Whether public authorities are bound to follow principles of natural justice while terminating a contract as per the terms of the agreement?

 In M/s Radhakrishna Agarwal Vs. State of Bihar, (1977) 3 SCC

457, it is held that in case of enforcement of contractual rights and liabilities the normal remedy of filing a civil suit is available to the aggrieved party and, therefore, the High Court will not exercise its prerogative writ jurisdiction to enforce such contractual obligation. In M/s Radhakrishna Agarwal (supra) it

is further held that a question of the distinction between an administrative and quasi-judicial decision can only arise in the exercise of powers under statutory provisions. Rules of natural justice are attached to the performance of certain functions regulated by statutes or rules made thereunder involving decisions affecting rights of parties. When a contract is sought to be terminated by the Officers of the State, purporting to act under the terms of an agreement between parties, such action is not taken in purported exercise of a statutory power at all. The limitations imposed by rules of natural justice cannot operate upon powers which are governed by the terms of an agreement exclusively. Thus in view of settled legal position, I am of the view that the petitioner is not even entitled to admission of this petition as issuance of notice being not a binding precedent applicable to invoke doctrine of 'stare decisis', and the order passed by the Hon'ble Division Bench being in different arena, no indulgence is required as petitioner has an alternative remedy of approaching the civil court if there is no arbitration clause in the agreement and if there is an arbitration clause then he has a duty to approach the arbitrator in terms of the arbitration clause in the agreement.

IN THE HIGH COURT OF MADHYA PRADESH

AT JABALPUR

WRIT PETITION No. 21169 of 2022

M/S KESHAV KANSHKAR  Vs THE PRINCIPAL SECRETARY DEPARTMENT OF ENERGY MANTRALAYA VALLABH BHAWAN

BEFORE

HON'BLE SHRI JUSTICE VIVEK AGARWAL

Dated:  20th OF SEPTEMBER, 2022.

Read full Judgment here: Click here

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Whether jurisdiction of high court Article 226 of the Constitution is ousted if there is arbitration clause?

Therefore, while exercising its jurisdiction under Article 226, the Court is entitled to enquire into whether the action of the State or its instrumentalities is arbitrary or unfair and in consequence, in violation of Article 14. 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 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. The jurisdiction under Article 226 was rightly invoked by the Single Judge and the Division Bench of the Andhra Pradesh in this case, when the foundational representation of the contract has failed. TSIIC, a state instrumentality, has not just reneged on its contractual obligation, but hoarded the refund of the principal and interest on the consideration that was paid by Unitech over a decade ago. It does not dispute the entitlement of Unitech to the refund of its principal.

 In the Supreme Court of India

(Before Dhananjaya Y. Chandrachud and M.R. Shah, JJ.)

Civil Appeal No. 317 of 2021

Unitech Limited and Others  Vs  Telangana State Industrial Infrastructure Corporation (TSIIC) and Others 

Decided on February 17, 2021

The Judgment of the Court was delivered by

Dhananjaya Y. Chandrachud, J.:—

Citation: 2021 SCC OnLine SC 99

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Whether contractual dispute between govt and private party can be decided on the basis of administrative law?

 As noted above, the contention of the respondent is that PSCs
are in the nature of a contract agreed to between the two
independent contracting parties. It is also mentioned that before
the signing of the PSCs, the approval of Cabinet is obtained
which reflects that the PSC as submitted to the Cabinet has the
approval of one of the contracting parties, namely, Government of
India in this case. When it is signed by the other party it means
that it has the approval of both the parties. Therefore, a
contracting party cannot claim to be oblivious of the provisions of
the law or the contents of the contract at the time of signing and,
therefore, later on cannot seek retrospective amendment as a
matter of right when no such right is conferred under the contract.

Even the doctrine of fairness and reasonableness applies only in
the exercise of statutory or administrative actions of the State and
not in the exercise of contractual obligation and issues arising out
of contractual matters are to be decided on the basis of law of
contract and not on the basis of the administrative law. No doubt,
under certain situations, even in respect of contract with the State
relief can be granted under Article 226. We would, thus, be
dealing with this aspect in some detail.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6929 OF 2012
JOSHI TECHNOLOGIES INTERNATIONAL INC. .....APPELLANT(S)
VERSUS
UNION OF INDIA & ORS. .....RESPONDENT(S)
Citation;(2015) 7 SCC 728

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Whether purchase of medicine by government is commercial transaction?

 In M/s.Meenakshi Pharma Distributors V.
State of Karnataka and others (AIR 1999 Karnataka
192), the State of Karnataka purchased medicines from
the plaintiff for the purpose of distribution among
government hospitals. The parties agreed that rate of
interest will be 15% per annum on the amount due. In
the suit filed by the supplier of medicines, the trial court
awarded interest only at the rate of 6% per annum from
the date of suit till the date of realisation. Challenging
the same, the plaintiff (supplier) filed appeal. Dismissing
the appeal, the Karnataka High Court held thus:-
“ the definition of the commercial transaction has to be
taken in conjunction with the person against whom the
liability has arisen. The person who has incurred the
liability is not the person who is the claimant of the money
or interest. It means when we have to judge the
commercial transaction, it has to be looked into whether
the person incurring the liability under the transaction has
incurred the liability in the context of trade or business or
industry. The respondent in this case purchased medicines
from the plaintiff - appellant and incurred the liability for
sums claimed. In ordinary course, Government purchases
medicines for being distributed among the Government
Hospitals. In Government Hospitals, the medicines are
provided to the ordinary people, common people as well as
to those who are down-trodden and for the betterment of
the people. By examining the nature of transaction it
cannot be said to be connected with any industry, trade or
business of the party who has incurred the liability, and
cannot be said to be commercial transaction as the
Government's Health Department purchased the same to
supply the medicines to various Government Hospitals for
the benefit of citizens and to be provided to common
persons subjected to various ailments.
Therefore, in my opinion, this transaction cannot be
termed as a commercial transaction. In this view of the
matter, the proviso of Section 34 will not be applicable to
the present transaction because when the medicines have
been purchased by the Government, it is nobody's case
that they were purchased to sell. It is no doubt that
Government purchases medicines to provide them to the
Government Hospitals for the welfare of the people as it
is the duty and responsibility of the Government to
ensure public health i.e the duty of the State under the
Constitution of India”.


IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE K.T.SANKARAN
&
THE HONOURABLE MR. JUSTICE P.D.RAJAN
THURSDAY, THE 16TH DAY OF OCTOBER 2014
AS.No. 533 of 2000 ( )
-----------------------

 THE SUPERINTENDING ENGINEER,
Vs
 m p varghese
Citation;AIR 2015(NOC)530 kerala

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When jurisdiction of High court can be invoked in case of contractual dispute between state and private party?

The position thus summarized in the aforesaid principles has to

be understood in the context of discussion that preceded which

we have pointed out above. As per this, no doubt, there is no

absolute bar to the maintainability of the writ petition even in

contractual matters or where there are disputed questions of fact

or even when monetary claim is raised. At the same time,

discretion lies with the High Court which under certain

circumstances, can refuse to exercise. It also follows that under

the following circumstances, 'normally', the Court would not

exercise such a discretion:

(a) the Court may not examine the issue unless the action has

some public law character attached to it.

(b) Whenever a particular mode of settlement of dispute is

provided in the contract, the High Court would refuse to exercise

its discretion under Article 226 of the Constitution and relegate the

party to the said made of settlement, particularly when settlement

of disputes is to be resorted to through the means of arbitration.

(c) If there are very serious disputed questions of fact which are of

complex nature and require oral evidence for their determination.

(d) Money claims per se particularly arising out of contractual

obligations are normally not to be entertained except in

exceptional circumstances.

69)

Further legal position which emerges from various judgments of

this Court dealing with different situations/aspects relating to the

contracts entered into by the State/public Authority with private

parties, can be summarized as under:

(i)

At the stage of entering into a contract, the State acts purely

in its executive capacity and is bound by the obligations of

fairness.

(ii)

State in its executive capacity, even in the contractual field,

is under obligation to act fairly and cannot practice some

discriminations.

(iii) Even in cases where question is of choice or consideration of

competing claims before entering into the field of contract, facts

have to be investigated and found before the question of a

violation of Article 14 could arise. If those facts are disputed and

require assessment of evidence the correctness of which can only

be tested satisfactorily by taking detailed evidence, Involving

examination and cross- examination of witnesses, the case could

not be conveniently or satisfactorily decided in proceedings under

Article 226 of the Constitution. In such cases court can direct the

aggrieved party to resort to alternate remedy of civil suit etc.

(iv) Writ jurisdiction of High Court under Article 226 was not

intended to facilitate avoidance of obligation voluntarily incurred.

(v) Writ petition was not maintainable to avoid contractual

obligation. Occurrence of commercial difficulty, inconvenience or

hardship in performance of the conditions agreed to in the

contract can provide no justification in not complying with the

terms of contract which the parties had accepted with open eyes.

It cannot ever be that a licensee can work out the license if he

finds it profitable to do so: and he can challenge the conditions

under which he agreed to take the license, if he finds it

commercially inexpedient to conduct his business.

(vi) Ordinarily, where a breach of contract is complained of, the

party complaining of such breach may sue for specific

performance of the contract, if contract is capable of being

specifically performed.

Otherwise, the party may sue for

damages.

(vii) Writ can be issued where there is executive action

unsupported by law or even in respect of a corporation there is

denial of equality before law or equal protection of law or if can be

shown that action of the public authorities was without giving any

hearing and violation of principles of natural justice after holding

that action could not have been taken without observing principles

of natural justice.

(viii)

If

the

contract

between

private

party

and

the

State/instrumentality and/or agency of State is under the realm of

a private law and there is no element of public law, the normal

course for the aggrieved party, is to invoke the remedies provided

under ordinary civil law rather than approaching the High Court

under Article 226 of the Constitutional of India and invoking its

extraordinary jurisdiction.

(ix) The distinction between public law and private law element in

the contract with State is getting blurred. However, it has not been

totally obliterated and where the matter falls purely in private field

of contract. This Court has maintained the position that writ

petition is not maintainable. Dichotomy between public law and

private law, rights and remedies would depend on the factual

matrix of each case and the distinction between public law

remedies and private law, field cannot be demarcated with

precision. In fact, each case has to be examined, on its facts

whether the contractual relations between the parties bear

insignia of public element. Once on the facts of a particular case it

is found that nature of the activity or controversy involves public

law element, then the matter can be examined by the High Court

in writ petitions under Article 226 of the Constitution of India to

see whether action of the State and/or instrumentality or agency

of the State is fair, just and equitable or that relevant factors are

taken into consideration and irrelevant factors have not gone into

the decision making process or that the decision is not arbitrary.

(x) Mere reasonable or legitimate expectation of a citizen, in such

a situation, may not by itself be a distinct enforceable right, but

failure to consider and give due weight to it may render the

decision arbitrary, and this is how the requirements of due

consideration of a legitimate expectation forms part of the

principle of non-arbitrariness.

(xi) 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.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 6929 OF 2012

JOSHI TECHNOLOGIES INTERNATIONAL INC.

.....APPELLANT(S)

VERSUS

UNION OF INDIA & ORS.

.....RESPONDENT(S)

Dated;MAY 14, 2015.

A.K. SIKRI, J.

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