L.S Panta, J.— These appeals by special leave filed by Kisan Sahkari Chini Mills Ltd., Sitarganj, Gadarpur and Nadehi (Civil Appeal No. 5543 of 2004), State of Uttaranchal (Civil Appeal No. 5544 of 2004), and Doiwala Sugar Company Ltd. and Kichha Sugar Company Ltd. (Civil Appeal No. 5545 of 2004) are directed against the final judgment and order dated 28-7-2004 passed by the Division Bench of the High Court of Uttaranchal in Writ Petition No. 318 of 2004 filed by Vardan Linkers, a proprietary concern of B.B Singh, first respondent in these appeals. By the impugned judgment, the High Court allowed the said writ petition and quashed the order dated 24-4-2004 of the Secretary, Cane Development and Sugar Industries, whereby the order dated 26-3-2004 of the Assistant Cane Commissioner, Udham Singh Nagar, granting permission to the first respondent to lift 85,000 quintals of molasses from the five sugar mills at a price of Rs 127 per quintal was cancelled.

Factual background

2. It is stated that there are six State controlled sugar mills in the State of Uttaranchal, which produce molasses as a by-product. of them, two mills, Doiwala Sugar Company Ltd. and Kichha Sugar Company Ltd., are government companies. The other four are in the cooperative sector, namely, Kisan Sahkari Chini Mills Ltd. at Nadehi, Gadarpur, Sitarganj and Bhajpur. Sale of molasses produced by these six sugar mills was controlled through the Molasses Sales Committee constituted by the State Government vide order dated 25-3-2003, with the following nine members:

(i) Commissioner, Kumaon Mandal, Nainital — Chairman

(ii) District Magistrate, Udham Singh Nagar — Member

(iii) Six General Managers of the four cooperative sugar mills and two sugar companies — Members

(iv) Assistant Cane Commissioner, Udham Singh Nagar — Secretary.

The said order made it clear that molasses of the six sugar mills shall be sold only through the said Committee. The State Government policy at the relevant time required molasses produced by these sugar factories to be disposed of in the following manner: 70% to distilleries and chemical factories in the State; 10% to manufacturers of country liquor within the State; and 20% to bona fide consumers (distilleries and chemical industries). No allottee who got allotment as a bona fide consumer could transfer the allotment to anyone else.

3. Kisan Sahkari Chini Mills Ltd., Gadarpur, issued a tender notice (published in Amar Ujala dated 23-2-2004) inviting offers from bona fide consumers for purchase of ‘B’ grade molasses produced by five sugar mills at Gadarpur, Nadehi, Sitarganj, Doiwala and Kichha. Tenderers were required to submit their tenders to the Assistant Cane Commissioner, Udham Singh Nagar, specifying the name of the sugar mills from which they wanted to purchase molasses and the quantity. The tender had to be accompanied by an earnest money of Rs 1,00,000 in respect of each sugar mill from which the tenderer wanted to buy molasses.

4. In response to the tender notice, the first respondent and others submitted their tenders, which were opened on 1-3-2004 at 3.30 p.m by the Assistant Cane Commissioner, Udham Singh Nagar, in the presence of the General Manager, Gadarpur, the purchase clerk of Sitarganj Mills and molasses clerk of Nadehi Mills. The first respondent's tender was for purchase of 15,000 quintals of molasses from Kisan Sahkari Chini Mills Ltd., Nadehi, at a price of Rs 101 per quintal. The said offer contained a note to the effect that “we will lift molasses in favour of distilleries of U.P, Punjab and Haryana”. The first respondent did not enclose any earnest money with the tender, but stated that a sum of Rs 1,00,000 was already deposited with Nadehi Sugar Mill. The first respondent did not make any offer for purchasing molasses from the other four mills.

5. As the prices offered by the tenderers were found to be very low, negotiations were held by the Assistant Cane Commissioner with the tenderers on the same day. This was followed by further negotiations on 3-3-2004. At the time of negotiations on 3-3-2004, only three members of the Molasses Sales Committee were present — District Magistrate, Udham Singh Nagar, General Manager, Gadarpur Sugar Mills and the Assistant Cane Commissioner, Udham Singh Nagar. The Chairman of the Molasses Sales Committee and the General Managers of the five other sugar mills, were not present. The Chief Accountant of Sitarganj Mills was present. During negotiations, the first respondent increased its offer to Rs 119 per quintal and again to Rs 127 per quintal.

6. The three members of the Committee, who were present (along with the Chief Accountant of Sitarganj Mills), submitted a note dated 3-3-2004 to the Chairman of the Molasses Sales Committee, reporting that during negotiations, the first respondent had offered to purchase the entire stock of molasses of the five sugar mills at Gadarpur, Nadehi, Sitarganj, Kichha and Doiwala at a price of Rs 127 per quintal, though he had submitted the tender only for purchase of molasses of Nadehi Sugar Mill. It was also reported that the first respondent had assured payment of earnest money in respect of each of the four other mills, within seven days if his offer was accepted. The report also stated that the price of Rs 127 per quintal offered by the first respondent was higher than the offer of the other tenderers — IGL (Rs 117) and Rampur Distillery (Rs 126). The Chairman was requested to make his recommendations for accepting the offer of the first respondent. The Chairman of the Molasses Sales Committee made an endorsement “Seen” on the said note on 3-3-2004. The District Magistrate, Udham Singh Nagar, made a note thereon to the effect, “Necessary orders may be issued today itself. Firm may deposit earnest money”. The first respondent deposited Rs 4,00,000 by bank drafts under cover of letter dated 10-3-2004, towards earnest money for purchase of molasses of the sugar mills at Gadarpur, Sitarganj, Kichha and Doiwala.

