# V. PURUSHOTHAM RAO v. UNION OF INDIA AND ORS

- **Citation:** [2001] Supp. 4 S.C.R. 411
- **Court:** Supreme Court of India
- **Decided:** 2001-10-19
- **Case number:** Civil Appeal No. 3100 of 2000
- **Bench:** G.B. Pattanaik, Ruma Pal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/v-purushotham-rao-v-union-of-india-and-ors-18245
- **Pages:** 37

## Headnote

Constitution of India, 1950 :
Article 226-Writ petition-Challenging the allotments of petrol pumps/
Gas agencies under the discretionary quota made by the Minister-High Court
held, the discretion had been exercised on sufficient materials and «fter enquiry
discharged the notice of cancellation-In other cases, found allotment made on
some extraneous considerations/political patronage hence cancelled the allotment-On appeal, held, in one of the matter B, the Court issued guidelines to
be followed while making discretionary allotments-Subsequently, in another
matter on similar issue the Court cancelled allotments, on.finding, that Minister
had made allotments without following guidelines and in a cluster manner and
the public property doled out in wholly arbitrary and discriminatory manner.
Civil Procedure Code, 1908 :
Section ] ]-Explanation (IV) -Constructive res-judicata-Applicability
of Principle of Constructive res-judicata-lt cannot be made applicable in each
and every public interest litigation, irrespective of the nature of litigation.
Order 1, Rule 8-Issuance of notice-Procedure of-The objective to
give opportunity to persons likely to be «ffected by litigation so ihat they may
be heard-Each and every allottee had been duly noticed, availed of opportunity of examining the original file-Under the circumstances there was no
requirement of issuing further notice.
Administrative Law :
A
B
c
D
E
F
Discretion-Exercise of-Verification by the Minister-The material on
which subjective satisfaction of the Minister was arrived at-For justifiable
G
reasons-Inquiry by the Oil Company cannot make the arbitrary order of the
Minister legal or just order-Public property-Must be dealt with for public
purposes and in public interest.
Grant of relief to allottees-On equitable consideration~It is not appropriate as granting of relief on sympathetic consideration on the ground of H
411
412
SUPREME COURT REPORTS
[2001] SUPP. 4 S.C.R.
A
equity would be a case of misplaced sympathy-No infirmity with ultimate
conclusion of High Court in cancelling the allotments.
B
c
D
E
F
G
H
Prior to 1995, the then Union Minister of Petroleum, in exercise of
his discretion had been allotting retail outlets for petroleum products,
L.P.G. dealership and SKO dealership without any prescribed norms. A
PIL petition under Article 32 of the Constitution of India was filed praying
for issuance of guidelines to regulate the exercise of discretion, in the
matter of such allotment Accordingly, this Court issued guidelines which
had been reported in 1995_ Suppl. (3) SCC 382.
'Common Cause' had also filed a petition on the same issue under
Article 32 on the basis of a news item praying for cancellation of allotment
made by the Minister concerned. This Court ultimately cancelled the
allotment holding that the allotments were arbitrary, discrimin~tory,
malafide and wholly illegal and also issued show cause notice to the Minister concerned as to why direction be not issued to police authority to
register a case for criminal breach of trust or any other offence and why he
should not be liable to pay damages for his malafide action. This decision
was reported in 1996 (6) sec 530.
In the meanwhile, Centre for Public Interest Litigation filed Civil
Writ Petitions on similar issues before Delhi High Court. Subsequently it
filed Transfer Petition for transferring the matters to this Court On
notice, affidavits had been filed by the Ministry of Petroleum. This Court
held that since two Writ Petitions were pending before the Delhi High
Court challenging the above said allotments, it was not necessary for this
Court to transfer the petitions and decide the matter. However, directions
were issued for transfer of the affidavits with enclosures to the High Court
and for expediting the hearing of the Petitions by the High Court.
In the matter of Common Cause v. Union of India, the then Minister
filed an affidavit. After hearing, the Court directed the CBI to hold an
investigation after re

## Text

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V. PURUSHOTHAM RAO
v.
UNION OF INDIA AND ORS.
OCTOBER 19, 2001
[G.B. PATTANAIK AND RUMA PAL, JJ.]
Constitution of India, 1950 :
Article 226-Writ petition-Challenging the allotments of petrol pumps/
Gas agencies under the discretionary quota made by the Minister-High Court
held, the discretion had been exercised on sufficient materials and «fter enquiry
discharged the notice of cancellation-In other cases, found allotment made on
some extraneous considerations/political patronage hence cancelled the allotment-On appeal, held, in one of the matter B, the Court issued guidelines to
be followed while making discretionary allotments-Subsequently, in another
matter on similar issue the Court cancelled allotments, on.finding, that Minister
had made allotments without following guidelines and in a cluster manner and
the public property doled out in wholly arbitrary and discriminatory manner.
