THE HON’BLE MR JUSTICE L. NARASIMHA REDDY Writ Petition No.14490 of 2009 ORDER: The petitioner is a proprietary concern, initially established by, late P.Gnaneswar Rao, who was appointed as a dealer by the Hindustan Petroleum Corporation Limited, way back in the year 1977. A petroleum outlet was installed in premises bearing No.1-1-5/1, Rashtrapathi Road, Secunderabad. Gnaneswar Rao died on 30.12.2006. His wife-Smt.Soudamini, was appointed as dealer, on compassionate grounds. The outlet is being run for supply of petrol, diesel and LPG gas, apart from other products. The respondents issued a show cause notice, dated 05.05.2009, directing the petitioner to explain as to why the dealership be not cancelled. Two reasons were mentioned therein. The first is about the alleged failure of the petitioner to reach the fixed targets of sales and the second is about the loan transaction of the petitioner with State Bank of India, Secunderabad Branch. The petitioner submitted explanation on 13.05.2009. She stated that, on account of the bereavement in the family, and lack of experience in the business certain anomalies occurred and that she would ensure that the sale targets are reached in future. She further stated that the loan account with the State Bank of India, is being settled and worked out in such a way as not to have any impact on the running of the outlet. The 1st respondent was not satisfied with the explanation. Through order, dated 17.07.2009, he terminated her dealership, with immediate effect. The petitioner challenges the same. She contends that the action of the respondents in terminating her dealership, is illegal and arbitrary and unreasonable. On behalf of the respondents, a detailed counter-affidavit is filed. It is stated that huge investment was made for modernization of the outlet, and despite the same, the sales have gone down. Instances of the outlet being kept dry, are also cited. The impugned action is said to have been taken almost as a last resort. Sri J.Prabhakar, learned counsel for the petitioner, submits that the petroleum outlet was being run till the year 2007, without any complaint, and taking into account, the performance and record of the husband of the petitioner, the respondents have appointed her as dealer, on compassionate grounds. He contends that the petitioner faced several problems, on account of the death of her husband, and despite the same, she arranged to run the outlet; may be with certain shortcomings. Learned counsel submits that the respondents did not give an opportunity to the petitioner to improve, and the livelihood of the entire family was taken away, in an arbitrary manner. Learned Advocate General appeared for the respondents. He raises an objection as to the very maintainability of the writ petition. He contends that the respondents have cancelled the dealership agreement through the impugned order and the petitioner has to approach a Civil Court, or must have recourse to other remedies, if she feels aggrieved. Placing reliance upon a judgment rendered by a learned Single Judge of this Court, in W.P.No.26180 of 2005, learned Advocate General submits that, once the decision making process, in canceling the agreement, accords with law and principles of natural justice, this Court cannot substitute its opinion for that of the respondents, on merits. He contends that the petitioner was given several opportunities to improve, and despite the same, the outlet was not run as per the norms. The respondents granted the dealership to the husband of the petitioner, way back in the year 1977. For three decades, it was run successfully without any complaint, till he died on 30.12.2006. Obviously by taking into account, the manner in which the outlet was run for the past three decades, the respondents appointed the petitioner as dealer in February, 2007. The respondents are justified in expecting the petitioner to run the outlet in a profitable manner. However, two factors need to be taken into account. The first is that it was a family concern and the death of the head of the family, naturally left a big vacuum. The second is that though the petitioner functioned as GPA of her husband for quite sometime, when he was under treatment, she has her own limitations, in acquiring the required managerial skills. In addition to that, the opening of outlets at various new places by different oil companies, would have their own impact on the volume of sales in the existing ones. It appears that the family was in a bit of financial distress by the time the husband of the petitioner died. Negotiations and settlements had to be made by the petitioner. At a time when highly experienced Executives, financial institutions, and established economies faced serious financial problems, the ability of a housewife in bereavement, like the petitioner to overcome such problems, cannot be expected beyond a point. In their show cause notice, dated 05.05.2009, the respondents have referred to clause (9) of the Dealership Agreement, and the targets fixed for the petitioner, for sale of motor spirit and high speed diesel. The sales recorded by the petitioner were mentioned. Reference was also made a letter dated 20.04.2009, addressed by the State Bank of India, which is to the effect that the petitioner availed working capital facilities and committed default. In her detailed explanation, dated 13.05.2009, the petitioner stated as under, with regard to the first aspect. “Sir, the undersigned took over the management of the outlet after the demise of her husband at the age of 60 years. Considering the age of the undersigned and the time it takes for the undersigned at that age to understand the grassroots of the business, we request you take the first two years of the dealership as a learning block for a novice to understand the market and potential of the market. While we agree that this performance is below the minimum off-take required for the products as per the dealership agreement, we request you to consider the last two years as an aberration due to the learning phase for the undersigned. We hereby urge you to give us the opportunity to enable the undersigned