WICKREMATUNGA v. ANURUDDHA RATWATTE AND OTHERS

027-SLLR-SLLR-1998-1-WICKREMATUNGA-v.-ANURUDDHA-RATWATTE-AND-OTHERS.pdf


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Wickrematunga v. Anuruddha Ratwatte and Others
201
WICKREMATUNGA
v.ANURUDDHA RATWATTE AND OTHERS
SUPREME COURTAMERASINGHE, J„
WIJETUNGA, J. ANDGUNASEKERA, J.
S.C. APPLICATION NO. F.R. 228/96NOVEMBER 7TH, 1997.
Fundamental Rights – Agreement for dealership in petroleum products -Termination of agreement – Articles 12 (2) and 14 (1) (g) of the Constitution -Executive, or Administrative action – Distinction between ‘Private’ and 'Public' lawmatter.
The petitioner was a ‘Dealer' in petroleum products appointed by the 2ndrespondent Ceylon Petroleum Corporation subject to terms and conditionscontained in an agreement made on 16.3.1988. He was carrying on business atthe Lanka Filling Station, Narahenpita. According to the petitioner, on 12.1.1996agents of the Corporation arrived at the Riling Station and ordered the employeesof the petitioner to leave the premises. On hearing about it, the petitioner visitedthe Riling Station when he was served with a letter stating that his appointmentas a Dealer had been terminted. The Corporation pleaded the following groundsin defence of the termination.
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The agreement was terminated for good cause as set out in the affidavitof the Corporation including alleged misconduct, lapses and malpracticeson the part of the petitioner, in violation of the terms and conditions ofthe agreement.
The agreement was terminable for default without notice and withoutassigning any reason whatsoever.
The activities of the Corporation did not constitute "Executive orAdministrative action" within the ambit of Articles 17 and 126 of theConstitution.
The termination of the agreement was a matter of "private" and not "public"law; hence it was not subject to constitutional restrictions relating to thefundamental rights and freedoms.
Held:
The Corporation had no cause to terminate the agreement; the allegedmalpractices were totally without foundation; and the allegations ofmisconduct and lapses have not been borne out by the documentsproduced in support of the allegations.
The power to terminate the agreement without notice and without assigningany reason did not mean that the terms of the agreement permitted theCorporation to terminate the agreement merely because it was minded todo so. A public corporation must act in good faith and act reasonably.The concept of unfettered discretion is inappropriate to a public authority.
Having regard to the degree of state control over the Corporation and thenature of its functions and powers, the Corporation is an instrumentalityor agent of the government subject to constitutional restraints pertainingto fundamental rights and freedoms.
"Law" in Article 12 of the Constitution includes regulations, rules, directions,principles, guidelines and schemes that are designed to regulate publicauthorities in their conduct. In the context, whilst Article 12 erects no shieldagainst merely private conduct, public authorities must conform to consti-tutional requirements, in particular to those set out in Article 12 even inthe sphere of contract; and where there is a breach of contract and aviolation of the provisions of Article 12 brought about by the same setof facts and circumstances, the aggrieved party cannot be confined to hisremedy under the law of contract.
The termination of the agreement was arbitrary, discriminatory on accountof political opinion and violative of the petitioner's rights under Articles12 (2) and 14 (1) (g) of the Constitution.
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Cases referred to:
Westminster Corporation L & N.W. Railway (1905) A.C. 426, 430.
Sevenoaks DC v. Emmett (1979) 39 P & CR 404.
Padfield v. Minister of Agriculture, Fisheries and Food (1968) A.C. 997,1032,1053, 1061.
Village of Arlington Heights v. Metropolitan Housing Development Corporation429 U.S. 252, 97 S.CL 555, 50 L Ed. 2d. 450 (1977).
Ramana v. International Airports Authority of India AIR 1979 S.C 1628.
Ajay Hasia v. Khalid Mujib Air 1981 S.C. 487.
Burton v Wilmington Parking Authority 365 U.S. 715, 815, S. Ct. 856, 6LEd. 2d. 45 (1961).
Flagg Brothers Inc., v. Brooks 436 U.S. 149, 98 S. CL 1729 56 L Ed. 2d185 (1978).
Terry v. Adams 345 U.S. 461, 73 S. Ct. 809, 97 L Ed. 1152 (1953).
Rahuma Umma v. Berty Premalal Dissanayake (1996) 2 Sri LR 293.
Deshapriya and another v. Municipal Council, Nuwara Eliya and others (1995)1 Sri LR 362.
Faiz v. Attorney-General and others (1995) 1 Sri LR 372.
Upaliratne v. Tikiri Banda and others (1995) 1 Sri LR165.
Marsh v. Alabama 326 U.S. 501, 66 S. Ct. 276,90 LEd.265(1946).
Evans v. Newton 382 U.S. 296, 86 S. Ct. 486, 15 L Ed. 2d. 373 (1966).
Jackson v. Metropolitan Edison Co. 419 U.S. 345, 95 S. CL 449, 42 L Ed.2d 477 (1974).
Memphis Light, Gas and Water Division v. Craft 436 U.S. 1, 98 S. Ct. 1554,56L Ed. 2d. 30 (1978).
Dahanayake v. De Silva (1978 – 79 – 80) Sri LR 47, 53 – 54.
Sukhdev Singh v. Bhagatram A.I.R 1975 S.C. 1331.
Somi Prakash v. Union of India A.I.R 1981 S.C.212.
Rendell – Baker v. Kohn 457 U.S. 830, 102 S. Ct.2764,73 LEd2d.418
(1982).
Kuruppuge Don Somapala Gunaratne and others v. Ceylon PetroleumCorporation and others S.C. Application No. 99/96, S.C. Minutes 31 July 1996.
Ratmalana Electorate Development Foundation v. Ceylon PetroleumCorporation and others S.C. 97/96, S.C. Minutes 1 August, 1997.
Basheshar Nath C.l.T. Delhi and Rajasthan (1959) Supp. I S.C.R 528, 551.
Perera v. Jayawickrema (1985) 1 Sri LR 285, 301.
Wijenayake v. Air Lanka (1990) 1 Sri LR 293.
Wijeratne v. The People's Bank (1984) 1 Sri LR 1, 10. 13.
Roberts and another v. Ratnayake and Others (1986) 2 Sri LR 36.
C. K. Achutan v. State of Kerala A.I.R 1959 S.C. 490.
Akbar Ahad v. State of Orissa 1971 Orissa 207.
BalKrishnan v. The State of Himchal Pradesh and others A.I.R 1975 HimchalPradesh 10, 34.
Radhakrishna Agrawal v. Bihar (1977) 3 S.C.R. 249.
SmithKIine Beecham Biologicals S.A. and another v. State PharmaceuticalCorporation and Others (1997) 3 Sri LR 20.
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Sri Lanka Law Reports
(1998) 1 Sri L.R.
Lugar v. Edmonson Oil Co. Inc. 457 U.S. 922, 102 S. Ct. 2744, 73 L Ed.2d., 482 (1982).
Yick Wo v. Hopking 118 U.S. 356 (1886).
Plyler v. Doe 457 U.S. 202; 102 S. Ct. 2382, 72 L Ed. 786 (1982).
Palihawadana v. Attorney-General F.R.D. Vol. 1,1.
Jayanetti v. Land Reform Commission (1984) 2 Sri LR 172, 184.
Shelly v. Kraemer, 334 U.S. 1, 68 S. Ct. 836, 92 L Ed. 1161 (1948).
Amzathul Zareena ami others v. The National Housing Development AuthorityS.C. Application 283 – 293/94 S.C. Minutes 22 June, 1995.
Nanayakkara v. Bandusena and others S.C. Application 572/95 S.C. Minutes1 February, 1996.
Peiris v. De Silva and others S.C. Application 221/95 S.C. Minutes 27 March,1996.
Gunasinghe v. Divisional Superintendent of Post Office, Matale, S.C.Application 4/96 S.C. Minutes 26 July 1996.
Gunaratne and others v. Ceylon Petroleum Corporation and others S.C.Application No. 99/96 S.C. Minutes 31 July, 1996.
Gamini Atukorale and others v. De Silva (I.G.P.) and others (1996) 1 SriLR 280.
Priyangani v. Nanayakkara and others (1996) 1 Sri LR 399.
Athukorala v. Jayaratne and others (1996) 2 Sri LR 413.
Krishna Mining Co. (Ceylon) Ud., v. Janatha Estates Development Board andothers (1996) 2 Sri LR 209.
Chandrasena v. Kulatunga and others (1996) 2 Sri LR 327.
Tennakoon v. De Silva (I.G.P.) and others (1997) 1 Sri LR 16.
Manage v. Kotakadeniya (P. Ms. General) and others (1997) 1 Sri LR 204.
