1. The facts relating to the present Rule may be briefly noticed.

2. In the year 1971, the Government of West Bengal introduced a Scheme under the Department of Animal Husbandary and Veterinary Services. Under the Scheme, various chilling stations were established in different districts of the State for collecting milk and transporting the same to the Central Dairy at Durgapur. Under the Scheme, several transport contractors were to be employed for this purpose.

3. On the 30th November, 1973 the tender submitted by the petitioner for transporation of milk under the above Scheme was accepted by the respondent State of West Bengal effective for a period of one year from the 1st December, 1973 till the 30th November, 1974.

4. On the same day an agreement in writing was entered into between the petitioner and the State of West Bengal for transporting milk from different chilling and collection centres to the Central Dairy at Durgapur. The agreement, inter alia, provided that the contractor will use either insulated vans or Punjab body trucks (i.e trucks with raised side shields) suitably covered with tarpaulins so as not to allow milk cans to be exposed to the Sun, provided that the suitability of the vehicles is certified in advance by the Dairy Manager or his authorised representatives. The agreement further provided that 100 cans each containing 40 litres milk will have to be carried in each vehicle and for that purpose a two-tier system with hinge arrangements will have to be made in the trucks, so that the trucks can carry the maximum load. The contractor under the agreement had no right to sub-contract any work undertaken by him under the contract. The agreement further provided that in case of any default or breach on the part of the contractors to fulfil the terms of the agreement, the Government shall have the right to determine the contract and forfeit the security deposit.

5. Thereafter the agreement was extended from time to time in the same terms and conditions except that in January, 1976 the rate was increased to one patse for reimbursing the toll charges. The last extension was up to the 30th November, 1979.

6. On the 20th January, 1977 by a registered deed of partnership of the right, title and interest of the proprietory firm S.P Das & Co. were transferred to a partnership firm of the same name and style.

7. By the communication dated the 15th October, 1979 which is anuexure ‘E’ to the petition the terms and conditions of the agreement mentioned above were revised and it, inter alia, provided as follows:

“This order will take effect from 1.12.79 and will remain valid for the period of five years i.e upto 30.11.84”

8. On the 29th November, 1979 the Milk Commissioner. West Bengal the respondent No. 2 herein sent the following communication to the petitioner No. 1.

9. Ref: This Office letter No. MC(S)/404/79 dated 15.10.79

Dear Sirs,

10. Please refer to this office letter mentioned above. The matters has been reviewed by the Government and after due consideration, the period of contract is renewed upto March 31, 1980. All other terms and conditions mentioned in the above mentioned letter will remain the same.”

11. It is this order contained in the communication dated 29th November, 1979 abridging the original period of contract till 30th November, 1984 to 31st March, 1980 which is challenged before me in this application.

12. Mr. Subrata Roy Chowdhury, appearing for the petitioner contended in the first place, that this action on the part of the Government of West Bengal was absolutely arbitrary and capricious. He pointed out that during the entire period of the petitioner's contract with the respondent no. 1 for collection of milk and transporation of the same to the Central Dairy at Durgapur, there has been no allegation of any default or breach of the terms of the relevant contracts on the part of the petitioner no. 1. My attention was invited to the affidavit-in-opposition filed on behalf of the State where there was no allegation that the petitioner no. 1 was guilty of any default or breach of any of the terms of the contract. In the circumstances, according to Mr. Roy Chowdhury, there was no ground for either cancellling the contract or abridging the period of the validity thereof in respect of the last contract.

13. Strong reliance was placed by Mr. Roy Chowdhury on a respect and rather well-known decision of the Supreme Court in the case of Ramana Dayaram Shetty v. The International Airport Authority of India reported in AIR 1979 SC 1628. In paragraph 10 of the report Bhagwati, J. who delivered the judgment on behalf of the Supreme Court, inter alia, observed 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 action to be judged and it must scrupulously observe those standards on pain of invalidation of an act in violation of them. This Rule was enunciated by Mr. Justice Frankfurter in Vitarelli v. Seaton (1959) 359 US 535; 3 L.Ed 1012 where the learned Judge said.

