ivil Appeal Nos
1402  1401 of 1990
From the Judgment and Order dated 225
1987 of Delhi High Court in CWP No 2687 of 1986
NS Hegde Additional Solicitor General K Swamy and Ms A Subhashini for the Appellants
G Ramaswamy Rajiv Sawnney AK Verma Sukumaran VB Saharya and SD Sharma for the Respondents
TC Bhatia In person for the Intervener
PUNCHHI J Special leave granted
These two appeals respectively are directed by the Union of India and the Delhi Development Authority hereinafter referred to as the DDA against the full bench decision and order of the Delhi High Court dated May 22 1987 declaring and by necessary implication directing that the DDA carry out and implement its resolution number 26 dated February 1 1983 which resolution was said to have been substituted by it by a later resolution number 3 dated August 1 1986 reiterated by another resolution dated November 3 1986
These resolutions related to some affairs of the Delhi Cloth Mills Limited hereinafter referred to as the DCM the writ petitioner before the High Court and the official reaction thereon
Some of the essential facts as culled out from the judgment of the High Court and others which have come by in the meantime would be necessary to be noticed
The Mill has a complex over an area of about 63 acres at sites at Bara Hindu Rao and Kishan Ganj at Delhi
The Delhi Development Act 1956 envisages preparation by the DDA of a Master Plan for Delhi which it did and was enforced and one of its attributes is to assign land use
Bara Hindu Rao is a non conforming area and the industry of the kind in which the Mill is engaged in has to be shifted out to a conforming area
6 12 acres of land near about Narela was said to have been ear marked for conformed use of factories
The DCM in September 1982 approached the DDA and putforth its proposal for shifting the Mill and for re developing the Mill area for group housing and flatted factories
On February 1 1983 the DDA by resolution number 26 agreed to the scheme as propounded by DCM as feasible for implementation in phases
But in passing it 954 recorded a fact that the shifting of the Mill would involve a lot of working population and consequently income and products manufactured by the DCM would carefully need to be looked into by the Delhi Administration and Ministry of Industries in terms of its affectation to the economy of Delhi
On the other hand in September 1983 the DDA turned down the request of the DCM for allotment of an alternate site measuring 150 to 200 acres of land in a conforming area for shifting having regard to the kind of industry the DCM was engaged in
The DCM then applied to the Secretary LabourLabour Commissioner Delhi Administration for permis sion to close down the Mill under the provisions of Section 25O of the Industrial Disputes Act
The reasons advanced by the DCM inter alia were that the Mill could not be kept located in a non conforming area as otherwise penal conse quences would follow as also that it had run into tremendous losses the industry being unprofitable
On April 15 1985 the request of the DCM was turned down by the Secretary LabourLabour Commissioner
In this state of affairs when the DCM had been given no place to shift to and the closure of the Mill had been declined the DDA reviewed the situa tion and passed a fresh resolution No 3 dated August 1 1986 reviewing its earlier resolution dated February 1 1983 recalling the grant of approval with regard to the scheme propounded by the DCM
Further it felt justified in taking such step as the Master Plan was under process of review keeping the perspective of the year 200 1 AD in view
The DDA even reiterated its resolution of August 1 1986 by another resolution dated November 3 1986 during the penden cy of the writ petition in the High Court when asked to have a fresh look into the matter
These two later resolutions as said before were quashed by the High Court restoring the earlier resolutions dated February 1 1983 taking a broader view that the mill could not be kept working in a non con forming area as otherwise it would attract penal action under the law after the lapse of three years from January 18 1986 and that
the DDA could not justify its action as even the proposals to modify the Master Plan with the perspective of year 2001 AD in view did not contain any proposal for change of land use of the site under the DCM and as of original it was a site marked for group housing and flatted factories
The reasons advanced by the Secretary LabourLabour Commissioner declining request of the DCM for closure of the Mill under section 250 of the Industrial Disputes Act as recorded were as follows The closure of the unit is not in public interest as this 955 would render almost 6000 workers jobless and adversely affect thousands of their families members
Besides trade and commercial activity associated with this Mill would be adversely affected on account of the closure
It is in public interest that the management makes all out efforts towards the efficient functioning of this Mill
Finally the operations of this unit are not dangerous to the lives of the Industrial workers and the people living around the factory
The location of the Unit in a thickly populated locality therefore does not involve any community risk
 The DCM filed Civil Writ No 1281 of 1985 in the High Court which was allowed by a Full Bench of the High Court on March 1 1989 ordering closure of the Mill though much after the decision instantly appealed against
The Lt Governor Delhi Administration sought special leave vide SLP C No 3630 of 1989
