PETITIONER: CHAMPAKLAL CHIMANLAL SHAH Vs. RESPONDENT: THE UNION OF INDIA DATE OF JUDGMENT: 23/10/1963 BENCH: <NAME>, K.N. BENCH: <NAME>, K.N. GAJENDRAGADKAR, P.B. SUBBARAO, K. AYYANGAR, N. RAJAGOPALA MUDHOLKAR, J.R. CITATION: 1964 AIR 1854 1964 SCR (6) 190 CITATOR INFO : R 1971 SC 823 (10) R 1971 SC1011 (3) MV 1972 SC 554 (65) D 1972 SC1767 (25) E 1973 SC2641 (15,20,25) RF 1974 SC1317 (9) RF 1974 SC2192 (65) RF 1976 SC1766 (2,6,14,16) RF 1976 SC2547 (14,16) R 1978 SC 363 (9) R 1979 SC 429 (11,23) R 1979 SC 684 (7) RF 1980 SC2086 (7) RF 1981 SC 965 (3,4) RF 1982 SC1107 (30) R 1987 SC2408 (5) D 1989 SC1431 (6) D 1991 SC 101 (18,42,226) ACT: <ORG> Servant--Central Civil Service--When is he quasi-permanent--Permanent and Temporary servants- Termination of service-Difference in mode not discriminatory-Action by way of punishment--Even temporary servant entitled to benefit of Art. 311- Preliminary enquiry and departmental enquiry- Latter does not attract Art. 311(2)- Constitution of India, Art. 311- Central Civil Service (Temporary Service) Rules, 1949, rr. 3 and 5. HEADNOTE: The appellant was in the service of <ORG>, his appointment being temporary liable to be terminated on one month's notice on either side. He was appointed in June 1949. On August 1954 he was informed that his services would be terminated from September 1954. No cause was assigned for the termination of his services and no opportunity was given to him of showing cause against the action taken against him. Before such termination the appellant was called upon to explain certain irregularities and was also asked to submit his explanation and to state why disciplinary action should not be taken against him. Certain preliminary enquiries were held against him but he was not heard therein. No regular departmental enquiry however followed and the proceedings were dropped. Claiming that he is a quasi permanent servant he brought a suit against the <ORG> alleging that the termination of his service was not justified. He prayed in the suit for a declaration that the termination of his service was illegal. He also claimed arrears of salary. <ORG> dismissed the suit and he appealed to <ORG> 191 without success. The present appeal was filed on a certificate granted by <ORG>. The first contention raised by the appellant was that he was a quasi-permanent employee and r. 5 of the Central Civil Service (Temporary Service) Rules, 1949 did not apply to him. Secondly it was contended that r. 5 was invalid as it was hit by Art. 16 of the Constitution and in any event the action taken against him was discriminatory and therefore hit by Art. 16. It was further contended that even if the appellant was a temporary servant he was entitled to the protection of Art. 311 (2) of the Constitution. Held.: (i) Sub-cls. (1) and (2) of r. 3 should be read conjunctively and not disjunctively and both the conditions contained therein should be fulfilled before a <ORG> servant can be deemed to be in quasi-permanent service. The <ORG> servant has to show that he has been in continuous <ORG> service for more than three years and that the appointing authority has made a declaration under sub-cl. (2) of r. 3. This being the position, since no declaration has been made in his case, the appellant cannot claim the benefits of r. 6 which places a quasi-permanent servant and a permanent servant on the same footing in the matter of termination of service. Hence he cannot claim the protection of Art. 311(2) on the ground that he must be deemed to be in quasi permanent service. <CITATION> , A.I.R. 1962 Bom. 45, <CITATION> ,  S.C.R. 828 and <CITATION> ,  S.C.R. 1295, distinguished. (ii) R. 5 which provides for termination of the services of a temporary <ORG> servant by giving him one month's notice is not hit by Art. 16. The classification of <ORG> servants into permanent, quasi-permanent and temporary is reasonable and differences in the matter of termination of service between these classes cannot be said to be discriminatory. (iii) Where termination of service of a temporary <ORG> servant takes place as it has taken place in the present ease, on the ground that his conduct is not satisfactory there cannot be any question of any discrimination. The contention of the appellant that he was denied the protection of Art. 16 and was treated in a discriminatory manner is rejected. (iv) Temporary <ORG> servants are also entitled to the protection of Art. 311(2) in the same manner as a permanent <ORG> servants, if the <ORG> takes action against them by meting out one of the three punishments i.e. dismissal, removal or reduction in rank. <NAME> <CITATION> ,  S.C.R. 828. Held, that when a preliminary enquiry is held to determine whether a prima facie case for a formal departmental enquiry is made out in the case of a temporary employee or a <ORG> servant holding a higher rank temporarily there is no question 192 of its being governed by Art. 311(2). Such a preliminary enquiry may even be held ex parte. It is only when the <ORG> decides to hold a regular departmental enquiry for the purpose of inflicting one of the three major punishments that the <ORG> servant gets the protection of Art. 311.  <CITATION> .  1 S.C.R. 26 and <CITATION> ,  S.C.R. 828, explained. Held, that even if a departmental enquiry against the appellant was contemplated it was not pursued and no punitive action was taken against him on the basis of the memorandum issued to him. Simply because the <ORG> issued such a memorandum but later decided not to hold a departmental enquiry for taking punitive action, it cannot be said that the <ORG> can never thereafter proceed to take action under the terms of r. 5 even though it is satisfied otherwise that the appellant's conduct and work are unsatisfactory. <CITATION> ,  3 S.C.R. 716, <CITATION> , A.I.R. 1960 S.C. 689. <CITATION> ,  1 S.C.R. 606 and, <CITATION> , A.I.R. 1964 S.C. 449 distinguished. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 472 of 1962. Appeal from the judgment and decree dated December 23, 1960, of <ORG> in First Appeal No. 464 of 1958.

<NAME>, <NAME>, <NAME> and <NAME>, for the appellants.

<NAME>, Additional Solicitor General, <NAME> and <NAME>, for the respondent.

