Delhi High Court

South Delhi Distrtibutors vs Govt.Of Nct Of Delhi And Anr. on 15 December, 2009

Author: Gita Mittal

           IN THE HIGH COURT OF DELHI AT NEW DELHI


                Writ Petition (Civil) No.11847/2009


                              Date of decision:    15th December, 2009


      SOUTH DELHI DISTRTIBUTORS                  ..... Petitioner
                    Through Ms. Richa Kapur, Adv.

                versus


      GOVT.OF NCT OF DELHI AND ANR.              ..... Respondents

Through Ms. Zubeda Begum, Adv.

CORAM:

HON'BLE MS. JUSTICE GITA MITTAL

1. Whether reporters of local papers may be allowed to see the Judgment?

2. To be referred to the Reporter or not?

3. Whether the judgment should be reported in the Digest?

GITA MITTAL, J (Oral)

1. By this writ petition, the petitioner has assailed an order dated 9th

September, 2009 issued under the signatures of the Additional Medical

Superintendent, terminating its contract of allotment of premises/shop

no.D-1, Casualty Area, GTB Complex, Shahdara, Delhi - 110 095 with

effect from three months from the date of the issue of the communication

and directing the petitioner to hand over possession thereof to the state

Branch.

2. Factual Matrix

There is no material dispute so far as the facts giving rise to the

petition are concerned and the same to the extent necessary, are briefly

noted hereafter.

2.1 The petitioner had participated in an open tender and was

successful in award of licence in the year 2002 for running a chemist shop

in respect of the premises/shop no.D-1, Casualty Area, GTB Complex,

Shahdara, Delhi - 110 095 for a period of three years.

2.2 The licence in favour of the petitioner was renewed for a further

period of three years on terms and conditions set out in the licence deed

dated 29th March, 2005. On expiry of this licence, a further renewal was

granted to the petitioner and a fresh licence deed dated 20th February,

2008 came to be executed between the parties. As per the terms of this

licence deed, the petitioner was permitted to continue with the running of

the chemist shop in the same premises till expiry of the licence for a

period of three years i.e. on 10th March, 2011.

2.3 The material terms of the licence deed relied upon by the parties

relevant for the purposes of the present adjudication may be considered

in extenso and read as follows:-

"1. That the allotment of the shop shall initially be made for a period of a term of three years commencing from 11-03- 2008 and as such this licence deed shall be deemed to be effective from 11-03-2008 to 10-03-2011. It is further agreed that the present license may be renewed further by the licensor subject to satisfactory performance of the licensee and with 10% increase on year to year basis. In case the licensee desires to renew the license for another term, he may give the consent two months prior to the expiry of the license period.

2. That the licensee shall deposit the monthly license fee of Rs.1,24,344=00 (Rupees One Lac Twenty Four Thousand Three Hundred Forty Four only) in advance by 10th day in the beginning of every month by way of bank draft in favour of Medical Superintendent, Guru Teg Bahadur Hospital, Shahdara, Delhi Hereinafter called the Medical Superintendent if not paid in the stipulated period, a penalty of Rs.100=00 per day will be charged so long for a maximum period of 30 days.

There after the Medical Superintendent will have absolute

power to forfeit the security deposit and to terminate the licence of the aforesaid shop.

xxx xxx xxx

4. That the Medical Superintendent will have the absolute power to terminate the licence of the shop without assigning any reason whatsoever.

xxx xxx xxx

13. That the rates agreed by the licensee for the articles sold will normally be not higher than the rates of such articles prevailing in the open market.

14. That the licensee shall be bound to sell the items only relating to his nature and style of business i.e. medicines/drugs, surgical items, implants and instruments and accessories, cosmetics and all other allied items for surgery purpose etc.

xxx xxx xxx

25. That if the licensee wants to discontinue the license during the license period, he shall have to give two months prior notice with enough justification acceptable to the Medical Superintendent.

xxx xxx xxx

30. That the licensor shall not grant any other license to any other person for the business of the same nature and style within the premises of Guru Teg Bahadur Hospital, Shahdara, Delhi.

xxx xxx xxx

33. That all disputes and differences arising out or in any way concerning to this deed except those the decisions whereof or otherwise herein before provided here shall be referred to the Sole Arbitration of any person nominated by the Lt. Governor of N.C.T. Delhi or in case his designation is changed or his office is abolished in the sole Arbitration of any person nominated by the officer who for the time being is entrusted whether or not in addition to other function with the function of Lt. Governor of N.C.T. Delhi by whatever designation such officer may be called. There will be no objection to any such appointments that the arbitrator so appoints objections to Lt. Governor that he had to deal with the matter to which this deed relates and that in the course of his duties such as Government servant he had expressed views in all or any of

the matters in dispute or differences. The award of the Arbitrator so appointed shall be final and binding on the parties."