F.C.I. v. Kamedhenu Cattlefeed Industries (1993) 1 S.C.C. 71.
Srilekha Vidarthi v. State of U.P., A.I.R (1991) S.C. 537, 550.
APPLICATION for relief for infringement of fundamental rights.
Romesh de Silva, PC with Geethaka Gunawardena for the petitioner.
K. Sripavan OSG for the 1st and 4th respondents.
Faisz Musthapha, PC with Kushan de Alwis and Sanjeewa Jayawardena for the2nd respondent.
A. A de Silva with G. D. Piyasiri for the 3rd respondent.
Cur. adv. vult.
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December 17, 1997.
AMERASINGHE, J.
The second respondent, the Ceylon Petroleum Corporation, (herein-after referred to as the 'Corporation') appointed the petitioner a "Dealer"in petroleum and petroleum products at the Lanka Filling Station, 570,Elvitigala Mawatha, Narahenpita, (hereinafter referred to as "the FillingStation"). The terms and conditions of the appointment were set outin a written document made on the 16th of March, 1988 (hereinafterreferred to as the Agreement').
Although since 1988 the petitioner had been paying by chequefor the items purchased from the Corporation, on the 11th of July,1995, the Area Manager of the Corporation had telephoned thepetitioner and informed him that the credit facilities, hitherto enjoyedby him would no longer be available.
The petitioner, therefore, continued to function as a Dealer,purchasing the products with cash. On the 12th of January, 1996,agents of the Corporation – the petitioner states it was a "large group";the Manager (Marketing) of the Corporation says there were only threeofficials of the Corporation, including the Area Manager – arrived atthe Filling Station and ordered the employees of the petitioner to leavethe premises. When he heard of this, the petitioner went to the FillingStation. The petitioner was then given a letter by the Area Managerof the Corporation stating that his appointment as a Dealer had beenterminated. The petitioner states in his affidavit, that, he left the RilingStation. The Manager (Marketing), in paragraph 14 of his affidavitstates that the premises were "handed over to the Area Managerwithout protest". The Corporation in its written submissions states: "Thepetitioner's agents had relinquished the possession of the filling stationpeacefully without protest". The petitioner was required by clause 29of the agreement to hand over peaceful possession of the premisesupon termination of the agreement. As every law abiding citizenrespecting the rule of law ought to do, the petitioner left his rightsto be decided by a court of law.
On the 9th of February, 1996, the petitioner filed a petition inthe Supreme Court alleging that his fundamental rights had beenviolated. Leave to proceed was granted on the 14th of February, 1996,
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in respect of the alleged violations of Articles 12 (2) and 14 (1) (g)of the Constitution.
Article 12 (2) states: 'No citizen shall be discriminated against onthe grounds of race, religion, language, caste, sex, political opinion,place of birth or any one of such grounds . . ."
The Corporation denies the petitioner's averment that the Agree-ment was terminated on political grounds. It states that the Agreementwas terminated for “good and lawful cause". In response to thepetitioner's averment that “no complaint whatsoever was made againsthim and . . . (that) he received no reprimand from the (Corporation)for his work from 1988 to 1996 January 12th“, the Manager (Marketing)of the Corporation specifically denied the petitioner's averment andreferred to the fact that “the petitioner had issued several chequesto the (Corporation) . . . which had been returned dishonoured. .and this he says was “much to the financial prejudice of the. . .Corporation". There were seven such cheques; three of them wereissued in 1989, two in 1991 and the third in 1994. The Corporationexplained that if dishonoured cheques are issued, and the Corporationnevertheless, "in order to ensure that the public is not inconveniencedby the interruption in supply", supplies the errant Dealer withpetroleum, “then the (Corporation) incurs the risk of suffering in theevent of continued default. Therefore, … as a result of a dealerissuing cheques which are dishonoured, the (Corporation) suffersconsiderable financial prejudice …"
The petitioner states that “If ever a cheque was dishonoured theamount of the dishonoured cheque was paid immediately to the(Corporation).” This has not been denied by the Corporation. The caseof the petitioner was not one in which he had been supplied petroleumwhile he was indebted and in which there was a “risk … of continueddefault". In the circumstances, in my view, the allegation of “much. . . financial prejudice" caused to the Corporation by the issue ofseven dishonoured cheques over a five-year period, when cash set-tlements were promptly made, is an unwarranted allegation.
The petitioner further points out that no cheque was dishonouredafter 1 December, 1994; that he had continued to transact businesswith the Corporation without any complaint from the Corporation abouthis creditworthiness but that on the 11th of July, 1995, without any
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reason being given, the facility afforded him to pay by cheque waswithdrawn.
The petitioner appealed against the decision to Her Excellency thePresident. Although the matter had been referred to the Ministryresponsible for the Corporation, no action had been taken on thematter, except the acknowledgement of the receipt of the petitioner'sappeal. The Corporation sought to justify ignoring the appeal to thePresident: It maintained that, although clause 2A of the agreementstates that "Delivery of petroleum products by the Corporation to thedealer shall be against payment in cash or on such other terms andconditions as the Corporation may, from time to time, determine andintimate by letter to the dealer . . .", yet payment by cash is the"principal form of payment"; “the facility afforded to the petitionerwhereby he could pay for his pruchases by cheque instead of cashwas a concession granted to him and cannot be claimed as of right"
Admittedly, the decisions to grant the facility was a matter ofdiscretion. Yet, in my view, it was not an arbitrary discretion: It wasa discretion to be exercised reasonably, fairly and justly and notexercised merely because the Corporation was minded to do so. Thefacility granted to the petitioner was a valuable one and its withdrawalshould not have been made unless the Corporation had some rationalbasis for doing so. Even if it had grounds each time a cheque wasdishonoured, the Corporation had accepted the cash payments thathad been promptly made and continued the facility. There was nocause for complaint between December, 1994 and July, 1995. Whatwas the basis for suddenly withdrawing the facility? Even if theCorporation was not bound to give the petitioner reasons for thewithdrawal of the facility, in my view the failure to do so in thecircumstances of this case, which I have referred to, point toarbitrariness.
It was submitted by the Corporation that "Even if the statementof the petitioner that the credit facility made available to him waswithdrawn by the (Corporation) without a just cause is correct . . .the petitioner cannot seek relief. . . regarding the withdrawal as thesame was done on 11. 7.1995 … (and the petitioner has therefore)not come within the time period specified by Article 126 (2) of theConstitution to seek relief regarding the said withdrawal". The reliefclaimed by the petitioner is with regard to the termination of the
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agreement resulting in his not being able to function as a Dealer, andnot in respect of the withdrawal of the facility. The withdrawal of thefacility is a part of the historical background of the decision of theCorporation that is challenged, namely the termination of theagreement; it is an evidentiary source. The petitioner relies upon itas one of a sequence of events that sheds light on the Corporation'salleged invidious purpose in terminating the agreement.
From the Corporation's point of view, the question of dishonouredcheques was brought in by the Manager (Marketing) to refute thespecific allegation of the petitioner that no complaint against him andno reprimand had been made against him from 1988 to January 12,1996. The Corporation has not established that there was anycomplaint or reprimand at any time with regard to the matter ofdishonoured cheques.
The Corporation also relied on the matter of the dishonouredcheques to justify the termination of the agreement, citing in supportthe clause of the agreement that stated as follows: ‘Failure to payand settle in full all monies due to the Corporation . . . will entitlethe Corporation to terminate the agreement without any notice what-soever." As we have seen, at the time, of the withdrawal of the facility,the petitioner was not guilty of having failed to pay and settle anymonies due to the Corporation. Indeed, there had been no occasionfor complaint on that account during the period of about six monthsimmediately before the withdrawal of the facility. In the absence ofan explanation as to why the facility was continued for so many monthsafter the last default without complaint or warning, I am unable toaccept the explanation of the Corporation that the sudden withdrawalwas related to the defaults committed earlier, for they are too remoteand far removed from the termination of the facility to be regardedas the cause for the withdrawal of the facility.
The petitioner's application relates to the termination of the Agree-ment that brought to an end his occupation and business as a Dealerin petroleum and petroleum products. The petitioner alleged that thesudden termination, without any warning or notice or any reasons beingassigned was on account of discrimination on grounds of politicalopinion. The first and second respondents deny this and state thatin terms of clause 12B of the agreement". . . the Board of Directorsmay by resolution passed at a meeting of the Board of Directors
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terminate the agreement without notice and without assigning anyreason whatsoever". The termination was based on a decision of theBoard. The Manager (Marketing) explained that the decision of theBoard was based upon his recommendation to terminate ". . . thepetitioner's dealership on account of various shortcomings in theadministration of the outlet including under-delivery of petroleum toconsumers and failure to comply with instructions". In its writtensubmissions, the Corporation states as follows:
"19. In view of the numerous irregularities and offences whichhad been perpetrated by the petitioner in violation of the termsand conditions of the dealership agreement, the Marketing Manager(sic) of the (Corporation) submitted a Board Paper to the Boardof Directors of the (Corporation) recommending the termination ofthe dealership agreement with the petitioner.