7. The Assistant Cane Commissioner, Udham Singh Nagar, vide letter dated 15-3-2004 permitted the first respondent to lift 5000 quintals of molasses from Kisan Sahkari Chini Mills Ltd., Nadehi, at the rate of Rs 127 per quintal within one month.

8. The first respondent gave an undated letter to the District Magistrate, Udham Singh Nagar requesting allotment of 1,02,000 quintals of molasses of all five sugar mills. On this letter, the District Magistrate, Udham Singh Nagar made a note on 23-3-2004 instructing the Assistant Cane Commissioner to issue orders giving time till 31-5-2004 to take delivery. On the basis of the said request of the first respondent, the Assistant Cane Commissioner prepared an undated official note and sought approval from the District Magistrate for granting permission to the first respondent for lifting 15,000 quintals of molasses from each of the four sugar mills at Nadehi, Gadarpur, Sitarganj and Doiwala and 25,000 quintals of molasses from Kichha Sugar Mill, in all 85,000 quintals, by 31-5-2004. The District Magistrate, Udham Singh Nagar, on 25-3-2004 made the following endorsement thereon: “Approved. The Commissioner has desired to issue orders.”

9. The Assistant Cane Commissioner, by letter dated 26-3-2004, addressed to the first respondent, informed him that on the approval of the Commissioner, Kumaon Mandal, he was permitted to lift a total quantity of 85,000 quintals of molasses from the five sugar mills by 31-5-2004 at a price of Rs 127 per quintal. The said letter is extracted below:

“M/s Vardan Linkers,

Bijnor (Uttar Pradesh)

Sir,

With reference to the tender dated 1-3-2004 invited on behalf of cooperative/corporation sugar mills for selling export molasses and further with reference to the negotiations held on 3-3-2004, it is informed to you that on the approval of Commissioner, Kumaon Mandal, Nainital, you are hereby permitted to lift total 85,000 quintals of molasses from the following sugar mills at the rate mentioned against the name of every sugar mill. You will have to lift the said molasses by 31-5-2004.

Sl. No. Name of sugar mill Allotted (per qt.) Rate Name of firm 1. Nadehi Coop. 15,000 127 Patiala Distillers & Manufacturers Ltd. 2. Gadarpur Coop. 15,000 127 - do - 3. Doiwala Coop. 15,000 127 - do - 4. Sitarganj Coop. 15,000 127 Chandigarh Distillers & Bottlers Ltd. 5. Kichha 25,000 127 - do -

In addition to the rates mentioned above you will have to pay excise duty, sales tax and other applicable taxes. You are also hereby informed that you will be bound by all the conditions mentioned in the tender form.

Assistant Cane Commissioner,

Udham Singh Nagar

Copy to:

General Manager/Executive Director of aforesaid chini mills with a request that they should grant necessary permission for lifting quantity of molasses mentioned against each sugar mill, after completing all formalities. The drafts towards the earnest money for all the sugar mills except Nadehi Sugar Mill have been received. The sugar mills concerned are requested to collect the draft regarding earnest money from the office.”

10. Around that time, the State Government received several reports that the prevailing price of molasses was much higher. On 6-4-2004, M/s Associated Alcohol and Breweries Ltd., Jaipur and M/s Jagjit Industries Ltd., Kapurthala, wrote letters to the District Magistrate, Udham Singh Nagar, offering to purchase molasses from the sugar mills of Kichha, Sitarganj, Gadarpur, Nadehi and Doiwala at the rate of Rs 260 and Rs 250 per quintal respectively. M/s Uttar Pradesh Sahkari Sugar Mills Sangh Ltd., Lucknow, informed the Government of Uttaranchal by a fax message that the stock of molasses lying at the cooperative sugar mills in the State of U.P at Sarsawa, Bagpat and Morna Distilleries were sold to M/s Chandigarh Distillers and Bottlers Ltd. on 8-4-2004 at the rate of Rs 300 per quintal. Information was also received that molasses was being sold by the neighbouring private sector sugar mills in Uttaranchal at rates ranging from Rs 310 to Rs 330 per quintal. In view of it, the Additional Secretary, Cane Development and Sugar Industries submitted a report to the Secretary, Cane Development and Sugar Industries [for short “Secretary (Sugar)”] referring to the irregularities in the proposal for supply of 85,000 quintals to the first respondent and stating that the six sugar mills would suffer a loss of more than Rs 1.40 crores if they were required to sell molasses at the rate of Rs 127 per quintal to the first respondent. The Secretary (Sugar), by letter dated 8-4-2004 addressed to the five sugar mills, stayed the operation of the letter dated 26-3-2004 issued by the Assistant Cane Commissioner allotting 85,000 quintals of molasses to the first respondent until further orders.

