2001 Supreme(SC) 1493

SUPREME COURT OF INDIA
G.B.Pattanaik : Ruma Pal
V.Purushotham Rao
Versus
Union Of India
Case No. : 3100 of 2000
Date of Decision : 10/19/01
Advocates Appeared: Agarwala Pramod B. : Ahmedd Irshad : Atrey Abhishek : Bachawat U.N. : Banerjee Ujjwal : Bhandare M.C. : Bhartiya R.K. : Bhatttt S.R. : Bhushan Prashant : Chakravartii P.K. : Chatterjee Abhijeet : Choudhurya Rukhsana : Dass B.V.Balaram : Dave Dushyant A. : Gautam Praveena : Gubrele R.C. : Gupta Anindita : Gupta Jai Prakash Narayan : Gupta Jaideep : Gupta K.K. : Gupta Vishal : Guptaa K.P. : Iyerr T.L.Vishwanatha : Jainn Sushil Kumar : Janani S. : Jhaa Anil K. : John K.J. : Kapoorr Sanjeev K. : Kapur Sanjay : Kapurr B.R. : Kapurr R.K. : Katariai Mohan V. : Kaushik K.C. : Khan Anis Ahmed : Kumar K.Ram : Maheshwari S.C. : Mathur Ashok : Mehta Anu : Mehta Dhruv : Mehta S.K. : Mehta V.A. : Mishraa P.N. : Mullick Pranab Kumar : Narsimhaa P.S. : Nedumaran R. : Palli Rekha : Parthasarathiy B. : Parthasarathyy B. : Puri H.K. : Puri S.K. : Raghunath A. : Raina A.K. : Rao A.Subba : Raoi G.Seshagiri : Raoo C.V.Subba : Raoo Y.Raja Gopal : Reddy D.Bharathi : Reddy D.Rama Krishna : Sagar S.U.K. : Sanghi G.L. : Sarin Sanjay : Satija B.K. : Sawhney Indra : Shantanu Swetank : Sharma Nanita : Sharma O.P. : Shastri Laxmi : Shobha : Singh Gopal : Singh Rana Ranjit : Sridhar P. : Srivastava Rajesh : Suchitraa C.K. : Talwar Rajiv : Tomar M.P.S. : Venugopal P. : Verma Narinder K. : Vig B.R.

Discretionary allotment of public property must be based on relevant materials available at the time of grant; subsequent third-party verification cannot cure initial arbitrariness. Additionally, the principle of constructive res judicata is not strictly applicable to Public Interest Litigations of grave public importance.

Headnote:(A) Constitution of India - Articles 32, 226 and 21 - Code of Civil Procedure, 1908 - Section 11, Order 1 Rule 8 and Order 2 Rule 2 - Discretionary allotment of public property - Allotments of retail outlets for petroleum products and LPG dealerships - The issuance of guidelines for future discretionary allotments does not constitute a tacit judicial approval of prior allotments made without such guidelines, especially where those allotments are found to be arbitrary or discriminatory. (Para 18)

(B) Public Interest Litigation (PIL) - Principle of constructive res judicata - The principle of constructive res judicata under Section 11 and Order 2 Rule 2 of the Code of Civil Procedure is not strictly applicable to PILs, as these are not adversarial inter-party disputes but are meant to bring public grievances to the court's notice. In conflicts between public interest and individual interest, the public interest overrides. (Para 19)

(C) Administrative Law - Exercise of Discretion - The subjective satisfaction of an authority exercising discretionary power must be based on relevant materials available at the time of the grant. Subsequent verification conducted by another agency cannot cure the initial arbitrariness or the absence of materials that informed the exercise of discretion. Disposal of public property is a trust and must be conducted for public purpose without suspicion of lack of principle. (Para 26)

(D) Natural Justice - Order 1 Rule 8, Code of Civil Procedure - In a PIL, if the court issues individual notices, allows the parties to examine relevant files, and provides an opportunity for a fair hearing before cancelling a grant, the non-issuance of a general notice under Order 1 Rule 8 does not vitiate the proceedings. (Para 25) (E) Equity - Beneficiaries of arbitrary orders - No equitable relief can be granted to beneficiaries of allotments that have been found to be arbitrary, discriminatory, or the result of a wanton exercise of power, regardless of the investments made or the duration of the business operation. (Para 23)

Facts of the case:
These appeals challenge the decisions of the High Court which cancelled various discretionary allotments of petrol pumps and LPG dealerships made between 1993 and 1996. The High Court found that a large number of allotments were made to affluent persons or based on political patronage without any verification of financial hardship or merit. The appellants contended that prior allotments were implicitly approved by the court in an earlier judgment and that the principle of constructive res judicata barred the High Court from re-examining the legality of the grants.

Findings of Court:
The court found that the High Court correctly exercised its jurisdiction by examining individual files. It was held that many allotments were made without any supporting materials, rendering them arbitrary. The court rejected the plea that the 1995 guidelines approved past lapses and held that the subsequent verification by oil companies did not justify the initial exercise of arbitrary discretion by the minister.

Issues: (i) Whether guidelines for future allotments imply approval of past discretionary grants. (ii) Whether constructive res judicata applies to PILs. (iii) Whether subsequent verification by an agency cures the lack of material during the initial exercise of discretion. (iv) Whether non-compliance with Order 1 Rule 8 CPC vitiates the proceedings. (v) Whether the beneficiaries are entitled to equitable relief based on investments and livelihood.

Ratio Decidendi: The court ruled that an arbitrary exercise of discretionary power in distributing public property is void and cannot be cured by subsequent administrative verifications. It affirmed that the technicalities of procedural law, such as constructive res judicata and Order 1 Rule 8 CPC, cannot be used as a shield to protect illegal allotments of public resources when the public interest is at stake.

Result: Appeals dismissed. Appellants allowed to wind up their respective businesses by 31st December 2001.