October 23, 1963. The Judgment of the Court was delivered by <NAME> This is an appeal against the judgment and decree of <ORG> on a certificate granted by that Court. The appellant was in the service of <ORG>. He was appointed on June 11, 1949 as an officiating Assistant Director Grade II in the office of the Textile, Commissioner, Bombay and was working as such till September 15, 1954. The appointment was temporary and his services were liable to be terminated on one month's notice on either side. He was posted after the date of his appointment in the Textile Commissioner's office at Ahmedabad and continued to work there till February 1954. He was transferred to Bombay in February 1954 and was informed in August 1954 that his services would be terminated from September 15, 1954. No cause was assigned for the termination of his services and no opportunity was given to him of showing cause against the action taken against him. He therefore brought a suit in <ORG> at Bombay, and his contention was that his services had been terminated unjustifiably and maliciously as the Regional Director of Production in the Textile Commissioner's office at Ahmedabad was against him. Because of this on December 29, 1953, the appellant was called upon to explain certain irregularities and was also asked to submit his explanation and to state why disciplinary action should not be taken against him. The appellant went on to state in the plaint that certain enquiries were held against him behind his back but the matter was not pursued and he was transferred to Bombay in February 1954. While he was at Bombay he received the notice terminating his services. He claimed that he was a quasi- permanent employee under the Central Civil Services (Temporary Service) Rules, 1949, (hereinafter referred to as the Rules) and no action under r. 5 of the Rules could be taken against him. He was further entitled to the protection of Art. 311 of the Constitution and as his services were terminated without complying with that provision the order was bad and liable to be set aside. It was further contended that if r. 5 applied to him, it was bad inasmuch as it was hit by Art. 16 of the Constitution and in any case the order passed against him was bad as it was discriminatory. The appellant therefore prayed that the order of August 13, 1954 by which his services were terminated be declared illegal and inoperative and he be declared a quasi permanent employee and reinstated in service. There was also a claim for arrears of salary and costs of the suit and such other consequential reliefs as the court might deem fit to give. The suit was opposed by <ORG> and its main defence was that the appellant was not a quasi permanent employee and that r. 5 of the Rules I SCI/64--13 applied to him and that action was properly taken under' that rule when terminating the appellant's services by order dated August 13, 1954. It was also contended that r. 5 was perfectly valid and that there was no discrimination practised against the appellant when his services were terminated. It was admitted that the memo. dated December 29, 1953 was issued to the appellant and he was directed to submit his explanation in respect of the irregularities mentioned therein to the Under Secretary, <ORG>, New Delhi and to state why disciplinary action should not be taken against him. It was also admitted that from December 1953 onwards some department inquiry was conducted against the appellant but it was averted that the said departmental inquiry was not pursued as the evidence against him was not considered to be conclusive. But as the appellant's work was not found satisfactory, he was transferred to Bombay in February 1954 to give him a chance of improvement. As his work and conduct were ultimately found to be unsatisfactory, his employment was terminated under r. 5 of the Rules as he was a temporary employee.

On these pleadings three main questions arose for decision before the trial court, namely, (i) whether the appellant was a quasi permanent employee and r. 5 of the Rules did not apply, to him (ii) whether r. 5 was invalid as it was hit by Art. 16 of the Constitution and in any case whether the action taken against the appellant was discriminatory, and therefore hit by Art. 16 of the Constitution, and (iii) even if the appellant was a temporary government servant, whether he was entitled to the protection of Art. 311(2) of the Constitution in the circumstances of this case. The trial court held on all these points against the appellant and dismissed the stilt. The appellant then went in appeal to <ORG>. <ORG> agreed with the trial court and dismissed the appeal. The appellant then applied for a certificate to appeal to this <ORG>, which was granted; and that is how the matter has come up before us.

The first question that fails for consideration is whether the appellant was a quasi permanent employee and r. 5 did not apply to him. If the appellant is held to be a quasi permanent employee, he will be entitled to the protection of Art. 311(2) and as admittedly the provisions of Art. 311(2) were not complied with in the present case, his suit would have to be decreed and no further question would arise for decision. Rule 3 of the Rules, which falls for consideration in this connection, is as follows:

"A Government servant shall be deemed to be in quasi-permanent service:--

(i) if he has been in continuous Government service for more than three years;

(ii) if the appointing authority, being satisfied as to his suitability in respect of age, qualifications, work and character, for employment in a quasi permanent capacity has issued a declaration to that effect, in accordance with such instructions as the Governor-General may issue from time to time."

The contention on behalf of the appellant is that as there is no conjunction "and" between the two sub-clauses of r. 3, a <ORG> servant must be deemed to be quasi- permanent if he complies with either of the two sub-clauses. It is urged that a temporary government servant will become quasi permanent if he has been in continuous government service for more than three years or if a declaration is made in his favour as required by sub-cl. (ii). The appellant thus reads the word "or" between the two sub- clauses. On the other hand, the respondent contends that looking at the scheme of the Rules the word "and" should be implied between the two sub-clauses and that both the clauses must be fulfilled before a <ORG> servant can be deemed to be in quasi-permanent service.

In this connection our attention was drawn to two cases of this Court in which this rule was mentioned. <CITATION> ,(1) this Court, when referring to r. 3 at p. 858, used (1)  S.C.R.

the conjunction "or" between the two sub-clauses. Learned counsel for the appellant relies on this to show that we should read the word "or" between the two sub-clauses. We are however of opinion that this Court was not specifically dealing with the interpretation of r. 3 in that case and what has been said there about r. 3 was merely for purposes of illustration. The other case of this Court to which reference has been made is <CITATION> .(1) There while quoting r. 3 at p. 1307, this Court used the word "and" between the two subclauses. That is probably due to the fact that the brochure on "Central Civil Services (Temporary Services) Rules 1949" printed by the General Manager, <ORG>, New Delhi, 1959, contains the word "and" between the two sub-clauses in r. 3. That also in our opinion is not conclusive in favour of the respondent, because it is not disputed before us that in the Government gazette where the Rules were first published, neither the word "and" nor the word "or" appears between the two sub-clauses of r. 3. This aspect of the matter was considered by <ORG> in <CITATION> (2) where the learned Judges pointed out at p. 48 that they found from the copy of the gazette of <ORG> in which these Rules were first published that neither the word "and" nor the word "or" appeared between the two subclauses and this position is accepted on behalf of the respondent before us. The question therefore arises whether we have to read the two sub-clauses conjunctively or disjunctively. We may add that <ORG>' in the case mentioned above read the two sub-clauses conjunctively and we are of opinion that view is correct.