11. Being aggrieved, the first respondent filed WP (C) No. 318 of 2004 in the High Court praying, inter alia, to issue directions to the appellants herein (the State Government, Controller of Molasses, Molasses Sale Committee and the five sugar mills) to continue the supply of molasses to him so that the entire allotted quantity of 85,000 quintals could be lifted on or before 31-5-2004. It was alleged that the first respondent had already taken delivery of 7465.9 quintals of molasses, from three sugar mills at Nadehi, Sitarganj and Doiwala and that he had also made all arrangements for taking delivery of the balance stock.

12. A Division Bench of the High Court, by interim order dated 19-4-2004, directed the State Government to take a decision on the claim of the first respondent after giving hearing within ten days. Pending such decision, the High Court permitted the first respondent to lift up to 20,000 quintals of molasses. The High Court also directed that the writ petition be listed on 29-4-2004 for final hearing and disposal.

13. By order dated 20-4-2004, the State Government dissolved the earlier Molasses Sale Committee and in its place reconstituted a fresh Molasses Sale Committee. The Secretary (Sugar) vide letter dated 20-4-2004 sought certain information/clarifications from the first respondent as also from Patiala Distillers and Chandigarh Distillers and on 22-4-2004 afforded personal hearing to the proprietor and representative of the first respondent and representatives of Patiala Distillers and Chandigarh Distillers. Thereafter, on due and proper consideration of the material on record, the Secretary (Sugar), passed a detailed order dated 24-4-2004, holding that there was no valid contract for supply of molasses to the first respondent and therefore the allotment letter dated 26-3-2004 was without any authority and consequently cancelled the said allotment letter issued by the Assistant Cane Commissioner allotting 85,000 quintals of molasses to the first respondent.

14. The findings on the basis of which he cancelled the allotment letter dated 26-3-2004 are extracted below:

“(i) That as per notice published on 23-2-2004 in Amar Ujala newspaper the tenders were invited from bona fide consumers and it was a compulsory condition to deposit Rs 1 lakh earnest money with the tender. In this regard M/s Vardan Linkers submitted its offer for 15,000 quintals of molasses @ 119 per quintal only for Nadehi Sugar Mills in its tender. No rates were mentioned for remaining sugar factories, namely, Gadarpur, Sitarganj, Kichha, Doiwala by M/s Vardan Linkers in its tender form. Moreover, no bank draft towards earnest money for Rs 1 lakh was submitted with tender form for Nadehi Chini Mills due to which the tender was defective and was not acceptable.

(ii) That on 3-3-2004 on the date of negotiation M/s Vardan Linkers has offered its negotiated rates @ Rs 127 per quintal of molasses, only for Nadehi Chini Mills. The remark on the aforesaid negotiation form given by the above firm that they are ready to lift the molasses of other sugar factories at this rate if their rates are approved by the Committee, in which case they are ready to deposit within one week. This condition is not acceptable in accordance to law because conditional tenders are liable for cancellation. The tender opening form dated 1-3-2004 and the negotiation form dated 3-3-2004 contains the signatures of General Manager, Sugar Mills, Gadarpur, Molasses Clerk, Sitarganj, Purchase Clerk and Assistant Cane Commissioner. As such the purchase clerk and molasses clerk were not the members of the Committee and their participation was not legal.

(iii) M/s Vardan Linkers has not offered its rates for Gadarpur, Doiwala, Sitarganj and Kichha Sugar Mills nor submitted bank drafts for earnest money for Rs 1 lakh for each sugar factory with the tender on 1-3-2004 or 3-3-2004. Moreover, the General Managers of these mills who were also the members were not present in the Committee meeting on 1-3-2004 and 3-3-2004 so the sale of molasses of these mills is not in accordance with the law.

(iv) The Assistant Cane Commissioner's letter dated 26-3-2004 which is originally written to M/s Vardan Linkers, Bijnor contains the details of M/s Patiala Distillers and Manufacturers and M/s Chandigarh Distillers to whom the molasses is sold @ Rs 127 per quintal but M/s Vardan Linkers did not disclose their names in its tender form. Moreover, on 1-3-2004 at the time of tender submission and on 3-3-2004 at the time of negotiation there were no authorisation letters in favour of M/s Vardan Linkers of these two distillers from which it is very clear that M/s Vardan Linkers is not a bona fide purchaser.

(v) That in Condition 9 of the tender form it is clearly mentioned that no person will transport the molasses in Uttaranchal and Uttar Pradesh and out of these States without the prior permission of Controller of Molasses. M/s Vardan Linkers has enclosed with its writ petition as Annexures 1 and 2 which are the no-objection certificates of the Excise and Taxation Commissioner, Patiala dated 16-3-2004 issued in favour of M/s Patiala Distillers and Manufacturers and “no-objection certificate” dated 12-3-2004 issued in favour of Chandigarh Distillers and Bottlers, from which it is clearly evident that on 1-3-2004, on the date of submission of tenders and on 3-3-2004 at the time of negotiation, they had no such certificates. No document has been produced about the approval of the Controller of Molasses. From this it is clear that even on compliance with this condition the tender was not acceptable.

