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CASE NO.: Appeal (civil)  5543 of 2004

PETITIONER: Kisan Sahkari Chini Mills Ltd. & Ors

RESPONDENT: Vardan Linkers & Ors

DATE OF JUDGMENT: 15/04/2008

BENCH: R. V. Raveendran & Lokeshwar Singh Panta

JUDGMENT: J U D G M E N T REPORTABLE

CIVIL APPEAL NO. 5543 OF 2004 W I T H CIVIL APPEAL NO. 5544 OF 2004 State of Uttaranchal                                     .....        Appellants Versus Vardan Linkers & Ors.                                     .....     Respondents  A N D CIVIL APPEAL NO. 5545 OF 2004 Doiwala Sugar Company Ltd. & Anr.                .....        Appellants Versus Vardan Linkers & Ors.                                     .....     Respondents  

Lokeshwar Singh Panta, J.

       These appeals by special leave filed by Kisan Sahkari  Chini Mills Limited, Sitarganj, Gadarpur and Nadehi [Civil  Appeal No. 5543/2004], State of Uttaranchal [Civil Appeal No.  5544/2004], and Doiwala Sugar Company Limited and Kichha  Sugar Company Limited [Civil Appeal No. 5545/2004] are  directed against the final judgment and order dated 28-7-2004  passed by the Division Bench of the High Court of Uttaranchal  in Writ Petition No. 318/2004 filed by Vardan Linkers, a  proprietary concern of B.B. Singh, first  respondent in these  appeals.  By the impugned judgment, the High Court allowed  the said writ petition and quashed the order dated 24.4.2004  of the Secretary, Cane Development and Sugar Industries,  whereby the order dated 26.03.2004 of the Assistant Cane  Commissioner, Udham Singh Nagar, granting permission to  the first respondent to lift 85,000 quintals of molasses from  the five sugar mills at a price of Rs.127/- per quintal was  cancelled.   

Factual Background :  2.      It is stated that there are six State controlled sugar mills  in the State of Uttaranchal, which produce molasses as a bye- product. Of them, two mills - Doiwala Sugar Company Limited  and Kichha Sugar Mills Limited -  are Government Companies.   The other four are in the co-operative sector, namely, Kisan  Sahkari Chini Mills Limited at Nadehi, Gadarpur, Sitarganj  and Bhajpur.  Sale of molasses produced by these six sugar  mills was controlled through the Molasses Sales Committee  constituted by the State Government vide order dated  25.3.2003, with the following nine Members: (i)     Commissioner, Kumaon Mandal, Nainital  -   Chairman (ii)    District Magistrate, Udham Singh Nagar           -  Member      

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(iii)   Six General Managers of the four Cooperative             Sugar Mills and two Sugar Companies       -  Members     (iv)    Assistant Cane Commissioner,  Udham          Singh Nagar                                             -  Secretary  

The said order made it clear that molasses of the six sugar  mills shall be sold only through the said Committee. The State  Government policy at the relevant time required molasses  produced by these sugar factories to be disposed in the  following manner:  70% to distilleries and chemical factories in  the State; 10% to manufacturers of country liquor within the  State; and 20% to bona fide consumers (distilleries and  chemical industries).  No allottee who got allotment as a bona  fide consumer could transfer the allotment to anyone else.  3.      The Kisan Sahkari Chini Mills Limited, Gadarpur, issued  a tender notice (published in Amar Ujala dated on 23.2.2004)  inviting offers from bona fide consumers for purchase of ’B’  grade molasses produced by five sugar mills at Gadarpur,  Nadehi, Sitarganj, Doiwala and Kiccha. Tenderers were  required to submit their tenders to the Assistant Cane  Commissioner, Udham Singh Nagar, specifying the name of  the Sugar Mills from which he wanted to purchase molasses  and the quantity. The tender had to be accompanied by an  earnest money of Rs.1,00,000/- in respect of each sugar mill  from which the tenderer wanted to buy molasses.    4.      In response to the tender notice, first respondent and  others submitted their tenders, which were opened on  1.3.2004 at 3.30 PM by the Assistant Cane Commissioner,  Udham Singh Nagar, in the presence of the General Manager,  Gadarpur, the Purchase Clerk of Sitarganj Mills and Molasses  Clerk of Nadehi Mills. The first respondent’s tender was for  purchase of 15,000 quintals of molasses from Kisan Sahakari  Chini Mills Limited, Nadehi, at a price of Rs.101/- per quintal.   The said offer contained a note to the effect that "we will lift  molasses in favour of distilleries of UP, Punjab and Haryana".  The first respondent did not enclose any earnest money with  the tender, but stated that a sum of Rs.1,00,000/- was  already deposited with the Nadehi Sugar Mill. The first  respondent did not make any offer for purchasing molasses  from the other four mills.  As the prices offered by the  tenderers were found to be very low, negotiations were held by  the Assistant Cane Commissioner with the tenderers on the  same day.  This was followed by further negotiations on  3.3.2004. At the time of negotiations on 3.3.2004, only three  members of the Molasses Sales Committee were present -  District Magistrate, Udham Singh Nagar, General Manager,  Gadarpur Sugar Mills and the Assistant Cane Commissioner,  Udham Singh Nagar. The Chairman of the Molasses Sales  Committee and the General Managers of the five other sugar  mills, were not present. The Chief Accountant of Sitarganj  Mills was present. During negotiations, the first respondent  increased its offer to Rs.119/- per quintal and again to  Rs.127/- per quintal.  5.      The three members of the Committee, who were present  (along with the Chief Accountant of Sitarganj Mills), submitted  a Note dated 03.03.2004 to the Chairman of the Molasses  Sales Committee, reporting that during negotiations, the first  respondent had offered to purchase the entire stock of  molasses of the five sugar mills at Gadarpur, Nadehi,  Sitarganj, Kichha and Doiwala at a price of Rs.127/- per  quintal, though he had submitted the tender only for purchase  of molasses of Nadehi sugar mill. It was also reported that the  first respondent had assured payment of earnest money in  respect of each of the four other mills, within seven days if his  offer was accepted.  The report also stated that the price of Rs.