The object of these Rules obviously was to provide for some security of tenure for a large number of temporary government servants who had to be employed in view of World War II and also to provide for former employees of the Governments of Sind, the North West Frontier Province and Baluchistan (1) [1958] S.C.R. 1295. (2) A.I.R. 1962 Bom. 45.

who had come to India on account of the Partition. This protection was afforded to temporary government servants and the government servants of the other type by the device of creating quasi-permanent service. Rule 3 provided in what circumstances a government servant shall 'be deemed to be quasi permanent. Quasi-permanent service is defined in r. 2(2) as meaning "temporary service commencing from the date on which a declaration issued under r. 3 takes effect and consists of periods of duty and leave (other than extraordinary leave) after that date." R, de 3 therefore must be read with r. 2(b) which defines "quasi-permanent service". Under r. 2(b), quasi-permanent service begins from the date on which a declaration is issued under r. 3. It follows therefore that before a government servant can be deemed to be in quasi-permanent service a declaration must be issued under the second sub-clause of r. 3, for that is the sine quo non for the commencement of quasi-permanent service. Without such a declaration quasi-permanent service cannot begin. If therefore the appellant's contention were to be accepted and a temporary government servant can be deemed to be in quasi-permanent service, if only the first sub-clause has been fulfilled, viz., that he has been in continuous government service for more than three years, there will be complete irreconcilability between r. 2(b) and the first clause of r. 3. Therefore, reading these two rules together the conclusion is inevitable that we must read the two sub-clauses conjunctively and hold that both conditions must be fulfilled before a Government servant can be deemed to be in quasi-permanent service, namely, (i) that he has been in continuous government service for more than three years, and (ii) that the appointing authority after satisfying itself as to suitability in various respects for employment in quasi-permanent capacity has issued a declaration to that effect. It is however urged that the definitions in r. 2 have to be read subject to there being nothing repugnant in the subject or context and it is contended that in the context of r. 3 the two sub-clauses must be read disjunctively.

We are of opinion that there is no force in this argument, and as a matter of fact the context of r. 3 itself requires that rule must be read in harmony with the definition of "quasi-permanent service" in r. 2(b), for it could not possibly be the intention of the rule making authority to create disharmony between the definition in r. 2(b) and the provision in r. 3. The contention on behalf of the appellants that the two sub-clauses are independent and have to be read disjunctively must be rejected and it must be held that both the conditions in r. 3 must be satisfied before a government servant can be deemed to be in quasi- permanent service.

This will in our opinion also be clear from the scheme of the Rules following r. 3. Rule 4 provides that "a declaration issued under r. 3 shall specify the particular post or the particular grade of posts within a cadre in respect of which it is issued, and the date from which it takes effect." This rule is clearly meant to apply to all quasi-permanent employees and shows that no government servant can be deemed to be in quasi-permanent service until a declaration has been issued. Rule 6 provides that "the service of a <ORG> servant in quasi-permanent service shall be liable to termination in the same circumstances and in the same manner as a government servant in permanent service." Now under the definition of r. 2(b), quasi-permanent service begins with a declaration issued under sub-cl. (1)of r. 3. Therefore the protection of r. 6 can only be given to a quasi-permanent employee after a declaration has been made. This again shows that a declaration is necessary before a <ORG> servant can claim to be in quasi.permanent service. Rule 7 provides that a government servant in respect of whom the declaration has been issued under r. 3, shall be eligible for permanent appointment on the occurrence of a vacancy in the specified posts which may be reserved for being filled from among persons in quasi-permanent service. This again shows that a quasi-permanent employee can become eligible for permanent appointment only when a declaration has been issued under r. 3. Again r. 8 provides that a government servant in quasi-permanent service shall as from the date on which his service is declared to be quasi-permanent be entitled to the same conditions of service in respect of leave, allowances and disciplinary matters as a government servant in permanent service holding the specified post. Here again the benefit of r. 8 can only be availed of by a quasi- permanent government servant in whose favour a declaration has been made. Then r. 9 provides that a government servant in quasi-permanent service shall be eligible for a gratuity under certain circumstances. This gratuity will be at the rate of half a month's pay for each completed year of quasi- permanent service, such gratuity being payable on the basis of the pay admissible to such government servant in respect of the specified post on the last day of his service. This again contemplates a declaration before the benefit of r. 9 can be claimed by a quasi-permanent employee. Rule 10 provides that where a government servant in quasi-permanent service is appointed substantively to a permanent pensionable post, the entire period of quasi-permanent service rendered by him shall be deemed to be qualifying service for the grant of gratuity and pension. Now under r. 2(b) quasi permanent service only commences after the declaration and therefore unless a declaration is made, the benefit of r. 10 cannot be taken by a quasi-permanent employee. The scheme of the rules therefore clearly shows that a declaration under r. 3 is necessary before a temporary government servant can claim to be a quasi- permanent employee. Otherwise if the two sub-clauses of r. 3 were to be read disjunctively the result would be that a person may become a quasi permanent employee under sub-cl. (1) but will get none of the advantages mentioned above. We are therefore satisfied that the scheme of the Rules and the harmony that is essential between r. 2(b) defining "quasi- permanent service" and r. 3 laying down how a government servant can be deemed to be in quasi permanent service require that the two sub-clauses should be read conjunctively and that two conditions are necessary before a government servant can be deemed to be in quasi-permanent service, namely, (i) continuous service for more than three years, and (ii) declaration as required by sub-cl. (ii)of r. 3. It is not in dispute that though the appellant had been in service for more than three years by 1954, no declaration as required by sub-cl. (ii) of r. 3 has ever been made in his case. He cannot therefore claim to be in quasi-permanent service. It follows therefore that he cannot claim the benefit of r. 6, which lays down that the services of a government servant in quasi-permanent service shall be liable to termination in the same circumstances and in the same manner as government servants in permanent service. If he could claim the benefit of r. 6, he would have been certainly entitled to the protection of Art. 311. As he is not entitled to the benefit of r. 6, he cannot claim the benefit of Art. 311 (9.2) on the ground that he must be deemed to be in quasi- permanent service.

