thus : "Scheme means Arunachal Pradesh State Lottery scheme indicating the following ;
"(i) Name of the lottery draw ;
(ii) Category of the lottery (Daily/weekly bumper);
(iii) Total number of tickets printed ;
(iv) Series if any ;
(v) Serial number of the first and last ticket in each series ;
(vi) Cost of each ticket for sale among public, i.e., maximum retail price (MRP);
(vii) Details of prizes ; (viii) Any other matter approved by the Government."
32. A combined reading of Rule 2(g) and Rule 2(p) shows that a lottery does not really mean ticket; it, rather, means a scheme, in whatever form and by whatever name called, for distribution of prize by lot or chance and the scheme includes name of the lottery draw, category of lottery, total number of tickets printed, etc. If harmony has to be maintained between the expression "sole distributor", as defined in Rule 2(i), and the expression "sole distributors", appearing in Rules 6(3) and 16(1), the only reasonable and plausible reading will be that the sole distributor means the distributor of that scheme of lottery in respect of which he stands appointed as the sole distributor. In other words, if the State Government has more than one scheme for running of its lotteries, it may choose to appoint either one sole distributor for all its schemes of lotteries or it may appoint one sole distributor for each of its schemes of lottery, which will obviously lead to appointment of more, than one "sole distributor".
33. What, thus, crystallizes from the above discussion is that under the said Rules, it is possible to have more than one sole distributor for distribution or sale of lottery tickets, but no two distributors can be assigned or given the right to distribute lottery tickets of one and the same scheme. This reading is also in harmony with Section 4(c) of the said Act inasmuch as Section 4(c) empowers States to sell lottery tickets itself or through, as interpreted above, distributor/distributors and/or selling agent/agents.
34. Supposing, a manufacturer has produced three different varieties of beverages under the name and style of A, B and C ; he may appoint three different distributors for his said three products giving each of them exclusive right to sell the brand of beverage assigned to him. Each of these distributors will, then, be sole distributor for the brand of beverage allotted to him. In the alternative, the manufacturer may appoint one individual as sole distributor for all his products, which will, in turn, mean none else can be appointed as sole distributor.
35. What logically follows from the above discussion is that the said Act of 1998 leaves it to the discretion of the State Governments to have its own policy for sale of its lottery tickets. The State may choose to sell the lottery tickets through its own machinery or it may appoint one distributor or more than one distributor for sale of its lottery tickets. Acting upon the discretion so vested by the said Act, the State framed the said Rules of 2001 and retained with it the power to appoint not more than one sole distributor for each of its scheme of lottery or one sole distributor for all its schemes of lotteries or one sole distributor for some of its schemes of lottery, which may, in turn, lead to appointment of more than one sole distributor for different schemes of lottery.
36. There is no dispute before me that by the agreement, dated 10.10.1997, petitioner No. 1 was appointed as the distributor by Slate for selling of its lottery tickets for five years commencing from 10.10.1997 and ending on 9.10.2002, but by orders, dated 18.9.2001 and 21.9.2001, the said agreement was extended for a further period of five years with effect from 10.10.2002 to 9.10,2007. Thus, even after coming into force of the said Act and Rules, the State respondent opted to continue to maintain the petitioner as their sole distributor.
37. Keeping the above in view, let me, now, come to, and deal with, the agreement, dated 10.10.1997, entered into between the petitioner No. 1 and the State. It is true that this agreement, as rightly contended by Mr. Mazumdar, nowhere used the expression "sole distributor" and it is only by the order, dated 18.9.2001, aforementioned that the expression "sole distributor" has been introduced and, then, the same expression was reiterated in the order, dated 21.9.2001, aforementioned.
38. However, the fact remains that the agreement, dated 10.10:1997, and the extension thereof by orders, dated 18.9.2001 and 21.9.2001, can not be read in isolation. Be that as it may, let me determine as to what the agreement, dated 10.10.1997, envisaged and whether it foresaw appointment of any other distributor for the purpose of sale of the said State lotteries. If it foresaw sale of all the lottery tickets of Arunachal Pradesh through petitioner No. 1 only or if it foresaw that none except the petitioner No. 1 can run the said State lotteries, there will be no escape from conclusion that notwithstanding the fact that the agreement, dated 10.10.1997, used word distributor and not the expression "sole distributor", the role of the petitioner No. 1 was, and has remained, in fact, that of the sole distributor.
39. Turning to the agreement, dated 10.10.1997, aforementioned, I find that clause 4 of the agreement reads as follows :
"All the lotteries of the Government of Arunachal Pradesh covering the period of this agreement shall be distributed by the Distributor named hereinbefore, i.e., M/s. N. V. Marketing Pvt. Ltd. Only"
40. Since the definition of the lottery given in Section 2(g) of the said Rules, as already indicated above, shows that the lottery means scheme. Clause 4 leaves no room for doubt that all the schemes, which relate to running of the lottery of the Government of Arunachal Pradesh, shall be distributed, during the period of the said agreement, through M/S. N. V. Marketing Pvt. Ltd. (i.e., the petitioner No. 1) and none others.
