Pcbl Ltd. Formerly Phillips ... vs Gujarat Water Infrastructure Ltd
2023 Latest Caselaw 926 Guj

     C/SCA/1424/2023                            ORDER DATED: 07/02/2023




     IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

              R/SPECIAL CIVIL APPLICATION NO.1424 of 2023

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         PCBL LTD. FORMERLY PHILLIPS CARBON BLACK LIMITED
                               Versus
                GUJARAT WATER INFRASTRUCTURE LTD.
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Appearance:
MR R S SANJANWALA, SR COUNSEL assisted by MR NANDISH CHUDGAR
and MS PANCHAMBA H JHALA(13320) for the Petitioner(s) No. 1,2

MR DEVEN PARIKH, SR COUNSEL assisted by MR KUNAL J VYAS and MR.
DEVANSH J. TRIVEDI for M/S. GANDHI LAW ASSOCIATES(12275) for the
Respondent(s) No. 1
==================================================================

 CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV

                            Date : 07/02/2023

                             ORAL ORDER

1. The petitioner No.1 being a Public Limited Company has

filed this petition with the following prayers:

"10(a) The Hon'ble Court may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other writ, order or direction, directing the respondent herein to reconnect the bulk water supply to the unit of petitioner No.1 herein at Mundra, Kutch, with immediate effect.

(b) The Hon'ble Court may be pleased to issue a writ of certiorari or a writ in the

C/SCA/1424/2023 ORDER DATED: 07/02/2023

nature of certiorari or any other appropriate writ, order or direction quashing and setting aside the impugned letter dated 24.1.2023 at Annexure P/1, whereby, GWIL has communicated to disconnect the bulk water supply to the Mundra Unit of petitioner No.1 herein, which was being supplied hitherto since the year 2008-2009."

2. The facts in brief are as under:

* It is the case of the petitioners that the petitioner

No.1 company is manufacturing carbon black which is the

basic raw material for manufacture of tyres. One of the

plants is situated at Mundra. The plant was established in

the year 2008-09. According to the petitioners, the

manufacturing process of carbon black is a continuous

process which is water intensive. Therefore, the State

government as a part of its Industrial policy to ensure

adequate water supply, through the Gujarat Water

Infrastructure Limited (for short, hereinafter referred to as

`the GWIL') respondent No.1 has provided for supply of

C/SCA/1424/2023 ORDER DATED: 07/02/2023

such water.

* It is the case of the petitioners that on 24.1.2008, a

company under respondent No.1 entered into an agreement

for bulk water supply. The initial agreement was for a

period of five years. It contained a renewal clause

stipulating that the agreement can be renewed at the end of

five year term for successive term of ten years. Under the

agreement, the respondent GWIL was required to supply a

monthly amount of water equally a minimum of 0.20

MLD. According to the petitioner, the supply by a

subsequent agreement was increased to 0.80 MLD. The

contract was renewed on 16.12.2014 effective from

21.4.2014. In accordance with the terms of the agreement,

the petitioner was sanctioned to withdraw 1.75 MLD of

water. In clause 2 of the agreement, it was specifically

stated that the purchaser will purchase a monthly quantity

of water that equals the minimum quantity which shall be

C/SCA/1424/2023 ORDER DATED: 07/02/2023

80% of the sanctioned quantity i.e. 1400 MLD. It appears

that according to the master agreement, according to the

petitioners, clause 3.2 thereof provided that the petitioners

will purchase a monthly amount of water that equals to the

minimum quantity of 0.20 MLD and maximum of 0.52

MLD.

* Terms of the master agreement including clause 5.6

and clause 13.4 thereof provided that the purchaser shall

pay for the minimum quantity of water specified in clause

3.2 as the case may be irrespective of the consumption or

non consumption of the said amount of water.

* Clause 13.4 provided that in the event the bulk

supplier i.e. the respondent was unable to supply the

minimum quantity of water, the purchaser will be given a

choice of either to receive free of cost within four months

consecutive billing cycles the quantity of water or receive

C/SCA/1424/2023 ORDER DATED: 07/02/2023

credit etc.