The appellant therefore must be held to be still in temporary service when his services were dispensed with in August 1954. The rule that applies to a temporary government servant is r. 5 which lays down that-

"(a) the service of a temporary Government servant who is not in quasi-permanent service shall be liable to termination at any time by notice in writing given either by the Government servant to the appointing authority, or by the appointing authority to the Government servant.

(b) The period of such notice shall be one month, unless otherwise agreed to by the Government and by the Government servant; Provided that the service of any such Government servant may be terminated forthwith by payment to him of a sum equivalent to the amount of his pay plus allowances, at the same rates at which he was drawing them immediately before the termination of his services, for the period of the notice or, as the case may be, for the period by which such notice falls short of one month or any agreed longer period."

In short r. 5 gives power to the <ORG> to terminate the services of a temporary government servant by giving him one month's notice or on payment of one month's pay in lieu of notice or such shorter or longer notice or payment in lieu thereof as may be agreed to between the <ORG> and the employee concerned. This rule is being attacked on the ground that it is hit by Art. 16 , which provides that "there shall be equality of opportunity for all citizens in matters relating to employment or appointment to any office under the <ORG>". We have not been able to understand how this rule can possibly be hit by Art. 16 , which provides for equality of opportunity. These Rules show that there are two classes of employees namely, (i) permanent employees, and(ii) temporary employees, the latter being divided into two sub-clauses (a) quasi-permanent, and (b) temporary. It is well recognised that the <ORG> may have to employ temporary servants to satisfy the needs of a particular contingency and such employment would be perfectly legitimate. There can also be no doubt, if such a class of temporary servants could be recruited that there would be nothing discriminatory or violative of equal opportunity if the conditions of service of such servants are different in some respects from those of permanent employees. Further we see no denial of equal opportunity if out of the class of temporary employees some are made quasi-permanent depending on length of service and their suitability in all other respects for permanent employment eventually and thus assimilated to permanent employees. It has been urged on behalf of the respondent that Art. 16 in any case will not apply to matters relating to termination of service. We do not think it necessary for present purposes to decide whether Art. 16 would apply to rules relating to termination of service. We shall assume for the purposes of this appeal that Art. 16 will apply even in the case of rules relating to termination of service. But we fail to see how the rule which applies to one class of government servants in the matter of termination but does not apply to the other two classes can be said to violate equality of opportunity provided in Art. 16. The classification of government servants into these classes is reasonable and differences in the matter of termination of service between these classes cannot be said to be discriminatory in the circumstances. In particular the very fact that the service of a government servant is purely temporary makes him a class apart from those in permanent service and such government servant cannot necessarily claim all the advantages which a permanent servant has in the matter of security of service. We are therefore of opinion that considering the nature of the employment of a temporary government servant, a provision like that in r. 5 in respect of termination of service is a. reasonable provision which cannot be said to deny equality of opportunity provided in Art. 16. The attack therefore on r. 5 on the ground that it is hit by Art. 16 of the Constitution must fail. It is next urged that even if r. 5 is good, the order by which the appellant's services were dispensed with was bad, because it was discriminatory. In this Connection reference was made in the plaint to a number of Assistant Directors whose services were not dispensed with even though they were junior to the appellant and did not have as good qualifica- tions as he had. We are of opinion that there is no force in this contention. This is not a case where services of a temporary employee are being retrenched because of the abolition of a post. In such a case a question may arise as to who should be retrenched when one out of several temporary posts is being retrenched in an office. In those circumstances, qualifications and length of service of those holding similar temporary posts may be relevant in consider- ing whether the retrenchment of a particular employee was as a result of discrimination. The present however is a case where the appellant's services were terminated because his work was found to be unsatisfactory. We shall deal with the question whether termination in this case is liable to be set aside on the ground that Art. 311 (2) was not complied with later; but where termination of the service of a temporary government servant takes place on the ground. that his conduct is not satisfactory there can in our opinion be no question of any discrimination. It would be absurd to say that if the service of one temporary servant is terminated on the ground of unsatisfactory conduct the services of all similar employees must also be terminated along with him, irrespective of what their conduct is. Therefore even though some of those mentioned in the plaint by the appellant were junior to him and did not have as good qualifications as he had and were retained in service, it does not follow that the action taken against the appellant terminating his services was discriminatory for that action was taken on the basis of his unsatisfactory conduct. A question of discrimination may arise in a case of retrenchment on account of abolition of one of several temporary posts of the same kind in one office but can in our opinion never arise in the case of dispensing with the services of a particular temporary employee on account of his conduct being unsatisfactory. We therefore reject the contention that the appellant was denied the protection of Art. 16 and was treated in a discriminatory manner. We now come to the last question whether the appellant Was entitled to the protection of Art. 311(2) of the Constitution, even though he was a temporary government servant. It is well settled that temporary servants are also entitled to the protection of Art. 311(2) in the same manner as permanent government servants, if the government takes action against them by meting out one of the three punishments i.e. dismissal, removal or reduction in rank: (see <CITATION> ("). But this protection is only available where discharge, removal or reduction in rank is sought to be inflicted by way of punishment and not otherwise. It is also not disputed that the mere use of expressions like "terminate" or "discharge" is not conclusive and in spite of the use of such innocuous expressions, the court has to apply the two tests mentioned in <NAME> case(1), namely-(1) whether ( )  S.C.R. 828.