Civil Procedure Code, 1908 :
Section ] ]-Explanation (IV) -Constructive res-judicata-Applicability
of Principle of Constructive res-judicata-lt cannot be made applicable in each
and every public interest litigation, irrespective of the nature of litigation.
Order 1, Rule 8-Issuance of notice-Procedure of-The objective to
give opportunity to persons likely to be «ffected by litigation so ihat they may
be heard-Each and every allottee had been duly noticed, availed of opportunity of examining the original file-Under the circumstances there was no
requirement of issuing further notice.
Administrative Law :
A
B
c
D
E
F
Discretion-Exercise of-Verification by the Minister-The material on
which subjective satisfaction of the Minister was arrived at-For justifiable
G
reasons-Inquiry by the Oil Company cannot make the arbitrary order of the
Minister legal or just order-Public property-Must be dealt with for public
purposes and in public interest.
Grant of relief to allottees-On equitable consideration~It is not appropriate as granting of relief on sympathetic consideration on the ground of H
411
412
SUPREME COURT REPORTS
[2001] SUPP. 4 S.C.R.
A
equity would be a case of misplaced sympathy-No infirmity with ultimate
conclusion of High Court in cancelling the allotments.
B
c
D
E
F
G
H
Prior to 1995, the then Union Minister of Petroleum, in exercise of
his discretion had been allotting retail outlets for petroleum products,
L.P.G. dealership and SKO dealership without any prescribed norms. A
PIL petition under Article 32 of the Constitution of India was filed praying
for issuance of guidelines to regulate the exercise of discretion, in the
matter of such allotment Accordingly, this Court issued guidelines which
had been reported in 1995_ Suppl. (3) SCC 382.
'Common Cause' had also filed a petition on the same issue under
Article 32 on the basis of a news item praying for cancellation of allotment
made by the Minister concerned. This Court ultimately cancelled the
allotment holding that the allotments were arbitrary, discrimin~tory,
malafide and wholly illegal and also issued show cause notice to the Minister concerned as to why direction be not issued to police authority to
register a case for criminal breach of trust or any other offence and why he
should not be liable to pay damages for his malafide action. This decision
was reported in 1996 (6) sec 530.
In the meanwhile, Centre for Public Interest Litigation filed Civil
Writ Petitions on similar issues before Delhi High Court. Subsequently it
filed Transfer Petition for transferring the matters to this Court On
notice, affidavits had been filed by the Ministry of Petroleum. This Court
held that since two Writ Petitions were pending before the Delhi High
Court challenging the above said allotments, it was not necessary for this
Court to transfer the petitions and decide the matter. However, directions
were issued for transfer of the affidavits with enclosures to the High Court
and for expediting the hearing of the Petitions by the High Court.
In the matter of Common Cause v. Union of India, the then Minister
filed an affidavit. After hearing, the Court directed the CBI to hold an
investigation after registering a case against the Minister and also imposed
exemplary damage of Rs. 50 lacs on the Minister concerned. The judgment
was reported in 1996 (6) SCC 593. Aggrieved, the then Minister filed a
Review Petition which was allowed by a three-Judge Bench of this Court
holding that the factors relevant to the exemplary damages had not been
taken by the Court and consequently levy of penalty was not in accordance
with law and that no case could be said to have been made out against the
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V. PURUSHOTHAM RAO v. U.O.l.
413
Minister concerned for directing registration of a case and such direction
could not have been given under Article 32 or Article 142; and such a
direction would be contrary to the concept of right to life under Article 21.
Pursuant to the directions of this Court, Delhi High Court examined
the relevant files dealing with allotments and came to the conclusion that
these were not the cases of aberrations here or there but were cases which
show a pattern of favouritism. Before the High Court, it had been contended on behalf of the allottees and the Government that the guidelines
laid down by the Supreme Court had impliedly regularised the allotments
made prior to 31st March, 1995 when this Court issued guidelines. Further
the High Court constituted a Committee of Advocates, to examine all.the
files and submit a report in a prescribed proforma. After discussing the
matter.with the counsel for the parties the Committee submitted its report
and subsequently notices were also issued to allottees. The allottees filed
their reply, and the Court heard counsel for the parties, scrutinized the
report by perusing the original files and finally disposed of the cases of
about 100 allottees by holding that discretion had been exercised on sufficient material, discharged the notices of cancellation but in other cases the
Court found that either there w«;re no material before the Minister concerned to justify the exercise of power for allotment or such allotment had
been made on account of political patronage or some other extraneous
considerations, and cancelled the allotments made. The High Court disposed of the remaining cases subsequently. These Orders of Delhi High
Court cancelling the allotment made by the Minister from discretionary
quota, have been challenged before this Court.
