M/S SREE RAJESHWARI DAIRY vs THE STATE OF KARNATAKA

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®




IN THE HIGH COURT OF KARNATAKA AT BENGALURU

ST
DATED THIS THE 1 DAY OF JUNE, 2026

BEFORE


THE HON'BLE MR. JUSTICE SURAJ GOVINDARAJ

WRIT PETITION NO. 23487 OF 2024 (CS-RES)

C/W

WRIT PETITION NO. 22850 OF 2024 (GM-TEN)



IN WRIT PETITION NO.23487/2024
BETWEEN

M/S SHREE SSR ENTERPRISES
HOUSE NO. 1-1-5/1/2
BESIDE SATSANG VIHAR
NEAR PILLAR NO.216
RAJENDAR NAGAR X ROAD
HYDERABAD-500048
REPRESENTED BY ITS MANAGING PARTNER
YASHWANTH KUMAR POTU
... PETITIONER
(BY SRI. JAYAKUMAR S. PATIL., SR. ADVOCATE FOR
SRI. PRUTHVI WODEYAR., ADVOCATE)

AND









Digitally signed
by SHWETHA
RAGHAVENDRA
Location: HIGH
COURT OF
KARNATAKA


1. THE STATE OF KARNATAKA
DEPARTMENT OF CO-OPERATION
VIDHANA SOUDHA
BANGALORE-560001
REPRESENTED BY ITS SECRETARY

2. THE KARNATAKA CO-OPERATIVE MILK
PRODUCERS FEDERATION LIMITED
KMF COMPLEX DR. M.H MARIGOWDA ROAD
BANGALORE-560029
REPRESENTED BY ITS MANAGING DIRECTOR

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3. THE RAICHUR BELLARY KOPPAL DISTRICT CO-OPERATIVE
MILK PRODUCERS SOCIETIES UNION
FIRE STATION, SANJAY GANDHI NAGAR
BELLARY-583101
REPRESENTED BY ITS MANAGING DIRECTOR


4. THE HASSAN CO-OPERATIVE
MILK PRODUCERS SOCIETIES UNION
NO.120 INDUSTRIAL AREA B.M ROAD
HASSAN-573201
REPRESENTED BY ITS MANAGING DIRECTOR


5. SR MARKETING AND SERVICES
REPRESENTED BY ITS SOLE PROPRIETOR,
MR. DAYAM RAKESH,
S/O LATE SRI. DAYAM SATYANARAYANA
TH
RESIDING AT FLAT NO.402, 4 FLOOR,
HAYAS MARVEL RESIDENCY, NARSINGI,
HYDERABAD-520075 TELANGANA
…. RESPONDENTS
(BY SRI. YOGESH D. NAIK., AGA FOR R1;
SRI. SUMANTH L. BHARADWAJ., ADVOCATE FOR R2;
SRI. M. SHYAM PRASAD., ADVOCATE FOR R3;
SRI. PRADEEP S. SAWKAR., ADVOCATE FOR R4;
SRI. PRAMOD NAIR SR. ADVOCATE FOR
SRI. SANTOSH MUTTALLI., ADVOCATE FOR R5)

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227
OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF
CERTIORARI QUASHING THE COMMUNICATION DTD 7.08.2024
BEARING NO.RBKMUL/02319/2024-25 ISSUED BY THE R-2 TO R-3
VIDE ANNX-H AND ETC.

IN WRIT PETITION NO.22850/2024
BETWEEN

M/S SREE RAJESHWARI DAIRY
PRODUCTS IND (PVT) LTD
SY NO. 224/EE2, MOJERIA SHIVAR
NH-7, KANIMET TA VILLAGE
MAHABUBNAGAR DISTRICT

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TELANGANA 509381
REPRESENTED BY ITS DIRECTOR
G SUDHAKAR REDDY
REGISTERED UNDER COMPANIES ACT, 1956
... PETITIONER
(BY SRI. JAYAKUMAR S. PATIL., SR. ADVOCATE FOR
SRI. MOHAMAD TAHIR.A., ADVOCATE)


AND


1. THE STATE OF KARNATAKA
DEPARTMENT OF CO-OPERATION
VIDHANA SOUDHA
BANGALORE-560001
REPRESENTED BY ITS SECRETARY

2. THE KARNATAKA CO-OPERATIVE MILK
PRODUCERS FEDERATION LIMITED
KMF COMPLEX, DR. M.H MARIGOWDA ROAD
BANGALORE-560029
REPRESENTED BY ITS MANAGING DIRECTOR
REGISTERED UNDER THE COMPANIES ACT, 1959.
3. THE HASSAN CO-OPERATIVE
MILK PRODUCERS SOCIETIES UNION
NO.120 INDUSTRIAL AREA B.M ROAD
HASSAN-573201
REPRESENTED BY ITS MANAGING DIRECTOR
REGISTERED UNDER THE COMPANIES ACT, 1959.

4. M/S SHAKTI MILK AND MILK PRODUCTS
A PARTNERSHIP FIRM
NO. 24-7 208/A
POOJA COMPLEX
ST
1 FLOOR
BESIDE NIT COLLEGE
DHARGA-KAZIPET
HANUMAKONDA, TELAGANA-506001.
REP BY ITS MANAGING DIRECTOR
…. RESPONDENTS
(BY SRI. YOGESH D. NAIK., AGA FOR R1;
SRI. SUMANTH L. BHARADWAJ., ADVOCATE FOR R2;
SRI. PRADEEP S. SAWKAR., ADVOCATE FOR R3;

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SRI. ANAND MUTTALLI., ADVOCATE FOR R4)

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227
OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF
CERTIORARI QUASHING THE TENDER DTD 20.05.2024 BEARING NO.
KMF/PUR/TENDER-650/2024-25 VIDE ANNEXURE-K ISSUED BY R-2
AND ETC.

THESE WRIT PETITIONS COMING ON FOR ORDERS AND
HAVING BEEN RESERVED FOR ORDERS ON 17.02.2026, THIS DAY,
THE COURT PRONOUNCED THE FOLLOWING:

CORAM: HON'BLE MR. JUSTICE SURAJ GOVINDARAJ

CAV ORDER


1. The petitioner in Writ Petition No.23487/2024 is
before the Court seeking for the following reliefs:
a. Issue a writ of certiorari quashing the
communication dated 07.08.2024 bearing
RBKMUL/02319/2024-25 issued by KMF to
Respondent No.3 vide Annexure-H.
(a)(i)To issue a writ of certiorari quashing the
work order dated 07.11.2024 bearing No.
RBKVMU/WC & FA/1249/2024-25 issued by
Respondent No.3 vide Annexure-J in the interest
of justice and equity.
b. Issue any writ or order or direction as this Hon’ble
Court deems fit under the circumstances of the
case.

2. The petitioner in Writ Petition No.22850/2024 is
before the Court seeking for the following reliefs:

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a. Issue a writ of certiorari quashing the tender
dated 20.5.2024 bearing No.KMF/PUR/Tender-
650/2024-25 vide Annexure-K issued by KMF.
b. Issue any writ of certiorari quashing the LOA
dated 07.08.2024 issued by KMF in favour of
Hassan vide Annexure-K1.

c. Issue any writ or order or direction as this Hon’ble
Court deems fit under the circumstances of the
case.

3. Facts in WP No. 23487 of 2024;

3.1. The petitioner claims to be a partnership firm
engaged in marketing, warehousing, and
clearing and forwarding operations in the State
of Telangana.

3.2. Respondent No.2 - The Karnataka Co-Operative
Milk Producers Federation Limited (Hereinafter
for brevity referred to as “ KMF ”) appointed the
petitioner as a marketing, warehousing,
clearing and forwarding agent on 18.05.2015 in
respect of products of Sri Rajeshwari Dairy
Products for the entire State of Telangana, for a
period of two years.

3.3. By order dated 28.09.2016, KMF permitted
transactions between the co-packing agent and
the marketing and warehousing agent to be
carried out through Respondnet No.4 – Hassan

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Co-operative Milk Producers Society Union
(Hereinafter for brevity referred to as
“ Hassan ”).

3.4. On 29.09.2016, KMF addressed a
communication to the petitioner stating that all
milk marketing operations would thereafter be
handled by Hassan. Pursuant thereto, Hassan,
acting under the directions of KMF, issued an
Expression of Interest for selection of an
agency to undertake marketing, warehousing,
clearing and forwarding operations in the State
of Telangana. The petitioner, having been
selected pursuant to the said process, was
issued a work order dated 30.03.2019, and a
Warehousing, Clearing and Forwarding Agency
Agreement was executed on the same date.

3.5. Subsequently, by communication dated
07.08.2024, KMF permitted respondent No.3 -
The Raichur Bellary Koppal District Co-
Operative Milk Producers Societies Union
(Hereinafter for brevity referred to as
“ Raichur ”) to market Nandini milk and allied
products in the districts of Warangal, Adilabad,
Nizamabad, Karimnagar, and Khammam. The

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petitioner contends that, in view of its
appointment as the Warehousing, Clearing and
Forwarding Agent for the entire State of
Telangana, the said districts could not have
been excluded from its area of operation.
Aggrieved thereby, the petitioner has
challenged the said communication before this
Court.

3.6. During the pendency of the proceedings, KMF
issued a further work order dated 07.11.2024
in favour of Raichur, which has also been
challenged by way of amendment. The
petitioner reiterates that, in light of its alleged
exclusive contract as Warehousing, Clearing
and Forwarding Agent, no parallel or
overlapping appointment in favour of Raichur
could have been made.

4. Facts in WP No.22850 of 2024;

4.1. The petitioner claims to be engaged in the dairy
industry, including production and packaging of
dairy products for sale in the State of
Telangana. It is stated that KMF, with the
objective of entering the Hyderabad market for
sale of Nandini milk, curd and allied products,

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issued a work order to the petitioner pursuant
to an Expression of Interest, for undertaking
co-packing, processing, pasteurisation,
standardisation, reprocessing, packaging and
refrigeration of milk, for a period of eleven
months.

4.2. It is further stated that KMF, by arrangement
dated 04.02.2016, entrusted the entire
business of sale of “Nandini” branded milk and
milk products in Hyderabad to Hassan. Under
the said arrangement, Hassan was vested with
responsibility to invite tenders and enter into
agreements for co-packing and related
activities. Though KMF had initially issued a
tender notification dated 30.04.2016, upon
respondent No.3 assuming control, an
agreement came to be executed between
Hassan and the petitioner on 01.10.2016 for
similar activities, for a period of 36 months.

4.3. In 2019, Hassan issued a fresh tender
notification. The petitioner, having been
selected, entered into an agreement dated
01.01.2020 for a further period of three years.
The petitioner contends that notwithstanding

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the entrustment of the Hyderabad market
(including the State of Telangana) to Raichur,
KMF, by communication dated 07.01.2020,
unilaterally divided Hyderabad into five zones.

4.4. In respect of the central, north and west zones,
KMF entrusted operations to the Shimoga Milk
Union, which in turn appointed M/s Sambasiva
Dairy Products (India) Private Limited as its
agent. The said action was objected to by
Hassan on the ground that parallel operations
by different milk unions would lead to market
disruption and operational confusion in
Hyderabad.

4.5. Thereafter, by communication dated
12.08.2020, KMF withdrew the earlier
permission granted to Shimoga Milk Union to
operate in three zones of Hyderabad and
directed Hassan to continue operations therein.
Subsequently, a tender notification dated
25.01.2023 was issued, which was challenged
in W.P. No.4989/2023; the said writ petition
came to be dismissed on 16.03.2023. Pursuant
thereto, the tender was awarded to the

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petitioner for a further period of 36 months
commencing from 19.05.2023.

4.6. In the meantime, KMF issued a tender
notification dated 20.05.2024 for co-packing of
milk and curd in the State of Telangana for a
period of two years. The said tender was
awarded to M/s Shakti Milk and Milk Products,
by issuance of a Letter of Acceptance dated
07.08.2024.

4.7. The petitioner has approached this Court
contending that Hassan, having been granted
exclusive rights in Telangana, and having in
turn appointed the petitioner for execution of
such activities, the subsequent action of KMF in
awarding parallel contracts is impermissible. It
is stated that a meeting of Hassan was
convened on 09.08.2024, pursuant to which a
communication dated 12.08.2024 was
addressed to KMF asserting that the petitioner
was already operating in the concerned areas.
In the aforesaid circumstances, the petitioner
challenges the actions of KMF and seeks the
reliefs set out in the writ petition.

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5. Sri.Jayakumar S Patil., learned Senior Counsel,
appearing for the petitioners in both the matters
submits that:

5.1. Sri.Jayakumar S Patil., learned Senior Counsel,
for the petitioners submits that the petitioners
have been appointed by Hassan for the entire
State of Telangana. It is contended that the
petitioner in W.P.No.22850/2024 has been
conferred exclusive rights to undertake co-
packing, processing, pasteurisation,
standardisation, reprocessing, packaging and
refrigeration of milk, and that such exclusivity
cannot be interfered with during the
subsistence of the contract.

5.2. That the petitioner in W.P. No.23487/2024 has
been appointed as the exclusive Warehousing,
Clearing and Forwarding Agent for the State of
Telangana, and that KMF could not have
appointed any third party to undertake identical
activities within the same territorial jurisdiction.

5.3. KMF has erroneously interpreted the expression
“Hyderabad”. According to him, the term does
not denote merely Hyderabad City, but refers
to the broader Hyderabad region, historically

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understood as encompassing the undivided
State of Andhra Pradesh, and, post-bifurcation,
the State of Telangana.

5.4. It is contended that the work orders issued in
favour of the petitioners remain valid and
subsisting till May 2026, and, during their
currency, no parallel appointment could have
been made. It is further submitted that an
earlier attempt by KMF to divide Hyderabad
into zones and entrust certain zones to
Shimoga Milk Union was withdrawn upon
objection, thereby affirming the petitioners’
exclusive operational domain. In such
circumstances, KMF is precluded from
reintroducing parallel arrangements.

5.5. Sri.Jayakumar S Patil., learned Senior Counsel,
submits that the consistent course of conduct
between the parties demonstrates that
exclusivity in favour of the petitioners was
recognised and maintained for a substantial
period. It is therefore contended that the
impugned communication dated 07.08.2024
and the work order dated 07.11.2024, whereby
respondent No.5 in W.P. No. 23487/2024 has

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been appointed as Warehousing, Clearing and
Forwarding Agent, and Hassan in W.P. No.
22850/2024 has been appointed for co-packing
activities, are arbitrary and impermissible.

5.6. It is further submitted that the petitioners have
been continuously performing the contractual
obligations since 2015 across the State of
Telangana, and that the subsisting contractual
arrangements could not have been altered
unilaterally. Learned Senior Counsel,
emphasises that respondents No.2 and 3, being
instrumentalities of the State, are amenable to
writ jurisdiction under Article 12 of the
Constitution of India, and their actions are
liable to be tested on the touchstone of Article
14.