the servant had a right to the post or the rank or (2) whether he has been visited with evil consequences; and if either of the tests is satisfied, it must be held that the servant had been punished. Further even though misconduct, negligence, inefficiency or other disqualification may be the motive or the inducing factor which influences the <ORG> to take action under the terms of the contract of employment or the specific service rule, nevertheless, if a right exists under the contract or the rules, to terminate the service the motive operating on the mind of the <ORG> is wholly irrelevant. It is on these principles which have been laid down in <NAME> case() that we have to decide whether the appellant was entitled to the protection of Art. 311(2) in this case. Before however we consider the facts of this case, we should like to make certain general observations in connection with disciplinary proceedings taken against public servants. It is well known that government does not terminate the services of a public servant, be he even a temporary servant, without reason; nor is it usual for government to reduce a public servant in rank without reason even though he may be holding the higher rank only temporarily. One reason for terminating the services of a temporary servant may be that the post that he is holding comes to an end. In that case there is nothing further to be said and his services terminate when the post comes to an end. Similarly a government servant temporarily officiating in a higher rank may have to be reverted to his substantive post where the incumbent of the higher post comes back to duty or where the higher post created for a temporary period comes to an end. But besides the above, the government may find it necessary to terminate the services of a temporary servant if it is not satisfied with his conduct or his suitability for the job and/or his work. The same may apply to the reversion of a public servant from a higher post to a lower post where the post is held as a temporary measure. This dissatisfaction with the work and,/or conduct of a temporary servant (1)  S.C.R. 828.

may arise on complaint against him. In such cases two courses are open to government. It may decide to dispense with the services of the servant or revert him to his substantive post without any action being taken to punish him for his bad work and/or conduct. Or the <ORG> may decide to punish such a servant for his bad work or misconduct, in which case even though the servant may be temporary he will have the protection of Art. 311(2). But even where it is intended to take action by way of punishment what usually happens is that something in the nature of what may be called a preliminary enquiry is first held in connection with the alleged misconduct or unsatisfactory work. In this preliminary enquiry the explanation of the government servant may be taken and documentary and even oral evidence may be considered. It is usual when such a preliminary enquiry makes out a prima facie case against the servant concerned that charges are then framed against him and he is asked to show cause why disciplinary action be not taken against him. An enquiry officer (who may be himself in the case where the appointing authority is other than the <ORG>) is appointed who holds enquiry into the charges communicated to the servant concerned after taking his explanation and this inquiry is held in accordance with the principles of natural justice. This is what is known as a formal departmental enquiry into the conduct of a public servant. In this enquiry evidence both documentary and oral may be led against the public servant concerned and he has a right to cross-examine the witnesses tendered against him. He has also the right to give documentary and oral evidence in his defence, if he thinks necessary to do so. After the enquiry is over, the enquiry officer makes a report to the <ORG> or the authority having power to take action against the servant concerned. The government or the authority makes up its mind on the enquiry report as to whether the charges have been proved or not and if it holds that some or all the charges have been proved, it determines tentatively the punishment to be inflicted on the public servant concerned. It then communicates a copy of the enquiry officer'sreport and its own conclusion thereon and asks himto show cause why the tentative punishment decidedupon be not inflicted upon him. This procedure is required by Art. 311(2) of the Constitution in the case of the three major punishments, i.e., dismissal, or removal or reduction in rank. The servant concerned has then an opportunity of showing cause by making a represen- tation that the conclusions arrived at the departmental enquiry are incorrect and in any case the punishment proposed to be inflicted is too harsh.

Generally therefore a preliminary enquiry is usually held to determine whether a prima facie case for a formal departmental enquiry is made out, and it is very necessary that the two should not be confused. Even where government does not intend to take action by way of punishment against a temporary servant on a report of bad work or misconduct a preliminary enquiry is usually held to satisfy government that there is reason to dispense with the services of a temporary employee or to revert him to his substantive post, for as we have said already government does not usually take action of this kind without any reason. Therefore when a preliminary enquiry of this nature is held in thecase of temporary employee or a governmentservant holding a higher rank temporarily it mustnot be confused with the regular departmentalenquiry (which usually follows such a preliminaryenquiry) when the government decides to frame charges and get a departmental enquiry made in order that one of the three major punishments already indicated may be inflicted on the government servant. Therefore, so far as the preliminary enquiry is concerned there is no question of its being governed by Art. 311(2) for that enquiry is really for the satisfaction of government to decide whether punitive action should be taken or action should be taken under the contract or the rules in the case of a temporary government servant or a servant holding higher rank temporary to which he has no right. In short a preliminary enquiry is for the purpose of collection of facts in regard to the conduct and work of a government servant in which he may or may not be associated so that the authority concerned may decide whether or not to subject the servant concerned to the enquiry necessary under Art. 311 for inflicting one of the three major punishments mentioned therein. Such a preliminary enquiry may even be held ex parte, for it is merely for the satisfaction of government, though usually for the sake of fairness, explanation is taken from the servant concerned even at such an enquiry. But at that stage he has no right to be heard for the enquiry is merely for the satisfaction of the Government, and it is only when the government decides to hold a regular departmental enquiry for the purposes of inflicting one of the three major punishments that the government servant gets the protection of Art. 311 and all the rights that protection implies as already indicated above. There must therefore be no confusion between the two enquiries and it is only when the government proceeds to hold a departmental enquiry for the purpose of inflicting on the government servant one of the three major punishments indicated in Art. 311 that the government servant is entitled to the protection of that Article. That is why this Court emphasised in <NAME> case(1) and in <CITATION> (2) that the motive or the inducing factor which influences the government to take action under the terms of the contract of employment or the specific service rule is irrelevant.

