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PETITIONER: MAHABIR AUTO STORES & ORS.

       Vs.

RESPONDENT: INDIAN OIL CORPORATION & ORS.

DATE OF JUDGMENT06/03/1990

BENCH: MUKHARJI, SABYASACHI (CJ) BENCH: MUKHARJI, SABYASACHI (CJ) RAY, B.C. (J)

CITATION:  1990 AIR 1031            1990 SCR  (1) 818  1990 SCC  (3) 752        JT 1990 (1)   363  1990 SCALE  (1)410  CITATOR INFO :  F          1991 SC 537  (32,48)  D          1991 SC 818  (18)

ACT:     Constitution of India 1950--Article 14, 32, 226 and  298 --State  organ--Action  of  entering or  not  entering  into contracts with individual parties--Whether can be questioned in writ jurisdiction.

HEADNOTE:     The appellant-firm had been carrying on the business  of distribution  and sale of all kinds of  lubricants  received from the respondent, a statutory corporation, since 1965. It is the case of the appellant that it acted as Lube distribu- tor of the respondent corporation and that it had been given the  Customer No. during the course of business. The  appel- lant  claimed that from Feb. 1965 to 27th May, 1983, it  had received  and uplifted the supply of  lubricants/goods  each year and the total quantity, of lubricants/goods thus lifted had  gone upto the extent of 1,11,34854 litres or  kgs.  The respondent suddenly stopped the supply of lubricants to  the appellant-firm on 27.5.1983. The appellant-firm made several representations  to  the respondent  against  the  aforesaid action of the respondent but to no use. The appellant there- upon  filed a writ petition in the High Court praying for  a writ  of  mandamns directing the respondent to  desist  from denying or discontinuing the supply of lubricants and there- by  save the appellant from being ousted from the  business; claim for damages from the date the supply was  discontinued was also made.     Before  the High Court, it was inter alia  contended  by the appellant that the correspondent that passed between the appellant and respondent and the invoices issued during  the long years of business would show that the respondent always treated  the appellant as its agent and distributor;  sudden stoppage  of supply violated the principles of natural  jus- tice.  It therefore sought the specific performance  of  the alleged  contract.  The respondent on the other  hand  ques- tioned  the maintainability of the petition as according  to it  the  respondent was not  ’State’ within the  meaning  of Art.  12 of the Constitution. It further averred that  there

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was no concluded contract by the respondent with the  appel- lant and that the work continued under an adhoc arrangement; that  the  policies of the respondent were governed  by  the guidelines/directions issued to it from time to time by  the Ministry of 819 Petroleum  whereunder  it  was no longer  possible  to  give further supplies to the appellant firm.     After considering the rival contentions advanced by  the parties  the  High Court, dismissed the writ  petition.  The appellant has filed this appeal with special leave. Allowing  and disposing of the appeal with directions,  this Court,     HELD: Every action of the State or of an instrumentality of  the  State in exercise of its executive power,  must  be informed by reason. In appropriate cases, actions uninformed by  reason  may be questioned as  arbitrary  in  proceedings under Article 226 or Article 32 of the Constitution. [826D]     The  respondent-company  Indian Oil  Corporation  is  an organ of the ’State’ or an ’instrumentality of the State’ as contemplated under Article 12 of the Constitution. [826F]     The State acts in its executive power under Article  298 of the Constitution in entering or not entering in contracts with  individual  parties. Article 14  of  the  Constitution would be applicable to those exercises of power.  Therefore, the  action  of  the State organ under  Article  14  can  be checked. [826F]     Rule  of reason and rule against arbitrariness and  dis- crimination, rules of fair play and natural justice are part of  the  rule of law applicable in situation  or  action  by State  instrumentality in dealing with citizens in a  situa- tion like as in the instant case. Even though the rights  of the  citizens are in the nature of contractual  rights,  the manner,  the method and motive of a decision of entering  or not entering into a contract, are subject to judicial review on  the  touchstone of relevance, and  reasonableness,  fair play natural justice, equality and non-discrimination in the type of the transactions and nature of the dealing as in the instant case. [827E-F]     The  dichotomy  between rights and  remedies  cannot  be obliterated  by  any straight jacket formule. It has  to  be examined in each particular case. [829D]     Decision of the State/Public authority under Article 298 of  the Constitution, is an administrative decision and  can be impeached on the ground that the decision is arbitrary or violative of Article 14 of the 820 Constitution  or on any of the grounds available  in  public law  field. It appears to us that in respect of  Corporation like  Indian  Oil  Corporation when  without  informing  the parties  concerned, as in the case of the appellant firm  on alleged change of policy and on that basis action to seek to bring  to  an end the course of transaction  over  18  years involving  large amounts of money is not fair action,  espe- cially  in view of the monopolistic nature of the  power  of the respondent in this field. [829F-G]     E.P.  Royappa v. State of Tamil Nadu and Anr., [1974]  4 SCC  3; Maneka Gandhi v. Union of India and Anr.,  [1978]  1 SCC 248; Ajay Nasia and Ors. v. Khalid Mujib Sehravardi  and Ors., [1981] 1 SCC 722; A.D. Shetty v. International Airport Authority  of India and Ors., [1979] 3 SCC 1  and  Dwarkadas Mariatia  and Ors. v. Board of Trustees of the Port of  Bom- bay, [1989] 3 SCC 293, referred to.