5.7. In this regard, he relies upon the decision in
K.V. Panduranga Rao v. Karnataka Dairy
1
Development Corporation, Bangalore ,
more particularly paras 22 and 23 thereof,
which is reproduced hereunder for easy
reference;

1

(1994) 1 Karnataka Law Journal 149

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22. Applying these aforesaid principles, let us consider
the position of the Federation. It is true that the entire
share capital is not met by the State Government;
that the membership is open not only to the State and
Central Governments, but also to the Co-operative
Milk Producers' Unions; that provision is made for
obtaining finances from sources other than the
Government; that the power of management lies in a
Board which consists not only the Government
nominees and officers, but Chairman of affiliated Milk
Producers' Unions; and that provision is made for
distribution of profits among the members, by way of
dividend on the paid up share capital. But these
answers in the negative, to some of the tests do not
mean that the federation is not ‘State’. It is not
necessary that all the tests laid down by the Supreme
Court should be satisfied to reach the conclusion as to
whether a given entity is a State.
23. It is evident from the facts narrated in paras (3)
to (6) above that the Federation is created by the
State Government to implement and to carry out
Dairy Development Programme in the State. Dairy
Development is a part of State's endeavour to
organise agriculture and animal Husbandry on modern
and scientific lines and to take steps for preserving
and improving breeds of cows and other milch cattle,
under the Directive Principles of State Policy, as
contained in Article 48 of the Constitution of India.
The Dairy units that were being originally run as
Departments of the State Government, were
transferred to the Federation on its incorporation,
either directly or through Karnataka Dairy
Development Corporation Ltd. to cut down the losses
incurred by the State Government. The functions of
the Federation as detailed in the Government order
dated 6-11-1982 and the Bye-laws of the Federation,
show that they are of public importance and closely
related to the Government's functions relating to

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organising animal husbandry. In the field in which it
operates, the Federation enjoys monopoly status
conferred by the State. Most of the finances, loans
and Bank guarantees required for running the affairs
of the Federation have been provided by the State
Government. The deep and pervasive control of the
State over the Federation over the functions and
working of the Federation are evident from the
Government Orders and Bye-laws 3.1, 5.1, 20 (1.1 to
1.3), 26.3, 26.8(a) referred to above. It is thus
evident that Federation has undertaken and is
executing functions which were earlier discharged by
the Government and which are public obligations of
the State. Therefore, there is no doubt that the
Federation as it presently stands, is an agent and
instrumentality of the State and is therefore ‘State’
within the meaning of that expression in Article 12.
We may point out here that several other High Courts
have, while dealing with similar Federations in other
States, consistently taken the view that such
Federations are instrumentalities of the State, See the
cases of A.P. Dairy Development Co-operative
Federation-Dr. Yarlagadda Purnachandra Rao v. State
of Andhra Pradesh [1984 LIC (NOC) 21.] , Punjab
State Co-operative Milk Producers Federation Ltd.-R.S.
Goyal v. State of Punjab [1989 (3) SLR 258.] and
National Dairy Development Board-S.A. Rahim v.
NDDB [1984 (1) LLJ 496.] . We are afraid that learned
Single Judge took a narrow view in holding that the
Federation is not ‘State’. Assuming that the Co-
operative Milk Producers' Unions, which are the
members of the Federation, are not instrumentalities
of the State as held by the learned Single Judge, it
does not follow that the Federation of such Milk
Producers' Union is not an instrumentality of State.
The totality of circumstances and the answers to
important tests laid by the Supreme Court as to
whether the functions of the entity are of public
importance and closely related to government

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functions and whether any Department or wing of the
Government has been transferred to the new entity,
and whether there is deep and pervasive State Control
over the affairs and functioning of the entity, ought to
have been considered by the learned Single Judge, in
determining whether the Federation is ‘State’ under
Article 12. He has failed to do and his reasoning and
decision cannot be sustained.

5.8. By relying on K.V.Panduranga Rao ,
Sri.Jayakumar S Patil., learned Senior Counsel,
submits that in K.V.Panduranga Rao , it has
been held that a co-operative federation
engaged in dairy development, though not
wholly owned by the State, would nonetheless
constitute “State” within the meaning of Article
12 of the Constitution of India, having regard to
the nature of its functions, the degree of State
control, and the public importance of the
activities undertaken.

5.9. Sri.Jayakumar S Patil., learned Senior Counsel,
submits that KMF and Hassan discharge
functions of public importance in the field of
dairy development, which is integrally
connected with the Directive Principles of State
Policy under Article 48 of the Constitution. It is
contended that the said entities operate under
deep and pervasive control of the State, are

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substantially financed by the State, and
perform functions which are closely related to
governmental objectives. On that basis, it is
submitted that KMF and Hassan are
instrumentalities of the State within the
meaning of Article 12, and consequently, their
actions are subject to judicial review on the
touchstone of Article 14 of the Constitution of
India.

5.10. Sri.Jayakumar S Patil., learned Senior Counsel,
relies upon the decision of the Hon'ble Supreme
Court in ABL International Ltd. v. Export
2
Credit Guarantee Corpn. of India Ltd . ,
more particularly para 8, 10, 14, 19, 21, 23,
27, 50 and 53 thereof, which are reproduced
hereunder for easy reference:
8. As could be seen from the arguments addressed in
this appeal and as also from the divergent views of
the two courts below, one of the questions that falls
for our consideration is whether a writ petition under
Article 226 of the Constitution of India is maintainable
to enforce a contractual obligation of the State or its
instrumentality, by an aggrieved party.
10. It is clear from the above observations of this
Court in the said case, though a writ was not issued
on the facts of that case, this Court has held that on a
given set of facts if a State acts in an arbitrary

2

(2004) 3 SCC 553

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manner even in a matter of contract, an aggrieved
party can approach the court by way of writ under
Article 226 of the Constitution and the court
depending on facts of the said case is empowered to
grant the relief. This judgment in K.N. Guruswamy v.
State of Mysore [AIR 1954 SC 592 : (1955) 1 SCR
305] was followed subsequently by this Court in the
case of D.F.O. v. Ram Sanehi Singh [(1971) 3 SCC
864] wherein this Court held: (SCC p. 865, para 4)
“By that order he has deprived the respondent of a
valuable right. We are unable to hold that merely
because the source of the right which the respondent
claims was initially in a contract, for obtaining relief
against any arbitrary and unlawful action on the part
of a public authority he must resort to a suit and not
to a petition by way of a writ. In view of the judgment
of this Court in K.N. Guruswamy case [AIR 1954 SC
592 : (1955) 1 SCR 305] there can be no doubt that
the petition was maintainable, even if the right to
relief arose out of an alleged breach of contract,
where the action challenged was of a public authority
invested with statutory power.”
(emphasis supplied)
14. This judgment again, in our opinion, does not help
the first respondent in the argument advanced on its
behalf that in contractual matters remedy under
Article 226 of the Constitution does not lie. It is seen
from the above extract that in that case because of an
arbitration clause in the contract, the Court refused to
invoke the remedy under Article 226 of the
Constitution. We have specifically inquired from the
parties to the present appeal before us and we have
been told that there is no such arbitration clause in
the contract in question. It is well known that if the
parties to a dispute had agreed to settle their dispute
by arbitration and if there is an agreement in that
regard, the courts will not permit recourse to any

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other remedy without invoking the remedy by way of
arbitration, unless of course both the parties to the
dispute agree on another mode of dispute resolution.
Since that is not the case in the instant appeal, the
observations of this Court in the said case of Bridge &
Roof Co. [(1996) 6 SCC 22] are of no assistance to
the first respondent in its contention that in
contractual matters, writ petition is not maintainable.
19. Therefore, it is clear from the above enunciation
of law that merely because one of the parties to the
litigation raises a dispute in regard to the facts of the
case, the court entertaining such petition under Article
226 of the Constitution is not always bound to
relegate the parties to a suit. In the above case of
Gunwant Kaur [(1969) 3 SCC 769] this Court even
went to the extent of holding that in a writ petition, if
the facts require, even oral evidence can be taken.
This clearly shows that in an appropriate case, the writ
court has the jurisdiction to entertain a writ petition
involving disputed questions of fact and there is no
absolute bar for entertaining a writ petition even if the
same arises out of a contractual obligation and/or
involves some disputed questions of fact.
21. Placing reliance on the observations of this Court
in the said case, the learned Counsel, contended,
unless the action challenged in the writ petition
pertains to the discharge of a public function or public
duty by an authority, the courts will not entertain a
writ petition which does not involve the performance
of the said public function or public duty. Learned
Counsel, argued in the instant case while repudiating
the contract, the first respondent was not discharging
any public function or public duty.
23. It is clear from the above observations of this
Court, once the State or an instrumentality of the
State is a party of the contract, it has an obligation in
law to act fairly, justly and reasonably which is the

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requirement of Article 14 of the Constitution of India.
Therefore, if by the impugned repudiation of the claim
of the appellants the first respondent as an
instrumentality of the State has acted in contravention
of the abovesaid requirement of Article 14, then we
have no hesitation in holding that a writ court can
issue suitable directions to set right the arbitrary
actions of the first respondent. In this context, we
may note that though the first respondent is a
company registered under the Companies Act, it is
wholly owned by the Government of India. The total
subscribed share capital of this Company is 2,50,000
shares out of which 2,49,998 shares are held by the
President of India while one share each is held by the
Joint Secretary, Ministry of Commerce and Industry
and Officer on Special Duty, Ministry of Commerce
and Industry respectively. The objects enumerated in
the memorandum of association of the first
respondent at para 10 read:
“To undertake such functions as may be entrusted to
it by the Government from time to time, including
grant of credits and guarantees in foreign currency for
the purpose of facilitating the import of raw materials
and semi-finished goods for manufacture or
processing goods for export.”
Para 11 of the said object reads thus:
“To act as agent of the Government, or with the
sanction of the Government on its own account, to
give the guarantees, undertake such responsibilities
and discharge such functions as are considered by the
Government as necessary in national interest.”
27. From the above discussion of ours, the following
legal principles emerge as to the maintainability of a
writ petition:

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(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 fact
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.
50. The learned Counsel, appearing for the appellants
in this appeal contended that the one and the only
stand taken by the first respondent in its two letters of
repudiation is that the appellants have changed the
mode of receipt of consideration without consulting
the first respondent which ground according to the
learned Counsel, is not one of the conditions of the
insurance contract. He further submitted that an
imposition of a condition of that nature requiring a
prior consultation would be beyond the terms of the
insurance contract, and therefore, impermissible.
While the learned Counsel, appearing for the first
respondent Corporation contended that the ground of
repudiation is not so much the lack of prior
consultation but, according to the learned Counsel, is
that the first respondent was not liable to pay for the
loss suffered by the exporter by agreeing to accept
the consideration in cash because that mode of
consideration was not covered by the risk insured by
the respondent. According to the learned Counsel, the
one and the only mode of payment of consideration
covered by the said respondent is by barter of goods.
Therefore, even though in the letters of repudiation
prior consultation before change in the mode of
consideration is pointed out as one of the grounds, the
same is not the primary ground.

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53. From the above, it is clear that when an
instrumentality of the State acts contrary to public
good and public interest, unfairly, unjustly and
unreasonably, in its contractual, constitutional or
statutory obligations, it really acts contrary to the
constitutional guarantee found in Article 14 of the
Constitution. Thus if we apply the above principle of
applicability of Article 14 to the facts of this case, then
we notice that the first respondent being an
instrumentality of the State and a monopoly body had
to be approached by the appellants by compulsion to
cover its export risk. The policy of insurance covering
the risk of the appellants was issued by the first
respondent after seeking all required information and
after receiving huge sums of money as premium
exceeding Rs 16 lakhs. On facts we have found that
the terms of the policy do not give room to any
ambiguity as to the risk covered by the first
respondent. We are also of the considered opinion
that the liability of the first respondent under the
policy arose when the default of the exporter occurred
and thereafter when the Kazakhstan Government
failed to fulfil its guarantee. There is no allegation that
the contracts in question were obtained either by
fraud or by misrepresentation. In such factual
situation, we are of the opinion, the facts of this case
do not and should not inhibit the High Court or this
Court from granting the relief sought for by the
petitioner.

5.11. By relying on ABL International ,
Sri.Jayakumar S Patil., learned Senior Counsel,
submits that the present writ petitions are
clearly maintainable notwithstanding that the
dispute arises in a contractual context. It is
contended that once KMF and Hassan are held

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to be instrumentalities of the State, their
actions, even in contractual matters, are
required to satisfy the test of fairness,
reasonableness and non-arbitrariness under
Article 14 of the Constitution of India.

5.12. Sri.Jayakumar S Patil., learned Senior Counsel,
submits that the impugned actions of KMF in
issuing the communication dated 07.08.2024
and the work order dated 07.11.2024, resulting
in parallel appointments in respect of the very
same field of operation, are ex facie arbitrary
and in derogation of the subsisting contractual
rights of the petitioners. It is further contended
that the mere existence of disputed questions
of fact or the contractual origin of the dispute
does not bar the exercise of jurisdiction under
Article 226, particularly where the impugned
action is vitiated by arbitrariness.

5.13. It is therefore submitted that the petitioners
are entitled to invoke the writ jurisdiction of
this Court to challenge the impugned actions,
and to seek appropriate reliefs, including
enforcement of their subsisting contractual
rights, inasmuch as the actions of the

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respondents fail to meet the constitutional
mandate of fairness and non-arbitrariness.

5.14. He relies on Mahabir Auto Stores and Others
3
vs. Indian Oil Corporation and Others .,
more particularly para 5, 15, 17, 18, 19, 20, 21
and 23 thereof, which are reproduced
hereunder for easy reference;
5. 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 lubricants. 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

3

(1990) 3 SCC 752

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behalf of the appellants. The firm was treated as
authorised dealer and agent of the respondent
company. It was contended that there was a change
of policy by the respondent company, and certain
documents of the year 1972 were relied upon to
indicate that the supply of lubricants was stopped to
those Associations 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 appellant'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-cum Delivery
Order there was a note indicating "For Conditions 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 in the
application filed under Article 226 of the Constitution.
15. Mr. Salve on behalf of the respondents sought to
urge that the appellant-firm had never been
appointed as a Lube Distributor. There is no letter of
intent, letter of appointment, much less letter at all.