* According to the petitioners, on several occasions

when the GWIL was not able to supply minimum quantity

of water as agreed, GWIL was raising bills only as per

actual quantity of water supplied and not as per the

minimum quantity of water supplied. According to the

petitioners, this was in violation of the agreement and was

conveyed to the respondent by letter dated 9.4.2021. A

refusal of the GWIL to revise the bills led to a dispute and

since the respondent threatened to discontinue the water

supply, the petitioners were compelled to pay the entire

amounts. For the resolution of the dispute, seeking

recourse to the arbitration clause under the agreement an

arbitrator was appointed as a result of an order of this

Court dated 16.12.2022.

* A subsequent renewal was made for a further period

C/SCA/1424/2023 ORDER DATED: 07/02/2023

of five years effective from 24.1.2008 by a renewal

agreement dated 10.7.2018. The agreement was therefore

to expire on 23.1.2023.

* It is the case of the petitioners that six months prior

to the expiry of the agreement, the petitioner company on

14.7.2022 made an application for renewal of the

agreement. It was followed up by letter dated 12.12.2022.

The petitioners also sought an appointment with the

Managing Director of GWIL which was refused.

* It is the case of the petitioners that by

communication dated 13.1.2022, GWIL informed the

petitioners that it could renew the agreement on certain

terms and conditions. To this, the petitioners on 4.1.2023

informed the respondent expressing reservations on certain

terms of the agreement being deleted which were

otherwise part of the master agreement. It also asked for

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the copy of the draft agreement. The respondent in

response sent a draft agreement of renewal, which

according to the petitioners did not contain the stipulation

such as the arbitration clause and the clause regarding

adjustment of bills in the event of short supply of water as

per clause 13.4 of the master agreement.

* After certain discussions were held between the

parties, by the impugned communication dated 24.1.2023

the respondent No.1 informed the petitioners that since

there is disinclination to execute the agreement in the

manner proposed by the respondent the water supply

agreement has come to an end on 23.1.2023 and the supply

of water will be stopped from 25.1.2023. This has given

rise to the present petition.

3. On 30.1.2023, this Court issued notice making it

returnable on 6.2.2023, as it was the case of the petitioners

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that the entire manufacturing process for lack of water

supply will come to a standstill. On 6.2.2023, the

respondent filed an affidavit in reply. Looking to the

request made by the petitioners, the matter was taken up

for hearing today.

4. Mr. R. S. Sanjanwala, learned Senior Counsel for the

petitioners would make the following submissions:

* Mr. Sanjanwala would submit that the initial

agreement was dated 24.1.2008. It was effective for a

period of five years providing further for a renewal of ten

years. He would take the Court to the terms of the

agreement essentially clause 3.2 thereof and clause 13.4 to

indicate that in the event of the respondent unable to

supply minimum quantity of water, the benefit of clauses

(i) and (ii) of Article 13.4 of the agreement was to be

extended to the petitioners. This essentially was the bone

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of contention between the parties. In accordance with

clause 17 of the agreement which provided for dispute

resolution, the disputes were referred to arbitration and the

same is pending. However, pending this, the agreement

was renewed in December, 2014 for a period of five years

keeping the terms of the master agreement intact, the

clauses of renewal too also one and the same. The only

limited aspect that the arbitrator is supposed to decide was

the question of the refunds of the amount which the

petitioners had paid in terms of the relevant clauses and

the bills.

* Mr. Sanjanwala would further submit that much

before the expiry of the contract, on 14.7.2022, the

petitioners had informed the respondent of renewal of the

agreement. Follow up letter was written on 12.12.2022 to

request the respondent to look into the matter at the

earliest and complete the documentation before the expiry

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of the current agreement on 23.1.2023. No response was

forthcoming from the respondents and even the Managing

Director refused to meet the petitioner No.2. On

31.12.2022, the respondent addressed a letter to the

petitioner No.1 informing of the main condition of the

renewal agreement. In the renewal agreement, the

conditions similar to clause 13.4 was found missing. So

also, was it found that some of the conditions were not in

consonance with the master agreement. On 4.1.2023, the

petitioners therefore addressed a letter to the respondent

contending that they cannot change the sanctioned

quantity and that if the supply was to be as per clause 13.4

of the master agreement, they would agree to accept a

draft copy of the agreement for necessary consideration.

He would submit that the draft renewal agreement which

was sent on 3.1.2023 did away the clauses of minimum

supply of water.

