2-ROBERTS AND ANOTHER v. RATNAYAKE AND OTHERS

004-SLLR-SLLR-1986-V-2-ROBERTS-AND-ANOTHER-v.-RATNAYAKE-AND-OTHERS.pdf


ROBERTS AND ANOTHERv.
RATNAYAKE AND OTHERS
SUPREME COURT.
RANASINGHE. J.. TAMBIAH. J. AND L. H. DE ALWIS. J.
S.C. APPLICATION No. 41/85.
OCTOBER 7. 14. 16. 17. 18. 23. 24. 29 AND 30. 1985.
NOVEMBER 4,5,6 AND 7. 1985.
Fundamental Rights – Can a violation of rights arising out of contract constitute aninfringement of fundamental rights? – Article 12 of the Constitution – Equality -Discrimination.
The second petitioner, the Sri Lankan wife of the 1 st petitioner a foreigner, heldtenancies of 3 stalls and two bare land leases from the Kandy Municipal Council at theJathika Pola, Tomlin Park. Kandy where she carried on several businesses including that
of a cafe. The petitioners complain they have been the victims of a relentless andunceasing series of attempts to deprive the 2nd petitioner of her tenancies and destroyher business by improper and illegal acts by the 1st to 3rd respondents acting incollusion, and that the respondents by terminating the 2nd petitioner's contracts oftenancies and leases on the grounds of unauthorised structural alterations and use ofstall premises for residence, have violated their fundamental right of equalityguaranteed to them under Article 12 of the Constitution.
Held (Tambiah, J. dissenting):
In order to invoke Article 12 of the Constitution on the ground of unequal treatmentand discrimination the second petitioner must show that she has been treateddifferently from other persons similarly circumstanced without'any rational basis andthat such differential treatment was unjustifiable. The two persons who the petitionersalleged were differently treated cannot be said to have been similarly situate.
In any event Article 1 2 of the Constitution cannot be availed of by the petitioners asthe tenancies had been lawfully terminated for a breach of the agreements. Thetermination of the contracts of tenancy had not been done under and by virtue of anystatutory provision empowering such termination but solely on the basis of a violation ofa term in the. agreement entered into between the Council and the 2nd petitioner. Therights and obligations of the parties here fall to be determined by the ordinary law ofcontract and Article 12 cannot be invoked.
Cases referred to:
.(1) Bal Krishan Vaid v. The State of Himachal Pradesh and Others -A.I.R. 19.75
■- Himachal Pradesh 10. 34.
M/s. Radhakrishna Agarwal and Others v. The State of Bihar and Others-A.I.R.1977S.C. 1496. 1500. 1501. 1502 and 1523.
Wijetunge v. Insurance Corporation of Ceylon-[l982] 1 S.L.R. 1.
Wijeratne and Another v. People's Bank and Another -[1984] 1 S.L.R. 1.
Perera v. University Grants Commission-S.C. No. 57/80-S.C. Minutes of4.9.1980: Fundamental Rights Decisions of the Supreme Court Vol. 1.. p. 103.
D. F. O. South Kheri and Others v. Ram Sanehi Singh -A.I.R. 1973 S.C. 205.
K. N. Guruswamy v. State of Mysore-1955 1 S.C.R. 305: A.I.R. 1954 S.C.592.
M/s. Shree Krishna Gyanoday Sugar Ltd. and Another v. The State of Bihar andAnother-A.I.R. 1975 Patna 123.
Ram Chandra Rai v. State of Madhya Pradesh-A.I.R. 1971 Q.C. 128.
Erusian Equipment and Chemicals Ltd's Case-A.I.R. 1975 S.C.-266.
Umakant Saran v. State of Bihar-A.I.R. 1973 S.C. 964.
Lekhraj Sathram Das v. N. H. Shah-A.I.R. 1966 S.C. 334.
B. K. Sinha v. State of Bihar-A.I.R. 1974 Patna 230.
Morarjee v. Union of India-A.I.R. 1966S.C. 1044.
Elmore Perera v. Major Montague Jayawickrema and Others -(1985) 1 S.L R285. 323.
State of Orissa v. Dr. (Miss) Binapani Dei-A.I.R. 1967 S.C. 1269.
Sitla Prasad v. Saidullah and Others-A.I.R. 1975 Allahabad 344.
Union of India v. M/s. Anglo-Afghan Agencies-A.I.R 1968 S.C. 718.
C. K. Achutan v. State of Kerala-A.I.R 1959 SC 490.
APPLICATION for infringement of the Fundamental Right of equality.
R. K. W. Goonesekera with Wijaya Wickremaratne and K. Jayasinghe for the 1 st and3rd respondents.
Gomin Dayasiri with Cecil Jayasinghe and Mrs. C. Amerasekera for the 2nd respondent.Sarath Silva. Deputy Solicitor-General as amicus curiaePetitioners in person.
January 1 5, 1986.
RANASINGHE, J.
I have had the advantage of reading, in draft, the judgment of mybrother, L. H. de Alwis, J., and I agree that th^petitioners' applicationcannot succeed. The facts and circumstances relevant to aconsideration of the petitioners' application have been set out atlength in the said judgment. I agree with the views expressed in thesaid judgment upon the several questions which arise forconsideration.
As the principal question of law-whether the act which is reliedupon as constituting a violation of the Fundamental Right, is in law,controlled by the provisions of Article 12(1) of the Constitution or byonly the law of contracts-upon which the application of the 2ndpetitioner must, in our opinion, fail, is not only an important question oflaw, but is also one that does not seem to have arisen forconsideration earlier by this Court, I propose to set down briefly myown approach to this question.
It has been contended that the 2nd petitioner s application must, inany event, fail for the reason that the violation complained of is, if atall, of rights arising out of contract, and does not constitute an
infringement of the Fundamental Right claimed by the 2nd petitioner;that the State and its agencies, when they act in the contractual field,do not come within, and cannot be controlled by the provisions ofArticle 12 of the Constitution; that once such an agency enters, inaccordance with the law, into a contract with a, citizen, such agencydoes not exercise any special statutory powers and is not subject toany special obligations other than those set out in .the agreement soentered into, and is placed in the same footing as any ordinary party toa contract; that the infringement, if any, upon which the claim isfounded in this case, is not a violation by the respondents of any1statutory duty or obligation cast upon them by the."law" of the land.
This objection which was first formulated by learned DeputySolicitor-General, who appeared as amicus curiae, was also supportedby learned counsel appearing for the respondents. Reliance for thiscontention was placed heavily upon two Indian authorities, one adecision of the Himachal Pradesh High Court; the other of theSupreme Court of India : Bal Krishan Vaid v. The State of HimachalPradesh and Others (1), M/s. RadhakrishnaAgarwal and Others i/. TheState of Bihar and Others (2).
The facts and circumstances in the case decided by the HimachalPradesh High Court were: In February 1974 the Himachal PradeshGovernment auctioned the reaches of the- bed of the river Siul toprivate contractors for the supply of sand, stone and bajri required forthe construction of a project undertaken by the Central Government;the petitioner was one of the successful bidders; and, on 15.3.74, adeed of agreement for a period of one year, in form "K", was executedbetween the petitioner and the Himachal Pradesh Government; thepetitioner thereupon entered into possession of his reach of-the riverbed; disputes soon arose between the petitioner and'the Project inregard to the payment to be made for the material supplied by thepetitioner, who contended that he too should be paid at the same rateas the other contractors were paid by the Project for such material; inJune 1974, the petitioner received a notice purporting to be underclause 30 of the aforesaid agreement, intimating the intention of theGovernment to terminate the contract upon the expiration of a periodof 30 days from the date of such notice; the relevant part of the saidclause 30 provided that a contract may be terminated by theGovernment if it considered that it is in the "public interest" to soterminate it, by giving one month's notice; neither the Mines andMinerals (Regulation and Development) Act 1957, which provided for
the grant of prospecting licences and mining leases, nor the HimachalPradesh Minor Minerals (Concession) Revised Rules of 1971, whichhad been framed in pursuance of the rule making power granted bysec. 15(1) of the Act, contained any specific provision empoweringthe Government to terminate a contract in the "public interest"; such aprovision was contained only in the aforesaid agreement which hadbeen entered into in form "K", a form which was prescribed by rule 33of the aforesaid Rules; the petitioner then came before the High Courtpraying for a writ to quash the order made by the Himachal PradeshGovernment terminating the aforesaid contract entered into by theGovernment with the petitioner.
Several preliminary objections were raised by the respondents. Thetwo objections which are of direct relevance to those arising beforethis Court in this case are; that the remedy by way of writ is not in anyevent available in respect of the alleged breach, for the reason thatwhat was claimed as the authority for the'termination was only a rightfounded in contract and not a power issuing from a statute; that theclaim of discrimination in that similar contracts held by othercontractors in respect of contiguous reaches of the same river bedhave not been terminated-made under the provisions of Article 14 ofthe Constitution (which corresponds to Article 12 of our Constitution)against the Government must also fail for the reason that thepetitioner's claim arises out of a breach of contract.
In dealing with the first of the aforementioned two objections theHigh Court formulated the question to be considered as being;whether the term or condition upon which the grievance is foundedhave legal force because it is a provision of the statute or only becauseit is a clause of the contract? Having considered several relevantdecisions of the Indian Courts, the High Court upheld the objection inthis way:
"In the case before us, the grievance is that there is a violation ofclause 30 of the agreement inasmuch as the termination of thepetitioner's contract had not been effected in the public interest.The provisions for such termination is to be found only in theagreement. It is not a provision of the Act or Rules. It is urged by thepetitioner that when Rule 33 refers to the agreement being in form"K" it thereby makes all the provisions of the agreement a part of theRules. It seems to me that the mere reference to form "K" in Rule33, does not clothe the provisions of form "K" with statutory
operation. The provisions in the agreement'become operative whenthe parties subscribe their signatures to the agreement: Rule 33does not bring them into operation. To be more specific, the Rulesdo not mention that the contract can be terminated by theGovernment in the public interest. Authority for the termination of acontract on that ground is to be found in the contract alone. It is aright founded in contract, it is not a power issuing from the
statute the petitioner's complaint arises out of an alleged
breach of contract and as no writ can issue in respect of it, we mustdecline to enter into that complaint."
The second objection too was disposed of in favour of therespondents as follows:
"Finally, we are left with the contention that the petitioner hasbeen the victim of discrimination inasmuch as no such action hasbeen taken' in respect of the contracts of Vinood Kumar Sud andUmesh Kumar covering the two contiguous reaches. To my mind,this contention must also fail on the finding that the complaint of thepetitioner arises out of a breach of contract. The petitioner's case inregard to discrimination is based on Article 14 of the Constitution.To invoke Article 14, it must be shown that the State has acted inthe context of law. When the Government is party to a contract, andit exercises a right by virtue of such contract, it is a matter fallingwithin the sphere of contract. If the Government, having enteredinto contracts with different persons, arbitrarily terminates thecontracts of one person only its action must necessarily be referredto its contractual capacity from which the contract and theimpugned action flows. Had the discrimination been applied in the
course of granting a contractthe discriminatory action of the
Government would be referable to its statutory authority, becausethe statute empowers the Government to enter into such contracts.But once the contract has been concluded between theGovernment and an individual any action taken by the Government inthe application of a term or condition of the contract must beattributed to the capacity of the Government as a contracting partyWhen the Government passes from the stage of granting a contractto the stage of exercising rights under it, it passes from the domain
of statutory power into the realm of contract In my opinion
Article 14 of the Constitution cannot be invoked by the petitioner."
In the second of the two authorities referred to above, viz.Agrawal's case (supra), the petitioners moved the High Court of Patnafor writs to quash ordrs made by the Patna. State Government -revising in 1 974 the rate of royalty payable by the petitioners under alease of 1970. and thereafter cancelling the lease by a letter dated15.3.1975 – on the basis that the revision, during the pendency ofthe lease to collect and exploit sal seeds from a forest area, of theroyalty payable by the petitioners was illegal. It was contended onbehalf of the petitioners that their applications raised constitutionalquestions relating to the exercise of executive powers of the StateGovernment, and that the State, acting in its executive capacitythrough its Government or its officers, even in the contractual fieldcannot escape the obligations imposed upon it by Part III of theConstitution, and in particular Article 14 (corresponding to Article12(1) of our Constitution) which guarantees both equality before, andequal protection of the laws. The submission made on behalf of theState Government, on the other hand, was; that, once the Stateenters into contracts with citizens, the State neither enjoys specialbenefits and privileges nor is subject to special burdens anddisadvantages, and both the State and the citizen are equallysubjected to the law of contract; the government authorities acting inthe field of contract cannot be controlled by Article 14 ; that, once theState enters into the contractual sphere after the requirements of formcontained in the Constitution have been complied with, the State takesits place, in the eye of the law, side by side with ordinary parties andlitigants and should be placed on the same footing as an ordinarylitigant; and that the .powers of the High Court, under Article 226,cannot be invoked whenever there is a dispute as to whether thecontract has been breached or not.
In dealing with the argument advanced on behalf of the petitionersthe Court observed; that the contention that the State Governmenthad some special obligation attached to it would have seemed moreplausible if it could be shown that the State or its agents had practisedsome discrimination against the petitioners at the very threshold or atthe time of entry into the field of contract so as to exclude them fromconsideration when compared with others on any unreasonable orunsustainable ground struck by Article 14 of the Constitution; that atthat stage the State acts purely in its executive capacity and is boundby the obligations which dealings of the State with the individualcitizens import into every transaction entered into in its exercise of its
constitutional powers; that, after the State or its agents have enteredinto the field of ordinary contract, the relations, however, are no longergoverned by the constitutinoal provisions but by the legally validcontract which determines rights and obligations of the parties interse; that no question arises of violation of Article 14 or of any otherconstitutional provision when the State or its agents purporting'tp'’actwithin this field perform any act; that, in the sphere of contract; theycan claim only rights conferred upon them by contract, unless somestatute steps in and confers some special statutory power or obligation'on the State in the contractual field which is 'apart fron’i contract.Having expressed itself thus, the Court then concluded that, in thecase under consideration, the contract does not contain any statutoryterms, or obligations, and that no statutory power or obligation, whichcould attract the application on Article 14 of the-Constitution,’isinvolved in that case; and'that, therefore, the case-was not such inwhich powers under Article 226 of the Constitution could be invoked.The Court also considered the contention – that even when a State orits agents or officers deal with a citizen whilst acting in the exercise ofpowers under the terms of a contract between the parties, there is adealing between the State and the citizen which involves performanceof 'certain legal and public duties' – not to be a sound proposition atall.
The decision in Himachal Pradesh High Court, referred to above,which had been delivered 1 974, does not seem to have been cited inAgarwat's case (supra) . Even so, in both cases the approach to thequestion under consideration has been similar; and the reasoning hasalso been strikingly similar.
All persons are, in terms of Article 12(1) of the Constitution, equalbefore the "law", and are also entitled to the equal protection of the"law". Article 170 defines "law" to mean "any Act of Parliament andany law enacted 'by any legislature at any time prior to thecommencement of the Constitution", and to include also "an Order inCouncil". The extended meaning given to the term "law" in sub Article(1) and (7) of Article 1 5 does not apply to,the word "law" contained insub-Article 12/which would have only the meaning given to it byArticle 170. The "law" the equality before which and the equalprotection of which is guaranteed by the Constitution to the citizens ofthe Republic, can and must therefore, be only a statutory provision’contained either- in an Act of Parliament, or in any legal enactmentpassed by any legislature prior to the promulgation of the Constitution.
It also includes an Order-in-Council brought into operation before thecommencement of the Constitution. A by-law made in pursuance of astatutory provision and which, upon notification in the Gazette of itsconfirmation by Parliament, becomes as valid and effectual as if itwere enacted in the main enactment will also be a provision containedin an enactment passed by the supreme legislature of this Island. Anyact done, therefore, in pursuance of a term or condition, set out in acontract entered into between a citizen and the State, would not.ordinarily, come within the term "law" so set out in the said Article;and a breach or violation of any such term or condition would notattract to it the provisions of Article 12(1). An act, done in pursuanceof a term or condition contained in such a contract and which said actis said to be a violation, could found a complaint of an infringement ofthe right embodied in Article 12(1) only where such term or conditionhas a statutory origin, or has, at least, what has been referred to inanother connection, a "statutory flavour". It is only where the Statehas acted in the context, and in the sphere of "law", as defined inArticle 1 70, that any invocation of Article 12(1) could be entertained.
On a consideration of the principles set out in the judgmentsreferred to above, and the provisions of both Articles 12(1) and 170of the Constitution, the principles that govern the question, which callsfor determination, are, in my opinion; that the "law", equality beforewhich and the equal protection of which is guaranteed by Article12(1) of the Constitution, constitutes only those statutory provisionscontained in Acts of Parliament, and in any enactment passed by anyLegislature of this Island at any time before the Constitution waspromulgated in September 1978, including all Orders-in-Councilpromulgated before the Constitution came into operation, and alsothose by-laws which, as set out earlier, are also as valid and effectualas if enacted in the main statute; that, where the State enters into acontract with a citizen in pursuance of any statutory power, the State,or such State agency is, at the "threshold stage", or the stage at whichsuch contract is being entered into, bound by the operation of theprovisions of Article 12(1) of the Constitution: that, once such anagreement is validly entered into, all parties to such agreement – theState, the State agency, and the citizen – are all ordinarily bound onlyby the terms and conditions set out in such agreement; that, if,however, there exists a statutory provision which, whether included,expressly or impliedly, as a term or condition of such agreement ornot, confers some special powers even in the field of contract, then
such provision affects the rights and obligations of the parties undersuch agreement; that, if the term or condition, which creates rights orobligations of the parties under the agreement, has legal force onlybecause it is incorporated in such agreement, then any violation evenby the State amounts only to a breach of contract, even where suchterm or condition has been incorporated because a statutory provisionrequires it to be so incorporated; that where the rights and obligationsof parties to such agreement have to be determined according to theordinary law of contract, then even the State has-to be treated in thesame way as any other ordinary party to a legally binding contract;that where the rights and obligations of the parties to such contract fallto be determined by the ordinary law of contract, then the provisionsof Article 1 2 (1) of the Constitution have no application, and cannot beinvoked.
The act of the respondents, which is being impugned by thepetitioners as constituting a violation of the Fundamental Right of the2nd petitioner set’ out in Article 12(1) is the termination of theagreement P106, P1 10 and P114, dated 8.7.83 entered intobetween the 2nd petitioner and the 1st and 3rd respondents on behalfof the Municipal Council of Kandy, by the notice, P426. dated12.3.85. No complaint of any violation of any Fundamental Right atthe "threshold stage" – viz; at or before the entering into of the saidAgreement P106 – has been made.
Part IV of the Agreement P106 states that the tenant (the 2ndpetitioner) specifically agrees "that the Council shall, for any breach ofany of the terms and conditions here contained apart from other rightshereinbefore contained have the right to terminate the tenancy by givinga month's notice and take action for ejectment and expulsion-of thetenant as provided by the Municipal Councils Ordinance or any otherlaw". "Other rights" conferred upon the Council by the precedingprovisions of P106, in regard to any breach of any of the terms andconditions contained in P106, by the tenant (the 2nd petitioner) are tobe found in paragraph (2) of Part III of P106 which provides that; inthe event of the tenant falling into arrears of rent, or of any breach,non-observance, non-performance by the tenant of the terms,conditions, stipulations and conditions contained in the saidagreement, the tenancy shall cease as if it had expired by effluxion of •time and it shall be lawful for the Council to re-enter the said premisesand remove the tenant therefrom as provided by the MunicipalCouncils Ordinance.
Sec. 1 55 of the Municipal Council Ordinance empowers a MunicipalCouncil to provide public markets within the Municipality, and tocharge rents for the use of shops and stalls within such markets. AMunicipal Council is given the power by sec. 1 57 to let to tenants onlease or otherwise any public market or any part of such market.Power is also conferred upon a Municipal Council, by the provisions ofsec. 156 (c) to determine any lease or tenure, which a person, who isconvicted of a breach of a by-law made under the Municipal Council,has in a stall or shop within such public market. The only expressprovision, under which a Municipal Council could terminate thetenancy of a stall holder in a public market, is to be found insub-section (c) of sec. 156. Termination under this provision,however, is limited to leases or tenures of such persons as comewithin sub-sec.(a) of the selfsame section 156. The provision of thesaid sub-sec. (c) of sec. 156 will apply to all contracts of tenancyentered into by a Municipal Council in respect of a stall in a publicmarket situate within the Municipality, whether or not such provisionsare included in any such contract. A conviction, as set out in sub-sec.
