014 1979 Administrative Law-1

14
ADMINISTRATIVE LAW
M.P. Jain*
I INTRODUCTORY
DURING THE year under survey, the Supreme Court has made two
pronouncements of great consequence, 1 which constitute a distinct and
positive contribution to the onward march of administrative law in India.
Both these judgments come from the creative pen of that erudite 'scholar
judge—Bhagwati, J. These are landmark cases which break new ground
and are bound to have a potent impact on the future development of Indian
administrative law These cases are surveyed below in some detail. 2
Most of the other cases just reiterate the already well established
propositions and do not take the law much further.
One notable and characteristic feature of the case law during the year
1979, however, is that a large chunk thereof relates to one single topic, viz.,
discretionary powers, and cases in other areas like delegated legislation,
natural justice, judicial review are only very few and not of much signifi-
cance. This shows that the topic of 'discretionary powers' is assuming
special importance in present day India. The reason for this development
is not far to seek. Too many varied discretionary powers are being
conferred on administiative authorities through modern legislation and,
consequently, too many persons are hurt by the exercise of these powers
and they take recourse to the courts for the redressal of their grievances in
the absence of any other alternative mechanism for the purpose. The two
cases mentioned above also fall in this area.
II DELEGATED LEGISLATION
There are only a few cases relating to this topic and even these just
reiterate the norms already well established without raising any new
issues.
The Punjab General Sales Tax Act, 1948, levied a purchase tax on
the sale of goods except the items or goods mentioned in schedule C
* Formerly, Professor of Law, Banaras Hindu University and Delhi University, At

present, Professor of Public Law, University of Malaya, Kuala Lumpur.
1
M.P. Sugar Milts v. State of Uttar Pradesh, A . I . R . 1979 S.C. 625; Ramarta v.
International Airport Authority, A.I.R. 1979 S.C. 1628.
a See under 'Discretionary Powers/ infra.
www.ili.ac.in The Indian Law Institute

Vol. XV] Administrative Law 319
to the Act. The state government, after giving three months' notice,
could add to, or delete any goods from the schedule. The provision was
challenged on the ground of excessive delegation of legislative power.3
After reviewing the previous relevant case law, the Supreme Court upheld
the provision in question in Babu Ram v. State of Punjab? In doing so,
the court particularly invoked its own earlier ruling in Banarsi Das Bhanot
v. State of Madhya Pradesh.5 It also took note of the provision in the
Act in question requiring the government to give three months' notice of the
proposed changes in the schedule. Thus, the government could make
changes in the schedule after giving prior publicity of its intention to do so
and, thus, giving an opportunity to the interested parties to make represen-
tations against the proposed changes. "In the case of a democratic
government, this itself acts as a check on arbitrary exercise of power,"
asserted the court. Anyway, the power to amend schedules to statutes is
commonly given to the executive and has been upheld in a number of
previous cases.6
Another case is Baban Naik v. Union of India7 Section 78 (1)
of the Maharashtra Co-operative Societies Act, 1961, authorises
the registrar to remove the committee of a co-operative society under
certain circumstances after, (i) giving it an opportunity to state its
objections within 15 days; and (z7) after consulting the Federal
Society to which the co-operative society concerned is affiliated. Under
section 157, the state government has authority by notification in the
gazette to exempt any society from any provision of the Act, provided that
no order is to be passed to the prejudice of a society without giving it an
opportunity to represent its case. The government issued a notification
under section 157 exempting a particular society from that part of section
78 which gives the safeguard of hearing to the affected society and consul-
tation with the concerned Federal Society. The court declared this
notification void, inter alia, on the ground of excessive delegation. Under
section 157, a legislative power is given to the government. This power
cannot be so exercised as to affect the substance of the provisions of the
parent Act in question. The notification in question withdrew the safe-
guards given to a society in the matter of supersession of its committee;
this affected the substance of the provisions of the parent Act and, hence,
the notification was void. The court ruled further that what section 157
authorises is that a society and not the registrar can be exempted from
statutory obligations. That part of section 78 from which the society in
question was sought to be exempted in the instant case, obligates the
registrar to observe certain conditions before superseding the committee of
3
On this topic see Jain & Jain, Principles of Administrative Law 32-38 (1979).
* A.I.R. 1979 S.C. 1475.
s A.I.R. 1958 S.C. 909.
s Jain & Jain, supra note 3 at 38-39,
7 AI.R. 1979Goal.

320 Annual Survey of Indian Law [1979
a society. Exemption from this part of the society in question, in effect,

amounted to exempting the registrar from complying with these requirements.
Section 157 does not authorise the government to avoid compliance with
any of the provisions of the Act and so the notification was void. The
notification was also held to be non-est because under section 157, a
notification to the prejudice of a society cannot be issued without giving it
an opportunity to represent its case, but this requirement was not observed
in the present case. In sum, the notification was held bad because it sought
to alter the policy of the statute in question and did not conform with the
mandatory procedural requirements prescribed in the parent Act.
Durga Chand v. Union of India8 illustrates the application of the
doctrine of ultra vires to delegated legislation.0 Rule 45 (xiii) of the Delhi
Cinematograph Rules, 1953, provided :
The rates of admission to the auditorium shall be fixed or revised

only with the prior approval of the Lt.-Governor of Delhi.
In the instant case, the question was whether the above rule was intra
vires the Cinematograph Act, 1952. The Delhi High Court held that the
rule in question was ultra vires the Act. There is nothing in the said Act
authorising price control of cinema tickets. On behalf of the govern-
ment, reference was made to section 16 (a) of the Act which authorises
prescription of "the terms, conditions and restrictions", subject to which
licences may be granted to cinema exhibitors. Under this clause, the
administration had imposed the following condition on cinema exhibitors :
The licensee shall not fix or revise the rates of admission to the
auditorium except with the prior approval of the licensing authority.
The court ruled that this condition was not justified by the Act in
question. The conditions to be prescribed in the licences have to be such
as facilitate the achieving and carrying out the purposes of the Act. Such
purposes set down the limits of the framing of such rules so that a rule to
be valid must pertain to them. But regulation or control of cinema
admission tickets was not the purpose of the Cinematograph Act. Thus,
the condition imposed in the licence could not be valid. The court also
emphasized that a lacuna or absence of policy and purpose in the parent
Act cannot be cured by the rule-making authority which has no plenary
powers as such but has to act within the limits of the power granted to it
by the Act in question. 10
In Ashok Industries v. State,11 a guideline issued by an executive
officer to the marketing board which was inconsistent with the relevant
Act, but binding on the board was quashed by the court.
s A.I.R. 1979 Del. 249.
9
For this topic see, Jain & Jain, supra note 3 at 55-68.
io See Bimal Chandra Banerjee v. State of Madhya Pradesh, (1970) 2 S.GC 467.
** AJ.R. 1979 ?at 221,

Section 3 (6) of the Essential Commodities Act, 1955, lays down that
any order issued under section 3 "shall be la id before both Houses of
Parliament as soon as may be after it is made". The Supreme Court ruled
in Atlas Cycle Industries Ltd. v. State of Haryana12 that sub-section (6) is
only directory and not mandatory and that non-laying of an order before
Parliament would not make it void. The use of the word 'shall' in section
3 (6) is not conclusive and decisive of the matter; the court is to determine
the 'true intention' of the legislature. The two considerations for regarding
a provision as directory arc, (/) absence of any provision for meeting the
contingency of the provision not being complied with; and (ii) serious
general inconvenience and prejudice that would result to the general public
if the act of government is declared invalid for non-compliance with the
particular provision. The policy and object underlying 'laying' provisions
are to keep supervision and control over subordinate authorities. 13 There
are various forms of laying, i.e., simple laying, laying with negative
resolution and laying with affirmative resolution. This section provides for
simple laying without any 'affirmative' or 'negative' resolution. Nor does
it provide that it shall be open to Parliament to approve or disapprove the
order made under section 3. The requirement of laying is not a condition
precedent but a condition subsequent to the making of the order. Such
a simple laying is regarded only as directory and not mandatory, and non-
laying of the order would not make it void.14 This, of course, is a well
established norm that simple laying procedure is regarded as directory
only.15 However, a doubt regarding the scope of section 3 (6) remains
unresolved and the Supreme Court also left it open in the Atlas case, viz.,
whether subsidiary orders made under section 3 need to be laid or not
before Parliament? 16
Ill DISCRETIONARY POWERS
It is a well established principle in India that conferment of sweeping
12
A.I.R. 1979 S.C 1149.
13
On the topic of laying see, Jain & Jain, supra note 3 at 69-71.
14
See M.P. Jain, Administrative Procedure under the Essential Commodities Act, 1955
85-89 (I.L J.,1965).
15
The court referred to the following cases in this connection : Bailey v. Williamson,
(1873) 8 Q.B. 118; Sarey v. Graham, (1899) 1 Q. B. 406; Jan Mohammad Noor
Mohammad v. State of Gujarat, AJ.R. 1966 S.C. 385; D.K. Krishnan v. Secretary,
Regional Transport Authority, Chittor, A.I.R. 1956 A.P. 129; State v. Kama, 1973 Cri.
L.J. 1871; Mathura Prasad Yadavav. Inspector General, Rly. Protection Force, Rly.
Board, New Delhi, 1974 Lab. I.C. 1177; Krishna Khanna v. State of Punjab, A.I.R.
1962 Punj. 132. Observations as to laying made by the Supreme Court in the follow-
ing cases indicating the procedure is mandatory were held to be only incidental:
Narendra Kumar v. Union of India, A.I.R. 1960 S.C, 430; Express Newspapers, A.I.R.
1958 S.C. 578 and Re Kerala Education Bill A.I.R. 1958 S.C 956.
J* On this question see Jain & Jain, supra note 3 at 100-1. Also Jain, supra note 14
at 89.

and uncanalised power on administrative authorities can be held to be hit

by article 14 and/or 19,17 How the courts apply this principle to concrete
situations is illustrated by Chandrakant Saha v. Union of India.1* Provisions
for licensing of rice mills made by the Rice-Milling Industry (Regulation)
Act, 1958, were challenged under articles 14,19 and 301,19 but the court
upheld them. The Act had been enacted by Parliament under entry 52,
list I.20 Existing rice mills were to apply for licences which were to be
issued to them by the licensing officer who had no discretion in the matter.
He could revoke a licence after giving the licensee an opportunity of showing
cause against the proposed action if he was satisfied, (/) it was obtained by
misrepresentation as to an essential fact; (i/)if the licensee had failed, without
reasonable cause, to comply with its conditions; (i/i) if he had contravened
any provision of the Act or the rules made thereunder. The court was of
the view that, as the section contained sufficient guidelines it did not
amount to exercise of an arbitrary power. Section 5 provided for grant of
licences to new rice mills. The power for the purpose was vested in the
central government and there are adequate guidelines laid down therein to
regulate the government's discretion in the matter. The power was, thus,
not uncanalised or unguided and did not constitute an unreasonable
restriction on the right of the petitioners to carry on their trade and
busmess.
On similar lines runs Organo Chemical Industries v. Union of India.21
Section 14B of the Employees' Provident Funds and Miscellaneous
Provisions Act, 1952, provides that where an employer makes defaults
in the payments of any contribution to the fund, the central
provident fund commissioner may recover from the employer suck
damages, not exceeding the amount of arrears, as he may think fit
to impose. Before imposing damages, the employer is to be *given
a reasonable opportunity of being heard. This provision was attacked
in the instant case by the petitioners (who had been subjected to
damage equal to the amount of arrears) on the ground that it vests
naked and unguided power to inflict any quantum of damages as the
commissioner likes and that this is bad under article 14. No reasons
need be given by the commissioner for his decision; there is no provision,
for any appellate or revisional review and no judicial qualification i$
prescribed for the commissioner. The Supreme Court, however, upheld
the provision in question. The court (per Krishna Iyer J.) was strongly
rnotivated to do so because of the fact that the legislation, in question
was social in nature and beneficial to the labour. The formal1 arguments
« Jain 4 Jain, id. at 311-343.

i» A.I.R. 1979 S.C. 314.
» For comments on these articles see Jain, Indian Constitutional Law 410. 444i 353
(1978).
so Id. at 227.
ai A J.R. 1979 S.C. 1803.