to prove that the learning over the last two years be put into implementation and ensure that growth to reach all targets is achieved. We are confident that we will get back on the growth path which has been our mainstay in the business for past decade from this year.” So far as the second aspect is concerned, she has categorically stated that no asset of the oil company was subject to any security and she would ensure that the financial transactions do not come in the way of outlet. This explanation did not find favour with the respondents and dealership agreement was terminated through their order, dated 17.07.2009. The manner in which the explanation offered by the petitioner was taken into account, is reflected in the following paragraph: “We have carefully examined your reply dated 13.05.2009 wherein you have admitted that the sale performance isbelow the stipulated targets and that State Bank of India is harassing you and that SBI is not having any right to damage and you are taking legal course etc., is not acceptable, as SBI has issued letter dated 20.04.2009 to our Corporation classifying your account as non-performing asset and they will seize all the current assets. The explanations offered by you are not acceptable for the reasons that you have not operated the outlet properly and kept the outlet dry on several occasions. By your omission & commission and by not following the instruction of the Corporatin, you have violated Clause No.9, 18, 34 read with 55 (K) of the Dealership Agreement dated 02.02.2007.” Except this, no other discussion is undertaken. This Court is aware of scope of its judicial review and the limits thereof. In matters of this nature, the review or scrutiny, for the most part of it, would be of the decision making process, rather than the decision, as such. More often than not the line separating these two is too thin, if not blurred. The decision making process is generally known after the steps, such as issuance of show cause notice, consideration of the explanation received from the concerned party, affording opportunity of being heard, application of the relevant provisions of law to the facts of the case etc. The requirement to act reasonably, fairly and not in an arbitrary and capricious manner, is aimed at ensuring that the authority concerned does not decide the matter according to his whims and fancies. The entitlement of a citizen to insist that the action taken against him be not arbitrary, unreasonable and capricious can be treated as a facet of his fundamental right guaranteed under 14 of the Constitution of India. It is not as if what is mentioned above is being stated for the first time. The Supreme Court of India and the High Courts have strived a lot to evolve each and every facet, referred to above. The concept or principle of equity under Article 14 of the Constitution of India, which was mostly confined to the complaint of unequal treatment i.e. discrimination, between two similarly situated persons or groups was expanded to cover instances of arbitrariness. It was explained that arbitrariness is antithesis of equity and thereby, violative of Article 14. The principle has become so well-known in Administrative law that reference to precedents is almost unnecessary. Reasonableness as a principle and an essential ingredient of exercise of administrative power is firmly established. A decision, which is unreasonable would lead to nullification of the very exercise. The principle was authoritatively stated by Lord “Coke”, four centuries ago, in Rooke’s[1] case. The authorities, that were conferred with the power to levy charges for repairing a river-bank, have chosen to collect it from one adjacent owner, than to apportion it among the similarly situated persons. The Court held: “…the words of the commission give authority to the commissioners to do according to their discretions, yet their proceedings ought to be limited and bound with the rule of reason and law. For discretion is a science or understanding to discern between falsity and truth, between wrong and right, between shadows and substance, between equity and colourable glosses and pretences, and not to do according to their wills and private affections; for as one saith, talis discretio discretionem confundit.” About half a century later, an English quote held in Estwick v. City of London[2]: “wheresoever a commissioner or other person hath power given to do a thing at his discretion, it is to be understood of sound discretion, and according to law, and that this Court hath power to redress things otherwise done by them.” In the recent past, the principle came to be elaborated in Associated Provincial Picture Houses Limited v. Wednesbury Corporation[3]. The enunciation is so succinct that the principle has since been known after that case and mentioned as Wednesbury on reasonableness. Lord Greene MR said in that case: “It is true that discretion must be exercised reasonably. Now what does that mean? Lawyers familiar with the phraseology used in relation to exercise of statutory discretions often use the word ‘unreasonable’ in a rather comprehensive sense. It has frequently been used and is frequently used as a general description of the things that must not be done. For instance, a person entrusted with a discretion must, so to speak, direct himself properly in law. He must call his own attention to the matters, which he is bound to consider. He must exclude from his consideration matters, which are irrelevant to what he has to consider. If he does not obey those rules, he may truly be said, and often is said, to be acting ‘unreasonably’. Similarly, there may be something so absurd that no sensible person could ever dream that it lay within the powers of the authority. Warrington LJ in Short v. Poole Corporation {(1926) Ch. 66} gave the example of the red-haired teacher, dismissed because she had red hair. This is unreasonable in one sense. In another it is taking into consideration extraneous matters. It is so unreasonable that it might almost be described as being done in bad faith; and, in fact, all these things run into one another.” In catena of decisions