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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 Distributor
for Lube products would be appointed and no new
products would be distributed either through the
existing network, 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.
17. 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 strait-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.
18. Having considered the facts and circumstances of
the case and the nature of the contentions and the
dealing between the parties and in view of the
present state of law, we are of the opinion that
decision of the State/public authority under Article
298 of the Constitution, is an administrative decision
and can be impeached on the ground that the
decision is arbitrary or violative of Article 14 of the
Constitution of India on any of the grounds available
in public law field. It appears to us that in respect of
corporation like IOC when without informing the

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parties concerned, 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 to course of
transaction over 18 years involving large amounts of
money is not fair action, especially in view of the
monopolistic nature of the power of the respondent in
this field. Therefore, it is necessary to reiterate that
even in the field of public law, the relevant persons
concerned or to be affected, should be taken into
confidence. Whether and in what circumstances that
confidence should be taken into consideration cannot
be laid down on any strait-jacket basis. It depends on
the nature of the right involved and nature of the
power sought to be exercised in a particular situation.
It is true that there is discrimination between power
and right but whether the State or the
instrumentality of a State has the right to function in
public field or private field is a matter which, in our
opinion, depends upon the facts and circumstances of
the situation, but such exercise of power cannot be
dealt with by the State or the instrumentality of the
State without informing and taking into confidence,
the party whose rights and powers are affected or
sought to be affected, into confidence. In such
situations most often people feel aggrieved by
exclusion of knowledge if not taken into confidence.
19. 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 (sic is expected) to be
followed by an organ of the State and that process
must be conscious and all those affected should be
taken into confidence.
20. Having regard to the nature of the transaction,
we are of the opinion that it would be appropriate to

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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
fairness 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 process which will work.
21. Therefore, we direct that the case of the
appellants be put to the respondents 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 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 necessary 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.
23. 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

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consistent with good government, which will be
arrived at fairly and should be taken after taking the
persons concerned whose rights/obligations are
affected, into confidence. Fairness in such action
should be perceptible, if not transparent.

5.15. By relying on Mahabir Auto , Sri.Jayakumar S
Patil., learned Senior Counsel, submits that
even in the realm of contractual or commercial
dealings, an instrumentality of the State is
under a constitutional obligation to act fairly,
reasonably and in a non-arbitrary manner. It is
contended that where there exists a long-
standing course of dealings and an established
working arrangement, the State or its
instrumentality cannot abruptly alter or
terminate such arrangement, particularly
without notice, consultation, or affording an
opportunity to the affected party.

5.16. Sri.Jayakumar S Patil., learned Senior Counsel,
submits that in the present case, the petitioners
have been engaged in the relevant operations
since 2015, and their continued engagement
over a substantial period establishes a
consistent course of conduct recognising their
role and operational domain. It is contended
that the impugned actions of KMF in introducing

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parallel arrangements by appointing third
parties, without prior notice or consultation with
the petitioners, is arbitrary and violative of the
principles of fairness mandated under Article 14
of the Constitution.

5.17. It is further submitted that, as held in Mahabir
3
Auto Stores , even in the absence of a formal
statutory obligation, the State and its
instrumentalities are required to act in a
manner that is fair, just and reasonable,
particularly where their actions have the effect
of disrupting an existing commercial
relationship of considerable duration. On this
basis, it is contended that the impugned actions
are liable to be set aside.

5.18. He relies upon the decision of the Hon’ble
Supreme Court in Shrilekha Vidyarthi v.
4
State of U.P ., more particularly para 13, 15,
18, 20, 21, 23, 24, 29, 30, 35, 36 and 39
thereof, which are reproduced hereunder for
easy reference;
13. The learned Additional Advocate General
contended that clause (3) of para 7.06 says that the
appointment of a District Government Counsel, is only

4

(1991) 1 SCC 212

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professional engagement terminable at will on either
side and not appointment to a post under the
government; and the government has the power to
terminate the appointment at any time ‘without
assigning any cause’. He contended that this power to
terminate the appointment at any time without
assigning any cause and the clear statement that the
appointment is only professional engagement
terminable at will on either side is sufficient to indicate
that the relationship is the same as that of a private
client and his Counsel,. In our opinion, this provision
has to be read not in isolation, but in the context in
which it appears and along with the connected
provisions, already referred to. The expression
‘professional engagement’ is used therein to
distinguish it from ‘appointment to a post under the
government’ in the strict sense. This, however, does
not necessarily mean that a person who is not a
government servant holding a post under the
government does not hold any public office and the
engagement is purely private with no public element
attaching to it. This part of clause (3) of para 7.06
means only this and no more. The other part of clause
(3) which enables the government to terminate the
appointment ‘at any time without assigning any cause’
can also not be considered in the manner suggested
by the learned Additional Advocate General. The
expression ‘at any time’ merely means that the
termination may be made even during the subsistence
of the term of appointment and ‘without assigning any
cause’ means without communicating any cause to the
appointee whose appointment is terminated. However,
‘without assigning any cause’ is not to be equated with
‘without existence of any cause’. It merely means that
the reason for which the termination is made need not
to be assigned or communicated to the appointee. It
was held in Liberty Oil Mills v. Union of India [(1984)
3 SCC 465] that the expression ‘without assigning any
reason’ implies that the decision has to be

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communicated, but reasons for the decision have not
to be stated; but the reasons must exist, otherwise,
the decision would be arbitrary. The non-assigning of
reasons or the non-communication thereof may be
based on public policy, but termination of an
appointment without the existence of any cogent
reason in furtherance of the object for which the
power is given would be arbitrary and, therefore,
against public policy. Clause (3) of para 7.06 must,
therefore, be understood to mean that the
appointment of a District Government Counsel, is not
to be equated with appointment to a post under the
government in the strict sense, which does not
necessarily mean that it results in denuding the office
of its public character; and that the appointment may
be terminated even during currency of the term by
only communicating the decision of termination
without communicating the reasons which led to the
termination. It does not mean that the appointment is
at the sweet will of the government which can be
terminated at any time, even without the existence of
any cogent reason during the subsistence of the term.
The construction, suggested on behalf of the State of
U.P. of this provision, if accepted, would amount to
conceding arbitrary power of termination to the
government, which by itself is sufficient to reject the
contention and thereby save it from any attack to its
validity.
15. A brief reference to some decisions of this Court,
in which the character of engagement of a
Government Counsel, was considered, may be made.
In Mahadeo v. Shantibhai [(1969) 2 SCR 422 : 40 ELR
81] it was held that a lawyer engaged by the Railway
Administration during the continuance of the
engagement was holding an ‘office of profit’. The
engagement of the Railway Counsel, was similar to
that of the Government Counsel, in the present case.
It was pointed out that by ‘office’ is meant the right

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and duty to exercise an employment or a position of
authority and trust to which certain duties are
attached; and such an engagement satisfied that test.
Even though the decision was rendered in the context
of disqualification under the Election Law by holding
an ‘office of profit’, yet it is useful for appreciating the
nature of such an engagement or appointment of a
Counsel, by the government. In Mundrika Prasad
Singh v. State of Bihar [(1979) 4 SCC 701 : (1980) 1
SCR 759] the nature of appointment of Government
Pleaders came up for consideration and it was said
that the office of a Government Pleader, as defined in
Section 2(7) of the Code of Civil Procedure, 1908, is a
public office. Krishna Iyer, J., in that decision, also
pointed out that the (SCC p. 707, para 16)
“governments under our Constitution shall not play
with Law Offices on political or other impertinent
considerations as it may affect the legality of the
action and subvert the rule of law itself”. In that
decision, an earlier Madras decision was quoted with
approval, wherein, it was clearly held that the duties
of the Government Pleader are of a public nature and
that the office of a Government Pleader is a public
office. The relevant extract is as under : (SCC pp.
706-07, para 15)
“… A Government Pleader is more than an advocate
for a litigant. He holds a public office. We recall with
approval the observations a Division Bench of the
Madras High Court made in Ramachandran v.
Alagiriswami [AIR 1961 Mad 450 : ILR 1961 Mad 553]
and regard the view there, expressed about a
Government Pleader's office, as broadly correct even
in the Bihar set up.
… the duties of the Government Pleader, Madras are
duties of a public nature. Besides, as already
explained the public are genuinely concerned with the
manner in which Government Pleader discharges his

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duties because, if he handles his cases badly, they
have ultimately to foot the bill. …
*
I consider that the most useful test to be applied to
determine the question is that laid down by Erle, J. in
(1851) 17 QB 149. The three criteria are, source of
the office, the tenure and the duties. I have applied
that test and I am of opinion that the conclusion that
the office is a public office is irresistible.”
Similarly, in Mukul Dalal v. Union of India [(1988) 3
SCC 144 : 1988 SCC (Cri) 566] , it was held that (SCC
pp. 149 & 152, para 6 & 9) “the office of the Public
Prosecutor is a public one” and “the primacy given to
the Public Prosecutor under the Scheme of the Code
(CrPC) has a social purpose”.
18. The scope of judicial review permissible in the
present case, does not require any elaborate
consideration since even the minimum permitted
scope of judicial review on the ground of arbitrariness
or unreasonableness or irrationality, once Article 14 is
attracted, is sufficient to invalidate the impugned
circular as indicated later. We need not, therefore,
deal at length with the scope of judicial review
permissible in such cases since several nuances of
that ticklish question do not arise for consideration in
the present case.
20. Even apart from the premise that the ‘office’ or
‘post’ of DGCs has a public element which alone is
sufficient to attract the power of judicial review for
testing validity of the impugned circular on the anvil of
Article 14, we are also clearly of the view that this
power is available even without that element on the
premise that after the initial appointment, the matter
is purely contractual. Applicability of Article 14 to all
executive actions of the State being settled and for

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the same reason its applicability at the threshold to
the making of a contract in exercise of the executive
power being beyond dispute, can it be said that the
State can thereafter cast off its personality and
exercise unbridled power unfettered by the
requirements of Article 14 in the sphere of contractual
matters and claim to be governed therein only by
private law principles applicable to private individuals
whose rights flow only from the terms of the contract
without anything more? We have no hesitation in
saying that the personality of the State, requiring
regulation of its conduct in all spheres by
requirements of Article 14, does not undergo such a
radical change after the making of a contract merely
because some contractual rights accrue to the other
party in addition. It is not as if the requirements of
Article 14 and contractual obligations are alien
concepts, which cannot co-exist.
21. The Preamble of the Constitution of India resolves
to secure to all its citizens Justice, social, economic
and political; and Equality of status and opportunity.
Every State action must be aimed at achieving this
goal. Part IV of the Constitution contains ‘Directives
Principles of State Policy’ which are fundamental in the
governance of the country and are aimed at securing
social and economic freedoms by appropriate State
action which is complementary to individual
fundamental rights guaranteed in Part III for
protection against excesses of State action, to realise
the vision in the Preamble. This being the philosophy
of the Constitution, can it be said that it contemplates
exclusion of Article 14, non-arbitrariness which is
basic to rule of law, from State actions in contractual
field when all actions of the State are meant for public
good and expected to be fair and just? We have no
doubt that the Constitution does not envisage or
permit unfairness or unreasonableness in State
actions in any sphere of its activity contrary to the

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professed ideals in the Preamble. In our opinion, it
would be alien to the constitutional scheme to accept
the argument of exclusion of Article 14 in contractual
matters. The scope and permissible grounds of judicial
review in such matters and the relief which may be
available are different matters but that does not
justify the view of its total exclusion. This is more so
when the modern trend is also to examine the
unreasonableness of a term in such contracts where
the bargaining power is unequal so that these are not
negotiated contracts but standard form contracts
between unequals.
23. Thus, in a case like the present, if it is shown that
the impugned State action is arbitrary and, therefore,
violative of Article 14 of the Constitution, there can be
no impediment in striking down the impugned act
irrespective of the question whether an additional
right, contractual or statutory, if any, is also available
to the aggrieved persons.
24. The State cannot be attributed the split
personality of Dr Jekyll and Mr Hyde in the contractual
field so as to impress on it all the characteristics of the
State at the threshold while making a contract
requiring it to fulfil the obligation of Article 14 of the
Constitution and thereafter permitting it to cast off its
garb of State to adorn the new robe of a private body
during the subsistence of the contract enabling it to
act arbitrarily subject only to the contractual
obligations and remedies flowing from it. It is really
the nature of its personality as State which is
significant and must characterize all its actions, in
whatever field, and not the nature of function,
contractual or otherwise, which is decisive of the
nature of scrutiny permitted for examining the validity
of its act. The requirement of Article 14 being the duty
to act fairly, justly and reasonably, there is nothing
which militates against the concept of requiring the
State always to so act, even in contractual matters.

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There is a basic difference between the acts of the
State which must invariably be in pubic interest and
those of a private individual, engaged in similar
activities, being primarily for personal gain, which may
or may not promote public interest. Viewed in this
manner, in which we find no conceptual difficulty or
anachronism, we find no reason why the requirement
of Article 14 should not extend even in the sphere of
contractual matters for regulating the conduct of the
State activity.
29. It can no longer be doubted at this point of time
that Article 14 of the Constitution of India applies also
to matters of governmental policy and if the policy or
any action of the government, even in contractual
matters, fails to satisfy the test of reasonableness, it
would be unconstitutional. (See Ramana Dayaram
Shetty v. International Airport Authority of India
[(1979) 3 SCC 489 : (1979) 3 SCR 1014] and Kasturi
Lal Lakshmi Reddy v. State of Jammu and Kashmir
[(1980) 4 SCC 1 : (1980) 3 SCR 1338] ). In Col. A.S.
Sangwan v. Union of India [1980 Supp SCC 559 :
1981 SCC (L&S) 378] while the discretion to change
the policy in exercise of the executive power, when
not trammelled by the statute or rule, was held to be
wide, it was emphasised as imperative and implicit in
Article 14 of the Constitution that a change in policy
must be made fairly and should not give the
impression that it was so done arbitrarily or by any
ulterior criteria. The wide sweep of Article 14 and the
requirement of every State action qualifying for its
validity on this touchstone, irrespective of the field of
activity of the State, has long been settled. Later
decisions of this Court have reinforced the foundation
of this tenet and it would be sufficient to refer only to
two recent decisions of this Court for this purpose.
30. In Dwarkadas Marfatia and Sons v. Board of
Trustees of the Port of Bombay [(1989) 3 SCC 293]
the matter was re-examined in relation to an

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instrumentality of the State for applicability of Article
14 to all its actions. Referring to the earlier decisions
of this Court and examining the argument for
applicability of Article 14, even in contractual matters,
Sabyasachi Mukharji, J. (as the learned Chief Justice
then was), speaking for himself and Kania, J.,
reiterated that: (SCC p. 304, para 22) “every action of
the State or an instrumentality of the State, must be
informed by reason. ….actions uninformed by reasons
may be questioned as arbitrary in proceedings under
Article 226 or Article 32 of the Constitution.”
Ranganathan, J. did not express any opinion on this
point but agreed with the conclusion of the other
learned Judges on the facts of the case. It is obvious
that the conclusion on the facts of the case could not
be reached by Ranganathan, J. without examining
them and this could be done only on the basis that it
was permissible to make the judicial review. Thus,
Ranganathan, J. also applied that principle without
saying so. In view of the wide ranging and, in
essence, all-pervading sphere of State activity in
discharge of its welfare functions, the question
assumes considerable importance and cannot be
shelved. The basic requirement of Article 14 is fairness
in action by the State and we find it difficult to accept
that the State can be permitted to act otherwise in
any field of its activity, irrespective of the nature of its
functions when it has the uppermost duty to be
governed by the rule of law. Non-arbitrariness, in
substance, is only fair play in action. We have no
doubt that this obvious requirement must be satisfied
by every action of the State or its instrumentality in
order to satisfy the test of validity.
35. It is now too well settled that every State action,
in order to survive, must not be susceptible to the vice
of arbitrariness which is the crux of Article 14 of the
Constitution and basic to the rule of law, the system
which governs us. Arbitrariness is the very negation of

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the rule of law. Satisfaction of this basic test in every
State action is sine qua non to its validity and in this
respect, the State cannot claim comparison with a
private individual even in the field of contract. This
distinction between the State and a private individual
in the field of contract has to be borne in the mind.
36. The meaning and true import of arbitrariness is
more easily visualized than precisely stated or
defined. The question, whether an impugned act is
arbitrary or not, is ultimately to be answered on the
facts and in the circumstances of a given case. An
obvious test to apply is to see whether there is any
discernible principle emerging from the impugned act
and if so, does it satisfy the test of reasonableness.
Where a mode is prescribed for doing an act and there
is no impediment in following that procedure,
performance of the act otherwise and in a manner
which does not disclose any discernible principle which
is reasonable, may itself attract the vice of
arbitrariness. Every State action must be informed by
reason and it follows that an act uninformed by
reason, is arbitrary. Rule of law contemplates
governance by laws and not by humour, whims or
caprices of the men to whom the governance is
entrusted for the time being. It is trite that ‘be you
ever so high, the laws are above you’. This is what
men in power must remember, always.
39. No doubt, it is for the person alleging arbitrariness
who has to prove it. This can be done by showing in
the first instance that the impugned State action is
uninformed by reason inasmuch as there is no
discernible principle on which it is based or it is
contrary to the prescribed mode of exercise of the
power or is unreasonable. If this is shown, then the
burden is shifted to the State to repel the attack by
disclosing the material and reasons which led to the
action being taken in order to show that it was an
informed decision which was reasonable. If after a

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prima facie case of arbitrariness is made out, the
State is unable to show that the decision is an
informed action which is reasonable, the State action
must perish as arbitrary.