(Underlined supplied)

2.4 It has been urged at length by Ms. Richa Kapur, learned counsel for

the petitioner that perusal of the licence deed would show that licence

deed postulated penalty for failure to deposit the amount of licence fee as

a consequence for the breach of licence. Clause 21 in this behalf reads as

follows:-

"21. That in the event of committing any breach of any terms and conditions of the licence herein on his part to be observed and performed, the Medical Superintendent with and without prejudice to the other rights of the Government shall be entitled to forfeit the security deposit or any part thereof on the expiration or early termination of the terms of this licence deed."

2.5 The licence deed empowered the Medical Superintendent to forfeit

the security deposit or any part thereof on expiration or early termination

of the terms and conditions of the licence in the event of breach of any of

the terms and conditions of the licence. It has further been pointed out

that in terms of Clause 25, in the event that the licensee wants to

discontinue the license during the license period, he is required to give

two months prior notice with enough justification acceptable to the

Medical Superintendent.

2.6. Clause 30 incorporates a prohibition on the respondents to grant

any other licence for running the pharmacy business within the premises

of the hospital during the currency of the petitioner's licence.

2.7 Learned counsel has contended that the petitioner is providing a

yeoman's service at the Guru Teg Bahadur Hospital and that there is no

other chemist shop in the premises to facilitate the thousands of patients.

2.8 In view of the above, it is contended that the petitioner was taken by

surprise on receipt of the communication dated 9th September, 2009

informing the petitioner that in exercise of power under Clause 4 of the

licence deed made on 20th February, 2008, the respondent had

terminated the contract of allotment of the shop of the petitioner with

effect from three months from the date of issuance of the communication

and required the petitioner to hand over the vacant possession to the

state Branch.

3. The present writ petition has been filed assailing this decision dated

9th September, 2009. It is not disputed that the period of three months

from the date of said letter expired on or about 9th December, 2009 and

the petitioner continues to run the business in the said shop in terms of

the order passed on 8th December, 2009 in the present writ petition.

4. Petitioner's Contentions

4.1. Based on the reading of the terms and conditions of the licence

deed, it has been urged by Ms. Kapur, learned counsel for the petitioner

that termination would be permissible only if there is a violation of any of

the terms and that breach of the contract was essential before the

termination of the licence could be terminated. It is urged that the

impugned action was in violation of Article 14 of Constitution being

arbitrary and unreasonable.

4.2 The petitioner's contention is that there was no complaint at all with

regard to the performance of the petitioner. In this regard, the petitioner

has placed reliance on a response dated 7th October, 2009 received by

the petitioner in answer to a query raised under the Right to Information

Act (`RTI Act' for brevity hereafter). The petitioner had specifically raised

a query as to whether any complaint had been received with regard to

the petitioner's shop. The respondent's response was in the negative.

4.3 To support the entitlement to continue to run the business and to

operate the licence for its full term, Ms. Kapur, learned counsel for the

petitioner has also urged that the same is also in the financial interest of

the respondent.

4.4 In this regard, learned counsel for the respondent has placed

reliance on the noting dated 13th February, 2008 received from the

respondent, again in answer to a query under the RTI Act. In this noting,

the respondent had occasion to consider the petitioner's request for

extension of the licence when the respondent had noticed as follows:

"P.U.C. placed opposite in the file received from M/s The Pharmacy regarding extension of period for licence of Shop No.1(Chemist Shop) situated in shopping complex, near Casualty Block in G.T.B. Hospital. The present occupant M/s The Pharmacy has requested for extension of licence of Shop No.1 for an another term of three years i.e. 11.3.08 to 10.3.2011 and has offered increase of licence fee of Rs.1,13,982/- per month. The rate of licence fee would be enough and on the higher side in comparison of existing rate of licence fee in the vicinity of G.T.B. Hospital. The extension of term will also save the expenditure of advt. which will also cost Rs.70,000/- to 80,000/- approx. Hence the same will be beneficial to Govt. Revenue.

In this regard, it is also submitted that as per agreement clause no.26 and 32 (placed at Flag `A') worthy Medical Superintendent is competent to take decision in this regard.

Submitted Please."

4.5 The petitioner contends that Clause 4 confers draconian power on

the respondents and that the same is the result of exercise of unilaterial

and superior bargaining power of the respondent. Arbitrariness and

unreasonableness in the action of the respondent in violation of the

constitutional provisions and rights of the petitioner is asserted. It is

contended that the impugned order of termination in purported exercise

of the power under Clause 4 is not sustainable on these grounds. It is

urged that the impugned decision is neither in public interest nor in the

financial interest of the respondents or the public at large.

5. Respondents Contentions

5.1 The respondents have contested the present writ petition both on

ground of maintainability and on merits. It has been contended that the

writ petition is not maintainable on the grounds of availability of an

alternate efficacious remedy. It is urged that the licence deed contains

Clause 33 which mandates that the petitioner is required to be relegated

to appropriate proceedings for arbitration in terms of the licence. The

other submission is that the respondents have the absolute power under

Clause 4 of the licence deed to terminate the licence and the decision

which has been taken in terms thereof, is not open to judicial review. It

is also contended that the action of the respondent is in public interest

and the challenge thereto not sustainable.