It is respectfully submitted that this measure had becomenecessary and indeed imperative in view of the highly unsatisfactoryrecord of the petitioner involving the negligent, careless andirresponsible conduct of the dealership operation conducted bythe petitioner.
In view of the foregoing circumstances, the Board ofDirectors of the (Corporation) took cognizance of the recommen-dation made by the Marketing Manager (sic.) and passed aresolution to terminate the dealership of the petitioner in terms ofclause 12B of the dealership agreement".
There is no evidence that the Board was furnished with anyinformation other than the information contained in the Board Paper.All that is stated in the Board Paper about the petitioner's allegedmisconduct is as follows:
*1. Mr. C. Wickramatunga holds the dealership at the CorporationControlled Lanka Service Station at Elvitigala Mawatha, Colombo.
In our routine checks in the past, we have observed many shortcomingsin the administration and operation of the outlet. Such lapses could be describedas under-delivering, suspected malpractices and failure to heed instructions.
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Disciplinary action could not be taken due to reasons beyond our control.
Some of these lapses warranted disciplinary action.*
In response to the petition alleging a violation of the petitioner'sfundamental rights, the Corporation not only sought to justify thewithdrawal of the facility to pay by cheque, but also referred to thefact that the failure to "pay and settle in full all monies due to theCorporation (entitled) the Corporation to terminate the agreementwithout any notice whatsoever". However, no reference is made inthe Board Paper to this matter, despite the fact that the MarketingManager in his affidavit places great importance on the need forDealers to issue cheques that will be honoured and draws attentionto the fact that clause 2C entitles the Corporation to terminate theagreement without any notice if there is a failure on the part of theDealer to "pay and settle in full all monies due to the Corporation".
The right to terminate the agreement without notice was contingentupon the condition that the Dealer had failed to pay and settle infull all monies due to the Corporation. The petitioner alleged, andthe Manager (Marketing) in his affidavit accepted the fact, that on thedate the Board Paper was submitted, which was also the date of thedecision of the Board, namely the 11th of January, 1995, the petitionerhad deposited a sum of Rs. 444,470 with the Corporation as paymentfor petroleum products which the Corporation did not deliver to thepetitioner. Additionally, the petitioner had to be reimbursed for 10,750litres of diesel and 4,900 litres of petroleum. The Corporation did, byits cheque dated the 24th of January, 1996, reimburse the petitionera sum of Rs. 677,190.80 (after, it states, deducting Rs. 50,000 todefray water and electricity dues); but the critically important matteris that at the date of the termination of the agreement, the conditionstated in clause 2C, namely that the Dealer shall have failed to payand settle in full all monies due to the Corporation, was not satisfied:if he owed Rs. 50,000, it was not owed to the Corporation, but tothe suppliers of water and electricity – the Ceylon Electricity Boardand the National Water-supply and Drainage Board. The bills wereissued in the name of the Corporation; but that is another matter.As between the petitioner and the Corporation, if there was a debtorat the relevant date it was not the petitioner, but the Corporation. Inthe circumstances, the Corporation had no cause to terminate theagreement in terms of clause 2C.
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The petitioner states that he was for the first time “confronted withallegations of misconduct, mismanagement and/or fraud0 when suchallegations were made in the affidavit of the Manager (Marketing), towhich was annexed the Board Paper. He goes on to state: “The(Corporation) has never ever complained and/or put me on notice ofany allegation of misconduct, mismanagement and/or fraud as set outin (the Manager's) affidavit. I am totally unaware of any allegationcontained in the (affidavit of the Manager (Marketing)) and I furtherstate that the said allegations are false and false to the knowledgeof the deponent of the said affidavit of the (Corporation) and has beenfabricated for the purpose of this case0.
The allegations against the petitioner mentioned in the Board Paperare vague. However, the Manager (Marketing), endeavoured to explainwhat he meant. He stated that the petitioner "had been advised toensure that under delivery of petroleum does not occur to the prejudiceof consumers. However, the petitioner had continued to indulge in thisdefault. I annex hereto marked 2R5, true copies of several 'retail outletinspection reports' and a report form prepared by officers of the(Corporation) who had inspected the petitioner's retail outlet, from timeto time, and who had detected the commission of the aforesaidirregularities".
2R5 comprised six reports: The first is dated 30th March 1990.It is an inspection report relating to eighteen specified items and oneother "miscellaneous" category. Additionally, there is a "Remarks andAction to be taken by Dealer" column. In that column it has beenobserved that the calibration was "found not in correct order. Adjustedand resealed". There is no suggestion that the petitioner was in any‘ way responsible for the defect: item 16 relates to the checking of thecalibration of pumps and the verification of seals. There is no findingthat the seals had been tampered with. There was a mechanical defectthat had been corrected by the inspecting officer who then resealedthe pump. There is a report dated 11 January, 1991. Evidently, it hadbeen reported to the Area Manager (West) that there was overdelivery. After checking the dispensing pumps, the Engineer reportedthat they were "not over delivering as reported to you". There arefour Retail Outlet Reports, similar in form to the 1990 report, datedthe 11th of June, 1991, the 3rd of June, 1992, the 26th of November1992 and the 15th of September, 1993. In all four reports, with regardto calibration, something it seems was found to be "slightly" deficienton each occasion in one or more dispensing pumps. There is no
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finding that the seals were tampered with or that the petitioner wasin any way responsible for the defect on any occasion. There hadbeen a mechanical defect that had been corrected each time by theinspecting officer who had then resealed the adjusted pump or pumps.
In the circumstances, I am of the view that the allegation that thepetitioner was guilty of "malpractices and failure to heed instructions"is totally without foundation. Moreover, it is significant that theCorporation has not produced any report, showing even mechanicaldefects, let alone grounds for "stern disciplinary action", sinceSeptember 1993, although when it terminated the agreement inJanuary 1996, it alleged a failure on the part of the petitioner todischarge his duties in the recent past. The statement by the Manager(Marketing) that the petitioner “had been advised to ensure that underdelivery of petroleum does not occur to the prejudice of consumers.However, the petitioner had continued to indulge in this default;" hisallegation that there were “many shortcomings in the administrationand the operation of the outlet"; and that the petitioner was guiltyof “under-delivering, suspected malpractices and failure to heedinstructions", have not been borne out by the documents he hasproduced in support of his averments and allegations of misconduct.
I have no hesitation in rejecting as false his averments and allegationsrelating to the so-called "lapses" of the petitioner.
In attempting to justify its action, the Corporation placed greatreliance on its authority under Clause 12B of the agreement whichstates as follows: "If the Dealer does not in the opinion of the GeneralManager perform his duties and obligations as a Dealer of petroleumproducts of the Corporation faithfully, diligently and efficiently or if hedefaults in complying with the terms, covenants and conditions of thisagreement … the Corporation shall be entitled to terminate thisagreement without any notice whatsoever. The Corporation shall alsobe entitled to terminate this agreement after three month's notice inwriting to the dealer and the Dealer is entitled to terminate thisagreement after three month's notice in writing given to theCorporation . . . Notwithstanding the above the Board of Directorsmay by a resolution passed at a meeting of the Board of Directorsterminate the agreement without notice and without assigning anyreason whatsoever".
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There was nothing to show what the opinion of the GeneralManager was. The agreement was terminated without three monthsnotice. It was terminated without any notice and without any reasonassigned for such termination except the vague allegation that thepetitioner had not been conducting his business in the recent pastin keeping with the Corporation's expectations. Admittedly, in termsof the agreement, the Board of Directors of the Corporation wereentitled to terminate the agreement without notice and without assign-ing any reason. This does not mean that the terms of the agreementpermitted the Corporation to terminate the agreement merely because.it was minded to do so. The Corporation seems to have assumedthat so long as it terminated the agreement in accordance with theterms of the agreement, its position was unassailable: In my view,the averments in the affidavit of its Manager (Marketing) giving reasonsfor the actions of the Corporation, both with regard to the withdrawalof the cheque facility and the cancellation of the agreement showa complete misapprehension of the legal duties of the Corporation:It is well settled that a public body, like the Ceylon Petroleum Corporation- a statutory public corporation -, must act in good faith and actreasonably: Westminster Corporation L & N.W. Railway<1). Such a*body must act upon "lawful and relevant grounds of public interest. H. W. R. Wade & C. F. Forsyth, Administrative Law, 7th Ed.p. 392. The fact that the action in question was controlled by a contractmakes no difference : the Corporation was nevertheless obliged toact reasonably and Within the limits of fair dealing': Sevenoaks DCv. Emmett® cited in Wade & Forsyth, ibid. It was also obliged to ensurethat its powers were exercised in a manner that did not erode theguarantees of fundamental rights and freedoms recognized and declaredby the Constitution. I shall refer to these matters again, later on. Thequestion I wish to deal with at this point is the wholly erroneous beliefthat there is anything like untrammelled discretion when public au-thorities are conducting their activities. When, as in section 5H of theCeylon Petroleum Corporation Act, a Government Department or oneof its agents or instrumentalities, is said to have 'absolute discretion'it merely means that it is that body and no other that can decidethe matter: it does not mean that that body is empowered to do asit may will. A private person is in a different situation. He or she maywith impunity act as wished, even, perhaps, out of malice or in aspirit of revenge. “But a public authority may do none of these thingsunless it acts reasonably and in good faith upon lawful and relevantgrounds of public interest. . . . The whole conception of unfettered
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discretion is inappropriate to a public authority, which possesses powersoley in order that is may use them for the public good": Wade &Forsyth, op. cit. at p. 392.