5.19. By relying on Shrilekha Vidyarthi ,
Sri.Jayakumar S Patil., learned Senior Counsel,
submits that the State and its instrumentalities
cannot claim a dual character in contractual
matters so as to act fairly at the stage of
entering into a contract, and thereafter act
arbitrarily during its subsistence. It is
contended that the requirement of Article 14,
namely fairness, reasonableness and non-
arbitrariness, permeates all actions of the
State, irrespective of whether such actions arise
in the realm of public law or contractual
dealings.

5.20. Sri.Jayakumar S Patil., learned Senior Counsel,
submits that even where a contract permits
termination or variation without assigning
reasons, such power cannot be exercised
arbitrarily or without the existence of a rational
and discernible basis. It is contended that in the
present case, the impugned actions of KMF in
introducing parallel arrangements and
appointing third parties in respect of the very

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same field of operation, during the subsistence
of valid contractual arrangements in favour of
the petitioners, are not informed by any
discernible principle or rational basis and are
therefore vitiated by arbitrariness.

5.21. It is further submitted that once a prima facie
case of arbitrariness is established, the burden
shifts to the respondents to justify their action
by placing on record the reasons and material
forming the basis of the impugned decisions. In
the absence of any such justification, the
impugned actions are liable to be set aside as
violative of Article 14 of the Constitution of
India.

5.22. He relies upon the decision of the Hon’ble Apex
Court in GAIL v. Indian Petrochemicals
5
Corpn. Ltd. , more particularly para 21, 22,
23, 24 and 25 thereof, which are reproduced
hereunder for easy reference;
21. Although the dispute arises from a commercial
contract, we find that the writ petition challenging the
clauses was maintainable. It is not disputed that GAIL
is a public sector undertaking and thus qualifies
under the definition of “State” as per Article 12 of the
Constitution. At the time of entering into contract,

5

(2023) 3 SCC 629

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GAIL was enjoying a monopolistic position with
respect to the supply of natural gas in the country.
IPCL, having incurred a significant expense in setting
up the appropriate infrastructure, had no choice but
to enter into agreement with GAIL. Thus, there was a
clear public element involved in the dealings between
the parties. Further, writ jurisdiction can be exercised
when the State, even in its contractual dealings, fails
to exercise a degree of fairness or practises any
discrimination. We are fortified in our view by this
Court's decision in ABL International [ABL
International Ltd. v. Export Credit Guarantee Corpn.
of India Ltd., (2004) 3 SCC 553] and Joshi
Technologies [Joshi Technologies International Inc. v.
Union of India, (2015) 7 SCC 728] .
22. In the present case, GAIL's action in levying “loss
of transportation charges” was ex facie
discriminatory, insofar as IPCL was mandated to build
its own pipeline in terms of the allocation letter and
was not using GAIL's HBJ pipeline at all. Thus, it
cannot be said that merely because an alternative
remedy was available, the Court should opt out of
exercising jurisdiction under Article 226 of the
Constitution and relegate the parties to a civil
remedy.
23. Now, we come to the validity of the clauses
under which “loss of transportation charges” were
levied. In our view, it would be extremely unfair and
unjust, apart from being an arbitrary action in
violation of Article 14 of the Constitution of India that
IPCL is charged for loss of transportation charges
when it is mandated to lay down its own pipelines
and not to transport the gas through the HBJ
pipeline. This action also violates the principle of non-
discrimination enshrined in Article 14. IPCL, which is
using its own pipelines, is being treated on a par with
other commercial entities who are carrying gas
through the HBJ pipeline laid down by GAIL. This is

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more so when the pricing orders by the authority
concerned i.e. MoPNG stipulate a fixed price for
natural gas.
24. On a basic principle, it cannot be doubted that
once GAIL has laid down the pipeline, it is entitled to
structure in its cost in the contract. However, the
issue is not simply that. We are faced with a scenario
where two public sector enterprises entered into a
contract in pursuance of the allocation made by the
MoPNG. There was also a time constraint for IPCL.
After incurring a heavy expenditure in the
construction of the Gandhar Plant, IPCL had very little
choice but to enter into the contract. What is of most
significance is that IPCL was bound to follow the
allocation terms provided by the principal authority
i.e. MoPNG. Thus, as pleaded by IPCL, they were
faced with a “Hobson's choice”, where they had to
either give up the contract or accept the clauses
levying transportation charges. On a conspectus of
the above factors, it can be said that GAIL exercised
an unequal bargaining power at the time of signing
the contract.
25. In fact, the contractual exercise of providing such
a clause runs contrary to every commercial and
common sense and is manifestly arbitrary, as IPCL is
not being charged under any general terms but for a
specific purpose. This purpose cannot exist in the
contract in view of the master authority i.e. the Union
of India, providing to the contrary.


5.23. By relying on Gas Authority of India ,
Sri.Jayakumar S Patil., learned Senior Counsel,
submits that even in contractual matters
involving commercial arrangements, the writ

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jurisdiction of this Court is maintainable where
the State or its instrumentality acts in a
manner that is arbitrary, discriminatory, or
unfair. It is contended that where one party
enjoys a dominant or monopolistic position,
resulting in unequal bargaining power, the
contractual terms and subsequent actions
flowing therefrom are subject to scrutiny on the
touchstone of Article 14 of the Constitution of
India.

5.24. Sri.Jayakumar S Patil., learned Senior Counsel,
submits that in the present case, KMF, being
the controlling entity in respect of the “Nandini”
brand and dairy distribution network, occupies
a position of dominance vis-à-vis the
petitioners. It is contended that the petitioners,
having made substantial investments and
having structured their operations in
furtherance of the arrangements entered into
with KMF and Hassan, were effectively left with
no real alternative but to continue within the
framework determined by the respondents.

5.25. Sri.Jayakumar S Patil., learned Senior Counsel,
further submitted that the impugned actions of

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KMF in introducing parallel appointments and
overlapping contractual arrangements during
the subsistence of the petitioners’ contracts are
manifestly arbitrary and commercially
irrational, inasmuch as they disrupt an existing
operational framework without any discernible
justification. Such action, it is contended, is
akin to imposing conditions or creating
obligations that are inconsistent with the very
structure of the contractual relationship, and
therefore falls foul of Article 14.

5.26. Sri.Jayakumar S Patil., learned Senior Counsel,
therefore submits that, as held in GAIL , where
a State instrumentality exercises its contractual
powers in a manner that is unjust,
discriminatory or reflective of unequal
bargaining power, the same is amenable to
judicial review and liable to be set aside.

5.27. He relies upon the decision of the Hon’ble Apex
Court in Subodh Kumar Singh Rathour v.
Kolkata Metropolitan Development
6
Authority , more particularly para 34, 53, 64
and 65 thereof, which are reproduced
hereunder for easy reference;

6

2024 SCC OnLine SC 1682

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34. Having heard the learned Counsel, appearing
for the parties and having gone through the
materials on record, the two pivotal questions
that fall for our consideration are as under:
34.1. (I) What is the scope of judicial review of
the actions of the State in the matters relating to
contract/tender disputes under writ jurisdiction?
34.2. (II) Whether the action on the part of the
respondent herein in cancelling the tender vide
its Notice dated 7-2-2023 was amenable to the
writ jurisdiction of the High Court? If so, whether
the said action could be termed as arbitrary or
unfair and in consequence of violation of Article
14 of the Constitution of India?
53. The decision of this Court in ABL
International Ltd. v. Export Credit Guarantee
Corpn. of India Ltd. [ABL International Ltd. v.
Export Credit Guarantee Corpn. of India Ltd.,
(2004) 3 SCC 553 : (2004) 118 Comp Cas 213]
is significant and was the turning point in the
scope of judicial review in contractual matters. In
this landmark ruling, this Court decisively laid
down and approved that a relief against a State
or its instrumentalities in matters related to
contractual obligations can be sought under the
writ jurisdiction. The relevant observations read
as under: (SCC pp. 570 & 572, paras 23 & 27)
“23. It is clear from the above observations of
this Court, once the State or an instrumentality
of the State is a party of the contract, it has an
obligation in law to act fairly, justly and
reasonably which is the requirement of Article 14
of the Constitution of India. Therefore, if by the
impugned repudiation of the claim of the
appellants the first respondent as an
instrumentality of the State has acted in

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contravention of the abovesaid requirement of
Article 14, then we have no hesitation in holding
that a writ court can issue suitable directions to
set right the arbitrary actions of the first
respondent. …
*
27. From the above discussion of ours, the
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
fact 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.”
(emphasis supplied)
64. Thus, the present dispute even if related to a
tender, cannot be termed as a pure contractual
dispute, as the dispute involves a public law
element. Although there is no discharge of a
public function by the respondent towards the
appellant yet there is a right to public law action
vested in him against the respondent in terms of
Article 14 of the Constitution. This is because the
exercise of the executive power by it in the
contractual domain i.e. the cancelling of the
tender carries a corresponding public duty to act
in a reasonable and rationale manner. Thus, we
find that the writ petition filed by the respondent
was maintainable and the relief prayed for could

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have been considered by the High Court in
exercise of its writ jurisdiction.
65. In Ramana Dayaram Shetty v. International
Airport Authority of India [Ramana Dayaram
Shetty v. International Airport Authority of India,
(1979) 3 SCC 489 : AIR 1979 SC 1628] this
Court held that the actions of the State in
contractual matters must conform to some
standard or norms which is rational, non-
discriminatory and not guided by extraneous
considerations, otherwise the same would be in
violation of Article 14 of the Constitution. The
relevant observations read as under: (SCC pp.
511-12, para 21)
“21. This rule also flows directly from the doctrine
of equality embodied in Article 14. It is now well
settled as a result of the decisions of this Court in
E.P. Royappa v. State of T.N. [E.P. Royappa v.
State of T.N., (1974) 4 SCC 3 : 1974 SCC (L&S)
165] and Maneka Gandhi v. Union of India
[Maneka Gandhi v. Union of India, (1978) 1 SCC
248] that Article 14 strikes at arbitrariness in
State action and ensures fairness and equality of
treatment. It requires that State action must not
be arbitrary but must be based on some rational
and relevant principle which is non-
discriminatory: it must not be guided by any
extraneous or irrelevant considerations, because
that would be denial of equality. The principle of
reasonableness and rationality which is legally as
well as philosophically an essential element of
equality or non-arbitrariness is projected by
Article 14 and it must characterise every State
action, whether it be under authority of law or in
exercise of executive power without making of
law. The State cannot, therefore, act arbitrarily in
entering into relationship, contractual or
otherwise with a third party, but its action must

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conform to some standard or norm which is
rational and non-discriminatory.”
(emphasis
supplied)

5.28. By relying on Subodh Kumar Singh Rathour ,
Sri.Jayakumar S Patil., learned Senior Counsel,
reiterated that even in matters arising out of
contracts or tenders, the writ jurisdiction of this
Court is maintainable where the impugned
action of the State or its instrumentality
involves a public law element and is alleged to
be arbitrary or unreasonable.

5.29. It is contended that the present dispute cannot
be characterised as a mere contractual dispute,
inasmuch as the impugned actions of KMF in
restructuring operational arrangements and
introducing parallel appointments in the State
of Telangana involve the exercise of executive
power having civil and commercial
consequences, thereby attracting the discipline
of Article 14 of the Constitution.

5.30. Sri.Jayakumar S Patil., learned Senior Counsel,
submits that, as held in Subodh Kumar Singh
6
Rathour , every action of the State in
contractual matters must conform to rational,

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non-discriminatory standards and must not be
guided by extraneous or irrelevant
considerations. It is contended that the
impugned communications and work orders,
having the effect of diluting or overriding the
petitioners’ subsisting contractual rights without
any disclosed rationale, are vitiated by
arbitrariness.

5.31. Sri.Jayakumar S Patil., learned Senior Counsel,
further submitted that the existence of a
contractual relationship or the availability of
alternative remedies does not bar the exercise
of writ jurisdiction, particularly where the action
impugned is not a mere breach but constitutes
an arbitrary exercise of power by a State
instrumentality. On this basis, it is contended
that the present writ petitions are maintainable
and the impugned actions are liable to be
interfered with.

5.32. On the basis of the aforesaid factual matrix and
the legal propositions laid down in the decisions
relied upon, Sri.Jayakumar S Patil., learned
Senior Counsel, for the petitioners submits that
the petitioners are operating under valid and

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subsisting contractual arrangements, which,
according to them, confer exclusive rights in
respect of the activities entrusted, namely co-
packing, processing, and Warehousing, Clearing
and Forwarding operations, within the State of
Telangana. It is contended that these
arrangements have been acted upon over a
substantial period of time, during which the
petitioners have established infrastructure,
invested capital, and structured their
commercial operations on the legitimate
premise that the field of operation entrusted to
them would not be subjected to parallel or
overlapping appointments.