Another sequential petition SLP C No 3369 of 1989 was preferred by the DCM against the order of the Full Bench of the High Court passed two days later on March 3 1989 extending time for grant of permission by the Lt Governor for closure of the factory till March 30 1989
When these matters were called in this Court along with the SLPs now appeals it transpired that the DCM and its employees ranging about 6000 in number had fortunately reached an agreement in the matter of closure of the factory
The High Court also had come to the conclusion that indisputably the location of the factory in Bara Hindu Rao within the munic ipal limits of New Delhi was not congenial from the point of view of sanitation and was otherwise hazardous
Keeping such finding and the settlement between the DCM and its employees in view the Full Bench judgment of the High Court dated March 1 1989 was left uninterfered with dismissing the special leave petition No 3630 of 1989 on March 27 1989 with a consequential direction So far as the payment of statutory compensation which forms part of the agreement we direct that DCM shall credit the amounts payable to the individual employees by opening an account with a nationalised bank as per the time schedule indicated in the agreement by making fixed deposits for an initial period of 91 days
Payment into the account and making over the fixed deposit receipt so far as the dis bursement of the statutory compensation is concerned shall be taken to have been satisfied when such fixed deposit receipt is made over to the respective employees 956 Sequelly SLP No 3369 of 1989 preferred by the DCM was also dismissed on the same date
What survived on March 27 1989 were the instant two special leave petitions now appeals and during the course of their hearing Mr Nariman appearing for DCM on his own indicated that DCM was prepared to locate a community centre and a hospital to serve the requirements of the employees as also the residents of the locality
He furthersubmitted that notwithstanding the pendency of those two petitions the Delhi Administration should proceed to process the application of DCM for requisite permission for locating the proposed flatted factories and residential accommodation for officers and workmen in accordance with the Master Plan subject to the result of these petitions
In these circum stances the Municipal Corporation of Delhi which was not a party to these proceedings though later represented by counsel as well as the two petitioners Union of India and the DDA were given directions to process the applications for permission and proceed with the same in accordance with law pending disposal of the special leave petitions
This order was later clarified on April 10 1989 to say that processing of the applications by the three aforementioned functionaries did not include making of a final order and no final order disposing of the applications be made until the special leave petitions are finally disposed of
It was further directed that in the matter of processing the Master Plan and the relevant law be kept in view
The scope of these matters is now considerably reduced and easily discernible
The factory has been ordered to be closed and the employer and the employees have entered a settlement
The supposed basis for reviewing or recalling resolution dated February 1 1983 on the basis of its affec tation to the industry and economy of Delhi as also to the workmen has vanished
On this footing and on the events which have come by the challenge to the judgment and order of the High Court loses vigour and this does not now at least remain a case calling for interference under Article 136 of the Constitution except what we intend adding thereto to further the cause of justice
Resolution No 26 dated February 1 1983 approving the scheme as given by the DCM provided that the scheme had taken all necessary safeguards and controls which would help triggering re development and rehabilitation in the congest ed areas of the central core of the capital
The Technical Committee of the DDA assisting in the matter was even of the opinion that when permitting flatted factories it could 957 be ensured that a reasonable percentage in the scheme is reserved for rehabilitating small industrial units presently functioning in the State in non conforming areas and that the scheme could only be implemented if it had the approval of the Delhi Administration and the Government of India
To further that object during the course of these proceedings upto date plans as prepared and submitted by the DCM to Municipal Corporation of Delhi together with the sanction accorded thereon by the Standing Committee of the Municipal Corporation of Delhi vide resolution No 1136 and 1137 dated November 24 1989 were sent to the DDA for approval on December 6 1989
These had to be examined by the DDA in accordance with the assurance given to this Court by Shri G Ramaswamy its learned counsel and keeping in view the Master Plan
These plans were examined vis a vis the plans earlier submitted by the DCM in 1982 83
We have been con veyed that the objections as raised by the Municipal Corpo ration of Delhi within their own domain have been adopted by the DDA as their own objections which are extracted below 1
FLATTED FACTORIES The scheme has been formulated on a piece of land measuring 2455 acres
This land is earmarked for flatted factories in Delhi Master Plan and partly for widening of road
The Master Plan provides on page 18 about the DCM site as follows The Delhi Cloth Mills have to move out of this congested area to the extensive industrial districts accord ing to the time schedules given for non conforming uses