In <NAME>'s case(2) what happened was that the government servant concerned was called upon to explain certain matters which cast an imputation upon him; but later it was made perfectly clear to him by the government that it was not holding any formal departmental enquiry against him with a view to inflicting any of the three major punishments, although the government desired to give him an opportunity to show cause why he should not be compul-

(1) (1958] 1 S.C.R. 828 (2) [1955] 1 S.C.R. 2 sorily retired, and after considering his explanation he was compulsorily retired under the relevant service rule. It was held in that case that this did not amount to punishment within the meaning of Art. 311(2 ), even though there was some imputation at an earlier stage and even though the servant concerned was asked to explain why he should not be compulsorily retired. As we have said already it is not usual for government to take action against a public servant without rhyme or reason and that is why in the case of temporary servants or servants holding higher ranks to which they have no right some kind of preliminary enquiry is usually held before the government decides to dispense with their set-vice or revert them to their substantive posts. The mere fact that some kind of preliminary enquiry is held against a temporary servant and following that enquiry the services are dispensed with in accordance with the contract or the specific service rule (e.g. r. 5 in this case) would not mean that the termination of service amounted to infliction of punishment of dismissal or removal within the meaning of Art. 311(2). Whether such termination would amount to dismissal or removal within the meaning of Art. 311(2) would depend upon facts of each case and the action taken by government which finally leads to the termination of service.

Let us now turn to the facts of this case. On December 29, 1953, a memorandum was given to the appellant under the signature of the Under Secretary to the Government of India. By that memorandum he was informed about four matters and his explanation was called in that connection. The first matter referred to his punctuality in attending office and his absenting himself from duty without prior intimation and instances in that respect were brought to his notice. The second matter was with respect to irregular claims for mileage allowance in respect of his visits to mills some of which were never made. Instances of these were also brought to his notice. The third matter related to a certain visit to a certain mill on a certain date which was never undertaken. The fourth matter was general relating to his work and conduct being not satisfactory and his not attaching due importance to the performance of his duties in accordance with the instructions of the Regional Director. He was required to submit his explanation by January 6, 1954 and also asked to state why disciplinary action should not be taken against him.

The contention on behalf of the appellant is that this memorandum really amounted to a chargesheet against the appellant and he was asked to give an explanation thereto and also to state why disciplinary action should not be taken against him. Stress is laid on the last sentence of the memorandum where the appellant was asked why disciplinary action should not be taken against him. It may be conceded that the way in which the memorandum was drafted and the fact that in the last sentence he was asked to state why disciplinary action should not be taken against him might give an impression that the intention was to hold a formal departmental enquiry against him with a view to punishing him. But though this may appear to be so, what is important to see is what actually happened after this memo- randum for the courts are not to go by the particular name given by a party to a certain proceeding but are concerned with the spirit and substance of it in the light of what preceded and succeeded it. It is true that in the written statement of the respondent it is stated that from December 1953 onwards a departmental enquiry was being conducted against the appellant, though the written statement went on to say that departmental enquiry was not pursued as the evidence was not considered to be conclusive. In actual fact however it is not even the case of the appellant that any enquiry officer was appointed to hold what we have called a formal departmental enquiry in which evidence was tendered from both sides in the presence of the appellant. This is clear from para 8 of the plaint in which it is said that some enquiries appeared to have been held after the memorandum of December 1953 but were not pursued further. It is however clear that no formal departmental enquiry as contemplated under Art. 311(2) read with the relevant Central Services Rules was ever held after the notice of December 29, 1953, as otherwise the appellant would have taken part in such an enquiry and would have been entitled to cross-examine witnesses produced against him and would also have been entitled to lead evidence. It seems therefore clear that though this memorandum was issued and the appellant was asked therein to state why disciplinary action should not be taken against him, no departmental enquiry followed that memorandum and the matter was dropped. That is further borne out by the fact that the appellant was transferred from Ahmedabad to Bombay in February 1954, which would be most unlikely if a departmental enquiry was going on against him in Ahmedabad. The respondent's case in this connection is that it gave up the departmental enquiry even though it was contemplated and transferred the appellant to Bombay in order to give him a chance of improvement. The appellant worked in Bombay for over six months and thereafter the Government finally decided to terminate his services under r. 5 as his work and conduct were found unsatisfactory even after his transfer to Bombay. On these facts there can in our opinion be no doubt that even if a departmental enquiry was contemplated in December 1953 it was not pursued and no punitive action was taken against him on the basis of the memorandum issued to him on December 29, 1953; what appears to have happened is that after the appellant was transferred to Bombay where he worked for six months more, the government came to the conclusion that his work and conduct were not satisfactory and therefore decided to terminate his services under r. 5. We cannot accept the proposition that once government issues a memorandum like that issued in this case on December 29, 1953, but later decides not to hold a departmental enquiry for taking punitive action, it can never thereafter proceed to take action against a temporary government servant in the terms of r. 5, even though it is satisfied otherwise that his conduct and work are unsatisfactory. The circumstances in this case are in our opinion very similar to the facts in <NAME>'s case("), the difference being that in that case he was compulsorily retired and in this case the appellant's services have been terminated. In <NAME>'s case(1) also at one stage, the government made imputation against his conduct but later withdrew them and did not follow up the matter by holding a departmental enquiry. This is exactly what happened in the present case and it was more than six months after that the appellant who had in the meantime been transferred to Bombay was discharged in the terms of r. 5 because his work and conduct were found unsatisfactory. The order terminating his services makes no imputation whatsoever against him and in the circumstances it cannot be said that the termination of his service is visited with any evil consequences as explained in <NAME> case(2). We are therefore of opinion that on the facts of this case Art. 311(2) has no application and the appellant was not entitled to the protection of that Article before his services were terminated under r. 5, for the termination of service here does not amount to infliction of the penalty of dismissal or removal.

