LexRAJASTHAN CO-OPERATIVE DIARY FEDERATION LTD. versus SH. MAHA LAXMI MINGRATE MARKETING SERVICE PVT. LTD. AND ORS.
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A RAJASTHAN CO-OPERATIVE DIARY FEDERATION LTD. B v. SH. MAHA LAXMI MINGRATE MARKETING SERVICE PVT. LTD. AND ORS. SEPTEMBER 17, 1996 (M.M. PUNCHHI AND SUJATA V. MANOHAR, JJ.] Constitution of India, 1950: A1ticles 226, 136-Writ Petition-Disputed questions of fact-Maintainability of-Govemment Co11tract---Letter of Intent C issued inf avour of contractor-Contractor did not fulfil conditions stipulated in Letter of I11tent-Subsequently, Letter of Intent cancel/ed---Colltractor i11- cu1Ted heavy expenses in anticipation of contract-Held: whether contractor incu1Ted heavy expenses in allticipation of contract and was entitled to recover the same were disputed questions off act-Such disputed questions off act D could neither be examined by High Court in writ petition nor by Supreme Court in appeal. Administrative Law : Natural justice-Pre-decisional hearing--Govemment Contract---Letter E' of Intent issued in favour of contractor-Letter of Intent specified submission of i1Tevocable bank guarantee of Rs. 15 lakhs within a stipulated date, execution of agreement within that date and submission of profit and loss account and balance sheet for the past year before execution of agree- ment-Contractor did ll'Jt fulfil conditions but issued advertisement inco1Tect- ly describing itself as sole selling agent Letter of Intent ca11ce/led without giving F opportunity of healing to contractor--Held : cancellation of letter of Intent not arbitrary-Reasons being gennane to the decision to cancel Letter of Intent, extraneous circumstances could not be relied upon to hold decision ma/a fide--l11 the circumsta11ces of the case;.pre-decisional hearing was not required to be given. G A Letter of Intent was issued by the appellant in favour of respon- dent No. 1 for appointment as selling agent of appellant's products. The conditions stipulated in the Letter of Intent were submission of an ir- revocable bank guarantee of Rs. 15 lakhs within a specified date, execution of an agreement within that date, submission of profit and loss account H and balance sheet for the past year before execution of the agreement. 368 RAJ. CO-OP. DIARY FEDERATION LID. v. M.I...M MICTG. SERV!CEPVf. LID. 369 However, respondent No. 1 did not fulfil the conditions of the Letter of A Intent but issued an advertisement in which respondent No. 1 incorrectly described itself as the sole selling agent of the appellant. For these reasons the appellant cancelled the Letter of Intent. Respondent No. 1 filed a ~it petition before the High Court chal- lenging the revocation of the Letter of Intent. The High Court allowed the · petition on the ground that the appellant had acted arbitrarily with mala fide intention and had violated the principles of natural justice in not giving a hearing to respondent No. 1 before cancelling the Letter of Iiltent. Being aggrieved the appellant preferred the present appeal. On behalf of respondent No. 1 it was contended that in anticipation of entering into a contact with the appellant,"(espondent No. 1 incurred heavy expenses and that respon~ent No. 1 wa~ entitled to recover them from the appellant. Allowing the appeal, this Court HELD 1.1. The appellant, as a prudent businessman is entitled to satisfy itself about the financial position of the party whom the appellant is appointing as its selling agent. If respondent No. 1 has not submitted B c D the requisite documents in this connection and has held itself out as the E sole selling agent when to its knowledge, there was no intention of appoint- ing respondent No. 1 as the sole selling agent, these are valid circumstan- ces which the appellant can take into account in deciding whether to enter into a contract and bind itself legally with respondent No. 1 or not. In these circumstances, if the letter of intent has been cancelled it cannot be considered as arbitrary action on the part of the appellant violative of any F Fundamental Rights of respondent No. 1. [373-A-C] 1.2. When the reasons for cancellation are clearly set out in the cancellation letter and are germane to the decision not to enter into a contract with respondent No.1, the extraneous circumstances relied on by G respondent No. 1 cannot make the decision mala fide. [373-D] 1.3. The doctrine of audi alteram partem cannot also be imported in these circumstances. If the conduct of respondent No. 1 was such that it did not inspire any confidence in the appellant, the a
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