Calcutta High Court
West Bengal Small-Scale Industries ... vs Hindustan Detergent Corporation And ... on 21 August, 2006
Equivalent citations: 2006(4)CHN180
Author: Bhaskar Bhattacharya
Bench: Bhaskar Bhattacharya
JUDGMENT Bhaskar Bhattacharya, J.
1. This mandamus appeal is at the instance of the respondents in a writ application and is directed against the order dated 1st September, 2004 passed by a leanred Single Judge thereby allowing the writ application filed by the respondent No. 1 and setting aside the order dated December 9, 2003 passed by the Managing Director of the present appellant by which the enlistment of the respondent No. 1 as 'Websi' Manufacturer was terminated.
2. The facts giving rise to the filing of the present mandamus appeal may be summed up thus:
(i) The respondent No. 1 is a registered partnership firm and it runs a small-scale industrial unit. The said respondent No. 1 is a manufacturer of the detergent powder.
(ii) The Department of Cottage and Small-scale Industries, Government of West Bengal, adopted a decision to promote the products manufactured by diverse detergent manufacturers through the West Bengal Small-scale Industries Development Corporation Limited by taking aid of the Public Distribution System of the Department of Food and Supply, Government of West Bengal. It was decided that the detergent should be sold under a common brand-name, viz. 'Websi'.
(iii) The respondent No. 1 applied for its enlistment under the said scheme and the appellant accepted the offer of the respondent No. 1 and enlisted the respondent No. 1 as one of the 'Websi' manufacturers.
(iv) The respondent No. 1 had the capacity to manufacture 250 M.T. of the detergent powder a month and it was always ready and willing to supply 50 M.T. of Websi' a month for distribution and sale. However, the appellant did not lift the aforesaid amount of 50 M.T. of 'Websi' detergent powder a month from the respondent No. 1.
(v) The respondent No. 1 noticed that the appellant, in course of time, began to purchase lesser quantity of "Websi" detergent powder from the respondent No. 1 although its capacity was all through 50 M.T. a month.
(vi) The respondent No. 1 was appointed as the agent of the appellant, initially, for the district of Midnapore, but subsequently, it was chosen as the agent, also for the districts of Bankura, Birbhum, Purulia and the entire North Bengal except the district of Malda.
(vii) In the meeting held in the chamber of the Managing Director of the appellant it was decided that each "Websi' manufacturing unit would be asked to supply the target of 7 M.T. a month to bring equality amongst the manufacturers instead of fixing the targets according to the capacity of the units pro rata linking with the sale of detergent powders.
(viii) Since, the respondent No. 1 had the capacity to manufacture 250 M.T. per month and as the initial registered target for the respondent No. 1 was 50 M.T., it approached this Court with a writ application for necessary direction.
(ix) The matter was listed before a learned Single Judge on April 10, 2002 when the appellant submitted before the learned Single Judge that the policy, as challenged by the respondent No. 1, had not been given effect to and in view of such concession, the learned Single Judge observed that it was not necessary for His Lordship to deal with the matter at that stage.
(x) Between the period of April, 2002 and March, 2003 total 85.5 M.T. 'Websi' powder had been lifted from the respondent No. 1 and in the meantime, the respondent No. 1 manufactured 40.075 M.T. detergent powders as per the alleged production programme given by the appellant. However, from the month of January, 2003, the appellant completely stopped withdrawal of materials from the respondent No. 1 although the empty Polly packets were supplied to the respondent No. 1 for packaging the detergent powders.
(xi) The Marketing Manager of the appellant on April 3, 2003 issued a show-cause notice asking the respondent No. 1 to show cause why action should not be initiated against it on the basis of allegation of the ration-dealers of Ghatal and other areas of Midnapore district that the respondent No. 1 had supplied bad quality of 'Websi' detergent powders. It was further alleged that various samples were collected from those areas and after testing the samples, those were found to be of below the standard prescribed.
(xii) The respondent No. 1 replied the show-cause notice denying the allegations made against it and it was denied that the samples collected by the appellant were manufactured by the respondent No. 1. The respondent No. 1 requested for supply of those samples to enable the respondent No. 1 to get those tested by any recognised testing-house.
(xiii) The second writ application out of which the present appeal arises was at that stage filed challenging the show-cause notice. When the matter was taken up for hearing by the learned Single Judge, the learned Advocate for the appellant submitted that the authority concerned would give its decision in the matter within ten days and accordingly, the matter was adjourned by the learned Single Judge to enable the appellant to produce the decision of the Managing Director on the next date of hearing. Ultimately, the appellant was directed to pass a reasoned speaking order and such order was passed on December 9, 2003 by which the respondent No. 1 had been expelled as a manufacturer of 'Websi' detergent power and also as supply-agent of the appellant.