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JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 1350  of 1990.     From  the  Judgment and Order dated 9.2. 1989  of  Delhi High Court in C.W. No. 1904 of 1983.     Dr. L.M. Singhvi, Dr. A.M. Singvi and D. Bhandari (N.P.) for the Appellants.     Harish N. Salve, Mrs. P. Shroff and S.A. Shroff for  the Respondent. The Judgment of the Court was delivered by     SABYASACHI  MUKHARJI, CJ. Having heard counsel  for  the parties  and having considered the facts, circumstances  and the contentions involved herein, we grant special leave  and dispose of the appeal by judgment herein.     This appeal arises out of the judgment and order of  the High Court of Delhi dated 9th February, 1989. Appellant  No. 1  is a partnership firm. The other four appellants are  the partners  of  the  said firm. The respondent  is  a  company incorporated  under the Indian Companies Act, 1956 and  hav- ing, inter alia, one of its regional offices at Janpath, New Delhi.  The  appellants sought in the  Writ  Petition  filed under Article 226 of the Constitution before the High  Court a  writ of mandamus against the respondent directing  it  to desist from denying or 821 discontinuing  the supply of all kinds of lubricants to  the appellant No. 1 and from ousting, black-listing, coercing or pressurising the appellant No. 1 from the business of  deal- ing with all kinds of lubricants supplied by the  respondent company  to  have  and to continue to supply  all  kinds  of lubricants to the appellant firm as was done in the past and for the maintenance of status quo existing on the 27th  May, 1953  and  for payment of necessary damages for  the  period from 28th May, 1983 till the date of the filing of the  writ petition  before the High Court or till the decision of  the writ petition.     The appellant No. 1, herein referred to as the firm,  is a  partnership  firm duly registered with the  Registrar  of Firms, Delhi. The said firm had been carrying on the distri- bution  and sale of all kinds of lubricants and  was  regis- tered  under Sales Tax Act vide Registration no. 1636  dated 22nd October, 195 1 and has a goodwill of its own, according to  the  said appellants, in the entire region  of  Northern India  with expertise and knowledge in the distribution  and sale of all kinds of lubricants. The appellants contend that in the past 32 years the appellant firm had acquired a  very good  reputation  and has earned enviable  goodwill  in  the trade.     As  stated  hereinbefore, the respondent  company  is  a statutory body incorporated under the Indian Companies  Act, 1956  and  have been dealing throughout with  the  appellant firm  since  1965  when the firm became,  according  to  the appellants,  its distributor. The appellants claim that  the said  firm  had been appointed as Lube Distributor  and  the appellant  firm have been given the Permanent Customer  Code No.  63-01-3115-1022-9-X,  according to the  appellant.  The appellants  contend that this was done in due course. It  is the further case of the appellants that the lubricants  were released  by  the respondent company to the  said  appellant firm on 25th January, 1965 by Invoice No. 146668 and  there- after the firm had promoted the sales of the products of the company successfully inasmuch as from February, 1965 to 27th May,  1983 and the firm had received and uplifted the supply of  lubricants/goods  each year and the  total  quantity  of