41. It is abundantly clear from the words all the lotteries of the Government of Arunachal Pradesh covering the period of this agreement", appearing in the said agreement, that the Government chose to restrain itself from selling or getting sold/distributed not only those lottery schemes, if any, which were in existence on the date of the said agreement (i.e., on 10.10.1997), but also those schemes of lotteries, which the Government may choose to introduce at any point of time during the subsistence of the said agreement. This impression gets reinforced from the fact that apart from using the words "all the lotteries of the Government of Arunachal Pradesh covering the period of this agreement", the Government admittedly chose not to specify in the said agreement that it had retained with itself, under the terms of the said agreement, the discretion/freedom/power/option to appoint any other sole distributor(s) during the period of the said agreement.
42. What consequently follows from the above discussion is that the State Government, as long as the above agreement remains in force, can not appoint any distributor for sale of its lottery tickets inasmuch as it has, in exercise of its executive discretion, chosen to get all the tickets of all its schemes of lotteries sold through petitioner No. 1 and none else. The agreement so reached, was perfectly in tune with the provisions of the said Act and Rules inasmuch as neither the Act nor the Rules made it mandatory for the Government to have/appoint more than one sole distributor.
43. Thus, though it was possible for the State respondents to appoint more than one sole distributor for sale of its different schemes of lotteries, yet, on account of the embargo that it has chosen to place on itself, the State has wholly restrained itself, under Clause 4 of the agreement, from getting its lottery tickets (in whatever form or by whatever name called) sold or distributed through anyone other than the petitioner No. 1. As long as these restrictions remain in force and the State Government does not legally wriggle out of the same, it has to remain saddled with its self-imposed restriction under Clause 4 of the said agreement.
44. The impression that the agreement, dated 10.10.1997, aforementioned rules out possibility of appointment of any further distributor for sale of lottery tickets of the State gets strengthened, when I notice from Clause 3 of the agreement that while imposing on itself a blanket restriction that it would not get sold its lottery tickets through any one other than the petitioner No. 1, the State imposed on the petitioner No. 1 too corresponding responsibility of buying from the State Government entire lot of every lottery ticket under the agreement inasmuch as Clause 3, I find, lays down, inter alia, that the distributor shall buy from the Government the entire lot of the printed tickets of every lottery under the agreement.
45. Thus, a combined reading of Clauses 3 and 4 shows that while the State Government agrees to sell all its lottery tickets, held under all its schemes of lotteries, through petitioner No. 1 only, the petitioner No. 1 too, similarly, agreed to buy the entire lot of every lottery ticket, which the State Governments may get printed for sale, the only redeeming feature being that the distributor will be entitled to a discount as may be mutually agreed upon from time to time. It is, undoubtedly, with this object, in mind, that Clause 2 of the agreement lays down as follows : "The lottery shall, for the period covered by the agreement, be run under the name and style as may be decided by the Secretary (Lotteries), Government of Arunachal Pradesh. He may consider suggestion, if any, from the Distributor in this regard. The name of the lotteries shall always be preceded by the word "ARUNACHAL PRADESH STATE LOTTERY".
46. Though it has been contended by Mr. Mazumdar that the petitioner has as large as 185 different kinds of schemes for running of the lottery and the respondent No. 4 has as many as 150 schemes for running of the lottery and names of all the lotteries being entirely different, there is no scope for clash of interest between the parties, it is clear from the reading of the agreement, as indicated above, that as long as this agreement remains in force, the State Government cannot run any scheme of lottery through any one other than the petitioner No. 1. The lotteries are not really of the parties, but it is of the State Government. In tune with the direction contained in the case of Suman Enterprises (supra) as to what a scheme for lottery should have, Rule 2(p), while defining scheme, made it clear that name is only one of the various ingredients of a scheme of lottery and name alone will not determine the scheme. This apart, all the tickets, according to Rule 2 (q), shall fall within the following definition : "Tickets" means Arunachal Pradesh State Lottery Tickets, bearing the imprint and logo of the State of Arunachal Pradesh having the facsimile signature of the Secretary to the Government of Arunachal Pradesh (State Lotteries) on it and are released for sale in respect of any particulars draw to be held on specific date and time with all necessary information for the convenience of the subscribers intending to enter in the draw for winning prize money of a particular draw on purchasing its tickets".