As for the failure to give reasons, Wade & Forsyth, op. cit. p. 402observe: "Reasonableness does not require reasons to be stated. Theonly significance of withholding reasons is that if the facts pointoverwhelmingly to one conclusion, the decision-maker cannot complainif he is held to have had no rational reason for deciding differently,and that in the absence of reasons he is in danger of being heldto have acted arbitrarily". See also Padfield v Minister of Agriculture,Fisheries and Food13*.
At the time of the termination of the agreement and the takingover of the Filling Station, the petitioner was not given reasons forthe termination of the agreement except that it was alleged that inthe recent past he had not been conducting his business in accordancewith the expectations of the Corporation. However, there were reasonsgiven by the Manager (Marketing) in response to the petition andaffidavit of the petitioner in the matter before this Court. As we haveseen, in the proceedings before this Court no rational basis for thetermination of the agreement has been adduced. As a result, inmy view, the Corporation has failed to establish its claim that thetermination of the agreement was for just cause. The allegation ofthe petitioner that the Corporation had not only acted arbitrarily, butthat it had discriminated against him invidiously on account of politicalopinion has not been successfully challenged.
In terms of the provisions of the agreement, of which the Manager(Marketing) was aware, indeed he quotes them in support of his actionand that of the Corporation, it was the Board that had to decide byresolution to terminate the agreement with the petitioner. The BoardPaper submitted by the Manager (Marketing) after stating that "someof" the petitioner's alleged "lapses warranted stern disciplinary action",went on to state as follows: “Before such action was taken we inserteda press notice in English and Sinhala dailies on the 11th August, 1995,calling for prospective dealers". (The emphasis is mine).
Five months before the Board could take a decision, the Manager(Marketing), and perhaps others, as the word “we" suggests, haddecided that the petitioner's agreement should come to an end; and
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steps had been taken before the Board had met on the 11th ofJanuary, 1996, to appoint the third respondent to take over the FillingStation. All that the Board was told about the third respondent wasas follows: "Miss R.M.S. Ratnayake of No. 1, Punchivilathawa, Vilathawa,Bingiriya, has satisfied all the requisite qualifications to be appointedas a dealer". Nevertheless, the focus of attention in the Board Paperwas the appointment of the third respondent: The caption of the BoardPaper was: "Appointment of a New Dealer at Lanka Service Station,Elvitigala Mawatha, Narahenpita, Colombo". The Manager (Marketing)stated that the third respondent was "interviewed by a qualified panelof the [Corporation] and found to be suitable0. He explained that
. . it is the practice of the [Corporation] and indeed an imperativestep, to appoint a new dealer in the event of an existing dealershipbeing cancelled. This step is imperative on account of the need toensure that the supply of petroleum to the public and the transportindustry remains uninterrupted".
The Filling Station concerned was not the only one in the countryor in Colombo; and so, the plea that it was "imperative" that the thirdrespondent or some other person should have immediately taken overfrom the petitioner to ensure that supplies to the public, ought, perhaps,to be taken with a pinch of salt. Be that as it may, a definite opinionhad been formed by the Manager (Marketing) and others, whoeverthey may have been, that the petitioner's agreement must be termi-nated; and such an opinion had been formed at least before theadvertisement was inserted in August, 1995. In my view, the words"before such action was taken" clearly indicate that there was at leastan expectation that the Board might, if not a confident assumptionthat the Board would, terminate the agreement. If at that stage – fivemonths before the Board's decision – it was believed by the Manager(Marketing) and others that petitioner's agreement must be terminated,why was the petitioner not given three months' notice prior to thetermination of the agreement in terms of clause 12B of the agreement?Why was the alternative procedure of termination without notice basedupon a resolution of the Board of Directors – a procedure obviouslyintended to provide for urgent action to deal with a serious situationthat might have unexpectedly emerged – resorted to? Departures fromthe normal procedural sequence affords evidence that improper purposesare playing a role in the decision-making process: See Village ofArlington Heights v Metropolitan Housing Development Corporation^.Why was the petitioner not told what the charges against him were
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and called upon to make an explanation, especially when, as theconduct of the Corporation showed, there was no urgency? Because,as we have seen, there were no justifiable charges to make.
As we have seen, the Corporation failed to satisfactorily explainwhy the petitioner was treated in the way he was. The petitioner statesthat the explanation is that he was discriminated against on accountof political opinion. It was stated by the petitioner that "the Chairmanand all Directors of the . . . Corporation are appointed by the firstrespondent, the Hon. Minister of Irrigation, Power and Energy; . . .the Chairman and the Directors are all political appointees and arepolitically aligned to the party presently in power, namely the People'sAlliance;… the Chairman of the (Corporation) is Mr. Anil Obeysekera. . . who is a long-standing supporter of the Sri Lanka Freedom Partyand is serving on various Committees and bodies of the Sri LankaFreedom Party for a considerable period of time; … the said AnilObeysekera is a strong supporter of the Sri Lanka Freedom Party;… the Directors of the (Corporation) are Mr. Anil Obeysekera,Mr. I. M. Senarathne lllankoon, Mr. S. M. R. Samarakoon, Mr. SunilAmaratunga, Mr. Jayaratne . . . (who) were appointed by the firstrespondent (the Minister) on or after the present government cameto power; . . the decision purporting to terminate the dealership andto take over the (Filling Station) are solely motivated by politics asan act of revenge against the petitioner who is a strong supporterof the United National Party; … the petitioner is the brother of Mrs.Hema Premadasa; … the petitioner had associated closely with thelate President Ranasinghe Premadasa; In the circumstances … thetake over of the (Filling) Station (was) merely on political grounds".
The petitioner alleged that the first respondent, the Ministerresponsible for the Corporation "influenced and/or pressurized and/or ordered and/or directed and/or caused the (Corporation) to terminatethe dealership and to take over possession of the premises".'
A Minister appoints the Chairman and Directors to discharge certainduties and functions. It behaves such persons to act in a cautious,responsible and lawful manner in keeping with the Minister's expec-tations of correctness of behaviour and conduct. If such personsappointed by a Minister betray his trust and do not fulfill the Minister'sexpectations, the Minister cannot, in my view, merely by reason ofthe fact that the persons were appointed by him or her, be held
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blameworthy for their disappointing behaviour or conduct. Muchless is his responsibility for the activities of employees of theCorporation appointed, not by the Minister, but by the Board. The firstrespondent admits that he appointed the Chairman and Directors ofthe Corporation; but he states that the Agreement was terminated bythe Board of the Corporation and that he "does not interfere with theday-to-day administration of the . . . Corporation". Section 7 of theCeylon Petroleum Corporation Act empowers the Minister to give theBoard general or special directions in writing after consultations withthe Board. There was no evidence that the Minister gave the Boardany directions on the matter of the termination of the Agreement. Ihave no hesitation in accepting the Minister's averments.
The petitioner's averment that Mr. Anil Obeysekera, the Chairmanof the Corporation, and Mr. I. M. Senaratne llankoon, Mr. S. M. R.Samarakoon, Mr. Sunil Amaratunga and Mr. Jayarathne, Directors ofthe Corporation, were "appointed by the first respondent on or afterthe present government came to power" is admitted by the Manager(Marketing) in his affidavit. The Chairman and Managing Director ofthe Corporation, Mr. Anil Jayantha Obeysekera, in his affidavit, statesthat he "without reservation adopt(s) and subscribe® to the avermentscontained in the affidavit deposed to by Mr. Saliya Unamboowe,Manager, Marketing, of the 2nd respondent Corporation". Thepetitioner's averment's in his affidavit of the 8th of February, 1996,that "the Chairman and Directors are all political appointees andare politically aligned to the party presently in power, namely thePeople's Alliance"; that the Chairman was "a long-standing" and"strong" supporter of the Sri Lanka Freedom Party and is serving onvarious Committees and bodies of the Sri Lanka Freedom Party fora considerable period of time", are denied by the Manager (Marketing)for the reason that he was "unaware" of the correctness of theseallegations. The Manager (Marketing) denied that the agreement wasterminated for political reasons and stated that the termination wasfor "good and lawful cause".
