No absolute bar in invoking writ jurisdiction against the State or its instrumentalist for enforcement of contractual obligations.
“The Court of King’s Bench hath not only the authority to correct errors in judicial proceedings, but other errors and misdemeanours […] tending to the breach of peace, or oppression of the subjects, or arising of faction, controversy, debate or any other manner of misgovernment; so that no wrong or injury, public or private, can be done, but that this shall be reformed or punished by due course of law..” (James Bagg’s case, (1572) 11 Co Rep 93b : 77 ER 1271)
The Administrative law in India has been shaped on the lines of English law. The Power to issue writ or any order of direction for “any other purpose” has been held to be included in Article 226 of the Constitution of India. However, the courts have been circumspect in exercising this power and have generally tend not to interfere in matters falling within the realm of private law, so to say, such as contractual disputes.
The reluctance on the part of the courts mainly stems from the fact that the contracts between the parties do provide for remedies and are thus governed by Indian Contract Act and in the event of breach, the affected party has a right to sue for damages, seek specific performance or injunction before civil court or in Arbitration (if provided under the Contract).
However, many a times it so happens, especially in contracts with the State or its instrumentalities, that the other contracting party is virtually rendered helpless on account of the nature and wording of such contracts, which are practically one sided, in favour of the State.
While dealing with the issues of Judicial review in matter of contracts with State or its instrumentalists, significant reference is drawn to the age-old landmark judgment of L.I.C Vs. ESCORTS where the Supreme Court, whilst distinguishing the character of LIC as the instrumentality of State and that as an ordinary shareholder, inter alia observed that the courts will examine actions of the State if they pertain to the public law domain and refrain from examining them if falls under realm of private law.
However, there is a growing trend in persuading the High Court for exercising powers under Article 226 of the Constitution of India against the state and its instrumentalities, more so because a contract with the state or its instrumentalists are non-negotiated standard contracts where bargaining power is unequal or monopoly corporation in its field.
With this, the courts have also started becoming somewhat receptive, if not liberal, to the Petitions of hapless parties suffering at the hands of the State and its instrumentalities and have started interpreting the language of Article 226 of the Constitution more broadly.
The observations of the Hon’ble Supreme Court, in the recent matter of Maharashtra Chess Association v. Union of India and Ors, is a testimony of this. The Hon’ble Supreme Court, while dealing with the powers of the High Courts under Article 226 was candid in expressing that the text of Article 226(1) provides that a High Court may issue writs for the enforcement of the fundamental rights in Part III of the Constitution, or “for any other purpose”. A citizen may seek out the writ jurisdiction of the High Court not only in cases where her fundamental right may be infringed, but a much wider array of situations.
The same view was reiterated by the Apex court in a recent judgment delivered on an Appeal relating to work order for construction and improvement of road in the matter of UOI vs. Puna Hinda. The Hon’ble Apex Court while recognizing maintainability of the Writ petition in contractual matters or in case where disputed question of facts or monetary claim is involved, summarized the instances “Normally” the High Court would not exercise its discretion in cases unless some public law character is attached, mode of settlement is already provided, serious disputed question of facts of complex nature requiring oral evidence for determination, monetary claim except in exceptional circumstances.
Even the Allahabad High Court has taken a view that “….The Jurisdiction of the High Court under Article 226 of the Constitution of India is equitable and discretionary and can be exercised by the High Court “to reach injustice wherever it is found”.
The Hon’ble Supreme Court in another recent judgment on an Appeal arising out of judgment dated 1st April 2019 of the Division Bench of the High Court of Telangana relating to development agreement between APIIC, Unitech and Nacre Garden Hyderabad Limited (Unitech Limited and Ors. v. TSIIC and Ors,) observed that “…the jurisdiction under Article 226 is a valuable constitutional safeguard against an arbitrary exercise of state power or a misuse of authority. In determining as to whether the jurisdiction should be exercised in a contractual dispute, the Court must, undoubtedly eschew, disputed questions of fact which would depend upon an evidentiary determination requiring a trial. But equally, it is well-settled that the jurisdiction under Article 226 cannot be ousted only on the basis that the dispute pertains to the contractual arena. This is for the simple reason that the State and its instrumentalities are not exempt from the duty to act fairly merely because in their business dealings they have entered into the realm of contract.”
Similarly, the presence of an arbitration clause also does oust the jurisdiction under Article 226 in all cases though, it still needs to be decided from case to case as to whether recourse to a public law remedy can justifiably be invoked. It further observed that it is incumbent upon state to Act fairly in their dealing with private parties and merely while dealing with private parties in the realm of contract, the State do not shed either their character of their obligation to act fairly.
In matter of forceful recovery of building cess under supply contract by UPPTCL, the Hon’ble Supreme Court upheld the judgment passed by the High Court of Judicature at Allahabad in Writ Petition filed by CG Power and Industrial Solutions Limited and Anr and reiterated that the existence arbitration clause as alternate remedy does not debar the court from entertaining a writ petition particularly in cases where the writ petition seeks enforcement of fundamental rights, failure of principle of natural justice, impugned order or proceeding is without jurisdiction and the vires of an Act is under challenge.
An analysis of the judgments quoted above and other similar judgments bring out that, the invocation of writ jurisdiction under Article 226 of the Constitution of India would be permissible;
- Violation of Article 14.
- The actions of State or its instrumentalists are arbitrary, discriminatory, mala fide or biased.
- Public law character attached to the actions of the State.
- Cases of violation of natural justice.
- Admitted liability.
All these recent judgments are a paradigm shift in the approach of the courts in exercise of Writ Jurisdiction in the matters of contractual disputes with State and its authorities. The law regarding to judicial review in contractual transaction with state or its instrumentalist has definitely evolved over the years and the ordinary citizens can, in appropriate cases, approach the High Courts for exercise of Writ jurisdiction.
To sum up, the underlying principle is that in matters of contractual dispute with the State and its instrumentalities is that there is no absolute bar to exercise the writ jurisdiction and the High Court should have holistic view and make a determination as to whether it would be proper to exercise its writ jurisdiction. ______________
AUTHORS
| Prasad Dhande Partner
| Amit Khairwar Senior Associate
|
DISCLAIMER
The contents of this article are for general information and discussion only and is not intended for any solicitation of work. This article should not be relied upon as a legal advice or opinion.
