Sardar Singh Anand & Sons, Joga ... vs M.S.T.C. Ltd. And Ors.
2002 Latest Caselaw 1633 Del

JUDGMENT

S.B. Sinha, C.J.

1. These three writ petitions involving common questions of law and fact were taken up for hearing together and are being disposed of by this common judgment.

2. A notice inviting tender was floated on 14.06.2000 for sale of various lots of old TMB Engines belonging to respondent Nos. 2 and 3 lying at VSD Meerut, U.P. The petitioners herein submitted their tenders, which are said to be the highest. They allegedly also complied with all tender conditions.

According to the petitioners, having regard to the fact that not only did they deposit the earnest amount, i.e., 20% of the bid amount along with their tender, but also deposited balance 80 % within one day, namely, 01.07.2000 on acceptance of their offer; but despite the fact that the same was required to be deposited within one week of the date of acceptance of the tender and they were entitled to obtain the delivery order, no action in this behalf was taken. The petitioners with their letter dated 21.07.2000 submitted that they duly deposited MRO No. 1341 showing payment made with the RBI and also submitted pay order No. 693889 of Syndicate Bank, New Delhi for Rs. 46,000/- towards Sales Tax being @ 8% with respondent No. 1 and requested him to issue the delivery order to enable it to take delivery of the purchased goods.

The respondent No. 1, however, refused to issue the said delivery order on the ground that certain instructions have been received by respondent No. 3 not to do so.

According to the petitioner, thereafter various representations were made, but respondent No. 1 herein refused to deliver the sold goods to the petitioner on the ground that an instruction in that regard had been received from respondent No. 2.

3. According to the petitioner, neither terms and conditions of the contract nor the law permits withdrawal from a contract when concluded contract has come into being. The action on the part of the respondents, the petitioner would contend, is highly arbitrary.

The writ petitioner in C.W.P. No. 6529 of 2000 inter alia claimed for the following reliefs :-

"IT IS THEREFORE PRAYED THAT this Hon'ble Court may kindly be pleased to issue appropriate writ order or direction especially:

a. In the nature of certiorari quashing the letter dtd. 4th October, 2000, of respondent No. 1 alleging withdrawal of the sale order cum acceptance letter dtd. 20th July, 2000, with respect to tender No. MSTC/T-85/2000/OD-SKB dated 14.6.2000.

b. In the nature of mandamus directing the respondents to issue the delivery order for lot Nos. T-85/399, T-85/400 forthwith and give delivery of the said lots to the petitioner and further pay damages to the petitioner @ Rs. 12,500/- per day from 21st July, 2000 till the goods are delivered to the petitioner."

The writ petitioners in C.W.P. No. 6530 of 2000 and C.W.P. No. 6531 of 2000 in Clause (b) of the prayer sought directions to the respondents to issue the delivery orders for lot Nos. T-85/396, T-85/397 and T-85/398; and Nos. T- 85/392, T-85/393 and T-85/394 respectively.

4. The respondents in their counter affidavit, on the other hand, averred that a complaint was received to the effect that the advertisement did not properly state the location and quota of the engines to be sold and in that view of the matter several persons could not participate in the auction.

According to the respondents, the engines were sold at lesser price and the difference in the price for 226 engines would amount to Rs. 16,03,000.05. It was stated that there was a mix up of engines as 4 x 6.5 ton engines were mixed with 3 ton TMB engines in the lots, which were offered for sale. Upon receipt of complaint, verifications were carried out and it was confirmed that 6.5 ton engines were mixed with 3 ton engines and the location of certain lots were not shown as VSD Meerut in the auction catalogue due to which healthy competition could not be generated.

It was contended :-

(i) For certain lots, location of Engines was not mentioned as VSD Meerut;

(ii) Number of Engines put up for auction was not mentioned; and

(iii) Engine assemblies were shown lying in OD Shakurbasti, whereas they were actually lying in VSD Meerut.

On verification, it has allegedly further been found :-

"(d) On receipt of the complaint a physical verification was carried out and it was revealed that instead of 226 Engine Assys of TMB 3 TON as mentioned in the tender form, only 222 TMB Engine 3 TON Assys were physically held at VSD Meerut and four 6.5 TON LPT Engine Assys were held instead of 3 TON TMB Engine thereby resulting in the variation in the pricing of these Engine Assys.