adopted by the court to uphold the commissioner's extensive power to

impose damages are: commissioner's power to impose punitive damages
for default in payment to the fund is quasi-judicial in character; it is,
therefore, to be exercised subject to the norms of natural justice; one of
these norms is giving of reasons by the concerned authority for the order
made by it, or, in other words, making a speaking order.22 Once the
commissioner gives reasons for his order imposing damages on an employer,
the order is subjected to the writ jurisdiction under article 226 so that
"perversity, illiteracy, extraneous influence, mala fides and blatant in-
firmities straight away get caught and corrected." On this basis, the court
thought that section 14B does not confer arbitrary power. "The maximum
harm is pecuniary liability limited by the statute." It was not impressed
by the argument based on the absence of guidelines in section 14B. It took
the view that the power under the section permits award of 'damages'
which has implications and limitations sufficient to serve as guidelines in
fixing the impost.23 The commissioner cannot pward anything more than
or unrelated to 'damages'. Nor can he go beyond 100 per cent of
the amount defaulted. The power conferred "is delimited by the
content and contour of *he concept itself and if the court finds
the commissioner travelling beyond, the blow will fall." 23a One of the
arguments used by the court to uphold section 14B was that "a high
official hears and decides." This argument was strengthened by pressing
into service the following observation made by the court earlier in
Radhakrishan"s case:24
When power is conferred on high and responsible officers they are

expected to act with caution and impartiality while discharging their
d u t i e s . . . . The vesting of discretionary power in the State or public
authorities or an officer of high standing is treated as a guarantee
22
To support this proposition, the court referred to the following cases : Siemens Eng.
andMfg. Co. v. Union of India, AJ.R. 1976 SC. 1785; Maneka Gandhi v. Union of
India, A.I.R. 1978 S.C. 597; Mohinder Singh Gilt, v. Chief Election Commissioner,
New Delhi, AJ.R. 1978 S.C. 851. For comments on Gill, see XIV A.S.I.L. 359 (1978).
2
3 Jn this connection, the court pointed out that damages are of various kinds, e.g.,
actual damages, civil damages, compensatory damages, consequential damages,
contingent damages, exemplary damages, general damages, irreparable damages,
pecuniary damages, prospective damages, special damages, speculative damages,
substantial damages, unliquidated damages, etc. The precise import of the term
'damages* in a given context is not difficult to discern asserted the court,
83<? Reference was made to the following cases where broad powers conferred o n
administrative officers have bsen upheld ; Avinder Singh's case, (1979)1 S C.C. 137;
CS.T. v. Radhakrishan, (1979) 2 S . C C . 249; KaushaVs case, (1978) 3 S.C.C. 558. A
serious question about the relevance of these cases to the present situation may be
raised. For example, Kaushal refers to the control of consumption of intoxicants.
This is not equivalent to default in payment of provident fund.
?4 CS.T. v. Radhakrishan, ibid.

that the power will be used fairly and with a sense of responsi-
bility.240
The petitioners had challenged the decision of the commissioner by

arguing that damages being compensatory in character could not exceed
the interest on the amount defaulted during the period of delay. But,
in the instant case, the commissioner had gone beyond this and rounded
it off to a sum equal to the defaulted contribution. This, it was argued,
was illegal. The answer to this question turned on the meaning of the
word 'damages' in the setting of the Act. The court ruled that the concept
of 'damages' under section 14B is not merely compensatory but it also
includes "a punitive sum quantified according to the circumstances of
the case". Several High Courts have taken the view that under this
section damages to be imposed should have correlation with the loss
suffered. Thus, they are intended to compensate the loss to the beneficia-
ries of the scheme and recovery of anything more would amount to a
penalty which was not permitted by the section. The Supreme Court did
not accept this point of view. Keeping in view the objects and purposes
of the legislation, as also the context in which the word 'damages' occurs,
it means 'penal damages'. It is also to penalise the employers so as to
deter them from making defaults in future. Examining the history of
section 14B, the court noted that the underlying purpose of its enactment
was to reduce arrears of provident fund which had reached the huge figure
of over Rs. 20 crores in 1972. Therefore, damages under this section are
not merely compensatory, but include "a punitive sum quantified accord-
ing to the circumstances of the case." However, the amount realised by
way of damages (less the administrative charges) are not meant to augment
the coffers of the government or to bolster its general revenue; it has to
be credited to the fund. Employees are a needy community and if the
fund is replenished by damages paid by the employers, the scheme can be
improved and benefits to the employees augmented.
A perusal of the court's judgment in the Organo case leaves behind the
uncomfortable feeling that by using high sounding words the court has
sought to create the facade that section 14B is imbued with many inherent
and substantial limitations and does not confer unguided power on the
commissioner. Such is not, however, the case in reality. The only restraints
found in section 14B really are: natural justice from which the court has
implied the need for the commissioner to give a reasoned decision—a
procedural requirement, and, the maximum limit on 'damages' to be
awarded by the commissioner against the defaulter-employer- a substantive
24
« Id. at 257. Reference was made to the following cases in support of the proposi-
tion that when power is vested in high officials, it will be presumed that discretion in
such authority will not be abused : Mohmedalli v. Union of India, AJ.R. 1964 S.C.
980; &£. Gupta v. Bombay Municipal Corp., (1968)1 S,C.R. 674; Chintalingamv.
Govt, of India, (1971) 2 S.C.R. 871.

Vol.XV] Administrative Law 325
limit. The court has refused to accept the argument that lack of any
appellate forum from the commissioner is a procedural lacuna. But has
not the court itself asserted earlier in Dwarka Prasad25 that the require-
ment to record reasons was not an effective safeguard in itself without
there being a higher authority to examine the propriety of these reasons and
revise and review the decision of the deciding officer?26 As it is, the recording
of reasons is only for the subjective satisfaction of the commissioner
rather than to afford any remedy to the aggrieved employer. Again, the
court seeks to give the impression that writ jurisdiction under article 226
is an adequate substitute for an appeal on merits. But this is only a
myth. A large catena of cases is there to show that judicial control
through writs over discretionary decisions is only peripheral and
marginal and does not extend to the merits of such decisions.27 At
one place, the court asserts that the concept of 'damages' itself is
self-limited, but the effect of this assertion is destroyed by the holding that
'damages' in the context of the Act in question need not merely be
'compensatory', but may even be punitive and deterrent subject to the
overall limit fixed by the statute. The commissioner's range of choice is,
thus, quite extensive (from 0 per cent to 100 per cent of the arrears). There
is yet another myth which the court has sought to perpetuate, viz., that
power vested in high officials is not apt to be misused. This assertion
has no foundation in facts. There is really no factual basis for the assump-
tion that high officials do not misuse their powers. How many cases are
there on record where the court itself has quashed exercise of discretion
by high officials because of some fault, abuse or maladministration? 28
Further, such an approach is destructive of the very foundation of
administrative law which insists on adequate procedural and substantive
safeguards because, in the absence thereof, uncontrolled power is apt to
be misused, for absolute power corrupts absolutely. This is human
nature and afflicts every human being whether high or low. The crux of
the matter is that if the proposition that article 14 does not permit
arbitrary power is to have any real worth, then the courts have to insist
on proper and adequate procedural and substantive safeguards against
discretionary powers irrespective of the status of the recipient of power.
Otherwise, it introduces a class distinction in law. One salutary safeguard
which appears to be absolutely necessary is at least one appeal to a
tribunal on merits from any decision of an administrative official. In the
absence of this, the procedural and substantive safeguards become more
25 Dwarka Prasad v. State of Uttar Pradesh, AJ.R. 1954 S.C 224.

26
Jain, supra note 19 at 480; Jain & Jain, supra note 3 at 336.
s? Jain& Jain, id. at 529.
28 Just to name only a few such cases ; Pratap Singh v. State of Punjab, A.I.R. 1964
S.C. 72; Rowjeev. State of Andhra Pradesh, A.I.R. 1964 S.C. 962; Hukam Chand v.
Union of India, A.I.R. 1976 S.C. 789; Raj Prakash v. A.D.M., New Delhi, A.I.R.
1978 Del. 17.

or less meaningless. In the instant case, the court has sought to devalue
the need of safeguards by saying that the only injury suffered by the
petitioners was 'pecuniary'. But in most of the cases of exercise of
administrative powers, the injury to the aggrieved party is only pecuniary,
for, as yet, mercifully, the administration is no* conceded the powers to
inflict physical injury without the intervention of the courts (barring
preventive detention). If the court's argument is taken to its logical end,
then, much of the rationale underlying administrative law will vanish.
At times exercise of discretionary power may be subjected to some
substantive restrictions. Non-conformity with these restrictions may
result in the decision being declared ultra vires. In a number of cases
during the year, this point has been raised, and in some cases the
courts have declared the decisions impugned as ultra vires. For example,
according to section 3 (3C), Essential Commodities Act, 1955, where any
producer of sugar is required, by order made under section 3 (2) (/), to
sell any sugar to government, the price payable to him is to be calculated
by the central government having regard to the four factors mentioned
therein. In Bhopal Sugar Industries v. Union of India29 the Madhya
Pradesh High Court ruled that the price fixation order issued by the
government was not valid as it did not have regard to the factors mentioned
in the statutory provision. The data adopted for price fixation by it
was for the year 1975-76 and had no relevance to the facts and circum-
stances prevailing in the year 1977-78. Again, in Shervani Sugar Syndicate
v. Union of India?* the fixation of sugarcane price was held invalid on the
ground that the guidelines laid down in the statutory provision had not
been adhered to. A perusal of the decision shows clearly that the price
fixation exercise was undertaken more with a view to conferring benefit on
the cultivators of sugarcane, and in doing so the requirements of the Jaw
were not observed. At one place, the court says that the order "clearly
smacks of arbitrariness and seems to be motivated by extraneous
considerations."
According to clause 11 (I) of the Andhra Pradesh Foodgrains Dealers
Licensing Order issued under the Essential Commodities Act, 1955, the
licensing authority or any other authorised officer is empowered to enter
and search any premises "in which he has reason to believe that any
contravention of the provisions of this order or of conditions of any
licence issued thereunder has been,, or is being or is about to be
committed." Thus, the concerned officer can only enter any premises
in which he has reason to believe that any contravention of any provisions
of the order, etc., is being committed. "Even at the time of entering
or searching the premises, there must be reasonable belief, that any
contravention has been or is likely to be committed." That'reason to
29 AJ.R. 1979 M.P. 163.

30 A.I.R 1979 All. 394.

believe' is a condition precedent to vesting any jurisdiction in any officer
to enter any premises or make a search. In the absence of such reasonable
belief, the entry and consequent search will be vitiated. The mere
fact that, subsequently, the officer discovered some discrepancy in the
stock cannot make good the reasonable belief which he is bound to
have initially before he makes an entry. "The subsequent discovery of
any material cannot be equated to the initial reasonable belief."31
Accordingly, in P. Ramachandra v. Government of India,Z2 as there was no
material to show that a reasonable belief could have been formed before
the concerned officer entered the premises, it was held that any subsequent
acquisition of any other material to justify the conclusion would not be
of any avail, nor would it justify the seizure or the search or even the
entry into the premises. The whole proceedings relating to entry, search
and seizure were, thus, quashed.
Under section 3 of the Commissions of Inquiry Act, 1952, the govern-
ment may appoint a commission of inquiry only for the purpose of making
an inquiry into any definite matter of public importance. 33 Commenting on
this provision, the Calcutta High Court observed in Orient Paper Mills v.
Union of India?*1 that the subject matter of the inquiry can only be a
"definite" matter of public importance. But, when this condition-precedent
is satisfied, the government may require the commission to perform some
ancillary or incidental functions. Such functions can, however, be only
those as are in aid \ of or for the purpose of conducting such inquiry.
Formation of the government's opinion leading to appointment of the
commission is subjective but there must exist circumstances upon which
it can be formed. There is no bar to appointing a commission of inquiry
to inquire even into such matters as have been previously investigated
or inquired into by other agencies of the government. The court
emphasized that the central government's power to appoint a commission
of inquiry under section 3 is not unfettered or uncontrolled; it can
appoint a commission of inquiry only when there exists a definite
matter of public importance to inquire and the courts are competent to
decide whether the matters to be inquired into are definite matters of
public importance or not. In Orient, the court came to the conclusion that
the matters to be inquired into which the commission had been appointed
were neither 'definite' nor of any'public importance'. In fact, they were
absolutely vague and general in nature. As the condition-precedent for
exercising the power under section 3 had not been fulfilled, the court issued
31 See Hindustan Aluminium v. Controller, Aluminium, A.I.R. 1976 Del. 225; XII
A.S.I.L. 500 (1976); Collector, Central Excise v. L.K.N. Jewellers, A. I. R. 1972 All.
231.
M AJ.R. 1979 A.P. 28.
33
On Commissions of Inquiry, see XIV A.SI.L., supra note 22 at 376.
si AJ.R. 1979 Cal. 114,