(vi) From the information obtained from the sugar mills it has been observed that the letter dated 26-3-2004 issued by the Assistant Cane Commissioner for sale of molasses in favour of M/s Vardan Linkers was only submitted in the mills by the representative during the period 6-4-2004 to 8-4-2004 of M/s Vardan Linkers and they lifted the molasses during this period. During this period another firm M/s Jagjit Industries, Kapurthala and another firm M/s Associated Alcohol and Breweries Ltd. vide its fax letter dated 6-4-2004 offered its rates @ Rs 250 and Rs 260 per quintal respectively for molasses. The submission of alleged letter dated 26-3-2004 of the Assistant Cane Commissioner issued a letter in favour of M/s Vardan Linkers and its submission by its representative in the mills during the period 6-4-2004 to 8-4-2004 creates doubt and question mark and by this act it creates loss of Rs 1.40 crores to the mills of the State of Uttaranchal. As such it is reviewed.

(vii) The Assistant Cane Commissioner, Udham Singh Nagar, Letter No. 2345.C/Sheera/Rudrapur dated 15-3-2004 issued to M/s Vardan Linkers for sale of 5000 quintals of molasses of Nadehi Sugar Mills contains the details of tender dated 1-3-2004 and subsequent negotiations dated 3-3-2004. As such, the Assistant Cane Commissioner would have preferred fresh tenders for sale of molasses if it was not considered for sale at that time.

(viii) From the facts available on file, it is observed that one M/s Chandigarh Distillers is purchasing molasses @ Rs 300 per quintal from the cooperative sugar mills of U.P which were near the sugar mills of the State of Uttaranchal. Moreover, the private sector mills in the State of Uttaranchal, like Laksar Uttam, Iqbalpur and Kashipur are selling the molasses @ Rs 330, Rs 320, Rs 320 and Rs 310 per quintal of molasses respectively. As such without any valid contract with the mill of the State of Uttaranchal to sell the molasses @ Rs 127 per quintal to M/s Vardan Linkers is against the rules.”

15. Being aggrieved by the interim direction dated 19-4-2004 to supply 20,000 quintals of molasses to the first respondent, the appellants approached this Court. When the special leave petitions came up for hearing on 5-5-2004, this Court granted leave and disposed of the appeals (CAs Nos. 2984-86 of 2004) in the following terms:

“By consent of the parties, the impugned orders are set aside. The respondents are permitted to amend their writ petition to challenge the order dated 24-4-2004. Reply, if any, including to this amendment to be filed within two weeks from today. The High Court is requested to dispose of the writ petition within a period of four weeks thereafter.”

16. The first respondent thereafter made an application for amendment of the pending writ petition, praying to challenge the order of cancellation dated 24-4-2004. The High Court allowed the application for amendment on 18-5-2004. The State of Uttaranchal and the sugar mills filed separate counter-affidavits, in opposition to the writ petitions setting out the entire facts, and contended that there was no concluded contract with the first respondent, for sale of 85,000 quintals of molasses; and that the first respondent, in collusion with certain officers (the Assistant Cane Commissioner and District Magistrate, Udham Singh Nagar), had managed to secure allotment of 85,000 quintals of molasses without any authority.

17. A Division Bench of the High Court heard the writ petition and allowed it by judgment dated 28-7-2004. The High Court quashed the order dated 24-4-2004 passed by the Secretary (Sugar) and directed that the first respondent “shall be allowed to lift 85,000 quintals of molasses less the quantity already lifted”, in terms of letter dated 26-3-2004. It also extended the time for lifting the molasses by a period equivalent to the number of days between 24-4-2004 and 31-5-2004, that is, one month and seven days. The correctness and legality of the said judgment of the High Court is challenged in these appeals.

Questions for consideration

18. Ordinarily, the remedy available for a party complaining of breach of contract lies for seeking damages. He will be entitled to the relief of specific performance, if the contract is capable of being specifically enforced in law. The remedies for a breach of contract being purely in the realm of contract are dealt with by civil courts. The public law remedy, by way of a writ petition under Article 226 of the Constitution of India, is not available to seek damages for breach of contract or specific performance of contract. However, where the contractual dispute has a public law element, the power of judicial review under Article 226 of the Constitution of India may be invoked.

19. We may refer to a few decisions illustrating the position:

19.1 In Divl. Forest Officer v. Bishwanath Tea Co. Ltd. (1981) 3 SCC 238 and State of Gujarat v. Meghji Pethraj Shah Charitable Trust (1994) 3 SCC 552 this Court observed that a writ petition challenging the termination of an arrangement which is said to be governed by a contract or agreement between the parties is not maintainable since it was a public law remedy, which was not available in private law field where the matter is governed by a non-statutory contract.

19.2 In Mahabir Auto Stores v. Indian Oil Corpn. (1990) 3 SCC 752 this Court noticed the difference between private law cases where the issue is the exercise of a “right” as contrasted from public law cases where the question is related to exercise of “power”:

“16. Mr Salve submitted that in private law field there was no scope for applying the doctrine of arbitrariness or mala fides. The validity of the action of the parties have to be tested, it was urged on behalf of the respondent, on the basis of ‘right’ and not ‘power’. A plea of arbitrariness/mala fides as being so gross cannot shift a matter falling in private law field to public law field. According to Mr Salve to permit the same would result in anomalous situation that whenever State is involved it would always be public law field, this would mean all redress against the State would fall in the writ jurisdiction and not in suits before civil courts.

17. We are of the opinion that in all such cases whether public law or private law rights are involved, depends upon the facts and circumstances of the case. The dichotomy between rights and remedies cannot be obliterated by any straitjacket formula. It has to be examined in each particular case. Mr Salve sought to urge that there are certain cases under Article 14 of arbitrary exercise of such ‘power’ and not cases of exercise of a ‘right’ arising either under a contract or under a statute. We are of the opinion that that would depend upon the factual matrix.”