6. Availability of Alternate Remedy

6.1 I have heard learned counsel for the parties. Before dealing with the

matter on the challenge on merits, it becomes necessary to deal with the

preliminary objection raised by learned counsel for the respondent to the

effect that the present petition would be barred on account of availability

of an alternative effective and efficacious remedy to the petitioner under

the contract.

6.2 In this behalf, the respondents have drawn my attention to an order

dated 15th October, 2004 passed in OMP No.28/2003 which was filed by

the petitioner. It appears that the petitioner was at that time working out

the terms of the extended licence. It has been pointed out that despite

the currency of the petitioner's licence, the respondents were initiating

steps for re-allotment of the shop by floating a tender. In this

background, a petition was filed by the petitioner under Section 9 of the

Arbitration & Conciliation Act. It was agreed in these proceedings that the

respondent may initiate action for re-allotment of the shop w.e.f. 11th

January, 2005 while the petitioner would be permitted to carry out its

business for the terms of its licence.

6.3 It needs no elaboration that exclusion of writ jurisdiction on grounds

of availability of an alternative remedy is really a rule of convenience. No

absolute prohibition has been laid down nor can it be so urged. In the

judgment reported at (2003) 2 SCC 107 (Para 7) entitled Harbanslal

Sahnia Vs. Indian Oil Corporation, the Supreme Court has reiterated

these principles and clearly stated that the exclusion is merely rule of

discretion and convenience and not one of compulsion. In this case, the

court had laid down the principle that in an appropriate case, despite

availability of alternative remedy, the High Court may exercise writ

jurisdiction in at least three contingencies:-

"(i) where the writ petition seeks petition seeks enforcement of any of the fundamental rights;

(ii) where there is failure of principles of natural justice; or

(iii) where the orders or proceedings are wholly without jurisdiction or the vires of an Act is challenged."

6.4 The petitioner has assailed the action of the respondent on all the

above grounds though no challenge to the vires of the act is laid. It has

been urged at some length that the petitioner's licence has been

terminated without any notice at all, despite two extensions in the past

and that this business is the bread and butter of the petitioner.

6.5 Learned counsel for the petitioner has been at pains to argue that

the termination is based on no relevant reasons and is absolutely

arbitrary and unfair.

6.6 The circumstances in which the petitioner filed the OMP No.28/2003

are materially different from those leading to the filing of the present

petition. Merely because the petitioner had invoked the remedy under

the Arbitration & Conciliation Act, 1996 would not by itself preclude the

petitioner from bringing and maintaining the present writ petition.

6.7 It is further to be noted that as per the impugned order dated 9 th

September, 2009, the order comes into force within three months thereof

which period has ended. In this background, relegation of the petitioner

at this stage to the remedy by arbitration shall not be efficacious as well.

6.8 In this background, I am not inclined to accept the objection so far

as the maintainability of the writ petition on ground of availability of

alternative remedy of arbitration is concerned.

7. Challenge to the order of termination

7.1 So far as the decision against the petitioner is concerned, Ms. Richa

Kapur, learned counsel for the petitioner has painstakingly drawn my

attention to the reasons for the same. It is contended that the decision is

arbitrary and unreasonable and that it has no nexus to the purpose

sought to be achieved. Learned counsel has submitted that the decision

is not in public interest and is predicated solely on an apprehension of the

respondent that allotment of space to the Jan Aushadhi outlet would

result in violation of Clause 30 of the licence to the petitioner.

7.2 It has been urged that the action of the respondent has to be tested

on the touchstone of the Article 14 of the Constitution of India. Reliance

is placed on the pronouncement of the Apex Court reported at (1979) 3

SCC 489 R.D. Shetty Vs. International Airport Authority & 2008

(8) SCALE 284 Jagmohan Singh Vs. State of Punjab (para 15).

Reliance is also placed on (2004) 2 SCC 130 Teri Oat Estates (P) Ltd.

Vs. U.T., Chandigarh & Ors. & (2004) 3 SCC 553 ABL International

Ltd. & Anr. Vs. Export Credit Guarantee Corporation of India Ltd.

& Ors.

7.3 It is an admitted position that no reason has been assigned in the

order dated 9th September, 2009 for the termination of the licence.

Before me, it is urged that the respondents have exercised power under

Clause 4 of the licence deed which confers absolute and exclusive power

on the Medical Superintendent to terminate licence without any reasons.

7.4 Learned counsel for the petitioner has submitted that in these

circumstances, the order of termination and the action of the respondent

has to be tested having regard to the concerns and considerations which

arose before th e respondent prior to the passing of the impugned order.

7.5 The instant case is concerned with the termination of the contract to

run a chemist shop in a government hospital. It is an admitted position

that the hospital is one of the largest in Delhi. According to the

petitioner, it is an approximately 1200 bedded hospital and caters to

almost 6000 patients in the out patient departments (OPDs) in various

specialties.

7.6 The respondents have submitted that they are bound to work the

schemes and policies of the Government of India so far as the health

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issues are concerned.