In his affidavit, dated the 29th of April, 1996, the petitioner statedthat Mr. Obeysekera, “although having occasion to deny the[averments of the petitioner in his affidavit of the 8th of February,1996, relating to Mr. Obeysekera's alleged political affiliations andactivities] has not resolved to do so in his affidavit". Although Mr.Obeysekera did not in his affidavit of the 9th of April, 1996, deny
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the petitioner's averments with regard to Mr. Obeysekera's politicalaffiliations and activities, he denied that the termination of the pe-titioner's dealership was politically motivated and/or actuated byany extraneous or collateral considerations". Mr. Obeysekera statedthat the termination of the agreement "was necessitated for the reasonsenumerated in the affidavit deposed to by the Manager, Marketing,of the 2nd respondent Corporation"; and that "the action taken againstthe petitioner is entirely referable to the petitioner's conduct and theunsatisfactory manner in which he had operated his dealership, andit cannot be maintained that the termination of his dealership was notrelated to a legitimate objective".
The fact that the Chairman and Directors of the Corporation wereappointed by the Minister after the present government came intopower, and the fact that the Chairman and the Directors supporteda political party whose opinions the petitioner did not share does notnecessarily lead to the conclusion that the Chairman and Directorswere motivated by political considerations in terminating the agreementwith the petitioner. In that connection it is pertinent to observe thatif the Chairman and Directors were politically motivated, the petitionerhas failed to explain why no action was taken against him from thetime they were appointed till January, 1996. In the circumstances, Iam of the view that the allegation that the Chairman and the Directorsof the Corporation was politically motivated has not been establishedby the petitioner.
As we have seen, the Manager (Marketing), stated in his BoardPaper that “Disciplinary action could not be taken due to reasonsbeyond our control". This has not been explained by the Manager(Marketing). If it is to be surmised that no action could be takenbecause the petitioner was a supporter of the political party in power,it does not explain why no action was taken for a considerable periodof time after another party came into power – a decisive fact, as wehave seen, that redounds to the advantage of the Chairman and theDirectors in making my decision whether they were politically moti-vated. In my view, disciplinary action was not taken because therewere no grounds for such action and no other. However, the petitioner,who had carried on business as a Dealer since 1988, found himselfin trouble in 1995. The petitioner has an explanation for his woes:In his affidavit dated the 29th of April 1996, the petitioner states thatwhen Mr. H. A. Samaraweera, the Manager (Marketing) retired in
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March, 1995, Mr. Saliya Unamboowe was appointed Acting Manager(Marketing). About two months later, Mr. Unamboowe was appointedManager (Marketing). The petitioner states that Mr. Unamboowe"is a supporter of the People's Alliance and has in fact activelyworked in support of the People's Alliance". The averments regardingMr, Unamboowe's political affiliations have not been denied.
As we have seen, on the 11th of July, 1995, the cheque facilitywas abruptly withdrawn without good cause. On the 12th of January,1996, the petitioner's occupation as a Dealer was brought to an endwith equal suddenness due to a decision of the Board of theCorporation based upon a paper prepared by the Manager (Marketing)in which he sought the approval of the Board to "terminate thedealership of (the petitioner) and cancel the authority granted to him(under the Ceylon Petroleum Corporation Act and clause 12B of theAgreement) to sell, supply and distribute (certain petroleum andpetroleum products.)" although he had no grounds for making therecommendation to terminate the agreement In fact, as we have seen,although it was the Board that could have decided to terminate theAgreement, the Manager (Marketing), and perhaps some others, hadfive months before the matter was submitted to the Board decidedon what the fate of the petitioner would be and by advertisementsought applications from persons for filling the vacany created by thedeparture of the petitioner from his Filling Station. The Manager(Marketing) explained that the steps were taken to ensure that therewould be no breakdown in supplies of petroleum: but as I have pointedout that was not the only source of petroleum in Colombo: Moreover,if it was known five months earlier that there were valid reasons. to terminate the agreement, there wets no reason why the normalprocedure of giving three months' notice, rather than the extraordinaryprocedure of summary termination after a resolution of the Board wasresorted to: as I have pointed out, as a matter of law, such a stepgave rise to a presumption that wrong motives were at work in thedecision-making process. I
I have no doubt in my mind that the Manager (Marketihg) wasthe moving force behind the termination of the petitioner's agreementand that he was motivated by political considerations. The Corporationappointed him, believed without question his allegations against thepetitioner, accepted his recommendations on the question of thetermination of the agreement, and decided to speak principally
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through him for the Corporation in the matter before us. The onlyaffidavit filed by the Corporation other than the affidavit of the Manager(Marketing) is that of the Chairman of the Corporation. His affidavitwas submitted as a document annexed to the affidavit of the Manager(Marketing); and in that affidavit the Chairman of the Corporationstates: "I have perused all and singular the several avermentscontained in the petition and affidavit filed by the petitioner. . . andwithout reservation adopt and subscribe to the averments containedin the affidavit deposed to by Mr. Saliya Unamboowe, Manager,Marketing, of the . . . Corporation". The Chairman states that heconsidered the averments in the petitioner's petition and affidavit. Eventhough he may have, for whatever reason, not investigated thereasons for the recommendations in the Board Paper submitted bythe Manager (Marketing) the Chairman, who had an opportunity ofcalling upon the Manager (Marketing) to clarify his allegations againstthe petitioner, has decided to accept unequivocally whatever theManager (Marketing) has stated. In the circumstances, in my view,the Corporation must assume full responsibility for the actions ofthe Manager (Marketing), who, for the reasons I have given, actedirrationally, in an arbitrary, capricious and invidious manner for politicalreasons. The Corporation's claim, made through the Manager(Marketing) that the termination was for "good and lawful cause" isin the circumstances, unacceptable.
So much for the facts in the light of the agreement and the legalframework within which the Corporation operated. I
I turn now to the "executive or administrative action" issue. Theprotection for individual rights and liberties contained in the constitutionapply only to the actions of certain governmental entities. Articles17 and 126 of the Constitution require that an aggrieved party mustestablish that challenged party's activities constituted 'executive oradministrative action'. The Corporation submitted that the terminationof the agreement was not 'executive or administrative action' withinthe meaning of Articles 17 and 126 of the Constitution and that thepetitioner's application should be rejected. Did the Corporation's activitiesinvolve sufficient governmental action so that they are subjected tothe values and limitations reflected in the Constitution? Were theresufficient contracts between the government and the Corporation tojustify subjecting the Corporation to constitutional limitations? Or isthe Corporation incapable of violating the Constitution because it is
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not a part of the government? There is no precise formula that hasbeen fashioned that can be applied for recognition of state respon-sibility on account of 'executive or administrative action'. Owing to thevery "largeness" of government, there are a multitude of relationshipsbetween government and institutions, and private persons; manypermutations and combinations of factual situations are possible. Theresolution of the question whether the alleged wrongdoer was capableof 'executive or administrative action' should abide the necessity ofdeciding the question in a particular case. There are several mattersthat might be considered in a case; Ramana v. International AirportsAuthority of India!5*; Ajay Hasia v. Khalid Mujib<6>. The decision wouldbe reached by 'sifting facts and weighing circumstances', and havingregard to the aggregate of relevant facts pertaining to that case: SeeBurton v. Wilmington Parking Authority17*; Flagg Brothers Inc., v. Brooks?3*;Ramana (supra) at p. 1642. Justice Frankfurter said: "The vitalrequirement is State responsibility – that somewhere, somehow, tosome extent, there be an infusion of conduct by officials, panopliedwith State power . . Terry v. Adams!9*. Where there is an infusionof State power, even the conduct of persons which might otherwisehave been regarded as falling outside the ambit of the commandsand restrictions of the Constitution, may be held to be 'executive oradministrative action': The phrase 'executive and administrative action'has been given a liberal interpretation: Rahuma Umma v.Dissanayakef10*; Deshapriya and another v. Municipal Council, NuwaraEliyaf11*; Mohomed Faiz v. Attorney-General°s>; Upaliratne v. TtkiriBanda and others!13*.