a writ of prohibition to prohibit the commission from inquiring into these

matters. 35
Under section 10(1), Industrial Disputes Act, 1947, the government can
refer a matter to the industrial tribunal for adjudication if it is of opinion
that an industrial dispute exists or is apprehended. 36 In A.S. Production
Agencies v. Industrial Tribunal,37 the Supreme Court pointed out that
the power of the government under this section is administrative and
discretionary. Of course, there must be some material before it on the basis,
of which it forms the opinion that an industrial dispute exists or is
apprehended. The formation of this opinion is subjective. A party can
impugn governmental action by showing that what was referred to the
tribunal was not an industrial dispute, but if it was such "its factual
existence and the expediency of making a reference in the circumstances
of a particular case are matters entirely for Government to decide upon, and
it will not be competent for the Court to hold the reference bad and quash
the proceedings for want of jurisdiction merely because there was, in its
opinion, no material before Government on which it could have come
to an affirmative conclusion on those matters " 3S Even if rejects
the request once to make a reference to the tribunal, and it does so
later on, the reference does not become bad. The government is not
reviewing any judicial or quasi-judicial order or determination; it can
subsequently refer the dispute in the interest of industrial peace. "It is
not absolutely necessary that there ought to be some fresh material before
the government for reconsideration of its earlier decision. . . . [W]hen the
Government declines to make a reference the source of power is neither dried
up nor exhausted," 38a The existence or apprehension, of the dispute enables
the government to exercise the power under section 10 (1). It is, thus,
clear that the court has given an expansive interpretation to section 10 (1)
of the Act conceding a very broad discretionary power to the government
to make reference of trade disputes to tribunal for adjudication.
At times, the statutory provision conferring discretion may make its
exercise conditional on fulfilment of some procedural formality. Non-
fulfilment of such a formality, if it is regarded by the court as being manda-
tory, may make the exercise of the discretionary power ultra viresP One
3
6 See P . Jagannath Rao v. State of Orissa, I.L.R. (1968) Cut. 482; A.M. Rasheedw.
State of Kerala, A J . R . 1974 S.C. 2249; Universal Industries and Cotton Mills Ltd. v.
Union of India (Cal. High Court, unreported); State of Jammu & Kashmir v. Bakshi
Gulam Mohd., A.I.R. 1967 S.C. 122; Krishana Ballabh Sahay v. Commissioner of
Inquiry, A J . R . 1969 S.C. 258. Also State of Karnataka v. Union of India, A J . R .
1979 S.C. 681; Jain & Jain, supra note 3 at 285-292.
se See XIV A.SL.L., supra note 22 at 371.
37 A.I.R. 1979 S.C. 170.
38 Id. at 174. See State of Madras v. C.P. Sarathy, A J . R . 1953 S.C. 53. Also Shambu
Nath v. Bank of Baro da, A.I.R. 1978 S . C 1088.
38A jd. at 175.
39 O n mandatory procedural requirements, see XIV A.S.I.L., supra note 22 at 372.

example of such application of the proposition is furnished by the State of

Madhya Pradesh v. Ram Ragubir Prasad.*0 Under section 3 (1) of the
relevant M.P. statute, the Board of Secondary Education could from time
to time lay down syllabi in relation to secondary education and publish the
the same in such manner as may be prescribed. Thereafter, under section 5,
the state government may "if it considers it necessary so to d o " undertake
preparation, printing or distribution of textbooks itself. Commenting on
section 3 (1), the Supreme Court pointed out that publication of the
syllabi was essential. 'Publication' means more than mere "communication
to concerned officials or departments." Publication is to make known to
the people in general. The expression 'publication' of syllabi connotes
publication to the academic world. Publication of the syllabi was necessary
before the government could undertake to prepare books by itself. Com-
menting on section 5, the court observed that the words "if it considers it
necessary so to do," were weighty words. Preparation of textbooks consti-
tutes a serious step and resort to that measure calls for a policy judgment.
"Government must consider it necessary so to do and this consideration
must imply advertence to relevant factors." Before the state government
can undertake to prepare^ print or distribute textbooks, "it must bestow
appropriate attention on the wisdom of the policy in the given circum-
stances." The law is complied with if the government, before undertaking
action under section 5, bestows consideration on matters of relevance. The
decision is that of the government which has a wide discretion in the matter.
The court does not sit in judgment over its decisions in these matters save
in exceptional circumstances. In the instant case, the syllabi had not been
properly published and so the government's undertaking to prepare its
own books was held to be wrong. 41
Under section 32 of the Orissa Co-operative Societies Act, 1963, the
registrar of co-operative societies has pow^r, under certain circumstances,
to supersede the managing committee of a co-operative society after
giving it an opportunity to state its objections. Before taking 'any'
action, the registrar has to consult the financing bank to which the
society in question is indebted and consider the opinion, if any, received
from it. In Sarat Chandra v. State,*2 the registrar gave notice to a society
calling upon it to show cause why it may not be superseded. This was
challenged on the ground that the concerned financing bank had not been
consulted before giving the said notice. The main argument, thus, was whe-
ther the words 'any' action in the statutory provision referred merely to the
final stage of removal of the committee, or to the entire process leading to
+
he removal including the giving of notice. The court took the liberal view
and held the notice to be bad. Before giving any such notice, consultation
with the concerned financing bank was necessary. This is a mandatory pro-
4
° A J . R . 1979 S.C. 888.
41
The requirement of publication is held to be mandatory : Jain & Jain, supra note
3 at 81.
4
2 A J R. 1979 Ori. 143.

vision and if it is not complied with by the registrar, he would have no

jurisdiction to issue it. The main argument for this view which appealed to
the court was that even the giving of notice by the registrar could have a
very serious adverse effect on the society in question and its working.
Hence, the advice of the financing bank must be sought from the very
commencement of the proceeding against the society because the former
has a large stake in the proper functioning of the latter which has borrowed
from it.
Exercise of discretion may be vitiated by some element which makes
it an abuse of discretion. A telling example of this proposition is
furnished by S.R. Vekataraman v. Union of India}* The appellant
public servant was compulsorily retired from service under clause
0 ) (l)ofnxle 56 of the Fundamental Rules in 'public interest.' He
challenged the order on various grounds. The Government of India
produced the relevant service record of the appellant and frankly admitted
that there was nothing on the record which could justify the order of
the appellant's premature retirement. The court quashed it on the
ground of abuse of power by the authority concerned. It defined the
concept of 'malice in law' as meaning "malice such as may be assumed
from the doing of a wrongful act intentionally but without just cause or
excuse, or for want of reasonable or probable cause." However, it was not
necessary to go into the question whether or not there was malice in law
in the instant case for "it is trite law that if a discretionary power has been
exercised for an unauthorised purpose, it is generally immaterial whether
its repository was acting in good faith or in bad faith." If an officer
exercising his discretion takes into account matters which the court
considers not to be 'proper' for the guidance of his discretion, then in the
eyes of the law he has not exercised his discretion. The court also pointed
out that there will be an error of fact when a public body is prompted by
a mistaken belief in the "exercise of a non-existing fact or circumstance."
An administrative order which is based on reasons of fact which do not
exist is infested with an abuse of power. In Government Branch Press v.
D.B. Belliappa,u the Supreme Court ruled that termination of service of
a temporary employee without any reason would be arbitrary and hit by
article 16.45 It laid down a significant rule to make judicial review of
exercise of discretion somewhat more effective, viz.:
Where a charge of unfair discrimination is levelled (by the

petitioner) with specificity, or improper motives are imputed to the
authority . . . it is the duty of the authority to dispel that charge
43
A.I.R. 1979 S.C 49.
44
AJ.R. 1979 S.C 429.
*5 j?or a full discussion on art. 16, see Jain, supra note 19 at 433.

Vol. XV} Administrative Law 331
by disclosing to the Court that reason or motive which impelled it

to take the impugned action.450
The court laid stress on the eternal principle of administrative law that
there is nothing like unfettered discretion, immune from judicial
reviewability. "The executive, no less than the judiciary, is under a
general duty to act fairly." To a similar effect are the observations
made by the Supreme Court in Khatki Ahmed Mushabhai v. Limdi
Municipality,** viz., the law vests a discretion to be reasonably exercised
in the context of citizen's fundamental right. The municipality can refuse
to grant a licence on grounds which are not irrelevant or unreasonable
within the meaning of article 19 (6).47 It is open to the licensing authority
to take note of all relevant circumstances and then decide whether a
licence should be granted.
D. Nataraja Mudaliar v. S.T.A., Madras1® is an example of a
discretionary decision being vitiated because of, (£) non-observance of
mandatory procedural requirements; and {ii) taking into account
irrelevant considerations in decision-making by the authority. The
criteria for the grant and renewal of permits for plying contract carriages
are laid down in section 50 of the Motor Vehicles Act, 1939.49 The
procedure for the purpose is regulated by section 58. The permit of the
petitioner was due to expire and he made an application for its renewal
two months earlier than the expiry date. The State Transport Authority
(S.T.A.) rejected the application on the ground that the India Tourist
Development Corporation (LT.D.C.) had expanded its activities and
put many tourist buses in service but these were not being fully utilised.
So it concluded that as the public sector was providing adequate facilities,
renewal of the applicant's permit would result in unhealthy competition.
This order was affirmed by the state transport appellate tribunal
(S.T.A.T.). On a writ petition, the High Court refused to interfere with
this order and the matter then came before the Supreme Court in appeal
under article 136. The court quashed the order on the ground that
natural justice was denied to the applicant and that the impugned order
was based on an untenable ground. There was no evidence on record to
show that the I.T.D.C. buses were under-utilised. Nor was there
«« Supra note 44 at 434.

« A.I.R, 1979 S.C 418.
4
7 id. at 419. For a discussion on art. 19 (6), see supra note 19 at 472-484.
4
» AJ.R. 1979 S.C. 114.
*9 One criterions is : the extent to which additional carriage may be necessary or desir-
able is the public interest. The authority is also to consider any representations
made by persons already holding contract carriage permits that the number of such
carriages for which permits have already been granted is sufficient or in excess of the
needs of the region.

specific material to show that there was unused vehicular potential. This
question was not put to the applicant before rejecting his application
which was not fair. Considerations of private or public sector do not
enter the picture in considering applications for permits under section 50.
"Some objective assessment to exclude the petitioner based on tangible
data is the minimum for a judicial negation of a fundamental right." 49 "
The court emphasized that the transport tribunpls function quasi-
judicially and "this imports some imperatives. You must tell the man
whose fundamental right you propose to negative the materials you may use
in your decision. You must act on relevant considerations, properly before
you, not on rumour or hearsay, ex cathedra assertions or inscrutable
hunch." 496 The court further emphasized:
The Authority must remember that a permit holder has an ordinary

right of renewal unless it is shown that outweighing reasons of
public interest lead to a contrary resuh. Permits are not bounty
but right, restricted reasonably by the Motor Vehicles Act.50
It is a firm rule of administrative law that discretionary power is to be

exercised, and a decision made, by the very authority to whom discretion
is entrusted by the statute in question. 51 The principle has been applied
by the Andhra Pradesh High Court in D. Satyanarayana v. Government of
Andhra Pradesh.*2 The statutory provision in question runs as follows:
Subject to the control of the Government . . . the licensing

authority, after making such enquiry as it deems fit . . . may for
reasons to be recorded either grant or refuse to grant the licence
applied for.
The question considered by the court in the instant case was regarding
the significance of the words "subject to the control of the Government"
in the statutory provision. Interpreting the provision in the light of the
general principles of administrative law, it ruled that the primary
authority to grant or refuse the licence is the licensing authority. The
words in question can only be regarded as conferring "appellate as well
as revisional jurisdiction" on the government and also to empower it
to issue quasi-legislative general directions to the primary licensing
authority. Beyond this, they do not confer any power on the government.
It is not empowered to exercise any original jurisdiction. It can revise
any action of the licensing authority. If the authority grants a licence, the
state government could cancel it if there are justifiable reasons. But it could
4
9« Supra note 48 at 117.
*M Id.at 116.
so Ibid.
si XIV A.S I.L., supra note 22 at 376. Also Jain & Jain, supra note 3 at 514.
52 AJ.R. 1979 A.P. 259.