7.7 The action taken is sought to be justified on ground of public interest

inasmuch as the respondent contended that they are working in the

scheme of Government of India to make available quality medicine at

affordable price as against average branded medicines at market price.

7.8 Ms. Zubeda Begum, learned counsel for the respondent has handed

over a copy of the brochure published by the Department of

Pharmaceutical of the Ministry of Chemicals & Fertilizers of the

Government of India setting out the purpose of the Jan Aushadhi

Campaign. It has been observed thereunder that over the years, India

has developed a strong capability in producing quality branded and

generic medicines in most of the therapeutic categories, evolving from a

mere Rs.1500 crores industry in 1980 to a more than 68,000 crores

industry in 2008. However, although these medicines are reasonably

priced, as compared to the prices of their equivalent medicines in most

other countries, yet a large population of poor people in the country, find

it difficult to afford the more expensive branded category of medicines.

Steps taken towards this include price control of Scheduled Drugs through

the National Pharmaceutical Pricing Authority( NPPA); price regulation of

Non-Scheduled Drugs; uniform VAT of 4% on medicines & reduction in

excise duty from 16% to 4%.

7.9 However, Government was still not satisfied with the above

regulatory and financial steps for ensuring greater availability of

medicines at affordable prices to all, specially for the poorer masses and

therefore, the Government has launched a country wide Jan Aushadhi

Campaign.

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The notified key objectives of the Jan Aushadhi Campaign are:-

"(i) Makes quality the hallmark of medicine availability in the country, by ensuring access to quality medicines through the CPSU supplies and through GMP Complaint manufacturers in the private sector.

(ii) Despite constraints of budget in the Central and State Governments, extend coverage of quality generic medicines in order to reduce and thereby redefine the unit cost of treatment per person. For example branded Diclofenac tablets are available at the average market rate of Rs.36.70 for a pack of 10 tablets. Jan Aushadhi Stores would be sell this at Rs.3.50 which is less than 10% of the market price of the branded category. Thus with the same cost 10 times more persons could be treated with same efficacy and cure.

(iii) Creates a demand for generic medicines. By All for All by improving access to better health care through low treatment costs and easy availability wherever needed in All therapeutic categories."

7.10 The respondents have explained that a communication dated 11th of

February, 2009 was received by the hospital from the Health & Family

Welfare Department of the Government of NCT of Delhi forwarding the

proposal of the Government of India in its order dated 2 nd November,

2008 and December, 2008 with regard to opening of Generic Drug Stores

"Jan Aushadhi" in Delhi. Comments of the Medical Superintendent on this

were called for.

7.11 The respondents have placed reliance on further communications

dated 20th August, 2009 and 28th August, 2009 addressed by the Central

Government to the Secretary of the Government of NCT of Delhi with

regard to the working of the Jan Aushadhi campaign. The Government of

India had communicated that the outlets would be open in hospital

premises which would be managed by the Kendriya Bhandar of the Govt.

of India. It was stated that the locations of these outlets have been

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finalised by the Government of India not only at the GTB hospital but at

other hospitals including the Lok Nayak Jai Prakash Hospital and the

Dr. Bhimrao Ambedkar Hospital, Rohini.

7.12 Ms. Begum, learned counsel for the respondent has contended that

as per the communication dated 20th August, 2009, the scheme of the

Central Government was that it would "provide a one time assistance of

Rs.2,00,000/- as furnishing and establishment costs and further

Rs.50,000/- as one time start up costs to the NGO for setting up the Jan

Aushadhi (`JAS' for brevity). The programme was postulated to be a self-

sustaining business model not depending on Government subsidy for

assistance and that it would be run in a campaign mode on the principle

of "Not for profits but with minimal profit". Learned counsel has placed

the copy of the brochure which has been published by the Government of

India in this behalf on record.

7.13 The Government of India addressed a letter dated 28th of August,

2009 to the Chief Secretary of the Government of NCT of Delhi that the

Kendriya Bhandar in consultation with the two hospitals including the GTB

Hospital, Shahdara had identified places for opening the Jan Aushadhi

stores. A request was made to instruct the authorities to allot these

shops to the Kendriya Bhandar immediately so that the stores can be

inaugurated by the Chief Minister.

7.14 It appears that at the same time when the respondent received the

communication dated 11th February, 2009 from the Govt. of NCT of Delhi,

the respondent considered the aspects with regard to the petitioner's

shop. On 13th February, 2009, the following noting was recorded on the

respondent's file:-

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"May kindly see the PUC placed opposite on the bill at 1/C to 3/C received from Kendriya Bhandar, wherein it has been requested to give permission to the said institution to open a Pharmacy/Chemist shop on the complex of GTB Hospital. It has also been stressed upon that Kendriya Bhandar will offer genuine and superior quantity of medicine at reasonable prices.

In this context, it is also worth mentioning that at present one Chemist shop i.e. The Pharmacy is running within Hospital complex and contract has been awarded to the said firm till 10/03/2001. As per the term and condition of the contract Agreement, the licenser shall not grant any other license to any other person for the business of the same nature and style within the premises of GTB Hospital.

