JUDGMENT 1. - The petitioner Company has filed this writ petition under Article 226 of the Constitution of India seeking issuance of a writ, order or direction to the effect that telegram dated 16.7.90 and letter dated 16/17.7.90 be declared as illegal and be quashed with a further declaration that letter of intent dated 1.6.90 continues to be in force. It has been further prayed that the non-petitioners be directed to take all necessary and consequential steps for execution of agreement and to implement the same qua the petitioner as Selling Agent for the territories of Rajasthan, Punjab, Haryana, Himachal Pradesh and Delhi. It has also been prayed that the respondents be directed not to appoint any other selling agent/distributor for the aforesaid territories. The petitioner has lastly prayed that the respondents be directed to give him commission on the products sold in the territories aforesaid after 12.6.90. 2. The petitioner is a Company incorporated under the Companies Act,1956. Its registered office is at Ahemdabad and branches at Jaipur, Alwar and other places. 3. Rajasthan Cooperative Dairy Federation Limited (hereinafter referred to as the Federation), is a Federation of District Cooperative Milk Products Union situated in various Districts of Rajasthan. Its Board is nominated by the Government of Rajasthan and the Federation acts under the control of Government of Rajasthan. The petitioner has claimed that it is an instrumentality and the agency of the State of Rajasthan. A separate post of Dairy Secretary exists in the Government of Rajasthan. 4. The Federation published an advertisement in November 19,1988 inviting applications for appointment of Selling Agent for its various products. The petitioner also submitted an application on 7.12.88. Initially 46 applications were received by the Federation in respect of Cattle Feed. Some more applications were later on received. Some 70 applicants were called for interview and discussion in May and June,1989. The petitioner and some other firms also submitted their offers to sell Ghee, Butter, Milk Powder and other Dairy products on behalf of the Federation. The Federation considered these offers and ultimately decided to negotiate with the petitioner and one other Company namely:- M/s Markets (India)Pvt. Ltd., Delhi. Between December,1988 and January 1990 discussions were held with the petitioner on five occasions. Likewise discussions were held with M/s Markets (India) Pvt.Ltd., Delhi. The Federation considered these offers and ultimately decided to negotiate with the petitioner and one other Company namely:- M/s Markets (India)Pvt. Ltd., Delhi. Between December,1988 and January 1990 discussions were held with the petitioner on five occasions. Likewise discussions were held with M/s Markets (India) Pvt.Ltd., Delhi. Three senior officers of the Federation namely:- (1) Financial Adviser (2) General Manager (Marketing), Dairy Products and (3) General Manager (Marketing), Cattle Feed were involved in the negotiations with the petitioner. On 4.2.89 the petitioner submitted its proposal in detail for sale of Dairy products and Cattle Feed worth Rs. 23 crores per annum. The Negotiation Committee which had examined the offers of the petitioner and M/s Markets (India) Pvt.Ltd. found petitioner's offer to be more favourable and therefore, gave its recommendations in favour of the petitioner on 6.2.1989. Further discussions were he is with the Managing Director of the petitioner Company on 3.7.89 and thereafter petitioner's case for appointment as Selling Agent for one year was approved., According to the petitioner despite these discussions and approval the matter remained pending in the files of the Federation. On 23.12.89, the General Manager (Marketing) placed the matter before the Managing Director of the Federation along with draft agreement. The papers were then sent to General Manager (Planning) on 27.12.89. The Managing Director of the petitioner Company was again invited for discussions/ negotiations and a meeting was held on 6.1.90 between the petitioner's Managing Director and three officers of the Federation namely:- Financial Adviser, General Manager (Marketing) and General Manager (Planning), Finally recommendations were made in favour of the petitioner on 16.1.90 . The issuance of letter of intent was still withheld and the petitioner was again called for discussions on 8.3.90. In the meetings held on 9.3.90 and 16.3.90 the petitioner further agreed to reduce the rate of commission to be favoured to him. The petitioner also agreed to sell the dairy products of the Federation at increased' prices in a tough competitive market. A letter dated 21.3.90 (Annexure-2) was written to the petitioner by the General Manager (Marketing) of the Federation asking the petitioner to go ahead for making suitable arrangements for the purpose of undertaking of marketing operations as Selling Agent on all India basis. A letter dated 21.3.90 (Annexure-2) was written to the petitioner by the General Manager (Marketing) of the Federation asking the petitioner to go ahead for making suitable arrangements for the purpose of undertaking of marketing operations as Selling Agent on all India basis. The matter was finally placed before the Board of Directors of the Federation in its meeting held on 5.5.90 and the proposal was approved by the Board of Directors of the Federation. Pursuent to this approval a letter of intent dated 1.6.90 was issued by the federation appointing the petitioner as Selling Agent for dairy products and cattle feed of the Federation in Rajasthan, Haryana, Punjab, Himachal Pradesh and Delhi on the terms and conditions mentioned in the letter of intent. It was proposed that agreement be executed by 12.6.90 but in the meanwhile the petitioner was required to take all preparatory action for starting the work from 21.6.90. 5. According to the petitioner in pursuance of letters dated 21.3.90 and 1.6.90 the petitioner took necessary steps for starting the work immediately. A letter dated 1.6.90 was sent to the Federation requesting to release advertisement in the news papers announcing its appointment as Selling Agent to facilitate the petitioner taking further steps. The petitioner's representative went to the office of the Federation on number of occasions between 1.6.90 to 12.6.90 for execution of the agreement but he was informed that the draft agreement had been sent to Legal Adviser for finalisation and the same had not been received back and that he will be informed as soon as the same will be received back. The petitioner was advised to go ahead with the preparation and was also asked to submit marketing plan. Marketing plan was submitted on 20.6.90. Since the draft agreement was not ready with the Federation up to that date, the petitioner informed the Federation that the Bank Guarantee of Rs. 15 Lakhs will be furnished within 3 days of signing the agreement. The petitioner further requested the Federation to release the advertisement announcing the appointment of petitioner. An advertisement was issued by the petitioner for recruitment of 56 staff members. The same was published in Rajasthan Patrika on 14.4.90. The Company established its office at 19/20 Prem Nagar, Khatipura Road, Jhotwara, Jaipur. Detailed market survey was conducted and marketing plan was submitted to the Federation. An advertisement was issued by the petitioner for recruitment of 56 staff members. The same was published in Rajasthan Patrika on 14.4.90. The Company established its office at 19/20 Prem Nagar, Khatipura Road, Jhotwara, Jaipur. Detailed market survey was conducted and marketing plan was submitted to the Federation. Advertisements were also issued in various national papers inviting applications for appointment for distributors at various places. Thus the petitioners incurred huge expenditure in preparing itself to start the work as Selling Agent of the Federation. It has also been alleged that the Managing Director of the Company continued to visit office of the Federation and also kept telephonic contact in order to request the Federation to execute the agreement at an early date. However, the draft agreement and the proforma for furnishing the Bank Guarantee were not made available. 6. The petitioner has alleged that the then Minister of State for Dairy Development, Shri Gopal Singh Khandela has summoned the files of the Federation relating to this contract with an ulterior motive. The petitioner made a representation to him on 9.7.90 to the effect that contract in favour of the petitioner should not be interfered with or revoked for political reasons and at the instance of the Chief Minister merely because Managing Director of the Petitioner Company happened to be brother-in-law of the Chief Minister. 