not take the initial action by itself; that has to be done by the licensing
authority. Such action is subject "o the control of the government
and not that of the licensee. The statutory provision in question sets up a
two-tier hierarchical system, which would be upset if the government
itself were to take original action. That way the government would affect
the primary licensing authority's powers and its revisional and appellate
powers would be converted into original powers. Support for the view
was derived from the Supreme Court's earlier pronouncement in State of
Punjab v. Hari Kishan.™ In Satyanarayana, the licensing officer granted
a licence for the construction of a building. One of the conditions for
it was that the building must be constructed within one year. For some
reasons, it was not completed within the period stipulated. The licensee
applied to the licensing authority for extension of time. In the meantime,
the government issued to the licensee a show-cause notice asking him to
show cause as to why the licence should not be cancelled for violation of
the said condition. He gave his explanation, but the government still
cancelled his licence. The court quashed the government's action on
the ground that the initial decision whether to extend the time or not for
construction of the building had to be made by the licensing'officer himself.
Thereafter, the government could revise the order of the licensing authorty
if it thought necessary to do so. It was not open to the government to
itself take the initial action by way of cancelling the licence on the
ground that the licensee failed to comply with the condition of the
licence.
In Ashadevi v. K. Shivraj,^ the Supreme Court enunciated certain
norms for regulating the exercise of discretionary power to make an order
of preventive detention. These are not new norms and have been laid
down earlier several times in many cases. In Ashadevi, an order of
preventive detention was made under the Conservation of Foreign
Exchange and Prevention of Smuggling Activities Act, 1974. This was
based on some confessional statements made by the detenu to the customs
authorities during his interrogation by them. These statements were
later retracted by the de'enu, but this fact was not communicated by the
customs authorities to the detaining authority. Also the fact that the
request by the detenu's lawyer to be present during the detenu's
interrogation was turned down by the customs authorities was not
intimated to the detaining authority. The court ruled that these were vital
facts. It opined that it was for the detaining authority to decide
whether the confessional statements made by the detenue were voluntary
or not but these vital facts which could have influenced the mind of the
detaining authority pne way or the other were neither placed before, nor
« A.I.R. 1966 S.C 1081; Jain & Jain, supra note 3 at 154.
fi* AJ.R. 1979 S.C. 447.

considered by the detaining authority and there was, thus, non-application

of its mind to the most material and vital facts. This vitiated the
requisite satisfaction of the detaining authority thereby rendering the
detention order invalid. The court emphasized that the detaining authority
must exercise due care and caution and act fairly and justly in exercising
the power of detention. Taking into account matters extraneous to the
scope and purpose of the statute vitiates subjective satisfaction. Similarly,
failure to take into consideration the most material facts would
equally vitiate the subjective satisfaction and invalidate the detention
order.
Estoppel
A significant feature of the case law during the year is that the plea
of estoppel has been invoked against the government several times. It
is indicative of the fact that with the passage of time, the topic of
promissory estoppel is assuming increasing significance in the area of
administrative law. This is because of the fact that the government and
other administrative authorities first make all sorts of promises or
representations to persons dealing with them and then seek to resile
therefrom, while the affected parties seek to bind them to their promises
or representations. In the year 1975, this reviewer had commented that
"by and large, even today application of estoppel against an
adminstrative authority remains an exception rather than the rule."55 In
1976, it had been said that "the judicial attitude on the question of
applying estoppel against administrative bodies remains equivocal and
ambivalent."56 As a result of judicial pronouncements during the survey
year, it is possible to say that the [doctrine of estoppel has now become
more definite and concrete and that its scope of operation has been
broadened. It is expected that this doctrine will be invoked increasingly
against administrative authorities in the coming years. The courts
appear to have finally shed their hesitation in allowing the doctrine of
estoppel its full operation against administrative authorities including
the government.
In 1957, the Poona Municipal Corporation, in order to boost industrial
development in the city, allotted industrial plots to several industrialists
on the condition that for ten years no octroi duty would be charged on
any new materials or machinery imported by them in the industrial estate
for the purpose of manufacturing. A few years later, the corporation
passed a resolution recommending iio the government withdrawal of
grant of octroi concession to new industries, but without disturbing the
ss XI A.S.LL. 484(1975).
56 XII A.S.I.L., supra note 31 at 503.

already granted exemption. The government passed a resolution

withdrawing exemption but without making any exception even for the
existing industries as recommended by the corporation. Accordingly, the
corporation sought to realise octroi from the existing enterprises which
was challenged on the ground that the corporation was estopped from
realising it on the basis of the doctrine of promissory estoppel. In Poona
Municipality v. Bijlee Products,*1 the Supreme Court decided the matter
in favour of the petitioners without, however, invoking the doctrine
of promissory estoppel. It referred to the background circumstances
of the case and read the government resolution restrictively so as not to
disturb the arrangements made with the existing industries and to
continue their exemption from payment of octroi. It asserted that
there [ was no indication in , the resolution of any intention to
take away a valuable right vested in the petitioners. Further, it argued,
that if the government resolution were to be read as withdrawing
the existing exemption, then it would suffer from a very serious infirmity,
viz., the government had power under the law to modify the
recommendation made by the corporation, but not so as to increase the
rate or the extent of any levy. In that case, the government resolution
as a whole would become invalid.
Appeals had been filed by the assessee before the income-tax appellate
tribunal. He withdrew them and also requested the Revenue to withdraw
its counter-appeals against him pending before the tribunal so that he
could take the matter before the Settlement Commission.57* When it
came up before the commission, the commissioner of income-tax took
objection to the matter being proceeded with there. Under the relevant
statutory provision, the commissioner had power to object to the matter
being dealt with by the Settlement Commission rather than by the normal
assessment machinery under the Income-tax Act. In Income Tax
Commissioner v. B.N. Bhattacharya,58 the question was whether the
commissioner was estopped from so objecting because earlier he had
withdrawn the income-tax department's appeals against the assessee
pending before the tribunal. The court answered in the negative. It
explained that the basic feature of estoppel is " a clear representation
having been made by A to B " and later, on the basis of the representation,
B acts to his detriment. At no stage was any representation made by the
commissioner to the assessee. The cases were withdrawn by the latter
of his own accord; the department withdrew the cases on his request.
Since the commissioner never asked him to withdraw his cases from the
tribunal, he was not estopped from objecting to the Settlement
Commission taking cognisance of the assessee's case. The court ruled
that the assessee's appeals would be automatically restored before the
" AJ.R. 1979 S.C 304.

w<* Ss. 254A to 245 M of the Income-tax Act, 1961.
58 A.I.R. 1979 S.C 1724.

tribunal, and also that the department ought not to revive its withdrawn
appeals because it had already admitted earlier that its appeals were very
weak indeed.
In Union of India v. P.M. Pillai,^ the Madras High Court refused to
apply the doctrine of estoppel against the Government of India in the
circumstances of the case. The government announced its sugar policy of
requiring sugar manufacturers to sell 70 per cent of their sugar production
to it or its nominees at government determined price and the rest 30 per
cent of their production in open free market at the prevailing market price.
This policy was formally put into effect through orders issued under the
Essential Commodities Act, 1955.59" To keep the price of sugar to be
sold to the government low, it was subjected to 25 per cent excise duty but
the sugar sold in the free market was subjected to 7fl\ per cent duty. The
central government allotted its quota of sugar to the state governments but
they failed to lift it. The central government then allowed the manufac-
turers to sell the same in the open market. The manufacturers insisted,
however, that they should be subjected to 25 per cent duty only on this
sugar as it was government quota sugar. The government refused to
accept this contention. The manufacturers then moved a writ petition in
the Madras High Court which was rejected. The court ruled that it was
not obligatory on the government's part to procure 70 per cent of the
sugar produced. How much sugar the government would procure depended
upon the circumstances prevailing at the time. The relevant provisions
made in the Sugar (Control) Order, 1966, were only of an enabling nature.
25 per cent excise duty was payable only on the stock lifted by the
government or the quota allottees. If an allottee does not lift his quota,
the stock becomes part and parcel of the general pool of the sugar
manufacturer. The policy declared by the government regarding procure-
ment of sugar was merely a declaration of intention on the part of the
government and, as such, cannot be enforceable in a court. That policy
had to be enforced through statutory orders. Therefore, no question
arose as regards the application of the doctrine of estoppel against the
government in the circumstances of the case. The petitioner was to pay
37^ per cent duty on the sugar sold in the free market even if in excess of
30 per cent production. The court then went on to make the following
statement:
Therefore a mere statement made by the Government or a Minister

of the Government cannot give rise to a cause of action to any
citizen to found a right thereon and to seek to enforce such a
right.... 596
59 A.I.R, 1979 Mad. 207,

69a
Supra note 14.
«»Id. at 215.

In support, it referred to the Supreme Court's pronouncement in
Excise Commissioner, U. P. v. Ramkumar,60 and, particularly, to the
statement that "there can be no question of estoppel against the Govern-
ment in the exercise of its legislative, sovereign or executive powers."81
These statements are too broadly worded and cannot be said to represent
the true position as regards the applicability of the doctrine of estoppel
against the administration. Commenting on the Ram Kumar case, this
reviewer had stated earlier as follows :62
The broad proposition stated in Ram Kumar is, thus, not supported
by authorities. In spite of some observations in ( this case that
estoppel does not operate against the government, it will be safe to
presume that the doctrine of estoppel is not completely and absolu-
tely ruled out as regards administration in all circumstances what-
soever. The Indo Afghan case63 and the Century Spinning^ case have
not been noted.
This statement stands vindicated by the Supreme Court's decision in M.P.

Sugar\Mills v. State of Uttar Pradesh, noted later in this survey.65
Atam Nagar Co-operative House Building Society v. State™ constitutes
an example of a situation where the court found it possible to apply the
doctrine of estoppel and give relief to the petitioners. The City Improve-
ment Trust adopted two schemes for land development. The chairman of
the- trust 2smrv& some pcmam who h&duapproached him for allotment of
plots that their request would be favourably considered if they formed
a co-operative society. They formed such a society and 90 residential
plots were allotted to it in pursuance of the chairman's assurance. The
society advanced money to the trust against this allotment of land. Later,
the trust abandoned these schemes in view of some court orders because it
had delayed acquisition of land for more than three years since the notifica-
tion for the same had been issued under the Land Acquisition Act. The
trust then formulated another parallel scheme but refused to accommodate
the members of the society on the ground that the assurance given by the
trust's chairman lapsed with the abandonment of the earlier scheme. The
society challenged the trust's decision through a writ petition. The court
*° AJ.R. 1976 S.C. 2237. Also see Malhotra & Sons v. Union of India, A J . R . 1976
J.&K.41.
«i XII A.S.I.L., supra note 31 at 506.
62 Ibid.
63 A.I.R. 1968 S . C 718.
6* Century Spn. <fc Mfg. Co. v. Ulhasnagar Municipality, A.I,R. 1971 S.C. 1021,
•5 Infra at p. 338.
H AJ.R. 1979 P. & H. 196.