It is agreed to we may submit the file before Worthy Medical Superintendent for his consideration in the light of the above."

(Emphasis supplied)

7.15 The matter proceeded for consideration of the proposal for opening

of the Jan Aushadhi outlet. On 19th February, 2009, the following noting

was recorded by the respondent:-

"The matter is regarding opening of Pharmacy Shop by Kandriya Bhandar and Generic Drug Shop in the name of "Jan Aushidhi".

In this context, it is submitted that a license deed was made on 20.02.2008 between GTB Hospital and M/s The Pharmacy wherein as per terms and conditions of the deed (No.30), it has been mentioned that the licensor shall not grant any other license to any other person for the business of the same nature within the premises of GTB Hospital.

Since M/s The Pharmacy is a chemist shop, appropriate action may be taken accordingly."

(Underlining supplied)

7.16 In view of the above, a communication dated 16th March, 2009 sent

from the office of the medical superintendent of the respondent hospital

to the Delhi Secretariat wherein it was informed that the present contract

of the pharmacy was in force till 10th March, 2011. The Medical

Superintendent had clearly informed the Govt. of NCT of Delhi that the

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hospital shall not be able to provide space to any other person dealing in

drugs till the expiry of the above said contract.

7.17 From a perusal of the above, it would appear that the respondents

were concerned about the prohibition contained in Clause 30 of the

licence deed dated 20th February, 2008 in favour of the petitioner

whereby the respondents were precluded from permitting opening of any

other chemist shop in the hospital premises. Clearly it was only on

account of the intention to open the Jan Aushadhi outlet which would be

operated by the Kendriya Bhandar and the consequences of the

prohibition contained in Clause 30 of the licence deed that the

respondents were persuaded to initiate the impugned action with regard

to the petitioner's licence.

7.18 The noting dated 24th August, 2009 thereafter records that the

respondents have reserved shop no.8 in the causalty area for the

purposes of opening the Jan Aushadhi store.

7.19 The Government of NCT of Delhi was directed by the Government of

India by requiring the Chief Secretary of the Govt. of Delhi to instruct the

authorities to allot the shop in GTB hospital to the Kendriya Bhandar

immediately. As a result, the Secretary (Health) directed that the

allotment of the alocated space by 12.00 noon on 4th September, 2009 be

confirmed to him. This direction was sent to the Medical Superintendent

of the respondent hospital.

7.20 It is an admitted position that the Jan Aushadhi outlet on the GTB

Hospital, Shahdara stands inaugurated during the pendency of these

proceedings and is running since 13th November, 2009.

7.21 The action of the termination of the licence taken by the

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respondent, has to be examined in this background. The respondents

were fully conscious of their responsibility and the prohibition contained

in Clause 30 of the licence deed executed in favour of the petitioner and

the consequences which would result therefrom. In this background, the

following noting was recorded on 24th August, 2009:-

"The matter on the file is regarding allotment of medicine shop in the Hospital Premises.

It is submitted that the extension of period w.e.f. 11.3.2005 for license of this shop was allowed with the approval of Finance Department. (8/N) for three years upto 10.3.2008. In the extension granted w.e.f. 11.3.2005, it was clearly mentioned that initial rate of License fee shall be Rs.94,200/- which will increase @ 10% on year to year basis for the next two years.

However, instead of calling fresh tenders on current competitive market rates, w.e.f. 11.3.2011 but with the approval of Worthy M.S. (11/N). This time, the file was not forwarded to Health & Family Welfare Department/Finance Department for concurrence.

Keeping in view the above circumstances, if agreed, the matter may be placed before Worthy M.S. For consideration and for:

(a) taking necessary action as per terms and conditions No.4 of License Deed dated 20.2.2008.

(b) obtaining expost-facto approval of Finance Department for regularizing the period w.e.f. 11.3.2008 with full justification."

7.22 The file was put up to the medical superintendent on the same date

who approved the proposed action at serial no.`a' above for proceeding

as per clause No.4 of the licence deed dated 20th February, 2008 on this

very date.

7.23 Pursuant to this direction of the medical superintendent on the 31st

August, 2009, the respondents issued the impugned order dated 9th

September, 2009 of termination of the petitioner's licence in purported

exercise of powers under Clause 4.

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7.24 From the above narration, it is apparent that the reason for

proceeding against the petitioner is the apprehensions of the respondents

if they proceeded to permit opening of a Jan Aushadhi outlet during the

currency of the petitioner's licence and nothing else.

7.25 A submission is made that the termination clause 4 of the licence is

unfair or unreasonable. In AIR1986SC1571 Central Inland Water

Transport Corporation Vs. Brojo Nath Ganguly & Anr., the Supreme

Court reiterated the well settled principle that the courts will enforce and

will, when called upon to do so, strike down an unfair and unreasonable

contract, or an unfair and unreasonable clause in a contract entered into

between the parties who are not equal in bargaining power.