7. The petitioner has further asserted issue regarding to award of contract to the petitioner came up before the Rajasthan Legislative Assembly on 16.7.90 by way of an adjournment motion by shri Surender Vyas, Member of the Assembly from Malpura. This adjournment motion was taken up in the Assembly on 16.7.90 at about 5.20 PM. The statement of the Minister of State for Daily Development continued up to about 6.10 PM. According to the petitioner, Minister of State has stated that the Federation had taken a decision to appoint the petitioner as Selling Agent after considering all the gross and cons of the matters and that no favour had been shown to the petitioner Company and that the decision had been taken in favour of the petitioner company much before the assumption of office by the Chief Minister who happens to be the brother-in-law of the Managing Director of the Company. It was stated that only formal issuance of letter of intent was done after 1.3.90 when the present Chief Minister has assumed the office. 8. It was stated that only formal issuance of letter of intent was done after 1.3.90 when the present Chief Minister has assumed the office. 8. The petitioner has, however,stated that the Hon'ble Minister for State Dairy Development Federation had called for the relevant files on 5.6.90 on the basis of some alleged complaints and the same were continuously kept with him up to 27.8.90 and even thereafter. The petitioner has stated that during the deliberations in the Assembly Hon'ble Chief Minister has also informed that no favour has been shown to the petitioner at his instance. He did not make any recommendation to any body for grant of selling agency to the petitioner Company. According to the petitioner on the one hand Hon'ble Chief Minister and Hon'ble Minister of State for Dairy Development had found nothing objectionable in the appointment of the petitioner as Selling Agent for the dairy products of the Federation, on that very day telegram was, issued by the Federation for cancellation of the letter of intent. This telegram was issued at 10.45 PM on 16.7.90 and this was followed by a letter dated 16/17.7.90. 9. The petitioner has challenged the cancellation of letter of intent on the ground that this has been done for extraneous considerations. According to the petitioner the cancellation of the letter of intent has been brought about by colourable exercise of power. This has been done at the instance of the Hon'ble Chief Minister because though he found no irregularity in the award of contract to the petitioner, in order to avoid the embarrassment and unnecessary publicity and in order to project his clean image' before the masses, action has been taken against the petitioner for no reasons whatsoever. The petitioner has challenged the cancellation as malafide. It has also asserted the action of the Federation is null and void because no notice or opportunity of hearing whatsoever was given to the petitioner before passing of the order. The alleged complaints were used behind his back and the order was passed in hot haste. Whereas the Minister of the Department had found no fault in the transaction up to 6.20 PM on 16.7.90 and found it fully justified before the Assembly and on the same day telegraphic cancellation was issued at 10.45 PM. The alleged complaints were used behind his back and the order was passed in hot haste. Whereas the Minister of the Department had found no fault in the transaction up to 6.20 PM on 16.7.90 and found it fully justified before the Assembly and on the same day telegraphic cancellation was issued at 10.45 PM. The Federation had taken 18 months to issue the letter of intent but it did not wait even for a day and issued the cancellation just before the midnight, when all offices had closed. The petitioner has asserted that two reasons given in the letter of cancellation are no reasons. The Bank Guarantee was to be submitted as a cover to the price of goods sold by the Federation for 15 days but even the agreement has not been executed and therefore, there was no question of supply of goods and therefore, mere failure on the petitioner to furnish Bank Guarantee could hardly afford any justification for cancellation of the letter of intent particularly when the petitioner had in its letter dated 3.6.90 informed the respondent Federation that the Bank Guarantee will be furnished within 3 days of the signing of the agreement. So far as the agreement is concerned it was not executed due to the fault of the Federation. Whenever, the petitioner's Managing Director approached the Federation between 1.6.90 to 12.6.90 and even thereafter he was told that the draft agreement is with the I gal Adviser. The petitioner was asked to go ahead for making necessary arrangements. Moreover, as per the statement of the Hon'ble Minister of State he had himself directed that the agreement be not executed. The proforma of Bank guarantee was also not furnished to the petitioner. Thus the two reasons given by the Federation are non-existent. The petitioner has also founded its claim on the plea of estoppel in as much as the petitioner was made to incur huge expenditure for sales promotion,marketing survey,recruitment of staff, establishing of office at Jaipur, issuing advertisements and initiating the distributors/dealers. The petitioner had acted on the instructions of the Federation and therefore, the Federation is not entitled to go back from its representation and put the petitioner to serious prejudice. 10. The respondent No.1 has not filed any reply to the writ petition. The petitioner had acted on the instructions of the Federation and therefore, the Federation is not entitled to go back from its representation and put the petitioner to serious prejudice. 10. The respondent No.1 has not filed any reply to the writ petition. In its reply respondent No.2 has raised a preliminary objection that the writ petition is not maintainable for commanding the Federation to enter into a contract with the petitioner.It has been asserted by the Federation that the petitioner was never appointed as Selling Agent of the Federation. The letter of intent is not an agreement between the parties and no legal contract has come into existence. Thus none of the legal or fundamental right of the petitioner had been infringed by cancellation of mere letter of intent. It has then been asserted by respondent No.2 that the petitioner had failed to execute the agreement up to 12.6.90. It's representative did not come for execution of agreement on 12.6.90 and unilaterally informed that the agreement would be executed on 17.6.90 but even thereafter, he did not come to execute the agreement. The irrecoverable Bank Guarantee was also not furnished. Along with the marketing plan the petitioner did not submit its balance sheet as well as profit and loss account and therefore, Federation had no option but to cancel the letter of intent. The respondent Federation has asserted that till an agreement is executed, no contract can be said to have come into existence. The draft agreement was ready with the Federation but the petitioner failed to appear for execution of the agreement. Regarding the statement of the Minister for State and the Chief Minister, the Federation has stated the same is not within its knowledge. It has further stated that the Secretary to the Government in Dairy Development called for the concerned file on 29.6.90. The Federation has shown its ignorance about the relationship between the Managing Director of the petitioner Company and the Hon'ble Chief Minister and has stated that this relationship came to its knowledge from the writ petition itself. The Federation has stated that the petitioner itself is responsible for not executing the agreement and for not furnishing the bank guarantee. The Federation was left with no option but to cancel the letter of intent on account of default of the petitioner. The Federation has stated that the petitioner itself is responsible for not executing the agreement and for not furnishing the bank guarantee. The Federation was left with no option but to cancel the letter of intent on account of default of the petitioner. The Federation has denied any influence by the Hon'ble Minister of State or Hon'ble Chief Minister in issuance of telegram dated 16.7.90 and letter ,dated, 16/17.7.1990. Lastly it has been asserted that if at all the. petitioner had suffered any loss, remedy by way of civil suit for damage was available to it. 11. In its rejoinder to the reply of respondent No.2 the petitioner has again asserted that according to the statement of the Hon'ble Minister for State of Dairy Development, the files had been summoned by him on 5.6.90 and he had directed the Federation not to take any further steps in the matter. Therefore, the plea of the Federation that nobody on behalf of the petitioner came to sign the agreement is incorrect. It has further been stated that Shri Mohan Singh Raghav, Managing Director of the petitioner company personally contacted the Managing Director and General Manager (Marketing) repeatedly but on the pretext of draft agreement being with the Legal Adviser, the respondent Federation avoided signing of the agreement. 