19.3 In Verigamto Naveen v. Govt. of A.P (2001) 8 SCC 344 this Court observed:

“21. … Where the breach of contract involves breach of statutory obligation when the order complained of was made in exercise of statutory power by a statutory authority, though cause of action arises out of or pertains to contract, brings it within the sphere of public law because the power exercised is apart from contract. The freedom of the Government to enter into business with anybody it likes is subject to the condition of reasonableness and fair play as well as public interest. After entering into a contract, in cancelling the contract which is subject to terms of the statutory provisions, as in the present case, it cannot be said that the matter falls purely in a contractual field.”

20. Finding serious irregularities in the letter dated 26-3-2004 issued by the Assistant Cane Commissioner, which directed supply of 85,000 quintals of molasses by five sugar mills to two distilleries through the first respondent at a very low price, the Secretary (Sugar), on 8-4-2004, stayed the operation of the said allotment letter.

21. The decision was challenged by the first respondent in the writ petition by contending that the allotment letter dated 26-3-2004 authorising him to lift 85,000 quintals of molasses was in pursuance of a concluded contract for sale of such molasses and therefore the decision of staying the operation of the allotment letter was invalid and illegal. The initial prayer in the writ petition was for a direction to “continue the supply of molasses so that entire allotted quantity of 85,000 quintals of molasses could be lifted on or before 31-5-2004”.

22. As the order dated 8-4-2004 of the Secretary (Sugar), staying the allotment letter was pending, the High Court in the meantime issued an interim direction to the State Government to hold inquiry in the matter after giving hearing to the first respondent. Accordingly, the Secretary (Sugar), held an inquiry and passed a detailed order dated 24-4-2004 giving the instances of irregularities committed by the Assistant Cane Commissioner and others and held that there was no concluded or valid contract and that the allotment letter dated 26-3-2004 was as a result of collusion between the first respondent and the Assistant Cane Commissioner and the District Magistrate and, therefore, cancelled the allotment letter dated 26-3-2004. In other words, the Secretary (Sugar), held that as there was no contract at all, therefore, the Assistant Cane Commissioner could not have issued a letter of allotment permitting the first respondent to lift 85,000 quintals of molasses. When the said order was passed, the first respondent amended the writ petition and included a prayer “for quashing the order of cancellation dated 24-4-2004”, contending that the cancellation order was illegal and arbitrary.

23. If the dispute was considered as purely one relating to existence of an agreement, that is, whether there was a concluded contract and whether the cancellation and consequential non-supply amounted to breach of such contract, the first respondent ought to have approached the civil court for damages. On the other hand, when a writ petition was filed in regard to the said contractual dispute, the issue was whether the Secretary (Sugar), had acted arbitrarily or unreasonably in staying the operation of the allotment letter dated 26-3-2004 or subsequently cancelling the allotment letter. In a civil suit, the emphasis is on the contractual right. In a writ petition, the focus shifts to the exercise of power by the authority, that is, whether the order of cancellation dated 24-4-2004 passed by the Secretary (Sugar), was arbitrary or unreasonable. The issue whether there was a concluded contract and breach thereof becomes secondary. In exercising writ jurisdiction, if the High Court found that the exercise of power in passing an order of cancellation was not arbitrary and unreasonable, it should normally desist from giving any finding on disputed or complicated questions of fact as to whether there was a contract, and relegate the petitioner to the remedy of a civil suit. Even in cases where the High Court finds that there is a valid contract, if the impugned administrative action by which the contract is cancelled, is not unreasonable or arbitrary, it should still refuse to interfere with the same, leaving the aggrieved party to work out his remedies in a civil court. In other words, when there is a contractual dispute with a public law element, and a party chooses the public law remedy by way of a writ petition instead of a private law remedy of a suit, he will not get a full-fledged adjudication of his contractual rights, but only a judicial review of the administrative action. The question whether there was a contract and whether there was a breach may, however, be examined incidentally while considering the reasonableness of the administrative action. But where the question whether there was a contract, is seriously disputed, the High Court cannot assume that there was a valid contract and on that basis, examine the validity of the administrative action.

24. In this case, the question that arose for consideration in the writ petition was whether the order dated 24-4-2004 passed by the Secretary (Sugar), cancelling the allotment letter dated 26-3-2004 was arbitrary and irrational or violative of any administrative law principles. The question whether there was a concluded contract or not, was only incidental to the question as to whether cancellation order dated 24-4-2004 by the Secretary (Sugar), was justified. As the case involved several disputed questions in regard to the existence of the contract itself, the High Court ought to have referred the first respondent to a civil court. But the High Court in exercise of its writ jurisdiction, proceeded as if it was dealing with a pure and simple civil suit relating to breach of contract.