The present site should be developed for flatted factories in gradual stages to relocate the industries now located in Ahata Kidara and other areas  2
Therefore this site after development in stages for flatted factories is to be utilised only for providing accommodation to the existing units in the above referred areas
The number of flatted factory units will depend uponbe related to the units locatedfunctioning in these areas
Therefore in the proposed scheme of flatted factory all these aspects have to be provided for and it should fulfil these requirements
The Scheme has to be modified accordingly as no such details provision are indicated in the Scheme
958 3
Regarding the No Objection Certificate from the land use point of view as required under bye law No 622 which has come into force wef 2683 DCM is required to obtain the NOC from the land use point
of view from the DDA before the plans can be approved by MCD
In the present case no such NOC under bye law No 622 has been applied for by the DCM 4
The right of way of National Highway No 10 as per Master Plan for Delhi is 200 ft
whereas in the Scheme it is shown as 150 ft the Scheme accordingly needs suitable modifica tion
In the proposed scheme an entryexit is provided from the proposed National Highway No 10 which would not be techni cally feasible because of the proposed road underbridge at this point
In the proposed scheme 2 basements have been provided equivalent to 40 of the ground coverage whereas the base ment should be equivalent to the ground coverage provided in the scheme and should be used for essential services and for parking
This condition has also been imposed in the NOC issued by Commissioner Slum under the Slum Improvement and Clearance Act 1956
GROUP HOUSING RESIDENTIAL COMPLEX AT KISHAN GANJ 1
The scheme on an area measuring 3973 acres has been formulated by the DCM in Kishan Ganj area comprising of i free hold land of DCM ii lease hold land with DCM where Lessor is DDA measuring 1198 acres and iii the DDA land encroached by the DCM measuring 5091 sq mtrs
As per the terms of lease the lessee cannot use without permission in writing of the Lessor land for any purpose other than that for which it has been given by the Lessor
The Scheme therefore needs modification to exclude the lease hold land which has been included in this Scheme
Land measuring 5091 sq mtrs
has been illegally en croachedby DCM
This land belongs to DDA which has 959 not been given on leasehold basis to the DCM
This land has been included in the re development Scheme
Since the owner ship of the land is with the DDA the Scheme will have to be modified to exclude this land also
Therefore lands leased out and unauthorisedly occupied should be deleted and the scheme should confine to the free hold land
The scheme needs modification
The scheme formulated is without any distinction of the freehold leasehold and the unauthorisedly occupied land
Therefore the plan has to be modified to ensure that the scheme on the lease hold land is a separate entity because in the eventuality of permission being granted by the Lessor to allow use of the land for group housing purposes it would be necessary as there may be occasion for determining the lease for violation of the lease terms and this will be possible only if the lease hold land has a separate identity on the ground
As per June 1983 Municipal Building Bye laws under the byelaws 622 a no objection certificate from land use point of view from DDA is required to develop this land for residential use
Therefore the DCM had have to obtain No objection Certificate  from land use point of view from DDA for the development of this land under the provisions of this bye law before their scheme could be considered and sanctioned by the Municipal Corporation of Delhi
In the Scheme formulated it is observed that some of the areas for facilities such as nursery school shopping etc have been included for coverage and FAR calculations as part of the group housing area while as per Master Plan stipula tions the area for community facilities within group
housing scheme cannot be included for the purpose of calcu lations of coverages and EAR
These should be left as inde pendent plots for providing such facilities
The present Master Plan Zoning regulations prescribe a height of 80 ft for residential group housing whereas the height provided is more than that
The present scheme has been formulated having some of the blocks of 12 floors ground plus 11 storeyes
The 960 Master Plan Zoning regulations provide a maximum height of 80 ft
ie ground plus 7 storeyes
Therefore the scheme needs notifications accordingly
In the proposed scheme 2 basements have been provided for parking servicing and storage whereas the basement should be provided equivalent to the ground coverage for essential services and for parking which is also one of the conditions imposed by the Commissioner Slum while granting NOC under the Slum Improvement and Clearance Act 1956
OF INDIA MIN
OF URBAN DEVELOPMENT COMMUNI CATION THIS REGARD
Director DD Min of UD vide his letter No 16021387 DD IIVA date 111289 has stated that the land use and the proportion in which the land has to be developed for various uses the provisions of the Master Plan of 1962 and the proposals made in PDP 2001 will have to be borne in mind
Further it is mentioned that a view is to be taken for the use for which the Nazul Land given on lease is to be put
Thus keeping in view the above communication from the Ministry the Scheme will require modifications in the light of the proposals made in PDP 2001