5.33. Sri.Jayakumar S Patil., learned Senior Counsel,
submits that KMF and Hassan, being
instrumentalities of the State within the
meaning of Article 12 of the Constitution of
India, are bound by the constitutional mandate
of fairness, reasonableness and non-
arbitrariness in all their actions, including those
arising in the contractual sphere. It is
contended that the State cannot assume a dual
character so as to adhere to constitutional
discipline at the stage of entering into a

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contract, and thereafter act in a purely private
capacity during its subsistence. The
requirement of Article 14 permeates the
entirety of State action and obligates the
respondents to act in a manner that is informed
by reason, consistent, and non-discriminatory.

5.34. It is further submitted that during the currency
of the subsisting work orders and agreements,
the impugned actions of KMF in issuing the
communication dated 07.08.2024 and the work
order dated 07.11.2024, thereby appointing
additional entities to undertake identical
activities in the very same territorial
jurisdiction, amount to a direct and arbitrary
interference with the petitioners’ operational
domain. Such actions, it is contended, are not
supported by any disclosed policy decision,
objective criteria, or rational basis, and are
therefore liable to be characterised as arbitrary
and violative of Article 14.

5.35. Sri.Jayakumar S Patil., learned Senior Counsel,
emphasises that the course of conduct between
the parties over the years demonstrates a
consistent understanding that the petitioners

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were to operate within the entirety of the State
of Telangana without competing or parallel
appointments. The earlier attempt by KMF to
introduce zonal bifurcation and involve another
milk union having been withdrawn upon
objection, reinforces the petitioners’ contention
that exclusivity in operational terms was both
recognised and acted upon. The impugned
actions, therefore, represent a departure from
established practice without any justification,
thereby attracting the vice of arbitrariness.

5.36. It is further contended that the petitioners have
altered their position and incurred substantial
financial and operational commitments in
reliance upon the subsisting arrangements. The
sudden introduction of parallel agencies not
only disrupts the existing supply chain and
distribution framework but also results in
commercial prejudice, erosion of business
viability, and uncertainty in operations. Such
action, it is submitted, is manifestly
unreasonable and disproportionate.

5.37. Sri.Jayakumar S Patil., learned Senior Counsel,
also submits that the petitioners were neither

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put on notice nor taken into confidence prior to
the issuance of the impugned communications
and work orders. The absence of any
consultative process or opportunity to represent
their position renders the decision-making
process arbitrary and contrary to the principles
of fairness which are required to be observed
by State instrumentalities, particularly in the
context of long-standing commercial
arrangements.

5.38. It is further submitted that the impugned
actions have the effect of imposing an
unreasonable restriction on the petitioners’
right to carry on trade and business under
Article 19(1)(g) of the Constitution of India.
While the State may regulate commercial
activity, such regulation must be reasonable
and in public interest. In the present case, the
impugned actions, being unsupported by any
discernible public interest or rational basis, fail
to satisfy the test of reasonableness.

5.39. Sri.Jayakumar S Patil., learned Senior Counsel,
therefore submits that the present case is not
one of a mere breach of contract, but one

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involving arbitrary exercise of power by State
instrumentalities in the contractual domain,
thereby attracting the jurisdiction of this Court
under Article 226. It is contended that the
impugned communications and work orders are
vitiated by arbitrariness, lack of transparency,
and absence of rational justification, and are
therefore liable to be quashed.

6. Sri.Sumanth L.Bharadwaj., learned Counsel,
appearing for Respondent No.2 - KMF would submit
that;

6.1. At the outset, it is contended that the writ
petitions are not maintainable. The dispute,
according to learned Counsel, arises purely out
of contractual arrangements and pertains to
commercial rights and obligations inter se the
parties. It is submitted that no public law
element is involved so as to warrant
interference under Article 226 of the
Constitution of India. The lis, being in the realm
of private law, ought to be adjudicated before a
competent civil forum.

6.2. Sri.Sumanth L.Bharadwaj., learned Counsel,
submits that the petitioners have

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fundamentally misconstrued the expression
“Hyderabad Market”. It is contended that the
said expression refers specifically to the
geographical and commercial market within the
city of Hyderabad, and cannot be expanded to
include the entire State of Telangana. The
interpretation sought to be placed by the
petitioners, equating “Hyderabad Market” with
the whole State, is stated to be untenable and
contrary to the contractual and administrative
understanding of KMF.

6.3. It is further submitted that, in terms of Clause
3 of the agreement entered into with the
petitioner in W.P. No. 23487/2024, KMF has
expressly reserved the right to add, delete or
modify the area of operation depending upon
market requirements and performance
parameters. In view of such contractual
stipulation, it is contended that no claim of
exclusivity can be asserted by the petitioners,
and KMF retains the authority to appoint
additional agencies as necessitated by business
exigencies.

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6.4. Sri.Sumanth L.Bharadwaj., learned Counsel,
submits that, historically, the marketing of
Nandini milk and allied products in Hyderabad
was carried out through Mother Dairy, which
procured products from various milk unions in
Karnataka. In order to streamline operations
and ensure efficient supply, KMF took a
conscious decision to entrust operations in the
“Hyderabad Market” to Hassan, which led to the
issuance of the order dated 28.09.2016.

6.5. Referring to the said order dated 28.09.2016, it
is submitted that the entrustment in favour of
Hassan was confined strictly to the “Hyderabad
Market”. It is contended that such entrustment
was a policy decision taken in the business
interest of KMF, and the scope thereof cannot
be enlarged by the petitioners. Being a policy
decision relating to commercial operations, the
same is not amenable to judicial review in writ
proceedings.

6.6. Sri.Sumanth L.Bharadwaj., learned Counsel,
further submits that all subsequent
communications, including the letter dated
29.09.2016 issued by KMF and the

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communication dated 12.07.2018 issued by
Hassan, consistently refer only to the
“Hyderabad Market” and not to the State of
Telangana. It is therefore contended that the
petitioners cannot derive any right beyond the
territorial scope expressly contemplated in
these communications.

6.7. It is submitted that the permission granted by
KMF to respondent No.3 on 17.07.2018 to issue
an Expression of Interest was also confined to
the “Hyderabad Market”. Consequently, any
action taken by Hassan beyond this limited
mandate would be ultra vires its authority.

6.8. Sri.Sumanth L.Bharadwaj., learned Counsel,
contends that Hassan exceeded its authority by
entering into agreements with the petitioners
purporting to cover the entire State of
Telangana. It is submitted that Hassan, being
subordinate to KMF in the operational
hierarchy, could not have expanded the
territorial scope beyond what was delegated.
Therefore, any claim of exclusivity based on
such agreements is legally untenable.

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6.9. In this background, it is submitted that the
petitioners cannot claim any exclusive right
over the entire State of Telangana. At best,
their rights, if any, are confined to the
“Hyderabad Market”. It is further submitted
that, in order to expand the market and
improve distribution of Nandini products in
other districts of Telangana, KMF took a policy
decision to permit other milk unions to operate
in specified districts, as reflected in the
communication dated 07.08.2024. Pursuant
thereto, appropriate appointments have been
made, including appointment of agencies by the
concerned unions.

6.10. Sri.Sumanth L.Bharadwaj., learned Counsel,
submits, without prejudice, that even assuming
the petitioners have enforceable rights within
the “Hyderabad Market”, the impugned
appointments pertain to districts outside
Hyderabad, and therefore do not infringe any
rights of the petitioners. It is contended that no
legal injury or prejudice is caused to the
petitioners by such appointments.

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6.11. Lastly, Sri.Sumanth L.Bharadwaj., learned
Counsel, reiterates that the decisions taken by
KMF are in the nature of policy and commercial
decisions, taken in furtherance of business
expansion and market efficiency. Such
decisions, it is submitted, are not amenable to
judicial review unless shown to be patently
arbitrary or mala fide, which is not the case
here. If the petitioners have any grievance
arising out of contractual terms, their remedy
lies before a civil court and not under Article
226 of the Constitution.

7. Sri Syed Kashif Ali Leaned Counsel, for Sri.Pradeep
S.Sawkar appearing for Respondent No.4 - Hassan
would submit that;

7.1. Sri Syed Kashif Ali, Learned Counsel, relies
upon the decision of Hon’ble Apex Court in
Noida Toll Bridge Co. Ltd. v. Federation of
7
Noida Residents Welfare Assn ., more
particularly para Nos.67, 68, 83, 87 and 88
thereof, which are reproduced hereunder for
easy reference;

7

(2025) 6 SCC 717

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67. The High Court while analysing the
reasonableness of the formula adopted, held
that Article 14 of the concession agreement was
perpetual in nature and it entitled Ntbcl to
recover user fees/toll indefinitely. Such a
clause, therefore, being opposed to public policy
was unjust and arbitrary and liable to be
severed from the concession agreement.
68. We find no error in the analysis undertaken
by the High Court. It is pertinent to understand
that the formula in Annexure F of the
concession agreement calculates the total
project cost and returns. As per the formula,
the total project cost is the aggregate of (a) the
project cost; (b) major maintenance expenses;
and (c) shortfall in the recovery of returns in a
specific financial year.
83. As previously mentioned, a letter dated 29-
8-2007 from the CEO of the appellant to Noida
indicated that the total project cost after 30
years would be approximately Rs 5353 crores,
suggesting that the term of the Project should
be extended to 100 years. The CAG Report
pertinently states that, if Ntbcl continues to
operate under the current terms of the
concession agreement, with extensions as per
its provisions, the unrecovered total project
cost could rise to around Rs 7200 crores by 31-
3-2020 and Rs 15,200 crores by 31-3-2029.
This unending escalation in the total project
cost leaves no room to doubt that the
concession agreement was cleverly designed to
remain perpetually operational.
87. Contracts loaded with terms which are so
unfair and unreasonable, that they truly baffle
this Court, are undoubtedly opposed to public
policy and must be adjudged void. [Central

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Inland Water Transport Corpn. v. Brojo Nath
Ganguly, (1986) 3 SCC 156 : (2009) 2 SCC
(Civ) 803 : 1986 SCC (L&S) 429] The Court is
always cautious when determining if a
particular contract or action is opposed to public
policy, but in doing so, it cannot shirk from its
duty and approve helplessly the interpretation
of a statute or a document or of an action which
is certain to subvert the societal goals and
endanger the public good. [Rattan Chand Hira
Chand v. Askar Nawaz Jung, (1991) 3 SCC 67]
88. To do so, the Court may invoke the
doctrine of severability and sever the incurable
parts of the contract from the whole. The Court
can do so only when the rest of the contract can
breathe and survive without the aid of its void
covenants. The Court must ask itself whether
the parties would have agreed to the valid
terms of the agreement if they knew that the
invalid terms would be removed. [Beed District
Central Coop. Bank Ltd. v. State of
Maharashtra, (2006) 8 SCC 514 : 2006 SCC
(L&S) 2042] Given the extent of manipulation in
the instant case, we must intervene and hold
that Article 14 of the concession agreement,
read with the formula in Annexure F, is opposed
to public policy and must be cut apart from the
concession agreement.

7.2. By relying on Noida Toll Bridge, Sri Syed
Kashif Ali, Learned Counsel, submits that
contractual terms or arrangements entered into
by the State or its instrumentalities, if found to
be manifestly unfair, unreasonable or opposed
to public policy, are amenable to judicial

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scrutiny and can be either invalidated or
appropriately moulded by the Court.

7.3. It is contended that the Hon’ble Supreme Court
has recognised that contracts which are
structured in a manner that perpetuates
imbalance, confers disproportionate advantage,
or results in unjust consequences are liable to
be struck down as being opposed to public
policy. The Court, in such circumstances, is
empowered to examine the substance of the
arrangement and intervene to prevent
arbitrariness and injustice.

7.4. Sri Syed Kashif Ali, Learned Counsel, submits
that in the present case, the conduct of KMF in
altering the operational framework by
introducing parallel agencies during the
subsistence of the petitioners’ contractual
arrangements results in a situation of inherent
unfairness and commercial imbalance. It is
contended that such action effectively dilutes
the contractual rights of the petitioners as also
Hassan while permitting overlapping
operations, thereby rendering the contractual

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framework uncertain and commercially
untenable.

7.5. It is further submitted that, even assuming that
the respondents seek to rely upon contractual
clauses reserving certain rights, such clauses
cannot be exercised in a manner that produces
manifestly arbitrary or unjust consequences. If
the contractual framework, as implemented,
results in unfairness or is contrary to public
policy, this Court would be justified in
intervening, including by reading down or
severing such offending aspects to ensure
conformity with constitutional principles.

7.6. On this basis, Sri Syed Kashif Ali, Learned
Counsel, submits that the impugned actions,
being inconsistent with the principles of fairness
and public policy, and resulting in manifest
arbitrariness, are liable to be interfered with by
this Court.

7.7. Sri Syed Kashif Ali, Learned Counsel, relies
upon the decision of Hon’ble Apex Court in M.I.
8
Builders (P) Ltd. v. Radhey Shyam Sahu ,
more particularly para Nos.57, 58 and 88

8

(1999) 6 SCC 464

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thereof, which are reproduced hereunder for
easy reference;
57. We may now examine some of the terms of
the agreement dated 4-11-1993. There are six
recitals to the agreements which cannot be
correlated to any discussion in any of the
meetings of the Mahapalika, the Executive
Committee or the High Power Committee.
Under clause (2) of the agreement it is for the
builder to make a construction at its own cost
and then to realise the cost with profit not
exceeding more than 10% of the investment in
respect of each shop. Nobody knows how much
cost the builder is likely to incur and how long it
will continue to be in possession of the shopping
complex. Full freedom has been given to the
builder to lease out the shops as per its own
terms and conditions to persons of its choice on
behalf of the Mahapalika and the Mahapalika
shall be bound by these terms and conditions.
The builder has also been given the right to sign
the agreement on behalf of the Mahapalika on
the terms and conditions which the builder may
deem fit and proper. The builder is only
required to give a copy of the agreement to the
Mahapalika after its execution and both the
Mahapalika and the builder shall remain bound
by the terms of that agreement. Since there is
no project report nobody knows how many
shops the builder would construct and of what
sizes. The Mahapalika is allowed to charge Rs
5000 per shop for every second and subsequent
transfer of shops by the builder but what
amount is to be charged for the first transfer or
subsequent transfers is left to the sole
discretion of the builder. A bare glance at the
terms of the agreement shows that not only the

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clauses of the agreement are unreasonable for
the Mahapalika but they are atrocious. No
person of ordinary prudence shall ever enter
into such an agreement. A trustee, which the
Mahapalika is, has to be more cautious in
dealing with its properties. Valuable land in the
heart of a commercial area has been handed on
a platter to the builder for it to exploit and to
make runaway profits. As a matter of fact on
examining the terms of the agreement we find
that the Mahapalika has been completely ousted
from the underground shopping complex for an
indefinite period. It has completely abdicated its
functions.
58. To repeat, the agreement is completely
one-sided favouring the builder. A land of
immense value has been handed over to it to
construct an underground shopping complex in
violation of the public trust doctrine and the
Master Plan for the city of Lucknow. The
Mahapalika has no right to step in even if there
is any violation by the builder of the terms of
the agreement or otherwise. The Mahapalika,
though considered to be the owner of the land,
is completely ousted and divested of the land
for a period which is not definite and which
depends wholly on the discretion of the builder.
On the question of reasonableness reference
may be made to Wade on Administrative Law,
7th Edn., p. 399. The learned author observed
that:
“The court must strive to apply an objective
standard which leaves to the deciding authority
the full range of choices which the legislature is
presumed to have intended. Decisions which
are extravagant or capricious cannot be
legitimate.”