On behalf of the appellants it was inter alia contended that this Court
issued guidelines which need to be followed by the Central Government in
making discretionary allotment of retail outlets of petroleum products etc.
which implied that the Court had approved earlier lapses in the matter of
allotment under discretionary quota and, therefore, it was not open to the
High Court to re-examine all the cases and decide the legality of the
allotments; that in view of the observations of three Judge Bench Judgment in Common Cause v. Union of India, the plea of constructive res
judicata should have been applied by the High Court; that the High Court
A
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did not consider the material available on record; that the High Court
discharged the notice of cancellation without ascribing any reasons; that
verification can be effectively done by the Oil Company at site and not by
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B
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SUPREME COURT REPORTS
[2001) SUPP. 4 S.C.R.
the Minister and to hold that the Minister must verify the contents of 'the
application, would be unreasonable; that even if the High Court found that
there had been no verification then, it would have directed a fresh verification rather than cancelling the distributorship; that the main culprit being
exonerated by the three Judge Bench of this Court, it would not be a fair
deal to punish the allottees, particularly when they had made investments
and earning their livelihood by operating the allotment in their favour;
that compassion or a case of extreme hardship has all along been recognised a germane factor for exercise of discretion which has also been
re~ognised by the Court in the guidelines issued; that the discretion exercised· being fair, reasonable and legal the same ought not to have been
interfered by the High Court; that a three Judge Bench Judgment having
overruled the earlier two Judge bench decision of this Court, High Court
could not have set aside the allotment made, relying upon the two )"udge
Bench Judgment of this Court.
On. behalf of the Centre for Public Interest Litigation it was contended that any illegal exercise of discretionary power is nothing but a
misreading of the Judgment in Common Cause v. Union of India; that in
Public Interest Litigation there is no adversial adjudication, the pripciple
of constructive 'res-judicata ought not to apply; that the review petition was
filed against the order of the Court directing institution of a criminal case
and levying of exemplary damages on the Minister concerned; in that
premise, any observation made by the three Judge Bench, in relation. to
legality of the allotment made by the Minister from discretionary quota
cannot be treated to be of any binding effect; that it would be unwise to
interfere with the well reasoned decision of the High Court, when the High
Court had examined all the files from the Ministry relating to allotment
under· discretionary quota.
Dismissing the appeals, the Court
HELD : 1.1. In the review petition, the three Judge Bench of this
Court was concerned with the correctness of the directions contained in
the order dated 4.11.96 to institute criminal prosecution against the Minister concerned and levy of penalty as exemplary damages. It is in that
context the Court made the observations not noticing .the fact that in the
matter of Common Cause, this Court had earlier directed .the High Court
to dispose of the two Writ Petitions pending in the High Court and to
decide the legality of the order of discretionary allotment made by the
V. PURUSHOTHAM RAO v. U.0.1.
415
Minister concerned. [441-A-B]
1.2. The Judgment of this Court in Centre for Public Interest Litigation, (1995) Supp. (3) SCC 382 cannot be construed by any stretch of
imagination to be a tacit approval of the discretionary allotments made
prior to that Judgment, since in the bmended petition, the petitioner,
Centre for Public Interest Litigation had only prayed for laying down the
guidelines to regulate exercise of discretion in the matter of allotment.
Moreover, when Common Cause had filed another petition under Article
32 alleging arbitrary exercise of directions in favour of 15 allottees and
A
B
this Court while disposing of the petition vide Judgment dated 25.9.96,
cancelled all such allotments on a finding that the Minister without keepC
ing in view any guidelines allotted in exercise of his discretion in a cluster
manner and the public property have been doled out in wholly arbitrary
and discriminatory manner. [434-H; 435-A; 437-C-F]
S.R. Dass v. State of Haryana, (1988) Punjab Law Journal page 123,
approved.
D
2. Civil Procedure Code is not required ~o be followed in a proceeding under Article 226 unless the High Court itself has made the provisions
of Civil Procedure Code applicable to a proceeding under Article 226.
Then again, the principles of section 11 as well as Order 11 Rule 2,
undoμbtedly contemplate an adversarial system of litigation, where the
Court adjudicates the rights of the parties and determines the issues arising in a ginn case .. Public Interest Litigation of a petition filed for public
interest cannot be held to be an adversarial system of adjudication and the
petitionei: in such case, mert:IY brings it to the notice of the Court, as to
how and in what manner the public interest is being jeopardised by arbitrary and capricious action o.f the authorities. [438-D-E]
3. The principle of consfructive res-judicata cannot be made applicable in each and every public interest litigation irrespective of litigation
itself and its impact on the society and the larger public interest which is
being served. There· can not be any dispute that in competing rights between the public interest and individual interest, the public interest would
over-ride. [439-D-E]
Rural Litigation and Entitlement Kendra v. State of U.P., [1989] Supp. 1
sec 504, relied on.
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416
SUPREME COURT REPORTS
pool] SUPP. 4 S.C.R.
A
Forward Construction, Co. and Ors. v. Prabhat Manda/, AIR (1986) SC
B·
391, referred to.