“An executive agency must be rigorously held to the standards by which it professes its action to be judged……………………….

Accordingly, if dismissal from employment is based on a defined procedure, even though generous beyond the requirements that bind such agency, that procedure must be scrupulously observed……………………This judicially envolved rule of administrative law is now firmly established and, if I may add, rightly so. He that takes the procedural sword shall perish with the swords.”

14. This Court accepted the rule as valid and applicable in India in A.S Ahluwalia v. State of Punjab (1975) 3 SCR 82 : (AIR 1975 SC 984) and in subsequent decision given in Sukhdev v. Bhagatram, (1975) 3 SCR 619 : (AIR 1975 SC 1331), Matthew, J. quoted the above-referred observations of Mr. Justice Frankfurter with approval. It may be noted that this rule, though supportable also as emanting from Article 14, does not rest merely on that article. It has an independent existence apart from Article 14. It is a rule of administrate law which has been judicially evolved as a check against exercise of arbitrary power by the executive authority. If we turn to the judgment of Mr. Justice Frankfurter and examine it, we find that he has not sought to draw support for the rule from the equality clause of the United States Constitution but evolved it purely as a rule of administrative law. Even in England, the recent trend in administrative law is in that direction as is evident from what is stated at pages 540, 41 in Prof. Wade's Administrative Law 4th Edition. There is no reason why we should hesitate to adopt this rule as a part of our continually expanding administrative law. Today with tremendous expansion of welfare and social service functions increasing control of material and economic resources and large scale assumption of industrial and commercial, activities by the State, the power of the executive Government to affect the lives of the people is steadily growing. The attainment of socio-economic justice being a conscious end of State policy, there is a vast and inevitable increase in the frequency with which ordinary citizens come into relationship of direct encounter with State power-olders. This renders it necessary to structure and restrict the power of the executive Government so as to prevent its arbitrary application or exercise. Whatever be the concept of the rule of law, whether it be the meaning given by Dicey in his “The Law of the Constitution” or the definition given by Hayek in his “Road to Serfdom” and “Constitution of linerty” or the exposition set forth by Herry Jones in his “The Rule of Law and the Welfare State”, there is, as pointed out by Mathew, J., in his article on “The Welfare State, Rule of Law and Natural Justice” in Democracy, Equality and Freedom “substantial agreement in juristic thought that the great purpose of the rule of law notion is the protection of the individual against arbitrary exercise of power, wherever it is found”. It is indeed unthinkable that in a democracy governed by the rule of law the executive Government or any of its officers should possess arbitrary power over the interests of the individual. Every action of the executive Government must be informed with reason and should be free from arbitrariness. That is the very essence of the rule of law and its bare minimal requirement. And to the application of this principle it makes no difference whether the exercise of the power involves affectation of some right or denial of some privilege.”

15. In paragraph 11 of the Report which, in my view, contains the kernel of the decision Bhagwati, J. goes on to observe as follows:—