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Quoting Lord Hailsham, L.C. in W. (an infant),
Re [1971 AC 682 : (1971) 2 All ER 49] where
he said:
“Two reasonable persons can perfectly
reasonably come to opposite conclusions on the
same set of facts without forfeiting their title to
be regarded as reasonable.”
The following passage from the treatise would
be relevant:
“This is not therefore the standard of ‘the man
on the Clapham omnibus’. It is the standard
indicated by a true construction of the Act
which distinguishes between what the statutory
authority may or may not be authorised to do.
It distinguishes between proper use and
improper abuse of power. It is often expressed
by saying that the decision is unlawful if it is
one to which no reasonable authority could
have come. This is the essence of what is now
commonly called ‘Wednesbury
unreasonableness’, after the now famous case
in which Lord Greene, M.R. expounded it as
follows:
‘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

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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,
L.J. in Short v. Poole Corpn. [1926 Ch 66 :
1925 All ER Rep 74] 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.'
This has become the most frequently cited
passage (though most commonly cited only by
its nickname) in administrative law. It explains
how ‘unreasonableness’, in its classic
formulation, covers a multitude of sins. These
various errors commonly result from paying too
much attention to the mere words of the Act
and too little to its general scheme and
purpose, and from the fallacy that unrestricted
language naturally confers unfettered
discretion.
Unreasonableness has thus become a
generalised rubric covering not only sheer
absurdity or caprice, but merging into
illegitimate motives and purposes, a wide
category or errors commonly described as
‘irrelevant considerations’, and mistakes and
misunderstandings which can be classed as
self-misdirection, or addressing oneself to the
wrong question. But the language used in the
cases shows that, while the abuse of discretion
has this variety of differing legal facets, in
practice the courts often treat them as distinct.

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When several of them will fit the case, the court
is often inclined to invoke them all. The one
principle that unites them is that powers must
be confined within the true scope and policy of
the Act.
Taken by itself, the standard of
unreasonableness is nominally pitched very
high: ‘so absurd that no sensible person could
ever dream that it lay within the powers of the
authority’ (Lord Greene, M.R.); ‘so wrong that
no reasonable person could sensibly take that
view’ (Lord Denning, M.R.); ‘so outrageous in
its defiance of logic or of accepted moral
standards that no sensible person who had
applied his mind to the question to be decided
could have arrived at it’ (Lord Diplock). It might
seem from such language that the deliberate
decisions of ministers and other responsible
public authorities could almost never be found
wanting. But, as may be seen in the following
pages, there are abundant instances of legally
unreasonable decisions and actions at all levels.
This is not because ministers and public
authorities take leave of their senses, but
because the courts in deciding cases tend to
lower the threshold of unreasonableness to fit
their more exacting ideas of administrative
good behaviour.”
59. When we keep in view the principles laid by
this Court in its various judgments and which
we have noticed above, it has to be held that
the agreement dated 4-11-1993 is not a valid
one. The agreement defies logic. It is
outrageous. It crosses all limits of rationality.
The Mahapalika has certainly acted in a fatuous
manner in entering into such an agreement. It
is a case where the High Court rightly interfered
in exercise of its powers of judicial review

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keeping in view the principles laid down by this
Court in Tata Cellular v. Union of India [(1994)
6 SCC 651] . Every decision of the authority
except the judicial decision is amenable to
judicial review and reviewability of such a
decision cannot now be questioned. However, a
judicial review is permissible if the impugned
action is against law or in violation of the
prescribed procedure or is unreasonable,
irrational or mala fide. On the principle of good
governance reference was made to a decision of
the Division Bench of the Bombay High Court in
State of Bombay v. Laxmidas Ranchhoddas
[AIR 1952 Bom 468, 475 (para 12) : 54 Bom
LR 681] (AIR Bom at p. 475) (para 12). It was
submitted that bad governance sets a bad
example. That is what exactly happened in the
present case.

7.8. By relying on M.I.Builders, Sri Syed Kashif Ali,
Learned Counsel, submits that where an
authority vested with public power exercises
such power in a manner that is unreasonable,
irrational, or amounts to an abdication of its
statutory or public duties, such action is liable
to be interfered with in exercise of judicial
review.

7.9. It is contended that the Hon’ble Supreme Court
has unequivocally held that decisions of public
authorities which are one-sided, arbitrary, or
confer disproportionate advantage without any
rational basis are liable to be struck down as

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being violative of the principles of good
governance and the rule of law. It is further
emphasised that even in contractual or
commercial matters, the State or its
instrumentalities cannot act in a manner that is
capricious, extravagant, or devoid of any
discernible principle.

7.10. Sri Syed Kashif Ali, Learned Counsel, submits
that in the present case, the impugned actions
of KMF in permitting overlapping and parallel
appointments during the subsistence of the
petitioners’ contractual arrangements with
Hassan disclose a clear absence of rationality
and structured decision-making. It is contended
that such actions are not guided by any
objective criteria, policy framework, or
discernible standard, and therefore fall within
the ambit of Wednesbury unreasonableness,
inasmuch as no reasonable authority acting
within the bounds of law would have adopted
such a course.

7.11. It is further submitted that the respondents,
while being custodians of a structured
distribution framework under the “Nandini”

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brand, are required to act in a manner that
promotes coherence, consistency and fairness.
The introduction of parallel arrangements,
without any transparent basis, is stated to
disrupt the existing framework and reflects an
improper exercise of discretion.

7.12. On this basis, Sri Syed Kashif Ali, Learned
Counsel, submits that the impugned actions are
vitiated by arbitrariness, irrationality and
improper exercise of power, and are therefore
liable to be set aside in exercise of the writ
jurisdiction of this Court.

7.13. Sri Syed Kashif Ali, Learned Counsel, relies
upon the decision of Hon’ble Maharashtra High
Court in Vijay Kumar Gupta vs State of
9
Maharashtra ., more particularly para No.9
thereof, which is reproduced hereunder for easy
reference;
9. Now, we may proceed to discuss the second
limb of point (iii). It is neither in dispute before
us nor it can be disputed that in the present
case, the State has exclusive control over
drawing of water and it has been allotting the
contract to respondent No. 2 without inviting

9

2008 (4)Mh.L.j

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any tenders and in its sole discretion that too
without framing any guidelines for that purpose.
It is a distribution of State largesse as except
the State, nobody could permit the drawing of
water from the wells which is the property of the
State. Water is essential for life and admittedly,
drawing of water and its distribution in the public
and private sector by respondent No. 2 was a
pure and simple trade activity. While operating
in the matter of trade coupled with distribution
of State largesse, the State was expected to
adhere to the cannons of equality and fairness.
Its action was to be beyond the limitations and
patent discrimination. Respondent No. 2, for the
first time, was awarded contract for a period of
10 years in the year 1987. Nothing is on record
to show why the decision of awarding contract to
the respondent No. 2 for such a long time was
taken without following any fair procedure. No
guidelines have been brought to our notice
which show on what basis the concerned
authorities in the administration of the State
hierarchy had applied their mind and in what of
administration such guidelines were framed for
the State to have taken such an action. This
contract was extended time and again without
permitting any other person to participate in any
manner whatsoever before awarding or
extending the contract in favour of respondent
No. 2. This perpetual grant/extension right from
the year 1987 till date is a strange phenomena
adopted by the State which exfacie is not only
arbitrary, unjust, unreasonable but even directly
impinges upon the spirit of Article 14 of the
Constitution of India. It appears from the record
that in the year 2005 on noticing the illegal and
unauthorized activities of respondent No. 2, the
concerned authorities issued a show-cause
notice intending to cancel the contract in favour

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of the respondent No. 2 as well as for imposing a
penalty of Rs. 9,95,578/for drawing water
unauthorisedly from one extra point for the
period between 12th May, 1998 to 3rd
December, 2005. This notice was challenged by
respondent No. 2 by filing a suit in the court of
competent jurisdiction. The court vide its order
dated 3.2.2005, declined to grant any interim
order in favour of the respondent No. 2.
Correctness of this order was challenged by
respondent No. 2 by filing an appeal before the
High Court which was also dismissed by order
dated 8th December, 2005. However, liberty
was granted to the respondent No. 2 to move
the trial court for expeditious disposal of the
suit. As it is evident that the courts in exercise of
their judicial discretion, consistently declined to
grant any relief to the respondent No. 2, he had
pursued the suit filed by him before the trial
court after the order of the appellate court dated
8.12.2005. With some sense of dissatisfaction,
we may notice that in the reply affidavit filed on
behalf of the Government in the present petition,
the reasons for extending the period of contract
is recorded in para 10 of the affidavit, which is in
reply to para 3(j) of the petition, which reads
thus
10. With reference to para 3(j) of the
petition, I say that as already stated
hereinabove, the Respondent No. 2 had agitated
his rights for the said contract by filing a Civil
Suit in the City Civil Court after receipt of the
Deputy Director of Sports and Youth Services,
Mumbai notice dated 19th September, 2005.
The Respondent No. 2 did not secure any
Interim relief against this Respondent and
thereafter he filed an Appeal challenging the
orders of the Hon'ble City Civil Court in Hon'ble

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High Court. Taking into consideration the
revenue loss due to closure of the site, these
respondents have awarded the contract to
Respondent No. 2.

7.14. By relying on Vijay Kumar Gupta , Sri Syed
Kashif Ali, Learned Counsel, submits that where
the State or its instrumentalities deal with
distribution of commercial rights, privileges, or
opportunities amounting to State largesse, such
distribution must conform to the constitutional
mandate of fairness, transparency and non-
arbitrariness under Article 14 of the
Constitution of India.

7.15. It is contended that the Hon’ble High Court has
held that the grant or extension of contractual
rights by the State, without following any fair
procedure, without inviting competition, or
without framing any objective guidelines, would
be ex facie arbitrary and violative of Article 14.
It is emphasised that even in trade or
commercial activities, the State cannot act in
an unfettered or discretionary manner so as to
favour particular entities or exclude others
without a rational basis.

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7.16. Learned counsel submits that in the present
case, the impugned actions of KMF in
permitting or facilitating parallel appointments,
without any transparent process, competitive
bidding, or disclosed criteria, amount to an
arbitrary distribution of commercial
opportunities. It is contended that the absence
of any discernible policy framework or
guidelines governing such appointments
renders the decision-making process opaque
and susceptible to arbitrariness.

7.17. It is further submitted that the respondents,
while exercising control over the distribution
network of “Nandini” products, are effectively
dealing with a form of State-controlled
commercial opportunity, and therefore are
required to adhere to the principles governing
distribution of State largesse. The impugned
actions, having been undertaken without
affording an equal opportunity to similarly
situated entities or without following any fair
procedure, are stated to be violative of Article
14.

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7.18. On this basis, learned counsel submits that the
impugned communications and appointments
are arbitrary, non-transparent and
constitutionally impermissible, and are
therefore liable to be set aside.

7.19. Sri Syed Kashif Ali, Learned Counsel, relies
upon the decision of Hon’ble Maharashtra High
Court in SecLink Technologies Corpn. v.
10
State of Maharashtra , more particularly
para No.79 thereof, which is reproduced
hereunder for easy reference;
79. As already observed above, in a tender for
certain work floated by a public authority, the
terms and conditions and, requirement and
scope of work should be certain and definite and
not uncertain and indefinite. In absence of
definite and certain scope of work, it would be
highly improper to proceed with the tender
process for the reason that such a situation may
pose uncertainty and difficulty in the mind of the
tenderers while submitting their bid. The CoS, in
th
its meeting held on 27 August 2020 considered
all these aspects of the matter and decided to
cancel the earlier tender process. The reasons,
thus, given by the respondents for cancelling the
earlier tender process, in our opinion, cannot be
said to be non-existent or unjustified or based
on any perversity.

10

2024 SCC OnLine Bom 3843

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7.20. By relying on SecLink Technologies
Corporation , Sri Syed Kashif Ali, Learned
Counsel, submits that in matters involving
public contracts and tenders, the scope of work,
territorial jurisdiction, and operational
parameters must be clearly defined, certain,
and free from ambiguity. It is contended that
any contractual or administrative arrangement
which suffers from vagueness or lack of clarity
is liable to result in uncertainty, arbitrariness,
and unequal treatment.

7.21. Learned counsel submits that the Hon’ble High
Court has emphasised that absence of definite
and certain terms governing the scope of work
creates confusion not only for the contracting
parties but also undermines the integrity and
fairness of the process itself. In such
circumstances, the decision-making process of
the authority becomes susceptible to
arbitrariness.

7.22. It is contended that in the present case, the
respondents have failed to maintain clarity and
consistency in defining the operational area and
scope of work. While on one hand the

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petitioners were permitted to operate under
arrangements which, according to them,
extended across the State of Telangana, the
respondents have subsequently adopted a
restrictive interpretation of “Hyderabad Market”
and simultaneously introduced parallel
appointments in overlapping territories. This
shifting and inconsistent delineation of
operational areas, it is submitted, results in
uncertainty and renders the contractual
framework inherently arbitrary.

7.23. Learned counsel further submits that the
introduction of multiple agencies without clearly
demarcating territorial boundaries or
operational responsibilities creates ambiguity in
execution, potential conflict in operations, and
an uneven playing field. Such lack of
definitional clarity, it is contended, is contrary
to the principles laid down in SecLink
Technologies, and is indicative of an
unstructured and arbitrary exercise of power.

7.24. On this basis, learned counsel submits that the
impugned actions, being founded on uncertain
and inconsistently applied parameters, are

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liable to be interfered with as violative of Article
14 of the Constitution of India.

7.25. Sri Syed Kashif Ali, Learned Counsel, relies
upon the decision of Hon’ble Maharashtra High
Court in New Horizons Ltd. v. Union of
11
India , more particularly para No.79 thereof,
which is reproduced hereunder for easy
reference;
17. At the outset, we may indicate that in the
matter of entering into a contract, the State
does not stand on the same footing as a private
person who is free to enter into a contract with
any person he likes. The State, in exercise of its
various functions, is governed by the mandate of
Article 14 of the Constitution which excludes
arbitrariness in State action and requires the
State to act fairly and reasonably. The action of
the State in the matter of award of a contract
has to satisfy this criterion. Moreover a contract
would either involve expenditure from the State
exchequer or augmentation of public revenue
and consequently the discretion in the matter of
selection of the person for award of the contract
has to be exercised keeping in view the public
interest involved in such selection. The decisions
of this Court, therefore, insist that while dealing
with the public, whether by way of giving jobs or
entering into contracts or issuing quotas or
licences or granting other forms of largesse, the
Government cannot act arbitrarily at its sweet

11

(1995) 1 SCC 478

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will and like a private individual, deal with any
person it pleases, but its action must be in
conformity with the standards or norms which
are not arbitrary, irrational or irrelevant. It is,
however, recognised that certain measure of
“free play in the joints” is necessary for an
administrative body functioning in an
administrative sphere [See : Ramana Dayaram
Shetty v. International Airport Authority of India
[(1979) 3 SCC 489 : (1979) 3 SCR 1014] (SCR
p. 1034 : SCC pp. 505-06, para 12); Kasturi Lal
Lakshmi Reddy v. State of J & K [(1980) 4 SCC
1 : (1980) 3 SCR 1338] (SCR p. 1355 : SCC pp.
11-12, para 11); Fasih Chaudhary v. Director
General, Doordarshan [(1989) 1 SCC 89 : 1988
Supp (3) SCR 282] (SCR p. 286 : SCC p. 92,);
Sterling Computers Ltd. v. M & N Publications
Ltd. [(1993) 1 SCC 445] ; Union of India v.
Hindustan Development Corpn. [(1993) 3 SCC
499] (at p. 513)].