• (-1) of sec. 156, is a condition precedent to the taking of the stepprovided for by sub-sec. (c) of the said section. In the absence of aconviction, as is required by the said sub-section (a), and the resultantnon-availability of the provisions of the sub-section (c), there is noother provision in the Municipal Councils Ordinance, itself under andby virtue of which a Municipal Council could terminate the tenancy of aperson who has been let into occupation of a stall in such market.
Sec. 268 of the Municipal Councils Ordinance empowers aMunicipal Council to make by-laws, and sets out the procedure to befollowed in that behalf. It is only a by-law made in the manner set out insub-sec.(1) of the said section, which will, upon notification in theGazette of its confirmation by Parliament, become as valid andeffectual as if it were enacted in the Municipal Councils Ordinanceitself. z''
The petitioners contend that the by-laws of the Kandy MunicipalCouncil, which were in force at the times material to theseproceedings, are those set out in the document P429. According toP429 the by-laws contained therein were approved by the relevantcommittee of the Kandy Municipal Council in March 1982. Therespondents, however, submit that the by-laws set out in P429.though proposed by the Council have not come into operation as they
have neither been approved by the Minister, nor confirmed byParliament. There is no express evidence before this Court that theconfirmation of the by-laws contained in P429 has been, as required bysub-sec. (2) of sec. 268 of the Municipal Councils Ordinance, notified inthe Gazette. There is also no such evidence of their having even beenconfirmed by Parliament as required by sub-sec. (1.) of th.e said sec.268. Nor has the attention of this Court been drawn to any suchGazette notification of which judicial notice could be taken. Therespondents maintain that the relevant by-laws are those dated21.06.1974, and published in Part IV-of the Gazette dated19 07.1974, copies of which were tendered to Court- at the hearingof this application on behalf of the respondents. In this state of theevidence on this matter. I agree that this Court will have to proceed onthe basis that the by-laws of the Kandy Municipal Council, which werevalid and in operation both in July 1983, when the agreements, P106,PI 10 and P114, were entered into, and in March 1985, when thenotice P426 was sent to the 2nd Petitioner, were the by-laws, dated19.06.1974 and published in the Gazette dated 19.07.1974.
The notice of termination, P426, sets out two acts of the petitioners/ which are said to constitute violations of the tenancy agreements: theeffecting of structural alterations to the stall buildings, and the use andoccupation of the said stall buildings as "residential premises". The
"making of any alterationsstructurally or otherwise" without the
prior approval of the 3rd respondent is forbidden by clause 1 2 of thetenancy agreements. In the by-laws of 1974 such unauthorisedalterations are prohibited only by by-law No 40. This by-law, howeverapplies only to the Kandy Central Market. It does not apply to the otherpublic markets established by the Kandy Municipal Council. Thus theonly provision, under and by virtue o'f which a monthly tenancy, suchas P106, could be terminated by the Municipal Council on the groundthat the'tenant has made unauthorised alterations to a. stall let out to'thetenant, is Part IV of the agreement entered into between them.
The facts and-circumstances relating to the nature and the makingof the structural alterations by the petitioners have been set out in thejudgement of L. H. de Alwis, J.
In this view of the matter, I am of opinion: that the termination of thesaid contracts of tenancy, on the ground of unauthorized structuralalterations made in contravention of clause 1 2 of such tenancy 'agreements, has been done not under and by virtue of any statutory
provision empowering a termination upon such ground; that suchtermination has been done solely on the basis of a violation of a termof the agreement entered into between the Council and the 2ndPetitioner; that, therefore, the said act of termination, upon the saidground, is in no way controlled by the provisions of Article 1 2( 1) of theConstitution; that the said act is in no way "hit" by the provisions of thesaid Article 1 2(1).
The foregoing conclusion is. in my opinion, sufficient to dispose ofthe application of the 2nd petitioner.
After this judgment was prepared, my brother Tambiah. J., madeavailable to me that portion of his judgment dealing with the questionof law considered by me. I, however, regret I am unable to agree withhis view of the matter.
TAMBIAH, J.
The petitioners are husband and wife. He is a citizen of the UnitedStates of America; she is a citizen of this country. They say that in1980, when they were in America, they came across a publicationdistributed in the USA by the Sri Lanka Government which describedthe many incentives and inducements the Sri Lankan Governmentoffered to attract American citizens to invest here. They had beensaving dollars in order to invest in a small business in the States. Afterreading the publication they began considering investing their savingsin Sri Lanka. They also had talks with the Commercial Attache of theSri Lankan Embassy in Washington. In 1981. they came to Sri Lankaand spent three weeks evaluating investment opportunities. Theyreturned to the States, not having reached a decision. They were sentfurther publications by the Sri Lankan Embassy, had furtherdiscussions with the Commerical Attache, and taking into account thefact that the 2nd petitioner, as citizen, could own property here and dobusiness in her own name plus the incentives, tax holidays etc. offeredunder the programme of the Foreign Investment Advisory Committee(FIAC) for joint ventures, they decided to come back to this country.They returned to Sri Lanka in 1 983. As the 2nd petitioner's father is aretired planter in Kandy and having regard to the scenic beauty and thecooler climate of Kandy, they decided to base themselves in Kandy.An export orientated project to process Sri Lankan potatoes intopacketed western-style potato crisps, in which he is the foreigncollaborator and his wife the local collaborator, is a FIAC approved
project. The formation of the Company was being handled by Ernst &Whinney, Chartered Accountants, Kandy, and they hoped tocommence production in November 1 984.
The petitioners saw an advertisement in the newspaper placed bythe Kandy Municipal Council offering commercial premises on tender,at the Jathika Pola, Tomlin Park, Victotia Drive, Kandy. Theadvertisement stated that the premises could be used for any trade,except selling beef or fish. They inspected the premises, andaccording to them, the shops in the Jathika Pola were closed down,virtually deserted and in a rather dirty and run down condition. Theonly attractions were, it is alongside the Kandy Lake, in a quiet locationaway from the Kandy town and had ample space for parking vehicles.They thought that with renovations and improvements, the premisescould be improved and made usable in many ways.
They decided to tender. As the conditions of tender stipulated thatonly Sri Lankan citizens could tender, the 2nd petitioner tendered forstalls 16,17 and 18 on 22.6.1 983. Her tenders were accepted, shebeing the highest bidder. She entered into 3 separate agreements withthe Municipal Council, Kandy.
In terms of the agreements, the 2nd petitioner rented all. three stallson a monthly tenancy for a period until the stalls are voluntarily handedover or the tenant is legally ejected. The tenancies were to commencefrom 01.7.1983. The terms and conditions of the tenancies are, interalia —
the tenant shall not contravene any of the by-laws of the Councilrelating to Public Markets.
the tenant and his employees shall remain in the stall only during'the hours 6,00 a.m. to 9.00 p.m.,
the Council shall have the right to terminate the tenancy bygiving a month's notice and take action for ejectment of thetenant as provided by the Municipal Councils Ordinance orany other law.
The 2nd petitioner took the tenancy of stall No. 1.6 to run a HondaRent-A-Cycle Agency on a monthly rental of Rs. 150. paid Rs. 26.150as once and for all payment together with interest at 20% and Rs.
as deposit. Stall No. 17 was taken by her to run a Cafe on amonthly rental of Rs. 150. and she paid Rs. 31,150 as once and forall payment and Rs. 11.811.25 as deposit. Stall No. 18 was taken byher to run a Tours & Travels Agency on a monthly rental of Rs. 150.and she paid Rs. 41.150 as once and for all payment and Rs.
as deposit. She went into occupation of the three stalls on15.7.83. The petitioners say that they had invested Rs. 350,000 oftheir savings into their businesses. At the time the 2nd petitioner tookpossession, she made some renovations and this, she says, she madeon the verbal understanding that interior renovations andredecorations that did not involve' exterior walls or parts of the mainbuilding were permitted at her discretion. She put ceilings, panellingetc., and also constructed two doorways on the inner walls to enableher and her staff to move from one stall to another. The three stallswere adjoining and each had only front doors.
On 18.7.83, the 2nd petitioner wrote to the MunicipalCommissioner, the 3rd- respondent, seeking permission' to use twoconcrete slab areas in front of stall No. 17, 20 feet in extent, on amonthly rental of Rs. '100. She was prepared to pay an year'sadvance. Her idea was to place some tables and chairs for use ofcustomers and to beautify the area around the slabs with flowerplants. The 3rd respondent was agreeable, provided she paid Rs. 250monthly per site and erected no structures. She agreed to the terms.Later, the Municipal Veterinary Surgeon, the 2nd respondent, actingfor the 3rd respondent, wrote to her granting permission to erectstructures with an understanding that she would demolish and removethe structures without any compensation, when so directed^by theCouncil. She, accordingly, constructed a. light weight roof over theconcrete slabs and has been paying rent at Rs. 500 per month for useof the two slabs. This was an additional source of income to theCouncil. The petitioners say they put in additional concrete and thatthey transformed these areas into a beautiful garden overlooking theKandy Lake by putting several thousand rupees worth of potted plantsand flowers. Learned attorney for the 1st and 3rd respondentsconcedes that the legal relation between the 2nd petitioner and theCouncil was that of landlord and tenant and that a monthly tenancywas established in regard to the two slabs. From July 1983 to July1984 the 2nd petitoner operated her businesses peacefully andwithout experiencing any problems from the Council.
On 10th July, 1984, the petitioners wrote to the 1st respondent,the Mayor, whether they could exchange stall No. 17 with a vacantstall. No. 1, next to one of the slabs. A copy of this letter was sent tothe Commissioner. The 1st respondent denies having received thisletter, though he admits having received several other letters writtenby the petitioners. They wrote again on 14th August, 1 984, to the 1 Strespondent referring to their earlier letter of -1 Oth July and stated, interalia, that they "were surprised to learn that a new tenant,at JathikaPola had secured temporary use of stall No. 1 during the Perahera bypayment'of only Rs. 100", that "he had tendered for a different stallthan the one he is occupying, then proceeded to illegally occupy a stallbelonging to the Oils & Fats Corporation". The letter ended "since ourrecent request to exchange stalls was denied, we must ask that thesepolicies be applied in an equal and fair manner; all we ask is fair andequal treatment".
The. tenant referred to is one Laxman Pethiyagoda. His tenders forstalls Nos. 5 and 13 were accepted. He entered, into similaragreements as the 2nd petitioner. The agreements contained identicalterms and conditions, except that the quantum of monthly rental,once and for all payment and deposit were different. His two tenanciescommenced on 1 st July, 1 984, and he too commenced a restaurantbusiness.
The Oils & Fats Corporation was the tenant of stall No. 4 and itstenancy commenced on 1st July, 1979. Its agreement with theCouncil contained identical terms and conditions. It had only to pay amonthly rental and a deposit.
According to the petitioners, in early August, 1984, Pethiyagodatold the 2nd petitioner that as the Mayor had rented him stall No. 1, hehad the right to use one of the bare land tenancies since it adjoined
stall No. 1 and when she had replied that she had a valid tenancy forover a year, he replied that he would have this area, if he wanted.About mid-August, the petitioners were told by their employees thatMrs. Pethiyagoda had told them that she and her husband were wellconnected at the Municipality and would have the tenancy taken awayand given to them. They had also learnt from the MunicipalAccountant and from the Commissioner that the Mayor was going totake away the left front slab area and give it to Pethiyagoda. Theirattempts to meet the 1st respondent at his office, were withoutsuccess, so they went to his house on the evening of 18th September1984. They confronted the 1 st respondent with what they had heardfrom the Accountant and the Commissioner and the 1st respondentsaid that he had already issued the orders and there was nothingfurther to discuss.
The 1 st petitioner, then, wrote the letter of 19th September, 1984,to the 1st respondent. The letter opens "Last night, after visiting youat your home, my wife was in tears. We are absolutely distressed bythe total lack of fairness or justice in your recent dealings withcomplaints my wife has made about irregularity at Jathika Pola". Itreiterated vvhat Mrs. Pethiyagoda told the 2nd petitioner and heremployees and that Pethiyagoda was in illegal occupation of a shop.for which he had not tendered. The letter proceeded to state that they' were shocked to learn that Mr. and Mrs. Pethiyagoda were his closerelatives and in the past few weeks had enjoyed his hospitality and thathe had issued an order to terminate one of the 2nd petitioner's twobare land tenancies; that though the Commissioner informed themthat this order had not yet gone through official channels, theAccountant has been aware of this for over a month. The letter allegedthat at the New Cultural Centre, Kandy, he had given the restaurant tobe fun'by a close friend of his, without calling for tenders. An answerwas demanded whether Pethiyagoda in fact had paid Rs. 1 10,000which he tendered for his tenancies and whether he executedagreements. The letter ended "I am not afraid to speak out. Sri Lankais a democracy,' and a free country, and you are an elected publicservant. You are in a position of public trust, and you should beaccountable for your actions". In their petition filed in this Court,Pethiyagoda has been described as a "cousin" of the 1st respondent.Copies of this letter of 19th September, were sent to the President,the Prime-Minister and-all Councillors.
The 1 st respondent does not deny the visit on 18th. September, northe receipt of letter dated 19th September. To this letter, no reply wassent. In this affidavit filed in this Court, the 1st respondent denied thatPethiyagoda was his "cousin" and that he even knew him before1984. He also denied the allegation of nepotism, favouritism,maladministration etc.
According to the 1 st respondent, in August 1984, complaints weremade by the petitioners that Pethiyagoda was illegally carrying onbusiness in stall No. 4; Pethiyagoda also made complaints against thepetitioners. The 2nd respondent was appointed to inquire into thecomplaints. He has produced the complaint dated 11.9.84 to the 1 strespondent by Pethiyagoda where the latter has listed nine complaintsagainst the petitioners and the 7th complaint reads "Robert isengaged in a laundry cleaning business where the washed dirty waterfrom the washing machines flows into the side of the front street inSangaraja Mawatha and then to the Lake.. The result of this haspolluted the atmosphere with obnoxious smells, existence of harmfulbacteria and dead fish in the Lake".
The 2nd petitioner's complaint dated 15.09.84 to the 1strespondent lists several grievances. The primary complaint is against aBritish tourist who was residing with the P.ethiyagodas and had beenresponsible for an offensive letter published in the 'Observer' whichhad permanently damaged the petitioners' reputation. They wereconsidering withdrawing from any further investment in Kandy and ifthey did so decide, whether the Council would permit them to sell theirbusinesses at Jathika Pola so that they'could recover their-investments. The complaint stated, inter alia, that this British tourist,along with the Pethiyagodas, has been illegally occupying a stall at thePola. It also referred to a thorough search of the shops in earlySeptember by the inspectors from the ’Municipality on a falseallegation that they were selling beer in the premises.
A written request by the 2nd petitioner to have her husband and herlawyer present at the inquiry was turned down by the 2nd respondent.The inquiry was held on-25.09.84. The report dated 16.10.84,containing the findings of the 2nd respondent has been produced. Itstates-
"Arising from this inquiry certain irregularities committed by bothparties have been brought to light. Mrs. Robert has converted stallNo. 17. into a laundry without permission of Council. Mr. L.Pethiyagoda was given lease of stall Nos. 5 & 13. Without any
authority he has changed his stall No. 13 with stall No. 4 with the
consent of the Manager of the Oils & Fats Corporation. Neither party
has obtained any approval for this transfer."
He recommended the following actions:
action to be taken against the 2nd petitioner for converting stallNo. 1 7 into a laundry in addition to a cafe. The views of theCouncil lawyer to be taken to cancel her licence for violating thelease agreement,
action to be taken against Mr. Pethiyagoda for changing stallNo. 13 to stall No. 4 witout the sanction of the Council. Theviews of the Council lawyer to be obtained to cancel the leasefor violating the lease agreement,
action to be taken against the Manager of the Oils & FatsCorporation for changing their stall without the sanction of theCouncil,
withdraw all concessions given to the 2nd petitioner as regardsoccupation of space at the entrance to the Pola. All temporary•structures to be demolished and the two areas to remain asopen space.’
At the inquiry, before the 2nd respondent, the 2nd petitioner madea statement which was recorded. She says she signed herstatement. The 2nd respondent had promised on 25.9.84 to post toher a copy of the statement she made. As she needed this for thepurpose of an inquiry to be held by the Ministry of Local Government,she telephoned the 2nd respondent on 18.12.84 and asked for acopy of her statement, which he promised to give the next day. Shewas surprised as her statement had been typed by a stenographer on25.9.84 and the Council had a photocopy machine. On 19.12.84,she sent an employee and collected a copy of her statement from the2nd respondent's office. Pinned behind the copy that the 2ndrespondent has signed as being a true copy of her statement, was asecond different version of the statement, with parts cut off forretyping. She says that some things had been added to the finalversion and it has been completely edited and falsified.
Both versions contain the statements:
"She was continuously harassing us indicating that she will someday ruin our establishment and that she-would have my concreteslab near stall No. 1 next month. I tried to meet the Mayor at theoffice, but he was in a hurry so that night we. went to see the Mayorat his house and discussed the problem".
What is found in the 2nd statement and has been scored off andomitted in the' 1 st statement are the words "and he was going to takethe slab and might". It is the 2nd petitioner's position that the words"he was going to take away the slab and give it to his cousin" havebeen omitted in the final version.
The 2nd respondent admits the request made on 18.12.84 for a ~copy of statement, but denies he altered her statement. He alsodenies that the 2nd petitioner signed her statement. The errors in theuncorrected copy, he states, occurred due to the-faulty English of thetypist which he corrected.
The 2nd petitioner also states that the findings ol the- 2ndrespondent had not been made known to her up to the time of herpetitioning this Court. On 1 1.01.1985. the Assistant Commissionerof Local Government in the presence of the petitioners requested fromthe 2nd respondent the file relating to the inquiry and the latter's replywas that it was at his home and he vvould bring same, after lunch. Nosuch file was brought in the afternoon and it is the petitioner's positionthat the 2nd respondent made the remark "If this donkey (1stpetitioner) talks too much. I will hit him". The 2nd respondent hasdenied these assertions relating to the file and the alleged remark.
It is unnecessary to come .to a finding on either of these mattersSuffice it is to say this. The 2nd respondent recommended drasticaction be taken against the 2nd petitioner for running an unauthorisedlaundry and dry-cleaning service. There is not a word in either of thestatements about this service. A finding has been arrived at. without asingle question being put to her about-the alleged transgression. Theallegation by Pethiyagoda was that the dirty water from the washingmachines was polluting the atmosphere and the waters of the KandyLake. She also had a legal tenancy for the two slabs, erected anauthorised-structure and has been paying Rs; 500 since July 1983.Why the recommendation to withdraw this tenancy and to demolishthe structure?
The 3rd respondent states that following the report of the 2ndrespondent, show cause letters were sent to the 2nd petitioner,Pethiyagoda and the Corporation. The letter dated 19.1 1.84 to the2nd petitioner alleged that she had converted stall No.' 17 to a laundrywithout the Council's permission and in violation of the tenancyagreement and required her to show cause within one week as to whyher tenancy should not be terminated. A similar letter was sent toPethiyagoda alleging that he had exchanged stall No. 13 with stall No.
4 without the Council's permission and in violation of the agreement.
The 2nd petitioner wrote to the 3rd respondent on 20.1 1.84 anorequested 30 days to enable her to retain lawyers to reply to the showcause letter. The 3rd respondent, in his reply dated 27.11.84,granted her 14 days from 27/1 1 to answer the said letter. Thereafterthere was correspondence between Messrs Julius & Creasy,attorneys-at-law, acting for the 2nd petitioner and the 3rd respondent,on this matter.
In reply to the show cause notice, Pethiyagoda. on 1.1.85 wrote tothe 3rd respondent admitting his fault of exchanging stalls withoutCouncil's, approval, and stated he was unaware of the by-laws andasked for pardon.
It would appear that no further action was taken on the show causeletters against either Pethiyagoda or the 2nd petitioner; against thelatter for the reason that the Council had been collecting licence feesfrom her for running the business of a laundry.
It is the 1st respondent's position that the Council appointed aSpecial Committee to further inquire into this matter with specialregard to the allegations made against him by the 2nd petitioner. TheCommittee sat on six occasions-4.1 .85, 16.1.85, 21.1.85,1 1.2.85, 18.2.85 and on 22.2.85. Both Pethiyagoda and theofficer-in-charge of stall No. 4 (Oils & Fats Corporation) appearedbefore the Committee, admitted the exchange of stalls in violation oftheir agreements, and agreed to revert back to their original stalls.Subsequent to this assurance, a joint letter was sent by them to theChairman of the Committee requesting permission to remain in theirexchanged stalls. In its report dated 27.2.85, the Committee turneddown this request as it "violated the terms of the tenancy agreements,and if permitted, it would create a bad precedent, in that, the otherstall holders too would resort to similar methods of circumventingmunicipal laws". The report recommended that the two stall holdersbe asked to revert back to their original stalls immediately andthereafter action be taken for contravening the provisions of theagreement.