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127/- per quintal offered by the first respondent was higher  than the offer of the other tenderers - IGL (Rs.117/-) and  Rampur Distillery (Rs.126/-).  The Chairman was requested to  make his recommendations for accepting the offer of first  respondent. The Chairman of Molasses Sales Committee made  an endorsement ’Seen’ on the said note on 3.3.2004. The  District Magistrate, Udham Singh Nagar, made a note thereon  to the effect, "Necessary orders may be issued today itself.  Firm may deposit earnest money". The first respondent  deposited Rs.4,00,000/- by bank drafts under cover of letter  dated 10.03.2004, towards earnest money for purchase of  molasses of the sugar mills at Gadarpur, Sitarganj, Kichha  and Doiwala.  6.      The Assistant Cane Commissioner, Udham Singh Nagar,  vide letter dated 15.03.2004 permitted the first respondent to  lift  5,000 quintals of molasses from Kisan Sahkari Sugar Mill  Ltd., Nadehi, at the rate of Rs.127/- per quintal within one  month.   7.      The first respondent gave an undated letter to the District  Magistrate, Udham Singh Nagar requesting allotment of  1,02,000 quintals of molasses of all five sugar mills. On this  letter, the District Magistrate, Udham Singh Nagar made a  note on 23.3.2004 instructing the Assistant Cane  Commissioner to issue orders giving time till 31.5.2004 to take  delivery. On the basis of the said request of the first  respondent, the Assistant Cane Commissioner prepared an  undated official note and sought approval from the District  Magistrate for granting permission to the first respondent for  lifting 15,000 quintals of molasses from each of the four sugar  mills at Nadehi, Gadarpur, Sitarganj, and Doiwala and 25,000  quintals of molasses from Kichha Sugar Mill, in all 85,000  quintals, by 31.05.2004.  The District Magistrate, Udham  Singh Nagar, on 25.03.2004 made the following endorsement  thereon: "Approved. The Commissioner has desired to issue  orders".     8.  The Assistant Cane Commissioner, by letter dated  26.03.2004, addressed to the first respondent, informed him  that on the approval of the Commissioner, Kumaon Mandal,  he was permitted to lift a total quantity of 85,000 quintals of  molasses from the five sugar mills by 31.05.2004 at a price of  Rs.127/- per quintal. The said letter is extracted below :  

"M/s Vardan Linkers, Bijnor (Uttar Pradesh)

Sir,  

With reference to the tender dated 1.3.2004 invited  on behalf of Co-operative/Corporation Sugar Mills  for selling export molasses and further with  reference to the negotiations held on 3.3.2004, it is  informed to you that on the approval of  Commissioner, Kumaon Mandal, Nainital, you are  hereby permitted to lift total 85000 quintals of  molasses from the following sugar mills at the rate  mentioned against the name of every sugar mill.  You will have to lift the said molasses by 31.5.2004.   S.  No. Name of  Sugar Mill Allotted  (Per Qt.)

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Rate Name of firm 1. Nadehi Co- op. 15000 127 Patiala  Distillers &  Manufacturers  Ltd. 2. Gadarpur Co- op. 15000 127     Do 3. Doiwala Co- op. 15000 127     Do 4. Sitarganj Co- op. 15000 127 Chandigarh  Distillers &  Bottlers Ltd. 5. Kiccha 25000 127      Do

In addition to the rates mentioned above you will  have to pay excise duty, sales tax and other  applicable taxes. You are also hereby informed that  you will be bound by all the conditions mentioned  in the tender form.  

Sd/- Assistant Cane Commissioner Udham Singh Nagar

Copy to :

General Manager/Executive Director of aforesaid  Chini Mills with a request that they should grant  necessary permission for lifting quantity of molasses  mentioned against each Sugar Mill, after completing  all formalities. The drafts towards the earnest  money for all the sugar mills except Nadehi Sugar  Mill have been received. The concerned sugar mills  are requested to collect the draft regarding earnest  money from the office.  

9.  Around that time, the State Government received several  reports that the prevailing price of molasses was much higher.   On 06.04.2004, M/s Associated Alchohols and Breweries  Limited, Jaipur and M/s. Jagjit Industries Limited,  Kapurthala, wrote letters to the District Magistrate, Udham  Singh Nagar, offering to purchase molasses from the sugar  mills of Kiccha, Sitarganj, Gadarpur, Nadehi and Doiwala at

