HONOURABLE SRI JUSTICE GODA RAGHURAM AND HONOURABLE SRI JUSTICE P.DURGA PRASAD WRIT APPEAL No.318 of 2011 ORAL ORDER: (per the Hon’ble Sri Justice Goda Raghuram) The appellants are the respondents in Writ Petition No.20302 of 2010 and the appeal is directed against the order, dated 14.03.2011, allowing the writ petition and invalidating the proceedings of the third respondent, dated 12.08.2010, whereby the first respondent’s dealership with respect to a retail petroleum outlet was terminated. The facts leading to the conclusion recorded by the learned single Judge has been succinctly stated in the impugned order and we do not feel it necessary to restate those facts. Suffice it to record that a show cause notice was issued on 08.12.2009 to the dealer alleging that the HSD Dispensing Unit was delivering 140 milli litres short for every five litres and on further examination, the lever of the metering unit was found to have been tampered, by replacing a gear with 39 teeth in place of one with 38 teeth. After receipt of the dealer’s explanation, wherein it was unequivocally and categorically asserted that the seal of the vending unit was intact and even according to the show cause notice, the respondents opened the seal after obtaining permission of authorities of the Legal Metrology Department, it was not physically possible for the dealer to have meddled with the unit by introducing a spurious or defective gear into a sealed unit, resulting in the short supply. The third appellant by the order, dated 12.08.2010, terminated the dealership agreement of the respondent in terms of Clauses 4, 56, 57, 58, 59, 64 and 66 and “other clauses of the dealership agreement”. The dealer was also intimated that remedy by way of arbitration is available qua Clause-66 of the dealership agreement, dated 14.06.2007. It was further stated in the last paragraph of the order that despite existence of an arbitration agreement, if the dealer resorts to any litigation in any Court of law, the same would not be maintainable as per the provisions of the Arbitration and Conciliation Act, 1996 and that any such litigation would be contested by the appellants at the dealer’s risk, cost and expense. The intimidatory reminder notwithstanding, the dealer ventured to file the writ petition and the same was allowed by the order under appeal. It requires to be noticed that in the show cause notice, dated 08.12.2009, the following is the account recorded on the verification of the dealer’s unit wherein the spurious gear was found to have been introduced into the unit resulting in the short supply of HSD: “Dispensing unit of L&T Z line make having serial number FV L&T 1866 on HSD service was found to deliver 140 ml short per 5 litres. On investigation, it was observed that the lever of the metering unit had extra play. After obtaining approval from the Weights and Measures Department over telephone the seals were broken and metering unit was opened and it was observed that there was a spurious gear having 39 teeth fitted on the metering assembly instead of standard gear having 38 teeth. This gear was having two layers of teeth. As none of the partners were available in the outlet at time of inspection, our officer Sri Moola Naga Satish had informed you over phone and advised you that consequent to the approval given by the Assistant Controller of Weights and Measures, Nizamabad the seals will be broken for checking the metering unit. Your representative Sri Y.Hanumantha Rao was present in the outlet when these irregularities were identified by the inspecting officials on 24/11/2009 and have acknowledged the findings of these irregularities and signed on the Inspection Report and Seizure Report. Our officials had taken the photographs of the spurious gear teeth, which were duly signed by your representative. The said spurious gear has been taken into our custody.” The dealer was charged with having committed the malpractice/irregularity of short supply by tampering with the Corporation’s equipment namely the Dispensing Unit by using unauthorized fittings or gears and that the (dealer’s) act of putting additional gear to the Dispensing Unit resulting in short supply tantamounts to tampering with the Dispensing Unit. On the basis of the charge, it is apparent that before any conclusion as to misconduct or malpractice or tampering by the dealer is arrived at, it must be demonstrated by the appellants by the standards of preponderance of probabilities (no lesser standard known to law exists) that the dealer could access the internal mechanism of the unit and could introduce the spurious gear. Alternatively, a compelling inference as to tampering by or on behalf of the dealer could have perhaps been legitimately arrived at if the respondents could establish that a proper gear was in fact installed in the unit on an earlier occasion and the dealer or his agents could have substituted the gear with a spurious one, even while the seal to the unit was intact. In the absence of officials of Weights and Measures Department and by obtaining only their telephonic approval, the seals were broken by agents of the appellants and the Metering Unit opened. It is the admitted factual scenario that the seals of the Dispensing unit were intact and as observed by the learned single Judge it is not the case of the appellants that the dealer or any other individual could gain access to the unit where the “spurious gear” was introduced even while the seal of the unit was intact. It is not the case of the appellants that the seals of the unit were tampered with or duplicate seals substituted for the seals put by officials of the Legal Metrology Department. Neither the show cause notice nor the final order impugned in the writ petition unravels the