Before the Committee, the 2nd petitioner stated that she would onlyappear, if her husband was permitted to be present. This request wasrefused. The 2nd petitioner, then, left the Committee of Inquiry, didnot give evidence and the inquiry against her proceeded in herabsence.
As against the 2nd petitioner, the Committee observed that thecollection of licence fees did not absolve her from fulfilling theprovisions of the agreement and the by-laws. As she had run a laundnwithout Council's authority, the report recommended that steps betaken to enforce the law immediately. The Committee alsorecommended that as she had erected an unauthorised structure inthe open space, when the condition on which this open space wasallotted to her was that no structure was to be put up in the .openspace, action be taken immediately to demolish this unauthorisedstructure. This recommendation is clearly wrong as in fact permissionwas granted to her to do so.
On the last day of sitting, namely, on 22.2.85, the Superintendentof Works (Secretary to the Planning Committee) who was summonedto give evidence with regard to the unauthorised structure, stated thathe visited the Jathika Pola that morning and had observed the twodoorways. The Committee observed that this was a structuralalteration of the building without Council’s authority, andrecommended that appropriate action be taken in terms of the by-lawsand in terms of the agreement.
The two doorways formed part of the original renovations which the2nd petitioner effected in 1983. In her letter dated 15.9.84 to the 1 strespondent, she referred to a false allegation made against her bysomeone that she was selling beer at the Jathika Pola and how theInspectors from the Council searched her shops, cupboards, etc., inearly September, 1984. Surely, they must have passed through thesevery door ways.
The 1st respondent, in his affidavit, states that-
"the report was unanimously adopted by the Council. In view of
the recommendation of the Committee that action be taken against
the 2nd petitioner and Pethiyagoda for violating the terms of the
agreements they entered into with the Council, the 2nd petitionerwas informed that the Council was terminating the tenancies ofstalls Nos. 16,17 and 18."
The termination notice is dated 1 2.3.85. The report of the SpecialCommittee was first referred to the Finance Committee of the Counciland on 18.3.85, the Finance Committee recommended that theReport be accepted and it be referred to the Council. At its monthlymeeting on 26.3.85, the Council accepted the recommendation ofthe Finance Committee. So, the termination notice had been sentbefore the Finance Committee's recommendation and before thereport was adopted by the Council.
In his first affidavit, the 3rd respondent states that following thereport of the Special Committee and on the instructions of the Council,he sent the letter dated 1 2.3.85 terminating the tenancies of the 2ndpetitioner. The letter states that she had effected, without authority,structural alterations to the stalls Nos. 16,17 and 18 and was usingsame as residential premises in violation of the terms of the tenancyagreement. She was asked to quit and vacate the premises and handover possession on or before 30.4.85, failing which, legal stepswould be taken to eject her. The 3rd respondent also states thathaving seen an advertisement in the Sunday Observer dated 1 7.2.85inserted by the 2nd petitioner for the sale of her businesses, he wroteto her on 21.2.85 informing her that she did not have the right toassign, sublet or part with the stalls; as the advertisement wasrepeated on 17.3.85, he wrote to her on 22.3.85 to remove thestructures on the bare land. But. the letter itself contains no reason forthe demolition order.
In his 2nd affidavit, the 3rd respondent states that security guardswere originally placed as a temporary measure until the stalls wereleased out, ancf when the stalls were taken, the Council resolved thatthe security guards be removed; that on 8.3.85 the petitioners wroteto the 1 st respondent with a copy to him. stating that their family, theiremployees and private security personnel would be residing on thepremises; that "the petitioners have confirmed not only that they havemade structural alterations to the stalls but that with the aid of thesealterations they were using the stalls for residential purposes, inflagrant violation of the terms of the agreements and Municipalregulations. In consequence. I wrote the letter dated 12.3.85terminating the tenancies of the three stalls."
The Minutes of the Council meeting on 29.8.84, state' that theCouncil adopted the recommendation of the Finance Committee,which in turn adopted the recommendation of the Health Committeethat "as all the stalls have been leased out, it is not necessary for theCouncil to have security officers there, and the lessees should beadvised, if it is necessary, to have their own security measures for theirstalls."
In his final affidavit, the 3rd respondent states that a petition dated
signed by several traders at the Jathika Pola was sent to himstating that the petitioners and their family and servants werepermanently residing..in the stalls; that he received a report dated18. 2. 85 addressed to the Deputy Municipal Commissioner, by theSuperintendent of .Works, stating that the stalls had beeninter-connected without permission, that h'e received a report dated
addressed to the 2nd respondent by the actingSuperintendent of Markets, stating that he visited the stalls on 5.3.85and observed that the inner partitioning of the walls had been removedand the family was in occupation of the stalls.
Learned attorneys for the respondents agree that there was noremoval of the inner partitioning walls; the petitioners had onlyconstructed two doorways on the inner walls.
The 1st trader to sign the joint petition was Pethiyagoda. Thoughthis petition is dated 7.3.85 the date stamp bears the date 13.03.85,the top left hand corner bears an endorsement and initials and thesame date, which is one day after the date of the termination notice.The last notation on the reverse is dated 14.03.85 and states that thematter is being referred to the legal officer of the Council. The report ofthe Superintendent of Works is dated 18.02.85, but the SpecialCommittee states in its report that the Superintendent of Works hadvisited the stalls only on 22.02.85 and had observed the twoopenings on the inner walls. So, the report bears a. date which is 4days before his discovery. The report of the Superintendent of Marketsaddressed to the 2nd respondent at the bottom bears the date1 2.03.85 and also a hand-written notation which appears to be thatof the 2nd respondent dated 13.3.85. The termination letter gave thepetitioners no opportunity to explain or show cause.
This letter terminating the 3 tenancies was followed by anotherletter dated 22.03.85 written by the 3rd respondent to the 2ndpetitioner which stated that permission to use the two concrete slabsis withdrawn and requiring the 2nd petitioner to vacate within 14 daysof receipt of the letter. No reasons were given for this order. Learnedattorney for the 1st and 3rd respondents conceded that the 2ndpetitioner had a monthly tenancy in regard to this bare land, and waspaying Rs. 500 as monthly rental. If so. the 2nd petitioner was entitledto a month's notice, terminating this tenancy. The termination was,therefore, unlawful.
On the question of residence, the petitioners' position is asfollows:- On 19.09.84, the petitioners wrote to the 1st respondent.inter alia, making allegations of corruption, nepotism andmaladministration at the Jathika Pola. and also pointing out the illegaloccupation of a stall by Mr. Pethiyagoda. a “cousin" of the Mayor.Within a few days of posting this letter, a large gang of thugs attackedthe 2nd petitioner's property and damaged it The two security guardsprovided to the Jatika Pola nightly by the Municipality were able todrive the thugs away and prevented more serious damage. Within aweek of this, the nightly security guards were withdrawn by the 1strespondent without notice to any of the tenants. A joint petition dated10.10.84 signed by all the tenants, barring Mr. Pethiygoda. was sentto the 3rd respondent protesting against the withdrawal of thesecurity guards. Within four days of the withdrawal of the guards, on13.10.84, there was a second attack by 8 thugs causing severedamage to the roof and injury to one of the employees. This wasbrought to the notice of the 3rd respondent, the Police and allCouncillors by their letter dated 13.10.84. There was no response tothese letters; not even Police help. On 08.03.85. .the petitionerswrote to 1st respondent, setting out the above facts and added-
"The latest serious incident of violence by thugs at the JathikaPola occurred on 13.02.85. One of our employees were severelyinjured and admitted to hospital with bleeding injuries, severe headinjuries and leg injuries. We are today informing the Kandy PoliceDepartment, The President, Prime Minister, The AmericanAmbassador to Sri Lanka, and officials of the U.S. Embassy thatuntil some final solution to these problems can be found, our entirefamily will personally remain on the premises each flight, in additionto a number of employees and private security personnel. We haveinstalled an electric alarm system, and we will personally direct thesecurity henceforth wim me intent ot apprehending tnese thugs andholding them for the Police when the next incident occurs."
iCopies of this letter were also sent to the 3rd respondent and all(Councillors. The 3rd respondent, in his 2nd affidavit admits that the(petitioners have reported to the Police the attacks on their propertywhich took place in September, October, 1984, and February 1985.Even the report by the Superintendent of markets states:
"Both accepted the fact that they spend the nights there becausethe Council has withdrawn the security men. Further, he said hebrought this fact to the notice of the Municipal Commissioner."
The fact that the Urban Development Authority reimbursed the 2nd■ petitioner for expenses incurred for providing her own security, showsthat the duty was cast on the Council to provide security at the JathikaPola.
The 3rd respondent's position is that he ordered removal of thestructures on the bare land to prevent the 2nd petitioner parting withthe stalls. The petitioners have produced the letter dated 11.02.85written by Mr. Paskaralingam, Secretary, Ministry of LocalGovernment, Housing and Construction, to the 1st petitioner in whichhe states-
"You may please find buyers for your wife's shops in the JathikaPola and write to me their names and addresses in order to get theKandy Municipal Council to transfer the tenancy."
It is the petitioners' position that it was in pursuance of this letter thatthey advertised in the Newspapers for the sale of their businesses.They have also annexed to one of their affidavits a tape-recordedconversation between the 1st petitioner and the 3rd respondent. Aruling whether this evidence is admissible or not does not arise, aslearned attorney for the 1st and 3rd respondents admits theconversation between the two. In this recorded conversation the 3rdrespondent states that he tried to help the petitioners to find a buyer.When the 1st petitioner expressed fears that buyers might befrightened to buy their businesses as the stalls belong to the Council,the 3rd respondent said-
"lf you can find a buyer and inform Mr. Paskaralingam,Paskaralingam will get in contact with him, and he will direct theMunicipality, right, give this to so and so, and get him intoagreements, that would be the end of it."
When the 1 st petitioner asked the 3rd respondent "If any one has anyquestions, could they call you quietly, and you can assure them." theanswer was 'Yes, I think I should". In the light of this conversation, thereason given by the 3rd respondent for the demolition is untenable. Ifind it difficult to understand the submission of learned attorney for the1st and 3rd respondents that the 3rd respondent in his privatecapacity, as a friend, was trying to help the petitioners to sell theirbusinesses, but the demolition order was issued by him in his officialcapacity, as Commissioner.
Having regard to the events and their sequence. I cannot resist butmake the observation that the 1 st, 2nd and 3rd respondents, acting inconcert, were relentlessly searching for reasons to have the 2ndpetitioner out of the Public Market at the Jathika Pola. One reason forthe termination of the tenancies of the 3 stalls, namely, theunauthorised 2 doorways, was as old as the 2nd petitioner'stenancies; the other reason, namely, residence in the stalls, wassupplied by the petitioners themselves on a platter and this waspounced upon as a ground of termination. Termination was speedilyand hastily done, with no opportunity afforded to the 2nd petitioner toexplain and show cause. It was a valuable investment. The terminationof the tenancies lacks bona fides.
The petitioners have produced the 1982 by-laws of the KandyMunicipal Council applicable to all Public Markets. By-law 4(c) statesthat no tenant shall without the written permission of the Councilpermit any person, other than a servant whose name is specified in thelicence or permit and whose name is registered at the MunicipalCouncil Office, to use or occupy any part of the stall shop etc. By-law5 prohibits the tenant from using or occupying any portion of a publicmarket other than the stall, shop, etc., he is authorised to use oroccupy under his licence or permit. By-law t>{ i) states tnat no personother than the tenant to whom a stall, shop etc., has been issued bythe Commissioner, shall use or occupy any portion of the PublicMarket. By-law 18(f) prohibits the act of sleeping within the premisesof a public market. By-law 28(1) empowers the Council to terminateany tenancy upon a conviction of the holder of the licence or permit fora breach of any of these by-laws. By-law 53 states that it shall belawful for the Council to terminate any tenancy in respect of any shop,stall etc. for a breach of by-laws 4, 7 and 19 of these by-laws. By-law56 states that any person who contravenes a by-law shall be guilty of
an offence and shall upon conviction be liable to a fine. By-law 37 onlyapplies to a shop or stall in the Central Market and prohibits extensionsor alterations, etc. in a shop or stall or space without the writtenpermission of the Commissioner.
The petitioners' complaint is that both Mr. Pethiyagoda, and theCeylon Oils & Fats Corporation, admittedly, had violated by-laws 4(c),5 and 6(/); a violation of by-law 4(c) warranted a termination of theirtenancies; though letters terminating their tenancies were sent, theywere not acted upon and in fact they were allowed to revert to theirrespective stall Nos. 13 and 4. But, in the case of the 2nd petitioner, aviolation of by-law 18(f) only warranted a lesser punishment, namely,an imposition of a fine, after conviction; yet, her tenancies wereterminated.
The petitioners' case is, that the petitioners, Mr. Pethiyagoda andthe Ceylon Oils & Fats Corporation belong to a class of similarly' situated persons, namely. Municipal Tenants in the same Public•Market Complex; the by-laws have been applied in an unequalmanner, favouring one party and not favouring the other party; therehas been a selective enforcement of the by-laws against thepetitioners and a non-enforcement of the same against the other twoand this constituted a violation of the fundamental right of equalprotection of the law, guaranteed to them by Article 12(1) of theConstitution.
The petitioners appeared before us in person to support theirapplication. The 1st petitioner spoke for himself and on behalf of hiswife as well.
The 1 st petitioner is not a party to the tenancy agreements or to thetenancy relating to the two bare lands. In fact, the tender conditionsstipulate that tenderers should be citizens of Sri Lanka. There is nolegal nexus between him and the Kandy Municipal Council. He,therefore, cannot complain of a breach of his fundamental right underArticle 12(1).
Two questions arise for our consideration:
Is there an infringement of the fundamental right of the 2ndpetitioner under Article 12(1) and
Do the acts complained of constitute executive or administrativeaction in terms of Articles 17 and 126 of the Constitution?
I shall deal with the 2nd question first.
Learned attorney for the 1 st and 3rd respondents, who raised thismatter as an objection, in limine, submitted that having regard to thevarious provisions of the Municipal Council Ordinance, when the twotests laid down in Wijetunge v. Insurance Corporation of Ceylon
and Wijeratne and Another v. People's Bank and Another
namely, the functional test and the governmental control test, areapplied, a Municipal Council cannot be regarded'as a State organ oragency. Learned Deputy Solicitor-General who was invited as amicuscuriae to assist this Court on this matter, on the other hand, submittedthat a Municipal Council exercises and performs governmentalfunctions and judged by the functional test, it is to be regarded as anorgan of the State.
I am inclined to agree with the submission of the learned DeputySolicitor-General.
The Constitution does not define 'executive or administrativeaction". The Indian Constitution, however, in Article 12 has defined'State' to include "the Government and Parliament of India and theGovernment and the Legislature of each of the States and all local orother authorities within the territory of India, or under the control of theGovernment of India".
In Perera v. University Grants Commission (5) the petitionerchallenged the validity of the rule of selection adopted by theUniversity Grants Commission for admission to the Universjty, asinfringing her fundamental right to equality of opportunity guaranteedto her by Article 12 (1) of the Constitution. An objection, in limine, wastaken that the alleged grievances of the petitioner did not come withinthe purview of Article 126 of the Constitution and that its act ofselection to Universities did not savour of executive or administrativeaction capable of affecting fundamental rights as envisaged in Article126 of the Constitution. Sharvananda, J., overruling the preliminaryobjection, observed:
"Constitutional guarantees of fundamental rights are directedagainst the State and its organs. The wrongful act of an individual,unsupported by State authority, is simply a private wrong. In thecontext of fundamental rights, the 'State' includes every repositoryof State power. The expression 'executive or administrative action'embraces executive action of the State or its agencies orinstrumentalities exercising governmental functions. It refers to
exertion of State power in all its forms. Education is one of the mostimportant functions of the State today. The University Act hasassigned the execution of a very important governmental function tothe 1 st respondent. In the circumstances, it is idle to contend thatthe respondent is not an organ or delegate of the government andthat its action in the matter of admission of students to theUniversities under it does not have the character of executive oradministrative action within the meaning of Article 126 of theConstitution."
In the Insurance Corporation of Ceylon case (supra) an employee ofthe Corporation complained that by reason of his trade union activitythe Corporation had taken disciplinary action and by this action hadviolated his fundamental rights of freedom of speech and expressionincluding publication and of his freedom to join a trade union, assuredto him by Article 14(1)(a) and 14(1 )(d) of the Constitution. TheCorporation took objection, in limine, that its action did not savour of"executive or administrative action" which alone attracts Articles 17and 126.
Sharvananda, A. C J., upheld the preliminary objection and
observed:
"One must see whether the Corporation is under Governmentcontrol or exercises governmental functions. The preamble to theAct states, inter alia, that it is an Act to provide for theestablishment of an Insurance Corporation, for carrying onexclusively the business of life insurance and carrying on in additioninsurance business of every other description. S. 5 provides for thefunctions of the Corporation. It states that the Corporation shallcarry on insurance business of every description. It carries on acommercial activity. Its very name has a commercial ring. Its powersdo not identify it with the Government and in some respectspreclude identification with the Government. The Corporationcarries on business on its own account and not on behalf of theState. Under the scheme of commercial nationalisation statutorycorporations have been set up as separate legal entities to run thenationalised industries on a commercial basis on their own accountand not on behalf of the Government. It was created to perform anddoes not perform any such essential service to the community asthe Petroleum Corporation. It is a legal entity created to carry on acommercial activity, namely, Insurance. It does not purport to carryon this business on behalf of the State and the extent of the controlexercised by the Minister over its operation is not so tar reachingand is insufficient to make it the servant or agent of the State.Whether we apply the functional test or the governmental controltest, the Insurance Corporation cannot be identified with theGovernment. It cannot be regarded as its 'alter ego' or organ ofState. Hence its action cannot be designated 'executive oradministrative action' which only attracts Articles 17 and 126 of theConstitution."
The Supreme Court was of the view that on the 'functional test', theInsurance Corporation carries on a 'a commercial activity' which wasnot a governmental function; on the 'governmental control test', theextent of the control was insufficient to make it an organ or a servantor agent of the State.
In the People's Bank case (supra), the petitioners who were securityofficers complained that the action of the Bank in placing them in thecategory of Class B Inspectors of the Security Service, though at therelevant time they had been drawing a salary higher than Class AInspectors, constituted an infringement of their fundamental rights toequality and was contrary to Article 12 and Article 4(c) and (d) of theConstitution. The Bank took the preliminary objection that there hadbeen no infringement of petitioners' alleged fundamental rights by"executive or administrative action". The preliminary objection wasupheld.
' Sharvananda, J. said:
'It is quite apparent from the material before us that the major roleof the 1 st respondent is in the commercial sphere and that its mainrole is that of a commercial bank.. Such Commercial activities of the.Bank .cannot.qualify as State actions. Having regard to the dutiesperformed by the petitioners it appears; that the petitioners areemployed by the Bank in connection with their commercial activities.In that perspective their employment in the Bank cannot be stampedas state employment. There is no nexus between the State and thebanking activities of the 1 st respondent for such action of the Bankto be treated as that of the State. The State is not involved in thecommercial activities of the 1 st respondent.
If the functions of the corporations are of public importance andclosely related to governmental functions it would bei a relevantfactor in categorising the Corporation as an instrumentality oragency of the Government. The public nature of the functions, if
impregnated with governmental characte'r or lied wun tnegovernment may render the corporation an agency of thegovernment.
The petitioners are employed in connection with the commercialactivity of the Bank. In the circumstances even if there is substancein their allegation of discrimination in the matter of theirappointment, in the absence of executive or administrative action,their grievance cannot form the subject matter of an application tothis Court for relief under Article 126 of the Constitution."
When this Island was a Colony, it had a highly centralised form ofGovernment and the Central Government exercised functions, whichin other countries are usually exercised by local authorities. Theresponsibility for the government of the Island was vested in thegovernor, and he was responsible for building roads, bridges, canals,for irrigation works and railways. He established the health service anderected hospitals and clinics and medical officers and sanitaryassistants were paid by him. The provinces were administered fromColombo through Government Agents who were representatives ofthe Central Government for the collection of revenue and for theexercise of central functions. It is for the purpose of decentralising thecentral government functions that local authorities were established.
