Allahabad High Court: In a matter concerning the issue of maintainability of the writ petition, the division bench of Shekhar B. Saraf * and Vipin Chandra Dixit, JJ. stated that the mere fact that private companies comply with the rules and regulations established by the various Ministries and public regulators do not by itself bring them within the meaning of ‘State’ under Article 12 of the Constitution, as these companies are not under the pervasive control (functionally, financially and/or administratively) of the Government of India. Thus, the petitioners were pursuing the wrong course by seeking relief under writ jurisdiction, as Nayara Energy Limited (‘NEL’) (formerly Essar Oil Limited) does not fall within the definition of ‘State’ as enunciated and explicated by the Supreme Court within the ambit of Article 12 of the Constitution of India.
The Court also extracted the principles that would apply to make a company amenable to writ jurisdiction.
Background
Petitioner 1 was a partnership firm registered with the objective of selling petroleum products, grease, distilled water, and other products. The firm obtained a franchise agreement with Nayara Energy Limited (formerly Essar Oil Limited) for the sale of Motor Speed Petrol and High-Speed Diesel lubes at a retail outlet in Bulandshahar, Uttar Pradesh.
On 18-08-2021, officials from NEL visited the outlet to conduct an inspection and collect product samples, which were sent to Bharat Petroleum Corporation Limited Quality Assurance Laboratory for testing. The test report highlighted several discrepancies in the samples that did not meet required specifications. Based on this report, NEL issued a show-cause notice to the petitioner, citing violations of the franchise agreement.
Petitioner 1 raised concerns about discrepancies in petrol and diesel delivery and questioned the authenticity of the test samples. However, the responses were deemed unsatisfactory, and the franchise agreement was terminated.
Aggrieved by the termination, the petitioner approached the Central Vigilance Commission (‘CVC’) on 31-01-2022, seeking redressal, but no action was taken. The petitioner sent a reminder on 04-03-2022 but received no response. Consequently, petitioner 1 has now approached the court seeking relief for the wrongful termination of the franchise agreement and the inaction of the authorities.
Issue
Whether NEL falls within the definition of ‘State’ as enunciated and explicated by the Supreme Court within the ambit of Article 12 of the Constitution of India.
Analysis and Decision
The Court highlighted that Article 12 of the Constitution of India defines the term ‘State’ for the purpose of enforcing fundamental rights. Fundamental rights are primarily enforceable against the ‘State’ and its instrumentalities rather than private individuals or bodies. Writ petitions under Article 226 are only maintainable against bodies/persons covered within the terminology of Article 12 of the Constitution of India.
Upon perusal of Article 12, the Court noted that the term ‘State’ includes:
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The Government and Parliament of India,
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The Government and Legislature of each State,
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All local authorities,
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Other authorities within the territory of India or under the control of the Government of India.
The Court also noted the definition of local authorities given under Section 3(31) of the General Clauses Act, 1897. However, it observed that the term ‘other authorities’ has not been defined in any legislation. Therefore, the Court said that the interpretation of the above term has caused a good deal of difficulty, and judicial opinion on its definition has undergone several changes over the years.
The Court mentioned that an authority falling within the expression ‘other authorities’ by reason of its inclusion within the definition of ‘State’ under Article 12 would be amenable to writ jurisdiction.
The Court referred to Ajay Hasia v. Khalid Mujib Sehravardi, (1981) 1 SCC 722, wherein the Court laid down the following six factors test to determine whether an entity is an instrumentality or agency of the Government.
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If the entire share capital of the body is held by the Government;
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If the financial assistance given by the government is so significant that it meets almost the entire expenditure of the body;
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If the body enjoys a monopoly status conferred or protected by the State;
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If there is deep and pervasive State control;
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If the functions of the body are of public importance and closely related to governmental functions;
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Transfer of a Government department to the corporation.
After referring few more judgments of the Supreme Court concerning the test to determine whether an entity is an instrumentality or agency of the Government, the Court extracted the following principles that would apply to make a company amenable to writ jurisdiction:
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To determine whether an authority/body would fall under ‘State’ within the meaning of Article 12 would have to be determined on the cumulative facts of financial, functional and administrative dominance and/or control of the Government upon such a body. If such control is factually found, then the body would be treated as ‘State’ within Article 12.
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Simply because a private institution is carrying out a public duty or function and may come within the definition of ‘State’ under Article 12 of the Constitution of India making it amenable to writ jurisdiction would not by itself make every dispute concerning the said institution amenable to writ jurisdiction. The same would largely depend upon the nature of the dispute and the enforcement of the right by an individual against such an institution. A right which purely originates from a private law cannot be enforced by taking aid of the writ jurisdiction irrespective of the fact that such an institution is discharging the public duties and/or public functions.
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The scope of issue of a writ of mandamus is basically limited to an enforcement of the public duty and therefore it is the ardent duty of the court to ascertain whether the nature of the duty comes within the peripheral of public duty. The public duty cast may be either statutory or otherwise and where it is, otherwise, the body/authority must be shown to owe that the duty or obligation to the public involves the element of public law.
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Individual wrongs or breach of mutual contracts without having any public law element as its integral part cannot be rectified through a writ petition under Article 226.
The Court emphasised that the relationship between Petitioner 1 and NEL was contractual in nature, established through a franchise agreement for the sale of petroleum and diesel products for commercial purposes. While the sale of petroleum products is governed by guidelines and regulations issued by the Ministry of Petroleum and Natural Gas, a department of the Government of India, NEL has been appointed as an agent to distribute franchises to private entities, including Petitioner 1. The Court further highlighted that NEL is a private company, not created by any statute, and is neither financially nor administratively controlled by the Government.
The Court stated that while NEL operates in the same domain of distributing and selling petroleum products as government-owned companies such as Indian Oil Corporation Limited, Bharat Petroleum Corporation Limited, and Hindustan Petroleum Corporation Limited it is distinguishable from these government entities. The key difference lies in the level of control: government companies are functionally, financially, and administratively under the pervasive and deep control of the Government of India, whereas NEL operates as an independent organization, with no such control exerted by the Government.
The Court highlighted that the fact that private companies comply with the rules and regulations established by the various Ministries and public regulators do not by itself bring them within the meaning of ‘State’ under Article 12 as these companies are not under the pervasive control (functionally, financially and/or administratively) of the Government of India.
The Court said that upon reviewing the reasons for the termination of the franchise agreement by NEL, it was clear that the termination resulted from non-compliance and flagrant violations of the agreement. As such, no element of public duty was involved in the present case, and the petitioners’ argument that the actions of NEL in terminating the agreement would be subject to writ jurisdiction was deemed superfluous and fallacious. The Court further stated that the petitioners were pursuing the wrong course by seeking relief under writ jurisdiction. It was also noted that the franchise agreement itself contained specific provisions for grievance redressal and/or arbitration.
In light of these facts, the Court found the objection raised by NEL regarding the maintainability of the writ petition to be justified.
[Manoj Petroleum v. Union of India, 2025 SCC OnLine All 1309, decided on 04-03-2025]
*Judgment Authored by: Justice Shekhar B. Saraf
Advocates who appeared in this case:
For the Petitioners: Mr. Arun Kumar Gupta, Senior Advocate assisted by Mr. Manish Gupta and Mr. Punit Kumar Upadhyay, Advocates
For the Respondents: Mr. Anand Tiwari, Mr. Arvind Kumar Goswami and Mr. Yash Padia, Advocates
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