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the rate of Rs.260/- and Rs.250/- per quintal respectively.   M/s Uttar Pradesh Sahkari Sugar Mills Sangh Limited,  Lucknow, informed the Government of Uttaranchal by a fax  message that the stock of molasses lying at the co-operative  sugar mills in the State of U.P. at Sarsawa, Bagpat and Morna  Distilleries were sold to M/s. Chandigarh Distillers and  Bottlers Limited on 8.4.2004 at the rate of Rs.300/- per  quintal.   Information was also received that molasses were  being sold by the neighbouring private sector sugar mills in  Uttaranchal at rates ranging from Rs.310/- to Rs.330/- per  quintal. In view of it, the Additional Secretary, Cane  Development and Sugar Industries submitted a report to the  Secretary, Cane Development and Sugar Industries, (for short  ’Secretary(Sugar)’) referring to the irregularities in the proposal  for supply of 85,000 quintals to first respondent and stating  that the six sugar mills would suffer a loss of more than  Rs.1.40 crores if they were required to sell molasses at the rate  of Rs.127/- per quintal to the first respondent.  The  Secretary(Sugar), by letter dated 08.04.2004  addressed to the  five sugar mills, stayed the operation of the letter dated  26.03.2004 issued by the Assistant Cane Commissioner  allotting 85,000 quintals of molasses to first respondent until  further orders.   10.     Being aggrieved, the first respondent filed W.P.(C)  No.318/2004 in the High Court praying inter alia to issue  directions to the appellants herein (the State Government,  Controller of Molasses, Molasses Sale Committee and the five  Sugar Mills) to continue the supply of molasses to him so that  the entire allotted quantity of 85,000 quintals could be lifted  on or before 31.05.2004.  It was alleged that the first  respondent had already taken delivery of 7465.9 quintals of  molasses, from three sugar mills at  Nadehi, Sitarganj, and  Doiwala and that he had also made all arrangements for  taking delivery of the balance stock. 11.  A Division Bench of the High Court, by interim order  dated 19.04.2004, directed the State Government to take a  decision on the claim of first respondent after giving hearing   within 10 days. Pending such decision, the High Court  permitted the first respondent to lift upto 20,000 quintals of  molasses.  The High Court also directed that the writ petition  be listed on 29.04.2004 for final hearing and disposal.     12.     By order dated 20.04.2004, the State Government  dissolved the earlier Molasses Sale Committee and in its place  reconstituted a fresh Molasses Sale Committee. The Secretary,  Sugar vide letter dated 20.04.2004 sought certain  information/clarifications from the first respondent as also  from  Patiala Distillers and  Chandigarh Distillers, and on  22.04.2004 afforded personal hearing to the Proprietor and  representative of first respondent  and representatives of  Patiala Distillers and Chandigarh Distillers.  Thereafter, on  due and proper consideration of the material on record, the  Secretary (Sugar), passed a detailed order dated 24.04.2004,   holding that there was no valid  contract for supply of  molasses to first respondent and therefore the allotment letter  dated 26.3.2004 was without any authority and consequently  cancelled the said allotment letter issued by the Assistant  Cane Commissioner allotting 85,000 quintals of molasses to  the first respondent. The findings on the basis of which he  cancelled the allotment letter dated 26.3.2004 are extracted  below :  "(i)    That as per notice published on 23.2.2004 in  Amar Ujala newspaper the tenders were invited  from bona fide consumers and it was a compulsory  condition to deposit Rs.1 lac earnest money with the  tender. In this regard M/s Vardan Linkers

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submitted its offer for 15000 quintals of molasses @  119 per quintal only for Nadehi Sugar Mills in its  tender. No rates were mentioned for remaining  sugar factories namely Gadarpur, Sitarganj, Kiccha,  Doiwala by M/s Vardan Linkers in its tender form.  Moreover, no Bank draft towards earnest money for  Rs.1 lac was submitted with tender form for Nadehi  Sugar Mills due to which the tender was defective  and was not acceptable.  

(ii)    That on 3.3.2004 on the date of negotiation  M/s Vardan Linkers has offered its negotiated rates  @ Rs.127 per quintal of molasses, only for Nadehi  Sugar Mills. The remark on the aforesaid  negotiation form given by the above firm that they  are ready to lift the molasses of other sugar  factories on this rate if their rates are approved by  the Committee, in that case they are ready to  deposit within one week. This condition is not  acceptable in accordance to law because the  conditional tenders are liable for cancellation. The  tender opening form dated 1.3.2004 and the  negotiation form dated 3.3.2004 contains the  signature of General Manager, Sugar Mills,  Gadarpur, Molasses Clerk, Sitarganj, Purchase  Clerk and Assistant Cane Commissioner. As such  the Purchase Clerk and Molasses Clerk were not the  members of the Committee and their participation  was not legal.  

(iii)   M/s Vardan Linkers has not offered its rates  for Gadarpur, Doiwala, Sitarganj, and Kichha Sugar  Mills nor  submitted bank drafts for earnest money  for Rs.1 lac for each sugar factories with the tender  on 1.3.2004 or 3.3.2004. Moreover, the General  Managers of these mills who were also the members  were not present in the Committee meeting on  1.3.2004 and 3.3.2004 so the sale of molasses of  these mills is not in accordance to the law.  

(iv)    The Assistant Cane Commissioner’s letter  dated 26.3.2004 which is originally written to M/s  Vardan Linkers, Bijnor contains the details of M/s  Patiala Distilleries and Manufactureres and M/s  Chandigarh Distillers to whom the molasses is sold  @ Rs.127 per quintal but M/s Vardan Linkers did  not disclose their names in its tender form.  Moreover, on 1.3.2004 at the time of tender  submission and on 3.3.2004 at the time of  negotiation there were no authorization letters in  favour of M/s Vardan Linkers of these two distillers  from which it is very clear that M/s Vardan Linkers  is not a bona fide purchaser.