4. The provisions of Order 1, Rule. 8 C.P.C. get attracted when there
are numerous persons having the ~ame interest, are sued or sue and the
Court can permit such a suit to be defended by adopting the procedure
under Order 1, Rule 8 CPC. In this case, the writ petition was in fact a
petition in public interest, and the allegations were that the concerned
authority had been involved in large scale ·allotment of ·retail outlets in
petrol, gas and kerosene, allotted arbitrarily and for extraneous considerations without having any guidelines for such allotments and as such it
C
tantamounted to disposal of public property in a manner.which is shocking
to conscience. The object of Order 1, Rule 8 C.P.C. is to give notice to
persons likely to be affected by litigation, so that they may be heard. In this
case, each and every allottee had been duly noticed, they have filed their
replies, they have availed of the opportunity of examining the original rde
D
and it was only after hearing them that the Orders of cancellation had
been passed. Therefore, there was no requirement of following the procedure under Order 1, Rule 8, nor can it be said that the entire exercise is
vitiated. (444-B-D; 445-B-C)
5.1. It is no doubt true that the Minister having exercised his discretion
E
and allotting a particular agency in favour of the applicant, has required the
oil company to make necessary verification before entering into any agreement with the alfottee, but this verification has nothing to do with the materials on which the subjective satisfaction of the Minister was arrived at for
exercise of his discretion in favour of any individual for justifiable reasons.
F
G
When a State property as distinct from a private property is being dealt with
by a Minister then it is of paramount importance that such public property
must be dealt with for public purpose and in public interest. The disposal of
public property undoubtedly partakes the character of a trust and therefore in a matter of such disposal, there should not be any suspicion of lack of
principle. The exercise of discretion must not be arbitrary or capricious or
for any extraneous c.onsideration. The subsequent inquiry supposed to have
been conducted by the oil company cannot replace the pre-conditions for
exercise of discretion by the Minister. (445-E-G; 446-B]
5.2. If the initial order of allotment by exercise of discretion is initiH
ated on the ground of absence of any material on verification by the con-
V. PURUSHOTHAM RAO v. U.0.1.
417
cerned authorjty, who has exercised his discretion, then subsequent inquiry
A
· by the oil company while operates in different fields cannot make the so
called arbitrary order of the Minister a legal or just order. [446-B~C]
. 6. The question of granting relief to the allottees on an equitable
consideration did not arise at all. In a case like this, sympathetic consideration on the· ground of equality would be a case of misplaced sympathy and
this Court refrains from granting any. relief on any equitable consideration. [ 443-B]
7. The High Court has applied its mind to each and every individual
B
case of discretionary allotment and cancelled only those allotments which
C
have been arbitrarily granted without any inquiry on being persuaded by
certain recommendations of High Court dignitaries and without verification of any materials. Therefore, there is no infirmity in the ultimate
conclusion of the High Court, cancelling the allotments in favour of the
appellants, so as to be interfered with by this Court. [434-H]
D
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3100 of 2000.
From the Judgment and Order dated 10.9.99 of the Delhi High Court in
C.W.P. No. 4003 of 1995
WITH
C.A. Nos. 3104-05, 3089, 3090, 3117, 3097, 3102, 3086, 3106, 3085,
3094, 3099, 3103, 3092 and 3101 of 2000.
O.P. Sharma, V.A. Mohta, U.N. Bachawat, Dushyant A. Dav.e, M.C.
Bhandare, S.C. Maheshwari, G.L. Saaghi, T.L. V. Iyer and P.N. Misra, P;S.
Narasimha, G. Seshagiri, A. Raghunath, P. Sridhar, R.C. Gubrele, K.R. Gupta,
Abhishek Atrey, Ms. Nanita Sharma, D. Rama Krishna Reddy, D. Bharathi
Reddy, Sushi! K. Jain, P. Venugopal, K. J. John, Pranab Kumar Mullick, Rajiv
Talwar, Swetank Shantanu, Mohan V. Katarki, Jaideep Gupta, Abhijeet
Chatterjee, Ms. Rukhsana, S. Janani, A. Subba Rao, Ms. C.K. Sucharita, Ms.
Dr. Lax.mi Shastri, Gopal Singh, Rana Ranjit Singh, Irshad Ahmad, S.R. Bhat,
R.K. Kapoor, B.R. Kapoor for Anis Ahmed Khan, B. Partha Sarthy, M.P.S.
Tomar; P.K. Chakraverti, K. Ram Kumar, B.K. Satija, Dhruv Mehta, Ms.
Shobha, Ms. Anu Mehta, S.K. Mehta, Ms. Rekha Palli, Pramod B. Agarwala,
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SUPREME COURT REPORTS
[2001] SUPP. 4 S.C.R.