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lubricants/goods such lifted had gone up to the extent of 1, 11,34,854  litres  or kgs. The appellants claimed  that  the said firm is one of the respondent company’s Lube  Distribu- tor  in  Northern India. It was the case of  the  appellants before  the High Court and also before this Court  that  the said firm had been carrying on business as the Lube distrib- utor  of  the respondent company and had  been  selling  all kinds  of  lubricants. The appellants contend that  the  re- spondent  company had recognised the appellant  firm  during all  this period as authorised dealer and a distributor  and an agent. 822     It was the case of the appellants before the High  Court and  they  had tried to demonstrate with  reference  to  the various  documents,  annexures etc. filed by them  that  the firm  had been always carrying business as Lube  Distributor of  the  Company, and has been selling all kinds  of  lubri- cants. The appellants further contended that the Company had recognised  the  firm during all this period  as  authorised dealer, distributor and agent. Certain letters were  written by  the company directing various customers to  contact  the firm as an authorised Lube Distributor. This contention  was stated  before  the High Court as well as before us.  It  iS stated  that annexures A-2 to A- 14 were copies  of  letters written  by the company directing various customers to  con- tact  the firm as an authorised Lube  Distributor.  Annexure A-15  is  an advertisement issued in a  specially  published souvenir  on the occasion of All India Highway  Motor  Rally held in 1972 sponsored by the Company in which the firm  was referred  to as the Company’s authorised  Lube  Distributor. Annexures A- 16 to A-35 are copies of the letters written by the Company to the appellants in relation to the dealing  of the appellants as Lube Distributor. There are several  other documents  on  which reliance was placed on  behalf  of  the appellants.  The firm was treated as authorised  dealer  and agent of the respondentcompany. It was contended that  there was  a change of policy by the respondent company, and  cer- tain documents of the year 1972 were relied upon to indicate that the supply of lubricants was stopped to those  Associa- tions  and Dealers to whom ad hoc supplies were  given,  who were merely re-sellers, traders and who did not have written contracts with the Company. That was the case of the  appel- lant’s  firm.  However, the appellants  asserted,  that  the supply  was continued to the appellant firm being  a  dealer and  distributor  of  the Company. Reliance  was  placed  on Annexures  P-28  to P-34 which are the  Product  Indent-cum- Delivery Orders for various periods issued by the Company to the  firm.  It is stated that in the  said  Product  Indent- cumDelivery  Order there was a note indicating  "For  Condi- tions  of Supply Please Turnover  .....  ". However, in  the copies  filed  with the rejoinder affidavit,  there  are  no terms on the reverse side of the Product Indent-cum-Delivery Order.  Although  the  firm has  been  receiving  continuous supply  of  lubricants  from the Company,  it  was  suddenly stopped  on 27th May, 1983 by the Company, and it  was  con- tended  that  such an action of the Company  will  have  the effect  of  black-listing  the firm  and  is  arbitrary  and against the principles of natural justice besides being  hit by the doctrine of promissory estoppel. The appellant  firm, it  was  contended,  had made  representations  against  the aforesaid action of the respondent company but to no use. In that  background the reliefs mentioned  here-in-before  were sought from the High Court 823 in the application filed under article 226 of the  Constitu-