In 1865, Municipal Councils were established for Colombo. Kandyand Galle. In 1910, the Municipal Councils Ordinance was passed.The Municipal Councils Ordinance No. 29 of 1947 was passed toamend and consolidate the law relating to Municipal Councils. S.2empowers the Minister by order published in the Gazette to declareany area to be a Municipality, to define the limits of the Municipality sodeclared and to assign a name and designation to the MunicipalCouncil to be constituted for the Municipality so declared. S.4 statesthat the Municipal Council shall be the local authority charged with theregulation, control and administration of all matters relating to publichealth, public utility services and public thoroughfares, and generallywith the protection and promotion of the comfort, convenience andwelfare of the people and the amenities. The Municipal Council haspower, inter alia, to establish and maintain the following publicservices-water supply, lighting of streets, public places and publicbuildings, the supply of electric light or power, markets, public baths,bathing places; laundries and places for washing animals, and anyother form of public service (s.40(1)(u)). A Municipal Council has the
duty of maintaining all public and private streets, to establish andmaintain any public utility service which it is authorised to maintainunder the Ordinance and generally to promote public health, welfareand convenience, and the development of sanitation and amenities ofthe Municipality (s.46). S. 277, as amended by Law No. 24 of 1977,empowers the Minister, in certain circumstances, to remove theMayor from office, or remove all the Councillors from office or dissolvethe Municipal Council, and the President may appoint a SpecialCommissioner to exercise the powers, duties and functions conferredor imposed upon the Council or the Mayor by the Ordinance.
These provisions show that the area to be created is a Municipalityand the entity to be established within the Municipality is a MunicipalCouncil, and the Council is charged or entrusted with functions, whichotherwise, the Central Government would have continued to perform.And, in the event of the removal of the Mayor or the dissolution of theCouncil, the Special Commissioner would perform these functions onbehalf of the Central Government. That is, the Central Governmentwould perform these functions. The governmental functions havebeen decentralised and have been delegated to the Municipal Councilto perform. There is, then, no doubt that a Municipal Council performsgovernmental functions.
A Municipal Council is not set up to carry on a "commercial activity."Article 27 (4) of the Constitution states thst the "State shall strengthenand broaden the democratic structure of government and thedemocratic rights of the people by decentralising the administrationand by affording all possible opportunities to the people to participateat every level in national life and in government". That is, the State ispledged to broaden the democratic structure of government bydecentralising its functions. Sections 5 and 8 of the MunicipalCouncils Ordinance states that a Municipal Council shall consist ofCouncillors who are elected at an election. No doubt. Part XIV of theOrdinance provides for Central control; ss. 218 to 226 provide for theauditing of accounts of the Municipal Council by the Auditor-General,for the audit report to be sent to the Minister, and for surcharges to bemade by the Auditor-General; s. 1 90 requires the Mayor to forward tothe Commissioner of Local Government a statement of receipts anddisbursements;s. 191 requires the Municipal Council to obtain thesanction of the Minister for borrowing monies. S.277. as amended,provides for the removal of Mayor or the dissolution of the Council forincompetency etc. These provisions are suggestive of some degree of
governmental control. But. it seems to me that there a Public Authorityis charged or entrusted with governmental functions, the‘governmental control test” is inappropriate and inapplicable. In theUniversity Grants Commission case (supra). I find that the Court wasonly concerned with the fact that an important governmental function,namely, education had been assigned to the Commission, and onlythe functional test was applied.
A Municipal Council, without question, performs governmentalfunctions and the actions of the Municipal Council would be "executiveor administrative action" within the meaning of Article 1-26. Theobjection, in limine, therefore fails.
As regards the 1st question, learned Deputy Solicitor-Generalreferred to the notice of termination dated 12.3.85 sent to the 2ndpetitioner, which alleged that she had effected structural alterations tothe market stalls and occupied the same as residential premises inviolation of the tenancy agreement dated 8th July, 1983. He pointedout that in terms of the agreement, for breach of any of the terms andconditions, the Council had the right to terminate the tenancy by givinga month's notice. His submission was that at the threshold stage ofgranting or entering into the contract, if the Council had discriminatedas between persons similarly situated. Article 12(1) could be invoked ;but once the contract has been concluded, the rights and liabilities ofthe. parties inter se are governed by the contract and no question ofviolation of Article 12(1) arises. He cited the cases of Bat Krishan Vaidv. The State of Himachal Pradesh and Others (supra) and M/s.Radhakrishna Agarwal and Others v. State of Bihar & Others (supra).Learned attorney for the 1 st and 3rd respondents associated himselfwith this submission.
In D.F.O. South Kheri & Others v. Ram Sanehi Singh (6) at anauction held by the Forest Officer, the respondent purchased the rightto cut timber for the period 01.11.65 to 31.10.66 from a certainforest. The Divisional Forest Officer made order that the sleepersagainst the tally dated 29.10.66 in the allotment of 1965-66 seasondo stand cancelled, since they were cut in the month of November1966 and be re-inspected against the allotment for 1966-67 season.The timber was actually removed by the respondent with the sanctionof the Forest authorities. The respondent moved the High Court for awrit restraining the-Divisional Forest Officer and other Forest Officersfrom giving effect to the order of cancellation, to have the said order
quashed on certiorari and for other incidental reliefs. A single Judgedismissed the petition holding that the D.F.O had gcted in the exerciseof authority conferred upon him by the terms of the contract and thatthe remedy of the respondent was to claim relief in a regular suit forenforcement of the agreement or for damages and not in a petitionunder Article 226 of the Constitution. In appeal, a Divisional Bench ofthe High Court reversed the order and held that the order made by theD.F.O. in the exercise of statutory authority was Jiable to be quashed,because it was made on irrelevant considerations. Affirming this order,Shah J. said (p. 206):
"Counsellor the appellants contends that since the dispute aroseout of the terms of the contract and the Divisional Forest Officerunder the terms of the contract had authority to modify any actiontaken by a subordinate forest authority, the remedy of therespondent was to institute an action in the civil court and that thewrit petition was not maintainable. But in the present case the orderis passed by a public authority modifying-the order or proceeding ofa subordinate forest authority. By that order he has deprived therespondent of a valuable right. We are unable to hold that merely■because the source of the right which the respondent claims wasinitially in a contract, for obtaining relief against any arbitrary andunlawful action on the part oi a public authority he must resort to asuit and not to, a petition by way of a writ. In view of the judgment ofthis Court in K. N. Guruswamy's cas.e, (7) there can be no doubtthat the petition was maintainable, even if the right to relief arose- out of an alleged breach of contract, where the action challengedwas of a public authority invested with statutory power."
In M/s: Shree Krishna Gyanoday Sugar Ltd. and Another v. TheState of dinar & Another (8) the State Government, in tne exercise ofpowers conferred under s.22fl) ot the Bihar & Orissa Excise Act.1915, which empowered the Government to grant to any person theexclusive privilege of supplying country spirit to GovernmentWarehouses, invjted tenders and the tenders of the petitioner andanother were accepted and the acceptance was communicated to'both. The petitioner supplied country spirit during certain periods onthe assurance of the Excise Commissioner and belief that he would bepaid-at least 42 paise per L.P. litre, but the State-failed to fulfil itsassurance.,He sought a mandamus to direct the Excise Commissionerto pay him the difference between 42 paise and 33 paise which had
already been paid to him. and it was allowed. For the State it wasargued that even if the petitioner had a right to claim the said sum, theforum for, the said claim was the Civil Court and not this Court for. exercise of its powers under Articles 226 and 227 of the Constitution.
Nagedra Prasad Sing, J. said (pp. 128. 130):
"But, it is difficult to accept the contention raised on behalf of theState that, when the State Government in exercise of its powersunder section 22 of the Act/ grants the exclusive privilege to anyperson on certain conditions under sub-section . (1) of s1. 22 and alicence is received by that person under sub-section (2) of thatsection it amounts to a contract made in exercise of the executive,power of the State Government within the meaning of Art. 299 ofthe Constitution. In my opinion, the State Government, in such 'circumstances, grants the exclusive privilege to. a particular personfor manufacturing, or supplying or selling articles covered by the Actin exercise of its statutory function under section 22 of the Act.
The argument of the learned Advocate-General that the claim ofthe petitioner is merely contractual which could be enforced only inthe Civil.Courts is also without any substance, since it has alreadybeen held that, while granting the privilege to the petitioner, therespondent State had exercised a statutory power conferred under'the Act, and. as such, it cannot be equated with those contractswhich are entered intobetween the State Government and a citizenin exercise of its executive powers.
In this connection I may refer to a case of the Supreme Court inThe D.F.O. South Kheri v. Ram Sanehi Singh (supra), where theirLordship had occasion to consider the effect of an order passed bya Divisional Forest Officer cancelling an order of his subordinateforest authority depriving the respondent in that case of his valuablerights. Their Lordships, while affirming the judgment of the HighCourt taking the view that the Divisional Forest Officer had nojurisdiction to rescind the order passed by his subordinate officer,who was duly authorised to pass the said order, observed asfollows:
'But in the present case the order is passed by a public authority 'modifying the order or proceeding of a subordinate forestauthority.- By that order he has deprived the respondent of avaluable right. We are unable to hold that merely because thesource of the fight which the respondent claims was initially in acontract, fdr obtaining relief against any arbitrary and unlawful
action on the part of a public authority he must resort to a suit andnot to a petition by way of a writ. In view of the judgment of thisCourt in K. N. Guruswamy's case (supra) there can be no doubtthat the petition was maintainable, even if the right to relief aroseout of an alleged breach of contract, where the action challengedwas of a public authority invested with statutory power.'
I am also supported by an observation of the Supreme Court inRam Chandra Rai v. State of Madhya Pradesh, (9) where, whiledepreciating summary dismissal of a writ application in connectionwith a licence issued by the Excise Department, it was observed
'The High Court summarily rejected the petition observing thatthe supply of liquor to the appellant was under a contract with theGovernment and if the Government had committed a breach ofthe contract the remedy is elsewhere. It cannot, without furtherinvestigation, be said that the rights and obligations arising undera licence issued under a statutory authority are purelycontractual.
In Bal Krishan Vaid's case (supra), the Central Governmentundertook a Hydrel Project ahd as sand, stone etc., were needed forconstruction, it entered .into an agreement with the Himachal PradeshGovernment to extract the required material from the bed of the riverSiul. The Mines and Minerals (Regulation and Development) Act,1957, provided for the granting of prospecting licences and miningleases. Rule 53 framed under the Act required the successful bidderto execute a deed in Form K'.The State Government held a publicauction to lease out the reaches of the river bed and leaseswereawarded to the petitioner and two others. The petitioner executed adeed of agreement in Form 'K'. Clause 30 of the Agreementstipulated that a contract may be terminated by the Government ifconsidered, by it to be in the public interest by giving one month'snotice. The petitioner received a notice terminating this contract. Thepetitioner assailed the validity of the notice by a writ petition.addressed to the High Court under Article 226 of the Constitution,and,, inter alia, complained that the State Government was guilty ofdiscriminating against the petitioner in asmuch as similar contractsheld by other contractors in respect of contiguous reaches of thesame , river bed have not been terminated and the Government hasthereby violated Article 14 of. the Constitution. Dealing with thiscontention Pathak, C.J. said (p. 34):
"Finally, we are left with the contention that the’ petitioner hasbeen the victim of discrimination inasmuch as no such action hasbeen taken in respect of the contracts of Vinod Kumar Sud andUmesh Kumar covering the two contiguous reaches. To my mind,this contention must also fail on the finding that the complaint of thepetitioner arises out of a breach of contract. The petitioner's case inregard to discrimination is based on Article 14 of the Constitution.To invoke Article 14, it must be shown that the State has acted inthe context of law. When the Government is party to a contract, andit exercises a right by virtue of such contract it is a matter fallingwithin the sphere of contract. If the Government, having enteredinto contracts with different persons, arbitrarily terminates thecontract of one person only, its action must necessarily be referredto its contractual capacity from which the contract and the• impugned action flows. Had the discrimination been applied in thecourse of granting a contract, as was the case in K. N. Guruswamyv. State of Mysore (supra) the discriminatory action of theGovernment would be referable to its statutory authority, becausethe statute empowers the Government to enter into such contracts.But once the contract has been concluded between theGovernment and an individual any action taken by the Government inthe application of a term or condition of the contract must beattributed to the capacity of the Government as a contracting party.When the Government passes from the stage of granting acontractto the stage of exercising rights under it, it passes from the domainof statutory power into the realm of contract. And as was observedby the Supreme Court in .C. K. Achutan v. State of Kerala (19),
'a contract which is held from the Government stands on
no different footing from a contract held from a private party.' In myopinion, Article 14 of the Constitution cannot be invoked by thepetitioner."’
In Agarwal's case (supra) the. State Government leased out someforest land to the appellants to collect and exploit sal seeds for 15years on payment of'royalty at a certain rate. The lease provided for anincrease of royalty every three years in consultation with the lessee,and also the cancellation of the lease. The State Government revisedthe rate of royalty payable by appellants and thereafter cancelled thelease. The appellants challenged the order of revision of rate andcancellation of lease as illegal by writ proceedings under Article 226.For the appellants it was contended that the lease had been enteredinto in the exercise of executive power ot the State under Article 298of the Constitution which stated that the executive power of the Unionand of each State shall extend to, inter alia, the making of contractsfor any purpose; such executive power was subject to the provision offundamental rights; by the increase of royalty and by the cancellationof the lease. Article 14 had been violated. Article 14 states that the"State snail not deny to any person equality before the law or equalprotection of the laws within the territory of India.” For the State it wasargued that governmental authorities when acting in the contractualfield, could not be controlled by Article 14. The High Court rejectedthe appellants' contention but granted a uertincate for appeal to theSupreme Court. The appeal was dismissed. –
Beg, C.J. said (pp. 1500, 1501, 1502 and 1503)-"'
"It is thus clear that the Erusian Equipment & Chemicals Ltd'icase (supra) (10) involved discrimination at the very threshold or atthe time of entry into the field of consideration of persons withwhom the Government could contract at all. At this stage, no doubt,the State acts purely in its executive capacity and is bound by theobligations which dealings of the State with the individual'citizensimport into every transaction entered into in exercise of itsconstitutional powers. But, after the State or its agents haveentered into the field of ordinary contract, the relations are no longergoverned by the constitutional provisions but by the legally valiccontract which determines rights and obligations of the parties interse,. No question arises of violation of Article 14 or of any otherconstitutional provision when the State or its agents, purporting tcact within this field, perform any act. In this sphere, they can onlclaim rights conferred upon them by contract and are bound by theterms of the contract only
The Patna High Court had very rightly divided the types of cases in1 which breaches of'alleged obligation by the State or its agents canbe set up into three types. These were stated as follows
'(i) Where a petitioner makes a grievance of breach of promise onthe part of the State in cases where on assurance or promisemade by the State he has acted to his prejudice andpredicament, but the agreement is short of a contract within themeaning of Article 299 Of the Constitution;
. (ii) Where the contract entered into between the person aggrieved,and the State is in exercise of a statutory power under a, certainAct or Rules framed thereunder and the petitioner alleges abreach on the part of the State; and
Where the contract entered into between the State and personaggrieved is non-statutory and purely contractual and the rightsand liabilities of the parties are governed by the. terms of thecontract, and the petitioner complains about breach of such1contract by the State.';
It then, very rightly, held that the cases now before us should beplaced in the third category where questions of pure allegedbreaches of contract are involved. It held, upon the strength ofUmakant Saran v. State of Bihar (11), and Lekhraj Sathram Das v.N. H. Shah (12). and B. K. Sinha v. State of Bihar (13). that no writor order can issue under Article 226 of the Constitution in suchcases 'to compel the authorities to remedy a breach of contractpure and simple.' Learned Solicitor-General, appearing for the;State, contended that there could be no aspect of Article 14 of the'constitution involved in a case where no comparison of the facts.and circumstances of a particular petitioner's case with those of'other persons said to be similarly situated is involved. In such acase, he submitted, there was no possibility of inferring a!
discriminationIn the case before us. allegations on which a :
violation of Article 14 could be based are neither properly made norestablished. Even if the appellants could be said tohave raised anyaspect of Article 14 and this Article could at all be held to operatewithin the contractual field whenever the State enters into suchcontracts, which we gravely doubt, such questions of fact do notappear to have been urged before the High Court. Before anyadjudication on the question whether Article 14 could possibly besaid to have been violated, as between persons governed by similar
contracts, they must be properly put in issue and established
On the allegations and affidavit evidence before us. we cannot,reach such a conclusion."
Bal Krishan Vaid's case (supra) was not. even referred to inAgarwal's case (supra). Strictly, that case belongs to the 2nd type ofcases set out in Agarwal's case (supra) for, the lease agreement wasentered into in the exercise of a statutory power conferred under theMines and Minerals (Regulation and Development) Act, 1957.
Seervai in his Constitutional Law of India (2nd Ed Vol. 3 at pp.
1852 and 1853) dealing with the judgment in Agarwal's case (supra)says:
"It is submitted that the proposition that Art. 14 was not attractedmay be correct on the facts of the case, but it is too wide, for incertain situations it would be incorrect. If a Government enters intoleases of similar and equal plots of land for a rent fixed under thelease, but to be increased periodically in consultation with thelessee, the increase made by Government being binding on thelessee, it is clear that Government cannot increase the rentdifferently for each of the said plots without violating Art. 14. InAgarwal's case, the Solicitor-General stated that the question ofArt. 14 would arise only-if increase of the petitioner's rent was beingcompared with the rent of other lessees. The Supreme Courtexpressed some doubt whether Art. 14 would be attracted butstated that there was no case made out for the application of Art.14. It is submitted that if. a law cannot confer arbitrary power onGovernment, to enter into leases and increase the rents of similarplots arbitrarily at its discretion, neither can Governmentdiscriminate by executive action between lessees occupying thesame position, by favouring some and disfavouring other lessees.Art. 14 forbids all arbitrary action."
The cases of D. F. O. South Kheri (supra) and of Gyanoday SugarLtd. (supra) belong to the.2nd category mentioned in Agarwal's case(supra).
■It seems to me that the case before us should be placed in thesecond category referred to in Agarwal's case (supra), namely, wherethe contract entered into is in the exercise of a statutory powerconferred by some Act or Rules framed thereunder and what is allegedis a breach on the part of the State or State organ.
A Municipal Council is empowered by s. 1 57 to let to tenants onlease or otherwise any public market or any part thereof; it may alsodetermine any lease or tenure of shop, stall or other place within themarket (s. 156 (c)): It is in the exercise of power conferred by s. 157that tenders for stalls in the Jathika Pola were called for. The tendersof the 2nd petitioner, Mr. Pethiyagoda. and of the Ceylon Oils and FatsCorporation were, accepted and similar agreements were entered intobetween the Municipal Council and these parties. The agreements
•were entered into in pursuance of a statutory power, and areultimately traceable to statutory power. The actjons challenged by the2nd petitioner were of a public body invested with statutory power.So, it seems to me that not only at the threshold stage of entering intothe contract, but even at the point of termination, there cannot bediscrimination between Municipal tenants having similar contracts.Even after the contract of tenancy is entered into, as between tenantsoccupying the same position, the contract cannot be applied to oneperson in one way and to another person in a different way. That isexactly what has happened in this case.
Before the Special Committee, both Pethiyagoda and theofficer-in-charge of the Oils and Fats Corporation admitted that theyhad exchanged stalls 4 and 13 without the permission of the Council.Despite their joint request to remain in the exchanged stalls, theCommittee recommended that they be asked to revert back to theiroriginal stalls immediately, and thereafter appropriate action be takenfor contravening the provisions of the agreement. The 2nd petitioner,according to the report, wtes faulted in regard to three matters and theCommittee recommended that appropriate action be taken in terms ofthe by-laws and the agreement. The 3rd respondent, then, sent theletter dated 12.3.85 to the 2nd petitioner terminating herrthreetenancies. The 2nd petitioner says that on 30.3.85 she telephonedthe 3rd respondent and asked that she be allowed to close up the twodoorways and apologise This would have involved only a day's workby one workman and an expense of about Rs. 500. The 3rdrespondent's reply was that there was no point in writing andapologising and her position was hopeless and that they retain thebest lawyer in the country.
As regards Pethiyagoda and the Corporation, letters terminatingtheir tenancies were sent only on 17.4.85. This was two'days afterthe petitioners filed their petition in this Court, which was on 15.4.85.No follow up action was taken on the termination notices, but instead,they were allowed to revert to their original stalls and continue theirtenancies. This was admitted by the instructing attorney for the 1 stand 3rd repondents in Court.
Learned attorney for the 1 st and 3rd respondents submitted thatunder the tenancy agreement, the termination clause gave a discretionto the Council to terminate the tenancy or not; that a discretion wasgiven to it to differentiate as regards meting of punishment depending
on the seriousness of the violations; tnat while the Council regardedthe breaches by the 2nd petitioner as serious, it did not view breachesby Pethiyagoda and the Corporation in the same light and that therecan be discrimination in meting out punishment. I cannot agree.