12. An additional affidavit of Shri Heera Lal Sharma, Dy. Manager (Marketing) of the respondent Federation has been filed on 7.11.90. In this affidavit it has been stated that draft agreement was prepared by him and Dr. Hari Lal, General Manager (M and P). This draft agreement was submitted to the Managing Director on 8.6.90. The petitioner did not appear for signing agreement on 12.6.90 and had informed Dr. Hari Lal on telephone that the petitioner will come on 17.6.90 but none came. The matter was referred to Shri K.K. Khanna, Advocate for legal advice on 15.7.90 by Dr. Hari Lai, General Manager (M and P). The Legal Adviser gave advice that the Federation has right to revoke the letter of intent. On 16.7.90 the matter was referred to the Managing Director, Shri Hanuman Prasad, who approved it. Thereafter on 16.7.90 in the evening the letter of revocation was drafted by the Legal Adviser and on his advice telegram was issued to the petitioner on 16.7.90 itself. On 16.7.90 the matter was referred to the Managing Director, Shri Hanuman Prasad, who approved it. Thereafter on 16.7.90 in the evening the letter of revocation was drafted by the Legal Adviser and on his advice telegram was issued to the petitioner on 16.7.90 itself. The four files pertaining to procedure and appointment of agent were sent to the Dairy Secretary on 29.6.90 by the Managing Director and the same were returned back on 16.8.90 after showing them to the Minister. The file pertaining to the issue of letter of intent and execution of agreement was neither called by the Secretary nor it was sent and it was with Dr. Hari Lal, General Manager (M and P). 13. A reply to this affidavit has been filed on behalf of the petitioner in which it has been reiterated that the Managing Director of the Company has visited the Office of the Federation every day till 12.6.90 and on every 2/3 days till 29.6.90 and contacted Shri B.L.Sharma, the Managing Director and Dr. Hari Lal, General Manager(M and P) and asked for execution of the agreement but each of them told the Managing Director of the petitioner Company that draft is under preparation by the Legal Adviser and as and when it is received, agreement will be executed. On 30.6.1990 Managing Director of the Company met Shri B.L. Sharma at his Malaviya Nagar residence and Shri Sharma disclosed that the matter is really in the hands of the Minister as the file has been summoned by him long back. According to the petitioner, if the agreement has been prepared by Shri Heera Lal and Dr. Hari Lal, there was no reason to send the letter of revocation for draft by the Legal Adviser. The petitioner has denied that Mohan Singh Raghav or any one else on behalf of the Company informed Shri Heera Lal on telephone that he will be coming on 17.6.90. In fact, Shri Mohan Singh Raghav has visited the office on 17.6.90. He met Dr. Hari Lal who stated that draft agreement has not yet been received from the Legal Advise.-. 14. On an application moved on behalf of the petitioner the original record relating to the case was summoned. Shri R.C.Joshi as well as the learned Advocate General were absolutely fair in placing the entire record for perusal of the Court. 15. Hari Lal who stated that draft agreement has not yet been received from the Legal Advise.-. 14. On an application moved on behalf of the petitioner the original record relating to the case was summoned. Shri R.C.Joshi as well as the learned Advocate General were absolutely fair in placing the entire record for perusal of the Court. 15. The record produced before the Court shows that the Board of Directors has considered the question of appointment of All India Selling Agent for marketing the products. The comparative offers of the petitioner and M/s Markets (India) Ltd. were considered in detail and thereafter decision to approve the appointment of the petitioner as a Selling Agent of All India basis was taken. This decision was taken by the Board in its 40th Meeting held on 5.5.90. The Managing Director was authorised to enter into agreement on the lines indicated by the Board in its Resolution No. 40(16). It is also apparent from perusal of File No. F.1(31) Agriculture/6/90 that on the direction of the Hon'ble Minister of State for Dairy Development a detailed note had been sent by the Managing Director of the Federation to the Secretary to the Government for being placed before the Minister. Files were sent by the Federation to the Secretary, Dairy Development in the last week of June 90 and they were then sent to the Hon'ble Minister of State. From perusal of file No. F.6(361)RCDF/M and P/ 90 (which started from 31.05.1990) it is clear that on 31.5.90 the General Manager (M and P) submitted a note for issuance of letter of intent. After approval by the Managing Director and other officers. The letter of intent was issued. On 8.7.90 the General Manager (M and P) took notice of the letter of the petitioner dated 21.6.1990 regarding its request for release of advertisement.The Financial Adviser, to whom the matter was referred by the Managing Director on 12.6.90, wrote a note on 26.6.90 that till a legally executed agreement takes place between the Federation and petitioner, it is not advisable to issue advertisement at the stage and no right is conferred on the party on the basis of letter of intent till the party executes agreement in favour of the Federation. Then at Note No. 11 to 12, the Managing Director has written the following "I agree. Then at Note No. 11 to 12, the Managing Director has written the following "I agree. Let us first finalise the agreement draft before taking up any such action. And being given by this firm, have been having milk also as an item which was not agreed to. Hon'ble Minister Dairy had asked for report and files pertaining to the selection of the party. This has been sent. The Dairy Minister has desired that no further action in this matter be taken till Government does not clear the case. This I had told to G.M. (M and P) immediately on his return from leave. Please ensure strict compliance as above. 16. Note 13 to 17, has been recorded by G.M. (Marketing) on 22.6.90, shows that the party was required to sign agreement before contract can be considered as final. It is also recorded that the party has not submitted Balance Sheet, Profit and Loss Accounts etc. and hence a letter will be sent for furnishing this before agreement will be got signed. Upon this note No. 18 is shown to have been recorded by the Managing Director on 30.6.90 in the following words : "He should give facts for each item agreed to. However, action from RCDF will have to await till reply from Government is not received on the case submitted to the Government as per desire of the Hon'ble Minister, Dairy, Government of Rajasthan.