ivil Appeal No 1350 of 1990
From the Judgment and Order dated 92
1989 of Delhi High Court in CW No 1904 of 1983
Dr LM Singhvi Dr AM Singvi and D Bhandari NP for the Appellants
Harish N Salve Mrs P Shroff and SA 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 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 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 lubricantsgoods each year and the total quantity of lubricantsgoods such lifted had gone up to the extent of 1 1134854 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 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  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 andor 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 challanorder 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 patchesreleases 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 andor 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 andor 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 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 17011782 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 directiveinstructionguidelines 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 dealersdistributors in lubricant oils
It was further the case of the respondent that the customer code number is given to authorised distributorsdealers 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 dealersagents 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 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 LM 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 litreskg 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 Ms Radha Krishna Agarwal  Ors
vs State of Bihar  Ors 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 Ms Radha Krishna Agarwal vs 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 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 EP Royappa vs State of Tamil Nadu  Anr   Maneka Gandhi vs Union of India  Anr   Ajay Hasia  Ors
vs Khalid Mujib Sehravardi  Ors   RD Shetry vs International Airport Authority of India  Ors  and also Dwarkadas Marlaria and sons vs Board of Trustees of the Port of Bombay  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 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 arbitrarinessmala 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 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 Statepublic 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 whichin 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 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 rightsobligations 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


Summary:
The appellant and two others were convicted for life and 3 years rigorous imprisonment or fine of Rs2500 each for offences under Section 302 read with Section 34 IPC and Section 201 read with Section 34 IPC respectively
On appeal by the accused the High Court set aside the convic tion of all of them under Section 302 read with Section 34 IPC and also the conviction of two of them under Section 201 read with Section 34 IPC
In respect of the appellant the High Court not only confirmed the conviction under Section 201 but also enhanced the sentence to 7 years rigorous imprisonment
While doing so the High Court did not issue notice to the appellant nor did it afford an opportunity of showing cause against the proposed enhance ment of sentence
Before the High Court the State did not prefer an appeal for an enhancement of sentence under Sec tion 377 Cr
PC on the ground of inadequacy
Allowing the appeal this Court HELD 11 Let punishment fit the crime  is one of the main objects of the sentencing policy
To achieve this object the Code of Criminal Procedure empowers the High Court to enhance the sentence in appropriate cases while the sentence awarded by the Subordinate Courts is grossly inade quate or unconscionably lenient or flea bite  or is not commensurate with the gravity of the offence
The High Court enjoins the power of enhancing the sentence either in exer cise of its revisional jurisdiction under Section 397 read with Section 401 or in its appellate jurisdiction under Section 377 read with Section 386c of the Criminal Proce dure Code subject to the provisos 1 and 2 to Section 386 of the Code
It is permissible for the High Court while exercising its revisional jurisdiction under Section 397 read with Section 401 IPC to exercise the power of a Court of Appeal under Section 386c for enhancement of sentence
857G H 858A 856 12
The High Court notwithstanding its powers under the appellate jurisdiction in an appeal preferred under Section 377 of the Code have powers to act suo motu to enhance the sentence in appropriate cases while exercising its revisional jurisdiction even in the absence of an appeal against the inadequacy of the sentence as provided under Section 377
858F G Bachan Singh etc
vs State of Punjab 1980 1 SCR 645 Nadir Khan vs The State Delhi Administration  and Lingala Vijay Kumar and Others vs The Public Prose cutor   relied on
The High Court both in exercise of its revisional jurisdiction under Section 397 read with Section 401 Cr
PC and its appellate jurisdiction under Section 377 read with Section 386c of Cr
PC in matters of enhancement of sentence should give the accused a reasonable opportunity of showing cause against such enhancement as contemplated under the first proviso to Section 386 as well under sub section 3 of Section 377 of the Code
The rules of natural justice as also the prescribed procedure require issuing notice to the appellant and affording an opportunity to be heard on the proposed action for enhancement of sentence
861A B Surjit Singh and Others vs State of Punjab 1984 Supp
SCC 518 and Sahab Singh  Others vs State of Haryana JT  relied on
In the instant case the High Court has enhanced the sentence unmindful of the relevant provisions of the Code of Criminal Procedure and also the rules of natural justice and by over stepping its jurisdiction adopted a leeway in en hancing the sentence from three years to seven years for the conviction under Section 201 IPC which exercise of powers in violation of the prescribed procedure is impermissible 861C D