7.26. By relying on New Horizons Limited, Sri Syed
Kashif Ali, Learned Counsel, submits that while
the State has discretion in matters relating to
award of contracts and structuring of
commercial arrangements, such discretion is
not absolute and must be exercised in
conformity with the mandate of Article 14 of
the Constitution of India. It is contended that
the State does not stand on the same footing
as a private individual and cannot act at its
whim or pleasure while dealing with public
contracts or commercial opportunities.

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7.27. Learned counsel submits that every action of
the State in the contractual domain must be
guided by rational, non-discriminatory
standards and must be informed by public
interest. While a limited degree of flexibility or
“free play in the joints” is recognised, such
flexibility cannot extend to actions that are
arbitrary, irrational, or lacking in any
discernible principle.

7.28. It is contended that in the present case, the
impugned actions of KMF in introducing parallel
and overlapping arrangements during the
subsistence of the petitioners’ contracts do not
disclose any objective criteria, policy
framework, or public interest justification. The
absence of any transparent basis for such
decisions takes the matter beyond the
permissible zone of administrative discretion
and renders the action arbitrary.

7.29. Learned counsel further submits that KMF,
while dealing with distribution and marketing of
“Nandini” products, are effectively allocating
commercial opportunities under a State-
controlled framework, and are therefore

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required to adhere to established norms of
fairness, transparency and equality. The
impugned actions, being inconsistent with these
principles, are stated to be violative of Article
14.

7.30. On this basis, Learned Counsel submits that
KMF cannot justify the impugned actions on the
ground of policy discretion or administrative
flexibility, as the same are neither structured
nor supported by any rational basis, and are
therefore liable to be set aside.

7.31. Sri Syed Kashif Ali, Learned Counsel appearing
for the Respondent No.3 – Hassan essentially
supports the case of the Petitioners and
submits that the present writ petitions are
maintainable notwithstanding that the dispute
arises in a contractual context, inasmuch as the
impugned actions are those of KMF, Hassan
having acted properly, KMF has also impinged
on the rights of Hassan, who are
instrumentalities of the State within the
meaning of Article 12 of the Constitution of
India. He contends that the lis is not a mere
private commercial dispute, but involves the

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exercise of public power in the contractual
domain, thereby attracting the discipline of
Article 14. Placing reliance on decisions such as
ABL International Ltd. v. Export Credit
2
Guarantee Corporation of India Ltd . and
Subodh Kumar Singh Rathour v. Kolkata
6
Metropolitan Development Authority , he
submits that writ jurisdiction can be invoked
where State action, even in contractual
matters, is arbitrary, unreasonable or lacking in
fairness, and that the existence of disputed
facts or alternative remedies does not operate
as a bar.

7.32. It is his submission that the impugned actions
of KMF in issuing communications and work
orders introducing parallel and overlapping
arrangements during the currency of the
petitioners’ contracts are ex facie arbitrary. He
contends that such actions lack any disclosed
policy basis, objective criteria or rational
justification, and represent a departure from
the established practice.

7.33. Learned counsel also submits that the manner
in which additional agencies have been

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introduced reflects a lack of transparency and
absence of any fair procedure. The allocation of
such commercial opportunities, being in the
nature of State largesse, is required to be
undertaken in a transparent and non-
discriminatory manner.

7.34. It is further contended that KMF has adopted
inconsistent and shifting positions with regard
to the scope of operation, particularly in their
interpretation of “Hyderabad Market”, while
simultaneously permitting overlapping
operations. Such lack of clarity and definitional
certainty, according to learned counsel, renders
the entire framework arbitrary and unworkable.

7.35. On the aforesaid grounds, learned counsel
submits that the impugned communications
and work orders are arbitrary, unreasonable
and violative of Articles 14 and 19(1)(g) of the
Constitution of India, and are therefore liable to
be quashed.

8. Sri.Pramod Nair., Learned Senior Counsel, appearing
for the newly appointed Re-packaging agent and
Warehousing Clearing and Forwarding Agency
submits that;

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8.1. Sri.Pramod Nair., Learned Senior Counsel,
submits that the authorization granted in favour
of his clients is confined strictly to the districts
of Warangal, Adilabad, Nizamabad, Karimnagar
and Khammam, and expressly excludes the
“Hyderabad Market”. It is therefore contended
that the operations of the answering
respondents do not overlap with the area in
which the petitioners claim to operate, and
consequently, no prejudice is caused to the
petitioners.

8.2. Sri.Pramod Nair., learned Senior Counsel,
further relies upon the order dated 01.10.2024
passed in W.P. No. 22850/2024, wherein this
Court clarified that Hassan Milk Union was at
liberty to supply milk and milk products to
Warangal District pursuant to the Letter of
Acceptance dated 07.08.2024. It is submitted
that the said order recognises and affirms the
permissibility of operations outside the
Hyderabad Market, thereby negating the
petitioners’ claim of exclusivity over the entire
State of Telangana.

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8.3. Sri.Pramod Nair., Learned Senior Counsel,
submits that the rights, if any, conferred upon
Hassan Milk Union were limited to the
“Hyderabad Market”, and consequently, any
rights derived by the petitioners through
Hassan Milk Union cannot extend beyond the
said territorial scope. It is further contended
that the present challenge is directed against a
tender process and consequential work orders,
in which the petitioners did not participate. On
that ground alone, it is submitted that the
petitioners lack locus standi to question the
validity of such tender or the appointments
made pursuant thereto.

8.4. Sri.Pramod Nair., Learned Senior Counsel,
further submitted that the petitioners are guilty
of suppression of material facts and
misrepresentation, amounting to suggestio falsi
and suppressio veri. Learned Senior Counsel
contends that the petitioners have sought to
project a right over the entire State of
Telangana, despite being aware that the
underlying authorization in favour of Hassan
Milk Union was confined only to the Hyderabad
Market. It is further alleged that the work order

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issued by Hassan Milk Union in favour of the
petitioners, purporting to cover the entire
State, is beyond the authority of Hassan Milk
Union and is the result of a collusive
arrangement between the petitioners and
Hassan Milk Union.

8.5. Sri.Pramod Nair., Learned Senior Counsel,
draws attention to the tender notifications
issued by Hassan Milk Union, which, according
to him, clearly indicate that bids were invited
only for the Hyderabad region and not for the
entire State of Telangana. It is therefore
contended that any agreement or work order
extending beyond the scope of the tender
documents is impermissible and unenforceable.

8.6. Sri.Pramod Nair., Learned Senior Counsel,
submits that the answering respondents have
made substantial investments, exceeding Rs.
35 crores, in establishing a state-of-the-art
dairy plant in compliance with the norms of the
National Dairy Development Board. Despite the
issuance of the work order in their favour, the
interim orders passed by this Court have

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prevented them from commencing operations,
thereby causing significant financial prejudice.

8.7. Sri.Pramod Nair., learned Senior Counsel, relies
upon the decision of Co-ordinate Bench of this
Court in Mahalakshmi Engineering Works
vs. Bangalore Electricity Supply Company
12
Limited ., more particularly para 9, 10 and 11
thereof, which are reproduced hereunder for
easy reference;
9. I have given my anxious consideration to the
submissions made by the respective learned
senior Counsel, and have perused the material on
record. In furtherance whereof the issues that
would fall for my consideration are –
(i) Whether BESCOM was right in seeking to re-
tender only those 10 tenders that were quashed
by this Court? and
(ii) Whether petitioners have any locus to question
any act of BESCOM qua the tender notified,
notwithstanding their non-participation in the
tender process?
In the light of the second issue cutting at the root
of the matter, I deem it appropriate to consider
the same at the outset.
Issue No.2:
(ii) Whether petitioners have any locus to question
any act of BESCOM qua the tender notified,

12

WP No.17266 of 2022 dated 09.11.2022

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notwithstanding their non-participation in the
tender process?
10. The afore-narrated facts with regard to
issuance of notice inviting tender for the works
notified therein are not in dispute. The petitioners
though belong to Scheduled Castes/Scheduled
Tribes and reservation of 10 tenders being
accorded thereto out of 50 tenders, did not
participate in the tender process, are all a matter
of record. The notice inviting tender did no where
restrict any tenderer to participate in any tender
on the NIT dated 28.03.2022. Though reservation
was stipulated qua 10 tenders, the tenderers
belonging to Scheduled Castes/Scheduled Tribes
were not precluded from participating in the
tenders of general category. As a matter of fact,
there were several tenderers who did participate
in both the tenders reserved for Scheduled
Castes/Scheduled Tribes and in the general
category. The petitioners chose to sit on the
fence, did not participate in the tender process at
all, neither in the 10 reserved tenders nor in the
40 unreserved tenders. Therefore, the petitioners
now seek to point out lacunae in the tenders,
sitting outside throughout. Whether that would be
permissible is the question?
11. A tenderer who remains outside and then
seeks to question the tender process or conditions
stipulated in the tender notification would not get
locus to challenge and condition of tender. This
issue need not detain this Court for long or delve
deep into the matter. The Apex Court in the case
of NATIONAL HIGHWAYS AUTHORITY OF INDIA
(supra) considering this issue, has held as follows:

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“20. While considering the relief claimed by the
respondent (claimant), the same should have
been tested on the touchstone of the principle
governing the tender process, especially when the
validity of the tender document has not been put
in issue or challenged before any competent
forum. Going by the terms and conditions in the
tender documents, as already alluded to in para
10 above, there is no title of doubt that the right
of the claimant (respondent) to match the bid of
L-1 or to exercise ROFR would come into play only
if the respondent was to participate in the tender
process pursuant to the notice inviting tenders
from the interested parties. The objective of
tender process is not only to adhere to a
transparent mechanism but to encourage
competition and give equal opportunity to all
tenderers with the end result of getting a fair offer
or value for money. The plain wording of the
eligibility clause in the tender documents and the
incidental stipulations make it explicit that the
respondent was required to participate in the
tender process by submitting its sealed bid
(technical and financial). The fact that a deeming
clause has been provided in the tender document
that if the respondent was to participate in the
bidding process, it shall be deemed to fulfill all the
requirements of the tender Clauses 3 to 6 of RFP,
being the existing concessionaire of the project,
does not exempt the respondent from
participating in the tender process; rather the
tenor of the terms of the documents made it
obligatory for the respondent to participate in the
tender process to be considered as a responsive
bidder, along with others. Having failed to
participate in the tender process and, more so,
despite the express terms in the tender
documents, validity whereof has not been
challenged, the respondent cannot be heard to

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contend that it had acquired any right
whatsoever. Only the entities who participate in
the tender process pursuant to a tender notice
can be allowed to make grievances about the non-
fulfillment or breach of any of the terms and
conditions of the tender documents concerned.
The respondent who chose to stay away from the
tender process, cannot be heard to whittle down,
in any manner, the rights of the eligible bidders
who had participated in the tender process on the
basis of the written and express terms and
conditions. At the culmination of the tender
process, if the respondent had not participated, in
law, the offer submitted by the eligible bidders is
required to be considered on the basis of the
stated terms and conditions. Thus, if the claim of
the respondent was to be strictly adjudged on the
basis of the terms and conditions specified in the
subject tender document, the respondent has no
case whatsoever.”

(Emphasis supplied)

The Apex Court clearly holds that the tenderer
who would chose to stay away from the tender
process cannot be heard to whittle down the
rights of eligible bidders who had participated in
the tender process on the basis of written and
express terms and conditions. At the culmination
of the tender process, if the tenderer had not
participated in law, he cannot be seen to question
the terms and conditions. The petitioners, in the
case at hand, have admitted their non
participation in the tender. Staying away from the
tender, they cannot now seek to challenge the
tender. It is further germane to notice a similar
view taken by the Calcutta High Court. A Division
Bench of the High Court of Calcutta in the case of

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SUBIR GHOSH v. STATE OF WEST BENGAL AND
OTHERS2 has held as follows:
“4. The more important factor is that the tender
process in this case opened sometime in March,
2019 and the closing date for submitting online
bids was April 1, 2019. The writ petition was filed
in January, 2020. Though it is submitted on behalf
of the writ petitioner that the time to submit the
bids was extended, no specific date in such regard
is indicated. What is apparent is that the writ
petitioner did not participate in the bidding
process and yet chose to challenge the same.
5. It is possible that a prospective bidder finds the
terms of the tender documents to be unfair or
illegal and challenges the same; but such
challenge has to be before the time to put in the
bids is closed. At any rate, if a bid is made and
the bid is thrown out on an illegal or unfair ground
contained in the tender documents, even then, a
challenge can be fashioned. But a person who has
not participated in the bidding process at all
cannot challenge the tender conditions on any
ground whatsoever. This admitted aspect of the
matter escaped the attention of the Single Bench
while passing the impugned order of January 15,
2020.
6. For the reasons aforesaid, the order dated
January 15, 2020 cannot be sustained and the
same is set aside. Since the best arguable case of
the writ petitioner will not result in any of the
tender terms being altered as the writ petitioner
did not participate in the process at all, the writ
petition itself is dismissed. Nothing in this order
will be construed to be an approval of the terms
and conditions of the tender document and in an
appropriate challenge, the same may be
considered in accordance with law.”

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In the light of the judgments of the Apex Court in
the case of NATIONAL HIGHWAYS AUTHORITY OF
INDIA and the Division Bench of the Calcutta High
Court in the case of SUBIR GHOSH holding that
only a participant can question the tender, the
challenge raised by the petitioners who are not
the participants in the subject tender, would thus
tumble down. Therefore, the second issue that fell
for consideration which concerns locus of the
petitioners to challenge the tender process being
held against the petitioners, the first issue with
regard to tender process would not arise for
consideration, as it is trite law, that if a writ
petitioner has no locus to raise a challenge to the
subject matter, no other ground on merit of the
challenge need be considered.

8.8. By relying on the above, Sri.Pramod Nair.,
Learned Senior Counsel, submits that a party
who has not participated in the tender process
has no locus standi to challenge either the
tender conditions or the consequential award of
contract. It is contended that the law is well-
settled that a person who chooses to remain
outside the bidding process cannot
subsequently seek to assail the terms of the
tender or the rights accrued to successful
bidders.