(v)     That in condition no.9 of the tender form it is  clearly mentioned that no person will transport the  molasses in Uttaranchal and Uttar Pradesh and out  of these States without the prior permission of  Controller of Molasses M/s Vardan Linkers has  enclosed with its writ petition as Annexure No.1 and  2 which are the No Objection Certificate of Excise  and Taxation Commissioner, Patiala dated  16.3.2004 issued in favour of M/s Patiala Distiller  and Manufacturer and ’No Objection Certificate’  dated 12.3.2004 issued in favour of Chandigarh

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Distillers and Bottlers, from which it is clearly  evident that on 1.3.2004 on the date of submission  of tenders and on 3.3.2004 at the time of  negotiation they have no such certificate. No  document has been produced about the approval of  Controller of Molasses. From this it is clear that  even on compliance of this condition the tender was  not acceptable.    (vi)    From the information obtained from the sugar  mills it has been observed that the letter dated  26.3.2004 issued by Assistant Cane Commissioner  for sale of molasses in favour of M/s Vardan Linkers  was only submitted in the mills by the  representative during the period 6.4.2004 to  8.4.2004 of M/s Vardan Linkers and they lifted the  molasses during this period. During this period  another firm M/s Jagjit Industries, Kapurthala and  another firm M/s  Associated Alcohol and Breweries  Limited vide its fax letter dated 6.4.2004 offered its  rates @ Rs.250 and Rs.260 per quintal respectively  for molasses. The submission of alleged letter dated  26.3.2004 of Assistant Cane Commissioner issued a  letter in favour of M/s Vardan Linkers and its  submission and its submission by its representative  in the mills during the period 6.4.2004 to 8.4.2004  creates doubt and question mark, and by this act it  creates loss of Rs.1.40 crores to the mills of State of  Uttaranchal. As such it is reviewed.  

(vii)   The Assistant Cane Commissioner, Udham  Singh Nagar letter No.2345/C/Sheera/Rudrapur  dated 15.3.2004 issued to M/s Vardan Linkers for  sale of 5000 quintals of molasses of Nadehi Sugar  Mills contains the details of tender dated 1.3.2004  and subsequent negotiations dated 3.3.2004. As  such the Assistant Cane Commissioner would have  preferred fresh tenders for sale of molasses if it was  not considered for sale at that time.  

(viii)  From the facts available on file, it is observed  that one M/s Chandigarh Distillers is purchasing  molasses @ Rs.300/- per quintal from the Co- operative Sugar Mills of UP which were near to the  sugar mills of State of Uttaranchal. Moreover, the  private sector mills in the State of Uttaranchal, like  Laksar Uttam, Iqbalpur and Kashipur are sealing  the molasses @ Rs.330, Rs.320, Rs.320 and Rs.310  per quintal of molasses respectively. As such  without any valid contract with the mill of State of  Uttaranchal to sale the molasses @ Rs.127 per  quintal to M/s Vardan Linkers is against the rules.   

13.     Being aggrieved by the interim direction dated 19.4.2004  to supply 20,000 quintals of molasses to the first respondent,  the appellants approached this Court. When the special leave  petitions came up for hearing on 5.5.2004, this Court granted  leave and disposed of the appeals [CA Nos. 2984-86/2004] in  the following terms:  "By consent of the parties, the impugned order are  set aside.  The respondents are permitted to amend  their Writ Petition to challenge the Order dated 24th  April, 2004.  Reply, if any, including to this  amendment to be filed within two weeks from today.   The High Court is requested to dispose of the Writ

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Petition within a period of four weeks thereafter."

The first respondent thereafter made an application for  amendment of the pending writ petition, praying to challenge  the order of cancellation dated 24.4.2004. The High Court  allowed the application for amendment on 18.05.2004.  The  State of Uttaranchal and the Sugar Mills filed separate counter  affidavits, in opposition to the writ petitions setting out the  entire facts, and contended that there was no concluded  contract with the first respondent, for sale of 85,000 quintals  of molasses; and that the first respondent, in collusion with  certain officers (the Assistant Cane Commissioner and District  Magistrate, Udham Singh Nagar), had managed to secure  allotment of 85,000 quintals of molasses without any  authority.  14.     A Division Bench of the High Court heard the writ  petition and allowed it by judgment dated 28.07.2004.  The  High Court quashed the order dated 24.04.2004 passed by the  Secretary (Sugar) and directed that the first respondent "shall  be allowed to lift 85,000 quintals of molasses less the quantity  already lifted", in terms of letter dated 26.03.2004.  It also  extended the time for lifting the molasses by a period  equivalent to the number of days between 24.4.2004 and  31.5.2004, that is one month and seven days.  The correctness  and legality of the said judgment of the High Court is  Questions for consideration

15.     Ordinarily, the remedy available for a party complaining  of breach of contract lies for seeking damages. He will be  entitled to the relief of specific performance, if the contract is  capable of being specifically enforced in law. The remedies for  a breach of contract being purely in the realm of contract are  dealt with by Civil Courts. The public law remedy, by way of a  Writ Petition under Article 226 of the Constitution of India, is  not available to seek damages for breach of contract or specific  performance of contract. However, where the contractual  dispute has a public law element, the power of judicial review  under Article 226 of the Constitution of India may be invoked.  We may refer to a few decisions illustrating the position.  15.1)   In Divisional Forest Officer v. Bishwanath Tea  Co. Ltd. \026 (1981) 3 SCC 235, and State of Gujarat vs. M. P.  Shah Charitable Trust \026 (1994) 3 SCC 552, this Court  observed that a writ petition challenging the termination of an  arrangement which is said to be governed by a contract or  agreement between the parties is not maintainable since it was  a public law remedy, which was not available in private law  field where the matter is governed by a non-statutory contract.  