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tion.     The respondent-company had raised various objections  to the  maintainability  of the Writ  Petition,  namely,  inter alia,  that the Company was not State within the meaning  of Article 12 of the Constitution as the Company is  registered under  the  Companies Act, 1956, the Writ Petition  was  not maintainable as no writ to enforce alleged supply, according to  the respondent company, was maintainable and the  appro- priate  remedy for the appellants was to claim  damages  for breach  of  contract or relief for specific  performance  of contract,  if any. It was submitted, further, that the  firm had not any contract and was seeking to rely on an irregular course  of  conduct and on an ad hoc arrangement  which  the company  cannot perpetuate in view of the prevailing  guide- lines and/or directions received from the Ministry of Energy in  the Department of Petroleum. Where in fact there was  an actual written agreement the Company’s contractual relation- ship  with its distributors was also capable of  termination forthwith  and  was only subject to the  normal  contractual laws and decisions in the realm of contract could not be the subject  matter  of  proceedings under article  226  of  the Constitution, it was submitted. The appellants case, it  was urged by the responde it-company, was at much lower footing. The  Company  however  deaied that the firm  had  even  been black-listed  and  it  had never acted in a  mala  fide,  or capricious  or  arbitrary manner or on  any  extraneous,  or oblique  or irrelevant consideration. There was  no  commit- ment, it was suggested, to supply a fixed quantity  regular- ly, made to the appellant firm at any stage.     It appears that the procedure adopted for the supply  of lube oil products was that the party requiring supply  would write  a  letter to the Company  ’whereupon  the  Divisional Office  through the Lube section would process the same  and would intimate as to how much supply was possible. Thereupon the  requisition  slip  would be processed  and  a  delivery challan/order  would  be  made out. The  conditions  of  the Proluct Indent-cum-Delivery Order, inter alia, categorically provided  that "IOC also reserves the right to  cancel  your order  without any intimation or assigning any  reason".  It further  provided that "IOC took no responsibility  of  des- patches/releases  of stocks shall be on the basis of  avail- ability of stocks." There was no other contract in the facts and  circumstances  of the case, it was urged.  The  letters making  the  requisitions, the  Product  Indent-cum-Delivery Orders,  the Delivery Challans as also the payment  are  the only  documents  constituting the  dealing  or  transactions between the parties. The Company had categorically  reserved its right to refuse and/or cancel the orders with- 824 out  any intimation or assigning any reason and it was  per- fectly within its fight to discontinue the said arrangement. Several obligations have been provided under the arrangement including,  inter alia, price controls, minimum off-take  of stocks,  safeguards  against  contamination,  fight  to  the inspection and/or unrestricted access, right of account etc. It was asserted’ that even under the contractual transaction as  entered  into with the Associated Trading  Company,  the respondent  company had fight of termination  forthwith  for any  reason whatsoever and the Company’s fight to  terminate was  not lettered by the doctrine of reasonableness or  doc- trine  of  natural  justice and rights of  hearing  etc.  as sought to be put forward on behalf of the appellants. It is, therefore,  suggested that what was not  even  contractually recognised should not be artifically given higher status, in the  facts and circumstances of the case, as the  appellants

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were  seeking  to  invoke the fight flowing  from  an  utter irregularity specially when the company had been made publi- cally  accountable especially when the Company does not  act unless  through a written contract as also when only  autho- rised.     It  was  further  the case of the  respondent  that  the company  was subjected to distribution policies  and  guide- lines  of  the Department of Petroleum in  the  Ministry  of Energy,  Government  of India. They are also  bound  by  the directives to the effect that lubricants are to be sold only to consumers, to those parties who will not sell directly or indirectly to foreign oil companies and no sale should  take place to old agents or distributor of foreign oil companies. All sales of lubricants must take place to actual  consumers or to such small parties who will sell actually to consumers and  not to foreign oil company. Besides this, the  Ministry of Energy by the letter beating reference No.  P-17011/7/82- SUP  dated 21st December, 1982 under policy number  201  had communicated  to all oil companies that no  new  distributor was to be appointed for distribution of lubricating oils and there  is a ban on such appointments. In the facts  and  the circumstances  of the case the Company was, thus,  according to      the      respondent,      prevented      by      the directive/instruction/guidelines  of the Ministry of  Energy to appoint new dealers and distributors or to formalise  any agreement constituting the dealership or distributorship. In fact,  right since 1972, 24 parties who had ad hoc  arrange- ment of supply of lube oils were discontinued, according  to the respondent. There was no assurance, whatsoever, nor  any promise  nor any contract or nor any prescribed schedule  to supply any quantity of lubricants, as alleged, to the appel- lant  or  to anybody else. It was further  asserted  in  the present  case  that  in view of the ban  imposed,  no  fresh distributors could be appointed nor the oil companies empow- ered to regularise and contract afresh for 825 dealers/distributors  in lubricant oils. It was further  the case  of  the respondent that the customer  code  number  is given to authorised distributors/dealers only. The  position was explained that the mode and manner of computerisation of accounts  set  out  in Annexure P-25 and  the  allotment  of customer code number is only for the purpose of  identifica- tion and not for any other purpose nor to designate the firm as  an authorised Lube distributor. The Company  had  denied that  the  Code 01 was allotted only  to  dealers/agents  as alleged. The Code 01 was applicable to all re-sellers, where a  further  sale is a necessary concommitment of  the  first sale. Certain particulars were given how 01 is given and  it was  stated in the case of four parties the partnership  was terminated because of the new policy.     The High Court after exhaustively dealing with the rival contentions came to the conclusion that viewed from  diverse angles,  the appellants had sought the specific  performance of certain alleged contract. It was also held that the  said alleged  contract  was  neither precise,  nor  definite  nor certain  nor was capable of being made certain. It  was  not certain,  in this case, as to how much goods  were  required and for how long were these required and at what  considera- tion, these were all uncertain and vague, it was  submitted. It  was held by the High Court that for a Writ  of  mandamus the  appellants  should have a legal right  to  enforce  the performance  of alleged duty by the respondent and since  no right  was shown to exist by the appellants for selling  the continuous supply of the lubricants whatsoever  indefinitely for  future and no corresponding legal duty was  imposed  on