25. When certain disputed facts cropped up, the High Court adopted a strange procedure of calling the General Managers of Sitarganj Sugar Mills and Nadehi Sugar Mills and putting some questions to them and recording their statements. The High Court reached the conclusion that there was a concluded contract between the five sugar mills and the first respondent for sale of 85,000 quintals of molasses at a price of Rs 127 per quintal. Thereafter, it formulated the question for consideration in the writ petition as to “whether the State Government was competent to cancel the valid and completed contract”, and held that having regard to the doctrines of part performance, legitimate expectation, estoppel and acquiescence, the cancellation of the allotment Letter dated 26-3-2004 issued by the Assistant Cane Commissioner was unsustainable and the first respondent was entitled to lift the entire quantity of 85,000 quintals (less 7465.9 quintals already lifted), and he was also entitled to extension of time for taking delivery by one month and seven days from the date of the judgment.

26. In this view of the matter, two questions arise for our consideration. They are:

(i) Whether the High Court was right in concluding/assuming that there was a valid contract?

(ii) Whether the High Court was justified in quashing the cancellation order dated 24-4-2004 passed by the Secretary, (Sugar)?

Re: Question (i)

27. Before a court can record a finding as to whether there is a contract, it has to find out who are the parties to the contract, when and what was the offer, whether there was an acceptance, and whether the offer and acceptance were valid. None of these were addressed nor answered by the High Court.

28. We extract below the averments made in the writ petition to contend that there is a concluded contract:

“That aforesaid tenders were opened on 1-3-2004 at the office of the Assistant Cane Commissioner, Udham Singh Nagar. The Assistant Cane Commissioner also happens to be the Secretary of the Committee.

That subsequently thereafter all the prospective allottees (who had submitted their tenders) were invited by the Committee and tenders were opened and in an open meeting, the bidders were asked to increase the bids and negotiations took place, and petitioner being the highest bidder as Rs 127 per quintal was accepted.

That at this junction, the deponent has been advised to state that once the bid of the petitioner was accepted by the authorised Committee for a certain price which was Rs 127 per quintal, it amounts to valid contract as it has all the ingredients of a valid contract, namely, offer, acceptance and consideration.”

Thus, the case of the first respondent is that there was a concluded contract—that is acceptance of his offer on 3-3-2004, when the negotiations took place. But in Paras 17 and 19 of the writ petition, the first respondent alleged that the contract was concluded when the letter dated 26-3-2004 was issued by the Assistant Cane Commissioner permitting him to lift 85,000 quintals of molasses and the said letter dated 26-3-2004 was an “agreement” between the parties. This ambiguity as to whether the contract came into existence on 3-3-2004 or 26-3-2004 was not even referred to by the High Court in the impugned order.

29. Let us next examine as to who was the purchaser. The tender notice made it clear that only bona fide consumers (that is, actual users) could make the offer. Admittedly, the first respondent did not have a distillery or manufacturing unit and was not a “consumer” of molasses. He was a transport contractor. Even the allotment letter dated 26-3-2004 shows that the first respondent was not the “consumer-purchaser”. Therefore, the first respondent could not be the purchaser. Let us consider whether Patiala Distillers and Chandigarh Distillers, who were shown as the persons who will take deliveries in the letter dated 26-3-2004, were the purchasers. They did not make any offer. Nor was any offer made on their behalf. There was no acceptance addressed to them. There was no agreement or contract with them. They did not seek delivery nor did they join the first respondent as the petitioners in the writ petition. They were not therefore the “purchasers”. If neither the first respondent, nor could Patiala Distillers/Chandigarh Distillers be the purchaser, who was the bona fide consumer who could claim performance? The question remains unanswered.

30. The tenders were invited for sale of molasses by five independent sugar mills. The tenderers were required to pay Rs 1,00,000 as earnest money, in respect of each sugar mill from which the tenderer intended to purchase molasses. The five sugar mills were different legal entities. Two of them were government companies incorporated under the Companies Act and the remaining three were independent cooperative sugar mills. The tender notice and the tender documents would make it clear that though the tender notice was common, the tenderers were required to make separate offers in regard to molasses to be purchased from each sugar mill showing the quantity which they wanted to purchase from each sugar mill and the price which they were willing to pay and also to pay separate earnest money deposit.

31. The first respondent did not make any offer except in the case of Nadehi Sugar Mill, even that was not accompanied by the earnest money deposit. He claims to have made an endorsement in the tender form on 3-3-2004, that if his rate was accepted, he was ready to lift the entire quantity of molasses from the five factories. But neither the original offer nor the alleged extension of the offer on 3-3-2004 was accompanied by any earnest money deposit. There was therefore no valid offer as on 3-3-2004. Nor was there any acceptance by the Molasses Sales Committee or any of the sugar mills on 3-3-2004. There was also no acceptance even by the three members of the Molasses Sales Committee on 3-3-2004. This is evident from the fact that after the negotiations meeting, a report was submitted by the three members of the Committee to the Chairman referring to the offer of the first respondent seeking his approval for their proposal to sell the molasses of the other mills to the first respondent. Therefore, it could not be said that there was a concluded or binding contract for sale or supply of molasses by any of the five mills on 3-3-2004.

32. It is admitted that the first respondent did not make any offer in the prescribed form of tender in regard to the molasses of the other four mills (Gadarpur, Doiwala, Sitarganj and Kichha). On 3-3-2004 when negotiations were held between the first respondent and three members of the Committee, the first respondent appears to have expressed his interest to purchase the molasses of all the mills at a price of Rs 127 per quintal and made an endorsement to that effect in his tender form. The first respondent claims to have paid Rs 4,00,000 as earnest money deposit in respect of four mills under cover of letter dated 10-3-2004. But thereafter there was no meeting of the Molasses Sales Committee nor any acceptance of the first respondent's offer. Neither the act of putting up a proposal by the Assistant Cane Commissioner or the District Magistrate for consideration by the Chairman of the Molasses Sales Committee nor the alleged approval of the recommendation for sale by the Chairman of the Molasses Sales Committee will lead to a binding contract as there was no decision by the Molasses Sales Committee to accept the offer. Therefore, on this count as well, there was no concluded contract.