accepting the petition directed the trust to send the case of the petitioner
society to the state government to exempt the land purchased by it from
the operation of the new scheme. It reasoned that the society had been
formed on the chairman's assurance and had made the necessary payment
to the trust for the land allotted. If the chairman had not given the
assurance, it would not have acted on the assurance. Instead, it would
have made some other alternative arrangements for getting residential
plots. By acting on the assurance, it materially changed its position and
the trust should, therefore, be estopped from going back on the solemn
assurance given by it earlier. The scheme was quashed because of undue
delay on the part of the trust. If the trust was now exempted from honour-
ing its assurance, it would benefit from its own negligence. The new
scheme was almost a replica of the old one and was adopted to overcome
the technical objections found therein. To accept the trust's argument
would amount to discarding the well known maxim that 'equity feeds the
grant of estoppel'. Rights came into existence in favour of the society on
account of the operation of the principle of estoppel and the trust could
not be allowed to ignore these rights.
The cause celebre of the year in the area of administrative law, and
especially on the question of applicability of estoppel against the
government, is M.P. Sugar Mills v. State of U.P}1 The Government of
Uttar Pradesh announced a scheme of exempting new industrial units from
sales tax for three years. It also gave a categorical assurance to the
petitioners to the effect that, if they set up a vanaspati factory in the state
its product would be exempt from sales tax for three years. Acting on
this assurance, the appellants set up their factory. Later, the government
went back on this promise, and sought to withdraw the exemption from
sales tax. This was challenged through a writ petition. The Supreme Court
ruled that the government was bound by its promise or assurance on the
ground of equity. The government had argued that the appellants' concern
was quite profitable and so no prejudice was caused to them by acting on
its assurance and setting up the factory. The court ruled that what was
material in the situation was the "altering of the position" by the petitioners
and not the "prejudice" caused to them. "The detriment in such a case
is not some prejudice suffered by the promisee by acting on the promise,
but the prejudice which would be caused to the promisee, if the promisor
were allowed to go back on the promise."670 In the instant case, tte*
relevant taxing statute contained a clause authorising the government to
grant exemptions from sales tax to new enterprises. It could, therefore,
issue a notification under this statutory provision to honour its promise.
Another plea which it had raised against the appellants was that of waiver.
However, the court rejected this plea on the ground that the government
67
Supra note I.
67«/rf. at651.

had not raised it in its affidavit filed in reply to the writ petition. It also
emphasized that it is an elementary principle that waiver is a question of
fact and must be properly pleaded and proved. The government had not
taken the plea at the first opportunity, but raised it for the first time at the
time of the hearing of the writ petition. This was not right. Explaining
the nature of waiver, the court emphasized that it means abandonment of
a right and this may be express or implied by conduct. The basic condi-
tion, however, is that it must be "an intentional act with knowledge."
There can be no waiver unless the person concerned is fully informed as to
his right, and with full knowledge of such right, the intentionally abandons
it. In the instant case, there was nothing to show that the appellant was so
placed.
The highlight of this case is a full-fledged discussion by the court of the
doctrine of promissory estoppel as applicable in the area of administrative
law. It has emphasized that the basis of the doctrine is equity. Lord
Denning recently discovered the doctrine in the High Trees case.68 Bhagwati
J. expounded the relevant principles as follows :
[W]here one party has by his words or conduct made to the other a
clear and unequivocal promise which is intended to crerte legal
relations or affect a legal relationship to arise in the future, knowing
or intending that it would be acted upon by the other party to whom
the promise is made and it is in fact so acted upon by the other
party, the promise would be binding on the party making it and he
would not be entitled to go back upon it, if it would be inequitable
to allow him to do so having regard to the dealings which have
taken place between the parties, and this would be so irrespective
whether there is any pre-existing relationship between the parties or
not,69
This principle is much broader than the principle of estoppel followed

in England. But the court has justified the broad principle on the ground
that it is based on equity, which is flexible. In England, equitable estoppel
can be used by and large only as a defensive or passive tool and not for
offensive purposes. This means that it cannot found a cause of action (except
as a proprietary estoppel). On the other hand, in India, estoppel can
be used for both purposes. Undoubtedly, in thus enunciating the
above mentioned principle, the Supreme Court (and especially
Bhagwati J.) has performed a very creative function. This doctrine has vast
potentiality as a juristic technique to do justice. If it is allowed full play,
it would seriously erode the principle of consideration in the law of
68
Central London Property Ltd. v. High Trees House Ltd., (1956) 1 All E.R. 256. Also
see, Lord Denning, The Discipline of Law 197-223 (1979). He calls this as a
"principle of justice and of equity".
09 Supra note 1 at 631.

contracts which is regarded as an anachronism in modern juristic thought.70
That aspect is not under consideration here. What we are concerned here
with is the creative streak in the present judgment which applies the
doctrine of estoppel against the government. Both in England and the
U.S.A., doubt exists as to how far this doctrine is applicable against
the government and by and large the courts have adopted a rather
restrictive, conservative and cautious attitude in this regard.71 In India,
the present case greatly strengthens the trend which was revealed in the
Supreme Court decision in the Indo-Afghan Agencies case,72 but it
has been seeing ups and downs since then. The Indian courts were
not able to make up their minds as to which way to go in applying
the doctrine.73 The government makes a promise knowing or intending
that it would be ac'ed upon by the promisee. When the latter, in fact,
acts in reliance upon the promise, and alters his position, then the former
would be held bound by the promise, which would be enforceable against
it at the instance of the promisee, notwithstanding the fact that there is
no consideration for the promise and that it is not recorded in the form of
a formal contract as required by article 299 of the Constitution.74 The
doctrine of executive necessity cannot be invoked by the government to
get out of its promise. If it does not want its freedom of executive action to
be hampered or restricted, it need not make a promise knowing or inten-
ding that it would be acted upon by the promisee and he would alter his
position relying upon it. But if it makes a promise, and the promisee
acts in reliance upon it and alters his position, then there is no reason why
it should not be compelled to make good such promise like any other
private individual. According to Bhagwati J. :
The law cannot acquire legitimacy and gain social acceptance

unless it accords with the moral values of the society and the
constant endeavour of the Courts and the legislatures must,
therefore, be to close the gap between law and morality . . . . The
doctrine of promissory estoppel is a significant judicial
contribution in that direction.75
70
See Law Commission, XIII Report.
71
Federal Crop Insurance Corp. v. Merrill, (1947) 332 U.S. 380; also American Juris-
prudence 2nd, 783, para 123; Howell, infra note 76; Lever {Finance) Ltd. v.
Westminster Corp , (1970) 3 All E.R. 496.
72
Supra note 63.
73
Reference was also made to the following cases to support this proposition :
Century Spg.&Mfg. Co. Ltd v.Ulhasnagar Municipal Council, A.I.R. 1971 S.C
1021, where the doctrine of promissory estoppel was applied to a municipal council.
The doctrine was again affirmed in Turner Morrison & Co. Ltd. v. Hungerford
Investment Ltdu A4.R, 1972 S.C 13Ut For discussion see XII A.SJ.L., supra note
31 at^G4-5.
M For art, 299 &;t Jain, i^ra nm 19 *J iii\ Jftia & Jftta, sm>ra note 3, oh. XVU,
» &wa note \ at « i

Bhagwati J. has spelt out the following exceptions to the doctrine of

estoppel: Being an equitable doctrine, it must yield when the equity so
requires. If the government can show that having regard to the facts as
they have subsequently transpired, it would be inequitable to hold it to
its promise, the court would not raise an equity in favour of the promisee
and enforce the promise against it. Also the promise would not be enforced
if public interest suffers in fulfilling 'the promise made by the government.
But it cannot claim exemption from the liability to carry out the promise
on some "indefinite and undisclosed" ground of necessity or expediency.
It is for the court to decide on the basis of the facts disclosed by the
government whether it would be inequitable to enforce the liability against
it. It is only when it is satisfied that the overriding public interest requires
that the government should not be held bound by the promise but should
be freed from it, that it would refuse to enforce the promise against the
government. "The Court would not act on the mere ipse dixit of the
Government, for it is the Court which has to decide and not the
Government whether the Government should be held exempt from
liability. This is the essence of the rule of law." 75a The doctrine cannot
also be applied in the teeth of an obligation or liability imposed by law.
The court referred to Howell™ which was an authority for the proposition
that promissory estoppel cannot be invoked to compel the government
to do an act prohibited by law. It refused to hold Excise Commissioner,
U.P. v. Ram Kumar11 as an authority against the applicability of the doctrine
of promissory estoppel against the government. There the government had
made no promise and so there was no occasion to apply the doctrine.
It also held that nothing in the Sipahi Singh case78 could persuade it to
take a different view as regards estoppel. There the respondent was
unable to show any factual basis for applying the doctrine. The court
noted that in Radhakrishna Agarwal v. State of Bihar,19 the Indo-Afghan
case80 was approved. Referring to the fact situation in the instant case,
it pointed out that a categorical representation was made on behalf of the
government that the appellants' proposed vanaspati factory would be
exempt from sales tax for three years. The government made the
representation knowing or intending that it would be acted upon by
the appellants. They did act upon it and set up the factory.
Thus, the factual basis for setting up the doctrine of promissory
estoppel was present. The plea of the government that the doctrine was
not applicable in the instant case because the appellants' factory was
75
« Ibid.
76
Howell v.Falmouth Boat Construction Co., 1951 A.C. 837. See for discussion, XII
A.S.I.L, supra note 31 at 504-5.
77
Supra notes 60 and 61.
78
Bihar Eastern Gangetic Fishermen Coop. Society Ltd. v. Sipahi Singh, A.I.R. 1977
S.C 2149. For comments on this case, see XIII A.S.I.L. 498-9 (1977).
79
A.LR. 1977 S C. 1496. For comments on the case, see XIII A.S.I.L., id. at 500-2.
80
Supra note 63.

342 Annual Survey of Indian Law (1979
making profit and, thus, no prejudice was caused to him, was rejected by
the court saying that it is not necessary " t o attract the applicability of the
doctrine of promissory estoppel, that the promisee, acting in reliance on
the promise, should suffer any detriment. What is necessary is only
that the promisee should have altered his position in reliance on the
promise." 80 " Bhagwati J. thus stated:
In order to invoke the doctrine of promissory estoppel it is enough

to show that the promisee has, acting in reliance on the promise,
altered his position and it is not necessary for him to further show
that he has acted to his detriment.806
Since the appellants in the instant case had altered their position, the
government was bound to make good the representation made by it.
Since the U. P. Sales Tax Act authorises the government to grant
exemptions from sales taxation, it can legitimately be held bound by its
promise to exempt the applicants from payment of sales tax. If there were
no provision in the taxing Act enabling the government to grant
exemption, it would not be possible to enforce the representation against
it because it cannot be compelled to act contrary to the statute. The
court ordered refund of tax money paid by the appellants to the
government by way of sales tax which it was not entitled to charge.
In U.S.A., in Federal Crop Insurance Corp. v. Merrill,81 the Supreme
Court denied that estoppel was applicable against the government.
Schwartz has [[criticized the reasoning used by the court in Merrill
to deny any remedy as having "all the beauty of logic and all the
ugliness of injustice." He has suggested that estoppel may not be
applied against a statute (as distinguished from the regulations of the
agency itself as in Merrill) but that it should apply in all other situations.
He states, "Both reason and policy argue that prejudicial reliance
warrants invoking the doctrine of estoppel against the government in
other cases." 82 This approach has recently been vindicated in U.S.A.
in Brandt v. Hickel.8B The Indian position as depicted in the present case
is far in advance of the position achieved in U.S.A. and England so
far on this question.84
Benefits and discretion
Another outstanding judicial pronouncement of the year is Ramana v.