47. Similarly, according to Clause 10(a) of the agreement, dated 10.10.1997, afrementioned, ticket shall bear the imprint and logo of the Government of Arunachal Pradesh and that the tickets shall be got printed by the Government directly or at the instance of the Government and Clause 10(c) lays down that sufficiently in advance of each draw, the Distributor shall intimate to the Government the number of tickets he wishes to buy and the Government shall, accordingly, place order on the printing press(es) for the printing of the tickets.
48. Thus, a combined reading of Clause 10 shows that tickets are not distributor's ticket, but that these are the tickets of the State Government and these tickets are printed in accordance with the demand placed by the Distributor.
49. It is worth noticing that though the agreement, dated 10.10.1997, aforementioned envisaged appointment of the petitioner for a period of five years as aforesaid, it does not fix the names of the lotteries and, in fact, Clause 2 of the agreement (as already indicated above), lays down that it is the Secretary of the department concerned, who will decide the name and style under which lottery would be run. It logically follows that the Government may decide to run all the lotteries under one name and style. Hence, notwithstanding as to what the name of the lottery may be or under what different schemes lottery tickets are printed for sale by the Government, the State Government is under obligation to get all its tickets under all its schemes of lotteries sold through the petitioner No. 1 alone. In short, the State respondents are free to choose the scheme of lotteries and the names under which the lottery tickets will be sold, but it has no freedom to get its lottery tickets sold through any one other than the petitioner No. 1.
50. I may pause here to point out that Mr. Mazumdar has referred me to Wharton's Law Lexicon (Fourteenth Edition) showing that while interpreting the meaning and role of a "Sole agent", Court has to bear in mind the terms and conditions of the contract. With the proposition of law, there can be no dispute and I have interpreted hereinabove the meaning of "sole distributor", appearing in the agreement aforementioned, with reference to the terms and conditions of the agreement, in question, and a realistic reading of the contents of the agreement vis-a-vis the relevant provisions of the said Act and Rules leave, I find, no room for doubt that the petitioner No. 1 stands appointed as sole distributor for all schemes of lotteries, which may be run, conducted or organized by the State respondents during the subsistence of the said agreements.
51. Mr. Goswami has referred me to W. T. Lamb & Sons v. Goring Brick Company Limited, reported in (1932) 1 KB. 710, wherein it has been held, I find, that appointment as sole selling agent confers an exclusive right to sell the goods. In this case, the defendants, having appointed the plaintiffs as the sole selling agent of all the bricks, which the defendants may manufacture, opted to sell the bricks themselves contending that their agreement with the plaintiff did not stipulate that as manufacturers, the defendants will not be able to directly sell their own bricks. Repelling this argument, the Kings Bench observed, I am tempted to quote, as follows :
"At any moment the defendants would have had the option of taking the whole of the business out of the plaintiffs' hands and availing themselves of the connections, which had been brought into operation through the. efforts of the plaintiffs. In other words, ail that the agreement would have given to the plaintiffs would have been the. possibility that the option, which the defendants claim to be entitled to exercise, would not be exercised for some time .....
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In the present case, I think that the effect of appointing the plaintiffs "sole selling agents" was to put into their hands the sole right of selling the goods manufactured by the defendants, not only as against any other agent whom, the defendants might appoint, but also without reservation in favour of the defendants themselves" (emphasis is added)
52. In the light of the above decision, it will be quite reasonable to interpret that the sole Distributor has conferred on the petitioner No. 1 exclusive right to issue, distribute and sell all the lottery tickets of the State respondents and since under the agreement, the petitioner No. 1 is the sole purchaser of lottery tickets of the State respondents to the exclusion of all others, the Sate respondents can not, during the subsistence of such agreement, appoint another person/or a group of persons/ firm as sole distributor and give him/them the status of sole purchaser of some of the lotteries of the State, which are, otherwise, required to be really sold by the State to the petitioner No. 1 alone. The relationship between the petitioner No. 1 and the State respondents has not remained merely that of principal and agent, but it has made the petitioner No. 1 assume the character of sole selling agent of all the lottery tickets of the State respondents.