33. In this case, the first allotment by the Assistant Cane Commissioner was on 15-3-2004 permitting the first respondent to lift 5000 quintals from Nadehi Mills at Rs 127 per quintal. This was wholly illegal as it was not in pursuance of any concluded contract and as the first respondent was not a bona fide consumer. The first respondent submitted the authorisation letter from Patiala Distillers and Chandigarh Distillers only on 14-3-2004. If there was already a concluded contract with the first respondent on 3-3-2004, there could not have been any change in the contract by submitting an authorisation letter from Patiala Distillers and Chandigarh Distillers on 14-3-2004. There was also no correspondence or negotiations subsequent to 3-3-2004 to show that any contract was concluded in favour of Patiala Distillers or Chandigarh Distillers. Therefore, when the letter dated 26-3-2004 was issued by the Assistant Cane Commissioner authorising the first respondent to lift 85,000 quintals of molasses it was not in pursuance of any concluded contract but was a unilateral unauthorised act on the part of the Assistant Cane Commissioner which would not bind the State Government.

34. The tender notice clearly specified that only bona fide consumers could make an offer. In his tender, the first respondent claimed that he was making an offer as a bona fide consumer, that is, as an actual user of molasses. The tender did not mention that he was making the offer as an agent of other consumers nor did he disclose the names of any consumers on whose behalf he was making the offer. He merely made a vague and sweeping statement that he will lift molasses in favour of distilleries of U.P, Punjab and Haryana. This showed that he was not acting for any specific principal.

35. Further, having regard to the requirement that sale will be only to bona fide consumers, the offer ought to have disclosed the name of the principal and his authority to make the offer on their behalf, if he was making an offer on behalf of anyone else. Further, the required certificate from the Excise Commissioner/Controller of Sugar that the purchaser was a bona fide consumer, ought to have been enclosed. For all these reasons, therefore, there could not be any valid contract with the first respondent.

36. The order dated 25-3-2003 constituting the Molasses Sales Committee made it clear that molasses could be sold only by the said Committee. This meant that the Molasses Sales Committee would identify and decide upon the purchaser, as also the terms of sales including the price. But the Molasses Sales Committee by itself was not the seller but only the authority entrusted with the task of finalising the sales and the sellers were the sugar mills themselves.

37. The Committee consisted of nine members with the Commissioner of Kumaon Mandal as Chairman, the District Magistrate, Udham Singh Nagar and the General Managers of the six sugar mills as members and the Assistant Cane Commissioner, Udham Singh Nagar, as the Member-Secretary. Admittedly, the nine members of the Committee were not present either on 1-3-2004 when the tenders were opened or on 3-3-2004 when the alleged negotiations were held. The tenders were opened on 1-3-2004 by the Assistant Cane Commissioner, who was the Secretary of the Committee. No meeting of the Committee had been called on 3-3-2004. The persons who were present in the alleged negotiations meeting were the District Magistrate, Udham Singh Nagar and only the General Manager of Godarpur Sugar Mills, apart from the Member-Secretary. The Chief Accountant of Sitarganj Sugar Mills who was present, cannot be considered to be a member of the Committee. The General Managers of the other four mills were not present, nor was the Chairman of the Committee present. Three members did not constitute the quorum for the Committee. Nor did the Committee authorise three members to finalise the sale of molasses. It cannot, therefore, be said that the negotiations held on 3-3-2004 were held by the Molasses Sales Committee or authorised members of the said Committee. In fact, the Molasses Sales Committee never considered the offer of the first respondent, nor accepted its offer.

38. The communication dated 26-3-2004 from the Assistant Cane Commissioner to the first respondent whereby and whereunder the first respondent was permitted to lift 85,000 quintals of molasses from the five sugar mills, did not refer to any decision by the Molasses Sales Committee to sell molasses to the first respondent. It referred only to the negotiations held on 3-3-2004 and stated that “on the approval of the Commissioner, Kumaon Mandal”, the first respondent was permitted to lift 85,000 quintals of molasses. The Commissioner, Kumaon Mandal was not the authority empowered to effect the sale of molasses. In the absence of any contract under which the five sugar mills agreed to sell 85,000 quintals in all to the first respondent at a price of Rs 127 per quintal, the question of the Assistant Cane Commissioner permitting the first respondent to lift 85,000 quintals of molasses did not arise. The letter dated 26-3-2004 sent by the Assistant Cane Commissioner cannot, therefore, be considered to be a contract for supply of 85,000 quintals of molasses to the first respondent.

39. Thus, there was no material before the High Court to assume or come to the conclusion that there was a concluded contract for supply of 85,000 quintals of molasses.