A , Ms. Praveena GaUtaJI\, R. Nedumaran, H.K. P~ri. S.K,. Puri, Rajesh sdvastava,
Ujjwal Banerjee, Anindita Gupta, Sanjeev ~- Kapoor, Vishal Gupta, Narinder
K. Verma for Prashant Bhushan, Ms. Indra Swahney, C.V.S. Subba Rao, K. C .
. Kaushik, B.V. Bairam Das, A.K. Raina, R.K. Bhartiya, Anil .K. Jha, B.R. Vig,
Sanjay Kapur, K.K .. Gupta; Sanjay Sarin,.Ashok Mathur,.Jai ·Prakash Narayan
B
Gupta, Y. Raja Gopal Rao and S.U.K. Sagar for the appearing parties.
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'ff
The Judgment of the Court was delivered by
. PATTANAIK, J. In this batch of appeals the judgment Qf Delhi High
Court, cancelling the allotment made by the concerned minister from out of his
s9- called. discretionary quota on petroleum dealership , as well as LPG dealership is under challenge .. Prior to 1995, the Minister of Petr~leum in exercise
of his discretion h.ad been allotting retail outlets for petroleum products, LPG
dealer~hip and SKO deaiershjp, without having any prescrib~d ~Qrms. . A
Public Interest Litigation had been. filed in this Court by Centre for Public
Interest Litigation under Article 32 of the Constitution, praying that .guidelines
to regulate the exercise of discretion in the matter of such allotment, which
results in exerCise of the discretion arbitrarily be fixed. It may be stated that
initially a prayer ha~ also been made in that application to cancel the dealership
in favour of respondent No. 4, but that prayer stood deleted and an amended
petition was filed as the said respondent did not accept the dealership in
question. This Court after hearing the counsel for the petitioner, and the
learned Attorney General, issued a set of _guidelines f~r discretionary allotment
of petroleum products' agencies to ensure that the exercise of discretion in
making such allotments are in conformity with the rule of law and by excluding
the likelil,iood of arbitrariness and minimising the area of discretion. The said
decision of this Court has since been reported in the case of Centre .for Public
Interest Litigation v. Union o.f/ndia and Ors., i[l995] Supp.3 S.C.C. 382. In
. para (4) of the aforesaid Judg~ent, the Court had directed as under :
, . . "We hereby direct that the above-quoted norms/guidelines etc. shail be
followed by the Central Government in making all :;uch discretionary
allotments of retail outlets for petroleum products, LPG Dealership
and SKO Dealership, hereafter."
'
The Common Cause had filed a petition under Article 32 on the basis of a news
item which appeared in· a national newspaper that the Minister of Petroleum
V. PURUSHOTHAM RAO v. U.0.1. [PATTANAIK, J.]
419
was personally interested in making allotment of petrol pumps in favour of 15
A
persons, who were either the relations of his personal staff or sons of the
Ministers, or sons/relations of the Chairman and Members of the Oil Selection
Boards, praying for cancellation of allotments made inter alia on the ground
that the allotments had been made by the concerned minister, ma/a.fide and the
decision is arbitrary and motivated by extraneous considerations. The Court
B
ultimately cancelled the allotments made in favour of the 15 persons mentioned
in the petition, on a conclusion that the allotments are arbitrary, discriminatory,
mala.fide and wholly illegal. The Court also issued certain other directions in
relation to the allottees and called upon the concerned minister to show cause
as to why a direction be not issued to the appropriate police authority to register
C
a case and initiate prosecution against him for criminal breach of trust or any
other offence under law and in addition, why he should not be liable to pay
damages for his ma/a fide action in ,i1otting petrol pumps to · 15. persons
mentioned therein. This judgment of the Court is reported in [1996] 6 SCC
530.
While the Common Cause case was pending in this Court, Civil Writ · D
Petition Nos. 4003 and 4430 of 1995 had been filed in Delhi High Court by
the Centre for Public Interest Litigation,
as public interest litigation, which
were pending in Delhi High Court. In those two petitions, allotment of petrol
pumps/gas agencies to various persons during the period 1992-93, 1993-94,
1994-95 and 1995-96 had been challenged. A Transfer Petition had been filed
in this Court, which was registered as Transfer Petition No. 127/96 and this
Court had issued notice in the transfer petition and stayed further proceedings
before the High Court. In an affidavit filed by the Ministry of Petroleum in
the aforesaid transfer petition, the then Joint Secretary had stated that in 199596 under the discretionary power of the Government, allotment had been made
to 99 persons and further orders had already been made in favour of 61 more
persons, allotting petrol pumps/gas agencies. One Mr. Srinivasan, Advocate
had filed an affidavit giving a long list of persons who are related to the then
Prime Minister/Ministers and other V.I.Ps and who had been allotted petrol
pumps and gas agencies. On behalf of petroleum ministry, an affidavit had
been filed, stating that due inquiry had been made through the oil companies.
and after due inquiry, the concerned minister had made the allotment. This
Court ultimately held that since the two writ petitions are pending before the
·High Court, wherein the allotment made to all these persons have been chal~
lenged, it· would not be necessary for this Court to get the writ petitions
transferred and decide the matter. The Court, therefore, vacated the stay order
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SUPREME COURT REPORTS
[2001] SUPP. 4 S.C.R.
granted and directed the Registry of the Court to' send all affidavits filed by the
parties in the transfer petition along with the annexures to the High Court. The
Court observed:
"We have no doubt that the High Court shall examine the issues
involved in the writ petitions and shall also go into the validity of the
. allotment of petrol pumps/gas agencies to various persons, after hearing them, in accordance with law. We request the High Court to
expedite the he~ing of the petitions."