International Airport Authority.8* As formulated by the Supreme Court
80a
Supra note 1 at 650.
so& id. at 651.
81
(1947) 332 U.S. 380.
82 Administrative Law 134-136 (1976).
83
427 F . 2d 53, 57 (9th cir. 1970) ; Schwartz, id. at 135-136.
si See de Smith, Judicial Review of Administrative Action 100-105, 317-318 (1980).
85 Supra note 1-

itself, the following interesting but significant questions arose in this case:
What are the constitutional obligations of the state when it takes action
in exercise of its statutory or executive power? Is the state entitled to
deal with its property in any manner it likes or award a contract to any
person it chooses without any constitutional limitations upon it? What
are the parameters of its statutory or executive power in the matter of
awarding a contract or dealing with its property? The great relevance of
these questions can be seen from the fact that in modern times state is
the source of much wealth.86 Many individuals and businesses enjoy
largess in the form of government contracts. Therefore, the question
whether or not persons dealing with the government enjoy any legal
protection or not assumes great significance. Can the state withhold,
grant or revoke a contract at its pleasure? Is the government in the same
position in this respect as a private person? Is Ramana, generally speaking,
the court answered these questions in the negative. It ruled that the
government cannot exercise its discretion in an arbitrary manner.
In the instant case, the International Airport Authority issued a notice
on January 3, 1977, inviting tenders for running a second class restaurant
and two snack bars at the airport at Bombay. The authority is a statutory
body set up under a parliamentary statute. It awarded the contract to
one Kumaria whose tender was the highest and who appeared to satisfy
all the conditions mentioned in the notice inviting tenders. Kumaria then
took necessary steps by way of purchase of necessary equipment (coolers,
crockery, etc.) for running the restaurant and the snack bars. The
authority failed to hand over possession of the premises to him as the
previous contractor (Irani) running the restaurant and snack bars did not
vacate the premises although his contract with the authority had come
to an end. There was some litigation betweent Irani and the authority,
but he did not succeed. Then Ramana filed the writ petition in October,
1977, challenging the decision of the authority in accepting Kumaria's
tender. Ultimately, the matter reached the Supreme Court by way of
special leave under article 136.
One of the contentions of the petitioner was that Kumaria did not
fulfil the conditions of eligibility stipulated in the notice inviting tenders.
The court examined this question and found that "the test of eligibility
laid down in the notice was an objective test and not a subjective one." 87
It further found that Kumaria was not eligible to submit the tender and
that the action of the authority in accepting the same contravened the
terms of the notice inviting the tenders. The next important question
was whether there was anything wrong in the authority accepting the
tender of Kumaria. The answer of the court to this question constitutes
the most crucial part of its opinion. The authority had sought to counter
86
See Jain & Jain, supra note 3 at 3-4.
87
Supra note 1 at 1634.

the petitioner's argument by the counter-argument that the conditions of

eligibility mentioned in the notice had neither any statutory force nor was
it issued under any administrative rules and, therefore, even if the notice was
not adhered to by the authority, the matter was not justiciable and furnished
no cause of action to the petitioner. The authority argued further that
it was competent to reject all tenders received by it and negotiate directly
with some one for entering into a contract with him. This was made
clear by the notice in question. The court accepted this part of the
authority's contention but ruled, nevertheless, that in the instant case,
it did not reject all the tenders outright and enter into direct negotiations
with Kumaria for awarding the contract. On the other hand, the authority
accepted his tender. The action of the authority could not, therefore,
be justified by the argument that it could have achieved the same
result by rejecting all the tenders received by it and entering into direct
negotiations.
The petitioner himself was not a tenderer. The question, therefore,
arose: Did he have locus standi to file the writ petition? The court ruled
that he did. The locus standi for his complaint was not that his tender
was rejected as a result of*improper acceptance of Kumaria's tender but
that he was differentially treated and denied equal opportunity with him
in submitting a tender. Had he known that non-fulfilment of the eligibility
requirement would be no bar to the consideration of a tender, he also
would have submitted a tender and competed for obtaining a contract. It
was held that the authority had laid down a norm or standard of eligibility,
and since Kumaria did not satisfy that standard or norm, it was not
competent to entertain his tender. The court expounded the relevant
principle on this point as follows:
It is a well settled rule of administrative law that an executive

authority must be rigorously held to the standards by which it
professes its actions to be judged and it must scrupulously observe
those standards on pain of invalidation of an act in violation of
them.88
This rule though supportable under article 14 as well does not rest
merely on it.89 It has an independent existence apart from it. "It is a
rule of administrative law which has been judicially evolved as a check
against exercise of arbitrary power by the executive authority." Today,
the individual comes so much in "relationship of direct encounter with
State power-holders", that it has become necessary "to structure and
ss Id. at 1635. Reference made to Vitarelli v. Seaton, 359 U.S. 535 (1959). Also
A.S. Ahluwalia v. State of Punjab, A.I.R. 1975 S.C. 984 ; Sukhdev v. Bhagatram,
ALR. 1975 S.C. 1331.
8» For art. 14, see M.P. Jain, supra note 19 at 410.

Vol. XVj Administrative Law 345
restrict the power of the executive Government so as to prevent its
arbitrary application or exercise." The very essence of the rule of law
and its bare minimal requirement is that every action of "the executive
government must be informed with reason and should be free from
arbitrariness" and it does not matter in applying this principle whether
the "exercise of the power involves affectation of some right or denial of
some privilege."90 Government's discretion is not unlimited in that it
cannot give or withhold largess in its arbitrary discretion or its sweet will.91
Bhagwati J. thus enunciated the crucial principle as follows:
It must, therefore, be taken to be the law that where the Govern-

ment is dealing with the public, whether by way of giving jobs or
entering into contracts or issuing quotas or licences or granting
other forms of largess, the Government cannot act arbitrarily at its
sweet will and, like a private indvidiual, deal with any person it
pleases, but its action must be in conformity with standard or norm,
which is not arbitrary, irrational or irrelevant. The power or
discretion of the Government in the matter of grant of largess
including award of jobs, contracts, quotas, licences etc. must be
confined and structured by rational, relevant and non-discriminatory
standard or norm and if the government departs from such standard
or norm in any particular case or cases, the action of the Govern-
ment would be liable to be struck down, unless it can be shown by
the Government that the departure was not arbitrary, but was
based on some valid principle which in itself was not irrational,
unreasonable or discriminatory.92
This principle also flows directly from article 14 which strikes at

arbitrariness in state action and ensures fairness and equality of treatment.93
The court observed on this point :
It must therefore follow as a necessary corollary from the principle

of equality enshrined in Article 14 that though the State is entitled
to refuse to enter into relationship with any one, yet if it does so, it
cannot arbitrarily choose any person it likes for entering into such
relationship and discriminate between persons similarly circumstan-
ced, but it must act in conformity with some standard or principle
which meets the test of reasonableness and non-discrimination and
any departure from such standard or principle would be invalid
*° Supra note 1 at 1636.
w Reference made to Mathew J.'s judgment in V. Punnan Thomas v. State of Kerala,
A.I.R. 1969 Ker. 81 ; Eurasian Equipment & Chemicals Ltd. v. State of West Bengal,
AJ.R. 1975 S.C. 266.
»2 Supra note 1 at 1637-38.
»3 SccE.P.Royappav. State of Tamil Nadu, A.I.R. 1974 S.C. 555; Maneka Gandhi v.
Unionrof India, supra note 22 ; Eurasian Equipment, supra note 91.

unless it can be supported or justified on some rational and non-
discriminatory ground.94
Referring to C.K. Achutan v. State of Kerala?* the court stated that there
it did not intend to lay down any absolute proposition permitting the
state to act arbitrarily in the matter of entering into contracts with
third parties.96
Is the above mentioned judicially evolved general principle of adminis-
trative law against arbitrary governmental action in the matter of conferr-
ing a benefit, binding on a body like the International Airport Authority as
well? The court answered this question in the affirmative stating that the
government has created many corporations to carry out its functions. It
could have carried out these tasks departmentally through its own service
personnel, but keeping in view the nature of some of the tasks to be per-
formed, they are handed over to the corporations. The court stated the
following principle in this connection:
The corporations acting as instrumentality or agency of Govern-
ment would obviously be subject to the same limitations in the field
of constitutional and administrative law as Government itself,
though in the eye of the law, they would be distinct and independent
legal entities. If Government acting through its officers is subject to
certain constitutional and public law limitations, it must follow a
fortiori that Government acting through the instrumentality or
agency of corporations should equally be subject to the same
limitations.960
The question, however, is how to determine whether a corporation is
acting as an instrumentality or agency of the government ? What are
the tests to determine whether a corporation established by statute
or incorporated under law is such ? The court surveyed the relevant case
law in U.S.A. to consider this question.97 State financial support plus
an unusual degree of control over the management and policies of an
institution might lead one to characterise it is a state operation.98 It may
also be a relevant factor to consider whether the corporation enjoys
monopoly status which is state conferred or state protected,99 Another
factor to consider may be whether the operation of the corporation is an
94
Supra note 1 at 1643. Also see Rasbihari Panda v. State of Orissa, AJ.R. 1966 S.C.
1081.
** A.I.R. 1956 S.C 490.
96
In Achutan, ibid., the Supreme Court had refused to issue mandamus to enforce a civil
liability arising out of a contract on the ground that contract normally creates a
private and not a public right. See Jain and Jain, supra note 3 at 445, 614-5.
96
« Supra note 1 at 1638.
97
Kerr v. Eneck Pratt Free Library, 149 F 2nd 212.
9
s Sukhdev v. Bhagatram, supra note 88 at 1359, 1360.
99
Douglas J', in Catherine Jackson v. Metropolitan Edison Co., 419 U.S. 345 (1974)*

Vol. XV] Administrative Law 34?
100
important public function. Where a corporation is an instrumentality or
agency of government, it would, in the exercise of its power or discretion,
be subject to the same constitutional or public law limitations as the
government. It should be bound by the rule mentioned above inhibiting
arbitrary governmental action when the corporation is dealing with the
public, whether by way of giving jobs or entering into contracts or other-
wise, and "it cannot act arbitrarily and enter into relationship with any
person it likes at its sweet will, but its action must be in conformity with
some principle which meets the test of reason and relevance."101
Both having regard to the constitutional mandate of article 14 as also to
the "judicially evolved rule of administrative law", the authority in question
was not entitled to act arbitrarily in accepting the tender of Kumaria, but
was bound to conform to the standard or norm laid down in the notice
inviting tenders. If there was no acceptable tender from a person satisfying
the eligibility condition, it could have rejected all the tenders and invited
fresh ones prescribing a less stringent standard or norm. But it could
not depart from the standard set by itself and arbitrarily accept
Kumaria's tender, for by doing so it denied equality of opportunity to
others similarly situated. Acceptance of Kumaria's tender was invalid as
being violative of the "equality clause" in the Constitution as also the rule
of administrative law inhibiting arbitrary action.
In spite of this ruling, the court refused to set aside the authority's
decision in the instant case awarding the contract to Kumaria. In view of
the peculiar facts and circumstances of the case, the court felt that
it would not be a sound exercise of discretion to upset the authority's
decision and avoid the contract. The petitioner personally had no real
interest in the result of the litigation. He was put up by Irani to deprive
Kumaria of the benefit of the contract secured by him. The writ petition
did not appear to have been filed bona fide by the petitioner to protect his
own interest. There was also the element of laches on his part in filing the
petition after the tender had been accepted by the authority. In the mean-
time, Kumaria had spent a large sum of money to put up the restaurant
and snack bars and it would, therefore, be most iniquitous to set aside the
contract at this stage.
This pronouncement has several notable points. Hitherto, in several
cases, the Supreme Court had ruled that when the government chooses one
person over another to enter into a contract, the aggrieved party could not
claim the protection of article 14 because the choice of the person to fulfil
the particular contract must be left to it.102 Now, this open choice of the
government in the matter of awarding contracts has been restricted; it is to
100
Mathew J. in Bhagatram, supra note 88 at 1331; also Marsh v. Alabama, 326 U.S.
501 (1945).
m Supra note 1 at 1642.
lot
Jain & Jain, supra note 3 at 616.

act in this matter in conformity with some reasonable and non-discrimina-
tory standards or principles. Further, on general principles of administra-
tive law, an authority is to be held bound to the standards which it says it
would follow in exercising its powers to confer benefits; it cannot deviate
from them with impunity and throw the proclaimed 'standards' to the
winds. That will be arbitrary action on its part. Even in the matter of
conferring privileges on the people, the government has to follow some
norms which are "rational, relevant and non-discriminatory". Thus,
in inviting tenders, the norms governing the tenderers should be
reasonable and non-discriminatory, and the government should not depart
from them arbitrarily and without proper justification. The position advo-
cated here is in line with the judicial thinking in countries like U.S.A.
and England where the concept of'privileges'is being slowly eroded and
being transformed into that of'right'.103 But the position reached by the
court in the International Airport Authority case is far in advance of that
yet reached in either of those two countries as regards disciplining of the
government's discretion to confer benefits on the people. This is a very
positive aspect of the instant pronouncement. There is, however, a debata-
ble aspect of the case as well. The court has elaborately gone into the
question whether the International Airport Authority is an instrumentality
or agency of the government so as to bring it under the same discipline of
administrative law as the government itself. The authority is a statutory
body. But that element does not appear to be sufficient to the court to
designate it as an 'instrumentality or agency' of the government. According
to the court's thinking, there should be something more to make a statutory
body as a government agency or instrumentality. On this point, it appears
to be deeply influenced by the judgment of Mathew J. in Bhagatram}^
This question needs a much fuller and deeper probe and investigation than
is possible within the limited confines of this survey. But, in the opinion of
this reviewer, a statutory body by itself, without anything more, should be
regarded as a government instrumentality or agency and be subjected to
the same discipline of administrative law as the government itself. When
the state sets up a statutory body, it is presumed that the activity to be
undertaken by this body is one in which it is interested and which it
desires to promote. Otherwise, why should the government goto the extent
of passing a law and set up a statutory body? If, however, the state seeks
to promote an activity through a non-statutory or a private body not set up
by it, then the question may arise whether such a body can be regarded as
an instrumentality or agency of the government. The several tests mentio-
ned by the court to decide whether a body is an instrumentality or agency
of the government may be relevant and pertinent to such a private or a
103 Schwartz, supra note 82 at 223-230; de Smith, supra note 84 at 171,188, 224.
104
Supra note 88.