The Special Committee dealing with the request of Pethiyagoda andthe Corporation to remain in their exchanged stalls observed that itwas-
"not'in favour of this request as they have violated the terms andconditions of the tenancy agreement, and if permitted, it wouldcreate a bad precedent, in that, the other stall holders too wouldresort to similar methods of circumventing the Municipal laws."
It recommended that they revert to their original stalls immediately andthat action be taken for breaching the terms of the agreement.
The petitioners produced the by-laws of the Council which wereapproved by the Law and General Purposes Committee on 11.3.82,12.3.82 and .18.3.82 as the operative by-laws. Learned attorney forthe 1st and 3rd respondents stated that these by-laws have not beenconfirmed by Parliament and gazetted. He produced the 1974 by-lawswhich were gazetted as the operative ones. According to the 1974by-laws, the holder of licence aan ’only occupy the qhop, stall etc.which he is authorised to occupy (by-law 5). Sleeping within thepremises of the public market after it is closed is prohibited (by-law 17(</)<). The prohibition of alterations in shop or stall without theCommissioner's written sanction only , applies to the Kandy Central'Market (by-law 40). The Council is empowered to cancel a licence, ifthe holder does not comply with any of the by-laws (by-law 29 (2)).Both Pethiyagoda and the Corporation have violated their contractsparting with possession of their respective stalls-and by-law 5.
The 2nd petitioner, went into residence of her stalls, after informingthe 1 st respondent, for a specific purpose to protect her property andto supervise her own security arrangements. The two doorways wereconstructed as far back as 1983 and unauthorised alteration in a shopor stall is not 'even a violation of the by-law. By sleeping on thepremises and in constructing the two doorways, she too has violatedher agreement and by-law 17 (d).
In terms of the 1982 by-laws, a tenant cannot,, without theCouncil's permission, permit any person to occupy or use any part ofthe stall, shop etc, other than a servant whose name is specified in thelicence and whose name is registered at the Municipal Office (by-law 4
). The holder of a licence can only occupy the shop or stall which heis authorised to occupy under the licence (by-law, 5). A tenancybecomes liable to be terminated for a breach of by-law 4(c); sleepingis prohibited (by-law 18) and upon a conviction for, a breach of thisby-law, a tenancy becomes liable to be cancelled (by-law 28). Theprohibition of unauthorised alteration applies only to the CentralMarket (by-law 37).
Though this set of by-laws have not been confirmed and gazetted,they reveal .the thinking of the Councillors as to what transgressionsare serious and what are not. A tenant permitting unauthorisedoccupation of his stall invites a cancellation of his tenancv, while thepenalty for sleeping in the stalls is a fine (by-law 56) and a cancellationof a tenancy can only be upon conviction. The by-law dealing withunauthorised alteration, was not meant for stalls at the Jathika Pola.
True, in the matter of termination of tenancies, the agreement hasgiven discretionary power to the Council. But, the discretionary powergiven to a public authority is essentially different from that given toprivate persons. A man making his will has unfettered and absolutediscretion to give his property to a cat or a cathedral; a private creditoris free .to choose which of his debtors he must release or a landlordcan elect to evict one tenant and not another, for the same default,but, it is wholly inappropriate to apublic authority. The notion ofabsolute and unfettered discretion can have no application in PublicLaw. Discretionary power is conferred on a public authority upon trustand in order that it may use them for public good. In the exercise of thediscretionary power, it must act fairly, reasonably and withoutdiscrimination. (See, Wade on Administrative Law, 4th Edn.. pp. 340,341 and De Smith on Judicial Review of Administrative Action, 4thEdn.. pp. 238, 279, 327, 346).
Here are three municipal tenants having similar contracts of tenancywith the Kandy Municipal Council in respect of stalls in the same PublicMarket. All three have violated some of the provisions of thecontracts. Cancellation of the tenancy was not obligatory; it wasdiscretionary. But, the discretion must be exercised similarly asbetween persons similarly situated and without discrimination.Pethiyagoda and the Corporation, though their tenancies have beenterminated, have been allowed to revert to their original stalls andcontinue their tenancies; the 2nd petitioner, on the other hand, hashad her three tenancies terminated, without any option given to her toclose up the two doorways and to cease residing in the stalls andthereafter to continue as tenant. The discretion has been unequallyused. The other two have received favoured treatment. The 2ndpetitioner is entitled to the same treatment and to be given the samechances as the other two tenants. There has been violation of the 2ndpetitioner's fundamental right of equal protection of the law. underArticle 12(1) of the Constitution.
In her petition, .she has asked that this Court declare the order dated
terminating her tenancies of premises Nos. 16. 17. 18. theorder dated 22.3.85 terminating the two bare land tenancies and theorder dated 22.3.85 ordering the demolition of the structure over thetwo bare lands null and void, as they have violated her fundamental'right under Article 12(1), and for damages.
Learned attorney for the 1 st and 3rd respondents concedes that inregard to the two bare lands, the legal relation between Council andthe 2nd petitioner was that of a landlord and tenant and that it was amonthly tenancy. If so, the letter dated 22.3.85 terminating the barelands tenancy requiring the 2nd petitioner to vacate them within 14days of receipt of the letter is clearly bad. Further, no reason has beenassigned for the termination of this tenancy. But, this does not helpthe 2nd petitioner's case as it has not been shown that as betweentenants having similar contracts, she has been discriminated against.
Nor can she complain against the demolition order as it was acondition of her tenancy that she would demolish and remove thestructure, without payment of any compensation, when directed bythe Council to do so.
Both the 1 st and the 3rd respondents have raised the objection intheir affidavits that the acts complained of are acts of the MunicipalCouncil, that the proper party against whom relief, if any, can beclaimed is the Municipal Council of Kandy, and as the petitioners havenot made the Municipal Council of Kandy a party, they cannot proceedwith their application. Before the hearing, the petitioners moved toadd the Municipal Council as a respondent. This was objected to bylearned attorney for the 1st and 3rd respondents and the petitionersvyithdrew their application to add the Council as a respondent.Learned Deputy Solicitor-General submitted that this Court has thepower to add a party, but as the petitioners have withdrawn theirapplication, they will have to face the consequences; that this Courtwill not make an order against the Municipal Council without hearing it.
The three tenancy agreements were between the Municipal Councilof Kandy, and the 2nd petitioner. S. 34(2) requires the seal of theCouncil to be affixed to any contract on behalf of the Council in thepresence of the Mayor or Deputy Mayor and the Commissioner whoshall sign their names to such contract. The seal has been affixed toeach of the contracts and they have been signed by the 1 st and 3rdrespondents.
No relief is claimed by the 2nd petitioner against the MunicipalCouncil. She has not asked that she be restored to the tenancies. Thereliefs are directed against the three respondents. S. 14 of theMunicipal Councils Ordinance, as amended by Law No. 24 of 1977,states that the Mayor shall be the chief executive officer of the Counciland all executive acts and responsibilities which are by this Ordinanceor by any other written law directed or empowered to be done ordischarged by the Council may, unless the contrary intention appearsfrom the context, be done or discharged by the Mayor. S. 170, asamended, states that the Municipal Commissioner shall, next to theMayor, be the Chief Executive Officer of the Council and in the event ofthe vacation of office by both the Mayor and Deputy Mayor, during theperiod between vacation of office of the Deputy Mayor and election ofa new Mayor, the- Commissioner may perform and discharge allfunctions and duties conferred of imposed on the Mayor. The 2ndrespondent is the officer responsible for the hygienic and sanitaryconditions in, inter alia,*Public Markets.
They have all failed affidavits and set out their respective positions.The 1st respondent has filed two affidavits with annexures. The 2ndrespondent one with annexures and the 3rd respondent threeaffidavits with annexures. What more could the Municipal Councilhave said? Not only has the Municipal Council been fully representedbut its interests are sufficiently safeguarded by the presence of thethree respondents on the record. It is not necessary that the MunicipalCouncil, Kandy, should be impleaded. I grant the 2nd petitioner thedeclaration that the impugned order dated 12.3.85 has violated herfundamental right of equal protection of the law assured to her under1Article 12(1) and is, therefore, void.
On the question of damages, the Chairman ol the UrbanDevelopment Authority wrote to the 1 st respondent the letter dated
and informed him that the UDA had decided to acquire theassets of the 2nd petitioner at Stalls Nos. 16, 17 and 18 at theJathika Pola Market and pay her any relevant compensation; that as
■from Q3.04.85, the UOA will be in possession of the stalls. The UDApaid Rs. 190.000 to the 2nd petitioner and the 2nd petitioner left thepremises on 11.7.85. This amount was made up as follows: Rs.133,410 being reimbursement for tender payments and otherpayments to the Council; Rs. 26,000 being reimbursement forpayments to Mecco Services Ltd.. Kandy, for security serviceprovided; Rs. 2,450 for tube lights; Rs. 1.500 for stainless steel sink;Rs. 1.600 for water meter, all making a total of'Rs. 164,960.According to the petitioners, a reduced amount was allowed forimprovements made and the total came to about Rs. 178.000; thatthe Chairman, UDA was kind enough to add Rs. 12.000 and round offthe figure to Rs. 190,000. In their letter dated 3.7.85 to theChairman, UDA the petitioners say that-
"this low figure is being accepted as we wish to remove ourselvesfrom Kandy immediately over fears for our safety because of therecurrent thuggery and violence.'
I cannot accept the contention of learned attorney for the 1 st and3rd respondents that having accepted this sum of money, thepetitioners are precluded from petitioning this Court. If it all. this factwould only affect the quantum of damages.
The petitioners complain that the extensive sign boards cost themRs, 15,000, they paid Rs. 8,000 for installing a telephone, that theyhad receipts for these payments, but these items were disallowed bythe UDA though they were taken over by it. They further complain thatnothing was allowed for the 2 bare land leases, that they lost over Rs.
over the sale of their equipment and fixtures, that they haveexpended more than Rs. 50.000 oh photocopy, vehicle travel,telephone ano other costs in seeking redress from this Court. Theyalso seek additional damages for torment, pain of mind and othersuffering over this whole matter.
The 2nd .petitioner is entitled to be paid the sums of Rs. 15.000.Rs. 8,000 and the loss sustained in a sum of Rs. 50.000 amountingto Rs> 73000.1 also take into account the pain of mind caused to the2nd pdtitidner. I direct that a sum of Rs 100.000 be paid to the 2ndpetitioner by the 1st, 2nd and 3rd respondents. She will also oeentitled to costs of this application.
L. H. DE ALWIS, J.
The first petitioner is a citizen of the Unites States of America and aforeign collaborator in a proposed project called Lanka-America (Pvt.)Ltd., approved by the Foreign Investment Advisory Committee(F.I.A.C). The second petitioner, who is his wife, is a citizen bydescent of Sri Lanka and the local collaborator in the F.I.A.C. Project.The second petitioner claims to hold permanent tenancies of 3 stallsand two bare land leases from the Kandy Municipal Council at theJatika Pola, Tomlin Park, Kandy, where she carried on severalbusinesses including that of a cafe. The complaint of the petitioners isthat from July 1984 they have been the victims of a relentless andunceasing series of attempts to deprive, the 2nd petitioner of hertenancies and destroy her small business by improper and illegal actscommitted by the three respondents acting in collusion. The 1strespondent is the Mayor of the Kandy Municipal. Council, the 2ndrespondent is its Veterinary Surgeon and the 3rd respondent, theMunicipal Commissioner. The petitioners allege that the threerespondents by their iffegal acts have repeatedly infringed thepetitioners fundamental rights under several Articles of theConstitution, but at the hearing, confined their application to-theinfringement only of their right to equality before the law, asguaranteed by Article 12.
In view of the volume of the pleadings and documents filed by thepetitioners it will be useful to give a brief narrative of the events thatled to the filing of this application.
The second petitioner is the daughter of a retired planter residing inKandy and both petitioners who were living in the United States ofAmerica came to Sri Lanka with a view to setting up a F.I.A.C. Projectand took up residence in Kandy. The F.I.A.C. Project was in regard tothe export of packeted potato crisps. The 2nd petitioner saw anadvertisement in the newspaper inserted by the Kandy Municipal^Council offering certain stalls in the Jatika Pola at Tomlin Park, forletting on tender and decided to commence a business herself. Shetendered for three stalls numbered 16, 17 and 18 and succeeded inobtaining them. Thereafter she entered into three separateagreements in respect of the stalls with the Kandy Municipal Council.P106 is the agreement entered into on 08.07.83 relating to stall No.16, where she proposed to carry on a business of "Roberts HondaRent-A-Cycle Agency." PI 07 and P108 are the agreements enteredinto on the sanrte day in respect of stalls No. 17 and 18, where she
proposed carrying on the business of "Roberts Lakeside Cafe" and“Roberts Tours & Travels Agency", respectively. The monthly rental ofeach stall was Rs. 150 and she had to make a once and for allpayment of considerable sums of money ranging from Rs. 26,150 toRs. 41,150 for the stalls. In front of the Jatika Pola were two smallvacant patches of bare land on which were concrete slabs, no doubtthe remains of some former structure. The 2nd petitioner offered totake on rent these two sites also from the Kandy Municipal Council andwas given them at a monthly rental of Rs. 250 each. But noagreement, as in the case of the stalls, was entered into in respect ofthem. Sometime later on a request made by her, she was permitted toerect a temporary light-weight roof on these sites on condition thatshe should demolish them at any time the Council directed her to doso. She spent a considerable sum of money and transformed tnesevacant areas into a beautiful garden restaurant and decorated it withpotted plants and flowers. The 2nd petitioner carried on businesspeacefully in these three stalls and premises for about a year until July1984 when a new tenant by the name of Pethiyagoda obtained thetenancy of stalls numbered 5 & 13 in the same Jatika Pola. The 2ndpetitioner states she had written a letter dated 10.07.84 to therespondent requesting the exchange of one of her premises at theJatika Pola for stall No. 1, but received no reply to it. The receipt of thisletter is however denied by the 1st respondent. The 2nd petitionerthen became aware that this same stall No. 1, had been let to Mr.Pethiyagoda for the duration of the Kandy Perahera. She also foundthat Mr. Pethiyagoda was occupying stall No. 4 belonging to theCeylon Oils & Fats Corporation instead of stall No. 5 which was one ofthe stalls he had taken on rent from the Municipal Council, and that hewas carrying on an unlicenced business of a cafe there. It was fromthen on that friction between the two of them commenced becauseMr. Pethiyagoda started running a rival cafe business in closeproximity to hers. In the first week of August, 1984, according to thepetitioners, Pethiyagoda told the 2nd petitioner that he wanted to takeover and use as part of his business one of the bare land patcheswhich had already been let to her and for which she was paying rent.Mr. Pethiyagoda claimed that he was "well connected" with importantofficials in the Municipal Council and declared that he could get thepremises if he wanted to. On receipt of information that this was goingto happen the petitioners went to see the 1st respondent, the Mayor,at his office. They allege that the 1st respondent was very curt withthem and abruptly terminated the interview before they could place all
their grievances 'before him, saying that he would look into the matterand asked them to see him later. They state that the 1 st respondent isa cousin of Mr, Pethiyagoda and attribute that as the reason for thealleged preferential treatment afforded to Pethiyagoda in the matter ofthe bare land tenancy and the partiality shown to him in regard to stallNo. 1 and the illegal businesss conducted by him in stall No. 4 towhich he had no right.
The petitioners thereafter went on several occasions to meet the1st respondent at his office but felt that he was avoiding them. Againin mid September they received information that the bare land tenancywas to be taken away from the second petitioner and given to Mr.Pethiyagoda. They met the 3rd respondent at the Municipal Office andhe confirmed that oral instructions had been given by the firstrespondent to that effect-. Being unable to meet the first respondent inhis office, the petitioners went to his residence at about 7 p.m. on18th September 1984. The first respondent was again rough andrude with them and admitted that he had issued orders to take awaythe second petitioner's tenancy to the bare land and to give it toPethiyagoda and walked away .That.'night the first petitioner wrote ascathing letter dated 19th"September 1984 (P127) to the firstrespondent accusing him of unethical, dishonest and corrupt conductand nepotism on account of his relationship to Pethiyagoda. He sentcopies of this letter to His Excellency, the President, the Hon. PrimeMinister and to all the 23 members of the Municipal Council of Kandy.The first petitioner was in the habit of sending copies of such letters'tohighly placed persons like the Ambassador for the United-States in SriLanka and Cabinet Ministers.
Within a few days of posting this letter, the petitioners state that avery large gang of thugs attacked the second petitioner's property atnight and caused damage to it. The two Municipal Security Guardswho were on duty at th'e Jatika Pola were able to drive away the thugsbefore they could cause further mischief. The Municipal SecurityGuards were then suddenly withdrawn without notice to thepetitioners. Within four days of the withdrawal of the Municipal guardsan extremely violent attack was launched by a gang of eight thugs onthe second petitioner's property. The roof was damaged and one ofthe second petitioner's employees was injured. Thereafter moreincidents of theft, damage to the second petitioner's property,thuggery and injury to persons occurred. On 13th February 1985,another violent attack-was made by thugs and one of the petitioner's
employees was severely injured on the head and had to behospitalised. In these circumstances the petitioners had to employsecurity guards of their own in order to protect their property at night.They also installed an alarm system in the premises and remainedthere to supervise the security arrangements. They wrote to the firstrespondent about all this on 8.3.1985 (P271). The petitioners statethat the Municipal Council claimed to have withdrawn its securityguards because of the cost involved. But they point out that securityguards were put back by the Municipal Council within two hours of thepetitioners handing over the stalls to the representatives of the UrbanDevelopment Authority (U.D.A.) on 11.7.85 when the premises werevested in the U.D.A.
The petitioners also allege that the respondents have tampered withand falsified several documents and fabricated other documents inorder to cover up their illegal acts. On 25.9.84 a complaint was madeby the second petitioner in the office of the second respondent, whichwas taken down by a typist on three pages of closely-spaced typingand was signed by the second petitioner. After several futile attemptswere made to obtain a copy of her statement the second petitionertelephoned the second respondent on 19.1 2.84 and reminded him ofhis promise to post her a copy on the day after the complaint wasmade. The second respondent replied that she could have a copy thenext day. The next day on being informed by a subordinate officer thatthe copy was ready she sent a messenger and collected it. But onexamining the letter she found annexed to it another copy bearingseveral corrections and deletions which she suggests had apparentlybeen mistakenly handed over by the subordinate officer. They are thetwo documents P242 and P244. A comparison of the twodocuments does show that corrections have been made and in P244and at P245 the words "and he was going to take the slab and might"are scored off by drawing a line across them. The "slab" is a referenceto the bare land area on which there was a concrete slab which the2nd petitioner alleged the first respondent told her he was going totake away from her and hand over to Pethiyagoda, when she wentwith the first petitioner to the first respondent's residence on theevening of 18.9.84.
The petitioners further allege that the report (P448) of the SpecialCommittee appointed by the Council to inquire into the lease of thestalls at the Tomalin Park, Jatika Pola and the allegations made by thesecond petitioner against the first respondent consists of several flaws
and is based on documents deliberately fabricated for the purpose ofthat inquiry. The second petitioner complains that the Committee didnot permit her husband, the first petitioner, to be present with her atthe inquiry when she was called upon to give evidence and shetherefore had no alternative but to walk out. She-points out that theCommittee acted on a fabricated report submitted by theSuperintendent of Works, Mr. Wijekoon dated 18.2.85 (3R15)regarding the structural alterations made by the petitioner in the stalls.In giving evidence before the Committee this officer stated that hevisited Tomalin Park, Jatika Pola on 22:2.85 which is four days afterthe date of his report (vide Report at 452). Learned counsel forthefirst and third respondents submitted that the date 22.2.85mentioned in the report is an obvious error on the part of theCommittee. The Committee met on six occasions and 18.2. was oneof the dates. An examination-of the reverse of 3R15 indicates that itwas first dealt with on 1 9.2. since a minute has been made under thatdate as follows"For necessary action pi." That endorsement alongwith the subsequent endorsements made thereon indicate that thedocument had been tendered by the Superintendent of Works at leaston 19.2. and is consistenrwith his signing the report on 18.2.85.
t
The petitioners also challenge as a fabrication the report 3 R 16dated 1 2.3.85 made by the Superintendent of Markets Mr. Jiffry, whostates that he inspected the petitioner's stalls on .5.3.85 and foundthat the "partitioning" between the three adjacent stalls Nos. 16. 17and 18 had been broken and provision made for access from one stallto the others. This had the effect of converting the three stalls intoone. The petitioners denied that Mrs. Jiffry came to their stalls’on the5th but admitted that his visit was on the 1 2th'as indicated by the dateof his report. They also denied that he entered the premises and madea physical inspection of the interior but merely remained outside andasked them a few questions. They further made the allegation that hisreport 3R16 was written by the second respondent under whom heworked and pointed to certain alleged similarities in the handwriting of4he second respondent on this document and his signature on anotherdocument, a comparison of which the first petitioner had made andproduced photocopies of them marked P569' and P570. In view ofthe serious allegation of this nature made by the first petitioner, wecalled for and examined the note book kept by Mr: Jiffry in which theentry of his inspection on the 5th March. '1985 was made. We alsomade a visual comparison between the writing of Mr. Jiffry in his note
book on the 5th March with the writing on the other pages of the notebook and 3R16. and there did not appear to be any glaringdissimilarities in the handwriting on these documents. The firstpetitioner then made the astounding allegation that the note bookitself had been written up by the second respondent for the purposesof this case. The first petitioner is not a handwriting expert and thematerial he had for a comparison of the handwriting of the secondrespondent and of Mr. Jiffry is very scanty. The first petitioner hadevery opportunity of availing himself of the services of a handwritingexpert but did not take it. although he had taken great pains in thepreparation of his case.