7.26 In the instant case, the petitioner accepted this clause not today but

in 2000 when it accepted the award of the licence to it and each time

when it renewed and laid no challenge to it till the termination.

7.27 For this reason, I am not inclined to examine the clause from this

angle.

7.28 It is also urged that petitioner had a reasonable expectation that he

would be working the full period of the contract. The petitioner has urged

that this business was its bread and butter and infrastructure for the

same stood created. The impact of the termination is not only on the

petitioner but on economic and social lives of employees as well.

7.29 From the above discussion, it is apparent that the only reason which

weighed with the respondent in passing the order dated 9th September,

2009 was the fact that in view of the prohibition under Clause 30 of the

petitioner's licence, its action to allot the space for running the Jan

Aushadhi outlet may get clouded. No other reason at all is discernible

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from the record which has been placed before me nor any reason is set

out in any of the communications or on the record of the present case by

the respondents.

7.30 The Jan Aushadhi Scheme of the Government of India has been

framed with the aim and objective of providing "quality medicine at

affordable prices for all". The programme targets primarily making

medicines available at cheap and affordable rates to the consumers who

are the patients visiting hospitals. Inasmuch as the hospitals run by the

state are within the control of the Department of Pharmaceutical of the

Ministry of Chemical & Fertilizers of the Government of India, it had

initially targetted opening of Jan Aushadhi Shops at Government hospitals

alone.

7.31 The scheme further envisages provision of generic drugs to the

patients other than branded items which are sold only at market prices

which may not be affordable to the patients consumers who are of health

services in the Government hospitals.

7.32 The termination for a public purpose and justiciable cause cannot be

assailed. However, the propounded reason that the decision was taken in

bona fide exercise of power under Clause 4 is not borne out from the

record of the respondent. It is evident that the respondents were clearly

guided by their desire to open Jan Aushadhi outlet and were apprehensive

of the consequences of breach of Clause 30 of the petitioner's licence

deed.

7.23 It needs no elaboration that even the exercise of a contractual

power by the government or its instrumentalities can be subjected to a

judicial scrutiny under Article 14 of the Constitution of India on the

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touchstone of illegality, irrationality or procedural impropriety, all of which

constitute part of unreasonableness in action. The caution on standards

of reasonableness to be applied in judicial review are also well settled. A

thing is not unreasonable in the legal sense merely because the courts

think it is unwise. The limits of the exercise of power were laid down by

the supreme court in AIR 1991 SC 1153 G.B. Mahajan Vs. Jalgaon

Municipal Council relying Administrative Law by H.W.R. Wade, Sixth

Edition, in the following terms:-

"The courts are kept out of the lush field of administrative policy, except when policy is inconsistent with the express or implied provisions of a statute which creates the power to which the policy relates or when a decision made in purported exercise of a power is such that a repository of the power, acting reasonably and in good faith, could not have made it. In the latter case, 'something overwhelming' must appear before the Court will intervene. That is, and ought to be, difficult onus for an applicant to discharge. The Courts are not very good at formulating or evaluating policy. Sometimes when the Courts have intervened on policy grounds, the Court's view of the range of policies open under the statute or of what is unreasonably policy has not won public acceptance. On the contrary, Curial views of policy have been subjected to stringent criticism. In the world of politics, the Court's opinions on policy are naturally less likely to reflect the popular view than the policies of a democratically elected Government or of expert administrators..."

7.34 The petitioner has contended that it had a reasonable expectation

that it would be permitted to fully work out its contract. The doctrine of

reasonable or legitimate expectation of a citizen has been held to give a

person sufficient locus standi for judicial review of action, but the same by

itself may not be a distinct enforceable right. In AIR 1993 SC 1601

Fertilizer Corporation of India Vs. Kamdhenu Cattle Feed

Industries, the Supreme Court held that failure to consider and give due

weight to it may render the decision arbitrary and this is how the

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requirement of due consideration of a legitimate expectation forms a part

of the principle of non-arbitrariness, a necessary concomitant of the rule

of law. However, so far as the manner in which it is to be considered, the

court held that :-

"The mere reasonable or legitimate expectation of a citizen, in such a situation may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary and this how the requirement due consideration of legitimate expectation forms a part of the principle of non- arbitrariness, a necessary concomitant of the rule of law. Every legitimate expectation is a relevant factor requiring due consideration in a fair decision making process. Whether the expectation of the claimant is reasonable or legitimate in the context is a question of fact in each case. Whenever the question arises, it is to be determined no according to the claimant's perception but in larger public interest wherein other more important considerations may outweigh what would otherwise have been the legitimate expectation of the claimant. A bona fide decision of th e public authority reached in this manner would satisfy the requirement of non-arbitrariness and withstand judicial scrutiny. The doctrine of legitimate expectation gets assimilated in the rule of law and operates in our legal system in this manner and to this extent."