non-statutory body, but a statutory body is in a different category.105
Further, the International Airport Authority Act, 1971, contains standard
provisions which can be found practically in the statute of any other statu*
tory corporation.106 There is nothing special in it which is not to be found
in any other parallel statute. There are other statutory bodies, however, like
the universities, which are under much less government control in matters
of policy than a statutory corporation. For example, whereas a standard
provision in the parent Act of a corporation is that the government can
issue a directive to it on matters of policy,107 there is no such provision found
in the university statutes as the university autonomy is preserved. But uni-
versities receive government funds. No one will argue that they need not
function according to the principles of administrative law. There have
been many cases where courts have applied the principles of administrative
law to the universities.108 Things will become much simpler if a general
norm were to be adopted, viz., statutory bodies ought to observe principles
of administrative law like any other government department. The question
of non-statutory bodies and even private bodies falls in a separate category;
there may be some elements present in such bodies as to place them in the
category of government agencies, making it incumbent on them to follow
the restraints of administrative law. It is this area which needs further
investigation. It seems to this reviewer that future developments in the
area of administrative law may lie in this direction.
To the same effect is the pronouncement of the Bombay High Court
in State Bank of India v. Kalpaka Transport Co.m The court ruled that
blacklisting of any one for entering into a contract raises problems under
article 14 and so while blacklisting a transport company and refusing to
enter into any contractual relation with him, the bank must act according
to natural justice. On this point, Desai C. J. observed as follows :
As the horizon of the State's activities is expanding in the modern

welfare State, judicial concepts are being remodelled to suit new
situations. If the State's organ is vested with powers, the concept
of contract is being replaced by constitutional obligations. If at the
threshhold of a deal, a citizen is to be discriminated against, aid of
the principles of natural justice is invited to safeguard the legitimate
expectation of the citizen.110
ios See M.P. Jain, 'The Legal Status of Public Corporations and their Employees', 18
JJ.LJ. 1 (1976); Jain & Jain, supra note 3 at 708-709.
we Jain & Jain, id., ch. XXI.
107 Jain & Jain, id. at 696-697.
108 See for example University of Mysore v. Govinda Roa, A J . R . 1965 S.C. 491 ;
N.N Misra v. Vice Chancellor, Gorakhpur University A J . R , 1971 Ail, 290; <?, Sawta
v.Lucknow University, A J , R , 1976 S<C< 1428,
W I A , I , R , 1979 Bom, 230,
no ux at 263,

The court further emphasized that before entering into a contract, if the
state wants to make a choice between the contending parties, it may choose
any one or the best one of them, but that must be done on a fair treatment
to all and not by discriminating one against the other. Once a contract is
entered into, the rights of parties are determined by its terms. However,
at the very threshhold, constitutional obligation requires the state agency
to act fairly and make a choice of the contracting party by affording equal
opportunity to all the contenders by examining their claims fairly.
IV JUDICIAL REVIEW
Writs
A writ petition in the High Court under article 226 remains the most
popular method to challenge an administrative action and to obtain redress
against the administration. There is, however, no significant pronounce-
ment in this area during the year. Some of the well settled propositions
have been reiterated. For instance, in Hoshnak Singh v. Union of India}11
the Supreme Court affirmed the proposition that if a writ petition under
article 226 is dismissed in limine by the High Court without passing a
speaking order, it does not create res judicata}12
In Electrogears Ltd. v. Rehabilitation Industries Corporation11* a
question was raised on which there has been a good deal of difference of
opinion among the High Courts, 114 viz. : can a writ petition be filed under
article 226 against a government company, Rehabilitation Industries Cor-
poration Ltd. in this case? This corporation is a non-statutory government
undertaking and all its shares are held by the President of India, and it is
registered under the Companies Act. The petitioner's argument was that
the writ petition had been filed to stop the corporation from infringing
section 24 of the Indian Electricity Act, 1910. The court held that a writ
petition was not maintainable against the corporation. Reference was
made by the court to such cases as Sukhdev Singh v. Bhagatram}15
Sabhajit Tewary v. Union of India}1* Executive Committee ofVaish Degree
College v. Lakshmi Narain111 The main reason for the court's view was
that a government company is not a statutory body. The court refused
to accept the petitioner's contention that because there is a duty imposed
by a statute on a company, a writ petition could lie if there is a breach of
111
A.I.R, 1979 S.C. 1328.
us Reference was made to the following cases: Daryao v. State of Uttar Pradesh, AJ.R.
1961 S.C. 1457; Virudhunagar Steel Rolling Mills Ltd. v. Government of Madras,
AJ.R. 1968 S.C. 1196. See XIV A.S.I. L., supra note 22 at 379-380.
us A.I.R. 1979 Cal. 320.
ii4 See XIV A.S.I.L,, supra note 22 at 380, 384.
H5A.LR, 1975 S.C. 1331.
us AJ.R. 1975 S.C. 1329.
H7 A I.R. 1979 S.C. 888.

that duty. Instead, a suit may lie under certain circumstances for the
purpose. In view of the discussion held in the last year's survey on this
point, it is not now necessary to labour the point again.118
A petition for quo warranto was filed against the Chief Minister of
Raja'sthan, Bhairon Singh Shekhawat, on the ground that he was not
validly elected to the House. The Rajasthan High Court ruled in
Purshottam Lai v. State119 that if a chief minister is holding office without
lawful authority, and in breach of any constitutional provision, then quo
warranto may be issued on the petition of a member of the public.120 The
office121 of a chief minister is one of substantive character created by the
Constitution. But the membership of the Assembly is not an office for the
purposes of quo warranto. A quo warranto is not a proper remedy to
raise questions relating to the election of a chief minister to the House.
Such a question can be raised properly only through an election petition.
What is a 'state' under article 12
This question is raised from time to time. Fundamental rights

enshrined in the Constitution122 do regulate and control administrative
action to some extent. Whenever a person seeks to invoke a fundamental
right to challenge an action of an authority, the question arises whether
the fundamental right in question applies to that authority. This question
has to be answered with reference to article 12 which defines a 'state' for
purposes of fundamental right.123 In State Bank of India v. Kalpaka Transport
Co.,124 the Bombay High Court considered the question whether the State
Bank is 'state'falling under the expression 'other authority'in article 12.
The court ruled after referring to Sukhdev126 and Rajasthan Electricity
Board126 that this expression was wide enough to include within it every
authority created by a statute even though governmental or quasi-
governmental functions were not vested in it. In the words of Desai C. J.:
«» XIV A.S.I.L., supra note 22 at 383-4.

119
AJ.R. 1979 Raj. 23.
120
On the scope of quo warranto see Kalayanmal Jaisani v. State of Rajasthan, A.I.R.
1972 Raj, 234; Prabhudutt Sharma v. State ofRajashan, 1971 Lab. I.C. 556; Kumari
Chandra Kala v. Laloo Ram, 1968 Raj. I.W. 418; Jain & Jain, supra note 3 at 431-3.
121
For discussion of the question what is an office, see Satish Chander Sharma v.
Univ. of Rajasthan, A.I.R. 1970 Raj 184; Dr. Deorao Laxman v. Keshav Laxman,
A.I.R. 1958 Bona. 314; Smt. Kanta Kathuriav. Manak Chand Surana. A J . R . 1970
S.C. 694; Ali Mohd. Tariq v. Election Commission, A J . R . 1968 J. & K. 46.
122
Jain, supra note 19.
123
Art. 12 runs as follows :
In this part, unless the context otherwise requires, 'the state' includes the
Government and Parliament of India and the Government and the Legis-
lature of each of the States and all local or other authorities within the
territory of India or under the control of the Government of India.
w Supra note 109.
125 Supra note 115.
126 Rajasthan Electricity Boards. Mohanlal, A J . R . 1967 S.C. 1857.

352 Annual Survey of Indian Law [ 1979
Whenever, therefore, there is statutory body or authority, the con-
stitution of which shows that it is the voice and hand of Government
which is felt in a large measure and which Corporation deals with
business of public importance or vital to the life of the community,
it will be safe to infer that such a corporation would fall within the
expression 'other authority' under Art. 12 of the Constitution,1260
The State Bank is a statutory corporation in the functioning of which
the government plays a significant role. Therefore, the court held it to be
'other authority' under article 12. Was the International Airport
Authority an'authority' for purposes of article 12? This question arose
in Ramana.127 It was necessary to decide this question as article 14 could
apply to it only if it comes within the purview of article 12. For this
purpose, the court preferred the broader test laid down by Mathew J. in
Sukhdev v. Bhagatram12* in preference to the one laid down in Rajasthan
Electricity Board v. Mohan Lai129 whether the statutory corporation or
other body or authority is an instrumentality or agency of government?
If it is, it would be an 'authority' under article 12. Explaining the use of
the word 'agency' here, the court stated that it does not suggest that the
corporation should be an agent of the government in the sense that what-
ever it does should be binding on the government. "It is not the
relationship of principal and agent which is relevant and material but
whether the corporation is an instrumentality of the government in the
sense that a part of the governing power of the state is located in the
corporation and though the corporation is acting on its own behalf and not
on behalf of the government, its action is really in the nature of state
action."130 After reviewing the provisions of the International Ail port
Authority Act, ihecourt came to the conclusion that the airport authority
is an "instrumentality or agency" of the central government and falls
within the definition of 'state' in article 12.
It is the view of the author that it will be far simpler for all concerned
to adopt a simple test that a body created by a statute is an 'authority' for
purposes of article 12. There is really no need to superimpose on a
statutory body another test that it be also "an instrumentality or agency"
of the government to be characterised as an authority. Most of these
bodies are autonomous. In a broad sense, every statutory body can be
regarded as an instrumentality of the state for it is set up by the state and
it carries out a function which the state seeks to promote. The author is
not aware of any statutory body which has not been held to be an
'authority' under article 12 irrespective of the functions discharged131 by
iwo Supra note 109 at 257.
127 Supra note 1.
las Supra note 115.
w Supra note 126.
io° Supra note I at 1648*
wi Jain, supra note 105»

it. There are a number of bodies so autonomous in character that they

can be regarded as instrumentalities of government in a very broad sense.
Such a test may be relevant in case of a non-statutory body, but not a
statutory body.
What is a 'tribunal' for purposes of article 136?
The Supreme Court held in Income-tax Commissioner, Calcutta v. B.N.

Bhattacharya132 that the Settlement Commission established under the
Income Tax Act is a 'tribunal* for the purpose of article 136. Section 245L
of the Act declares all proceedings before the commission to be judicial.
The commission has considerable powers and its determinations affect the
rights of the parties; its obligations are quasi-judicial. "When a body is
created by statute and clothed with authority to determine rights and
duties of parties and to impose pains and penalties on them it satisfies the
test laid down in Associated Cement Co. case." 133
Statutory provisions for judicial review

Under section 18 (1) of the Land Acquisition Act, 1894, the collector
makes a reference to the court regarding compensation for the land
acquired. In this connection, the Supreme Court considered a number
of questions in Md. Hasnuddin v. State of Maharashtra.134 Can the court
go behind the reference made by the collector if the application on which
the reference has been made is beyond the period of limitation prescribed
in the Act? Can the court go into the question that the application for
reference was not made to the collector within the time prescribed in
section 18 (2) of the Land Acquisiton Act, 1894? Can the court refuse
to entertain the reference if it finds it to be barred by time? On this
question, by and large, the courts have taken the view that a collector's
jurisdiction is circumscribed by the conditions laid down in section 18 (1)
and that if he makes a reference even though the application for
reference was not in accordance with the provisions in section 19, the
court acquires no jurisdiction to hear the reference and that it can refuse
to hear it if it was made on a time-barred application. Interpreting
section 18, the court observed that a written application to the collector
to make a reference makes it incumbent on him to make it if certain
conditions are fulfilled, viz., (i) there has to be a written application
by an interested person who has not accepted the award; (ii) the
nature of objections which he can raise; (Hi) time limit within which
he can make the application. The power of the collector to make
the reference is circumscribed by these conditions and one of them is
regarding limitation prescribed in the proviso to section 18. The condition
regarding limitation is a sine qua non for a valid reference by the collector.
132
AJ.R. 1979 SC. 1724.
133
Associated Cement Co. v. P.N. Sharma, A.I.R. 1965 S.C. 1595.
134 A I.R. 1979 S.C. 404.