The special Committee which issued its report P448 on 27.2.85found that the second petitioner had made structural alterations install Nos. 16, 17 and 18 in contravention of the terms of theagreements.
In regard to the structure erected by the second petitioner in the"open space" which had been let to her. the Committee in their reporterroneously refer to it as unauthorised. That is not correct. Thesecond petitioner was permitted at her request to construct alight-weight roof over the concrete slab on a temporary basis on herundertaking to demolish it. whenever the Municipal Council wanted itdone (vide P121 A dated 31.8.1983). This is also admitted by thefirst and second resoondents in their affidavits filed in this case.
The Committee also found that Pethiyagoda had violated the termsof the agreement he had entered into with the Council by exchangingwithout authority stall No. 13 for stall No. 4, that had been let to theCeylon Oils & Fats Corporation. In fact both Pethiyagoda and Mr.Werellagama. the Manager of Ceylon Oils & Fats Corporationadmitted this violation.
The grievance of the petitioners is that they ha e been maliciouslydiscriminated against in favour of Pethiyagoda because of their earliercomplaints of fraud, corruption and maladministration against the firstand second respondents. The first respondent, it is alleged, incollusion with the second respondent directed the third respondent toissue the orders set out in paragraphs 500 (A), (B) & (C) of theirpetition, namely:-
(a) To terminate the "life-time hereditary" tenancies of the secondpetitioner of stalls Nos. 1 6, 1 7 & 18 Jatika Pola by notice dated12.3.85 (P426 & P426A)
To terminate the second petitioner's tenancy of the two bareland leases by notice dated 22.3.85 (P427).
To demolish and remove the structures erected on the two bareland areas by order dated 22.3.85 (P428).
.Pethiyagoda and the Manager of the Ceylon Oils & Fats Corporationwho were equally guilty of breaches of their agreements, on the otherhand did not have their tenancies terminated but were only directed torevert to their original stalls. The "petitioners therefore allege aninfringement of their fundamental right- to equality before the law, asguaranteed by Article 12 of the Constitution.
The respondents denied the allegations made against them in theirrespective affidavits. The first respondent denied that Pethiyagoda.is acousin of his and said that he did not even know him prior to 1984.The petitioners have been acting on hearsay and are not. sure of thetrue relationship between Pethiyagoda and the first respondenfas thecorrespondence discloses. The petitioners gradually changed theirposition in regard to the relationship of Pethiyagoda to the 1strespondent, from one of cousin, to cousin-at-law and then to some"connection", which they were unable to establish.
Their allegation that the attack by a gang of thugs was made on thesecond petitioner's premises within a few days of her writing letterP127 on 19.9.84 to the first respondent seemed to convey theinsinuation that it and the subsequent acts of thuggery were made atthe instance of the first respondent . The possibility that the attackscould have been instigated by other persons who were angry with thepetitioners cannot be ruled out. Pethiyagoda had sent a petition (2R6)to the first respondent on 11.9.84 complaining of several allegedunlawful acts committed by the petitioners. The petitioners in turnhad by letter dated 15.9.84 (2R7) made counter-allegations againstPethiyagoda. Both parties were summoned for an inquiry by thesecond respondent by notices 2R8 and 2R9 dated 19.9.84 that is,on the day P127 was written. The second petitioner's statementP242 was recorded on 25.9.84, and the report of the inquiry 2R12was made by the second respondent to the first and third respondenton 16.10.84. There was a finding that the second petitioner hadconverted stall No. 17 into a laundry without the permission of theCouncil and that Pethiyagoda had changed his stall No. 13 for stallNO. 4 without the authority of the Council.
It is therefore abundantly clear that within a few days of 19.9.84when the petitioners wrote that letter P127 to the first respondentthere were other persons against whom allegations had been made bythe second petitioner and who could have been responsible for theacts of violence complained of by the petitioners. •
The first respondent in his affidavit also pointed out that the councilhad resolved to withdraw the Municipal night security guards byresolution on 29.8.84,' since all the stalls, had been let out. It appearsthat security guards are employed only to look after stalls that have not, been leased out. That resolution was made sometime before thesecond petitioner's letter of 19.9.84, although, no doubt, it wasimplemented only a few days after the 19th September.
On the findings in the second respondent's report 2R12, thesecond petitioner was sent a notice dated 19.1 1.84 (3R1/P181) bythe third respondent to show cause why her tenancy of stall No. 17should not be terminated for converting it into a laundry. The secondpetitioner in fact in her letter of 1 5.9.84 (2R7) addressed to the.firstrespondent admitted at page 4 that they brought to Kandy the firstautomatic laundry dry cleaning establishment. Nevertheless she askedfor time to consult her lawyers and thereafter no further actionappears to have been taken about it by the council. Since it did notconstitute one of the grounds for eventually terminating her tenancy ofstall No. 17 by P426, nothing more need be said about it.
As regards the allegation of falsifying the second petitioner'sstatement (P244) the second respondent admits in his affidavit thatthe typist's draft of the statement contained several grammatical andtypist's errors and needed correction. He also stated that theuncorrected script was annexed to the fair copy and both were, on hisinstructions, handed to the second petitioner's messenger when hecalled for the copy. He however denied that the second petitionersigned her statement, and the 3rd respondent in his reply to the firstpetitioner's letter to him dated 7.2.85 (P363), categorically statesthat she did not sign the statement (P259 of 18.2.85). It was furthersubmitted by counsel for the second respondent that irrelevantmatters mentioned by the second petitioner were deleted from herstatement P244 and so the words at P245 "and he was going to takethe slab and might" were scored off as irrelevant. However, in hisaffidavit the 2nd respondent has given the reason for the correctionsas the typist's faulty English and not the irrelevant matters. The inquiry
however, it will be observed, was into thte complaint of Pethiyagoda(2R6) dated 11.9.84 against the petitioners and thecounter-complaint of the second petitioner (2R7) dated 15.9.84against Pethiyagoda in which the first respondent was not involved.Consequently the second respondent in his letter (P137/2R11) of
in reply to the second petitioner's letter of 22.9.84(P136/2 R10) requesting a postponement of the inquiry to enable herto consult her lawyers, specifically informed her that no matter that felloutside the tenancy issues would be discussed at the meeting.
The second petitioner submitted that the tenancies were "life-timeand hereditary", according to circular of 31.12.80 (P575) andconsequently could not be terminated by the Council. But that is notso. The circular states that the tenancies are.subject to the terms andconditions of the Agreements entered into between the parties andare liable to be terminated, for any breach of the terms and conditionsof the Agreement. Paragraph 7 of the circular further states that thecouncil has the right on the death of a tenant, to transfer the tenancyto the spouse or child of the tenant if such an application is made, andnot that the tenant's spouse or child is entitled as of right to thetenancy on the death of the tenant.
The second petitioner also took up the position that since theagreements were entered into between the Kandy Municipal Counciland her, it vyas only the Municipal Council and not the third respondentwho could have terminated the tenancies. In-fact clause IV of theagreements gives the council the right to terminate the tenancies forany breach of its terms and conditions.
Section 34(1) of the Municipal Council's Ordinance provides thatevery Municipal Council shall be a corporation with perpetualsuccession and a common seal.
Section 34(2) provides that the common seal of the Council shall• not be affixed to any contract on behalf of the council, except in thepresence of the Mayor or Deputy Mayor and the Commissioner whoshall sign their names to such contract in token of their presence.
In all the three contracts P106. P110 and P114, the common sealof the Kandy Municipal Council has been affixed in the presence of theMayor the first respondent, and the Commissioner the thirdrespondent.
Section 14(3) of the Ordinance as amended by section 99 of theLocal Authorities Elections (Special Provisions) Law No. 24 of 1971,provides that the Mayor of a Municipal Council shall be the chiefexecutive officer of the Council and all executive acts andresponsibilities which are by the Ordinance empowered to be done ordischarged by the Council, may. unless the contrary intention appearsfrom the context; be done or discharged by the Mayor. The firstrespondent therefore was empowered to exercise the powers of thecouncil. He also had the power under section 14(4) to delegate any ofthe powers, duties and functions imposed on him to any officer of thecouncil. It was under the powers vested in him by section 14(3) and(4) of the Municipal Councils Ordinance as amended by section 99 of• the Local Authorities Elections (Special Powers) Law No. 24 of 1977and in terms of Resolution No. 9(114) of 26.8.83 of the KandyMunicipal Council that he delegated certain functions to the officersspecified in the document (1R4/P578).
It was pointed out by the petitioners that the function of determiningleases of stalls in Markets under section 156(c) of the Ordinance,falling under Part VII of the schedule of 1R4 (page 5). had beendelegated to the Municipal Veterinary Surgeon, the secondrespondent, and therefore the third respondent had no authority toissue the notices of termination of the tenancies-P426. P427.
1 R4 states that the delegation is made by the first respondent-
subject to the further restriction that the Mayor of Kandy,reserves to himself the right to interpose, at any time, if he deems itnecessary to do so, in regard to the discharge of the powers, dutiesor functions delegated herein."
It is submitted by learned counsel for the first respondent thatalthough the power to determine the leases had been delegated to thesecond respondent, the first respondent in the exercise of his rightlawfully to interpose at any time, directed the third respondent to issuethe notices (P426 & P427) terminating the tenancies of the secondpetitioner.
To my mind, it seems that the tenancies were not terminated undersection 156(c) of the Ordinance because that could only have beenpossible if the second petitioner had been convicted of a breach of aby-law, as indicated by section 156(a). Section 156 states:
The Council may-
fa) expel or cause to be expelled from any public market anyperson who, or whose servant, is convicted of a breach ofany by-law made under this Ordinance in relation tomarkets;
(c) determine any lease or tenure which such person may havein any such stall, shop or other place within the market.
"Such person"in sub-section (c) refers to a person convicted of abreach of any by-law in sub-section.(a). The tenancies wereterminated under clause IV of the Agreement for a breach of the termsand conditions of the Agreement and that is made manifest in theletter P426. The termination was directed by the first respondent asthe Chief Executive Officer of the. Council performing its functions byvirtue of the power vested in him by section 14(3) of the Ordinance,as amended.
; It was next submitted by the petitioner that the Council could not acton the recommendations of the Special Committee Report dated
until it was adopted by the Council at a meeting.
Action was initiated on the report of the Superintendent of Worksdated 18.2.85 when it was referred to the Council's lawyers on
as indicated by the endorsement on the reverse of that report,regarding the structural alterations made by the second petitioner. The3rd respondent also states in his affidavit of 18.6.85 that he wrotethe letter terminating the second petitioner's tenancies 3R6/P426 onreceipt of the petitioner's letter dated 8.3.85 (3R10) addressed tothe first respondent regarding their decision to.remain in the premisesevery night until a final solution was found to theirproblems.
The report of the Special Committee 1R2/P448 was tabled beforethe Finance Committee on 18.3.85, according to the Minutes of theCouncil of.that date (P516) and that was after the notice of 12.3.85(P426) terminating the tenancy had been sent. The Mayor informedthe Committee that the second petitioner had broken the walls ofstalls Nos. 16, 1 7 & 18 and had altered the character of the buildingand that she and her family were residing there. He further informed
the committee that legal action was being taken regarding these illegalacts. The documents in Sinhala 1R2 dated 22.4.85 shows that theFinance Committee recommended that the report be accepted and bereferred to the Council. That was done and the Council approved andaccepted the report on that day. The Council thus by their decision,ratified the action already taken to terminate the second petitioner'stenancies by letter dated 12.3.85 (3R6/P426).
The petitioners complain that the unequal and discriminatorytreatment meted out to them by the respondents constitute a violationof their fundamental rights guaranteed by Article 1 2 of theConstitution. It is confined primarily to the agreements entered intowith the Kandy Municipal Council and concerns only the secondpetitioner who alone held those agreements. The first petitioner is nota citizen of this country and was hard put to it to show anyinfringement of his fundamental right under Article 12(1) of theConstitution. This Article declares that:
"All persons are equal before the law and are entitled to the equal
protection of the law."
In order to succeed the first petitioner must therefore make out thatnot only has he been treated differently from others, but that he hasbeen so treated from persons similarly circumstanced without anyreasonable basis and that such differential treatment was unjustifiablymade. Morarjee v. Union of India (14) referred to in Perera v.University Grants Commission (supra).
The first petitioner's complaint is that the finding of the SpecialCommittee Report P448 at page 6, that the allegations made by himagainst the Mayor are without substance, was arrived at withoutaffording him an opportunity of being heard. The Special Committeewere however dealing with the allegations made by Mrs. Roberts onlyas they state in paragraph one of the report. She was given anopportunity of supporting them but she refused to give evidenceunless her husband was also present. The Committee informed herthat they were sitting only as a fact finding committee and since theother tenant, Pethiyagoda, had not asked for any representative of histo be present at the inquiry, it would be unfair to allow her only-thisconcession. She then walked out. The Committee proceeded with theinquiry and after examining the voluminous documents tendered byher found that the allegations made by her were without substance.Unfortunately the Committee which set out to inquire into the
allegations of Mrs. Roberts erroneously added the name of Mr.Roberts also, when they said that the allegation's made by Mr. & Mrs.Roberts against the Mayor were groundless. In any event even if thefirst petitioner's allegations were also considered without giving himan opportunity of supporting them, it would at the most, amount to aviolation of the principles of natural justice, which is not a fundamentalright. "Rules of natural justice cannot be elevated to the status offundamental rights."-per Sharvananda, C.J. in Elmore Perera v. MajorMontague Jayawickrema & Others (15). The first petitioner's nextcomplaint is about the rudeness, incivility and the failure to reply hisletters by the respondents regarding official matters. But they do notconstitute a violation of any statutory obligation on the part of therespondents and consequently no ordinary legal right, far from afundamental right, is infringed. The first petitioner's application musttherefore fail.
The complaint of the second petitioner is that the reasons given forthe termination of her tenancies in the letter P426, that she had madestructural alterations in the stalls and was occupying them as aresidential premises without authority are not grounds for thetermination of her tenancies under the 1982 by-laws (P429)(described as amended by-laws after approval by the Law & GeneralPurposes Committee on 1 1.3.1982, 12.-3.82 and 18.3.82 of theKandy Municipal Council applicable to all Public Markets).
By-law 53 empowers the Municipal Council to terminate a tenancyfor a contravention of only three by-laws, viz. 4, 7, & T9. Acontravention of any other by-law is punishable under by-law 56(a)with a fine on conviction.
In the case of the second petitioner the breaches of the by-lawscommited by her did not warrant the termination of her tenanciessince they were not one of the three above-mentioned by-laws. Evenby-law 37 which prohibits unauthorised alterations to stalls wasinapplicable since it referred only to the Central Market and not to theTomalin Park Jatika Pola where her stalls are situated. The otherground for the termination of her tenancies, according to her, was thatshe-remained in the premises after 9 p.m. when it should have beenclosed, implied in contravention_pf by-law 23. But a breach of thisby-law is punishable only with a fine and the tenancies cannot beterminated under by-law 33, except under section 156(a) & (e) of theOrdinance, upon a conviction under by-law 36(a). By-law 23 appliesto the hours of business from 6 a.m. to 9 p.m. when a stall must bekept open and is inapplicable to a situation like this. In my view, theappropriate by-law is 18(/), which prohibits sleeping within thepremises of a public market. A breach of even this by-law is onlypunishable with a fine under by-law 56(a). but her tenancy cannot beterminated under by-law 53.'Of course if she were prosecuted andconvicted of contravening this by-law, her tenancies'could have, beenterminated under section 156(a), read with 156(c) of the MunicipalCouncils Ordinance. But she was not prosecuted and convicted for hertenancies to be terminated.
Pethiyagoda and the Manager of the Ceylon Oils & Fats Corporationon the other hand, it is submitted, by exchanging their stalls Nos. 5 &13 have violated by-laws 4 & 7. By-law 4(c) prohibits permitting anyperson other than a servant to use or occupy the stall, without thewritten permission of the Council and by-law 7 prohibits a tenant fromchanging or altering the sale of commodities in his stall without thewritten sanction of the Council. For a violation of these two by-lawsthe Council is empowered under by-law 53 to terminate the tenancyof the tenant. But Pethiyagoda and the Manager of the Ceylon Oils &Fats Corporation who had violated by-laws 4 & 7 did not have theirtenancies terminated, while her tenancies were terminated for abreach of by-law 18(0. which did not warrant such termination, underby-law 56(a). The second petitioner therefore complains of unequaland discriminatory treatment as against her.
The petitioners came into court complaining of discriminatorytreatment on the basis of the 1982 by-laws and referred to themspecifically in their pleadings and correspondence with therespondents. The respondents however state that the by-laws whichwere applicable were those made in 1974. But they made no effort intheir affidavits to set out the .correct position until much later in thecourse of hearing when counsel produced a set of the 1974 by-lawswhich he submitted were in operation at the time.
Section 268(1) of the Municipal Councils Ordinance provides that—
"no by-law shall have effect until it has been approved by theMinister, confirmed by the Senate & House of Representatives (nowParliament) and notification of such confirmation is published in theGazette."
Sub-section (2) states that: "Every by-law shall upon notificationof such confirmation be as valid, and effectual, as if it were hereinenacted."
The 1982 by-laws are only proposed- amendments that have beenapproved by a Committee of the Kandy Municipal Council but have notgone through the procedure set out in section 268. As such they arenot valid and effectual.- The by-laws of 1974, as their title indicates,have been approved by the Minister,, confirmed by the then NationalState Assembly and been gazetted. They are the only valid andeffectual set of by-laws that were in operation at the time.
There was rriuch controversy as to which set of by-laws theMunicipal Council was operating under at the time of the agreements..The petitioners state it was the 1982 by-laws but that is denied by therespondents. It could only have been the 1974 by-laws which werethe only valid by-laws at the time. They do not cease to operate, untilthey are revoked. The second petitioner could not have acted to herprejudice on any representation held out to her that the 1982 by-lawswere operative, since she was not even aware of their existence at thetime of the agreements. It was only much later that she obtained acopy of them from the Deputy Mayor in response to the request byletter of 9.12.84 (PI 87). '
Turning now to the 1974 by-laws, it will be seen that the secondpetitioner has committed only a violation of. by-law '18(b) which moreor less corresponds toby-law 18(f) .of the 1982 proposed by-laws,namely sleeping within the premises of the public market after it isclosed.
'By-law 40 which prohibits alterations to stalls is inapplicablebecause it relates to the Kandy Central Market only and not to thesecond petitioner's stalls which are situated in Tomalin Park JatikaPola. This by-law comes under the heading "By-laws applicable to theKandy Central Market only." By-law 30 which is the first by-law thatcomes under that heading states "The succeeding by-laws shall applyonly to the Kandy Central Market"
The second petitioner has thus committed a breach of by-law 1 8(f)which under by-law 53 is only punishable with a fine and her tenancieswere not liable to be terminated under section 156(c) and (a) of theOrdinance on a conviction, as she was not prosecuted.
Sri Lanka Law Reports
Pethiyagoda and the Manager of the Ceylon Oils & Fats Corporationare in the same position as the second petitioner as far as the 1974by-laws are concerned. They have committed a breach of by-law 4(c)which corresponds to b'y-law 4(c) of the 1982 by-laws alreadyreferred to. By-laws 7 & 53 of the proposed 1982 amended by-lawsfind no place in the 1974 by-laws. Consequently the tenancies of thestalls of Pethiyagoda and the Ceylon Oils & Fats Corporation alsocould not have been terminated under the 1974 by-laws for a violationof by-law 4(c) except under section 156(c) and (a) of the Ordinanceupon a "conviction under by-law 53.