` 17. Thereafter, there appears note of 15.7.90 of the General Manager (M and P) regarding the failure of the petitioner to execute agreement and furnish Bank Guarantee and also failure on its part to furnish Balance Sheet, profit and loss account etc. A proposal was made for revoking the letter of intent and after seeking legal advice the telegram and the letter for cancellation of the letter of intent had been sent. 18. Shri B.L. Sharma, learned counsel for the petitioner has argued that the cancellation of the letter of intent suffers from malafide and arbitrariness. The Federation had taken almost 20 months to finalise and approve the proposal of appointment of Selling Agent. Detailed negotiations were held with the petitioner M/s Markets (India) Pvt. Ltd. on several occasions. The Federation was represented by a higher powered committee. After careful examination of the interest of the Federation as well as the public interest, decision was taken to appoint the petitioner as Selling Agent. Detailed negotiations were held with the petitioner M/s Markets (India) Pvt. Ltd. on several occasions. The Federation was represented by a higher powered committee. After careful examination of the interest of the Federation as well as the public interest, decision was taken to appoint the petitioner as Selling Agent. The petitioner was asked to prepare for start of the work by the end of the June, 1990. The agreement could not be executed on account of the fault of the Federation and the Government. After, all the said happening, the cancellation has been brought about in hot haste and without application of mind. On the one hand statement was made on the floor of the -Assembly by the Hon'ble Minister of State that the award of contract to the petitioner was perfectly in order and was not on account of any political consideration, on that very night the authorities of the Federation issued telegraphic cancellation. Such action of the Federation is not bona fide and is unjustified. The action of the Federation is contrary to the public interest and has resulted in serious injury to the petitioner. Shri Sharma argued that the decision has not been taken by the Federation on its own but under the dictate of the respondent No. 4 because the Chief Minister did not want this controversy to be raised in the public. Shri Sharma then argued that the grounds for cancellation given in the letter dated 16/17.7.90 are wholly untenable. The conditions contained in the letter of intent clearly stipulated that the goods will be allowed to be lifted only after the Bank Guarantee is furnished. The petitioner has written in Annexure-4 that it would furnish bank guarantee within 3 days of the execution of agreement. The Managing Director of the petitioner Company had gone on everyday between 4.6.90 to 29.6.90 but the authorities of the Federation had informed him that the agreement is under preparation. According to the learned counsel for the petitioner the facts, which have come on record, clearly show that the agreement was no executed because of the interference of the Government and now fault was being found with the petitioner. According to the learned counsel for the petitioner the facts, which have come on record, clearly show that the agreement was no executed because of the interference of the Government and now fault was being found with the petitioner. Learned counsel for the petitioner further argued that revocation of the letter of intent has been done by the Managing Director, although, the decision according approval for appointment of the petitioner as Selling Agent was taken by the Board of Directors. Placing reliance of Section 33 of the Rajasthan Cooperative Societies Act, 1965, Shri Sharma argued that since Federation is cooperative Society, a decision taken by the Board of Directors could be reversed only by the Board of Directors and not by the Managing Director of the Federation. There has been no delegation of powers in favour of the Managing Director. Shri Sharma argued that before effecting cancellation of the letter of intent no opportunity of hearing was given to the petitioner. The petitioner was made to spend a huge amount in order to prepare itself for selling of the products of the Federation. The authorities of the Federation asked the petitioner to take steps for starting the. work by end of the June. After all the necessary steps had been taken by the petitioner, the cancellation of the letter of intent was made without giving any action oriented notice to the petitioner. The petitioner was never informed of the proposal of the Federation to cancel the letter of interest (sic "intent") or to withdraw the approval of the Board of Directors regarding appointment of the petitioner as Selling Agent on the ground that he had failed to execute the agreement or failed to furnish the Bank Guarantee or Profit and Loss Account, Balance Sheet etc. If notice had been given to the petitioner, it would have demonstrated that the fault of non - execution of the agreement was not that of the petitioner but that of the Federation itself. He submitted that the Federation was estopped from cancelling letter of intent. The Federation had made a representation to the petitioner by issuing letter of intent. The petitioner had acted in pursuance of that representation and therefore, on the principle of promissory estoppel, the Federation was left with no choice to cancel the letter of intent issued in favour of the petitioner. 19. The Federation had made a representation to the petitioner by issuing letter of intent. The petitioner had acted in pursuance of that representation and therefore, on the principle of promissory estoppel, the Federation was left with no choice to cancel the letter of intent issued in favour of the petitioner. 19. The learned Advocate General and Shri R.C. Joshi, learned counsel for the respondent No. 2 argued that no legal or constitutional right was conferred on the petitioner by mere issuance of letter of intent. The petitioner very well knew that he had to sign the agreement before it became effective. It was also to submit the Bank Guarantee. The petitioner failed to execute the agreement. Nobody came to sign the agreement or to submit the bank guarantee. When the petitioner had failed to fulfil its obligations as stipulated in the letter of intent, the matter was referred to the legal Adviser on 15.7.90. After receipt of the opinion of the Legal Adviser regarding cancellation of the letter of intent the matter was placed before the Managing Director by the General Manager (M and P), Dr. Hari Lal. The same was approved by the Managing Director and then telegram was sent to the petitioner for cancellation of the letter of intent. It was a sheer coincidence that the telegram was issued on the very day on which the Hon'ble Minister of State for Dairy Development had made a statement in the Legislative Assembly. It has then been argued that the allegations of mala fide levelled against respondent No. 4 are too vague to while agreeing with the plea that the State action should be fair and in public interest, the learned Advocate General argued that the Federation carried business activities in public interest. The State may control over it but the State exercises its power only in public interest. No direction was given by the Government for cancellation of the letter of intent. The Federation is itself an autonomous body and the Federation had taken its own decision. The Government had not interfered with the decision of the Federation in any manner nor had it dictated the manner in which the action was to be taken by the Federation. No direction was given by the Government for cancellation of the letter of intent. The Federation is itself an autonomous body and the Federation had taken its own decision. The Government had not interfered with the decision of the Federation in any manner nor had it dictated the manner in which the action was to be taken by the Federation. Shri Agarwal further argued that final acceptance was subject to the fulfilment of the conditions specified in the letter of intent and if the Federation found that the petitioner had failed to fulfil these conditions, it was justified in issuing the telegram. 20. Shri R.C. Joshi, in addition to other arguments, submitted that the allegations made by the petitioner against respondents No. 3 and 4 are absolutely vague. The entire decision regarding approval of appointment of petitioner as Selling Agent and cancellation of the letter of intent was taken at the level of the Federation. Shri Joshi submitted that affidavit of Shri Heera Lal was very specific on the question that nobody had come on 12.6.90 for signing of the agreement and in fact the authorities of the Federation were informed that the petitioner's representative would come on 17.6.90 for signing the agreement. Shri Joshi further argued that old system of distribution of goods of he Federation through the District network was being continued. There was nothing arbitrary in the action of the Federation in issuing telegram for cancellation of the letter of intent. 