53. Coming to the submission of the respondents that Clause 16 of the agreement lays down that in case of any difference or dispute between the parties touching the agreement, the same shall be referred for arbitration as per the provisions of the Indian Arbitration Act, 1940, it is worth mentioning that to the agreement, dated 10.10.1997, aforementioned, the respondent No. 4 is not a party and the terms and conditions embodied in Clause 16 do not govern any dispute that the petitioners and the State respondents may develop regarding appointment of the respondent No. 4 as the sole Distributor. Thus, when the said agreement is not binding on the respondent No. 4, no fruitful purpose will be served by taking resort to arbitration, particularly, because of the fact that even if the arbitrator decides that the appointment of respondent No. 4 is in violation of the agreement, dated 10.10.1997, this will not ipso facto rescind the agreement, which the State respondents have entered into with the respondent No. 4,
54. In other words, notwithstanding the existence of the arbitration clause in the agreement, the fact remains that since the respondent No. 4 is not a party to the said agreement and since the contents of the said arbitration clause do not bind the respondent No. 4, the existence of the said arbitration clause cannot create legal impediment in petitioners' right to approach this Court if their case is, otherwise, found fit to be interfered with by this Court. Reference made, in this regard, by Mr. Goswami to Deep Narain Singh and Ors. v. Dhaneshwari and Ors. (AIR 1960 Patna 201), Shri Patanjal and Anr. v. Rawalpindi Theatres Private Ltd., Delhi (AIR 1970 Delhi 19) and ITC Classic Finance Ltd. v. Grapco Mining and Co. Ltd. (AIR 1997 Cal. 397) is not misplaced.
55. For what has been discussed above, regarding the arbitration agreement, Mr. Mazumdar's reference to the case of Heavy Engg, Corporation Limited v. Atin Bose, reported in AIR 1978 NOC 209 (Cal), is also misplaced.
56. It has also been pointed out by Mr. Mazumdar, as already indicated above, that under Rule 23, if any question arises as to the interpretation of the said Rules, the matter shall be referred to the Governor of Arunachal Pradesh and the decision of the Governor shall be binding and hence, the question whether the Government can or cannot appoint another sole Distributor under the Rules should have been referred to the Governor. It needs to be noted that the subject-matter of this writ petition involves not merely interpretation of the Rules, but also interpretation of the agreement, dated 10.10.1997, as well as the consequences flowing therefrom. Hence, the writ petition cannot be dismissed merely on the ground that for interpretation of the Rules, the petitioner ought to have made representation to the Governor of Arunachal Pradesh or asked the State respondents to refer the matter to the Governor for giving his interpretation in the matter.
57. It may be pointed out that though the respondents contend that existence of arbitration clause in the agreement, dated 10.10.1997, and Rule 23 of the said Rules provide adequate alternative remedy to the petitioners for grievances, if any, which they may have on account of appointment of respondent No. 4 as another sole Distributor and hence, writ jurisdiction may not be exercised, suffice it to mention here that existence of alternative remedy does not create any legal and/or constitutional bar to entertainment of writ petitions ; it is, rather, a restriction, which Courts impose upon themselves not to interfere, generally, in a matter, where alternative remedy is available. Notwithstanding, however, such self-imposed restrictions, the writ Court has the discretion to interfere in a matter, where the State action is shown to be suffering from arbitrariness and/or violation of the principles of natural justice. Reference may be made to (1998) 8 SCC 194, (1996) 6 SCC 667, AIR 1969 SC 556. I may also refer to (1998) 8 SCC 1, wherein the Apex Court has clarified the position of law in the following words :
"The power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provision of the Constitution. This power can be exercised by the High Court not only for issuing writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari for the enforcement of any of the Fundamental Rights contained in Part III of the Constitution but also for "any other purpose".
Under Article 226 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. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this Court not to operate as a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged." (emphasis is supplied).
58. In short, thus, in the instant case, mere existence of arbitration clause and/or existence of Rule 23 cannot bar this Court's jurisdiction if the Court is, otherwise, satisfied that the State's action in appointing respondent No. 4 is arbitrary and/or in violation of the principles of natural justice, particularly, when I am satisfied, for reasons pointed out above, that the said arbitration clause as well as Rule 23 do not really offer adequate remedy to the petitioners, situated as they are, in the facts and attending circumstances of the present case.
59. Though it has been contended by Mr. Mazumdar that on contractual matters, writ Court should not interfere, it needs to be pointed out that the present one is not a case of violation of the agreement reached between two private parties; it is rather a case, where the agreement, having been entered into by the Government in accordance with the law, the agreement has assumed the character of a statutory contract and such a contract cannot be allowed to be violated to the prejudice of the citizen by arbitrary acts of the State. Though the Rules permit appointment of more than one sole distributor, it does not logically follow that appointment of only one sole distributor will ipso facto become illegal.
60. The agreement, dated 10.10.1997, aforementioned clearly shows that during the subsistence of the agreement, the State respondents can not enter into agreement with any person or persons for appointment as sole distributor in respect of any of its schemes of lottery tickets. It needs to be borne in mind that every action of the State has to be reasonable and in consonance with the principles of natural justice. Hence, there is no scope for the State to act arbitrarily and if it is not to behave arbitrarily, then, it cannot be allowed to act in the manner in which it has acted in denying the opportunity of showing cause or of hearing to the petitioners, while modifying the petitioners' agreement, which could not have been modified, as already indicated above, without the consent of the petitioners.