(xiv) In view of the aforesaid fact, the respondent No. 1 filed an application for further relief thereby challenging the decision of the Managing Director of the appellant dated December 9, 2003 and such prayer was allowed.
(xv) Ultimately, the learned Single Judge disposed of the writ application by setting aside the order dated December 9, 2003 on the ground that the step taken by the appellant was not in conformity with the provision contained in Article 14 of the Constitution of India.
3. Being dissatisfied, the appellant has come up with the present mandamus appeal.
4. Mr. Ahin Chowdhury, the learned senior counsel appearing on behalf of the appellant, has, at the very outset, submitted before us that the learned Single Judge erred in law in entertaining a writ application complaining termination of contractual obligation between his client and the writ petitioner. According to Mr. Chowdhury, in the matter of contractual obligation of a party of this nature, a Writ Court should not entertain this type of a dispute. Mr. Chowdhury submits that his client has every legitimate right to decide whether it would continue its business-term with the writ petitioner and whether it would be beneficial for his client to keep the contract alive with the writ petitioner. Mr. Chowdhury submits that if his client is not satisfied with the performance of the writ petitioner, the Writ Court cannot compel his client to continue the business relation. Mr. Chowdhury, thus, prays for dismissal of the writ application on that ground alone.
5. Even on merit, Mr. Chowdhury contended that his client was satisfied with the various complaints lodged by different persons and on the basis of such complaints, various samples supplied by the writ petitioner were tested and those were found to be of below the average prescribed by his client and in such circumstances, if his client decided to terminate the agreement for the misconduct on the part of the writ petitioner, this Court sitting in a writ jurisdiction cannot direct his client to continue relation with the writ petitioner and suffer loss.
6. In support of his contention, Mr. Chowdhury relies upon the following decisions:
1) State of U.P and Anr. v. Johri Mal ;
2) Binny Ltd. and Anr. v. V. Sadasivan and Ors. ;
3) Zee Tele Films Ltd. v. Union of India .
7. Mr. Talukdar, the learned Counsel appearing on behalf of the writ petitioner/respondent, on the other hand, supported the decision given by the learned Single Judge and contended that even in the field of contract, the appellant, being a State within the meaning of Article 12 of the Constitution of India, should act reasonably and not arbitrarily. Mr. Talukdar contends that before terminating the agreement, his client was not given opportunity even to cross-examine the alleged complainants on whose compliant the appellant took such drastic action. Even those samples, allegedly manufactured by the writ petitioner, were not placed before his client for re-verification by an impartial agency. Mr Talukdar submits that it is rightly pointed out by the learned Single Judge that the appellant had no scope of purchasing those samples as only a ration-card-holder can purchase the detergent powder from those ration shop. Mr. Talukdar further submits that in the case before us, even his client made allegation of mala fides against the appellant on the assertion that the son of the Deputy Regional Director, Food and Supply, in the District of the Burdwan was willing to get the agency of the Midnapore region for his son who is also enlisted as a detergent manufacturing unit although his application for enlistment was not routed through the Small Scale Detergent and Soaps Manufacturers Association as was the case for all the units, as a result, his client's agency had been cancelled.
8. Even Mr. Talukdar draws attention of this Court to the circular and guideline issued by the appellant itself showing that if any of the agents is found to have supplied "below average detergent powder", for the first instance, he should be suspended for six months and in the second instance, the agreement should be terminated. Mr. Talukdar submits that in this case, the fact that even on the basis of first complaint the agency has been cancelled itself shows that the appellant acted with mala fide intention. He, therefore, prays for dismissal of the appeal.
9. In support of his contention, Mr. Talukdar relies upon the following decisions:
1) ABL International Ltd. and Anr. v. Export Credit Guarantee Corporation of India Ltd. ;
2) Chairman, Raihvay Board and Ors. v. Chandrima Das and Ors. .
10. After hearing the learned Counsel for the parties and after going through the materials on record we are of the view that even in the field of contract, the appellant being a State within the meaning of the Article 12 of the Constitution of India cannot act arbitrarily. It is rightly pointed out by Mr. Talukdar that on the basis of decision of the Managing Director of the appellant, although, the termination order has been passed, before taking such an action, the writ petitioner was not given an opportunity even to cross-examine those complainants or to verify the samples which were allegedly found to be of "below average quality" by an independent test-house. In the reasoned order, the appellant has not dealt with the allegation of the mala fide intention of the appellant imputed by the respondent No. 1 in answer to the show-cause notice. We have already pointed out that specific case of the writ petitioner was that the son of the Deputy Regional Director. Food and Supply, Burdwan, was interested in getting the said agency in the Midnapore area for his son and to oblige him, the agency of the writ petitioner was cancelled. In the case before us, there is no dispute that the appellant in collaboration with the Department of Food and Supply, Government of West Bengal, sells the detergent powder by taking aid of its food distribution system and in such a situation, it was the duty of the respondent to at least deal with such allegation in the reasoned order when the definite allegation of the writ petitioner is that the said son of the Deputy Regional Director got his name enlisted not through the usual process.