“Today the Government, in a Welfare State is the regulator and dispenser of special services and provider of a large number of benefits including jobs contracts, licences, quotas, mineral rights etc. The Government pours forth wealth, money, benefits, services, contracts, quotas and licences. The valuables dispensed by Government take many forms, but they all share one characteristic. They are steadily taking the place of traditional forms of wealth. These valuable which derive from relationships to Government are of many kinds. They comprise social security benefits, cash grants for political sufferers and the whole scheme of State and local welfare. Then again, thousands of people are employed in the State and the Central Government and local authorities. Licences are required before one can engage in many kinds of business or work. The power of giving licences means power to withhold them and this gives control to the Government or to the agents of Government on the lives of many people. Many individuals and many more businesses enjoy largess in the form of Government contracts. These contracts often resemble subsidies. It is virtually impossible to lose money on them and many enterprises are set up primarily to do business with Government. Government owns and controls hundreds of acres of public land valuable for mining and other purposes. These resources are available for utilisation by private corporations and individuals by way of lease or licence. All these mean growth in the Government largess and with the increasing magnitude and range of governmental functions as we move closer to a Welfare State, more and more of our wealth consists of these new forms. Some of these forms of wealth may be in the nature of legal rights but the large majority of them are in the nature of privileges. But, on that account, can it be said that they do not enjoy any legal protection? Can they be regarded as gratuity furnished by the State so that the State may withhold, grant or revoke it at its pleasure? Is the position of the Government in this respect the same as that of a private giver? We do not think so. The law has not been slow to recognise the importance of this new kind of wealth and the need to protect individual interest in it end with that end in view, it has developed new forms of protection. Some interests in Government largess, formerly regarded as privileges, have been recognised as rights while others have been given legal protection not only by forgoing procedural safeguards but also by confirming/structuring and checking Government discretion in the matter of grant of such largess. The discretion of the Government has been held to be not unlimited in that the Government cannot give or withhold largess in its arbitrary discretion or its sweet will. ………………………………………………………………………….. The Government cannot be permitted to say that it will give jobs or enter into contracts or issue quotas or licences only in favour of those hiving grey hair or belonging to a particular political party or professing a particular religious faith. The Government is still the Government when it acts in the matter of granting largess and it cannot act arbitrarily. It does not stand in the same position as a private individual.”

16. This decision which, in my view, has been rightly described as a landmark in the evolution of Constitutional law by the Supreme Court of India, breaks a fundamentally new ground in this filed by obliterating the distinction between the Government acting in exercise of its statutory power and the ever-expanding filed of Government action in awarding contracts and licences. This judgment contains the article of faith both under the Constitutional guarantee of Article 14 and also as a rule of administrative law that Government in either of these fields cannot act arbitrarily or at its sweet will. The Government cannot, to recapitulate the famous doctrine enunciated in the American Chinese Laundry case act with an unequal hand and an evil eye. This, in my view, is the basic principle enunciated in the above case.

17. Mr. Roy Chowdhury, relying on the above case, contended that the action of the State Government in reducing the period of validity of the contract in the instant case is most arbitrary and capacious. He pointed out that no reason of any kind whatsoever has been indicated by the State Government in the impugned communication. As I have pointed out, it is not the case of the State Government that the petitioner No. 1 has been guilty of any default or breach of the agreement. The principal reason in support of the impugned order is to be found in paragraph 3 of the affidavit-in-opposition. There it has been stated that the fact that the petitioner No. 1 is a registered partnership firm was at no point of time communicated to the Government. In any event, no copy of the alleged partnership deed has been disclosed by the petitioner. The contracts/obligations referred to in the petition according to the affidavit, would not be assigned to the partnership firm without the consent of the respondent and is not binding on them.

18. As pointed out by Mr. Roy Chowdhury, in paragraph 3 of the affidavit in-reply it has been stated that the petitioner No. 2 who was the sole proprietor of the erstwhile concern as well as a partner of the partnership firm personally met the then Milk Commissioner Mr. M. Konar after the registration of the firm and showed him a copy of the deed of partnership. Mr. Konar looked into the document and told the petitioner No. 2 that there was no need for filing the document and asked him to produce the same if required at any point of time later on. Mr. Roy Chowdhury also drew my attention to the significant fact that since January, 1977 all letters addressed to the respondents were signed by a partner on behalf of the firm describing himself as such.

19. The only other ground indicated in the affidavit-in-opposition is an attempt to state that the petitioner failed to furnish the security deposit in accordance with the stipulation in the contract as a result of which the impugned order was passed. In answer to that, it is stated in paragraph 7 of the affidavit in-reply that immediately on receipt of the order dated 15th October, 1979 extending the period of the agreement for five years the petitioners requested the respondent to intimate to them the amount of the initial security deposit to be paid by them but the respondent No. 1 have not chosen to give any reply.

20. Mr. Naranarayan Gooptu who was followed by Mr. Indrajit Sen on behalf of the respondents made certain submission on this point. In my view no effective answer was given by the learned lawyers for the State with regard to this particular contention of Mr. Roy Chowdhury.