mystery of the closed unit and metaphysical entry of the spurious gear into the unit. This was a fatal error in the order of termination of the dealership, on account of which the learned single Judge was persuaded to invalidate the order of termination of the respondent’s dealership, by the appellants. We find no error in the logical process of reasoning adopted by the learned single Judge, for the conclusion that termination of the dealership of the first respondent herein by the appellants on the basis of the matrix of facts adverted to above, was arbitrary and liable to be invalidated. Learned senior counsel for the appellants-Sri D.V.Seetharam Murthy would strenuously contend on the merits of the learned single Judge’s decision that such intrinsic analysis into the validity of the order of termination by the High Court under Article 226 of the Constitution of India was unwarranted as such analysis is more appropriately pursued before the Arbitrator in the context of an arbitration remedy agreed to between the parties, under Clause 66 of the dealership agreement. Responding to a query from this Court as to how the appellants could explain the curious case of the spurious gear inside a locked unit, the learned senior counsel would urge that since the authorized dealer of the gears supplied by Larsen and Turbo had through a letter, dated 10.05.2010, informed the appellants that the gear found in the dealer’s unit was an unauthorized gear and not manufactured and supplied by the authorized supplier, the inference is compelling that since it was only the dealer who stood to gain from short delivery of HSD, he must have introduced the gear notwithstanding that the unit was sealed and despite absence of an explanation as to how a spurious gear could have been introduced into the sealed unit. His contention does not commend acceptance by this Court as it suffers from the logical fallacy of an undistributed middle. The letter of the supplier to the appellants, dated 10.05.2010, is not conclusive of the fact that a standard gear was in place till the inspection nor it is to be construed by any principle of law that a spurious gear was not installed. Since the HSD vended by the dealer is clearly found to be in short supply and that is an undisputed fact, and since a spurious gear having 39 teeth instead of 38 was also found embedded inside the HSD Unit, the conclusion is irresistible in a world governed by physical laws that someone or some agent introduced a non- standard gear into the HSD Unit. But from this fact to take a logical leap to infer that it was introduced by the dealer, is irrational. The chain of circumstances is not complete and merely because the dealer alone would stand to benefit from the short supply, no such inference could legitimately be drawn. It is the admitted position that the supplier of the gears is a private agent. Neither the State nor an instrumentality of the State is the accredited supplying agent of the appellants. There is nothing in the pleadings, including in the counter-affidavit of the appellants herein before the learned single Judge that establishes that the introduction or replacement of the gears is by the respondent dealer. From the statement in the show cause notice, dated (08.12.2009, that the seals put by the Legal Metrology Department on the HSD Unit were opened on the telephonic message of the Legal Metrology Department), it is legitimate to infer that the dealer does not have official access to the internal mechanism of the Vending Unit and that the seals and the maintenance of the integrity of the seals is by the Legal Metrology Department. No effort is made to establish whether the seals on the unit were tampered. As the supplier of the gear, which was found to be non-standard, is an agent of the appellants by the same standards of preponderance of probabilities the possibility of a defective or spurious gear having being supplied cannot be excluded. This is the implication as well as the expressed reason, on the basis of which the writ petition was allowed. Faced with the difficulty of explaining the mystery of the spurious gear in a sealed unit, the learned senior counsel would strenuously contend that the learned single Judge erred in entertaining the writ petition and granting relief since the writ petition itself is not maintainable. At one stage, it was contended that this Court has no jurisdiction, but, on further reflection, the learned senior counsel would state that this is not an appropriate case where the Court should have exercised discretion to entertain the writ petition, examine the vitality of the impugned order and grant relief. Several judgments were cited in support of the contention that a writ petition against violation of terms of a non-statutory contract and requiring the examination of breach of clauses of a non-statutory contract, was not maintainable. These include judgment of this Court in S.Suresh V. Indian Oil Corporation Ltd., Southern Region, Madras[1]; order of a learned single Judge of this Court in W.P.No.26180 of 2005, dated 10.07.2009; another order of a learned single Judge of this Court in W.P.No.76 of 2005, dated 11.01.2005; judgment of a Division Bench of this Court in W.A.No.261 of 2005, dated 17.02.2005; another judgment of a Division Bench of this Court in Sri Lalitha Devi Gas Agencies V. Hindustan Petroleum Corpn. Ltd[2]; judgment of a learned single Judge of this Court in K.Srinivas Rao V. State of A.P.