The court to which the collector makes the reference being a tribunal of
special jurisdiction is obligated to see that the reference made to it by
the collector complies with the conditions laid down in section 18
so as to give the court jurisdiction to hear the reference. It is only a valid
reference which gives jurisdiction to the court. According to the Supreme
Court, the court has the following duty in such a situation:1340
Every tribunal of limited jurisdiction is not only entitled but bound
to determine whether the matter in which it is asked to exercise its
jurisdiction comes within the limits of its special jurisdiction and
whether the jurisdiction of such tribunal is dependent on the
existence of certain facts or circumstances. Its obvious duty is to
see that these facts and circumstances exist to invest it with
jurisdiction, and where a tribunal derives its jurisdiction from the
statute that creates it and that statute also defines the conditions
under which the tribunal can function, it goes without saying that
before that tribunal assumes jurisdiction in a matter, it must be
satisfied that the conditions requisite for its acquiring seisin of that
matter have in fact arisen.
In the instant case, the collector awarded a paltry sum of money as
compensation for the land acquired. For a piece of land measuring over
2,000 sq, yards and situated in the city of Aurangabad, the total
compensation awarded by the collector was only Rs. 1,318. The land was
acquired in February, 1958. The appellant, instead of making an
application to the collector for reference of the case to the court under
section 18, requested that he himself review the award made by him,
but he declined to do so. The appellant then made an application for
reference and the collector forwarded the same to the court keeping the
question of limitation open. The matter then arose for consideration
as to whether the court can go into the question of limitation. At the
Supreme Court level, keeping the injustice to the party in view, the
government appears to have agreed to consider whether it should make
an ex gratia payment to the appellant of a sufficient amount by way of
compensation which will be commensurate with the market value of the
piece of land in 1958. The court thought that the piece of land must
have been of some value and it felt sorry for the appellant at his
'incredible folly' in not applying for reference within the prescribed time
and, thus, losing what may be legitimately due to him. It expressed a
hope that the government would consider the matter. Such extremely
harsh cases raise the question whether the primitive machinery to assess
compensation for the land acquired, devised in 1894, is good enough for
modern times when land values have increased so much and proper
determination of the amount of compensation is crucial to the person
*«* Id. at 412.

who is being deprived of his land for a public purpose, and the cbllector,
a mere executive officer, does not appear to be a fit person to handle this
job.
Whether a revision would lie to the High Court under section 115,
Civil Procedure Code, 1908, from a decision of the commissioner under
the Workmen's Compensation Act, 1923, deciding a dispute under section
19(2) of that Act? The Madhya Pradesh High Court answered this question
in the negative in Yeshwant Rao v. Sampat.135 The commissioner for
workmen's compensation is appointed by the state government for an
area by notification. Under section 19 (2), the commissioner decides
any question as to the liability of any person to pay compensation or as
to its amount or duration. The commissioner is given all powers of a
civil court to take evidence on oath or compel attendance of witnesses.
The court pointed out that there are many similar features between, a
court and a tribunal: both can give binding decisions; procedure of both
is very much similar except that a tribunal's procedure may not be as
strictly prescribed as that of a court. The two differ, however, insofar
as a court is a part of the ordinary hierarchy of courts while a tribunal
is constituted under a special Act to exercise some special jurisdiction.136
The word 'court' in section 115 of the Code in a narrow sense, meaning
only a "civil court in the normal hierarchy of courts". The section does
not include tribunals established under special Acts and exercising special
jurisdiction. This view is suported by several High Court cases.137 So, an
order passed by the commissioner under section 19, Workmen's Compen-
sation Act is not reviewable by the High Court. The court refused to follow
the contrary view taken in some High Court cases.138 In Krishna Gopal v.
Dattatraya,™ a claims tribunal constituted under section 110 of the Motor
Vehicles Act was held to be a civil court for the purposes of section 115
of the Code.140 It ruled that these cases were not relevant as a claims
tribunal was not involved in the present case.
The Supreme Court also ruled in Md. Hasnuddin v. State of
Maharashtra1*1 that the function of the collector under section 18 of the
135 AJ.R. 1979 M.P. (21.

136
See A.C. Companies v. P.N. Sharma, supra note 133 at 1599 ; Durga Shankar
Mehta v. Raghuraj Singh, A.I.R. 1954 S.C. 520, at 522; Engineering Mazdoor Sabha
v. Hind Cycles Ltd., A J R . 1963 S.C. 874.
137 See Sawatram Ramprasad Mills v. Vishnu Pandorang, A J R . 1950 Nag. 14; H.C.D.
Mathur v. E.I. Rly., AJ.R. 1950 All. 80. In these two case, the authority under the
Payment of Wages Act, 1936 was held not to be subordinate to the High Court
within the meaning of s. 115, C.P.C. General Manager, Bhilai Steel Project v. Bhutani
& Co., 1965 M.P.L.J. (Notes) 73.
iss Shaikh Amir v Jarder Beg, 1979 M.P.LJ. (notes) 68; Abdui Rashidv. Hanuman Oil
& Rice Mill, AJ.R. 1951 Ass. 88; Mohanlal v. Fine Knitting Mills Co., A J . R . 1960
Bom. 387; Rajiyabi v. MM. & Co., A.I.R. 1970 Bom. 278.
"a AJ.R. 1972 M.P. 125.
i « Also see Mangilal v. Union of India, AJ.R. 1974 M.P. 159#
MSupr a nott 134.

Land Acquisition Act is not judicial in nature, nor is the collector a
court subordinate to the High Court and, therefore, the High Court could
not interfere under section 115 of the Code with the collector's refusal
to make a reference.
Purported to be done—limiting judicial review
A municipal board levied and collected a tax which was found to be

not authorised by law. The tax payer filed a suit for recovery of money
paid by him. The board pleaded that it was protected by the clause in
the statute which required that a suit for anything done or purported to
be done by the board under the Act would not lie after six months from
the accrual of the alleged cause of action. The Supreme Court ruled in
Firm Surajmal Bansidhar v. Ganganagar Municipality1*2 that the collection
of an illegal levy could not be said to be a thing "done or purporting
to be done"143 under the Act. What was plainly prohibited by the Act
could not be "claimed to be purported to be done in pursuance or
intended execution of the Act".
Disclosure of documents—section 123, Evidence Act, 1872
If the contents of the documents were such that their disclosure would
affect either the national defence or public security or good neighbourly
relations they could claim the character of a document relating to affairs
of state. There may be another class of documents which could claim
the same privilege not by reason of their contents as such, but by reason
of the fact that, if the said documents were disclosed, they would
materially affect the freedom and candour of expression of opinion in
the determination and execution of public policies. Privilege cannot be
claimed under section 123 because the government apprehends that if
the document is produced, it would defeat the defence raised by the state.
When a privilege is claimed concerning a particular document, the court
has to determine the character or class of document. If it concludes that
the document does not relate to the affairs of the state then it should reject
the claim for privilege and direct its production. A decision of the
cabinet relates to the 'affairs of the state' as it affects the integrity of the
cabinet in determination and execution of public policies. For non-
production of the same, privilege can be claimed. The Calcutta High
Court gave this ruling in Orient Paper Mills v. Union of India.1** In this
connection, reference may be made to the English case Attorney-General
v. Jonathan Cape Ltd.1**
H2 AJ.R. 1979 S.C. 246.

m Reference made to Poona City Municipal Corp. v, Dattatraya Nag.esk, A I R 1965
S.C 555. *
i « A.I.R. 1979 Cal. 114.
W (1976) Q.B. 752. Cabinet discussions may be protected against publication for
ten years in public interest but not for longer \h$n th#t period.

V TORTS
The driver of a military vehicle was driving to the railway station to
bring jawans of the army from there to the unit headquarters. Because of
his rash and negligent driving, he dashed against a tempo from behind
and injured its occupants. On being sued for compensation, the Union
of India denied its liability on the ground that the driver was performing
a "statutory duty in exercise of sovereign powers delegated to him
by the competent authority.146 The High Court of Jammu and
Kashmir negatived this contention in Union of India v. Savita Sharma.1*1
The court ruled that the statutory duty being performed by the
driver could [not be said to be referable to the exercise of the
delegated sovereign powers. The jawans could have been transported
in a private bus or a truck or in any other vehicle. The act of
their transportation from one place to another in the ultimate
analysis could be performed by private individuals also in their vehicles.
This act could be regarded as an act in exercise of sovereign powers
only if it could be shown that it could not have been performed by
private individuals.148 "The performance of only such acts could be
said to be in exercise of the sovereign powers or delegated sovereign
powers which could not be performed under the statute by any
individual other than the person who allegedly performed the same."149
146
Following references were cited before the court by the Union of India in support of
its contention: Kasturi Lai Ralia Ram Jain v. State of Uttar Pradesh, A.I.R. 1965
S.C. 1039; Collector, South Arcot v. Vedanthachariar, AJ.R. 1972 Mad. 148;
State v. Chhotey LaU AJ.R. 1967 All. 327; State v. Dattamal, AJ.R. 1967 M.P. 246;
Harbans Lai v. Union of India, AJ.R. 1970 J. & K. 5; Union of India v. Sugrabai,
A.I.R. 1969 Bom. 13; State v. Padmalochan, AJ.R. 1975 Ori. 41; Ramdayal v.'
Bhanwarlal, A.I.R. 1976 Raj. 173; State of Rajasthan v. Vidyawati, A.I.R. 1962
S.C. 933; Union of India v. P.S Mahal, AJ.R. 1976 J.& K. 80; Roop Lai v. Union of
India, A.I.R. 1972 J. & K. 22.
14
?AJ.R. 1979 J. &K. 6.
14
s Union of India v. Smt. Jasso, AJ.R. 1962 Punj. 315.
149
Satya JVati v. Union of India, AJ.R. 1967 Del. 98. On this topic see Jain & Jain,
supra note 3, ch. XVI.

014 1979 Administrative Law-1

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14

* Formerly, Professor of Law, Banaras Hindu University and Delhi University, At

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a society. Exemption from this part of the society in question, in effect,

The rates of admission to the auditorium shall be fixed or revised

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Ill DISCRETIONARY POWERS

It is a well established principle in India that conferment of sweeping

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and uncanalised power on administrative authorities can be held to be hit

« Jain 4 Jain, id. at 311-343.

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adopted by the court to uphold the commissioner's extensive power to

When power is conferred on high and responsible officers they are

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The petitioners had challenged the decision of the commissioner by

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25 Dwarka Prasad v. State of Uttar Pradesh, AJ.R. 1954 S.C 224.

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29 AJ.R. 1979 M.P. 163.

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a writ of prohibition to prohibit the commission from inquiring into these

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example of such application of the proposition is furnished by the State of

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vision and if it is not complied with by the registrar, he would have no

Where a charge of unfair discrimination is levelled (by the

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by disclosing to the Court that reason or motive which impelled it

«« Supra note 44 at 434.

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The Authority must remember that a permit holder has an ordinary

It is a firm rule of administrative law that discretionary power is to be

Subject to the control of the Government . . . the licensing

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considered by the detaining authority and there was, thus, non-application

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already granted exemption. The government passed a resolution

" AJ.R. 1979 S.C 304.

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Therefore a mere statement made by the Government or a Minister

59 A.I.R, 1979 Mad. 207,

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This statement stands vindicated by the Supreme Court's decision in M.P.

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This principle is much broader than the principle of estoppel followed

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The law cannot acquire legitimacy and gain social acceptance

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Bhagwati J. has spelt out the following exceptions to the doctrine of

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In order to invoke the doctrine of promissory estoppel it is enough

Benefits and discretion

Another outstanding judicial pronouncement of the year is Ramana v.

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the petitioner's argument by the counter-argument that the conditions of

It is a well settled rule of administrative law that an executive

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It must, therefore, be taken to be the law that where the Govern-

« Id. at 412.