21. In my view, this contention of Mr. Roy Chowdhury is absolutely sound and should succeed. As I have already indicated, no real grounds are disclosed either in the impugned communication or in the affidavit filed on behalf of the respondents as to why the contract which was initially extended for a period of five years was suddenly reduced upto 31st March, 1980. In that view of the matter, it must be held that the action of the State Government is absolutely arbitrary and capricious and without any rayme or reason. This contention of Mr. Roy Chowdhury therefore succeeds.

22. The next submission of Mr. Roy Chowdhury was on the question of natural justice. He prefaced his submission with the well known proposition laid down by the Supreme Court that all executive action which involves civil consequences must comply with the rules of natural justice. Admittedly, in the facts of the present case, before the impugned order was passed, no reference of any kind was made to the petitioner no. 1 and it was never given any opportunity whatsoever of showing cause against the action proposed to be taken against it. My attention, in this connection was drawn to another well-known decision of the Supreme Court in the case of Smt. Maneka Gandhi v. Union of India reported in AIR 1978 SC 597. At paragraph 57 of the Report Bhagwati, J. who delivered the judgment, inter alia, observes as follows:—

“The question immediately arises: does the procedure prescribed by the Passports Act, 1967 for impounding a passport meet the test of this requirement? Is it ‘right or fair or just?’ The argument of the petitioner was that it is not, because it provides for impounding of a passport without affording reasonable opportunity to the holder of the passport to be heard in defence. To impugned the passport of a person, said the petitioner, is a serious matter, since it prevents him from exercising his constitutional right to go abroad and such a drastic consequence cannot in fairness be visited without observing the principle of audi alteram partem. Any procedure which permits impairment of the constitutional right to go abroad without giving reasonable opportunity to show cause cannot but be condemned as unfair and unjust and hence there is in the present case clear infringement of the requirement of Article 21 ……………………….”

23. At paragraph 58 of the Report Bhagawati, J. inter alia, observes as follows:

“We may commence the discussion of this question with a few general observations to emphasise the increasing importance of natural justice in the field of administrative law. Natural justice is a great humanising principle intended to invest law with fairness and to secure justice and over the years it has grown into widely pervasive rule affecting large areas of administrative action………………………………………………………. Thus, the soul of natural justice is ‘fair play in action’ and that is why it has received the widest recognition throughout the democratic world. In the United States, the rights to an administrative hearing is regarded as essential requirement of fundamental fairness. And in England too it has been held that ‘fair play in action’ demands that before any prejudicial or adverse action is taken against a person, he must be given an opportunity to be heard. The rule was stated by Lord Denning M.R in those terms in Schmidt v. Secy. of State for Home Affairs. (1969) 2 Ch. D. 149 “where a public officer has power to deprive a person of his liberty or his property, the general principle is that it has not to be done without his being given an opportunity of being heard and of making representations on his own behalf.”……………………….”

24. At paragraph 59 of the Report Bhagawati, J. observes inter alia, as follows:

“Now, if this be the test of applicability of the doctrine of natural justice, there can be no distinction between a quasi-judicial function and administrative function for this purpose. The aim of both administrative inquiry as well as quasi-judicial inquiry is to arrive at a just decision and if a rule of natural justice is calculated to secure justice, or to put it negatively, to prevent miscarriage of justice, it is difficult to see ??? it should be applicable to quasi-judicial inquiry and not to administrative inquiry. It must logically apply to both. On what principle can distinction be made between one and the other? Can it be said that the requirement of fair play in action’ is any the less in an administrative inquiry than in a quasi-judicial one? Sometimes an unjust decision in an administrative inquiry may have far more serious consequences than a decision in a quasi-judicial inquiry and hence the rules of natural justice must apply equally in an administrative inquiry which entails civil consequences……………………”

25. From the above observations of the Supreme Court it is quite clear that the rules of natural justice apply with equal force and rigour irrespective of whether the action is an administrative one or quasi-judicial. The conclusion is inevitable that by virtue of the impugned order the petitioners have been deprived of a valuable right of property namely the right to carry on business interms of the new contract for the period of full five years upto ??? This valuable right his admittedly been taken away from the petitioners without giving them any opportunity to showing cause or of being heard in any manner whatsoever. Consequently, it must be held that the impugned order is completely contrary to all principles of natural justice. This contention of Mr. Roy Chowdhury therefore also succeeds.