[3] and in M.A.Salam V. Prl.Secy. to Govt. of A.P., BCW Dept., Hyd[4], P.Rajagopal Reddy Vs. A.P. State Road Transport Corporation, Hyd[5]; judgment of a Division Bench of this Court in HPC Ltd., Sec’bad V. Margadarsi Service Centre[6]; and the judgment, dated 14.03.2011 in W.A.No.1051 of 2009. The several judgments of this Court referred to above and cited on behalf of the appellants used the expressions jurisdiction, maintainability and discretion as though those are synonymous, which they are not. In case of tribunals created by Statute, the legislature may invest the tribunal with substantive jurisdiction to decide specified matters consecrated by the legislation and also to decide the jurisdictional facts on which the exercise of substantive jurisdiction depends, as observed by the Supreme Court in Desika Charyuttu V. State of Andhra Pradesh.[7] When it comes to a Tribunal with plenary jurisdiction, as this Court is constituted under Article 226 of the Constitution of India, normatively this Court has the jurisdiction not only to decide the subjects consecrated to its adjudicatory domain as an expressly or a compelling implication of the nature of the adjudicatory enterprise but also has the jurisdiction to decide on the jurisdictional facts. The obligation as a corollary of the judicial review power consecrated on this Court it is axiomatic that no legislation can denude this Court of its constitutional jurisdiction, including provisions of the Arbitration and Conciliation Act, 1996. No provision of the Arbitration and Conciliation Act, 1996 endeavours either expressly or by compelling implication to exclude the jurisdiction of this Court. No authority has been cited before us to legitimize a conclusion that the jurisdiction of this Court has been or could be excluded by an agreement to the contrary. In the circumstances, if the jurisdiction of this Court extends to examining the vitality of a conduct under a contract entered into by a public authority, such jurisdiction cannot be excluded either by legislation or by a contract including by an arbitration clause. No binding authority has been cited before us which unequivocally elucidates a principle that examination of non-statutory contracts involving disputes arising between the parties to a contract, where the State or an instrumentality of the State is a party, is beyond the jurisdiction of this Court and entertainment of such disputes is excluded from the ambit of the power of judicial review, under Article 226 of the Constitution of India. In fact, after a fairly comprehensive analysis of several precedents including the judgment in ABL International Ltd and Anr. V. Export Credit Guarantee Corporation of India Ltd. And Ors[8], the Supreme Court in Noble Resources Ltd V. State of Orissa[9] concluded that the contractual matters are not beyond the realm of judicial review. Its application may however be limited and this statement of principle was recorded in the context of non- statutory contracts of public authorities; since a statutory contract in any case and beyond the disputation is within the public law domain, of judicial scrutiny. The several precedents of the Supreme Court on the area of availability of judicial review on contracts of public authorities, while employing different phraseology reiterating the established principles are ad idem on the issue that even disputes arising out of non-statutory contracts are amenable to the jurisdiction of the High Court as a matter of inherence of jurisdiction under Article 226 of the Constitution. What are spelt out however, are guidelines or advisories as to the appropriate exercise of discretion in entertaining such matters. The Supreme Court in ABL International Ltd and Anr’s case (8th cited supra) states the relevant principles thus: “From the above discussion of ours, following legal principles emerge as to the maintainability of a writ petition:- (a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable. (b) Merely because some disputed questions of facts arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule. (c) A writ petition involving a consequential relief of monetary claim is also maintainable.” As a result of the above analysis of precedents binding and persuasive, we are of the considered view that the order under appeal is not unsustainable on account of an overreach of jurisdiction by this Court. With regard to the exercise of discretion, not only do we find that the discretion has been exercised by the learned single Judge and therefore, it is normally not a case for second guess in an intra court appeal, for the exercise of a discretion and scrutiny of the order impugned in the writ petition, no elaborate examination of the evidence was required on the patent facts on record. The conclusion as to the dealer’s malfeasance was arrived at by the appellants on the singular fact that there was short supply of HSD and on the opening of the seal of the unit after breaking it, the spurious gear was found. The basis of these two facts found is inadequate and is flawed for the reason that the fact that a spurious gear was introduced by the dealer was not legitimately inferred and the fact of the external seals of the unit being intact was not adverted to nor explained in the order of termination. No elaborate recording or analysis of oral and documentary evidence was involved in the enterprise and therefore, we are of the considered view that the exercise of discretion by the learned single Judge is not flawed. On the aforesaid analysis, we are of the considered view that the order under appeal is impeccable and is not liable to be interfered with. Accordingly, the writ appeal is dismissed. In the circumstances, however, without costs. _____________________________ JUSTICE GODA RAGHURAM _________________________ JUSTICE P.DURGA PRASAD 21st July 2011 dr [1] 2007(3) ALD 243 [2] 2002(5) ALD 389 (DB) [3] 2002(5) ALD 393 [4] 2003(1) ALD 699 [5] 2010(6) ALD 521 [6] 2010(6) ALD 517 (DB) [7] AIR 1964 SC 807 [8] (2004) 3 SCC 553 [9] AIR 2007 SC 119