The fact that a natural or corporate person engages in an activitywhich could be performed by the State will not in itself subject suchperson to constitutional limitations, for the State could engage virtuallyin any activity. On the other hand activities or functions which aretraditionally associated with sovereign government and are operatedalmost exclusively by government entities, may be regarded as publicfunctions: A person who performs such functions may, therefore, besubject to Constitutional limitations: Marsh v. Alabama04*; Evans v.Newton115*. Likewise, if such functions are akin to traditional Statefunctions, it may be indicative of the fact that the person exercisingsuch functions must be subject to constitutional limitations. Ajay Hasiav. Khalid Mujib (supra). Each case must depend on its own circum-stances: In Jackson v. Metropolitan Edison Co.<ie* concerned theconduct of a privately owned company that supplied electricity. Acustomer's service was terminated without a final hearing to determine
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the status of her account with the company. She asserted that thecompany was required to give her notice and a hearing in the samemanner as would a governmental agency which would terminate Statebenefits to her. The US Supreme Court found no State action involvedin the operation of this utility even though it was given virtually amonopoly status and licensed by the State. In a later case, however,the Court held that utility companies that are operated by governmentagencies are required to provide their customers with fair notice andbilling review procedures prior to termination of service if state lawprovides for such termination only "for cause": Memphis Light, Gasand Water Division v. Craft17*.
Matters relating to petroleum do not come within traditional gov-ernmental functions. Nevertheless, matters concerned with the saleand distribution of petroleum are regarded as matters of nationalimportance. This was referred to repeatedly in the affidavit of theManager (Marketing) and in the submissions made by the Corporationto emphasize the need for an uninterrupted, efficient supply of pe-troleum to the public. He said the Corporation was engaged in a "vitalindustry which is essential to the country's economy". In Dahanayakev. De Silva*ia>, Samarakoon, CJ said ". . . Petroleum has ceasedto be a mere consumer item of private trade and is now the concernof governments at both national and international levels . . ."
Petroleum was once sold and distributed by private persons.However, in 1961, those functions were entrusted by the Governmentto the Corporation by the Ceylon Petroleum Corporation Act, No. 28of 1961. (References that follow to "sections" are references to the1961 Act as amended by the Ceylon Petroleum Corporation (Amend-ment) Act No. 5 of 1963). In Dahanayake v. de Silva (supra),Samarakoon, CJ said: "Political ideology at the time considered that,petroleum being an essential service for the community, it should bethe responsibility of and the sole business of the Government of thecountry . . .“
Being an essential public function, why was it not entrusted to aGovernment Department?
At about the same time, neighbouring countries were experiencingmuch the same problems as we were aqd resorting to means thatat the time were regarded as appropriate. Matthew, J. in Sukhdev
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Singh v. Bhagatramfia>, explained: The tasks of government multipliedwith the advent of the welfare state and consequently, the frameworkof civil service administration became increasingly insufficient forhandling the new tasks which were often of a specialized and highlytechnical character. At the same time 'bureaucracy* came under acloud. The distrust of government by civil service, justified or not, wasa powerful factor in the development of a policy of public administrationthrough separate Corporations which would operate largely accordingto business principles and be separately accountable. The publicCorporation, therefore, became a third arm of the government".
Whatever the reason or reasons for the creation of publiccorporations may have been, this much is clear: The creation of suchinstitutions were not intended to and did not provide the governmentwith an opportunity of evading its obligations: In particular, the Statecannot free itself from the limitations of the Constitution in the operationof its governmental functions merely by delegating certain functionsto persons, natural or juristic. As Matthew, J. observed in SukhdevSingh, (supra) "The fact that these corporations have independentpersonalities in the eye of the law does not mean that they are notsubject to the control of Government or that they are not instrumentalitiesor agencies of the State for carrying on business which otherwisewould have been run by the State departmentally. If the Statehad chosen to carry on these businesses through the medium ofGovernment departments, there would have been no question thatactions of these departments would be 'State' actions. Why then shouldactions of these corporations be not State actions?": See also SomiPrakash v. Union of lndiam.
Contacts between the Corporation are also relevant: In my view,the fiscal aspects of the Petroleum Corporation need to be considered,for, in my view, they show a symbiotic relationship between theCorporation and Government: The initial capital of the Corporation waspaid to it out of the Consolidated Fund of the State (section 23; cfAjay Hasia, supra). The approval of the Minister responsible for theCorporation is necessary for the Board of the Corporation to increasethe capital (section 24 (1)) or to borrow money (section 24 (2) & (3));to invest funds (section 25); and to issue, transfer, deal with, redeemor cancel Corporation Stock (section 26 (2)). The Minister of Financein respect of certain Corporation Stock, and with the concurrence ofthe Minister responsible in the case of other Corporation Stock,
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guarantees the repayment of the principal of, and the payment ofinterest on Corporation Stock, Parliament being informed of suchguarantee. Sums required for the fulfillment of such a guarantee maywith the prior approval of Parliament, be paid out of the ConsolidatedFund: (section 27); surplus revenue must be paid into a generalreserve, not exceeding the amount determined by the Minister, thebalance being paid to the Treasury to be credited to the ConsolidatedFund (section 29). The accounts of the Corporation are audited byan auditor appointed by the Minister in consultation with the Auditor-General, and transmitted to the Auditor General; The report of theAuditor-General and a statement by the Corporation and its activitiesduring the financial year to which the report relates and of the activitieswhich are likely to be undertaken in the next financial year are tobe submitted to the Minister who is required to lay such reports beforeParliament: (section 31).
The special favours granted to the institution by the State, asdistinguished from benefits derived by the Corporation from gener-alized government services, such as police protection, is also arelevant matter as showing contact as well as symbiotic relationship:Burton v. Wilmington Park Authority, (supra); The Corporation isexempted from income tax: (section 33). It is also exempted fromstamp duty and registration fees (section 67). The Corporation is alsovested with special powers of acquiring or requisitioning property forits use: (section 34) and the Minister is empowered by a vestingorder to effect the compulsory transfer of property to the Coporation:(section 35).
The interest of the State in the Corporation's personnel matters,is another matter to be considered: See per Justice White in Rendell-Baker v. KohnP1*. Although the general supervision, control andadministration of the affairs and business of the Corporation is vestedin the Board of Directors: (section 15), the Minister appoints the Boardof Directors, one of whom is appointed in consultation with the Ministerof Finance, and the Minister may, without assigning a reason, removeany Director from office: (section 8). The remuneration .of Directorsis determined by the Minister with the concurrence of the Ministerof Finance (section 9). The Chairman and Vice-Chairman of the Boardare appointed by the Minister who may remove them without assigninga reason: (section 17). The prior approval of the Minister is required
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for the appointment and removal by the Corporation of the GeneralManager: (section 18). Section 7 states:
"The Minister may, after consultation with the Board of Directors, give suchBoard general or special directions in writing as to the exercise of the powers ofthe Corporation, and such Board shall give effect to such directions.
The Minister may, from time to time, direct in writing the Board of Directorsto furnish to him, in such form as he may require, returns, accounts and otherinformation with respect to the property and business of the Corporation, and suchBoard shall carry out every such direction.
The Minister may, from time to time, order all or any of the activities ofthe Corporation to be investigated and reported upon by such person or personsas he may specify, and upon such order being made, the Board of Directors shallafford all such facilities, and furnish all such information, as may be necessaryto carry out the order."
The Minister may, with the concurrence of the Minister of Finance,by an Order specify or determine (a) the maximum spot price or rate;(b) the minimum spot price or rate; (c) the spot price or rate; (dj themaximum amount or percentage of discount or rebate; and (e) theformula fixing the price, at which petroleum shall be sold, suppliedor delivered: the Order may set out the terms and conditions for suchsale, supply or delivery; (section 66).
In my view, there is 'deep and pervasive State control1, indicatingthat the Corporation is a state agency or instrumentality: See AjayHasia, (supra).
There is further evidence that the Corporation and Government areentangled and entwined: although the Corporation is empowered toemploy such officers and servants as may be necessary for carryingout the work of the Corporation: (section 6 (b)), yet officers in thepublic service, with the consent of such officers and of the Secretaryto the Treasury may be temporarily or permanently appointed to theCorporation: (section 19). In my view, the-way in which public servantscould be appointed to the Corporation suggests that governmentemployees and Petroleum Corporation employees were essentially thesame, doing the same thing, namely, serving the public as servantsof the public, and not merely as employees of some person, personalor corporate. This view is underlined by the fact that all officers andservants of the Corporation are deemed to be public servants within
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the meaning and for the purpose of the Penal Code: (section 20);and its employees would, like other public servants, be liable foroffences under the Bribery Act, No. 11 of 1954: (section 21). As inthe case of official acts generally, no suit or prosecution lies againstthe Minister, the Corporation or its officers done in good faith: (section74). No writ against person or property may be issued against anymember of the Corporation in any action brought against theCorporation: (section 75).
