1991 Supreme(Raj) 605
RAJASTHAN HIGH COURT AT JAIPUR BENCH
G.S.Singhvi, J.
Shree Mahalaxmi Mingrate Marketing Service Private Limited - Appellant
Versus
The State of Rajasthan and others - Respondent
S.B. Civil Writ Petition No. 3714 of 90.
Decided On : 22-03-1991
The Court held that the cancellation of the letter of intent was arbitrary, capricious, and violative of the principles of natural justice.
Headnote:
LETTER OF INTENT - APPOINTMENT OF SELLING AGENT - CANCELLATION - ARBITRARINESS - MALAFIDE - PUBLIC INTEREST - PRINCIPLES OF NATURAL JUSTICE - JUDICIAL REVIEW - WRIT PETITION - RELIEF.
Fact of the Case:
The petitioner, a company incorporated under the Companies Act, 1956, was appointed as the Selling Agent for the products of the Federation, a Federation of District Cooperative Milk Products Union situated in various Districts of Rajasthan. The petitioner had submitted an application for the appointment and after negotiations and discussions, the Federation issued a letter of intent on 1.6.1990 appointing the petitioner as the Selling Agent. The petitioner took necessary steps for starting the work and incurred huge expenditure. However, on 16.7.1990, the Federation issued a telegram and a letter cancelling the letter of intent. The petitioner challenged the cancellation as malafide and arbitrary, and sought a declaration that the letter of intent continues to be in force.
Finding of the Court:
The Court held that the cancellation of the letter of intent was arbitrary, capricious, and violative of the principles of natural justice. The Court found that the Federation had not given any opportunity to the petitioner to explain or represent against the proposed cancellation, and that the reasons given for the cancellation were untenable and erroneous. The Court also found that the allegations of malafide levelled against the respondents were not proved.
Issues: 1. Whether the cancellation of the letter of intent was arbitrary and capricious? 2. Whether the cancellation of the letter of intent violated the principles of natural justice? 3. Whether the reasons given for the cancellation were untenable and erroneous? 4. Whether the allegations of malafide levelled against the respondents were proved?
Ratio Decidendi: 1. The Court held that the cancellation of the letter of intent was arbitrary and capricious because the Federation had not given any opportunity to the petitioner to explain or represent against the proposed cancellation, and that the reasons given for the cancellation were untenable and erroneous. 2. The Court held that the cancellation of the letter of intent violated the principles of natural justice because the Federation had not given any opportunity to the petitioner to explain or represent against the proposed cancellation. 3. The Court held that the reasons given for the cancellation were untenable and erroneous because the petitioner had not defaulted in signing the agreement or in furnishing the bank guarantee, and that the Federation had not sent any communication to the petitioner about fulfilment of the two conditions stipulated in letter dated 1.6.1990. 4. The Court held that the allegations of malafide levelled against the respondents were not proved because the petitioner had not produced sufficient material to establish the plea of malice of respondent No. 4.
Final Decision: The Court allowed the writ petition, quashed and set aside the telegraphic order dated 16.7.1990 as well as the letter dated 16/17.7.1990 issued by the respondent No. 2, and left the parties to bear their own costs.
JUDGMENT
1. - The petitioner Company has filed this writ petition under Article 226 of the Constitution of India seeking issuance of a writ, order or direction to the effect that telegram dated 16.7.90 and letter dated 16/17.7.90 be declared as illegal and be quashed with a further declaration that letter of intent dated 1.6.90 continues to be in force. It has been further prayed that the non-petitioners be directed to take all necessary and consequential steps for execution of agreement and to implement the same qua the petitioner as Selling Agent for the territories of Rajasthan, Punjab, Haryana, Himachal Pradesh and Delhi. It has also been prayed that the respondents be directed not to appoint any other selling agent/distributor for the aforesaid territories. The petitioner has lastly prayed that the respondents be directed to give him commission on the products sold in the territories aforesaid after 12.6.90.
2. The petitioner is a Company incorporated under the Companies Act,1956. Its registered office is at Ahemdabad and branches at Jaipur, Alwar and other places.
3. Rajasthan Cooperative Dairy Federation Limited (hereinafter referred to as the Federation), is a Federation of District Cooperative Milk Products Union situated in various Districts of Rajasthan. Its Board is nominated by the Government of Rajasthan and the Federation acts under the control of Government of Rajasthan. The petitioner has claimed that it is an instrumentality and the agency of the State of Rajasthan. A separate post of Dairy Secretary exists in the Government of Rajasthan.
4. The Federation published an advertisement in November 19,1988 inviting applications for appointment of Selling Agent for its various products. The petitioner also submitted an application on 7.12.88. Initially 46 applications were received by the Federation in respect of Cattle Feed. Some more applications were later on received. Some 70 applicants were called for interview and discussion in May and June,1989. The petitioner and some other firms also submitted their offers to sell Ghee, Butter, Milk Powder and other Dairy products on behalf of the Federation. The Federation considered these offers and ultimately decided to negotiate with the petitioner and one other Company namely:- M/s Markets (India)Pvt. Ltd., Delhi. Between December,1988 and January 1990 discussions were held with the petitioner on five occasions. Likewise discussions were held with M/s Markets (India) Pvt.Ltd., Delhi. Three senior officers of the Federation namely:- (1) Financial Adviser (2) General Manager (Marketing), Dairy Products and (3) General Manager (Marketing), Cattle Feed were involved in the negotiations with the petitioner. On 4.2.89 the petitioner submitted its proposal in detail for sale of Dairy products and Cattle Feed worth Rs. 23 crores per annum. The Negotiation Committee which had examined the offers of the petitioner and M/s Markets (India) Pvt.Ltd. found petitioner's offer to be more favourable and therefore, gave its recommendations in favour of the petitioner on 6.2.1989. Further discussions were he is with the Managing Director of the petitioner Company on 3.7.89 and thereafter petitioner's case for appointment as Selling Agent for one year was approved., According to the petitioner despite these discussions and approval the matter remained pending in the files of the Federation. On 23.12.89, the General Manager (Marketing) placed the matter before the Managing Director of the Federation along with draft agreement. The papers were then sent to General Manager (Planning) on 27.12.89. The Managing Director of the petitioner Company was again invited for discussions/ negotiations and a meeting was held on 6.1.90 between the petitioner's Managing Director and three officers of the Federation namely:- Financial Adviser, General Manager (Marketing) and General Manager (Planning), Finally recommendations were made in favour of the petitioner on 16.1.90 . The issuance of letter of inten
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