rendered by the Supreme Court and other High Courts in India, this principle is followed. It is a different matter that the test of reasonability must be applied carefully and the personal views of a judge on such matters cannot be imported to decide the level of reasonableness. The proportionality in administrative action, has also been evolved as one of the yardsticks to assess the validity of an administrative decision. Even where circumstances exist to such a citizen with punitive measure, it should be commensurate with the degree of violation. In other words, deviation by a citizen on a trivial aspect cannot invite extreme action. A serious doubt exists as to whether the principles, referred to above, apply or become relevant at the stage of decision making process or subsequent stage of the decision itself. The answer is not that simple. It is possible to contend that once the procedural safeguards in the decision making process are observed, it is immaterial whether the ultimate decision is arbitrary, unreasonable, capricious, disproportionate etc. In such an event, the judicial review stricto sensu may not be available to apply those principles. On the other hand, if the principles are treated as the facets of the very exercise of administrative power, and become part of the decision making process, judicial review would become wide enough to annul a decision, in case it is tainted with any of the vices, notwithstanding the fact that the decision making process in its narrow sense, namely issuance of show cause notice, giving an opportunity of being heard, was perfect. While, the former would make the noble concept of judicial review, a glorified ministerial act, the latter would make it meaningful and helping protection of the rights guaranteed to the citizens. The trend of the constitutional Courts is in this very direction. Reverting to the facts of the case, the petitioner mentioned certain facts dealing with the first allegation made against her. It is a matter of record that the sales were not up to the expected level. One has to examine this, with reference to attendant circumstances. If everything in trade and commerce were to have occurred with mathematical precision and as per statistical projections, financial and industrial giants, across the world would not have filed bankruptcy petitions. Several factors contribute, whether for sustaining losses or reporting profits. Many of them cannot be taken for granted. The petitioner could have been find fault, if only she had the necessary wherewithal, and control over other factors, but still did not evince the required amount of interest. Not a word was said about the explanation offered by the petitioner except stating that it was unsatisfactory. The very allegation as to the letter addressed by the State Bank of India, was outside the province of the relationship between the petitioner and the respondents. Now-a-days, it has become common for financial institutions including the Nationalized Banks to resort to arm twisting and blackmailing tactics. The Supreme Court and the High Courts had to intervene on several occasions, decrying the methods adopted by such institutions, such as, engaging recovery agents, threatening the customers in other ways, etc. It was not even alleged that any assets of the respondents were hypothecated or mortgaged by the petitioner. It was totally irresponsible on the part of the authorities of the State Bank of India, to have addressed letters to the respondents in relation to their transaction with the petitioner. On her part, the petitioner informed the respondents that no property of it was subject to any transaction with the bank and that she would ensure that the image of the respondents was not at all effected in any way. Still by making a mechanical reference to the explanation, the dealership and agreement of the petitioner was cancelled. This Court is convinced that the impugned order is a clear example of arbitrary, reasonable and capricious exercise of power by the respondents. At any rate, the cancellation of dealership is totally disproportionate, even if the allegation against the petitioner is true. Being a creature of a statue and an organization fully owned by the Union of India, the 1st respondent is expected to take decisions, which accord with the settled principles. They could have given an opportunity to the petitioner to improve, if necessary by sending one of their officers either to guide the petitioner or to monitor the activities. It was not even alleged that the petitioner has resorted to any malpractices or objectionable activities. It must not be forgotten that notwithstanding the administrative and commercial capacities, State owned oil companies are incurring losses. The compassion shown by the respondents while appointing the petitioner as dealer, was permitted to wither-away. In a judgment in W.P.No.26180 of 2005, a learned Judge of this Court held that once dealership agreement comes to an end due to breach of terms and conditions, there is nothing that can be done in a writ petition. However, if it emerges that the very exercise of determination as to whether the conditions were breached, is tainted with the factors known to administrative law, the Court has a duty to intervene, lest extraordinary jurisdiction conferred under Article 226 of the Constitution of India receives a set back to its importance and relevance. The Writ Petition is accordingly allowed, and the impugned order is set aside. It is directed that, it shall be open to the respondents to associate a Senior Officer with the agency of the petitioner to guide and monitor the activities at the petroleum outlet from time to time. It shall be the obligation of the petitioner to arrange necessary finances, to ensure proper supply and any instance of permitting the outlet to become dry of its stock, due to paucity of funds with the petitioner, shall by itself constitute the basis for cancellation. There shall be no order as to costs. ____________________ L. NARASIMHA REDDY, J. Dt.22-12-2009. L.R. copy to be marked. GJ [1] (1598) 5 Co.Rep.99b [2] (1647) Style 42 [3] (1948) 1 KB 223 229