Re: Question (ii)

40. Let us now examine whether the Secretary (Sugar), was justified in issuing the order dated 24-4-2004 cancelling the order dated 26-3-2004 and whether the High Court was justified in questioning the order of the Secretary (Sugar). The order dated 24-4-2004, passed by the Secretary (Sugar) holding that the first respondent did not have any valid contract for supply of molasses and it had no right to enforce the letter dated 26-3-2004 issued by the Assistant Cane Commissioner was perfectly valid and justified. We have already held that the decision of the Secretary (Sugar) that there was no concluded contract for sale of any molasses in favour of the first respondent or his nominee is correct and does not suffer from any infirmity or perversity.

41. The first respondent does not dispute that 70% of the molasses was earmarked for supply to distilleries and chemical factories in the State of Uttaranchal and 10% for manufacturers of country liquor in the State and only 20% was earmarked for use by bona fide consumers, that is, distilleries and chemical factories outside the State. Obviously, the price for sale to each category would be different. The price at which 70% is sold to the distilleries and chemical factories within the State will normally be less than the price at which 20% is sold to distilleries or chemical factories outside the State. The tenders were invited in regard to the quota earmarked for bona fide consumers where distilleries and chemical factories outside the State could participate. In spite of it, the District Magistrate, Udham Singh Nagar, prepared a note for the attention of the Chairman of the Committee wherein he referred to the price of Rs 117 per quintal at which molasses was being sold to IGL which was a distillery within the State covered by 70% local quota, to justify the sale of molasses to the first respondent under 20% outside quota though it was not a bona fide consumer at a price of Rs 127 per quintal. The note neither mentioned the fact of the quantities to be sold nor the fact that the first respondent had not produced any certificate either from the Cane Commissioner or from the Excise Department to show that it was a bona fide consumer of molasses.

42. The tender notice made it clear that only bona fide consumers of molasses could make offers. The first respondent is a proprietary concern carrying on transport business at Bijnor in the State of Uttar Pradesh but the tender was submitted by the first respondent in the name and style of “Vardan Linkers, Bijnor being bona fide consumer registered industrial unit”. The note added at the end of the tender stated that “we shall lift molasses in favour of distilleries of U.P, Punjab and Haryana”. If the first respondent was to lift the molasses for other units, it was admittedly not a bona fide consumer.

43. Only on 14-3-2004, the first respondent produced authorisation letters showing him as authorised agent of Patiala Distillers and Manufacturers Ltd., Patiala and Chandigarh Distillers and Bottlers Ltd., Patiala. On the basis of those letters, the first respondent requested for delivery of 45,000 quintals (that is 15,000 quintals each from Nadehi, Gadarpur and Doiwala Sugar Mills) to Patiala Distillers and 40,000 quintals (15,000 quintals from Sitarganj Mills and 25,000 quintals from Kichha Mills) to Chandigarh Distillers. Though the tender was opened on 1-3-2004, the first respondent did not disclose till 14-3-2004 that he was submitting the tender on behalf of the two abovesaid distillers in the State of Punjab. Thus, it was clear that the offer was made not by the first respondent as a bona fide consumer but as a non-consumer trader. Therefore, there was no valid offer at all by the first respondent.

44. The Assistant Cane Commissioner was fully aware that the first respondent was not a bona fide consumer, he was also aware of the prevailing sale prices in regard to molasses to be sold to bona fide consumers outside the State at much higher prices than what was offered by the first respondent and also of the fact that the price for the sale of molasses to consumers within the State was much less than the rate for sale of molasses to bona fide consumers outside the State, he proceeded to negotiate with the first respondent taking only one more member (District Magistrate) into confidence. The manner in which the entire matter was proceeded with, showed collusion between the first respondent on one hand and the District Magistrate, Udham Singh Nagar and the Assistant Cane Commissioner, Udham Singh Nagar on the other hand, to dispose of large quantities of valuable molasses at a throw-away price without proper negotiations and without valid authority from the Molasses Sales Committee to a party who was not entitled to purchase molasses as a bona fide purchaser.

45. The various serious irregularities were noticed by the Secretary (Sugar) in his detailed and reasoned order dated 24-4-2004 and resultantly, he directed cancellation of the letter dated 26-3-2004 issued by the Assistant Cane Commissioner which permitted the first respondent to lift 85,000 quintal of molasses from five mills. He also held that there was no valid contract. In the facts and circumstances narrated hereinabove, it is not legally possible to hold that the order dated 24-4-2004 was either arbitrary or unreasonable or mala fide. It was fully justified and in public interest. If the order dated 24-4-2004 did not suffer from an infirmity which required correction by application of principles of administrative law, the High Court ought not to have interfered with it. There was, apparently, no justification for invoking the principles of legitimate expectations, estoppel, acquiescence and principle of part performance to make out a contract where none existed, or to give directions to five independent sugar mills to supply huge quantities of molasses to the first respondent without any contract at an admittedly low price of Rs 127 per quintal.

46*. We, therefore, allow these appeals and set aside the judgment dated 28-7-2004 passed by the High Court of Uttaranchal in WP No. 318(N/B) of 2004 and dismiss the writ petition. We direct the first respondent to pay costs of Rs 10,000 in each appeal (in all Rs 30,000) to the appellants.

47. This Court, by interim orders dated 23-8-2004 and 10-9-2004, had permitted the first respondent to lift in all 15,000 quintals of molasses from Nadehi Mills. Though the first respondent is not entitled to it, not being a bona fide consumer, if the supplies have already been effected and paid for, the issue of supply to that extent may be treated as closed.