It is now necessary to examine the agreements in order to ascertainif the parties have violated any of the terms and conditions of theagreements. P426 expressly states that the second respondent'stenancies are terminated for a violation of the terms and conditions ofthe Agreements, namely by making structural alterations in the stallsand occupying them as a residential premises.
The by-laws have also been incorporated in the agreements of allthree parties as terms and conditions by clauses (f) and 33, whichmake a contravention of any of them by the tenant a breach of theagreement, empowering the Council to terminate the tenancy underparagraph IV.
The agreements entered into by the Council with Pethiyagoda inrespect of stalls Nos. 5 & 3 are 2R4A and 2R4B dated 19.7.84 andthat with the Ceylon Oils & Fats Corporation is 2R5C. The petitionerschallenge the genuineness of these agreements because there is onlyone attesting witness to the signature of the Mayor, instead of therequired two and none to the signature of the Municipal Commissionerin 2R4A & B, while the agreement with the Ceylon Oils & FatsCorporation (2R5C) does not mention the day of the month it wassigned nor are there any attesting witnesses to the signature of theMunicipal Commissioner. The allegation of fabrication is denied by therespondents.
Clause 12 of the Agreement prohibits the tenant from making anyalterations to the stalls whether structurally or otherwise or whether.permanent or temporary without the prior approval in writing of theMunicipal Commissioner or any person duly authorised by him. Thesecond petitioner in her letter of 11.3.85 (P390)to the first
respondent and in her affidavit of 15.4.85 filed with, this applicationadmitted that she constructed the doorways .inside the stalls abouttwo years prior. This alteration had the effect of converting the'tjireeseparate stalls into one unit by means of the communicatingdoorways. She however states that the alterations were made at thetime she first renovated the premises and that she obtained the verbal .permission of some person, but does not mention his name, so thatthe first respondent could not have been in a position to verify it. Theonly person who could'have permitted'the alterations'was theMunicipal Commissioner in writing or any other person duly authorisedby him. These alterations were clearly effected in breach'of clause 12of the agreement only, since by-law 40 of the 1974 by-laws is notapplicable to this Market stall. The second petitioner also subsequentlyadmitted her fault and offered to apologise for it and close up thedoorways, but the respondents do not appear to have been preparedto accept it. Her tenancies were thus liable to be terminated for aviolation of this clause.
Regarding; her occupation of the stalls as a residence, clause 23permits a tenant and his servants to remain inside the Market buildingsor premises only from 6-am. to 9 p.m. By-law 18(d) of the 1974by-laws prohibits any person, who would include even a tenant, fromsleeping within the.market premises after it has been closed.
The Superintendent of Markets in his report dated 12.3.85 (3R16)states that he inspected the premises on 5,3.85 and spoke to thepetitioners and they admitted that they spend the nights there afterthe Council had withdrawn its security guards. This was solely donefor the purpose of protecting their property from constant attacks bygangs of thugs shortly after the letter of 19.9.84(P127). Thepetitioners had installed an alarm system in their stalls and had toremain there to supervise the security arrangements . They had alsoemployed their own security personnel after the withdrawal of theMunicipal Council security guards. They had every right to protect theirproperty and indeed clause 1 9 of the agreement makes it their duty tolook after the security of their property. The Council itself, when itresolved on 29.8.84 (1 R1) that it was unnecessary to maintain asecurity guard as all the stalls had been rented out, directed that thetenants'should be instructed to make their own arrangementsregarding security, if necessary. It is therefore abundantly clear thatpetitioner remained in the premises at night with their employees forthe express purpose of safeguarding their property against mischief
and theft at the hands of thugs. They have openly said so in a letterP156 which they wrote to His Excellency the President on 24.11.84.They also wrote to the first respondent a letter on 8.3.85(P271/3R10) in which they said their entire family would remain onthe premises each night along with their employees and securitypersonnel until some final solution to their problem was found.
In these circumstances it can hardly be said that there was a breachof by-law 18(d) or clause 23 of the agreement by the secondpetitioner, except in a very technical sense. Nevertheless the Councilacting under the Agreements terminated the second petitioner'stenancies for a breach of these terms and that relating to thealterations to the stalls.
As far as Pethiyagoda and the Manager, Ceylon Oils & FatsCorporation are concerned, they admitted the unauthorised exchangeof stalls 5 & 13 which constituted a violation not only of by-law 4(c)but also of clauses 4 & 32 of the Agreements. By-law 4(c) of the1974 by-laws correspond with by-law 4(c) of the proposed 1982by-laws. By-law 4 (c) prohibits a tenant from permitting any personother than a servant from using or occupying any part of the stall.Clause 4 prohibits a tenant from carrying on a trade which is notauthorised in the licence and clause 32 prohibits him from parting withthe possession of his stall.
It is however in the discretion of the Municipal Council underparagraph IV of the Agreements to terminate a tenancy for a breach ofa term of the Agreement which would, no doubt, depend on thecircumstances of each case. Pethiyagoda and Werellegama. theManager of Ceylon Oils & Fats Corporation had promptly admittedtheir fault in writing and undertook to revert to their original stalls. Nodamage had been caused to the stalls. In these circumstances theirtenancies were not terminated and they were directed to revert totheir original stalls within a week's time.
The Council, on the other hand, decided to terminate the tenanciesof the second petitioner on account of the structural alterations madeand their occupation of the stalls as a residential premises.
The other two unlawful acts that the second petitioner complains ofin the petition is that notice dated 22.3.85 (P427) informing her thatpermission granted to her to use the bare land sites is withdrawn and
requesting her to vacate the sites within fourteen days of the receipt ofthe letter. By a letter of the same date (P428) she was also directed todemolish and remove the light-weight temporary roof she hadconstructed over the concrete slab within fourteen days of the receiptof the letter.
The third- respondent in his affidavit- filed in, this court on 10.6.85states that he requested the second petitioner to remove thetemporary structure made by her, when, he saw that she hadadvertised her business for sale in the newspapers on three occasionscommencing on 17.-2,85 and feared that she intended to assign orsub-let them', which she had no right to do.'~
The respondents ..were unaware that the petitioners hadcommunicated with Mr. Paskaralingam. the Secretary to the Ministry'of Local Government, and had been advised by him rightly or wronglyby letter dated 1 1.2.85 (P456) to go ahead and fjnd buyers. It was inconsequence of this letter that the second petitioner assumed thatshe had the authority to advertise her business for sale.
Although a formal written, agreement had not been entered intobetween- the second petitioner and the Council in respect of theconcrete slab areas as in the case of the stalls, the second petitionernevertheless became a monthly tenant of the Council on the paymentof a monthly rental, by virtue of. the letters referred to earlier, butsubject to the conditions set out therein. They were blocks of bare'land and the Council had the right to terminate her tenancy and. request her to remove the temporary structures erected by her. Butsince they were monthly tenancies, notice of at least one monthshould have been given to the second’petitioner before terminatingthem. But by,P427 only fourteen days notice to vacate these siteswas given. As far as the structures are concerned the Council had theright to direct her to demolish and remove them.
The infringement of a fundamental right, for which relief is providedby Articles 1 7 and 1 26 of the Constitution, must be by executive oradministrative action. It is therefore incumbent on the petitioners, inthe first instance to establish that the wrongful acts of the threerespondents in terminating second petitioner's tenancies of sfalls No.
1 6, 1 7 & 18 by notice P426/3R6 and of the bare land areas by noticeP427 constitute executive or administrative action. The threerespondents are officers of the Kandy Municipal Council and it is
therefore necessary to ascertain whether the Municipal Council is anorgan or agency of the State, if their action is to be regarded asexecutive or administrative action.
It is contended by counsel for the respondents that the KandyMunicipal Council is a local authority having corporate status and isnot an organ of the State. The Indian Constitution, it is pointed out.unlike ours, expressly includes in the definition of "State", in Article 12'all local or other authorities within the territory of India or under thecontrol of the Government of India." It was further submitted that thesecond and third respondents belong to a different service, namely theLocal Government Service, and are subject to the disciplinary controlof the Local Government Service Commission, unlike Public Officerswho belong to the Public' Service. In Perera v. University GrantsCommission (supra) Sharvananda, C.J..as he then was. said at page112:
"The wrongful act of an individual, unsupported by Stateauthority, is simply a private wrong. Only if it is sanctioned by theState or done under State authority does it constitute a matter forcomplaint under Article 126. Fundamental rights operate onlybetween individuals and the State. In the context of fundamentalrights, the 'State' includes every repository of State power. Theexpression 'executive or administrative action' embraces executiveaction of the State or its agencies or instrumentalities exercisinggovernmental functions. It refers to exertion of State power in all itsforms."
In Wijetunga v. Insurance Corporation and Another (supra)Sharvananda, A. C. J., said again at page 6:
"Delegation of a State function to a party may make the party'saction, the action of the Government or thus make the Stateresponsible for such action. The decisive question is what is theinvolvement of the State, in the activity of the party concerned.When private individuals or groups are endowed by the State withpowers or functions, governmental in nature, they become agenciesor instrumentalities of the State subject to the constitutionalinhibitions-of the State. The inquiry is whether there is a sufficientlyclose nexus between the State and the action of the agencies that ischallenged, so that the action of the agencies may fairly be treatedas that of the State itself. Thus the relevant question is what is therelationship between the particular corporation whose acts are
challenged and the State? Is it a Department of Government orservant or instrumentality of the State? Whether the Corporationshould be accorded the status of' a department of government ornot must depend on its Constitution, its powers, duties andactivities. Those are basic factors to be considered. One must seewhether the Corporation is under government control or exercisesgovernmental functions. For determining the integral relationshipbetween the State and the Corporation we have to examine theprovision of the statute by which the Corporation has beenestablished
He then went on to say at page 14:
"It may be said that there are several criteria which from time totime the Judges have thought relevant. These include: Is the body
performing a task formerly carried on.by private enterprise?To
what extent is it subject to Ministerial control? Has it independent
discretionary powers?Must it consult a Minister before it acts?
Can a Minister give directions? Is its function one which hashistorically been regarded as go'vermental? Is it incorporated? Is itsubject to government audit? Is its authority general or local? Is it amere domestic body? Is execution against its property allowed?
The main criterion-
'now seems to be whether, the body is performing a functionanalogous to that performed by the Crown Servants and undersome degree of control by a Minister of the Crown'."
It is now necessary to determine whether the Municipal Council,Kandy on whose behalf these respondents acted, is ap agency orinstrumentality of the State by examining the functions it. performs andascertaining what control the State maintains .over it. MunicipalCouncils. Town Councils and other local authorities constitute what is.generally called Local Government and as the term signifies is adecentralised form of the Central Government.
Article 27 (4) of the Constitution provides that-"the State shall strengthen and broaden the democratic structureof government and the democratic rights of the people bydecentralising the administration and' by affording all possibleopportunities to the people to participate at every level in nationallife and in government."
It will be observed that the State has distributed some of its powersand functions among these various local bodies which exercise themwithin certain specified areas defined by the State. Under section 2 ofthe Municipal Councils Ordinance, it is the Minister of LocalGovernment who declares any area by order published in the Gazetteto be a Municipality within defined limits and a Municipal Council isthen constituted for that area in accordance with the provisions of theOrdinance. Under section 4,a Municipal Council is charged with theregulation, control and administration of all matters relating to thepublic health, public utility services and public thoroughfares andgenerally with the protection and promoton of the comfort,convenience and welfare of the people and the amenities of theMunicipality. These are clearly functions that were the responsibility ofthe State and which now have been transferred to Municipal Councilswith a view to relieving the State of the multifarious functions andduties that it would otherwise have to perform.
For the purpose of discharging the duties entrusted to it, isconferred among other powers, under section 40, the power toestablish and maintain public services like water supply, the lighting ofstreets, public places and public buildings, the supply of electriclighting or power to markets, public bathing places and any form ofpublic service. Under section 46 it is entrusted with the duty:
to maintain and cleanse all public streets,
to enforce the proper maintenance, cleanliness and repair of allprivate streets;
to supervise and provide for the growth and development of theMunicipality;
to establish and maintain any public utility service required forthe welfare, comfort or convenience of the public; and
generally to promote the public health, welfare and convenienceand the development, sanitation and amenities of theMunicipality.
These functions are clearly of a governmental nature and satisfy thefunctional test which makes the Municipal Council an agency orinstrumentality of the State.
The State also exercises control over Municipal Councils in variousways. Under section 7' the Minister is empowered by Order publishedin the Gazette to issue all directions as may be necessary orappropriate for the purposes of any preliminary arrangements inconnexion with the Constitution of any Municipal Council under thisOrdinance.
The power of a Municipal Council’to borrow money is restricted bythe requirement of Ministerial sanction in the instances set out insection 191 and 193 of the Ordinance.
An Annual Administration Report after the close of each financialyear showing a statement of accounts must be submitted by theMayor to the Minister, under section 218.
kA duplicate of the Auditor's report has to b.e sent to the Minister assoon as possible after the close of the financial year under section222. Under section 268, by-laws made by the Municipal Councilrequire the approval of the Minister and have to be confirmed byParliament and published in the Gazette before they become valid andeffectual.,
By section 277, as amended by Law No. 24 of 1977, the Ministeris empowered to remove the Mayor or any Councillor from office or todissolve the Municipal Council for any of the reasons specifiedthereunder.
The Minister also has the power to call for extracts of proceedingsof the Council under section 278, and for statistics connected withthe working, income and expenditure of a Municipal Council undersection 279. Section 280 empowers the Minister to make an inquiryinto the working of a Municipal Council.
Under section 289 as amended by Law No. 24 of 1 977, theMinister is empowered to make regulations generally for the purposeof giving effect to the principles and provisions of the Ordinance. Inthis manner the State exercises control over the administration andfinances of a 'Municipal Council', and the "governmental control test"is also satisfied, making a Municipal Council a State agency orinstrumentality. Actions of the Municipal Council and its officers arethus "executive or administrative action" within the meaning of Articles17 & 1 26 of the Constitution.
Wade in Administrative Law, 4th Ed. at page 1 22. summarises theposition of a local authority as follows:
' "It is needless to emphasise that local government is subjected to
Central Government in numerous and important waysand it is
probably through financial adminstration that the CentralGovernment's control makes itself most felt."
In the present case the second petitioner's complaint is of unequaltreatment and discrimination against her by the three respondents interminating her tenancies of stalls No. 16, 17 & 18 by letter P426,while dealing lightly with Pethiyagoda and the Ceylon Oils & FatsCorporation for breaches of their respective agreements.
Undoubtedly the Kandy Municipal Council entered into all theseagreements in the exercise of its statutory powers under section 157of the Municipal Councils Ordinance which enables it to let to tenantson lease or otherwise, on such terms as it may think fit any part (stall)of any public market. It is admittedly the respondents that the JatikaPola at Tomalin Park where these stalls are situate is a public market.
The Agreements entered into by the Council with the secondpetitioner incorporate in them the by-laws by virtue of clauses (f) and33 which impose an obligation on the second petitioner to complywith and not contravene the by-laws. They therefore form part andparcel of the terms and conditions of the Agreements and paragraphIV of the Agreement gives the Council the right to terminate a tenancyfor a breach of any term or condition of the Agreement. In the presentcase it is evident that the Council through the third respondentterminated the second petitioner's tenancies for breaches of clauses1 2 & 23 of the Agreements and by-law 18(d) which is also made aterm of the Agreement. The question now is whether Article i 2 of theConstitution can be invoked in dealings between the Council and thesecond petitioner, under the agreements entered into between them.
Learned Deputy Solicitor-General who appeared as amicus curiaecontended that in the field of contract involving the State and a privatecitizen, violation of fundamental rights have no place except at thethreshold stage of entering into the contract when the State acts in itsexecutive capacity while exercising a statutory power. But once thecontract is entered into, it is the terms and conditions of the contractalone that bind the State and the individual.
He relied for this proposition on two Indian cases: M/s.Radhakrishna Agarwal & Others -v: State of Bihar.& Others (supra).and Bat Krishnan Vaid v. The State of Himachal Pradesh & Others,(supra).
In AgarwaTs case (supra) the State Government had leased outsome forest land to the appellants to collect and exploit Sal seeds for15 years on payment of royalty at a certain rate, and the State underthe terms of the leases, revised the rate of royalty and thereafter,cancelled the lease for breach of certain conditions.
The contract was presumably executed in compliance with 'theprovisions of Article 299 of the Constitution, which relates tocontracts made in the exercise of the executive power of the Stateunder Article 298 which empowers it to carry on any trade or businessand make contracts for any purpose.
It was held there that—
"at the very threshold or at the time of entry into the field ofconsideration of persons with whom the Government could contractat all, the State, no doubt, acts purely in its executive capacity and isbound by the obligations which dealings of the State with individualcitizens import into every transaction entered into in the exercise ofits constitutional powers. But after the State or its agents haveentered into the field of ordinary contract'the relations are ho longergoverned by the constitutional provisions but by the legally validcontract which determines rights and obligations of the parties interse. No question arises of violation of Article 14 (which correspondswith Article 12 of our Constitution) or of any other constitutional. provision when the State or its agents,'purporting to act within thisfield, performs any act. In this sphere, they can'only claim rightsconferred upon them by contract and are bound by the terms of thecontract only, unless some statute steps in and confers somespecial statutory power or obligation on the State, in the contractual, field which is apart from contract." (The emphasis is mine).
Beg, C.J., in that case.at para 10, referred to Erusian Equipment &Chemicals Ltd. case (supra) where an order of blacklisting had theeffect of depriving a person of equality of opportunity in the matter ofpublic contract, and said that case-
"involved discrimination at the very threshold or at the time ofentry into the field of consideration of persons with whom thegovernment could contract at all."
The Supreme Court in that case approved of the classification madeby the Patna High Court of cases in which breaches of allegedobligations by the State or its agents could be set up. into three types.
The first category does not apply to the present case.
The second category is-
"where the contract entered into between the person aggrievedand the State is in the exercise of a statutory power under acertain Act or Rules framed thereunder and the petitioner allegesa breach on the part of the State."
The third category is-
"where the contract entered into between the State and theperson aggrieved is non-statutory and purely contractual and therights and liabilities of the parties are governed by the terms ofthe contract and the petitioner complains about the breach ofsuch contract by t|pe State."
The cases which belong to the second category are K. N.Gtliruswamy v. The State of Mysore (supra), D.F.O. South Kheri v.Ram Sanehi Singh (supra), and M/s. Shree Krishna Gyanoday SugarLtd. v. State of Bihar (supra).
In Guruswamy's case (supra) section 15 of the Mysore Excise Actof 1901 prohibited the sale of liquor without a licence from the DeputyCommissioner. Section 29 authorised government to make rules forthe purpose of carrying out the provisions of the Act. The relevantRules are:
Rule 1-1. "The privilege of retail vend of exercisable articles shallbe disposed of either by auction or by such other method as maybe notified by Government."
Rule I-2. "In cases where the right of retail vend is permitted byGovernment to be disposed of by calling for tenders, anotification calling for the same shall be published by the ExciseCommissioner in three successive issues of the Mysore Gazette,after obtaining the previous approval of the Governmenttherefor."
Rule 11-8. "The shops will be knocked down to the highest bidder,but the sale will be subject to formal confirmation by the DeputyCommissioner who shall be at liberty to accept or reject any bidat his discretion. Such formal confirmation will be tantamount toan acceptance of the bid unless revised by the ExciseCommissioner for special reasons"
Rule 11-10. "Shops remaining unsold at the first auction of shopsthe sales of which have not been confirmed but cancelled, willordinarily be disposed of by re-auction or by tender or otherwiseat the discretion of the Deputy Commissioner, later on."
The appellant Guruswamy and the fourth respondent Thimmappawere rival liquor contractors. The contract for the City & Taluk ofBangalore was auctioned by the third respondent, the DeputyCommissioner. The appellant's bid of Rs. 180,000 a month was thehighest and the contract was knocked down in his favour subject toformal confirmation by the Deputy Commissioner.
Thimmappa was present at the auction but did not bid. Instead ofthat he went direct to the Excise Commissioner behind the appellant'sback and made an offer of'Rs. 1 85,000.
The Excise Commissioner then made order cancelling the auction•sale and requested the Deputy Commissioner, Bangalore District, totake action under Rule 10 and forwarded to him the tender given byThimmappa.
The Deputy Commissioner informed the appellant that the sale hadbeen cancelled by the Excise Commissioner and made an order thatthe tender of Thimmappa is accepted.