11. Over and above, the fact, that the appellant itself has not followed its own circular by terminating the contract on the alleged proof of supply of the materials of below average quality though this was the first instance, itself suggests that it did not act reasonably. We have found that the quality of the disputed detergent was allegedly found to be just three per cent below the standard fixed by the appellant and in such a case, the opportunity ought to have been given to the writ petitioner to verify those samples either by itself or through an independent testing-agency. The appellant could not produce receipt showing that it purchased those materials really from those ration shops of the concerned area although it had no ration-card tagged with those shops.
12. The learned Single Judge, it appears from the record, has given elaborate reasons why the order of termination should not be accepted and we find that in this case, having regard to the facts indicated above, we should not interfere with the discretion exercised by the learned Single Judge. The findings recorded by the learned Single Judge are quite reasonable and any prudent person on the basis of the materials on record would come to the same conclusion.
13. We now propose to deal with the decisions cited by Mr. Chowdhury.
14. In the case of State of U.P and Anr. v. Johri Mal (supra), the Supreme Court reiterated the well-settled principle that in exercise of judicial power of review the Court will have no jurisdiction to entertain a writ application in a matter governed by contract or qua contract as public law element would not be involved therein. However, in paragraph 24 of the said judgment the Court itself stated that the legal right of an individual may be founded upon a contract or a statute or an instrument having the force of law. According to the Supreme Court, 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. According to the Supreme Court, the question is required to be determined in each case having regard to the nature of and extent of authority vested in the State and 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 an exhaustive list of such actions. If we follow the aforesaid principle, it is clear that in the case before us, the statutory duty of the appellant is to help the small-scale units and in exercise of such duty involving public law elements it entered into the contract with the writ petitioner. Therefore, the action is subject to judicial scrutiny and if it does not follow the Article 14 of the Constitution, it will be amenable to the writ jurisdiction. Therefore, the aforesaid decision does not help Mr. Chowdhury's client in any way.
15. In the case of Binny Ltd. and Anr. v. V. Sadasivan and Ors. (supra), it was held that judicial review is designed to prevent the cases of abuse of power and neglect of duty by public authorities. According to the Supreme Court, under our Constitution, the Article 226 is couched in such a way that a writ of mandamus could be issued even against a private authority but such private authority must be discharging a public duty and that the decision sought to be corrected or enforced must be in discharge of public function. If we rely upon the said principle, it is clear that in this case the appointment of writ petitioner by the appellant was in discharge of its public duty for which the appellant itself is constituted and thus, its action is amenable to Article 226 of the Constitution of India. We thus, find that the said decision does not help Mr. Chowdhury's client in any way.
16. In the case of Zee Tele Films Ltd. v. Union of India (supra), the majority view held that the Board of Control for Cricket in India is not a State within the meaning of Article 12 of the Constitution of India. However, Mr. Chowdhury relied upon paragraphs 259 to 266 of the judgment which is part of the minority judgment. In paragraph 259, the minority view was that only because a body answers the description of a public authority, discharges public law-functions and has public duties, the same by itself would not lead to the conclusion that all its functions are public functions. According to the minority view, many duties in public law would not be public duties as, for example, duty to pay taxes. By way of illustration, the Hon'ble Judges pointed out that mandamus could be issued directing a private body discharging public utility services in terms of a statute for supply of electrical energy whereas its other functions like flowing from a contract, etc. would not generally be amenable to judicial review. We respectfully agree with the aforesaid observation made in paragraph 259 that generally other functions flowing from a contract would not be amenable to judicial review but when the appellant itself was constituted for the purpose of helping the small scale units, the contract involved herein are of public nature and was entered into in exercise of part of its public duty and thus, the aforesaid observation cannot help the appellants.
17. The decisions cited by Mr. Chowdhury are, thus, of no assistance to his client.
18. It is needless to mention that the appellant would be free to proceed afresh after giving the fullest opportunity of hearing to the writ petitioner for the purpose of showing either that it did not supply those materials or that even if those were supplied, those were not of the quality below the one prescribed by the appellant and also after giving an opportunity of cross-examining the complainants on the basis of whose complaint the action was taken.
19. The appeal is, thus, devoid of any substance and is dismissed accordingly. In the facts and circumstances, there will be, however, no order as to costs.
Prabuddha Sankar Banerjee, J.
20. I agree.