8.9. Sri.Pramod Nair., Learned Senior Counsel,
submits that in the present case, the petitioners
did not participate in the tender process

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pursuant to which the answering respondents
were awarded the work. Having consciously
abstained from participating, the petitioners
cannot now be permitted to question the
validity of the tender process or the work
orders issued pursuant thereto. Such a
challenge, it is contended, is barred on the
ground of lack of locus and is liable to be
rejected at the threshold.

8.10. It is further submitted that the Hon’ble
Supreme Court has consistently held that
participation in the tender process is a
precondition for maintaining a challenge to its
outcome, and that non-participants cannot be
permitted to “sit on the fence” and
subsequently challenge the process after the
bids have been finalised. Learned Senior
Counsel emphasises that permitting such
challenges would undermine the sanctity of the
tender process, discourage fair competition,
and prejudice the rights of those bidders who
have participated in accordance with the terms
and conditions of the tender.

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8.11. On this basis, it is contended that the
petitioners, having admittedly not participated
in the relevant tender process, lack the
necessary locus to maintain the present writ
petitions insofar as they seek to challenge the
tender and the work orders issued in favour of
the answering respondents, and consequently,
the petitions are liable to be dismissed on this
ground alone.

8.12. Sri.Pramod Nair., learned Senior Counsel, relies
upon the decision of the Hon'ble Apex Court in
13
NHAI v. Gwalior-Jhansi Expressway Ltd . ,
more particularly para 20 thereof, which is
reproduced hereunder for easy reference;
20. While considering the relief claimed by the
respondent (claimant), the same should have been
tested on the touchstone of the principle governing
the tender process, especially when the validity of the
tender document has not been put in issue or
challenged before any competent forum. Going by the
terms and conditions in the tender documents, as
already alluded to in para 10 above, there is no tittle
of doubt that the right of the claimant (respondent) to
match the bid of L-1 or to exercise ROFR would come
into play only if the respondent was to participate in
the tender process pursuant to the notice inviting
tenders from the interested parties. The objective of
tender process is not only to adhere to a transparent
mechanism but to encourage competition and give

13

(2018) 8 SCC 243

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equal opportunity to all tenderers with the end result
of getting a fair offer or value for money. The plain
wording of the eligibility clause in the tender
documents and the incidental stipulations make it
explicit that the respondent was required to
participate in the tender process by submitting its
sealed bid (technical and financial). The fact that a
deeming clause has been provided in the tender
document that if the respondent was to participate in
the bidding process, it shall be deemed to fulfil all the
requirements of the tender Clauses 3 to 6 of RFP,
being the existing concessionaire of the project, does
not exempt the respondent from participating in the
tender process; rather the tenor of the terms of the
documents made it obligatory for the respondent to
participate in the tender process to be considered as a
responsive bidder, along with others. Having failed to
participate in the tender process and, more so,
despite the express terms in the tender documents,
validity whereof has not been challenged, the
respondent cannot be heard to contend that it had
acquired any right whatsoever. Only the entities who
participate in the tender process pursuant to a tender
notice can be allowed to make grievances about the
non-fulfilment or breach of any of the terms and
conditions of the tender documents concerned. The
respondent who chose to stay away from the tender
process, cannot be heard to whittle down, in any
manner, the rights of the eligible bidders who had
participated in the tender process on the basis of the
written and express terms and conditions. At the
culmination of the tender process, if the respondent
had not participated, in law, the offer submitted by
the eligible bidders is required to be considered on the
basis of the stated terms and conditions. Thus, if the
claim of the respondent was to be strictly adjudged on
the basis of the terms and conditions specified in the
subject tender document, the respondent has no case
whatsoever.

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8.13. By relying on Gwalior Jhansi Expressway ,
Sri.Pramod Nair., learned Senior Counsel,
submits that participation in the tender process
is a sine qua non for asserting any right or
grievance in relation to the tender or the
contract awarded pursuant thereto. It is
contended that the Hon’ble Supreme Court has
categorically held that a party which chooses to
remain outside the bidding process cannot
subsequently claim any entitlement, nor can it
be permitted to challenge the outcome of the
tender or the rights accrued in favour of
successful bidders.

8.14. Learned Senior Counsel submits that the tender
process is designed to ensure transparency,
competition, and equal opportunity, and that all
claims relating to rights such as matching bids,
preferential rights, or continuance of
engagement are necessarily contingent upon
participation in such process. Even an existing
concessionaire or incumbent entity, it is
submitted, is not exempt from the requirement
of participating in the tender, and failure to do

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so disentitles such party from raising any
grievance.

8.15. It is therefore contended that, in the present
case, the petitioners, having admittedly not
participated in the tender process pursuant to
which the answering respondents were
appointed, cannot assert any enforceable right
in respect of the subject matter of the tender.
Learned Senior Counsel emphasises that the
petitioners cannot be permitted to bypass the
tender mechanism and yet seek to interfere
with or invalidate the outcome of a competitive
process conducted in accordance with
prescribed terms.

8.16. He further submits that permitting such a
challenge would not only be contrary to settled
law but would also prejudice the rights of bona
fide participants who have acted in accordance
with the tender conditions. On this ground, it is
contended that the petitioners lack locus standi,
and the writ petitions, insofar as they seek to
assail the tender process and the consequential
work orders, are liable to be dismissed.

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8.17. Sri.Pramod Nair., learned Senior Counsel, relies
upon the decision of the Hon’ble Calcutta High
Court in Subir Ghosh vs. State of West
14
Bengal and others more particularly para 5
and 6 thereof, which are reproduced hereunder
for easy reference;
5. It is possible that a prospective bidder finds the
terms of the tender documents to be unfair or illegal
and challenges the same; but such challenge has to
be before the time to put in the bids is closed. At any
rate, if a bid is made and the bid is thrown out on an
illegal or unfair ground contained in the tender
documents, even then, a challenge can be fashioned.
But a person who has not participated in the bidding
process at all cannot challenge the tender conditions
on any ground whatsoever. This admitted aspect of
the matter escaped the attention of the Single Bench
while passing the impugned order of January 15,
2020.
6. For the reasons aforesaid, the order dated January
15, 2020 cannot be sustained and the same is set
aside. Since the best arguable case of the writ
petitioner will not result in any of the tender terms
being altered as the writ petitioner did not participate
in the process at all, the writ petition itself is
dismissed. Nothing in this order will be construed to
be an approval of the terms and conditions of the
tender document and in an appropriate challenge, the
same may be considered in accordance with law.

8.18. By relying on Subir Ghosh , Sri.Pramod Nair.,
learned Senior Counsel, reiterates that a person

14

(2020) SCC Online Calcutta 2213

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who has not participated in a tender process is
precluded from challenging either the tender
conditions or the outcome of the tender. It is
contended that even if a prospective bidder
considers the tender conditions to be unfair or
illegal, such challenge must be mounted prior
to the closure of the bidding process; failing
which, the right to question the process stands
forfeited.

8.19. Learned Senior Counsel submits that the
Hon’ble High Court has categorically held that a
non-participant cannot be permitted to assail
the tender conditions on any ground
whatsoever, and that such a challenge is liable
to be rejected at the threshold. It is
emphasised that participation in the tender
process is a necessary precondition to acquire
standing to challenge any aspect of the tender.

8.20. Applying the aforesaid principle, learned Senior
Counsel submits that the petitioners, having
admittedly not participated in the tender
process pursuant to which the answering
respondents have been appointed, cannot now
seek to question either the validity of the

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tender or the consequential work orders. It is
contended that the petitioners, having chosen
to remain outside the competitive process,
cannot be permitted to indirectly invalidate the
rights of successful bidders who have
participated in accordance with the prescribed
procedure.

8.21. He further submits that the present writ
petitions, insofar as they seek to challenge the
tender process and the appointments made
pursuant thereto, are therefore not
maintainable and are liable to be dismissed on
the ground of lack of locus standi alone, without
entering into the merits of the controversy.

8.22. On the basis of the aforesaid submissions and
the authorities relied upon, Sri Pramod Nair,
learned Senior Counsel, submits that both the
writ petitions are devoid of merit and are liable
to be dismissed in limine. It is contended that
the petitioners lack locus standi to maintain the
present proceedings, inasmuch as they did not
participate in the tender process pursuant to
which the answering respondents have been
appointed, and therefore cannot be permitted

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to challenge either the tender or the
consequential work orders.

8.23. Learned Senior Counsel further submits that
the rights claimed by the petitioners are, in any
event, confined to the “Hyderabad Market”, and
the appointments in favour of the answering
respondents pertain to districts outside
Hyderabad. It is therefore contended that no
legal injury or prejudice is caused to the
petitioners, and the writ petitions are liable to
be rejected on this ground as well.

8.24. It is also submitted that the petitioners have
sought to expand their contractual entitlement
beyond its legitimate scope, and have
approached this Court with suppression and
misrepresentation of material facts. On this
ground also, it is contended that the petitioners
are disentitled to any discretionary relief under
Article 226 of the Constitution of India.

8.25. Learned Senior Counsel emphasises that the
answering respondents have made substantial
investments and have been lawfully awarded
contracts pursuant to a valid tender process,
and that any interference at this stage would

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result in serious prejudice to them and
adversely affect the larger business operations.

8.26. On these grounds, it is submitted that the writ
petitions deserve to be dismissed, and the
answering respondents be permitted to carry
on their operations in the districts allotted to
them, subject to the undertaking that they shall
not operate within the “Hyderabad Market”.

9. Heard Sri.Jayakumar S Patil, learned senior Counsel,
appearing for the petitioners in both the above
petitions, Sri.Sumanth L. Bharadwaj., learned
Counsel, appearing for KMF in both the petition,
Sri.Pramod Nair., learned Senior Counsel, appearing
for respondent No.5 in WP No.23487 of 2024 and
Respondent No.4 in WP No.22850 of 2024 and Sri
Syed Kashif Ali, learned counsel appearing for the
Respondent No.3., learned Counsel, appearing for
Respondent No.4 - Hassan Milk Union in WP
No.23487 of 2024 and respondent No.3 – Hassan
Milk Union in WP No.22850 of 2024. Perused papers.

10. The points that would arise for determination are;
i. Whether the present writ petitions are
maintainable under Articles 226 and 227
of the Constitution of India, having regard

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to the contractual nature of the dispute,
and whether the impugned actions involve
a sufficient public law element attracting
judicial review under Article 14?
ii. Whether the petitioners have established
subsisting and enforceable contractual
rights of exclusivity, and in particular,
whether such rights extend to the entire
State of Telangana or are confined to the
“Hyderabad Market”, and the true meaning
of that expression?
iii. Whether the impugned communications,
tenders and work orders result in
impermissible parallel or overlapping
arrangements, and if so, whether such
actions are arbitrary, unreasonable or
violative of Article 14 of the Constitution of
India?
iv. Whether the respondents, particularly
KMF, were entitled under the terms of the
agreement and in exercise of
policy/commercial discretion to modify or
expand the area of operations and appoint
additional agencies, and the extent to
which such decisions are amenable to
judicial review?
v. Whether the petitioners, having not
participated in the tender process, have
locus standi to challenge the impugned
actions, and whether any alleged
suppression or misrepresentation affects
their entitlement to relief; and
consequently, whether the petitioners are
entitled to the reliefs sought?

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vi. What order?

11. This Court answers the above points as under:

12. Answer to Point No.i: Whether the present writ
petitions are maintainable under Articles 226
and 227 of the Constitution of India, having
regard to the contractual nature of the dispute,
and whether the impugned actions involve a
sufficient public law element attracting judicial
review under Article 14?

12.1. The present writ petitions have been filed under
Articles 226 and 227 of the Constitution of
India. Article 226 confers upon every High
Court the power to issue writs, orders, and
directions for the enforcement of fundamental
rights and for any other purpose. Article 227
confers upon the High Court the power of
superintendence over all courts and tribunals
throughout its territorial jurisdiction. The
primary basis for the exercise of jurisdiction in
these petitions is Article 226, which is the
source of the power to issue a writ of certiorari
quashing the impugned administrative
decisions of KMF and Hassan as being contrary
to Article 14. Article 227 supplements Article
226 by providing broader supervisory
jurisdiction where necessary, but no separate
reliance need be placed upon it in the present

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case, the jurisdiction under Article 226 being
fully adequate to the reliefs sought.

12.2. The question of maintainability of writ petitions
arising from contractual disputes involving
State instrumentalities is one of the most
debated threshold questions in Indian
administrative law. Its resolution requires the
Court to consider a set of competing
considerations: on one side, the foundational
principle that the State and its instrumentalities
are bound by the constitutional guarantee of
equality and non-arbitrariness in all their
actions; and on the other, the principle that
courts should exercise restraint in converting
commercial disputes into constitutional
controversies. Both petitioners hold subsisting
commercial agreements with Hassan, a
constituent of the KMF dairy federation, and yet
the reliefs they seek are not the enforcement of
contractual terms per se, but the quashing of
administrative decisions taken by KMF in the
exercise of its institutional authority.

12.3. This Court is called upon to determine, at the
threshold, whether the subject-matter of these

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petitions crosses the line from private contract
law into public constitutional law, the domain
where Article 226 operates. The resolution of
this question requires this Court to trace the
historical evolution of the law, to examine the
constitutional status of KMF and Hassan under
Article 12, and to identify the specific public law
elements present on the facts.

12.4. The jurisprudence on the maintainability of writ
petitions in contractual matters commenced
with the decision of a Constitution Bench of the
Hon'ble Supreme Court in Ramana Dayaram
Shetty v. The Inter
15
National Airport Authority of India . In
this landmark decision, the Court laid the
foundation for the 'public law in private law'
doctrine, the principle that State
instrumentalities, even when acting in the guise
of private parties in the commercial domain,
remain bound by the constitutional guarantees
of Articles 14 and 16. The Hon'ble Supreme
Court held that the rules and norms governing
the grant of contracts and licences by State
instrumentalities must conform to Article 14,

15

(1979) 3 SCC 489

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and that a departure from these rules without
good reason gives rise to a constitutional
remedy under Article 226.

12.5. The Hon'ble Supreme Court in Ramana
15
Dayaram Shetty was careful, however, to
circumscribe the scope of the doctrine. It was
not the Hon'ble Supreme Court's intention to
hold that every contractual action of a State
instrumentality is automatically reviewable in
writ jurisdiction. The doctrine was intended to
apply to actions that involve the exercise of a
'public element', actions that partake of the
character of State action rather than of the
commercial conduct of a private person. The
challenge for subsequent courts has been to
identify, in a principled manner, where this line
is to be drawn.

12.6. Subsequent to Ramana Dayaram Shetty , the
law underwent a process of gradual
elaboration. In Mahabir Auto Stores v.
3
Indian Oil Corporation , the Hon'ble Supreme
Court affirmed that the public law doctrine
applies to long-standing commercial
relationships between State instrumentalities