(e) On receipt of complaint, physical checking was carried out and it was recorded that 43 Engine Numbers as reflected int he auction catalogue did not tally with Engine Nos. on ground which would have caused problems when the lot lifting was being carried out, annexed as Annexure R-10.

(f) Central Vehicle Depot forwarded another Board proceedings duly priced by unit Board of offrs. for the lots held at VSD Meerut Cantt. for 222 TMB 3 TON Engines & 4 X 6.5 Ton LPT Engines. The difference in the cost by the unit pricing Board for the lots included in Tender T-85 opened on 14 June 2000 & the unit pricing Board received from CVD, vide their letter No. 1064/Eng/Ex. dt. 21 Sept 2000 is Rs. 21,32,000/-, which is annexed herewith and marked as Annexure R-11.

(g) That if the Engines had been permitted to be lifted, it would have caused loss to the state as wrong engines would have got lifted at the time of lot lifting due to variation in type and Nos of the Engines."

5. The administrative grounds for withdrawal of the said tender are said to be as under :-

"(a) There was a difference in the 43 engine Nos. as reflected in the Auction Catalogue and on physical checking on ground. (Annexure R-10).

(b) 4 Engine Assy of 6.5 Ton TMB had not been identified properly but were included in the lots and show as TMB 3 Ton engines.

(c) There was a flaw in the advertisement published in the Auction journal for T-85 wherein location of the engines was shown as OD Shakurbasti instead of VSD Meerut. The type of engines and qtys. were not mentioned in the advertisement.

(d) The respondent No. 1's Auction Catalogue did not reflect the location of these engines as VSD Meerut for lot No. 392 to 397.

(e) There is a difference of Rs. 21,32,000/- in the pricing of the above mentioned engines by the Board of Officers, contained in Auction Catalogue T-85 and the new Board of officers Auction Catalogue. The earlier pricing was 22,60,000/- and the now pricing done by new bd of officer is rupees 43,92,000/- (Annexure R-11)."

6. Mr. Lekhi, the learned senior counsel appearing on behalf of the petitioners, would submit that as from the tender document it would appear the goods were to be sold on "as is where is" basis, the respondents were liable to follow the rule of the game. According to the learned counsel, the said rule is analogous to the rule of playing card in blind. He would submit that once a right in the said goods became vested in the petitioners, they could not has been deprived there from. In support of the said contention, strong reliance has been placed on Leigh & Sillavan Ltd. v. Aliakmon Shipping Co. Ltd. , (1985) 2 All ER 44 ; and West Bengal State Electricity Board v. Patel Engineering Co. Ltd. & Ors., 2001 (1) SCLAE 255.

7. Mr. Maninder Singh, the learned counsel appearing on behalf of the respondents, on the other hand, would submit that the action on the part of the respondents cannot be said to be arbitrary, as notice inviting tender was issued on a mistaken fact. The learned counsel would contend that in a situation of this nature, this Court should not exercise its writ jurisdiction.

8. Mr. Shali, the learned counsel appearing on behalf of respondent No. 1 would submit that these writ petitions are

not maintainable, as there exists an arbitration clause in the notice inviting tender.

The learned counsel wold submit that the money, which is lying with the respondents, would be given back to the petitioners. According to the learned counsel, in the event the writ petitions are allowed, the same would amount to unjust enrichment to the writ petitioners herein.

9. The factual matrix of the matter, as noticed hereinbefore, clearly depicts that the cause of action for filing the writ petitions arose out of a contract qua contract and no public law character is involved in these writ petitions.

It may be true, as has been submitted by Mr. Lekhi, that the respondents are 'State' within the meaning of Article 12 of the Constitution of India, but the same by itself would not mean that this Court in exercise of its jurisdiction under Article 226 of the Constitution of India would enter into a disputed question of fact or enforce a contract qua contract. The law in this regard is not in dispute.

10. There cannot be any doubt that Article 14 of the Constitution of India applies in case of contract entered into by the between the State and others. However, when the State enters into transactions pursuant to its commercial pursuits, its action cannot be said to be a state action unless public law character is attached to it.