21. Rajasthan Cooperative Dairy Federation is a society registered under the Rajasthan Cooperative Societies Act, 1965. A question had arisen before the learned Single Judge in Vallabh Chand Mehta v. Rajasthan Dairy Cooperative Federation Ltd. and others, 1981 WLN (UC) 341 in as to whether the Federation is an instrumentality or agency of the State or not. After making elaborate discussions of the principles of law laid down in various cases the learned Single Judge concluded that the Federation comes within the scope of term "Other authorities" used under Article 12 of the Constitution of India. The same question was again examined by a Division Bench in Rajasthan Cooperative Dairy Federation and another v. Manohar Lal, 1983 RLR 558 After making reference of Sukhdeo Singh v. Bhagat Ram, AIR 1975 SC 1131 , Ramanna Dayaram Shetty v. International Air Port Authority of India, AIR 1979 SC 1628 , Raj. The same question was again examined by a Division Bench in Rajasthan Cooperative Dairy Federation and another v. Manohar Lal, 1983 RLR 558 After making reference of Sukhdeo Singh v. Bhagat Ram, AIR 1975 SC 1131 , Ramanna Dayaram Shetty v. International Air Port Authority of India, AIR 1979 SC 1628 , Raj. State Electricity Board v. Mohan La1, AIR 1967 SC 1857 , Ajay Hasia v. Khalid Mujib, AIR 1981 SC 487 and Som Prakash Rekhi v. Union of India, AIR 1981 SC 212 the Division Bench concluded that the Federation falls within the ambit of Article 12 of the Constitution of India and as such amenable to writ jurisdiction under Article 226 of the Constitution of India. All the tests laid down for determination as to whether a particular body is an agency or instrumentality of the State and therefore, falls within the scope of the term "Other Authorities" used in Article 12 of the Constitution of India have been reiterated in Central Inland Water Transport Corporation v. Brojonath Ganguli, AIR 1986 SC 1571 In the light of the decision of the Division Bench in Rajasthan Cooperative Dairy Federation v. Manohar Lal (supra) it must be concluded that the Federation is an agency or instrumentality of the State and therefore, comes within the ambit of the term State as defined in Article 12 of the Constitution of India. As a logical corollary, all its actions must be informed by public interest and must be free from arbitrariness. State and its agencies or instrumentalities must act in consonance with the various provision of the Constitution. Their actions are always subject to judicial review. The State and its agencies or instrumentalities cannot act arbitrarily. 22. In S.G. Jaisinghani v. Union of India and others, 1967 SLR 482 Ramaswamy J had indicated the following tests of arbitrariness of State action. It would be profitable to quote observations made more than two decades ago : "In this context it is important to emphasise that the absence of arbitrary power is the first essential of the rule of law upon which our whole constitutional system is based. In a system governed by rule of law, discretion, when conferred upon executive authorities, must be .confined within clearly defined limits. In a system governed by rule of law, discretion, when conferred upon executive authorities, must be .confined within clearly defined limits. The rule of law from this point of view means that decision should be made by the application of known principles and rules and, in general, such decisions should be predictable and the citizen should know where he is. If a decision is taken without any principle or without any rule it is unpredictable and such a decision is the antithesis's of a decision taken in accordance with the rule of law. (See Dicey, "Law of the Constitution" Tenth Edn., Introduction ex). "Law has reached its finest moments", stated Dougles, J. in United States v. Wunderlick (*), "When it has freed man from the unlimited discretion of some ruler where discretion is absolute, man has always suffered". It is in this sense that the rule of law may be said to be the sworn enemy of caprice. Discretion, as Lord Mansfield stated it in classic terms in the case of John Wilkes (*), "Means sound discretion guided by law it must be governed by rule, not humour; it must not be arbitrary, vague and fanciful." 23. Similarly in E.P. Rayappa v. State of Tamil Nadu, 1974(4)SCC 3 Bhagawati J(as he then was) in his concurring judgment made lucid enunciation of the principles of the Enquiry embodied in Articles 14 and 16 of the Constitution of India and observed as under: "The basic principle which, therefore, informs both Articles 14 and 16 is equality and inhibition against discrimination. Now, what is the content and reach of this great equalising principle ? It is a founding faith, to use the words of Bose. J.," a way of life", and it must not be subjected to a narrow pedantic or lexicographic approach. We cannot countenance and attempt to truncate its all - embracing scope and meaning, for to do so would be to violate activist magnitude. Equality is a dynamic concept with many aspects and dimensions and it cannot be "cribbed, cabined and confined" within traditional and doctrinaire limits. From a positivistic point of view, equality is antithetic to arbitrariness. In fact equality and arbitrariness are sworn enemies; one belongs to the rule of law in a republic while the other, to the whim and caprice of an absolute monarch. From a positivistic point of view, equality is antithetic to arbitrariness. In fact equality and arbitrariness are sworn enemies; one belongs to the rule of law in a republic while the other, to the whim and caprice of an absolute monarch. Where an act is arbitrary, it is implicit in it that it is unequal both according to political logic and constitutional law and is therefore violative of Article 14, and if it effects any matter relating to public employment, it is also violative of Article 16. Articles 14 and 16 strike at arbitrariness in State action and ensure fairness and equality of treatment. They require that State action must be based on valid relevant principles applicable alike to all similarly situate and it must not be denial of equality. Where the operative reason for State action, as distinguished from motive inducing from the antechamber of the mind, is not legitimate and relevant but is extraneous and outside the area of permissible considerations it would amount to malafide exercise of power and that is hit by Articles 14 and 16. Malafide exercise of power and arbitrariness are different lethal radiations emanating from the same vide; in fact the latter comprehends the former. Both are inhibited by Articles 14 and 16." 24. The power of judicial review in contractual matters was invoked by the Supreme Court as early as in 1954 in Guruswamy v. State of Mysore, AIR 1954 SC 592 in that case their Lordships of the Supreme Court had held that before the State could cancel the highest bod of liquor contract after acceptance, it ought to give a notice to the party concerned. Similar view was expressed in DFO South Kheri v. Ram Snehi Singh, AIR 1973 SC 205 In Union of India v. Anglo Afgan Agency, AIR 1968 SC 718 their Lordships of the Supreme Court applied the principles of promissory estoppel in the field of Export Policy framed by the Government of India. In Erusian Equipment and Chemicals Ltd. v. State of West Bengal, 1975(1) SCC 70 the Supreme Court applied the principles of natural justice in a case where a contractor was black-listed without being heard. 25. In Erusian Equipment and Chemicals Ltd. v. State of West Bengal, 1975(1) SCC 70 the Supreme Court applied the principles of natural justice in a case where a contractor was black-listed without being heard. 25. The concept of equality received new dimensions by the Supreme Court's Judgement in Maneka Gandhi v. Union of India, 1978 (1) SCC 248 , Ramanna Dayaram Shetti v. International Air Port Authority, 1979 (3) SCC 489 , M/s Kasturilal Laxmi Reddy v. State of Jammu and Kashmir, 1980 (4) SCC 1 In these cases extensive discussions on the power of judicial review in contractual matter has been made. This forward march of law has continued from year to year and the principles laid down in Ramanna Dayaram Shetty, Kasturi Lal Laxmi Reddy have been reiterated in Dwarka Marftia and Sons v. Bombay Port Trust, 1989 (3) SCC Page 293 , Mahaveer Auto Stores v. Indian Oil Corporation, 1990 (3) SCC 752 and Kumari Shrilekha Vidyarthi v. State of U.P. and others 1991 (1) SCC 212 In Shrilekha's case the Supreme Court was considering the question of termination of the appointment of all the Government Counsels in all the districts of the State. In the course of Judgment the Supreme Court has observed : "Applicability of Article 14 to all executive actions of the State being settled and for the same reason its applicability at the threshold to the making of a contract in exercise of the executive power being beyond dispute, can it be said that the State can thereafter cast off its personality and exercise unbridled power unfettered by the requirements of Article 14 in the sphere of contractual matters and claim to be governed therein only by private law principles applicable to private individuals whose rights flow only from the terms of the contract without anything more ? We have no hesitation in saying that the personality of the State, requiring regulation of its conduct in all spheres by requirements of Article 14, does not undergo such a radical change after the making of a contract merely because some contractual right accrue to the other party in addition, it is not as if the requirements of Article 14 and contractual obligations are alien concepts, which cannot co-exist. 