15.2) In Mahabir Auto Stores v. Indian Oil  Corporation \026  (1990) 3 SCC 752, this Court noticed the difference between  private law cases where the issue is the exercise of a ’right’ as  contrasted from public law cases where  the question related  to exercise of ’power’ : "Mr. Salve submitted that in private law field there  was no scope for applying the doctrine of  arbitrariness or mala fides. The validity of the action  of the parties have to be tested, it was urged on  behalf of the respondent, on the basis of "right" and  not "power". A plea of arbitrariness/mala fides as  being so gross cannot shift a matter falling in  private law field to public law field. According to Mr.  Salve to permit the same would result in anomalous  situation that whenever State is involved it would  always be public law field, this would mean all  redress against the State would fall in the writ

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jurisdiction and not in suits before civil courts.  

We are of the opinion that in all such cases whether  public law or private law rights are involved,  depends upon the facts and circumstances of the  case. The dichotomy between rights and remedies  cannot be obliterated by any strait-jacket formula. It  has to be examined in each particular case. Mr.  Salve sought to urge that there are certain cases  under Article 14 of arbitrary exercise of such  "power" and not cases of exercise of a "right" arising  either under a contract or under a statute. We are  of the opinion that that would depend upon the  factual matrix."  

15.3)    In Veriyamto Naveen v. Government of Andhra  Pradesh \026 (2001) 8 SCC 344, this Court observed :

"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 canceling 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."  

16.     Finding serious irregularities in the letter dated  26.3.2004 issued by the Assistant Cane Commissioner, which  directed supply of 85,000 quintals of molasses by five sugar  mills to two distilleries through first respondent at a very low  price, the Secretary (Sugar), on 8.4.2004, stayed the operation  of the said allotment letter.  The decision was challenged by  the first respondent in the writ petition by contending that the  allotment letter dated 26.3.2004 authorizing him to lift 85,000  quintals of molasses was in pursuance of a concluded contract  for sale of such molasses and therefore the decision of staying  the operation of the allotment letter was invalid and illegal.  The initial prayer in the writ petition was for a direction to  ’continue the supply of molasses so that entire allotted  quantity of 85,000 quintals of molasses could be lifted on or  before 31.5.2004’. As the order dated 8.4.2004 of the   Secretary (Sugar), staying the allotment letter was pending,  the High Court in the meantime issued an interim direction to  the State Government to hold inquiry in the matter after giving  hearing to the first respondent.  Accordingly, the Secretary  (Sugar), held an inquiry and passed a detailed order dated  24.4.2004 giving the instances of irregularities committed by  the Assistant Cane Commissioner and others and held that  there was no concluded or valid contract and that the  allotment letter dated 26.3.2004 was as a result of  collusion  between the first respondent and the Assistant Cane  Commissioner and the District Magistrate and, therefore,  cancelled the allotment letter dated 26.3.2004.  In other  words, the Secretary (Sugar), held that as there was no  contract at all, therefore, the Assistant Cane Commissioner  could not have issued a letter of allotment permitting the first  respondent to lift 85,000 quintals of molasses. When the said  order was passed, the first respondent amended the writ

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petition and included a prayer ’for quashing the order of  cancellation dated 24.4.2004’, contending that the  cancellation order was illegal and arbitrary. 17.     If the dispute was considered as purely one relating to  existence of an agreement, that is, whether there was a  concluded contract and whether the cancellation and  consequential non-supply amounted to breach of such  contract, the first respondent ought to have approached the  Civil Court for damages.  On the other hand, when a writ  petition was filed in regard to the said contractual dispute, the  issue was whether the Secretary (Sugar), had acted arbitrarily  or unreasonably, in staying the operation of the allotment  letter dated 26.3.2004 or subsequently cancelling the  allotment letter. In a civil suit, the emphasis is on the  contractual right. In a writ petition, the focus shifts to the  exercise of power by the authority, that is whether the order of  cancellation dated 24.4.2004 passed by the Secretary (Sugar),  was arbitrary or unreasonable.  The issue whether there was a  concluded contract and breach thereof becomes secondary. In  exercising writ jurisdiction, if the High Court found that the  exercise of power in passing an order of cancellation was not  arbitrary and unreasonable, it should normally desist from  giving any finding on disputed or complicated questions of fact  as to whether there was a contract, and relegate the petitioner  to the remedy of a civil suit. Even in cases where the High  Court finds that there is a valid contract, if the impugned  administrative action by which the contract is cancelled, is not  unreasonable or arbitrary, it should still refuse to interfere  with the same, leaving the aggrieved party to work out his  remedies in a Civil Court. In other words, when there is a  contractual dispute with a public law element, and a party  chooses the public law remedy by way of a writ petition  instead of a private law remedy of a suit, he will not get a full  fledged adjudication of his contractual rights, but only a  judicial review of the administrative action. The question  whether there was a contract and whether there was a breach  may, however, be examined incidentally while considering the  reasonableness of the administrative action. But where the  question whether there was a contract, is seriously disputed,  the High Court cannot assume that there was a valid contract  and on that basis, examine the validity of the administrative  action.  18.     In this case, the question that arose for consideration in  the writ petition was whether the order dated 24.4.2004  passed by the Secretary (Sugar), cancelling the allotment letter  dated 26.3.2004 was arbitrary and irrational or violative of any  administrative law principles. The question whether there was  a concluded contract or not, was only incidental to the  question as to whether cancellation order dated 24.4.2004 by  the Secretary (Sugar), was justified.  As the case involved  several disputed questions in regard to the existence of the  contract itself, the High Court ought to have referred the first  respondent to a Civil Court. But the High Court in exercise of  its writ jurisdiction, proceeded as if it was dealing with a pure  and simple civil suit relating to breach of contract.   When  certain disputed facts cropped up, the High Court adopted a  strange procedure of calling the General Managers of Sitarganj  Sugar Mills and Nadehi Sugar Mills and putting some  questions to them and recording their statements. The High  Court reached the conclusion that there was a concluded  contract between the five sugar mills and the first respondent  for sale of 85,000 quintal of molasses at a price of Rs.127/-  per quintal. Thereafter, it formulated the question for  consideration in the writ petition as ’whether the State  Government was competent to cancel the valid and completed