11. The Supreme Court in Life Insurance Corporation of India v. Escorts Ltd., held that LIC as a shareholder is required to act as any other shareholder and thus it cannot be restrained from doing so nor is it bound to disclose its reasons for moving the resolutions.

12. The Supreme Court further held in Food Corporation of India v. Jaganath Dutta , .

"We are of the view that the High Court was not justified in quashing the impugned notice especially when the terms and conditions of the contract permitted the termination of the agreement by either of the parties. The High Court should not have gone into the question of contractual obligation in its writ jurisdiction under Article 226 of the Constitution. Even otherwise the High Court misread the documents on the record and grossly erred in reaching the conclusion that no policy-decision was taken by the FCI to terminate the storage agencies in the State of West Bengal."

13. In Amarendra Kumar v. State of Bihar , a Division Bench of Patna High Court, wherein one of us, S.B. Sinha, C.J., was a member, held :-

"In the case of Burmah Construction Co. v. State of Orissa ,, delivering the judgment of the Constitution Bench, Shah, J. stated thus:

"The High Court normally does not entertain a petition under Article 226 of the Constitution to enforce a civil liability arising out of a breach of contract or a tort to pay an amount of money due to the claimant and leaves it to the aggrieved party to agitate the question in a civil suit filed for that purpose. But an order for payment of money may sometime be made in a petition under Article 226 of the Constitution against the State or against an officer of the State to enforce a statutory obligation.'

14. In the case of Suganmal v. State of Madhya Pradesh , the Court took the view that a petition praying merely for the issue of a writ of mandamus for refund of tax or any money due from the State cannot be normally maintained. It was held (at p.1742 of AIR) :-

'Normally petitions solely praying for the refund of money against the State by a writ of mandamus are not to be entertained. The aggrieved party has the right of going to the Civil Court for claiming the amount and it is open to the State to raise all possible defenses to the claim, defenses which cannot, in most cases, be appropriately raised and considered in the exercise of the writ jurisdiction.'

See also D.R. Mills v. Commissioner, Civil Supplies , .

15. In Northern India Seeds Corporation v. The State of Bihar , 1994 (1) BLJR 559 it was noted :-

"45. In Radhakrishna Agarwal v. State of Bihar, , the Supreme Court categorized the cases arising out of breaches of alleged obligation by the State or its agents in three types of cases, namely:

(i) Where the petitioner makes a grievance of breach of promise on the part of the State in cases where promise has been made by State and the promises has acted to his prejudice.

(ii) Where the contract entered into between the Contracting Party of the State is in exercise of

statutory power under Statutory Acts or Rules framed there under.

(iii) Where the contract entered into between the State and the persons aggrieved is non-

statutory and purely contractual of the rights and obligation of the parties thereto are governed by the terms of the contract.

The Supreme Court held that whereas the case falling within the categories (i) and (ii) aforementioned, a writ petition under Article 226 of the Constitution would be maintainable but in the cases falling within the category (iii), no writ petition shall lie.

46. This aspect of the matter has been considered by a Full Bench of this Court in Pancham Singh v. State of Bihar, reported in 1991 (1) PLJR 352 , when this Court upon taking into consideration various other decisions of Supreme Court carved out a fourth category and held that a writ petition shall also be maintainable where the contract has been terminated by the 'State' on a ground de' hors any of the terms of the contract, and which is per se violative of Article 14 of the Constitution.

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50. Reference in this connection may be made to BASF India Ltd. v. The State of Bihar, 1992 BBCJ 670 . The Division Bench in that case held:

"We are of the definite opinion that in all cases where breach of contract is alleged, the matter shall have to be decided keeping in view the law laid down by the Supreme Court (i.e. the decision of the Supreme Court in Radhakrishna Agarwal's case) ."

53. In Bisra Lime Stone Company Ltd. v. Orissa State Electricity Board, , the Supreme Court upon taking into consideration its earlier decision in Indian Aluminium Company v. Kerala State Electricity Board, , held that a writ petition is not maintainable where the parties can get their disputes resolved by invoking the adjudicating machinery of the arbitration clause."