It remains now to consider certain cases on which reliance was placed on either side. Strong reliance has been placed on behalf of the appellant on <CITATION> (3). In that case <NAME> was a temporary government servant. A charge-sheet was served on him on February 5, 1955 and he was charged with having taken bribes in two cases. He was also asked to explain why disciplinary action should not be taken against him. He was further asked to state if he wanted to be heard in person and also to put forth any defence. It will be clear that charges were served upon <NAME> (1)  1 S.C.R. 26- (2)  S.C.R. 828. (3) 1 3 S.C.R. 716.

in that case while in the present case no charges were ever served on the appellant and the communication of December 29, 1953 was headed as a memorandum. Further the charge- sheet in <NAME> case(,) besides asking him to state why disciplinary action should not be taken against him also asked him to state in his reply if he wanted to be heard in person and wanted to put forward any defence, which clearly showed that a departmental enquiry was going to be held particularly when the charges were given by the Settlement Officer who had apparently been appointed the enquiry officer for the purpose. Further in <NAME> case(,) an enquiry was held and a report was submitted by the enquiry officer to the Deputy Commissioner. The enquiry officer found <NAME> guilty of the charges and recommended that he should be removed from service immediately. On the basis of this report an order was passed by the Deputy Commissioner which stated in so many words that it had been established that bribes had been taken by <NAME> and that he accepted the report of the Settlement Officer. The Deputy Commissioner then went on to order that the services of <NAME> were terminated on payment of one month's pay in lieu of notice. Obviously in that case a departmental enquiry was held by the enquiry officer, a report was made to the Deputy Commissioner who was apparently the authority to dismiss or remove <NAME> and he passed the order terminating his services on the basis of the report, though he did not use the word "dismiss" or "remove" in his order. In those circumstances this Court held in conformity with what had been said in <NAME> case(2) that the mere use of the word "termination" would not conclude the matter and as the facts showed as they did in <NAME> case() that the order was one of dismissal or removal and was passed as a punishment after inquiry, Art. 311(2) should have been complied with. The facts of that case in our opinion are very different from the facts in the present case. (1)  3 S.C.R. 716.

(2) [1958] S.C.R. 828.

As we have already pointed out no departmental enquiry was really held after the memorandum of December 29, 1953 in this case and no enquiry officer was appointed and no report was made by any enquiry officer. Whatever might have been the intention behind the memorandum dated December 29, 1953, the matter was not pursued and the departmental enquiry if it was ever intended to be held was dropped. The appellant thereafter was transferred to Bombay to give him chance of improvement and it was only six months later when it was found that his work and conduct were still unsatisfactory that government took action under r. 5 and dispensed with his services. On the facts of the present case therefore it cannot be said that the order of dispensing with the services of the appellant which was passed in August 1954 was an order punishing the appellant by imposing upon him the penalty of removal or dismissal.

The next case is <CITATION> (1). That was a case of a probationer and this Court laid down five propositions therein. It is the third proposition therein on which strong reliance has been placed on behalf of the appellant. It is in these terms :- "But, if instead of terminating such a person's service without any enquiry, the employer chooses to hold an enquiry into his alleged misconduct, or inefficiency, or for some similar reason, the termination of service is by way of punishment, because it puts a stigma on his competence and thus affects his future career. In such a case he is entitled to the protection of Art. 311(2) of the Constitution."

it is urged on behalf of the appellant that this proposition means that as soon as any kind of enquiry is held against a probationer and the same it is said will apply to a temporary employee as the two (1) A.I.R. 1960 S.C. 689.

stand more or less on the same footing-the protection of Art. 311(2) would be available. We are of opinion that this is reading much more in the proposition then was ever intended by this Court. In that case the <ORG> after some kind of enquiry said in the order terminating the services of the servant concerned that confidential enquiries showed that he had the reputation of being a corrupt officer and that there was ample material to show that the report about his resorting to corrupt practices was justified. The order further said that his work was wholly unsatisfactory and in consideration of those matters, it was provisionally decided to terminate the probation and the government servant was asked to show cause why he should not be discharged. His explanation was then considered and the <ORG> finally decided to discharge him. The facts of that case as they appeared from the copy of the government decision showed that the government was actually proceeding on the basis that Art. 311(2) was applicable in that case and that is why some enquiries were held and a provisional conclusion to terminate the services of the officer concerned was arrived at and he was asked to show cause against that. In those circumstances this Court held that as government had purported to take action under Art. 311 , the action was bad as the protection envisaged by that Article was not afforded to the servant concerned. The third proposition therefore in that case does not in our opinion lay down that as soon as any kind of enquiry is held into the conduct of a probationer or a temporary servant he is immediately entitled to the protection of Art. 311. All that the third proposition lays down is that if the govern- ment chooses to hold an enquiry purporting to act under Art. 311 as was the case in that case, it must afford to the government servant the protection which that Article envisages.

<NAME> case(1) was considered by this Court in a later case in the State of Orissa (1)A.I.R,1960 S.C, 689.

v. <NAME>) which was also a case of a probationer. In <NAME> case,(1) the order was to the effect that the government servant was discharged from service for unsatisfactory work and conduct from the date on which the order was served on him. This Court in <NAME> case(1) referred to the rules, which provided that " where it is proposed to terminate the employment of a probationer, whether during or at the end of the period of probation, for any specific fault or on account of his unsuitability for the service, the probationer shall be apprised of the grounds of such proposal and given an opportunity to show cause against it, before orders are passed by the authority competent to terminate the employment" and pointed out that action in accordance with the rules would not be hit by Art. 31 1. <NAME> case(1) was distinguished in that case and it was pointed out that the third proposition in <NAME> case(2) referred to "an enquiry into allegations of misconduct or inefficiency With a view, if they were found established, to imposing punishment and not to an enquiry whether a probationer should be confirmed," which means that where the Government purports to hold an inquiry under Art. 311 read with the Rules in order to punish an officer, it must afford him the protection provided therein. The third proposition therefore in <NAME> case(2) Must be read in the context of that case and cannot apply to a case where the government holds what we have called a preliminary enquiry to find out whether a temporary servant should be discharged or not in accordance with his contract or a specific service rule in view of his conduct. The third proposition must be restricted only to those cases whether of temporary government servants or others, where government purports to act under Art. 311(2) but ends up with a mere order of termination. In such a case the form of the order is immaterial and the termination of service may amount to dismissal or (1)  1 S.C.R. 606.

(2) A.I.R. 1960 S.C. 689.

removal. The same view has been taken in <CITATION> (1) We are therefore of opinion that on the facts of this case it cannot be said that the order by which the appellants, services were terminated under r. 5 was an order inflicting the punishment of dismissal or removal to which Art. 311(2) applied. It was in our opinion an order which was Justified under r. 5 of the rules and the appellant was not entitled to the protection of Art. 311(2) in the circumstances. The appeal therefore fails and is hereby dismissed. In the circumstances we pass no order as to costs.