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contract’, and held that having regard to the doctrines of part  performance, legitimate expectation, estoppel and  acquiescence, the cancellation of the allotment letter dated  26.3.2004 issued by the Assistant Cane Commissioner was  unsustainable and the first respondent was entitled to lift the  entire quantity of 85,000 quintal (less 7,465.9 quintal already  lifted), and he was also entitled to extension of time for taking  delivery by one month and seven days from the date of the  judgment.  In this view of the matter, two questions arise for  our consideration. They are : (i)     Whether the High Court was right in  concluding/assuming that there was a valid contract? (ii)   Whether the High Court was justified in quashing the  cancellation order dated 24.4.2004 passed by Secretary,  (Sugar)?

Re:  Question (i) 19.     Before a court can record a finding as to whether there is  a contract, it has to find out who are the parties to the  contract, when and what was the offer, whether there was an  acceptance, and whether the offer and acceptance were valid.  None of these were addressed nor answered by the High Court.  20.     We extract below the averments made in the writ petition  to contend that there is a concluded contract : "That aforesaid tenders were opened on 1.3.2004 at  the office of Assistant Cane Commissioner, Udham  Singh Nagar. The Assistant Cane Commissioner  also happens to be the Secretary of the Committee.  

That subsequently thereafter all the prospective  allottees (who had submitted their tenders) were  invited by the Committee and tenders were opened  and in an open meeting, the bidders were asked to  increase the bids and negotiations took place and  petitioner being highest as Rs.127 per quintal was  accepted.  

That at this junction, the deponent has been  advised to state that once the bid of the petitioner  was accepted by the authorized Committee for a  certain price which was Rs.127 per quintal, it  amounts to valid contract as it has all the  ingredients of a valid contract, namely, offer,  acceptance and consideration."  

Thus, the case of first respondent is that there was a  concluded contract - that is acceptance of his offer on  3.3.2004, when the negotiations took place.  But in paras 17  and 19 of the writ petition, the first respondent alleged that  the contract was concluded when the letter dated 26.3.2004  was issued by the Assistant Cane Commissioner permitting  him to lift 85,000 quintals of molasses and the said letter  dated 26.3.2004 was a ’agreement’ between the parties. This  ambiguity as to whether the contract came into existence on  3.3.2004 or 26.3.2004 was not even referred to by the High  Court in the impugned order.   21.     Let us next examine as to who was the purchaser. The  tender notice made it clear that only bona fide consumers  (that is, actual users) could make the offer. Admittedly, the  first respondent did not have a distillery or manufacturing  unit and was not a ’consumer’ of molasses. He was a transport  contractor. Even the allotment letter dated 26.3.2004 shows  that the first respondent was not the ’consumer - purchaser’.  Therefore, first respondent could not be the purchaser. Let us  consider whether Patiala Distillers and Chandigarh Distillers,

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who were shown as the persons who will take deliveries in the  letter dated 26.3.2004, were the purchasers. They did not  make any offer. Nor was any offer made on their behalf. There  was no acceptance addressed to them. There was no  agreement or contract with them. They did not seek delivery  nor did they join the first respondent as petitioners in the writ  petition. They were not therefore the ’purchasers’.  If neither  first respondent, nor Patiala Distillers/Chandigarh Distillers  could be the purchaser, who was the bona fide consumer who  could claim performance?  The question remains unanswered. 22.     The tenders were invited for sale of molasses by five  independent sugar mills.  The tenderers were required to pay  Rs.1,00,000/- as earnest money, in respect of each sugar mill  from which the tenderer intended to purchase molasses.  The  five sugar mills were different legal entities. Two of them were  Government companies incorporated under the Companies Act  and the remaining three were independent co-operative sugar  mills. The tender notice and the tender documents would  make it clear that though the tender notice was common, the  tenderers were required to make separate offers in regard to  molasses to be purchased from each sugar mill showing the  quantity which they wanted to purchase from each sugar mill  and the price which they were willing to pay and also to pay  separate earnest money deposit. The first respondent did not  make any offer except in the case of Nadehi Sugar Mill, even  that was not accompanied by the earnest money deposit. He  claims to have made an endorsement in the tender form on  3.3.2004, that if his rate was accepted, he was ready to lift the  entire quantity of molasses from the five factories. But neither  the original offer nor the alleged extension of the offer on  3.3.2004 was accompanied by any earnest money deposit.  There was therefore no valid offer as on 3.3.2004. Nor was  there any acceptance by the Molasses Sales Committee or any  of the sugar mills on 3.3.2004. There was also no acceptance  even by the three Members of the Molasses Sales Committee  on 3.3.2004. This is evident from the fact that after the  negotiations meeting, a report was submitted by the Three  Members of the Committee to the Chairman referring to the  offer of first respondent seeking his approval for their proposal  to sell the molasses of the other Mills to the first respondent.   Therefore, it could not be said that there was a concluded or  binding contract for sale or supply of molasses by any of the  five mills on 3.3.2004.  23.     It is admitted that the first respondent did not make any  offer in the prescribed form of tender in regard to the molasses  of the other four mills (Gadarpur, Doiwala, Sitarganj and  Kitcha).  On 3.3.2004 when negotiations were held between  the first respondent and three members of the Committee, the  first respondent appears to have expressed his interest to  purchase the molasses of all the mills at a price of Rs.127/-  per quintal and made an endorsement to that effect in his  tender form. First respondent claims to have paid  Rs.4,00,000/- as earnest money deposit in respect of four  mills under cover of letter dated 10.3.2004. But thereafter  there was no meeting of the Molasses Sales Committee nor  any acceptance of first respondent’s offer. Neither the act of  putting up a proposal by the Assistant Cane Commissioner or  the District Magistrate for consideration by the Chairman of  the Molasses Sales Committee nor the alleged approval of the  recommendation for sale by the Chairman of the Molasses  Sales Committee will lead to a binding contract as there was  no decision by Molasses Sales Committee to accept the offer.  Therefore, on this count as well, there was no concluded  contract.  24.     In this case, the first allotment by the Assistant Cane