26. The Preamble of the Constitution of India resolves to secure to all its citizens. Justice, social economic and political; and Equality of status and opportunity. 26. The Preamble of the Constitution of India resolves to secure to all its citizens. Justice, social economic and political; and Equality of status and opportunity. Every State action must be aimed at achieving this goal. Part IV of the Constitution contains 'Directives Principles' of state Policy which are fundamental in the governance of the country and are aimed at securing social and economic freedoms by appropriate State action which is complementary to individual fundamental rights guaranteed in Part III for protection against excesses of State action, to realise the vision in the Preamble. This being the philosophy of the Constitution, can it be said that it contemplates exclusion of Article 14 non-arbitrariness which is basic to rule of law from State actions in contractual field when all actions for the State are meant for public good and expected to be fair and just ? We have no doubt that the Constitution does not envisage or permit unfairness or unreasonableness in State actions in any sphere of its activity contrary to the professed ideals in the preamble. In our opinion, it would be.alien to the Constitutional Scheme to accept the argument of exclusion of Article 14 in contractual matters. The scope and permissible grounds of judicial review in such matters and the relief which may be available are different matters but that does not justify the view of its total exclusion. This is more so when the modem trend is also to examine the unreasonableness of a term in such contracts where the bargaining power is unequal so that these are not negotiated contracts but standard form contracts between unequals. 27. There is an obvious difference in the contracts between private parties and contracts to which the State is a party. Private parties are concerned only with their personal interest whereas the State while exercising its powers and discharging its functions, acts indubitably, as is expected of it, for public good and in public interest. The impact alone is sufficient to import at least the minimal requirement of public law obligations and impress with this character the contracts made by the State or its instrumentality. The impact alone is sufficient to import at least the minimal requirement of public law obligations and impress with this character the contracts made by the State or its instrumentality. It is a different matter that the scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties maybe relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes. However, to the extent, challenge is made on the ground of violation of Article 14 by alleging that the impugned act is arbitrary, unfair or unreasonable, the fact that the dispute also falls within the domain of contractual obligations would not relieve the State of its obligation to comply with the basic requirements of Article 14. To this extent, the obligation is of a public character invariably in every case irrespective of their being any other right or obligation in addition thereto. An additional contractual obligation cannot divest the claimant of the guarantee under Article 14 of non- arbitrariness at the hands of the State in any of its actions. 28. The State cannot be attributed the split personality of Dr. Jekyll and Mr. Hyde in the contractual field so as to impress on it all the characteristics of the State at the threshold while making a contract requiring it to fulfil the obligation of Article 14 of the Constitution and thereafter permitting it to cast off its garb of state to adorn the new robe of a private body during the subsistence of the contract enabling it to act arbitrarily subject only to the contractual obligations and remedies flowing from it. It is really the nature of its personality as State which is significant and must characterise all its actions, in whatever field, and not the nature of function, contractual or otherwise, which is decisive of the nature of scrutiny permitted for examining the validity of its act. The requirement of Article 14 being the duty to 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. The requirement of Article 14 being the duty to 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. There is a basic difference between the acts of the State which must invariably be in 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 in sphere of contractual matters for regulating the conduct of the State activity. 29. In Wade's Administrative Law, 6th Ed. after indicating that 'the powers of public authorities are essentially different from those of private persons', it has been succinctly stated at p. 400401 as under ' "The whole conception of unfettered discretion is inappropriate to a public authority, which possesses powers solely in order that it may use them for the public good." There is nothing paradoxical in the imposition of such legal limits. It w:auld indeed be paradoxical if they were not imposed. Nor is this principle an oddity of British or American law; it is equally prominent in French law. Nor is it a special restriction which fetters only local authorities; it applies no less to ministers of the Crown. Nor Ts it confined to the sphere of administration it operates wherever discretion is given for some public purpose, for example where a judge, has a discretion to order jury trial. It is only where powers are given for the personal benefit of the person empowered that the discretion is absolute. Plainly this can have no application is public law. For the same reasons there should in principle be no such thing as un reviewable administrative discretion, which should be just as much a contradiction in terms as unfettered discretion. The question which has to be asked is what is the scope of judicial review, and in a few special cases the scope for the review of discretionary decisions may be minimal. It remains axiomatic that all discretion in capable of abuse, and that legal limits to every power are to be found somewhere," (emphasis supplied) The view, we are taking, is, therefore, in consonance with the current thought in this field. It remains axiomatic that all discretion in capable of abuse, and that legal limits to every power are to be found somewhere," (emphasis supplied) The view, we are taking, is, therefore, in consonance with the current thought in this field. We have no doubt that the scope of judicial review may vary with reference to the type of matter involved, but the fact that the action is reviewable, irrespective of the sphere in which it is exercised, cannot be doubted. 30. It can longer be doubted at this point of time that Article 14 of the Constitution of India applies also to matters of Governmental policy and if the policy or any action of the Government, even in contractual matters, fails to satisfy the test of reasonableness, it would be unconstitutional. See Ramana Dayaram Shetty v. The International Airport Authority of India and Ors., 1979 (3) SCR 1014 and Kasturi Lal Lakshmi Reddy v. State of Jammu and Kashmir and Anr., 1980 (3) SCR 1338 . In Col. A.S. Sangwan v. Union of India and Ors, 1980 (Supp. SCC 599 , while the discretion to change the policy in exercise of the executive power, when not trammelled by the statute or rule, was held to be wide, it was emphasised as imperative and implicit in Article 14 of the Constitution that a change in Policy must be made fairly and should not give the impression that it was so done arbitrarily or by any ulterior criteria. The wide sweep of Article 14 and the requirement of every State action qualifying for its validity on this touchstone, irrespective of the field of activity of the State, has long been settled. Later decisions of this Court have reinforced the foundation of this tenant and it would be sufficient to refer only to two recent decisions of this Court for this purpose. 