61. Since the contract entered into between the parties on 10.10.1997 and subsequent extension thereof is in exercise of the statutory powers of the State, the contract between the parties is really a statutory contract and when statutory obligations are arbitrarily chosen to be ignored by the State, interference by the High Court in such contractual matters becomes essential under Article 226. Reference may be made to the case of Verigamto Naveen v. Government of A. P. and Ors., reported in (2001) 8 SCC 344, wherein it has been laid down as follows :
"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 & Son v. Board of Trustees of the Port of Bombay. Mahabir Auto Stores v. Indian Oil Corpn. And Shrilekha Vidyarthi (Kuinari)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" (emphasis is added)
62. That the Court has the power of judicial review over every administrative action of the State including actions taken in contractual matters and can interfere with such action if the same does not fall or withstand tests under Article 14 has no longer remained in doubt. Reliance is correctly placed, in this regard, by Mr. Goswami on AIR 1991 SC 537 (Kumari Shrilekha Vidyarthi etc. v. State of U. P. and Ors., wherein the Apex Court has succinctly laid down the position of the law in the following words :
"We have no doubt that the Constitution does not envisage or permit unfairness or unreasonableness in State action in any sphere of its activity contrary to the professed ideals in the Preamble. In our opinion, it would be alien to the Constitutional Scheme to accept the argument of exclusion of Art. 14 in contractual matters .....
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22. There is an obvious difference in the contracts between private parties and contracts to which the State is a party Private arties are concerned only with their personal interest whereas the State while exercising its powers and discharging its functions, acts indubitably, as is expected of it, for public good and in public interest .....
However, to the extent, challenge is made on the ground of violation of Article 14 by alleging that the impugned act is arbitrary, unfair or unreasonable, the fact that the dispute also falls within the domain of contractual obligations would not relieve the State of its obligation to comply with the basic requirements of Article 14. To this extent, the obligation is of a public character invariably in every case irrespective of there being any other right or obligation in addition thereto. An additional contractual obligation cannot divest the claimant of the guarantee under Article 14 of non-arbitrariness at the hands of the State in any of its actions.
23. Thus, in a case like the present, if it is shown that the impugned State action is arbitrary and, therefore, violative of Article 14 of the Constitution, there can be no impediment in striking down the impugned act irrespective of the question whether an additional right, contractual or statutory, if any, is also available to the aggrieved, persons." (emphasis is supplied)
63. Though earning of the profit/revenue may be one of the objects, which promoted the State respondents to enter into the agreement with the respondent No. 4, the fact remains that the Government cannot act like a private individual with sheer purpose of earning profits/revenue by acting prejudicially to the interest of the party with whom it has entered into agreement. In the case at hand the State action is not only contrary to the agreement, which it has with the petitioners, but that giving of distributorship of some of the lottery tickets to the respondent No. 4 by the State is arbitrary as well as unreasonable and unfair. To a case of such nature, judicial review is warranted, because though the subject-matter of dispute is a contractual transaction, the transaction is not between two private individuals, but between the State and its citizen.
64. That a writ petition is maintainable even if the right to relief arises out of an alleged breach of contract has also been clarified in AIR 1973 SC 205 (The D.F.O, South Kheri and Ors. v. Ram Sanehi Singh), wherein it has been observed thus :
"We are unable to hold that merely because the source of the right which the respondent claims was initially in a contract, for obtaining relief against any arbitrary and unlawful action on the part of a public authority he must resort to a suit and not to a petition by way of a writ. In view of the judgment of this Court in K.N. Guruswamy's case, (1955) 1 SCC 205/AIR 1954 SC 592 there can be no doubt that the petition was maintainable, even if the right to relief arose out of an alleged breach of contract, where the action challenged was of a public authority invested with statutory powers."
65. It is also settled position of law that the Courts are more concerned with the decision-making process rather than the decision itself. In the process of taking decision to appoint respondent No. 4, the State, it is clear, acted arrogantly, arbitrarily and unfairly in dealing with a citizens' rights arising out of a statutory contract.