It has been held that whether a Corporation enjoys a monopolystatus conferred by the State is a relevant factor: See Ramana,(supra); but cf. Jackson Metropolitan Edison Co. (supra). The rightto "import, export, sell, supply or distribute" petrol, kerosene, dieseloil and furnace oil is vested "exclusively in the Corporation": (section5B). The right to explore for, and exploit, produce and refine petroleumis vested "exclusively in the Corporation": (section 5D). The estab-lishment and maintenance of equipment or facilities for the exploration,exploitation, production, refinement, storage, sale, supply or distributionof petroleum other than by the Corporation is prohibited except withthe written authority of the Minister: (section 5F). No person otherthan the Corporation may export, sell, lease, transfer, hypothecate,alienate or dispose of any equipment or facilities for the exploration,exploitation, production, refinement, storage, sale, supply or distributionof petroleum: (section 5H). Authority may be granted.or terminatedby the Minister or the Board at their "absolute discretion" to personsto do any of the things over which the Corporation has been givena monopoly on terms and conditions determined by the Minister orCorporation in their "absolute discretion": (section 5H).
Having regard to these matters in the aggregate, I cannot butconclude that the Petroleum Corporation of Ceylon is an instrumentalityor agent of the Government. I am fortified in arriving at that conclusionby the fact that the Supreme Court has on more than one occasionso regarded the Corporation; its public character requires that it betreated as an institution subject to the Constitutional commandsand restraints pertaining to fundamental rights and freedoms;Dahanayake v. De Silva (supra); Kuruppuge Don Somapala Gunaratneand others v. Ceylon Petroleum Corporation and othersR*.
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Learned Counsel for the third respondent cited Ratmalana Elec-torate Development Foundation v. Ceylon Petroleum Corporation andothers<Z3> in support of his submission that when the Corporationterminated the appellant's Agreement, it was a matter of 'private1 andnot 'public' law and therefore, the petitioner was not entitled to invokethe jurisdiction of the Court relating to fundamental rights.
In the Ratmalana Electorate Development Foundation case, thePetroleum Corporation had, pursuant to a decision of the Board,terminated the agreement of a Dealer and taken possession of his'Filling Station'. The appellant alleged mala tides, a violation oflegitimate expectations and a violation of the principles of naturaljustice, and applied to the Court of Appeal for a writ to quash thedecision of the Corporation. The majority, (Anandacoomaraswamy andGunawardene, JJ. Dheeraratne, J. dissenting), citing Wade, Admin-istrative Law, 5th Ed. p. 550, held that the power of termination wasderived from the contract and was a matter of 'private law' and outsidethe scope of 'prerogative remedies'. The Court's attention had beendrawn to Kuruppuge Don Somapala Gunaratne and others v. CeylonPetroleum Corporation and others, (supra) in which it had been heldby Fernando, Dheeraratne and Anandacoomaraswamy JJ., that wherethe Petroleum Corporation had, pursuant to a decision of the Board,terminated an agreement with a Dealer and taken possession of his'Filling Station' without notice to the Dealer, and without sufficientreasons, and taking into account irrelevant considerations, it violatedthe Dealer's fundamental rights of equality before the law and equalprotection of the law guaranteed by Article 12 (1) of the Constitution.The Court held that "passing the impugned resolution was 'admin-istrative or executive action', although it involved a contract". Themajority in Ratmalana Electorate Development Foundation said thatin Kuruppuge Don Somapala Guneratne "The Court was dealing withthe case of a violation of Fundamental Rights under Article 12 (1)of the Constitution. However in the instant case the position is differentas this court has to consider the writ jurisdiction of the Court of Appeal".
.In this connection, it is pertinent to observe that Das, CJ. inBasheshar Nath C.I.T. Delhi and Rajasthanobserved that Article14 of the Indian Constitution (which states: The State shall not denyto any person equality before law or the equal protection of the lawswithin the territory of India), "combines the English doctrine of the ruleof law with the equal protection clause of the 14th Amendment". In
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Kuruppuge Don Somapala Guneratne and others v. Ceylon PetroleumCorporation and others (supra), Fernando, J. rejecting the view that"law" in Article 12 meant a statute said: "I take the broader view thatthe principle of equality before the law embodied in Article 12 is anecessary corollary of the concept of the Rule of Law which underliesthe Constitution (Perera v. Jay a wickrema(!S>) ". Perhaps the recentproliferation of applications relating to alleged violations of Article 12of the Constitution may be explained by the fact that the Articlecombines the elements of the rule of law and the elements of the14th Amendment of the American Constitution? It is unnecessary forthe purpose of deciding the matter before me to consider whetherit is possible to precisely demarcate public and private law and whetherjudicial review under the two procedures should be regarded asmutually exclusive and so on: On those matters, see Wade andForsyth, op. tit., esp. Chapter 18. It seems to me that posing thequestion whether a matter is a 'public' or 'private' law matter beforedeciding whether it is a matter that is justiciable having regard to theprovisions of the Constitution is an unsatisfactory approach to thequestion: the labels "public" or "private", if there is any worth indoing so, might be affixed after the matter has been decided, havingregard to the facts in the light of the law. How does one define “public"and "private", and how does one distinguish between "public" forfundamental rights purposes and "writ" purposes? In my view, thatkind of sterile debate will only result in the waste of the Court's timeand aggravate the problem of the law's delay.
The Corporation denied that its conduct brought it within therestraints imposed by the Constitution relating to fundamental rightsand freedoms. It submitted that the alleged grievance of the petitionerwas misconceived, since the termination of the agreement was amatter of contract relating to the commercial activity of the Corporationand not an 'executive or administrative action' which alone, in termsof Articles 17 and 126 of the Constitution could give a petitioner aright to seek relief in respect of the alleged infringement of thefundamental rights and freedoms recognized and declared by theConstitution: It was submitted that, although acts of the State at thethreshold stage or at the stage of entering into a contract might attractthe Constitutional guarantees of equality and equal protection of thelaw, yet, where there was a contract in force, Article 12 of theConstitution would apply only if the rights and liabilities are imposedby statute: "law" in Article 12 should not be interpreted to include
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administrative schemes: Wijenaike v. Air LankaP°>; see also Wijeratnev. The People's Bankt27*; Roberts and another v. Ratnayake andothersC. K. Achutan v. State of Kerala12®; Akbar Ahad v. Stateof Orissa*301; Bal Krishnan v. The State of Himchal Pradesh andothers*3’*; Radhakrishna Agarwal v. Bihar*32*.
Article 12 (1) of the Constitution states: "All persons are equalbefore the law and are entitled to the equal protection of the law".I am unable to agree that "law" in Article 12 is confined to Acts ofParliament: See Kuruppuge Don Somapala Gunaratne and others v.Ceylon Petroleum Corporation and others (supra). In my view, itincludes regulations, rules, directions, principles, guidelines and schemesthat are designed to regulate public authorities and functionaries intheir conduct: See SmithKIine Beecham Biologicals S.A. and anotherv. State Pharmaceutical Corporation and others!33*, in Lugar v. EdmonsonOil Co. Inc.*34*, Justice Brennan for the U.S Supreme Court articulatedthe basic test to determine when the deprivation of a right may befairly attributable to the State:
'First, the deprivation must be caused by the exercise of someright or privilege created by the State or by a rule of conductimposed by the State or by a person for whom the State isresponsible . . . Second, the party charged with the deprivationmust be a person who may fairly be said to be a State actor.This may be because he is a State official, because he has actedtogether with or has obtained significant aid from State officialsor because his conduct is otherwise chargeable to the State".
The emphasis is mine.
If the rules of conduct contain provisions that are Constitutionallyimpermissible (e.g. because they discriminate against persons on thegrounds of race, religion, language, caste, sex, political opinion orplace of birth or are otherwise invidiously discriminatory, or containirrational classifications), they must be declared unconstitutional.Likewise, if such provisions are ex facie lawful, not invidiouslydiscriminatory, and rational in the matter of classification, but in theirapplication violate the Constitutional restraints and guarantees relatingto fundamental rights and freedoms declared and recognized by theConstitution, the action of the authority concerned must be declaredunconstitutional: For instance, if they are applied in an invidiously
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discriminatory manner, or in a capricious, unreasonable or arbitrarymanner; Yick Wo v. Hopkins*35’; Plyler v. Doe <36). This Court hasconsistently proceeded on that basis from the time of Palihawadanav. Attorney-General*37}; see also Jayanetti v. Land Reform Commis-sion*36’.
I agree that the action inhibited by Article 12 is only such actionas may fairly be said to be that of the State, and that Article 12 erectsno shield against merely private conduct, however discriminatory orwrongful: cf. Shelly v. Kraemet*39’. However, I am unable to agree withthe view advanced by learned ^counsel for the second and thirdrespondents, that in the sphere of contracts, public authorities andfunctionaries do not have to conform to Constitutional requirements,and in particular those set out in Article 12: They cannot, in my view,avoid their Constitutional duties by attempting to disguise their activitiesas those of private parties.