Appeal dismissed.


PETITIONER: MAHABIR AUTO STORES & ORS. Vs. RESPONDENT: INDIAN OIL CORPORATION & ORS. DATE OF JUDGMENT06/03/1990 BENCH: <NAME>, <NAME> (CJ) BENCH: <NAME>, <NAME> (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 -- <ORG> 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 <ORG> 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 <ORG>, 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 '<ORG>' within the meaning of Art. 12 of the Constitution. It further averred that there 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 <ORG> whereunder it was no longer possible to give further supplies to the appellant firm. After considering the rival contentions advanced by the parties <ORG>, 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 <ORG> or of an instrumentality of the <ORG> 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 <ORG> is an organ of the '<ORG>' or an 'instrumentality of the <ORG>' as contemplated under Article 12 of the Constitution. [826F] The <ORG> 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 <ORG> 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 <ORG> 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 <ORG>/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 <ORG> like <ORG> 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- <CITATION> and Anr.,  4 SCC 3; <CITATION> .,  1 SCC 248; <CITATION> .,  1 SCC 722; A.D. Shetty v. <ORG>,  3 SCC 1 and <CITATION> - bay,  3 SCC 293, referred to. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1350 of 1990.

From the Judgment and Order dated 9.2. 1989 of <ORG> in C.W. No. 1904 of 1983.

Dr. <NAME>, Dr. <NAME> and <NAME> (N.P.) for the Appellants.

<NAME>, Mrs. <NAME> and <NAME> for the Respondent.

The Judgment of the Court was delivered by <NAME>, 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 <ORG> 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 <ORG> a writ of mandamus against the respondent directing it to desist from denying or 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 <ORG> 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 <ORG>, 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 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 <ORG> 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.

It was the case of the appellants before <ORG> 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 <ORG> of the <ORG>, and has been selling all kinds of lubri- cants. The appellants further contended that the <ORG> 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 <ORG>. This contention was stated before <ORG> 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 <ORG>. 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 <ORG> in which the firm was referred to as the <ORG>'s authorised <ORG>. Annexures A- 16 to A-35 are copies of the letters written by the <ORG> to the appellants in relation to the dealing of the appellants as <ORG>. 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 <ORG>. 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 <ORG>. Reliance was placed on Annexures P-28 to P-34 which are the Product Indent-cum- Delivery Orders for various periods issued by the <ORG> 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 <ORG>, it was suddenly stopped on 27th May, 1983 by the <ORG>, and it was con- tended that such an action of the <ORG> 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 <ORG> in the application filed under article 226 of the Constitu- tion.

The respondent-company had raised various objections to the maintainability of the Writ Petition, namely, inter alia, that the <ORG> was not State within the meaning of Article 12 of the Constitution as the <ORG> 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 <ORG> in <ORG>. Where in fact there was an actual written agreement the <ORG>'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 <ORG> 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 <ORG> 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 "<ORG> also reserves the right to cancel your order without any intimation or assigning any reason". It further provided that "<ORG> 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-

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 <ORG>, 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 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 <ORG> in <ORG>, <ORG>. 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, <ORG> 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 <ORG> 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 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.

<ORG> 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 <ORG> 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 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 <ORG>, as mentioned hereinbefore.

We have heard learned counsel Dr. <NAME> as well as Mr. <NAME> exhaustively. Further affidavits were filed and documents produced before us. It was sought to be urged by Dr. <NAME> that the respondent was an instrumentality of <ORG> and as such the question involved was whether an instrumentality of <ORG> 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. <NAME> suggest- ed that the respondent <ORG> is an instrumentality of <ORG> under Article 12 of the Constitution. From 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 <ORG>. 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 <ORG> was never made known or revealed prior to the Counter Affidavit in <ORG> 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 <ORG> or an instrumentality of the <ORG> 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 <CITATION> .,  3 SCC 457.1t appears to us, at the outset, that in the facts and circumstances of the case, the respondent-company <ORG> is an organ of the <ORG> or an instrumentality of the <ORG> as contemplated under Article 12 of the Constitution. The <ORG> 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 <ORG> organ under Article 14 can be checked. <CITATION> , (supra) at p. 462, but Article 14 of the Constitution cannot and has not been construed as a charter for judicial review of <ORG> action after the con- tract has been entered into, to call upon the <ORG> to account for its actions in its manifold activities by stat- ing reasons for such actions. In a situation of this nature certain activities of the respondent company which consti- tuted <ORG> 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 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 <ORG> 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 <ORG> 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 <CITATION> .,  4 SCC 3; <CITATION> .,  1 SCC 248; <CITATION> .,  1 SCC 722; R.D. Shetry v. <ORG>.,  3 SCC 1 and also <NAME> and sons v. <ORG>,  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 <ORG> 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 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 <ORG> products without written contract. It was further asserted that the <ORG> 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 <ORG> 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 <ORG> 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 <ORG>'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 <ORG> 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. <NAME> 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 <ORG> would process the same. The policy decision in December, 1982 indicated that no new Distributor for Lube products would be appointed and no new products would be distributed either through the existing net-work, of existing <ORG> 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. <NAME> 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. <NAME> to permit the same would result in anomalous situation that whenever <ORG> is involved it would always be public law field, this would mean all redress against the <ORG> 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 straight jacket formula. It has to be examined in each particular case. Mr. <NAME> 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 <ORG>/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 <ORG> 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 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 <ORG> or the instrumentality of a <ORG> 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 <ORG> or the instrumentality of the <ORG> 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 <ORG>. 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 <ORG> 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 <ORG> dealing with a right of the <ORG> 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 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 <ORG> introduced in December, 1982 would not cover the appellant firm and as such the 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 <ORG>. 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 <ORG> are, there- fore, set aside and the direction and order as aforesaid are substituted and the application made to <ORG> is disposed of on the aforesaid terms. In the facts and circum- stances of the case, there will be no order as to costs.

<NAME> Appeal al- lowed.