16. Yet again the Supreme Court recently in Assistant Excise Commissioner v. Issac Peter , held :-

"We are, therefore, of the opinion that in case of contracts freely entered into with the State, like the present ones, there is no room for invoking the doctrine of fairness and reasonableness against one party to the contract (State), for the purpose of altering or adding to the terms and conditions of the contract, merely because it happens to be the State. In such cases, the mutual rights and liabilities of the parties are governed by the terms of the contracts (which may be statutory in some cases) and the laws relating to contracts. It must be remembered that these contracts are entered into pursuant to public auction, floating of tenders or by negotiation. There is no compulsion on anyone to enter into these contracts. It is voluntary on both sides. There can be no question of the State power being involved in such contracts. It bears repetition to say that the State does not guarantee profit to the licensees in such contracts. There is no warranty against incurring losses. It is a business for the licensees. Whether they make profit or incur loss is no concern of the State. In law, it entitled to its money under the contract. It is not as if the licensees are going to pay more to the State in case they make substantial profits. We reiterate that what we have said hereinabove is in the context of the contracts entered into between the State and its citizens pursuant to public auction, floating of tenders or by negotiation."

17. This aspect of the matter has also been considered in A.C. Roy Co. and Ors. v. Union of India and Ors. , wherein one of us S.B. Sinha, C.J. was a member.

18. In State of U.P. and Ors. v. Bridge & Roof Company (India) Ltd. , the law has been laid down in the following terms :-

"15. In our opinion, the very remedy adopted by the respondent is misconceived. It is not

entitled to any relief in these proceedings, i.e., in the writ petition filed by it. The High Court appears to be right in not pronouncing upon any of the several contentions raised in the writ petition by both the parties and in merely reiterating the effect of the order of the Deputy Commissioner made under the proviso to Section 8-D (1).

16. Firstly, the contract between the parties is a contract in the realm of private law. It is not a statutory contract. It is governed by the provisions of the Contract Act or, maybe, also by certain provisions of the Sale of Goods Act. Any dispute relating to interpretation of the terms and conditions of such a contract cannot be agitated, and could not have been agitated, in a writ petition. That is a matter either for arbitration as provided by the contract or for the civil court, as the case may be. Whether any amount is due to the respondent from the appellant-Government under the contract and, if so, how much and the further question whether retention or refusal to pay any amount by the Government is justified, or not, are all matters which cannot be agitated in or adjudicated upon in a writ petition. The prayer in the writ petition, viz., to restrain the Government from deducting a particular amount from the writ petitioner's bill(s) was not a prayer which could be granted by the High Court under Article 226. Indeed, the High Court has not granted the said prayer."

19. We, therefore, are of the opinion that these writ petitions are not maintainable.

20. In Leigh & Sillavan Ltd.'s case (Supra) , the Court of Appeal was considering a matter relating to passing of property and sale of goods. The action therein did not arise out of an action in public law remedy and the Court of Appeal was concerned with interpretation of a contract. It was also concerned with the case of negligence and liability of the Insurance Company.

21. In that view of the matter, the decision of the Apex Court in W.B. Electricity Board v. Patel Engineering Co. Ltd. & Ors. , (2001) 2 SCC 451 will have no application in the instant case. Therein the Apex Court was concerned with the interpretation of a highly competitive international tender and held that in a case of that nature where the bidders were required to take all possible case in submitting their tenders, they cannot later on be permitted to rectify their mistakes which were impermissible in terms of the tender documents. In the instant case, the respondents have pleaded mistake of fact. They had also pleaded mistake in relation to the location where the properties were situated. In the aforementioned situation, if the authorities had taken a decision to withdraw the offer, which would amount to recession of contract, the remedy of the petitioner would be to file a suit for damages or take recourse to the Arbitration clause.

22. It is now well known that even a suit for specific performance of contract would ordinarily not be decreed when the plaintiff can be compensated in terms of money by way of damages.

23. For the reasons aforementioned, there is no merit in these writ petitions, which are dismissed accordingly but without any order as to costs. However, the petitioners herein can take refund of the amount deposited by them without

prejudice to their rights and contentions in any future litigation.