66. In the case in hand, apart from the fact that while deciding to grant to the Respondent No. 4 distributorship of the lottery of the State of Arunachal Pradesh, the State has acted not only in contravention of the agreement, which it has with the petitioners, but that it has also acted arbitrarily in taking the decision on its own without bothering to even consult the petitioners so as to maintain some semblance of adherence to the principles of natural justice. The decision making process, thus, smacks of arbitrariness and of denial of principles of natural justice. Reference made, in this regard, by Mr. Goswami to Style Dress Land v. Union Territory of Chandigarh and Anr., reported in (1997) 7 SCC 89 is not misplaced at all, because it has been laid down in this case as follows :
"11. Even the administrative orders and not (pic only) quasi-judicial are required to be made in a manner in consonance with the Rules of natural justice, when they affect the rights of the citizens to the property or the attributes of the property. While exercising the powers of judicial review the court can look into the reasons given by the Government in support of its action but cannot substitute its own reasons. The Court can strike down an executive order, if it finds the reasons assigned were irrelevant and extraneous. The courts are more concerned with the decision-making process than the decision itself,
12. This Court in Shrilekha Vidyarthi (Kumari) v. State of U.P. held that every State action, in order to survive, must not be susceptible to the vice of arbitrariness which is the crux of Article 14 and basic to the rules of law, the system which governs us, arbitrariness being the negation of the rule of law. Non-arbitrariness, being a necessary concomitant of the rule of law, it is imperative that all actions of every public functionary in whatever sphere must be guided by reason and not humour, whim, caprice or personal predilections of the persons entrusted with the task on behalf of the State and exercise of all powers must be for public good instead of being an abuse of power." (emphasis is added)
67. Mr. Mazumdar has referred to the case of the State of Bihar and Ors. v. Jain Plastic and Chemical Limited [(2002) 1 SCC 216] in support of his contention that on a question of contract, writ jurisdiction cannot be exercised. The reliance placed on the decision cited by Mr. Mazumdar is not only distinguishable but also not applicable to the case at hand. In Jain Plastic (supra), what the Apex Court laid down is that in a case of breach of contract simplicitor, where the decision has to be reached upon appreciation of facts and evidence, extraordinary jurisdiction under Article 226 cannot be resorted to, particularly, when alternative remedy is available. In the case at hand, however, facts are not in dispute nor is the present one a case of breach of contract simplicitor ; rather, the present one is a case, which has arisen not merely on breach of contract, but also for arbitrary and unfair action of the State.
68. It has been contended in their affidavit filed by the State respondents that appointment of respondent No. 4 has been resorted to, because there has been a decline in the overall sale of the lottery tickets. If this be the ground for appointment of respondent No. 4 as another sole distributor, then, conditions imposed on the parties by Clause 15 of the agreement, dated 10.10.1997, aforementioned will get attracted inasmuch as under this Clause, if any modification to the said agreement has to be made, it shall be made only with the consent, in writing, of both the parties to the agreement. Bringing in of the respondent No. 4 to the field of the lottery conducted, run and organized by the State of Arunachal Pradesh definitely amounts to modification of the agreement aforementioned, though no such modification was, as indicated above, possible without the consent of the petitioners. In this regard, however, if I may reiterate, consent of the petitioners was neither sought nor has been obtained.
69. Though it has been contended by Mr. Mazumdar that the appointment of the petitioner as the sole distributor for all the lotteries of the State of Arunachal Pradesh is contrary to the said Rules of 2001, suffice it to mention here that since validity of the agreement, dated 10.10.1997, aforementioned or extension thereof by the orders, dated 18.9.2001 and 21.9.2001, are not under challenge in the present writ petition, this aspect of the matter, without any foundation in the pleadings, cannot be raised by way of arguments. This apart, I have already indicated above that the agreement, which the State respondents have reached with the petitioner No. 1, on 10.10.1997, is neither contrary to, nor in violation of, the relevant provisions of the said Rules. Even if the Government wanted to wriggle out of the agreement, it was not possible for it to do so ignoring, completely and entirely, the conditions imposed by Clause 15 of the agreement, dated 10.10.1997, and also the principles of natural justice. Far from making out a case for modification of the agreement aforementioned, the Government has, in fact, extended the said agreement, on 21.9.2001, for another five years.
70. Though it has been submitted by Mr. Mazumdar that allowing the agreement, dated 10.10.1997, to hold the field to the exclusion of respondent No. 4's agreement with the State will create monopoly in favour of the petitioners, suffice it to mention here that for the reasons discussed above, I have already held that it was a matter of executive policy decision to resort to appoint of one distributor for sale of all the lottery tickets of the State of Arunachal Pradesh and since the matter falls within the realm of executive discretion and policy, the writ Court will not interfere, particularly, when the agreement, dated 10.10.1997, aforementioned, which is the foundation of the petitioners' case, is neither, for reasons indicated above, contrary to law nor is the said agreement under challenge in this writ petition.