Pursuant. to the directions contained in the judgment of this Court in
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Common Cause v. Union of India, [1996] 6 SCC 530," show cause notice
having been· issued to the then Minister Captain Satish Sharma,
said Shri
Sharma had filed an affidavit in reply to the show cause notice. The Court
ultimately perused the show cause n.otice filed and after hearing the counsel
apI>earing for the Minister, directed the CBI to hold an investigation, after
D
registering a case against the concerned minister in respect of the allegations
dealt with and findings made by the Courtearlier in th_e Common Cause case.
On the question of liability of the minister to pay exemplary or compensatory
damages, . the Court considered the matter and came to the conclusion that
Captain Satish Sharma, the then minister would be liable to pay exemplary
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damages and· quantified the same at Rs. 50 lacs. This Judgment of the Court
has been reported in [1996] 6 S.C.C. 593.
Pursuant to the directions of this Court in Common Cause case, [ 1996]
6 S.C.C. 530, the Delhi High Court took up the writ petitions which had ~een
filed a.i; Public Interest Litigation by the Centre for Public Interest Litigation.
On ex;imination of the relevant files dealing with the allotment of retail outlets
of pettol, LPG distributorship and SKO/LDO dealership under the discretionary quota made by the minister concerned, it was revealed that between January
1993 till 1996, 179 retail outlets (petrol pumps), 155 LPG distributorships and
45 SKO/DLO dealerships had been allotted by the concer.ned minister under
the discretionary quota. In its order dated 29th of August, 1997, the Division
Bench of Delhi High Court came to the conclusion that the examination of files
clearly shows that these are not the ca::;es of aberrations here or there but are
cases which show a pattern of favouritism. From the judgment of Delhi H~gh
Court in C.W. 4003/95 dated 29.8.1997, it transpires that even before the
Supreme Court stayed the proceedings by order dated 6th December, 1995,
V. PURUSHOTHAM RAO v. U.0.1. [PATTANAIK, J.]
421
the High Court had called upon the. respondents by order dated 2nd November,
1995 to produce the list of allotments made under the discretionary quota of
the petroleum minister for allotment of petrol retail outlets, LPG distributorship
arid Kerosene distributorship from the date of the tenure of the minister which
was 18th of January, 1993. Before the Delhi High Court, it had been contended
by the allottees as well as by the Government that the judgment dated 31st
March, 1995 of the Supreme Court laying down the guidelines, since reported
in (1995) Supp. 3 S.C.C. 382 ·would indicate that the Supreme Court had
implidely regularised the allotments made prior to 31st March, 1995 and
consequently the validity of the said allotments need not be gone into. The
High Court however was not persuaded to agree with the submissions and in
our view rightly, particularly, when in the Common Cause case (1996) 6 SCC
530 this Court has p~sitively directed the High Court to examine the issues
involved and dispose of the two pending writ petitions in accordance with law.
Since the allottees were required to be noticed before any decision is taken, the
High Court by its order dated 11th Dec,:ember, 1996, constituted a Committee
of three advocates and directed them tQ examine all the files and submit a report
in a Proforma which had been prepared by the Court itself, after discussion with
the counsel appearing for the parties. The said Committee submitted its report,
on the basis of which the Court issued notices to various persons by its order
dated 27th of February, 1997 and 20th of March, 1997 and the Court was to
deal with the cases of about 400 allottees. Pursuant to the notices issued, the
allottees filed their respective show causes and then the Court heard the respective counsel for the allottees as well as examined the report of the Committee
and scrutinized the same by perusing the original file and finally disposed of
the cases of abput 100 allottees by its judgment dated 29th of August, 1997.
The Court on examination of the materials before it and on perusal of the
original files, appears to have taken the view in several cases that the discretion
had been exercised on sufficient materials and· after inquiry and held those
allotments. to have been
proper exercise of tlle discretion and accordingly
discharged the notices of cancellation. But in those cases, where the Court
found either there were no materials before the concerned minister in support
of the applications filed to justify the exercise of power for allotment under the
discretionary quota or such allotments had been made on account of political
patronage or some other extraneous considerations, the Court cancelled the
allotment made with certain directions therein. It would be apprbpriate at this
stage to notice the observations of the High Court:
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"It is unfortunate that perusal of the files show that a large number of
persons to whom allotments were made under the discretionary quota
belong to an affluent class of society and not the class which may
deserve compassion, resulting in exercise of discretion in their favour.