26. The last principal contention of Mr. Roy Chowdhury was on the basis of the doctrine of promissory estoppel. This submission was on the basis of another well-known decision of the Supreme Court in the case of Motilal Padampat Sugar Mills Co. Ltd. v. The State of Uttar Pradesh, reported in AIR 1979 SC 621. Reference was made to paragraph 10 other paragraphs of the petitioner here it has been stated that relying on the order dated 15th October, 1979 the petitioners had ordered a fleet of vehicles and had employed a good number of persons for carrying out the job which was to last for a period of five years. According to the petitioners, the monthly bill on account of salaries and establishment charges run into about Rs. 50,000. Since the petitioner No. 1 relying on this representation altered its position for the worse, it was submitted on the strength of the above decision of the Supreme Court that the State of West Bengal was estopped from contending that the period of five years which was the original period of extention could be abridged by the impugned order.

27. It was contended on behalf of the respondents that the doctrine of promissory estoppel had no manner of application to the facts of the present case.

28. Having regard to my findings on the other two principal points I do not feel inclined to express any opinion on this particular contention.

29. On behalf of the State, reliance was sought to be placed on a decision of mine in the case of ??? Bhaskar Chetty v. State of West Bengal reported in 1978 (1) CLJ 596. In that decision, I followed the decision of the Supreme Court in the case of Radhokrishna Agarwalla v. State of Bihar reported in AIR 1977 SC 1496 and held that after the parties have entered into a contract, the rights and obligations flow only from the contract unless some statute steps in. In the absence of any statutory inhibition, those rights cannot be enforced in the writ jurisdiction. I further held that, at an earlier stage however, when the parties are on the threshold of forming of a contract the State is bound to abide by the Constitutional provisions. For instance when the State is considering the acceptance of a tender submitted by a large number of parties, it is incumbent upon the State to consider each and every application for tender. Otherwise there will be a violation of Article 14 of the Constitution.

30. I may mention that my judgment in the above case was upheld by the Court of Appeal presided over by Chittatosh Mookerjee and B.C Ray, JJ. and is reported in 1978 (2) CLJ 166.

31. On the basis of those two decisions, it was contended on behalf of the State that no Writ lies since rights of the petitioner flow entirely from a concluded contract. In other words, since the parties are no longer on the threshold of a contract but are within the realm of a concluded contract there is no question of the applicability of any Constitutional inhibition and hence no Writ lay.

32. In my view, this contention on behalf of the respondents is misconceived. No doubt, for a time the preposition which was laid down by the Supreme Court in a number of cases over the years to the effect that when the rights of the parties flow entirely from a contract in the nature of a licence or otherwise, the Writ jurisdiction under Article 226 of the Constitution cannot be invoked held the field, I fallowed one of such decisions in Radhakrishna Agarwalla's case mentioned above in my decision in Chetty's case which as I have said was affirmed by the Court of Appeal. But after the International Airport Authorities' case which I have extensively referred to above, those decisions of the Supreme Court ??? earlier does not appear to be good law. Although there is no express reference to that group of cases in the judgment of Bhagwati, J. in the International Airport Authorities' case, and I fervently wish they were, it seems to me that after the judgment of Bhagwati, J. it is a matter of total indifference whether the right of a party flows from a Statute or under a contract. As elaborately pointed out by Bhagwati, J. the distribution of what His Lordship called Government largess, whether it takes the form to a Statutory action or an administrative action or a contractual action, the interdict as to arbitrariness ??? full force and vigour. That being so, this contention on behalf the State fails.

33. This disposes of all the contention raised by the parties.

34. In the result, this application succeeds and the Rule is made absolute. There will be a Writ in the nature of Mandamus commanding the respondents to forthwith, recall cancel and withdraw the order dated the 2th November, 1979 which is annexure ‘F’ to the petition and to forbear from giving effect thereto in any manner whatsoever.

35. There will be no order as to costs.

Rule made absolute.