Judgment : These three writ petitions have been preferred by a Transport Contractor engaged in the transport of essential Commodities as a carrier under the Tamil Nadu Civil Supplies Corporation Limited, challenging the order of termination of the contract as well as blacklisting on account of failure to perform the contract as per the terms and conditions. 2. The prayer in W.P. No. 23261 of 2007 is to quash the impugned order dated 26. 2007 on the file of the Regional Manager, Tamil Nadu Civil Supplies Corporation, Erode Region, Erode terminating the contract of the petitioner for the year 2006-2007. The prayer in W.P. Nos. 22033 and 22034 of 2007 pertains to blacklisting of the petitioner for a period of three years and to allot the contract to the petitioner after setting aside the said orders of blacklisting dated 16. 2007. 3. W.P. No. 23261 of 2007 The factual matrix necessary for the disposal of the writ petition are as under: The petitioner is stated to be the managing partner of “Dinesh Babu Transport” engaged in the handling and transport of essential commodities for the last twenty five years. The petitioner hs been in the line of operation as a transport contractor under the Tamil Nadu Civil Supplies Corporation and the transport unit of the petitioner has completed the transport contracts so far taken in satisfactory manner and as such there were no room for complaints against the petitioner in her transaction with the respondent Corporation for all these years. 4. In pursuance of the notification issued by the first respondent for the purpose of appointment of transport contractors pertaining to various regions, the petitioner took part in such tender and her tender was found to be the lowest tender. But however, with a view to avoid the award of contract in favour of the petitioner, the second respondent issued a show cause notice dated 25. 2007 calling upon the petitioner to show cause as to why the contract executed between the petitioner and the respondent should not be cancelled on the basis of certain alleged deficiency in service. In the said notice, the following deficiencies were pointed out as the reason for initiation of proceedings for cancellation of contract. 2007 calling upon the petitioner to show cause as to why the contract executed between the petitioner and the respondent should not be cancelled on the basis of certain alleged deficiency in service. In the said notice, the following deficiencies were pointed out as the reason for initiation of proceedings for cancellation of contract. “(a) The petitioner failed to take delivery of 150 metric tons of Wheat allotted by the Food Corporation of India from Erode Region during 2006 and in view of non-lifting of such Wheat, the quota for the month of October was lapsed. .(b) The failure of the petitioner to supply required number of lorries for needy Godowns in time, 117.529 metric tons of wheat moved departmentally during March, 2007. .(c) Since the petitioner has not provided required lorries for needy Godowns, an amount of Rs. 27,400/- has been recovered from the petitioner and as per the tender condition, if penalty is imposed more than 25% of the Security Deposit, the transport contract is liable to be terminated.” 5. In response to the show cause notice dated 25. 2007, the petitioner submitted her explanation wherein the petitioner while denying the contention of the respondents also submitted certain factual particulars, which would show that the charges framed against the petitioner were not proved. In the reply it was also indicted that the contract itself is coming to an end by 30.6.2007 and as such the issue of charge sheet at the fag end of the contract on 25. 2007 was clearly mala fide and resorted to by the respondents only with a view to see that no fresh contract is awarded to the petitioner. 6. The matter was examined by the second respondent on the basis of the explanation given by the petitioner and the contract was terminated as per proceedings dated 26. 2007 and the said proceeding was challenged in W.P. No. 23261 of 2007. 7. The proceedings initiated by the second respondent for the purpose terminating the existing contract which expires on 30.6.2007 was taken as the basis for black listing the petitioner for a period of three years as per proceedings dated 16. 2007. The respondents have passed two orders on 16. 2007 blacklisting the petitioner for a period of three years and those two separate orders for two separate regions, are the subject matter of W.P. Nos. 22033 and 22034 of 2007. .8. 2007. The respondents have passed two orders on 16. 2007 blacklisting the petitioner for a period of three years and those two separate orders for two separate regions, are the subject matter of W.P. Nos. 22033 and 22034 of 2007. .8. It is found from the impugned orders dated 16. 2007 in W.P. Nos. 22033 and 22034 of 2007 that the basis for blacklisting the petitioner for a period of three years pertains to the inaction on the part of the petitioner as well as her failure to adhere to the terms of the contract for the period 2006-07, ending with 30.6.2007. It is also found that though notices were served on earlier occasions to the petitioner in respect of certain deficiencies, but however the contract was sought to be cancelled only during the last phase of the contract. The contract was intended to be up to 30.6.2007 and the show cause notice has been issued on 25. 