Wpether this hrrge number of persons got allotment on accouht of their
·affluence or on account of their close proximity with. the powers that
be, it may be difficult to say de.finitely, one way or the other but that
makes no difference since both· affluence and/or proximity; are irrelevant.and extraneous considerations for exercise of discretion."
The Court also came to the further conclusion that there had been no verification of the. statements made in the applications by the allottees _and hardly
any application contains details of annual income or bio-data and hardly any
person had filed iμiy affidavit in support of his claim, seeking grant of discretionary allotment and in several cases the applications even did not bear any
data and a number of allottees belonged to one Parliamentary Constituency
an.d were active members and supporters of the party in power at the relevant
tim~. · The Court having cancelled the allotments made in favour of ~he appellants, who-~e before us, the present appeals have been filed by grant of special
leave'. . After the disposal of first batch of cases by the High Court by its
judgment dated 29 .8:.1997, the High Court issued notices to some other allottees
and disposed of the second batch of cases by its order dated 11.10.99 and both
these orders of Delhi High Court are under challenge, so far as it relates to the
cancellation of allotments made under the discretionary quota.
Captain Satish Sharma, who was the concerned minister and against
whom the Court had directed registration of a criminal case by the C.B.I., and
also levied penalty of Rs. 50 lacs, filecl a review petition against the aforesaid
two directions of the Court, which was entertained and that review petition was
allowed by a three Judge Bench of this Court, since reported in [ 1999] 6 S.C.C.
667. In the· aforesaid case, this Court came to the conclusion that the factors
relevant to the award of exemplary damages had not been taken by this Court
and consequently the levy of penalty of Rs.50 lacs was not in accordance with
law. The Court also held that no case could be said to have been made out
against' the concerned minister for directing registering a case under Section
409 and such a direction could not have been given under Article 32 or under
Article 142 and further, such a direction would be contrary to the concept of
right to life under Article 21. The Court, therefore,;set aside the two directions
V. PURUSHOTHAM RAO v. U.0.1. [PATTANAIK, J.]
423
earlier made in relation to registering a criminal case and levy of penalty
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against the minister. Certain observations had been made in the aforesaid three
Judge Bench Judgment, which form the sheet anchor of one of the contentions
of the appellants in the present batch of appeals and we will refer to those
observations and deal with the same at appropriate stage. The aforesaid
Judgment of the Court has since been reported in [ 1999] 6 SCC 667.
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1997 and 1999, against the order of cancellation of allotments made under
discretionary quota, about 79 special leave petitions had been filed in this
Court, which had been dismissed or dismissed as withdr~wn. Notwithstanding
the dismissal of the afore.said special leave petitions, after the three Judge
Bench Judgment of this Court dated 3rd August, 1999 since reported in [ 1999]
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6 S.C.C. 667, special leave petitions having been filed, this batch of cases were
listed before the Bench presided over by the very learned Judge, who was
presiding over the Bench which reviewed the earlier judgment and absolved
the concerned minister from the direction of levy of penalty as well as from
the criminal prosecution. The Bench, therefore, having granted leave, the
present appeals were placed for hearing. At this stage, it would be appropriate
for us to notice that the review petitions filed by Captain Satish Sharma, the
concerned Minister was in relation to the order dated 4.11.96 in the case of
Common Cause v. Union of India, [1996] 6 S.C.C. 593 and was not in relation
to the judgment dated 25.9.96 in the case of Comnwn Causey. Union of India
reported in [1996] 6 S.C.C. 530. The three Judge ~ench however committed
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an error in paragraph (7) by noticing that the review petition relates to both the
judgments viz. the Judgment dated 25.9.96 and 4.11.1996. Mr. P.P. Rao, the
learned counsel, appearing in four of these appeals viz. Civil Appeal Nos.
3085, 3094, 3099 and 3092, seriously contended that th~ judgment of this
Court in the Centre for Public Interest Litigation v. Union of India, [1995]
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Supp. 3 S.C.C. 382 in no uncertain terms, stipulates that the norms and guidelines should be followed by the Central Government in making discretionary
allotment of retail outlets of petroleum products, LPG distributorship and SKO
dealership, subsequent to the said judgment which necessarily and impliedly
indicates that the Court has approved the earlier lapses in the matter of such
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allotment under discretionary quota and, therefore, it was not open to the High
Court to re-examine all the cases and decide the legality of the allotments made
under the discretionary quota.
He further contended that in view of the
observations of this Court in the three Judge Bench Judgment [1999] 6 S.C.C.
667, in paragraph 115 of the said judgment, the plea of constructive resH
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judicata. should have been applied by the High Court and the High Court
committed error in rejecting the said contention. According to Mr. Rao, on a
plain· reading of the judgment of this Court in Centre for Public Interest
Litigation case [1995] Supp. 3S.C.C. 382, the conclusion is irresistible (hat the
Court in that case. had given its stamp of judicial approval t<:>. the d.iscretionmi .
allotments had already been made by that date and it is for. that reason; the
Court had indicated that the guidelines 'therein would b~ f()llciwed hereafter.