7.35 On behalf of the petitioner, it is pointed out that there are several

medical specialties and super specialties wherein generic drugs may not

be available. Ms. Richa Kapur Kapur, learned counsel for the petitioner

has placed the following list before this court:-

    Sl. No.    Specialty                Availability     in     Generic
                                        Formulations
    1.         Dermatology & Skin       No medicine.
    2.         Oncology                 No medicine.
    3.         Ophthalmology            Only some eye drops.
    4.         E.N.T.                   Only some tablets. No ointment.
    5.         Dental                   No     paste,  mouthwash     or
                                        gumpaint available.
    6.         Cardiac                  No life saving infectibles or
                                        tablets.
    7.         Radiology                No dyes.


                                    - 20 -
     8.         Medicine                 No insulin inhalers, nebulisers,
                                        solutions, liver medications.
    9.         Anesthesia               No medicine and injections.
    10.        Psychiatry               Full range of mental medicine
                                        not available.
    11.        Neurology                No medicine or injection.


     It is contended       that only some      antibiotics, iron, B-complex

supplement, some gastric medications and some paediatrics preparations

in the generic forms are readily available.

7.36 Ms. Richa Kapur, learned counsel for the petitioner has placed

reliance on the pronouncement of the Supreme Court reported at AIR

1991 SC 537 Kumari Shrilekha Vidyarthi etc. etc. Vs. State of U.P.

& Others wherein dealing with requirements of Article 14 in the contexts

of contractual matters for regulating the conduct of the State activity, the

Supreme Court laid down the following proposition of law:-

"28. Even assuming that it is necessary to import the concept of presence of some public element in a State action to attract Article 14 and permit judicial review, we have no hesitation in saying that the ultimate impact of all actions of the State or a public body being undoubtedly on public interest, the requisite public element for this purpose is present also in contractual matters. We, therefore, find it difficult and unrealistic to exclude the State actions in contractual matters, after the contract has been made, from the purview of judicial review to test its validity on the anvil of Article 14.

xxx xxx xxx

36. The meaning and true import of arbitrariness is more easily visualized than precisely stated or defined. The question, whether an impugned act is arbitrary or not, is ultimately to be answered on the facts and in the circumstances of a given case. An obvious test to apply is to see whether there is any discernible principle emerging from the impugned act and if so, does it satisfy the test of reasonableness. Where a mode is prescribed for doing an act and there is no impediment in following that procedure, performance of the act otherwise and in a manner which does not disclose any discernible principle which is reasonable, may itself attract the vice of

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arbitrariness. Every State action must be informed by reason and it follows that an act uninformed by reason, is arbitrary. Rule of law contemplates governance by laws and not by humour, whims or caprices of the men to whom the governance is entrusted for the time being. It is trite that 'be you ever so high, the laws are above you'. This is what men in power must remember, always."

7.37 Reliance has been placed on the observations of the Apex Court in

para 11 of the pronouncement reported at (1979) 3 SCC 489 R.D.

Shetty Vs. International Airport Authority, wherein the court has

observed that the Government when it acts in the matter of granting

largesse is not arbitrary and it does not stand in the same position as a

private individual. It was observed that the discretion of the Government

is not unlimited and the Government cannot give or withhold largesse in

its arbitrary discretion. In para 11 of the judgment, the following binding

principles which still hold good were laid down:-

11. 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 valuables 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 Governments 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 pubic land valuable for mining and other purposes. These resources are available for utilisation

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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 pos ition 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 and 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 forging procedural safeguards but also by confining/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 at its sweet will. It is insisted, as pointed out by Prof. Reich in an especially stimulating article on "The New Property" in 73 Yale Law Journal 733, "that Government action be based on standards that are not arbitrary or unauthorised." "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 having 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.

7.38 Having regard to the contractual nature of the relationship between

the parties, reference can be usefully made to the pronouncement of the

Apex Court at AIR 1990 SC 1031 Mahabir Auto Stores & Ors. Vs.

Indian Oil Corporation & Ors. In this case, the court was concerned

with the refusal of the respondents to supply oil to the petitioner who was

its long term dealer and licensee without any reasons or justification.

This action of the respondent was assailed before the Apex Court when

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the following principles were laid down in para 12 :-

"12. .............In a situation of this nature certain activities of the respondent company which constituted State under Article 12 of the Constitution may be in certain circumstances subject to Article 14 of the Constitution in entering or not entering into contracts and must be reasonable and taken only upon lawful and relevant consideration, it depends upon facts and circumstances of a particular transaction whether hearing is necessary and reasons have to be stated. In case any right conferred on the citizens which is sought to be interfered, such action is subject to Article 14 of the Constitution, and must be reasonable and can be taken only upon lawful and relevant grounds of public interest. Where there is arbitrariness in State action of this type of entering or not entering into contracts, Article 14 springs up and judicial review strikes such an action down. Every action of the State executive authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public authority, in such monopoly or semi- monopoly dealings, it should meet the test of Article 14 of the Constitution. If a Governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable. In this connection reference may be made to E.P. Royappa v. State of Tamil Nadu and Anr.,(1974)ILLJ172SC; Maneka Gandhi v. Union of India and Anr., [1976]102ITR1(SC); A jay Hasia and Ors. v. Khalid Mujib Sehravardi and Ors., (1981)ILLJ103SC; R.D. Shetty v. International Airport Authority of India and Ors. 1979CriLJ905 and also Dwarkadas Marfatia and sons v. Board of Trustees of the Port of Bombay [1989]2SCR751 . It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like the present one. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and non-discrimination in the type of the transactions and nature of the dealing as in the present case."