2007. The relevant agreement executed between the parties clearly shows that there was also a provision for Arbitration. In view of the binding nature of the agreement entered into by the petitioner and the respondents, the factual dispute raised in W.P. No. 23261 of 2007 in respect of the impugned order dated 26. 2607 has to be decided only by an Arbitrator. Since the parties to the contract had prescribed a particular procedure for resolution of dispute, such procedure has to be followed. 9. Clause 21 of the agreement provides that in case of any dispute in the contract including the interpretation of any of the clauses of the tender or the agreement, the matter shall be referred by the Corporation/Contractor to an Arbitrator, who shall be selected by the party from the panel of the Arbitrators approved by the Board of Directors of the Corporation and communicate the same within fifteen days from the date of receipt of the letter from the Corporation along with a name of the Arbitrator from the panel and in case of failure of reply from the Contractor within the period of fifteen days, the Corporation would be at liberty to choose any one of the Arbitrators from the panel of Arbitrators. Therefore, it is clear that the provision of Arbitration is very specific and the same has been agreed to be resorted to by both parties and as such the parties should be relegated to the proceedings before the Arbitrator. 10. Accordingly, W.P. No. 23261 of 2007 is disposed of a directing the first respondent to refer the dispute to an Arbitrator within a period of four weeks from the date of receipt of a copy of this order and the Arbitrator so appointed shall dispose of the matter as expeditiously as possible on merits and as per law in view of the pendency of the writ petition from 2007. .11. W.P. Nos. 22033 and 2204 of 2007 The order impugned in both these writ petitions involves civil consequences for the petitioner inasmuch as the petitioner will not be able to take part in the tender floated by the respondents from time to time for a period of three years. .12. The registration as a Contractor is a valuable right of the petitioner which enables her to take part in the tender process floated by the respondents from time to time. In view of blacklisting, it may not be possible for the petitioner to take part in the subsequent tender. It has also the effect of putting the petitioner in adverse circumstances and her reputation is also likely to be affected on account of the adverse order passed against her. The non performance of the contract by the petitioner for the year 2006-07 is found to be the reason for blacklisting the petitioner as per the impugned orders dated 16. 2007. The proceeding against the petitioner for such non-performance is the subject matter of W.P. No. 23261 of 2007. Therefore, it is evident that only on account of the show cause notice issued to the petitioner on 25. 2007 and culminated in passing the final order of cancellation of the contract on 26. 2007, which made the respondents to issue the show cause notice for blacklisting as well as the ultimate order of blacklisting on 16. 2007. Curiously, even before passing the order of cancellation of contract on 26. 2007, the respondents took emergent steps to black list the petitioner for a period of three years as per the impugned proceedings dated 16. 2007. In fact, the reasons as found mentioned in the show cause notice dated 25. 2007. Curiously, even before passing the order of cancellation of contract on 26. 2007, the respondents took emergent steps to black list the petitioner for a period of three years as per the impugned proceedings dated 16. 2007. In fact, the reasons as found mentioned in the show cause notice dated 25. 2007 in W.P. No. 23261 of 2007 are the very same reasons for issue of the show cause notice dated 25. 2007 in these two matters which culminated in passing the order of blacklisting on 16. 2007. .13. Therefore, it is evident that even without deciding the issue as to whether the petitioner has committed breach of the terms of contract, the respondents have resorted to the extreme step of blacklisting her. The respondents should have waited till the finalization of the proceedings in W.P. No. 23261 of 2007 for the purpose of blacklisting. However for the reasons best known to the them, they have resorted to this extreme step of blacklisting, even without waiting for the outcome of the enquiry Initiated against the petitioner as per show cause notice dated 25. 2007, which ultimately ended in termination of the contract as per proceedings dated 26. 2007. 14. The Apex Court in Union of India v. Mithiborwala and Others AIR 1975 SC 266 : (1975) 1 SCC 70 considered the effect of blacklisting a contractor and the necessity to issue notice to the affected party before taking such a decision and held thus: “12. Under Article 298 of the Constitution the executive power of the Union and the State shall extend to the carrying on of any trade and to the acquisition, holding and disposal of property and the making of contracts for any purpose. The State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. The order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of blacklisting. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality. 14. The State can enter into contract with any person it chooses. No person has a fundamental right to insist that the Government must enter into a contract with him. A citizen has a right to earn livelihood and to pursue any trade. A citizen has a right to claim equal treatment to enter into a contract which may be proper, necessary and essential to his lawful calling. 