This Court has always said or acted on the assumption thatgovernment departments and agencies, institutions and persons per-forming public functions or clearly entwined or entangled with gov-ernment, must comply with the provisions of Article 12: See e.g.Amzathul Zareena and others v. The National Housing DevelopmentAuthority*401; Nanayakkara v. Bandusena and others*41’; Peiris v. deSilva and others*42’; Gunasinghe v. Divisional Superintendent of PostOffice, Matale*43’; Gunaratne and others v. Ceylon Petroleum Corpo-ration and others*44’; Gamini Atukorale and others v. de Silva (IGP)and others*45’; Priyangani v. Nanayakkara and others*461; Athukorala v.Jayaratne and others*41); Krishna Mining Co. (Ceylon) Ltd. v. JanathaEstates Development Board and others*46’; Chandrasena v. Kulatunge'and others*49’; Tennekoon v. de Silva (IGP) and others*50’; Manage v.Kotakadeniya (Post Ms. General) and others*51’; SmithKIine BeechamBiologicals S.A and another v. State Pharmaceutical Corporation andothers (supra); see also F. C. I. v. Kamedhenu Cattlefeed Industries*519.
I would have refrained from burdening my judgment with any citationson this matter, but for the fact that leraned counsel for the Corporationhas raised the matter.
The drawing of a distinction between cases in which there is acontract and those in which the matter is at a threshold stage or atsome stage before the making of a contract is, in my view, artificial,narrow and inappropriate. In my view, where there is a breach of
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contract and a violation of the provisions of Article 12 brought aboutby the same set of facts and circumstances, there is no justificationin law for holding that only one of the available remedies can beavailed of and that the other consequently stands extinguished. Norcan it be correctly said that the aggrieved party must be confinedto his remedy under the law of contract, unless there is a violationof statutory obligations: SmithKIine Beecham Biologicals S.A. andanother v. State Pharmaceutical Corporation (supra). In Srilekha Vidarthiv. State afU.PS531, the Supreme Court of India considered the contractsof public bodies vis-a-vis Article 14 of the Indian Constitution (whichdeals with the fundamental rights of equality before the law and equalprotection of the law). Verma, J. (as he then was) speaking for theCourt, said:
The State cannot be attributed the split personality of Dr. Jekyll and Mr. Hydein the contractual field so as to impress on it all the characteristics of the Stateat the threshold while making a contract requiring it to fulfill the obligation of Article14 of the Constitution and thereafter permitting it to cast off its garb of State toadorn the new robe of a private body during the subsistence of the contract enablingit to act arbitrarily subject only to the contractual obligations and remedies flowingfrom it. ft is really the nature of its personality as State which is significant andmust characterize all its actions, in whatever field, and not the nature of function,contractual or otherwise, which is decisive of the nature of the scrutiny permittedfor examining the validity of its act. The requirement of Article 14 being the dutyto act fairly, justly and reasonably, there is nothing which militates against the .concept of requiring the State always to so act even in contractual matters. Thereis a -basic difference between the acts of the State which must invariably be inthe public interest and those of a private individual, engaged in similar activities,being primarily for personal gain, which may or may not promote public interest.Viewed in this manner, in which we find no conceptual difficulty or anachronism,we find no reason why the requirement of Article 14 should not extend even inthe sphere of commercial matters for regulating the conduct of State activity.’ I
I therefore hold that "when (the Ceylon Petroleum Corporation)enters into contracts for services for the safe and distribution ofpetroleum products, it does so as agent of the State": Dahanayakev. De Silva (supra) at p. 53-54; If the Corporation arbitrarily terminatesthe contract of a Dealer, the Court would declare that the Corporationhas violated Article 12 of the Constitution: Kuruppuge Don SomapalaGunaratne and others v. Ceylon Petroleum Corporation and others,(supra). In the matter before me it has been established that theAgreement was terminated on account of political opinion. ThereforeI hold that the Corporation has violated Article 12 (2) of theConstitution: Cf. Gamini Atukorale and others v. de Silva and others,(supra); Athukorala v. Jayaratne and others, (supra).
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The petitioner was granted leave to proceed with his application,in which he alleged that Article 14 (1) (g) of the Constitution wasviolated. Article 14 (1) (g) states: "Every citizen is entitled to thefreedom to engage by himself or in association with others in anylawful occupation, profession, trade, business or enterprise". Thepetitioner was unable to engage himself in his business or occupationas a Dealer in petroleum as a direct result of the unlawful terminationof his Agreement with the Corporation. Had he been able to obtainpetroleum from some source other than the Corporation, the act ofthe Corporation may not, in my view, have been held to have violatedArticle 14 (1) (g). However, as we have seen no person can sell,supply or distribute petroleum unless such person is authorized to doso by the Corporation: (section 5E Ceylon Petroleum Corporation Act);indeed, nor can a person even establish or maintain any equipmentor facilities for the sale, supply or distribution of petroleum withoutauthorization: (section 5F CPC Act).
In the circumstances, I hold that the Corporation violated Article14 (1) (g) of the Constitution.
The petitioner prayed that the Court be pleased to make order "thatthere has been a violation of the fundamental rights of the petitioner".
For the reasons explained in my judgment, I declare that-
the first respondent, Honourable Anuruddha Ratwatte, Min-ister of Irrigation, Power and Energy, has not violated any provisionof the Constitution;
the second respondent, the Ceylon Petroleum Corporation,has violated Articles 12 (2) and 14 (1) (g) of the Constitution.
The petitioner prayed that the Court be pleased to make order"annulling and/or setting aside the decision to terminate thedistributorship and/or dealership of the petitioner", and to “annul orset aside the decision to take possession of" the Filling Station (570,Elvitigala Mawatha, Narahenpita, Colombo 5), and to make orderdirecting the respondents to hand over the said premises to thepetitoner.
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For the reasons explained in my judgment, the decision toterminate the agreement with the petitioner and the consequentialexpulsion of the petitioner from the premises situated at 570, ElvitigalaMawatha, Colombo 5, was unconstitutional and therefore of no forceor avail. There is no need for setting aside the decision of theCorporation to terminate the agreement. Nor is it necessary to setaside consequential actions by the Corporation, including the takingover of the premises referred to or authorizing the third respondentto take over those premises and act as a Dealer at that place. Anact that is unconstitutional is invalid and of no legal effect: it is devoidof legal force; and it is of no value; it amounts to nothing and . isof no efficacy. Therefore, the Ceylon Petroleum Corporation is boundto take such steps as are necessary to reinstate the petitioner in theplace at which he was carrying on his business or occupation asa Dealer before the unlawful termination of the agreement. However,for the removal of any doubt, I make order and direct the CeylonPetroleum Corporation to forthwith reinstate the petitioner as a Dealerat 570, Elvitigala Mawatha, Colombo 5, under and in terms of theMemorandum of Agreement made on the 16th of March, 1988,between the Corporation and the petitioner.
The implementation of the decision of this Court would necessarilymean that the person who was appointed by the Corporation to takeover and carry on business as a Dealer at 570, Elvitigala Mawatha,Colombo 5, would be displaced. The person who would be displacedhas been named as the third respondent in these proceedings, shehas been duly noticed, written submissions have been filed on herbehalf, and she has been represented by learned counsel who hasbeen heard by the Court. I have taken due account of all that hasbeen said on her behalf. Therefore, in determining reliefs, I am notburdened by the constraints imposed by the circumstances in KuruppugeDon Somapla Gunaratne (supra).
The petitioner prayed that “the Court be pleased to make orderawarding the petitioner damages in a sum of Rs. 25 million or anyother sum as to your Lordships' Court may seem just". The petitionerfiled a statement from his Accountants with regard to the "Turn Overof G.P. Enterprises" for the years 1992/93,1993/94 and 1994/95. Theyrelate to a "Filling Station" and a “Service Station". What is "G.P.Enterprises" ? There is no reference to it in the petition or in any
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affidavit of the petitioner or of any one else. Damages must beestablished by evidence. They have not been established.
However, for the infringement of his fundamental rights under Article12 (2) and 14 (1) (g) of the Constitution, I consider it just and equitablethat the Corporation should pay the petitioner a sum of Rs. 100,000as a solatium. I recognize not only the fact that as in Kuruppuge DonSomapala Gunaratne (supra) the Corporation acted arbitrarily, butalso that in the matter before me (a) it was motivated by politicalconsiderations – a ground specifically identified and explicitly con-demned by the Constitution; and that (b) Article 14 (1) (g) was alsoviolated.
I make order that a sum of Rs. 100,000 be paid by the CeylonPetroleum Corporation, the second respondent, to the petitioner asa solatium for the infringement by the Corporation of the petitioner'sfundamental rights and freedoms.
The petitioner prayed for costs. I make order that the secondrespondent, the Ceylon Petroleum Corporation, shall pay the petitionera sum of Rs. 25,000 as costs.
WIJETUNGA, J. – I agree.
GUNASEKERA, J. – I agree.
Relief granted.