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the  respondent  to  supply, the Writ of  mandamus  was  not maintainable.  In those circumstances the  Writ  Application was dismissed as not maintainable.     Aggrieved  thereby the appellants have come up  to  this Court, as mentioned hereinbefore.     We  have heard learned counsel Dr. L.M. Singhvi as  well as Mr. Salve exhaustively. Further affidavits were filed and documents  produced before us. It was sought to be urged  by Dr.  Singhvi that the respondent was an  instrumentality  of State  and  as  such the question involved  was  whether  an instrumentality  of State can suddenly, arbitrarily,  unrea- sonably, without any relevant factors and without any notice and  determination or proceeding stop supplies  of  products which, according to him, had been supplied more than-1 crore 11 lacs litres/kg of product continuously and uninterrupted- ly over a period of more than 18 years. Dr. Singhvi suggest- ed  that the respondent IOC is an instrumentality  of  State under Article 12 of the Constitution. From 826 the nature of the business carried on by the appellants,  it was manifest to us that the supply of the lubricants of  the type  with  which the respondent had a  monopoly,  could  be carried  on by the appellants only as the supplier from  the reSpondent.That  business  was not possible  otherwise.  The respondent  had  monopoly in that respect.  This  aspect  is important.  The respondent firm was supplying from  1965  to 1983 large quantities of lubricant oil and from 1983 onwards till  1989 supplies were continued on the interim  order  of the  High Court of Delhi. Supplies were stopped suddenly  on 27th  May, 1983. There is no dispute that no intimation  was given, no notice was given, no query or clarification sought for and there was no adjudication as such. It was held  that the appellant firm was not entitled to supply, the  stoppage of  supply  in May 1983 was, therefore, bad.  The  appellant further  contended that the case of  the  respondent-company IOC  was never made known or revealed prior to  the  Counter Affidavit  in the High Court of the appellants. The  conten- tion  urged  on behalf of the appellants was  that  this  is patent violation of all canons of natural justice, fair play and reasonableness. It is submitted that natural justice and reasonableness of the procedure are enshrined under  Article 14 of the Constitution.     It is well settled that every action of the State or  an instrumentality  of the State in exercise of  its  executive power,  must  be informed by reason. In  appropriate  cases, actions uninformed by reason may be questioned as  arbitrary in  proceedings under Article 226 or Article 32 of the  Con- stitution. Reliance in this connection may be placed on  the observations  of this Court in M/s Radha Krishna  Agarwal  & Ors.  v. State of Bihar & Ors., [1977] 3 SCC 457.1t  appears to us, at the outset, that in the facts and circumstances of the  case,  the respondent-company IOC is an  organ  of  the State  or  an instrumentality of the State  as  contemplated under Article 12 of the Constitution. The State acts in  its executive  power  under Article 298 of the  Constitution  in entering  or not entering in contracts with individual  par- ties. Article 14 of the Constitution would be applicable  to those  exercises  of power. Therefore, the action  of  State organ under Article 14 can be checked. See M/s Radha Krishna Agarwal v. State of Bihar, (supra) at p. 462, but Article 14 of  the Constitution cannot and has not been construed as  a charter  for judicial review of State action after the  con- tract  has  been  entered into, to call upon  the  State  to account for its actions in its manifold activities by  stat- ing reasons for such actions. In a situation of this  nature