7.39 Ms. Begum, learned counsel for the respondent has distinguished

this judgment on facts. However, having regard to the principles which

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have been laid hereinabove which bind this court, the distinction on facts

will be of no consequence.

7.40 So far as the products which the petitioner was permitted to sell, are

concerned, the same are listed in Clause 14 of the licence deed which

permits the petitioner/licencee to be bound to sell items only relating to

the nature and style of business of pharmacy which has been described to

include the medicines/drugs, surgical items, implants, instrument and all

other and accessories, cosmetics and all other allied items for surgery

purposes etc. The respondents exercise a scrutiny and control with

regard to the price at which these are sold in terms of the licence deed.

7.41 It is also not the respondent's case that the Jan Aushadhi outlet is

going to be supplying surgical equipments, implants and other items

which have been mentioned in clause 14 of the licence deed.

7.42 As stipulated in the licence deed, the petitioner's shop is the only

chemist shop in the hospital. There was thus no other chemist shop

existing to cater to the huge daily influx of the patients. The respondents

do not propose to open any other chemist shop.

7.43 There can be no doubt that the efforts to provide quality medicine at

affordable price is not only laudable but is essential and deserves to be

encouraged and implemented in the right earnest. However, if the

submissions made by learned counsel for the petitioner are correct then

efforts to provide only generic drugs at the hospital complex to the

exclusion of all other medicines may defeat the very purpose for which

the scheme has been formulated. This is not the declared object of the

scheme of the Government. The patients seeking treatment at the public

hospital would be deprived of a facility of the chemist shop in respect of

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the several medications for which generic formulations are not available

in the market. Medical treatment is not confined to medication alone.

Surgical and orthopedic procedures may require several implants and

implements.

7.44 The decision of respondent to terminate the licence of the petitioner

results in detriment to the interest of the patients for whose benefit the

decision is contended to have been taken. The decision of the

respondents in this background, is clearly unreasonable and not in

furtherance of any public purpose at all

7.45 The stand taken by the respondent to the effect that their action in

termination of the contract under Clause 4 is not justiciable for the reason

that they were entitled to proceed in the matter in this manner, cannot be

sustained in view of the plethora of judgments noted above.

7.46 Learned counsel for the petitioner has also placed reliance on the

pronouncement reported at (2004) 2 SCC 130 Teri Oat Estates

Private Limited Vs. U.T. Chandigarh in support of the contention that

the order of termination was drastic and in the facts of the case, not

sustainable.

7.47 I find that in the pronouncement reported at (2004) 3 SCC 553

ABL International Limited Vs. Export Credit Guarantee

Corporation of India Ltd., the Apex Court has observed that there was

no absolute rule to the effect in all cases involving disputed questions of

facts, the parties are required to be relegated to a civil suit.

This issue, however, does not really arise for consideration in the

present case.

7.48 On 8th December, 2009, Ms. Richa Kapur, learned counsel for the

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petitioner had contended that in case the petitioner is permitted to run its

business at the premises in question for the full tenure as per the licence

deed dated 20th February, 2008 which would come to an end till 10th

March, 2011, the petitioner would not insist on claiming under Clause 30

of the licence deed and would not raise any objection to the respondents

permitting any other chemist shop or drug shop in the premises in

question. Learned counsel for the petitioner also submitted that the

petitioner was willing to place an affidavit in this regard on record.

7.49 Pursuant to the above statement, the petitioner has filed an affidavit

dated 11th December, 2009 wherein in para 2, a specific undertaking has

been given to the following effect:-

"2. That the deponent undertakes that if M/s South Delhi Distributor is permitted to run its business from Shop No.1 within the premises of Guru Teg Bahadur Hospital Delhi for the full tenure as per the licence deed dated 20th February, 2008 which would come to an end till 10th March, 2011, the deponent would not insist on claiming under clause 30 of the licence deed and would not raise any objection to the Licensor Respondent No.2 permitting to run the Shop No.8 in question by Kendrya Bhandar as `Jan Aushadhi'."

7.50 This undertaking on behalf of the petitioner is accepted and the

petitioner shall remain bound by the terms thereof. In this view of the

matter, the apprehensions of the respondent based on the prohibition in

Clause 30 also do not survive. Thus the apprehensions of the respondent

that there would be a breach of the terms of the licence deed dated 20th

February, 2009 if it permitted setting up of a Jan Aushadhi outlet are also

completely removed.

7.51 The petitioner was granted renewal of the licence and had a

reasonable expectation that he would be permitted to work the full terms

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thereof. It has been urged that the closure of their business would

amount to taking away the bread and butter and only source of livelihood