71. In view of the fact that under the agreement, dated 10.10.1997, the petitioner No. 1 was required to sell, as indicated above, all the lottery tickets of the State of Arunachal Pradesh throughout India as its sole distributor, there can be no escape from conclusion that to run such a distributorship/business, the petitioners must have, as contended by the petitioners, had to appoint a large number of agents/stockists, etc., throughout the country for selling the lottery tickets and running of such a business/distributorship must have required, as claimed by the petitioners, not only huge investment, but also development of extensive nation-wide network. In such a situation, if the State respondents unilaterally and arbitrarily appoint another distributor for selling the lottery tickets, then, the petitioners will obviously suffer not only loss of business but also tremendous adverse financial consequences and loss of good-will. There is, therefore, no doubt, that if the agreement reached by the State respondents with the respondent No. 4 is allowed to remain in force, it will cause serious prejudice to the interest of the petitioners. Viewed from this angle, appointment of the respondent No. 4 as another sole distributor is not merely a breach of contract, but gross violation of the principles of natural justice inasmuch as the appointment of respondent No. 4 has been, admittedly, made without prior information to, and/or negotiation with, and/or consent of, the petitioners.
72. It is also required to be borne in mind that legitimate expectation is an integral and inseverable part of the concept of natural justice. On its appointment as sole distributor for all the lotteries of the State of Arunachal Pradesh, the petitioners must have, one can reasonably infer, under expectation of making profits by increasing their business, developed their own network and made investments ; hence, in such a situation, the State cannot ignore, or act in a manner prejudicial to, the legitimate expectations, which the petitioner must have, in consequence of the terms and conditions of the agreement reached between the parties, had developed. Thus, the situation is that as far as the petitioners are concerned, they have acted upon the terms and conditions of the agreement by appointing their own agents, stockists, etc., but the State, now, appears to have been endeavouring to resilie from its own commitments. To ensure that no State acts arbitrarily and/or treat unfairly its citizens is the solemn duty of writ Courts.
73. It is, now, well settled that even in the matter of contractual transactions to which State is a party, the State action cannot be arbitrary, unfair or without consideration of the legitimate expectation of the affected party. In fact, consideration of the legitimate expectation forms part of the principle of non-arbitrariness under Article 14 of the Constitution as well as the rule of law. It becomes an enforceable right in case of failure of the State to give due weightage to the legitimate expectations of the party with whom the State enters into contractual transactions. Reference made by Mr. Goswami to the Apex Court's decision in Food Corporation of India v. Kamdhenu Cattle Feed Industries, reported in 1993 (1) SCC 77, is not misplaced inasmuch as it has been laid down in this case as follows :
"In contractual sphere as in all other State actions, the State and nil its instrumentalities have to conform to Article 14 of the Constitution of which non-arbitrariness is a significant facet. There is no unfettered discretion in public law. A public authority possesses powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is 'fairplay in action'. Due observance of this obligation as a part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly in his interaction with the State and its instrumentalities, with this element forming a necessary component of the decision-making process in all State actions. To satisfy this requirement of non-arbitrariness in a Station action, it is, therefore, necessary to consider and given due weight to the reasonable or legitimate expectations of the persons likely to be affected by the decision or else that unfairness in the exercise of the power may amount to an abuse of excess of power apart from affecting the bona fides of the decision in a given case. The decision so made would be exposed to challenge on the ground of arbitrariness. Rule of law does not completely eliminate discretion in the exercise of power, as it is unrealistic, but provides for control of its exercise by judicial review." (Emphasis is added)
74. It has been contended, on behalf of the respondents, that if the agreement entered into between the petitioners and the State respondents as well as the agreement reached between respondent No. 4 and the State respondents are both allowed to continue, there will be no over-lapping of the sale of lottery tickets inasmuch as the names of the lotteries for each of the parties are different from the other.
75. The question, however, is not whether there will be overlapping of the names, but the question is whether the State respondents' agreement with respondent No. 4 has the effect of modifying and/or substantively rescinding vital aspects of the agreement, dated 10.10.1997, and extension thereof on 21.9.2001. A dispassionate reading of the contents of the agreement, dated 10.10.1997, vis-a-vis the relevant provisions of law leaves no room for doubt that the entry of respondent No. 4 into the field of Arunachal Pradesh State Lotteries, if allowed, will have the affect of substantially rescinding a vital aspect of the petitioners' agreement inasmuch as the petitioner No. 1 will not remain sole distributor in respect of all the lotteries, which the State Government will be running.
76. It may also be pointed out that under Clause 2 of the agreement, dated 10.10.1997, it is entirely for the State respondents to choose the name and style of the lotteries, which the State runs. Though the petitioners may offer suggestions, the ultimate decision as regards the name and style of the lottery will be of the government. In this view of the matter, if the Government tomorrow chooses to run all its lotteries, under one name, the petitioners cannot object thereto. What will follow, as a corollary, if the respondent No. 4's agreement remains in force, is that in addition to the petitioner No. 1, respondent No. 4 may also be running the same lottery. Thus, both these persons may end up running the same lottery.