It was held that although the Excise Commissioner exercised hisauthority a little irregularly because the tender did not reach himthrough the proper channel nevertheless the cancellation was for thegood reason that the government would be able to get an extra Rs.
a month as revenue. The cancellation was therefore proper andas the appellant obtained no right to the licence by the mere fact thatthe contract had been knocked down in his favour since theacceptance was subject to sanction, the appellant's prayer for amandamus' to confirm his right to the licence could not be granted.
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It was also held that the subsequent action of the DeputyCommissioner in giving the contract to Thimmappa was wrong sincethe procedure laid down in Rule II, 10 was not properly followed. ThatRule required that where the first auction is cancelled, the shops will.ordinarily be disposed of by re-auction or by tender or otherwise at thediscretion of the Deputy Commissioner. Here there was no re-auctionor tender and it was held that the words "or otherwise" had the samemeaning as specified in Rule 1.1, that is, by notification.
This was therefore a case where in the exercise of his statutorypowers the Deputy Excise Commissioner committed a breach of hisobligation to followthe procedure laid down in a Rule framed underthe Act, regulating the grant of the contract and the discrimination atthe threshold of the contract was referable to the statutory authorityto enter into the contracts.
In the D.F.O. South Kheri case (supra), an auction was held by theForest Officer and the petitioner Sanehi Singh purchased the right tocut timber from certain forest lots for the period 1.11.65 to31.10.66. On 10.1.1967 the D.F.O., South Khen Division, passedan order that the sleepers "against the tally" dated 29.10.66 in theallotment of 1 965-66 season being "wrong" since they were cut inthe month of November, 1966, do stand cancelled and that thesleepers.be "passed against" the tally after getting the hammer-markscancelled and be "re-inspected against the allotment for 1966-67season." By that order the timber which the respondent claims wasactually removed by him with the sanction of the forest authoritiesunder the tally dated 29.10.1966 was to be treated as if it wasremoved in November, 1966.
Under the terms of the contract the D.F.O. had authority to modifyany action taken by a subordinate forest authority and it wascontended for the appellant that the remedy of the respondents wasto institute action in a civil court and that the writ petition was notmaintainable.
The High Court had held that since a competent officer dulyauthorised had already "passed the railway sleepers" and the decisionhad been given effect to, it was not open to the Divisional ForestOfficer to rescind the order. The Supreme Court was of the view thatthe order passed by a public authority modifying the order or
proceedings of a subordinate forest officer had deprived therespondent of a valuable right arid constituted arbitrary and unlawfulaction on the part of a public authority. In the circumstances it heldthat although the source of the right was initially in a contract the .respondent could resort to a petition by way of a writ and not to a civilsuit in order to obtain relief against the arbitrary and unlawful action ofthe public authority, since the order had to be made in a mannerconsonant with the rules of natural justice, when it affected therespondent's, right to property.
In that case the D.F.O. did not call for any explanation from therespondent nor give him an opportunity of being heard before makingthe order to his prejudice. The Supreme Court intervened because theorder of the D.F.O. was arbitrary and unlavyful and violated theprinciples of natural justice inasmuch as the original decision of theforest officer had already been given effect to. There was accordinglya violation of the fundamental rules of the Indian "Constitutional setup" that every citizen is protected against arbitrary authority by thestate or its officers. (The emphasis is mine). In State of Orissa v. Dr.(Miss) Binapani Dei (16) Shah, J:said: •
"We are unable to hold that merely because the source of theright which the respondent claims was intially in a contract, forobtaining relief against any arbitrary and unlawful action on the partof a public authority he must resort to a suit and not to a petition byway of a writ."
The Full Bench of the Allahabad High Court in Sitla Prasad v.Saidullah & Others (17) sought to explain th i decision in D.F.O. SouthKheri case (supra) on the basis that there was a purported exercise ofstatutory power by the D.F.O.; so that even if a right flowing undercontract was affected, it might be possible for the person to maintaina petition under Article 226 of the Constitution. It emphasised that thewrit petition was primarily directed against the illegal exercise ofstatutory power which adversely affected the petitioner s contractualrights.
It will be observed that under Article 226 of the Indian Constitutionthe High Court, has the power to issue writs for the enforcement offundamental rights as well as non-fundamental or ordinary legal rightsor for any other purpose where it may be just or expedient for thecourt to intervene. The Supreme Court on appeal intervened because
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of the arbitrary and unlawful action of a State Officer and the violationof an ordinary'legal right, viz. the principles of natural justice in thepurported exercise of his statutory powers.
In The Allahabad Full Bench case the petitioner was appointed asthe authorised retailer under the provisions of U. P. Sugar ControlOrder 1966 for the sale of sugar, by agreement between him and theDistrict Magistrate. On a complaint against the petitioner theagreement was terminated by the District Magistrate under the termsof the agreement after getting an enquiry made, but without affordingany opportunity to the petitioner to have his say in the matter. Theagreement nowhere provided that before terminating the agreementthe District Magistrate will have to afford an opportunity to the dealerconcerned to have his say in the matter.
It was held that by terminating the agreement the District Magistratedid not interfere with the right of the petitioner which could be securedby filing a petition under Article 226 of the Constitution. Infringement,if any, was of the petitioner's contractual rights, which he could, if so,advised, secure in a properly instituted suit. The cancellation, if at all,infringed merely a contractual right and nothing else. In such a casethe question of following the principles of natural justice did not arise.
The third case is M/s. Shree Krishna Gyanoday Sugar Ltd. &Another v. The State of Bihar & Another (supra). In this case tne StateGovernment in the exercise of its statutory functions under section 22of the Bihar & Orissa Excise Act granted the exclusive privilege formanufacturing and supplying of country spirit to governmentwarehouses in North Bihar for a period of three years to the petitioner.In view of a writ application filed by the petitioner the order of the StateGovernment was stayed. During the pendency of the writ applicationthe petitioner, after discussions with the Excise Commissioner agreedto maintain supplies of country spirit to the Government Warehouses,as he was doing under an earlier contract at the rate of 33 paise perLondon Proof litre provisionally, pending the writ application, becausethe new rate accepted by the State Government was 42 paise perLondon Proof litre.
After the writ application was dismissed the petitioner requested theExcise Commissioner to make payment at the rate of 42 paise perLondon Proof litre. When he failed to comply with the request thepetitioner appealed to the Board which had supervisory powers over
the Excise Department and it directed the Excise Commissioner tomake payment at that rate on the basis that such an assurance hadbeen given. The State of Bihar and the Excise Commissioner then fileda writ petition to quash this order for several reasons, one being thatno licence had been issued to the petitioner, pending the earlier writapplication.
Nagendra Prasad Singh, J.. said at para 15:
"In my judgment the petitioner had agreed and acted to itsprejudice on the basis of the assurance given by the ExciseCommissioner, and it is not now open to the Excise Commissioneror the State Government to take the plea that the supplies made bythe petitioner were without any licence and as such, it was notentitled to found its claim on the basis of the statutory order passedby the State Government."
The learned judge went on to say:
"This aspect of the matter has been- considered in severaljudgments of the Supreme Court, where it has held that courts havepower in appropriate cases to compel performance of theobligations imposed upon departmental authorities by orders whichare executive in character, when they find that any person has actedto his detriment on solemn promises made by the State Governmentor its authorities concerned. I am inclined to hold that there hasbeen a substantial compliance with section 22 (2) of the Act."
He referred to the Union of India v. M/s. Anglo Afghan Agencies(18) which dealt with the case whether persons acting onrepresentations made by government can claim in the absence of theexecution of a formal contract under Article 299 of the Constitution,that government shall be bound to carry out its promise.
Shah, J., in that case at para 10 said:
"Under our Constitutional set up no person may be deprived of hisright or liberty except in due course of and by authority of law; if amember of the executive seeks to deprive a citizen of his right orliberty otherwise than in exercise of power derived from thelaw-common or statute-the courts will be competent to, andindeed, would be bound to protect the rights of the aggrievedcitizen." (The emphasis is mine).
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This was therefore a case where there was a violation of the"Constitutional set up" a term coined by the same learned judge in theD.F.O. South Kheri case (supra).
The third category of cases is where the contract entered intobetween the State and the person aggrieved is non-statutory, andpurely contractual and the rights and liabilities of the parties aregoverned by the terms of the contract and the petitioner complains ofthe breach of such contract by the State.
"Non-Statutory" here, in my view means, not that the contract doesnot originate in the exercise of a statutory power, but that the contractcontains no statutory terms or obligations on the part of the State abreach of which is remediable outside the contract. A State cannotenter into a contract except by virtue of Article 298 of the Constitutionor under a statutory power. In Agarwal's case (supra) the lease tocollect and exploit sal seeds from a forest was entered into by theState by virtue of its executive power under Article 298 of theConstitution. But what was held in that case was that-
"the contract did not contain any statutory terms or obligations,
and no statutory power or obligation which could attract the
application of Article 14 was involved."
It therefore fell closely into the third category of contracts pure andsimple where the parties are governed only by the terms of thecontract.
In Lekhraj Sathram Das Lalvarti v. N. H. Sheh & Others (supra), theproprietors of two firms had in 1947 migrated to Pakistan and boththese firms became vested in the custodian of Evacuee Properties forthe State of Madras under section 8 of the Administration of EvacueeProperty Act 1950 On 6.3.52 the appellant was appointed asmanager of the two firms under section 10(2) (b) of the 1950 Act, Byorder dated 18.12.59 the management of the appellant wasterminated and the possession of the business taken over by thedeputy custodian. The appellant filed a writ petition to quash thatorder in the High Court of Kerala and having failed there, brought thepresent appeals. In this case the appointment was made under astatute but it was held to be contractual, in the absence of anystatutory obligation between the custodian and the appellant andaccordingly the appellant was not entitled to a writ.
In the second case. Umakant Saran v. State of Bihar (supra) thecomplaint of the appellant was that the 5th & 6th respondents whowere both junior to him in service without teaching qualifications hadbeen illegally appointed lecturers in surgery at Rajendra MedicalCollege, Ranchi, in disregard of his own claim to the post. He prayedfor the issue of a mandamus for setting aside these appointments. Buton the day when the State Government had taken the decision to fillthe posts the appellant was not eligible for appointment since he hadnot completed the minimum period of three years' teachingexperience, while the respondents had done so. Irwas therefore heldon the facts, that while the respondents were eligible for appointmentas lecturers the appellant was not, and therefore could not beregarded as aggrieved for the purpose of issue of mandamus forsetting aside the appointments of the respondents. This was also acase where there were no statutory obligations or duties on the State,which had been violated. It was a contract pure and simple.
In Sinha v. State of Bihar (supra) the petitioner who was anunemployed engineer was given a contract by the SuperintendingEngineer, Flood Investigation Circle, Muzaffapur, for earth-work inGupta Bund on 29.12.1971. This was in accordance with the policylaid down by the government. The work was to be completed by31.1.1972. The grievance of the petitioner is that although the datefor completion had expired before he could finish the work, freshtenders were invited by advertisement and arbitrarily and illegally hispart of the work was given to the 6th & 7th respondents. Thepetitioner filed an application for a writ of mandamus commanding the3rd & 4th respondents to grant adequate extension of time for him tocomplete the work and to declare the agreement in favour of the 6th &7th respondents void and illegal. Untwalia, C.J., of the Patna HighCourt said at page 23 T-
"I am conscious of the fact that under certain circumstances awrit of mandamus can issue to compel the authorities concerned todo certain acts even though they related to contractual rights. But insuch a situation the contractual right of a petitioner is affected notmerely by a- breach of contract on the part of the authoritiesconcerned but also because of their violation of statutory duties.The matter stands on a different footing if the action which is takenby the authorities concerned is in violation to their statutory duties.In the instant case, however, it is clear on the fact and in the
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circumstances of this case that as between the two contractingparties to the contract, pure and simple, one of them is said to havecommitted a breach…I am. therefore, definitely of the view thatuntil and unless in the breach is involved violation of certain legal andpublic duties or violation of statutory duties to the remedy of whichthe petitioner is entitled by the issuance of a writ of mandamus,mere breach of contract cannot be remedied by this court inexercise of its powers under Article 226 of the Constitution."
In this case also there were no obligations and duties involved whichhad, been violated by the State.
Bal Krishnan Vaid v. The State of Himachal Pradesh & Others(supra) was a case where the State entered into a contract in theexercise of its statutory powers. The Mines & Minerals (Regulation &Development) Act 1957 provided fir the granting of prospectinglicences and mining leases. The Himachal Pradesh Mines andMinerals (Concession) Revised Rules 1971 which were framed undersection 1 5(1) of the Act. purported to give effect to its provisions sofar as they related to mines and minerals. Rules 28 to 33 provided forthe grant of contracts to carry, win. work and carry away any minedminerals specified in the contract through open action or by invitingtenders. Rule 33 provided that when a bid is confirmed or a tender isaccepted the bidder or tenderer shall execute a deed in Form K'. Thepetitioner executed an agreement in Form 'K' and clause 30 of theagreement stipulated that:
"a contract may be terminated by the government if consideredby it to be in the public interest by giving one month's
notice;Neither in the Act nor in the rules was there any specific
provision empowering the government to terminate a contract in thepublic interest. The provision is to be found only in the agreement inform K' prescribed by rule 33."
The petitioner received a notice purporting to be under clause 30 ofthe agreement that his contract would be terminated on the expiry ofthirty days from the date of issue of the notice. It was held that theauthority for the termination of the contract on the ground that it wasnot in the public interest was a right founded in contract and not apower issuing from the statute and the remedy by way of a writ couldnot be claimed in respect of its breach.
Pathak, C.J., said in regard to the petitioner's contention that he hasbeen the victim of discrimination inasmuch as no such action has beentaken in respect of the contracts of the other two persons:
"To my mind, this contention must also fail on the finding that thecomplaint of the petitioner arises out of a breach of contract. Thepetitioner’scase in regard todiscrimination is based on Article 14 ofthe Constitution (which corresponds with our Article 1 2). To invokeArticle 14, it must be shown that the State has acted in the context• of law. When the government is party to a contract and it exercisesa right by virtue of such contract it is a matter falling within thesphere of contract. If the government, having entered into contractswith different persons, arbitrarily terminates the contract of oneperson only its action must necessarily be referred to its contractualcapacity from which the contract and the impugned action .flow.Had the discrimination been applied in the course of granting acontract, as was the case in K. H. Guruswamy v. State of Mysore(supra), the discriminatory action of the • government would bereferable to its statutory authority, because the statute empowersthe government to enter into such contracts. But once the contracthas been concluded between the government and an individual anyaction taken by the government in the application of a term orcondition of the contract must be attributed to the capacity of thegovernment as a contracting party. When the government passesfrom the stage of granting a contract to the stage of exercisingrights under it, it passes from the domain of statutory power into therealm of contract. And as was observed by the Supreme Court inC. K. Achutan v. State of Kerala (19).
"…A contract which is held from the Government stands on nodifferent footing from a contract held from a private party. In myopinion, Article 14 of the Constitution cannot be invoked by thepetitioner."
Vaid's case (supra) which was decided in 1957 does not appear tohave been considered in the later case of Agarwal (supra) by theSupreme Court. Nevertheless the Judges in both cases have taken thesame line of reasoning and come to similar conclusions on the law.There are therefore two independent decisions of the Indian courts,one of the High Court and the other of the Supreme Court laying downthe same principle of law. I am of opinion that the decisions set out thelaw on the point correctly and follow them.
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In the present case the second petitioner's tenancies of stalls 16.
1 7 & 18 have been terminated on two grounds. One is the breach ofthe prohibition against making alterations to stalls, which is found onlyin clause 12 of the Agreements and not in any by-law applicable to thestalls in question, incorporated in the Agreements. The authority forthe termination of the tenancies on this ground is by virtue ofparagraph IV of the Agreements, which is a right founded only incontract and not a power issuing from a statute. It is a term of theAgreements that is binding on the parties. The Council's right toterminate the tenancies, thus, is under the contracts and is notreferable to any statutory power or obligation, apart from thecontracts. A complaint of discrimination in violation of Article 1 2 of theConstitution therefore cannot be invoked in a contract pure andsimple.
In the result, the second petitioner's application fails. But since shealleges that the by-laws, which are incorporated in the Agreements,have been unequally applied to her, in violation of her fundamentalrights, I shall proceed to deal with that aspect of the matter.
The second ground for the termination of the second petitioner'stenancies, is that she used the stalls as a residential premises, that is,by remaining in them at night. The appropriate by-law applicable is18(d) which prohibits sleeping within the premises of any PublicMarket after it is closed. Clause 23 of the Agreements does not permita tenant or his servants to remain inside the Market premises between9 p.m. and 6 a.m.
The by-laws have been incorporated in the Agreements by clauses(f) and 33, and form part and parcel of the terms and conditions of tneAgreements. In Vaid's case (supra) Pathak, C.J., said:
"If the term or condition which creates the right or obligation iscontained in the statute and has legal force as a provision of thestatute then the violation of the term or condition is a violation of thestatute, and that is so even if the term or condition is incorporated ina contract between the parties"
By-law 1 8(d) is incorporated as a term of the Agreements and haslegal force as a provision of the statute, by virtute of section 268(2) ofthe Municipal Councils Ordinance, and a violation of that term of theagreements is a violation of a statute. A contravention of this by-law is
made punishable with a fine under by-law 53, but it is only afterprosecution and on conviction that the Council is empowered bysection 156(c) read with section 156(a) of the Municipal CouncilsOrdinance to terminate the tenancies.
In the present case the Council did not prosecute the secondpetitioner and obtain a conviction against her for a breach of thisby-law, so that her tenancies could not have been terminated on thisground. Nevertheless the Council terminated her tenancies.
Pethiyagoda and the Manager of the Ceylon Oils & Fats Corporationalso committed a breach of by-law 4(c) and the corresponding clause32 of the Agreements. A contravention of the by-law was alsopunishable with a fine only under by-law 53', though upon convictiontheir tenancies could have been terminated under section 1 56(c) and
of the Ordinance. They were not prosecuted and convicted andtheir tenancies were not terminated.
The grievance of the second petitioner therefore is that in theapplication of the by-laws, she was unequally treated in that for abreach of a by-law committed by all three of them, only her tenancieswere terminated while the tenancies of the other two were not. Shethus complains of a violation of her fundamental right to equalitybefore the law as guaranteed by Article 12 of the Constitution.
Before Article 1 2 of the Constitution can be invoked it must beshown that the Council acted in the context of the law. "Law" asdefined in Article 1 70 of the Constitution means-
"Any Act of Parliament and any lavy enacted by any legislature at
any time prior to the commencement of the Constitution."
Section 268(2) of the Municipal Councils Ordinance provides that aby-law shall be "valid and effectual, as if it were herein enacted."Hence a by-law would come within- the definition of "law" for thepurposes of Article 1 2 of the Constitution.
The Municipal Council has sought to terminate the tenancies of thesecond petitioner for what in effect is a breach of by-law 18(d) but didnot terminate the tenancies of the other two persons for breaches ofby-law 4(c). Undoubtedly the Council could not have terminated thesecond petitioner's tenancies for a breach of that by-law in view of the
fact that it had not prosecuted her under by-law 33 and obtained aconviction against her as required by section 1 56(c) & (a) of theMunicipal Councils Ordinance. The same applies to the other twopersons, but in their case the tenancies were not terminated. Thetermination of the second petitioner's tenancies for a breach of thatby-law is clearly unlawful and the remedy for it lies elsewhere.
The Agreements by incorporating these particular by-laws in themhave conferred a statutory power or obligation on the MunicipalCouncil which is apart from contract. The Council's action is thusreferable to its statutory authority and the breach complained of is of astatutory obligation. .
However, in order, to invoke Article 1 2 of the Constitution on theground of unequal treatment and discrimination, the second petitionermust show that she has been treated differently from the two otherpersons who were similarly circumstanced without any rational basisand that such differential treatment was unjustifiable.
Quite clearly the second petitioner and the two other personscannot be said to have been similarly situate. The second petitionerhad committed two wrongful acts, one in breach of the terms of theAgreements for which her tenancies were liable to be terminated, andthe other for a breach of a by-law. The other two persons hadcommitted only one wrongful act in breach of a by-law for which, asstated above, their tenancies could not have been terminated. Thesecond petitioner had thus failed to establish that she and the othertwo persons were similarly circumstanced and her complaint ofunequal treatment in violation of Article 1 2 of the Constitution mustfail on the ground of a breach of the by-laws. In any event Article 12 ofthe Constitution cannot avail her since her tenancies have beenlawfully terminated for a breach of the Agreements.
In view of the conclusion reached by me, it is unnecessary toconsider the other objections raised by the respondents.
I therefore dismiss the application of the petitioners, but in thecircumstances of this case, I make no order for costs.
Application dismissed.