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certain  activities of the respondent company which  consti- tuted  State under Article 12 of the Constitution may be  in certain circumstances subject to Article 14 of the Constitu- tion in entering or not entering into contracts and must  be reasonable and taken 827 only upon lawful and relevant consideration, it depends upon facts and circumstances of a particular transaction  whether heating is necessary and reasons have to be stated. In  case any  right conferred on the citizens which is sought  to  be interfered,  such  action is subject to Article  14  of  the Constitution,  and must be reasonable and can be taken  only upon  lawful and relevant grounds of public interest.  Where there  is  arbitrariness  in State action of  this  type  of entering or not entering into contracts, Article 14  springs up  and judicial review strikes such an action  down.  Every action  of the State executive authority must be subject  to rule of law and must be informed by reason. So, whatever  be the  activity of the public authority, in such  monopoly  or semi-monopoly  dealings, it should meet the test of  Article 14 of the Constitution. If a Governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unrea- sonable.  In this connection reference may be made  to  E.P. Royappa  v.  State  of Tamil Nadu & Anr., [1974]  4  SCC  3; Maneka  Gandhi v. Union of India & Anr., [1976] 1  SCC  248; Ajay Hasia & Ors. v. Khalid Mujib Sehravardi & Ors.,  [1981] 1 SCC 722; R.D. Shetry v. International Airport Authority of India & Ors., [1979] 3 SCC 1 and also Dwarkadas Marlaria and sons  v. Board of Trustees of the Port of Bombay,  [1989]  3 SCC  293.  It  appears to us that rule of  reason  and  rule against arbitrariness and discrimination, rules of fair play and  natural justice are part of the rule of law  applicable in  situation or action by State instrumentality in  dealing with  citizens  in a situation like the  present  one.  Even though  the  rights  of the citizens are in  the  nature  of contractual  rights, the manner, the method and motive of  a decision  of entering or not entering into a  contract,  are subject  to judicial review on the touchstone  of  relevance and reasonableness, fair play, natural justice, equality and non-discrimination  in  the  type of  the  transactions  and nature of the dealing as in the present case.     The  existence of the power of judicial  review  however depends upon the nature and right involved in the facts  and circumstances  of  the particular case. It is  well  settled that there can be "malice in law". Existence of such "malice in  law" is part of the critical apparatus of  a  particular action in administrative law. Indeed "malice in law" is part     the  dimension  of the rule of relevance and  reason  as well as the rule of fair play in action.     It  was submitted that the respondent had  continuously, uninterruptedly, consistently and repeatedly dealt with  the appellant  and recognised the appellant, and had treated  it as a dealer. On that 828 basis the appellants and his family had acted for 19  years. To  substantiate  these assertions,  certain  documents  and samples  were referred to by the appellants.  Our  attention was drawn to large number of invoices, cash memos and to the customer  code No. 013115 allotted to the appellant. It  was submitted  that the prefix 01 applied only to dealers,  dis- tributors etc. The defence of the respondent was the absence of  written  contract which was the standard  form  and  not appointment letters. The appellant contended that the appel- lants were selling IOC products without written contract. It

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was  further asserted that the IOC has sought to change  its stand  and  say that it does not deal  with  person  without contract but according to the appellants, has issued letters of appointment to some of them and these persons,  according to  the appellants, sell lubes. It was submitted  that  this change  of stand was an afterthought. It was further  stated that letters, in some cases, cannot lead to an exclusion  of all  others  to  whom letters of appointment  had  not  been issued. It is submitted that in the fairness IOC could  have and should have issued such letter of appointment to  appel- lant  No. 1 also and should have considered the case of  the appellant-firm. It was submitted that IOC has always treated lube  and non lube products on the same basis, without  dis- tinction.  This  distinction which was sought  to  be  urged before  us, it was submitted, was an after thought  and  not justified. The appellant contended that the IOC’s  purported reliance  upon the guidelines, was not  justified.  Further- more,  the guidelines were not mandatory or  binding.  These use  directory  words like "may".  More  importantly,  these exclude  all those who are part of the existing network  and apply for fresh appointment of new distributors. The  appel- lant  was  part of the existing network and was  not  to  be inducted  as a new distributor and the appellant-firm  falls within  the existing network and has always been so  treated continuously  and uninterruptedly from 1965 to 1983, it  was the case of the appellants. It was contended that the appel- lant-firm was entitled to relief, inter alia, on grounds  of promissory estoppels, unreasonable and arbitrary  exclusion, and discriminatory treatment under Article 14 of the Consti- tution.     Mr.  Salve  on behalf of the appellants sought  to  urge that  the appellant firm had never been appointed as a  Lube Distributor.  There  is no letter of intent, letter  of  ap- pointment, much less letter at all. Ad-hoc supplies of  Lube products  alone  had been made to the  appellant  from  1965 onwards.  The  procedure  adopted for  the  supply  of  lube products was that the appellant would write a letter to  the company whereupon the Divisional Office, Lube Section  would process  the  same. The policy decision  in  December,  1982 indicated that no new 829 Distributor for Lube products would be appointed and no  new products  would be distributed either through  the  existing net-work,  of  existing Lube Distributors or  to  authorised dealers of other products such as, petrol, SKO, LDO and HSD. It  was submitted that as a result of the policy it was  not the appellant alone to whom the supplies were  discontinued. There  was  similar discontinuance of supplies to  24  other parties whose names were given in the counter affidavit.     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  tailing  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  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