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Commissioner was on 15.3.2004 permitting the first  respondent to lift 5000 quintals from Nadehi Mills at Rs.127/-  per quintals.  This was wholly illegal as it was not in  pursuance of any concluded contract and as first respondent  was not a bona fide consumer. The first respondent submitted  the authorization letter from the Patiala Distillers and the  Chandigarh Distillers only on 14.3.2004.  If there was already  a concluded contract with the first respondent on 3.3.2004,  there could not have been any change in the contract by  submitting an authorization letter from Patiala Distillers and  Chandigarh Distillers on 14.3.2004.  There was also no  correspondence or negotiations subsequent to 3.3.2004 to  show that any contract was concluded in favour of Patiala  Distillers or Chandigarh Distillers.  Therefore, when the letter  dated 26.3.2004 was issued by the Assistant Cane  Commissioner authorizing the first respondent to lift 85,000  quintals of molasses it was not in pursuance of any concluded  contract but was unilateral unauthorized act on the part of the  Assistant Cane Commissioner which would not bind the State  Government.   25.     The tender notice clearly specified that only bona fide  consumers could make an offer.  In his tender, the first  respondent claimed that he was making an offer as a bona fide  consumer, that is, as an actual user of molasses.  The tender  did not mention that he was making the offer as an agent of  other consumers nor did he disclose the names of any  consumers on whose behalf he was making the offer.  He  merely made a vague and sweeping statement that he will lift  molasses in favour of distilleries of U.P., Punjab and Haryana.   This showed that he was not acting for any specific principal.  Further having regard to the requirement that sale will be only  to bona fide consumers, the offer ought to have disclosed the  names of the Principal and his authority to make the offer on  their behalf, if he was making an offer on behalf of anyone  else. Further, the required Certificate from the Excise  Commissioner/Controller of Sugar that the purchaser was a  bona fide consumer, ought to have been enclosed.  For all  these reasons, therefore, there could not be any valid contract  with first respondent. 26.     The order dated 25.3.2003 constituting the Molasses  Sales Committee made it clear that molasses could be sold  only by the said Committee.  This meant that the Molasses  Sales Committee would identify and decide upon the  purchaser, as also the terms of sales including the price. But  the Molasses Sales Committee by itself was not the seller but  only the authority entrusted with the task of finalizing the  sales and the seller were the sugar mills themselves.  The  Committee consisted of nine members with Commissioner of  Kumaon Mandal as Chairman, the District Magistrate, Udham  Singh Nagar and the General Managers of the six sugar mills  as members and the Assistant Cane Commissioner, Udham  Singh Nagar, as the Member-Secretary. Admittedly, the nine  members of the Committee were not present either on  1.3.2004 when the tenders were opened or on 3.3.2004 when  the alleged negotiations were held. The tenders were opened  on 1.3.2004 by the Assistant Cane Commissioner, who was  the Secretary of the Committee. No meeting of the Committee  had been called on 3.3.2004. The persons who were present in  the alleged negotiation meeting were the District Magistrate,  Udham Singh Nagar and only the General Manager of  Godarpur Sugar Mills, apart from the Member-Secretary. The  Chief Accountant of Sitarganj Sugar Mills who was present  ,cannot be considered to be a member of the Committee. The  General Managers of other four mills were not present nor was  the Chairman of the Committee present. Three members did

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not constitute the quorum for the Committee. Nor did the  Committee authorize three members to finalise the sale of  molasses. It cannot therefore, be said that the negotiations  held on 3.3.2004 were held by the Molasses Sales Committee  or authorized members of the said Committee. In fact, the  Molasses Sales Committee never considered the offer of first  respondent, nor accepted its offer.  27.     The communication dated 26.3.2004 from the Assistant  Cane Commissioner to the first respondent whereby and  whereunder the first respondent was permitted  to lift 85,000  quintals of molasses from the five sugar mills, did not refer to  any decision by the Molasses Sales Committee to sell molasses  to the first respondent. It referred only to the negotiations held  on 3.3.2004 and stated that "on the approval of  Commissioner, Kumaon Mandal", first respondent was  permitted to lift 85,000 quintals of molasses. The  Commissioner, Kumaon Mandal was not the authority  empowered to effect the sale of molasses.  In the absence of  any contract under which the five sugar mills agreed to sell  85,000 quintals in all to the first respondent at a price of  Rs.127 per quintal, the question of Assistant Cane  Commissioner permitting the first respondent to lift 85,000  quintals of molasses did not arise.  The letter dated 26.3.2004  sent by Assistant Cane Commissioner cannot therefore, be  considered to be a contract for supply of 85,000 quintals of  molasses to the first respondent.  28.     Thus, there was no material before the High Court to  assume or come to the conclusion that there was a concluded  contract for supply of 85,000 quintals of molasses.               Re : Question (ii) :