31. It is now too well settled that every State action, in order to survive, must not be susceptible to the vice of arbitrariness which is the crux of Article 14 of the Constitution and basic to the rule of law, the system which governs us. Arbitrariness is the very negation of the rule of law. Satisfaction of this, basic test in every State ction is sine qua non to its validity and in this respect, the State cannot claim comparison with a private individual even in the field of contract. Arbitrariness is the very negation of the rule of law. Satisfaction of this, basic test in every State ction is sine qua non to its validity and in this respect, the State cannot claim comparison with a private individual even in the field of contract. This distinction between the State and a private individual in the field of contract has to be borne in the mind. 32. The meaning and true import of arbitrariness is more easily visualised than precisely stated or defined. The question, whether an impugned act is arbitrary or not, is ultimately to be answered on the facts and in the circumstances of a given case. An obvious test to apply is to see whether there is any discernible principle emerging from the impugned act and if so, does it satisfy the test of reasonableness. Where a mode is prescribed for doing an act and there is no impediment in following that procedure, performance of the act otherwise and in a manner which does not disclose any discernible principle which is reasonable, may itself attract the vice of arbitrariness. Every State action must be informed by reason and it follows that an act uninformed by reason, is arbitrary. Rule of law contemplates governance by laws and not by humour, whims or caprices of the men to whom the governance is entrusted for the time being. It is trite that 'be your ever so high, the laws are above you.' This is what men in power must remember, always." 33. The above principles of law make it abundant to clear that every action of State and its agencies or instrumentalities which affect public must not be arbitrary and must be in public interest. The State action must be informed with fairness in contradistinction to arbitrariness and at the same time it must be based on good reasons. The decision of a public body must not be capricious or based on whims. It must be in consonance with the principles of natural justice. Wherever state action affects an individual adversely, opportunity of hearing must be afforded to such individual and the action of the State or public authority must be informed by reasons. There must be application of mind by the State or its agencies or its instrumentalities. It must be in consonance with the principles of natural justice. Wherever state action affects an individual adversely, opportunity of hearing must be afforded to such individual and the action of the State or public authority must be informed by reasons. There must be application of mind by the State or its agencies or its instrumentalities. This application of mind must be borne out from the record even though it may not be necessary to indicate reasons in the order in all cases. The decision must be bonafide and must not be actuated by malice or irrelevant considerations. The decision must be based on grounds of public interest as opposed to personal interest. 34. In the present case it is apparent from the perusal of the fact which has come on record that the respondent Federation had entered into negotiation and discussion for any months be for deciding to appoint the petitioner as Selling Agent of its various products. A Committee of 3 Senior Officers of the Federation had negotiated terms and conditions with the petitioner Company. After due consideration of different factors and especially the interest of the Federation, the Committee made recommendation for appointment of the petitioner as Selling Agent. Board of Directors of the Federation also considered the matter in detail and thereafter approved the appointment of the petitioner as Selling Agent for the products of the Federation. For atleast 6 months the petitioner was given to understand that his offer has been accepted and he was being appointed as Selling Agent. The petitioner was directed to establish infrastructure for starting the work from the last week of June, 1990. It was asked to go ahead for making suitable arrangements for that purpose. Thereafter the letter of intent was issued to the petitioner on 1.6.1990. The petition had undertaken market survey prepared marketing plan, established its office and took steps for appointment of distributors and engaging of staff. In the process the petitioner had incurred a lot of expenditure. Neither in the letter dated 1.6.1990 nor in any other communication sent to the petitioner, there was a stipulation that in case of failure of the petitioner to sign the agreement or to furnish bank guarantee the letter of intent would stand cancelled or would be revoked by the Federation. Neither in the letter dated 1.6.1990 nor in any other communication sent to the petitioner, there was a stipulation that in case of failure of the petitioner to sign the agreement or to furnish bank guarantee the letter of intent would stand cancelled or would be revoked by the Federation. The petitioner had in fact submitted an advertisement to the Federation for publication so that the public at large may come to know that the petitioner had been appointed as Selling Agent for the products of the Federation in various territories. The petitioner also wrote to the Federation that it would be in a position to furnish bank guarantee within 3 days of the execution of the agreement. At no point of time the Federation had told the petitioner or its representative that on account of its failure to sign the agreement and to furnish bank guarantee or any other document, it intended to cancel the letter of intent. The nothings of the Managing Director on 29.6.90 and 30.6.90 clearly indicate that the Hon'ble Minister of State for Dairy Development had asked the Federation not to take further action without his instructions. This is also corroborated by the statement made by the respondent No. 4 on the floor of the Legislative Assembly on 16.7.90. The note recorded by the Managing Director on 29.6.90 is very crucial. It clearly records the Dairy Minister has desired that no further action in the matter till the Government does not clear the case. Obviously, therefore, the plea of the respondent Federation that the petitioner had not signed the agreement on 12.6.90 or any other date thereafter, cannot be accepted as correct. The sudden change of the stance of the Federation on 15.7.90 is inexplicable. No reason is borne out from the reply of the Federation of from the record which has been placed for perusal of the Court. There has been no application of mind on the considerations relating to the interest of the Federation or the public interest. There is nothing on record to show that Federation had re-examined the question of appointing the petitioner as Selling Agent and after a scrutiny of the matter had come to the conclusion that it would be contrary to public interest to finalise the agreement with the petitioner and therefore, it should be cancelled. There is nothing on record to show that Federation had re-examined the question of appointing the petitioner as Selling Agent and after a scrutiny of the matter had come to the conclusion that it would be contrary to public interest to finalise the agreement with the petitioner and therefore, it should be cancelled. On 16.7.90 Hon'ble Minister for state Dairy Development had categorically stated on the floor of the Legislative Assembly that the action of the Federation in taking decision to appoint the petitioner as Selling Agent was perfectly in order. There was no political interference. No favouritism had been shown to the petitioner. However, in hot haste the authorities of the Federation took drastic action of cancellation of the letter of intent to the petitioner. In the absence of any material having been placed on record to support the sudden decision of the Federation on the night of 16.7.90 and total lack of application of mind on the considerations of public interest or the interese of Federation, it must be concluded that the two elements which must necessarily be found' in every State action namely lack of arbitrariness and the. action being in public interest are totally missing in the present case. It is true that in every case reasons are not to be communicated to the party concerned but the requirement of fairness is implicit in every State action and reasons must be borne out from the record. Arbitrariness is writ large in the fact of the action taken by the Federation by way, cancellation the letter of intent through telegram. It is true that an elements of discretion vests with the Federation in such matters but the discretion has to be exercised properly and there is an implied duty to shun arbitrariness in the exercise in order to promote the object interest and not mere whims or caprice of individuals. Further persons which is invested with such power must bear in mind that the power is to be exercised fairly, reasonable and justly. The total absence of application of mine in the present case is clear proof arbitrariness in the action of the Federation. 