 The DDA thus requires the aforesaid objections to be first met before it could give its final approval
It is worthy of record that under interim directions of this Court afore referred to its approval shall proceed after the disposal of these appeals
And we feel that time for that purpose has arrived
Having heard learned counsel for the parties and having taken note of the objections above referred to we take the view that the appeals be dismissed conveying a direction that the DDA shall grant to the DCM conditional approval subject to removal of the above enumerated objections raised or such of them as are valid and tenable in law after DCM is heard by the Municipal Corporation of Delhi which the DDA has adopted and the matter be formalised forthwith by the DDA and other authorities connected therewith within eight weeks from today so that the settlement between the workers and the DCM and other matters connected do not stagnate and rather move further to the benefit of all concerned
It appears that to the 6000 961 workmen the grant of such approval even though conditional would be beneficial so are the terms of the settlement
Saddling the order appealed against with the above direction we dismiss these appeals
No Costs
IA No 1 of 1989 for intervention by a co sharer named Tara Chand Bhatia voicing grievance that the DCM has under valued its property at Bara Hindu Rao etc
and that it should be ordered to be revalued is also dismissed as it has no connection with the main issue
Y Lal Appeals dismissed


Summary:
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 lubricantsgoods each year and the total quantity of lubricantsgoods thus lifted had gone upto the extent of 11134854 litres or kgs
The respondent suddenly stopped the supply of lubricants to the appellant firm on 2751983
The appellant firm made several representations to the respondent against the aforesaid action of the respondent but to no use
The appellant there upon filed a writ petition in the High Court praying for a writ of mandamns directing the respondent to desist from denying or discontinuing the supply of lubricants and there by save the appellant from being ousted from the business claim for damages from the date the supply was discontinued was also made
Before the High Court it was inter alia contended by the appellant that the correspondent that passed between the appellant and respondent and the invoices issued during the long years of business would show that the respondent always treated the appellant as its agent and distributor sudden stoppage of supply violated the principles of natural jus tice
It therefore sought the specific performance of the alleged contract
The respondent on the other hand ques tioned the maintainability of the petition as according to it the respondent was not State  within the meaning of article 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 guidelinesdirections issued to it from time to time by the Ministry of 819 Petroleum whereunder it was no longer possible to give further supplies to the appellant firm
After considering the rival contentions advanced by the parties the High Court dismissed the writ petition
The appellant has filed this appeal with special leave
Allowing and disposing of the appeal with directions this Court HELD Every action of the State or of an instrumentality of the State in exercise of its executive power must be informed by reason
In appropriate cases actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution
826D The respondent company Indian Oil Corporation is an organ of the State  or an instrumentality of the State  as contemplated under Article 12 of the Constitution
826F The State acts in its executive power under Article 298 of the Constitution in entering or not entering in contracts with individual parties
Article 14 of the Constitution would be applicable to those exercises of power
Therefore the action of the State organ under Article 14 can be checked
826F Rule of reason and rule against arbitrariness and dis crimination rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situa tion like as in the instant case
Even though the rights of the citizens are in the nature of contractual rights the manner the method and motive of a decision of entering or not entering into a contract are subject to judicial review on the touchstone of relevance and reasonableness fair play natural justice equality and non discrimination in the type of the transactions and nature of the dealing as in the instant case
827E F The dichotomy between rights and remedies cannot be obliterated by any straight jacket formule
It has to be examined in each particular case
829D Decision of the 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 820 Constitution or on any of the grounds available in public law field
It appears to us that in respect of Corporation like Indian Oil Corporation when without informing the parties concerned as in the case of the appellant firm on alleged change of policy and on that basis action to seek to bring to an end the course of transaction over 18 years involving large amounts of money is not fair action espe cially in view of the monopolistic nature of the power of the respondent in this field
829F G EP Royappa vs State of Tamil Nadu and Anr
   Maneka Gandhi vs Union of India and Anr 1978 1 SCC 248 Ajay Nasia and Ors
vs Khalid Mujib Sehravardi and Ors   AD Shetty vs International Airport Authority of India and Ors  and Dwarkadas Mariatia and Ors
vs Board of Trustees of the Port of Bom bay   referred to