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straight  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.     Having  considered  the facts and circumstances  of  the case  and  the nature of the contentions  and  the  dealings between the parties and in view of the present state of law, we  are  of the opinion that decision  of  the  State/public authority  under  Article  298 of the  Constitution,  is  an administrative  decision and can be impeached on the  ground that the decision is arbitrary or violative of Article 14 of the Constitution of India on any of the grounds available in public law field. It appears to us that in respect of Corpo- ration  like  IOC when without informing  the  parties  con- cerned,  as  in  the case of the appellant  firm  herein  on alleged change of policy and on that basis action to seek to bring  to  an end the course of transaction  over  18  years involving  large amounts of money is not fair action,  espe- cially  in view of the monopolistic nature of the  power  of the respondent in this field. Therefore, it is necessary  to reiterate that even in the field of public law, the relevant persons 830 concerned  or  to be affected, should be taken  into  confi- dence.  Whether  and in what circumstances  that  confidence should  be taken into consideration cannot be laid  down  on any  straight jacket basis. It depends on the nature of  the fight  involved and nature of the power sought to  be  exer- cised  in a particular situation. It is true that  there  is discrimination between power and fight but whether the State or the instrumentality of a State has the right to  functign in  public field or private field is a matter  which,in  our opinion,  depends  upon the facts and circumstances  of  the situation,  but such exercise Of power cannot be dealt  with by  the  State or the instrumentality of the  State  without informing and taking into confidence, the party whose fights and  powers affected or sought to be affected,  into  confi- dence.  In such situations most often people feel  aggrieved by  exclusion  of knowledge if not being taken  into  confi- dence.     Such  transaction should continue as  an  administrative decision with the organ of the State. It may be  contractual or  statutory but in a situation of transaction between  the parties  for  nearly two decades, such procedure  should  be followed  which will be reasonable, fair and just, that  is, the process which normally be accepted to be followed by  an organ  of the State and that process must be  conscious  and all those affected should be taken into confidence.     Having  regard to the nature of the transaction, we  are of the opinion that it would be appropriate to state that in cases  where  the instrumentality of the  state  enters  the contractual field, it should be governed by the incidence of the  contract.  It is true that it may not be  necessary  to give  reasons  but,  in our opinion, in the  field  of  this nature fairness must be there to the parties concerned,  and having regard to the large number or the long period and the nature  of the dealings between the parties,  the  appellant should  have been taken into confidence. Equality and  fair- ness  at least demands this much from an instrumentality  of the State dealing with a right of the State not to treat the contract as subsisting. We must, however, evolve such  proc- ess which will work.     Therefore, we direct that the case of the respondent  be

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put  to the appellants, and let the  respondent  authorities consider afresh the submissions made by the appellant  firm, namely, that the existing arrangement amounts to a  contract by  which the distributorship was continued in case  of  the appellant firm without any formal contract and further  that the  new  policy of the Government introduced  in  December, 1982 would not cover the appellant firm and as such the 831 appellant  should  continue. It will be  sufficient,  having regard  to  the  nature of the claims,  for  the  respondent authority to consider this aspect after taking the appellant firm into confidence on this aspect. Nothing further need be stated or required to be done and we give no ’directions  as to whether reasons should be recorded or hereinafter  should be  given. In the facts and circumstances, it is not  neces- sary to give oral hearing or record the reasons as such  for the  decision.  The decision should be based on  fair  play, equity and consideration by an institution like IOC. It must act fairly.     We  direct accordingly that the present  arrangement  to continue  until the respondent company gives the  considera- tion on the lines indicated above and makes the decision.     It is not our decision which is important but a decision on  the  above basis should be arrived at  which  should  be fair, just and reasonable--and consistent with good  govern- ment--which  will be arrived at fairly and should  be  taken after taking the persons concerned whose  rights/obligations are  affected,  into  confidence. Fairness  in  such  action should be perceptible, if not transparent.     The Judgment and the Order of the High Court are, there- fore, set aside and the direction and order as aforesaid are substituted  and the application made to the High  Court  is disposed of on the aforesaid terms. In the facts and circum- stances of the case, there will be no order as to costs. Y.  Lal                                          Appeal  al- lowed. 832