That being th_e position, not only that tl;le principle of constructive res-judic_ata .
would apply, but also it was not open for the.High Court to re"open and
examine the legality of the discretionary allotmen.ts made. prior to 1995: .
Aceording to Mr. Rao, during the period when the aUotffientshad beer) made
in favour of his clients, which is prior to the guiaeiines indicated by. this Court .
in the Centre for Public Interest Litigation case, under the pre•exis~ing practice
and norms, the concerned minister having exercised the disc.1;etion1. the High
Court committed serious error in interfering with th()se discretio!l·~ or~ers of .
allotment. Mr. Rao further urged tQat. the impugned judgment wollld indic;ate ·
that there has been no due consideration of the show'-cal!se filed by the.alloUees
and the materials referred to in the show~cause have'noi b6en consider~d·by '
the High Court and, therefore, it would be a fit case where ~attet ~~hould be ·
remitted back to the High Court for re-consideration. According '.to Mf. Rao~
the discretion having been exercised .in favour of his>clients, who l:iappened to·
be political sufferers and a po Ji ti cal sufferer having been recognised as.a ~la5s/ '
category by themselves in the case ofD)I, Chanchala v. State'of'Afyfo;e and
Ors. etc., [1971fSupp. S.C.R. 608 at 629, the High. Court committ¢ serious
error of law in interfering with the allotmeQts ~ade in fa\lo~r of his clients and '
as such the impugned orders cannot be sust~n~d; ·Mr. R~~ . also urged' ;that
allotments having been made in individualcases of extreme hardship' by the
minister concerned and that being one of the norms wh.ich this C9titt fol1nu-_ .<
lated in its guidelines in the case of Centre for Publit Int~rest Litigation ~nd · ·
the appellants having invested huge mon~y ~nd this beillg the o~ly source pf
livelihood since 1993, the same ought not to have been cancelled,'partic~Jarly _
when. no public interest will be served by such cancellation.
Mr. P.S. Narasimha, the learned . counsel, appearing for the appellant in
Civil A,ppeal No. 3100/2000, while supporting the arguments ofMr. Rao,
further urged that all the necessary information was available with the High
Court !Jut the Court never considered those materials nor did the Court inquire
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into the correctness of those materials, as it would be apparent from the
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V. PURUSHOTHAM RAO v. U.0.1. [PATTANAIK, J.]
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affidavit of the appellant, filed pursuant to the notice of show-cause and also
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the impugned order of the High Court dealing with the appellant's case. This
being the position, Mr. Narsimha urged that the order of cancellation should
be set aside and the matter should be remitted back to the High Court for reconsideration.
Appearing for the appellants in Civil Appeal Nos. 3104-3105 of 2000,
Mr. Narsimha, the learned counsel urged that in these two cases, the concerned
authority having exercised the discretion in favour of a young educated unemplOyed youth belonging to a back-ward community and his family being under
financial constr~nt, the conclusion of the High Court that it was a case of
arbitrary allotment, is unsustainable in law.
Mr. V.A Mohfa, the learned senior counsel appearing for the appellant
in Civil Appeal No. 3089/2000, urged that the allotment in favour of his client
. had been made under discretionary quota as the family of the applicant had
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been put to severe financial hardship on account of natural calamity on one
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hand and the Naxalite activities on the other hand. According to the learned
counsel, this must be held to be a germane consideration which weighed with
the concerned authority for exercise of his discretionary power and, therefore,
the High Court ought not to have cancelled. the allotment made in favour of
the appellant.
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Mr: Dushyant A. Dave, the learned senior counsel appearing for the
appellant in Civil Appe!il No. 3090 of 2000 urged that. the only ground on
. which the Higq Court has set aside the allotment made in favour of the
appellant is that there had been no verification whatsoever regarding other
members of his family and their sources of income before exercising discretion,
and therefore; since the minister approved the allotment without any verification, the allotment is liable to be cancelled. According to Mr. Dave, the fact .
that the order of allotment itself indicated that the 1.0.C. Ltd. would conduct
requisite verifi<,:atiori before issuance of Letter of Intent, it cannot be said that
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the order in question was ·without any inquiry. Mr. Dave urged that it is
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nobody's case that the 1.0.C., on an inquiry came to the conclusion that the
grant of distributorship in favour of the appellant on compassionate grounds
was unjustified. That apart, the appellant himself had filed an affidavit before
the High Court, indicating his family conditions and the fact that he had no
resources and he had gathered the resources from friends, but the High Court
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SUPREME COURT REPORTS
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unfortunately over-looked these materials and directed cancellation of the
allotment made in favour of the appellant. The learned counsel also urged that
the order of the High Court would indicate that in case of several other notices,
the High Court discharged the notice of cancellation without ascribing any
reason and therefore, there was rio reason why the High Court should have
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cancelled the allotment made in favour of the appellant.