15. The blacklisting order does not pertain to any particular contract. The blacklisting order involves civil consequences. It casts a slur. It creates a barrier between the persons blacklisted and the Government in the matter of transactions. The blacklists are instruments of coercion. 17. The Government is a Government of laws and not of men. It is true that neither the petitioner nor the respondent has any right to enter into a contract but they are entitled to equal treatment with others who offer tender or quotations for the purchase of the goods. This privilege arises because it is the Government which is trading with the public and the democratic form of Government demands equality and absence of arbitrariness and discrimination in such transactions. Hohfeld treats privileges as a form of liberty as opposed to a duty. The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with any one but if it does so, it must do so fairly without discrimination and without unfair procedure. Hohfeld treats privileges as a form of liberty as opposed to a duty. The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with any one but if it does so, it must do so fairly without discrimination and without unfair procedure. Reputation is a part of a person’s character and personality. Blacklisting tarnishes one’s reputation.” 15. The Apex Court in Shrilekha Vidyarthi v. State of U.P. AIR 1991 SC 537 : (1991) 1 SCC 212 while considering an application under Article 14 of the Constitution of India in respect of Governmental policy as well as in contractual matters, held that if the policy or any action of the government, even contractual matters, fails to satisfy the test of reasonableness, it would be unconstitutional. “22. 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 of every State action is also on public interest. This factor alone is sufficient to import at least the minimal requirements 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 may be 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 Articles 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 basis requirements of Article 14. To this extent, the obligation is of a public character invariably in every case irrespective of there 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. 23. To this extent, the obligation is of a public character invariably in every case irrespective of there 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. 23. Thus, in a case like the present, if its is shown that the impugned State action is arbitrary and, therefore, violative of Article 14 of the Constitution, there can be no impediment in striking down the impugned act irrespective of the question whether an additional right, contractual or statutory, if any, is also available to the aggrieved persons. 27. Unlike a private party whose acts uninformed by reason and influenced by personal predilections in contractual matters may result in adverse consequences to it alone without affecting the public interest, any such act of the State or a public body even in this field Mould adversely affect the public interest. Every holder of a public office by virtue of which he acts on behalf of the State or public body is ultimately accountable to the people in whom the sovereignty vests. As such, all powers so vested in him are meant to be exercised for public good and promoting the public interest. This is equally true of all actions even in the field of contract. Thus, every holder of a public office is a trustee whose highest duty is to the people of the country and, therefore, every act of the holder of a public office, irrespective of the label classifying that act, is in discharge of public duty meant ultimately for public good. With the diversification of State activity in a Welfare State requiring the State to discharge its wide ranging functions even though its several instrumentalities, which requires entering into contracts also, it would be unreal and not pragmatic, apart from being unjustified to exclude contractual matters from the sphere of State actions required to be non-arbitrary and justified on the touchstone of Article 14. 28. 28. Even assuming that it is necessary to import the concept of presence of some public element in a State action to attract Article 14 and permit judicial review, we have no9 hesitation in saying that the ultimate impact of all actions of the State or a public body being undoubtedly on public interest, the requisite public element for this purpose is present also in contractual matters. We, therefore, find it difficult and unrealistic to exclude the State actions in contractual matters, after the contract has been made, from the purview of judicial review to test its validity on the anvil of Article 14. 39. No doubt, it is for the person alleging arbitrariness who has to prove it. This can be done by showing in the first instance that the impugned State action is uninformed by reason inasmuch as there is no discernible principle on which it is based or it is contrary to the prescribed mode of exercise of the power or is unreasonable. If this is shown, then the burden is shifted to the State to repel the attack by disclosing the material and reasons which led to the action being taken in order to show that it was an informed decision which was reasonable. If after a prima facie case of arbitrariness is made out, the State is unable to show that the decision is an informed action which is reasonable, the State action must perish as arbitrary.” 