77. The Government had its choice of running the lottery itself or appoint one or more sole distributors. The Government chose to appoint only one sole distributor for all its schemes of lotteries. Having taken their decision, when the Government has already entered into the agreement, dated 10.10.1997, aforementioned and when the petitioners have done whatever is required to be done by them under the said agreement, the Government cannot, now, run away from the agreement without adhering to clause 15 of the agreement and/or ignoring the basic principles of natural justice.
78. When the cancellation/revocation of the agreement has the adverse affect upon the livelihood of the person concerned, it is essential to adhere to the principles of natural justice, i.e., of giving notice or opportunity to the person affected to have his say in the matter. In the present case, apart from the fact that no modification could have been made in the agreement aforementioned without the consent of the petitioners, the principles of natural justice also required that the petitioners he given the opportunity of having their say in the matter of appointment of respondent No. 4. Having not done so, the State respondents have violated the principles of natural justice and though the action of the State respondents is administrative in nature, the same, being in violation of the principles of natural justice, will attract interference in exercise of powers under Article 226 of Constitution of India. I am guided to adopt this view from the law laid down in Raj Restaurant and Anr. v. Municipal Corporation of Delhi (1982) 3 SCC 338.
79. As far as Mr. Mazumdar's reference to Air. India Limited v. Cochin Air India Limited and Ors., [(2000) 2 SCC 617] is concerned, the same does not help the case of the respondents inasmuch as in this case, the Apex Court has clearly laid down that the Court may not interfere with the decision, but it can interfere with the decision-making process on the ground of mala fide, unreasonable or arbitrariness. In the case at hand, as already indicated above, the petitioners' case is that the State respondents' action is wholly unreasonable and completely arbitrary. Hence, if the materials on record support the contention of the petitioners, the writ Court cannot ignore the petitioners' case. It is, no doubt, true that if alternative remedy is available and if the dispute relates to private contract and contract agreement includes arbitration clause, the remedy of the affected party lies in taking recourse to either arbitration or institution of suit and not writ jurisdiction. Regarding this position of law, there can be no dispute, but when the State Government's arbitration clause does not govern all the parties to the dispute and the dispute does not arise out of breach of private contract but statutory contract and when the State action is prima facie arbitrary and unfair, writ Court cannot refuse to entertain such writ application. Reference made by Mr. Mazumdar to the case of the State of U. P. and Ors. v. Bridge Roof Company (India) Ltd. [(1996) 6 SCC 22] is therefore, wholly misplaced inasmuch as in this very case, it was laid down as follows ;
"Firstly, the contract between the parties is a contract in the realm of private law. It is not a statutory contract. It is governed by the provisions of the Contract Act or, may be, also by certain provisions of the Sale of Goods Act. Any dispute relating to interpretation of the terms and conditions of such a contract cannot be agitated, and could not have been agitated, in a writ petition. That is a matter either for arbitration as provided by the contract or for the civil court, as the case may be. Whether any amount is due to the respondent from the appellant-Government under the contract and, if so, how much and the further question whether retention or refusal to pay any amount by the Government is justified, or not, are all matters which cannot be agitated in or adjudicated upon in a writ petition. The prayer in the writ petition, viz., to restrain the Government from deducting a particular amount from the writ petitioner's bill(s) was not a prayer which could be granted by the High Court under Article 226. Indeed, the High Court has not granted the said prayer." (emphasis is supplied)
80. Mr. Goswami has also referred to John S. Service v. John Foster Dullers and Ors. etc. 454 US 363 (1957) to show that even when the State or its functionary has absolute discretion to take decision, the decision taken must not be arbitrary and must adhere to the principles of natural justice. In this case, the Secretary of the State dismissed an officer, the U.S. Supreme Court struck down the State action on the ground that though the law provided that the Secretary of the State may, in his absolute discretion, terminate employment of any officer or employees of the department of State, whenever he shall deem such termination necessary or advisable in the interest of United States, the termination was done without adhering to the principles of natural justice. In the present case, apart from the fact that the agreement, dated 10.10.1997, aforementioned does not even give the State respondents absolute discretion to modify the terms and conditions of the said agreement, yet the State chose to not only modify the agreement effectively, but, in effect, rescind the same substantially, without adhering to the principled of natural justice, Such an action, as discussed above, cannot be allowed to stand good on record by the writ Court.
81. If such arbitrary exercise of power by the State as glaring noticeable in the present case, is allowed to survive, it will lead to rampant abuse of powers by the State. Viewed from this angle, rule of law would be the ultimate casualty of such abuse of powers unless the Court chooses to interfere.
82. In the result and for the reasons discussed above, this writ petition succeeds. The agreement, dated 27.2.2002, aforementioned, entered into between the State respondent and the respondent No. 4 appointing respondent No. 4 as a sole distributor of Arunachal Pradesh State Lottery shall stand set aside and qushed. The Rule is accordingly made absolute.
No order as to costs.