29.     Let us now examine whether the Secretary (Sugar), was  justified in issuing the order dated 24.4.2004 cancelling the  order dated 26.3.2004 and whether the High Court was  justified in questioning the order of the Secretary (Sugar).    The order dated 24.4.2004, passed by the Secretary (Sugar)  holding that the first respondent did not have any valid  contract for supply of molasses and it had no right to enforce  the letter dated 26.3.2004 issued by the Assistant Cane  Commissioner was perfectly valid and justified. We have  already held that the decision of the Secretary, Sugar that  there was no concluded contract for sale of any molasses in  favour of first respondent or his nominee is correct and does  not suffer from any infirmity or perversity. 30.     The first respondent does not dispute that 70% of the  molasses were earmarked for supply to distilleries and  chemical factories in the State of Uttaranchal and 10% for  manufacturers of country-liquor in the State and only 20%  was earmarked for use by bona fide consumers, that is  distilleries and chemical factories outside the State. Obviously,  the price fore sale to each category would be different. The  price at which 70% is sold to the distilleries and chemical  factories within the State will normally be less than the price  at which 20% is sold to distilleries or chemical factories  outside the State. The tenders were invited in regard to the  quota earmarked for bona fide consumers where distilleries  and chemical factories outside the State could participate. In  spite of it, the District Magistrate, Udham Singh Nagar,  prepared a note for the attention of the Chairman of the  Committee wherein he referred to the price of Rs.117/- per  quintal at which molasses were being sold to IGL which was a  distillery within the State covered by 70% local quota, to  justify the sale of molasses to the first respondent under 20%  outside quota though it was not a bona fide consumer at a  price of RS.127/-  per quintal. The note neither mentioned the

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fact of the quantities to be sold nor the fact that the first  respondent had not produced any certificate either from the  Cane Commissioner or from the Excise Department to show  that it was a bona fide consumer of molasses.  31.     The tender notice made it clear that only bona fide  consumers of molasses could make offers. The first  respondent is a proprietary concern carrying on transport  business at Bijnor in the State of Uttar Pradesh but the tender  was submitted by the first respondent in the name and style of   "Vardan Linkers, Bijnor being bona fide consumer registered  industrial unit."  The note added at the end of the tender  stated that "we shall lift molasses in favour of distillery of UP,  Punjab and Haryana". If first respondent was to lift the  molasses for other units, it was admittedly not a bona fide  consumer.  Only on 14.3.2004, the first respondent produced  authorization letters showing him as authorized agent of  Patiala Distillers and Manufacturers Ltd., Patiala and  Chandigarh Distillers and Bottlers Ltd., Patiala. On the basis  of those letters, the first respondent requested for delivery of  45000 quintals (that is 15000 quintals each from Nadehi,  Gadarpur and Doiwala Sugar Mills) to Patiala Distillers and  40,000 quintals (15,000 quintals from Sitarganj Mills and  25,000 quintals from Kiccha Mills) to Chandigarh Distillers.  Though the tender was opened on 1.3.2004, the first  respondent did not disclose till 14.3.2004 that he was  submitting the tender on behalf of the above said two distillers  in the State of Punjab. Thus, it was clear that the offer was  made not by first respondent as a bona fide consumer but as a  non-consumer trader. Therefore, there was no valid offer at all  by the first respondent. The Assistant Cane Commissioner was  fully aware that first respondent was not a bona fide  consumer, he was also aware of the prevailing sale prices in  regard to molasses to be sold to bona fide consumers outside  the State at much higher prices than what was offered by first  respondent, and also of the fact that the price for the sale of  molasses to consumers within the State was much less than  the rate for sale of molasses to bona fide consumers outside  the State, he proceeded to negotiate with the first respondent  taking only one more member (District Magistrate) into  confidence. The manner in which the entire matter was  proceeded with, showed collusion between the first respondent  on one hand and the District Magistrate, Udham Singh Nagar  and the Assistant Cane Commissioner, Udham Singh Nagar on  the other hand, to dispose of large quantities of valuable  molasses at a throw-away price without proper negotiations  and without valid authority from the Molasses Sales  Committee to a party who was not entitled to purchase  molasses as a bona fide purchaser.  32.     The various serious irregularities were noticed by the  Secretary (Sugar) in his detailed and reasoned order dated  24.4.2004 and resultantly, he directed cancellation of the  letter dated 26.3.2004 issued by the Assistant Cane  Commissioner which permitted the first respondent to lift  85,000 quintal of molasses from five mills. He also held that  there was no valid contract. In the facts and circumstances,  narrated hereinabove,  it is not legally possible to hold that the  order dated 24.4.2004 was either arbitrary or unreasonable or  mala fide. It was fully justified and in public interest. If the  order dated 24.4.2004 did not suffer from an infirmity which  required correction by application of principles of  Administrative Law, the High Court ought not to have  interfered with it. There was, apparently, no justification for  invoking the principles of legitimate expectations, estoppel,  acquiescence and principle of part performance to make out a  contract, where none existed or to give directions to five

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independent sugar mills to supply huge quantifies of molasses  to first respondent without any contract at an admittedly low  price of Rs.127/- per quintal  33.     We, therefore, allow these appeals and set aside the  judgment dated 28.7.2007 passed by the High Court of  Uttaranchal in WP No.318(N/B) of 2004 and dismiss the writ  petition. We direct the first respondent to pay costs of  Rs.10,000/- in each appeal (in all Rs.30,000/-) to the  appellants.  34.     This Court, by interim orders dated 23.8.2004 and  10.9.2004, had permitted the first respondent to lift in all  15,000 quintals of molasses from Nadehi Mills. Though the  first respondent is not entitled to it, not being a bona fide  consumer, if the supplies have already been effected and paid  for, the issue of supply to that extent may be treated as closed.