35. It is true that mere issuance of letter of intent may not be equated with a case where contract has been concluded between the parties but nonetheless an imperfect or inchoate right had been conferred on the petitioner. The total absence of application of mine in the present case is clear proof arbitrariness in the action of the Federation. 35. It is true that mere issuance of letter of intent may not be equated with a case where contract has been concluded between the parties but nonetheless an imperfect or inchoate right had been conferred on the petitioner. The peculiar facts of this case show that even before issuance of letter of intent the petitioner had been asked to go ahead to prepare itself to start the work. The petitioner was made to part away with the substantial money in order to facilitate starting the marketing of the products. As already notice, the letter of intent did not contain a stipulation that in case of failure of the petitioner to sign the agreement or to furnish bank guarantee or some more documents, the letter of intent will automatically stand revoked or will be liable to be cancelled. The minimum which the Federation ought to have done, was to have intimated to the petitioner that on account of its failure to sign the agreement and to furnish bank guarantee, the Federation was going to cancel the letter of intent and to give it an opportunity of explanation or representation against the proposed action. The minimum requirement of principles of natural justice namely principle of audi alterum partem should have been followed looking to the facts of this case. Admittedly, there has been a non-compliance of this requirement of principle of natural justice. Therefore, decision of the Federation to revoke letter of intent by telegraphic communication is liable to be declared as void. 36. I also find considerable force in the arguments of Shri B.L. Sharma, learned counsel for the petitioner that the reasons given for cancellation of the letter of intent are non-existent and are irrelevant. The respondent Federation has made an attempt to shift the blame on the petitioner by alleging that the petitioner had failed to sign the agreement. The petitioner has been consistently asserting that its Managing Director has visited the office of the Federation, met the Managing Director and the General Manager (M and P) for signing the agreement but he was told every time that draft of the agreement was lying with the Legal Advisor. The petitioner has been consistently asserting that its Managing Director has visited the office of the Federation, met the Managing Director and the General Manager (M and P) for signing the agreement but he was told every time that draft of the agreement was lying with the Legal Advisor. On the question of Bank Guarantee the Managing Director or the petitioner Company had written that the Bank Guarantee will be furnished within 3 days of sighing of the agreement. In fact the petitioner would not have been in a position to lift the products without first furnishing the bank guarantee. The petitioner's assertion that Shri Mohan Singh Raghav had met Dr. Hari Lal, General Manager (M and P) of the Federation had not been controverted for an affidavit of Dr. Hari Lal. Moreover, the controversy sought to be created on behalf of the respondent No. 2 on the question as to which party has defaulted regarding the signing of the agreement, the nothings of the Managing Director on 29.6.90 as well as the statement made by the respondent No. 4 on the floor of the Assembly on 16.7.90 conclusively established that respondent No. 4 had instructed the authorities not to take further action in the matter of appointments Selling Agent and the further action certainly included signing of agreement. Whether it was justified or not for the Federation to have acted under the instructions of respondent No. 4 is not relevant for determination of the question as to whether the petitioner had defaulted in signing the agreement. On the question of fault of the petitioner the answer is very simple and this has to be in negative because the Federation itself had decided not to take further action as per the desire of the respondent No. 4. Thus the main reason given for cancellation of the letter of intent of the petitioner is clearly erroneous and is untenable. Equally untenable is the second reason mentioned in the letter that the petitioner has failed to furnish the bank guarantee. The petitioner had written to the Federation on 26.6.90 that it would furnish the Bank Guarantee within 3 days of signing of the agreement. No further communication was sent to the petitioner by the Federation stipulating that if he failed to furnish bank guarantee within specified time, the Federation would cancel its appointment as Selling Agent. The petitioner had written to the Federation on 26.6.90 that it would furnish the Bank Guarantee within 3 days of signing of the agreement. No further communication was sent to the petitioner by the Federation stipulating that if he failed to furnish bank guarantee within specified time, the Federation would cancel its appointment as Selling Agent. Thus the petitioner could very well rely on his request for furnishing bank guarantee within 3 days of the signing of the agreement. Moreover, as already mentioned herein above, the Federation had in deference of the desire of the respondent No. 4 decided not to take further action. There is nothing on record to show that after 30.6.90 the Federation had sent any communication to the petitioner about fulfilment of the two conditions stipulated in letter dated 1.6.90. Therefore, in my opinion both the reasons given by the respondent No. 2 for cancelling letter of intent are untenable and erroneous. 37. So far as the allegations of malafides levelled against respondents No. 3 and 4 are concerned, it may straight away be said that the Court had not issued notice to respondent No. 3. Even otherwise the allegations made against respondent No. 3 and 4 are wholly vague so far as the question of cancellation of letter of intent is concerned. The petitioner has not produced sufficient material to establish the plea of malice of respondent No. 4. In fact the can did statement of the respondent No. 4 on the floor of the Assembly on 16.7.90 wholly negates of the plea of the petitioner that action had been taken against the petitioner on account of malafide of respondent No. 4. Merely because the respondent No. 4 had called for the files on receipt of complaint from some individuals and had directed that no further action be taken in the matter, it cannot be inferred much less concluded that the respondent No. 4 had acted with ulterior motive, prejudice or bias against the petitioner. In my opinion the petitioner has totally failed to bring home the charge of malafide against the respondent No. 4. Charge of malafide are often made but are rarely proved. The degree of proof required for establishing the charge of malafide of very high order. In my opinion the petitioner has totally failed to bring home the charge of malafide against the respondent No. 4. Charge of malafide are often made but are rarely proved. The degree of proof required for establishing the charge of malafide of very high order. The burden of placing sufficient material to prove the charge of malafide heavily lay on the petitioner and that the petitioner had not been able to discharge. 38. As already held in above, the action of the respondent Federation in cancelling the letter of intent issued to the petitioner for his appointment as Selling Agent is arbitrary, capricious and violative of the principles of natural justice. 39. In view of the above, I do not consider it necessary to decide that the question regarding the authority of the Managing Director to prove cancellation of letter of intent. 40. Consequently the writ petition is allowed. The telegraphic order dated 16.7.90 as well as the letter dated 16/17.7.90 issued by the respondent No. 2 are quashed and set aside. The parties are left to bear their own costs.Writ Petition allowed. *******