16. The extent of jurisdiction under Article 226 of the Constitution of India in the matter of enforcement of contract qua contract came up for consideration before the Apex Court in M.D., H.S.I.D.C. v. Hari Om Enterprises (2008) 9 SCALE 241 : (2008) 6 MLJ 691, and after considering the case laws in extenso, the Apex Court observed thus t pp. 701 & 702 of MLJ “37. It may be true that ordinarily in a matter of enforcement of a contract qua contract, a writ Court shall not exercise its jurisdiction under Article 226 of the Constitution of India. But, it is also trite that where the action of a State is violative of Article 14 of the Constitution of India as being wholly unfair and unreasonable, the writ Court would not hesitate to grant relief in favour of a person, where both law and equity demands that such relief should be granted. 42. But, it is also trite that where the action of a State is violative of Article 14 of the Constitution of India as being wholly unfair and unreasonable, the writ Court would not hesitate to grant relief in favour of a person, where both law and equity demands that such relief should be granted. 42. Referring to Duarkadas Marfatia and Sons v. Board of Trustees of the Port of Bombay, AIR 1989 SC 1642 : (1989) 3 SCC 293 , this Court held: “24. The field of letting and eviction of tenants is normally governed by the Rent Act. The Port trust is statutorily exempted from the operation of the Rent Act on the basis of its public/governmental character. The legislative assumption or expectation as noted in the observations of CHAGLA, C.J. in Rampratap Jaidayal case cannot make such conduct a matter of contract pure and simple. These corporations must act in accordance with certain constitutional conscience and whether they have so acted, must be discernible from the conduct of such corporations. In this connection, reference may be made on the observations of this Court in Som Prakash Rokhi v. Union of India reiterated in M.C. Mehta v. Union of India wherein at p. 146 this Court observed: (SCC p. 48. para 55) “It is dangerous to exonerate corporations from the need to have constitutional conscience; and so, that interpretation. Language permitting, which makes governmental agencies, whatever their mean (sic), amenable to constitutional limitations must be adopted by the Court as against the alternative of permitting them to flourish as an imperium in imperio.” 25. Therefore, Mr Chinai was right in contending that every action/activity of the Bombay Port Trust which constituted ‘State” within Article 12 of the Constitution, in respect of any right conferred or privilege granted by any statute is subject to Article 14 and must be reasonable and taken only upon lawful and relevant grounds of public interest. 17. In the present case, though notice has been issued by the respondents before passing the impugned order, the fact remains that the materials relied on by the respondents to cancel the contract as per the impugned order dated 26. 2007 were the materials used by them for the purpose of blacklisting. Since the respondent was also a party to the contract, they should have got the matter decided by an Arbitrator. 2007 were the materials used by them for the purpose of blacklisting. Since the respondent was also a party to the contract, they should have got the matter decided by an Arbitrator. At present, we have only the version of the respondents with regard to the alleged irregularities committed by the petitioner in respect of the contract for the year 20062007. It is true that there is a provision for cancellation of contract as well as blacklisting the contractor. Clause 8 of the agreement provides that The Tamil Nadu Civil Supplies Corporation Limited reserves the right to terminate the contract and black list the tenderer on reasonable cause after giving fifteen days notice to the contractor, in case the performance of the contractor is found to be poor and unsatisfactory. 18. In the matter in question, the contract was for the period 2006-07 ending with 30.6.2007. The notice of termination of the contract as well as for blacklisting were issued only on 25. 2007 and even during the pendency of the enquiry with respect to non performance of the contract by the petitioner, the impugned order of blacklisting for a period of three years has been issued by the respondent as per order dated 16. 2007. Even though very strong motive has been attributed against the respondents in the affidavit filed in support of the writ petition for passing the impugned order, I am not inclined to look into those aspects at present as the same would prejudice the case of the parties before the Arbitrator and in the subsequent proceedings. At any rate, there was no factual foundation as well as sufficient materials to black list the petitioner for a period of three years and that too even before the impugned order of cancellation of the contract. 19. In view of the reasons aforesaid, both the impugned orders are liable to be quashed and accordingly they are quashed. It would be open to the respondents to initiate proceedings against the petitioner for blacklisting after the disposal of the Arbitration proceedings as per the order in W.P. No.23261 of 2007. In view of the pendency of these proceedings, the respondent shall take immediate action for appointment of the Arbitrator. 20. In the result, W.P. No.23261 of 2007 is disposed of and W.P. Nos.22033 and 22034 are allowed subject to the above direction. Consequently, the connected MPs closed. No costs.