C/SCA/1424/2023 ORDER DATED: 07/02/2023

* Mr. Sanjanwala would invite the Court's attention to

a letter dated 13.1.2023 written to GWIL conveying

certain issues as retaining of clauses 13.4, 17 of the dispute

resolution etc. However, in Mr. Sanjanwala's submission

by the impugned communication dated 24.1.2023, in an

arbitrary manner and out of motive as a result of the

invoking of the arbitration, the petitioners were informed

that the water supply will be stopped with effect from

25.1.2023.

* Mr. Sanjanwala would submit that the present is a

case which does not involve entertaining a dispute which

would be in the realm of a contract but the same would

involve public policy. He would submit that from the

affidavit in reply filed on behalf of the company

respondent it is evident that an NOC was granted to the

petitioner company for ground water extraction. That

C/SCA/1424/2023 ORDER DATED: 07/02/2023

permission was in pursuance of the notification of the

Ministry of Water Resources dated 24.9.2020 which was

pursuant to the directions of the National Green Tribunal.

Reading the preamble in the background of the notification

dated 24.9.2020, Mr. Sanjanwala would submit that it was

on the directions of the Hon'ble Supreme Court in the case

of M C Mehta v. Union of India in Writ Petition

No.4677 of 1985 that under the Environmental Laws,

extraction of ground water was permitted and, therefore,

the issue that needs to be adjudged falls within the domain

of public policy and not purely a matter of private

contract. The NOC was granted for ground water

extraction where the local government water supply

agencies are not able to supply the desired quantity of

water.

* Mr. Sanjanwala would read the impugned

communication dated 24.1.2023 to submit that damage to

C/SCA/1424/2023 ORDER DATED: 07/02/2023

the environment would be a direct fall out of the

discontinuing of the water supply by the respondent. All

these circumstances indicate that the non renewal of the

contract for supply of water is motivated as a result of the

arbitral proceedings and also the abrupt stopping of the

supply of water to an industry without giving it an

opportunity of setting out an alternative resource is

arbitrary and therefore this Court in exercise of powers

under Article 226 of the Constitution of India, can

certainly interfere even if the contract is a matter under

consideration. The implication of termination of the

contract of non renewal thereof has a direct bearing on a

declared policy and therefore an element of public law is

involved so as to warrant interference under Article 226 of

the Constitution of India.

5. In support of his submission, Mr. Sanjanwala would rely

on the following decisions:

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(a) Unitech Limited v. Telangana State Industrial Infrastructure Corporation (TSIIC) reported om 2021 SCC Online SC

(b) Noble Resources Limited v. State of Orissa reported in 2006(10) SCC 236 &

(c) Uttar Pradesh Power Transmission Corporation Limited v. CG Power & Industrial Solutions Limited reported in 2021 (6) SCC 15.

6. In the case of Unitech Limited (Supra), Mr. Sanjanwala

would rely on paragraphs 38 to 40 of the decision to

submit that merely because some disputed question of fact

arises, it is improper for the Court to conclude that a writ

petition under Article 226 of the Constitution of India is

not maintainable. Even an arbitration clause within a

contract cannot be an absolute bar in entertaining the

petition.

7. Relying on the decision in the case of Noble Resources

C/SCA/1424/2023 ORDER DATED: 07/02/2023

Limited (Supra) concentrating on para 15, 18, 20 and 32

to 33, Mr. Sanjanwala would submit that as held in the

case of Mahabir Auto Stores v. Indian Oil Corpn

reported in 1990(3) SCC, 752, the Supreme Court had

opined that even if the nature of rights are contractual in

nature, the motive of the decision is subject to judicial

review. In the facts of the present case, the motive was the

pending arbitration proceedings and therefore the

termination being motivated, this Court could sit in

judicial review.

8. Mr. Sanjanwala would rely on para 66 of the decision in

the case of CG Power & Industrial Solutions

Limited(Supra) that even in case when the contract has an

arbitration clause the same will not bar a petition under

Article 226 of the Constitution of India.

9. Mr. Deven Parikh, learned Senior Counsel for the

C/SCA/1424/2023 ORDER DATED: 07/02/2023

respondent would make the following submissions:

* Mr. Parikh would invite the Court's attention to the

prayers made in the petition and submit that no writ of

mandamus can be issued in the nature of a direction to the

respondent to reconnect the bulk water supply. A party

cannot be seen to approach a Court seeking a direction that

its water supply be continued particularly when the

contract in question has come to an end.

* Mr. Parikh would further submit by reading the

various conditions of the master agreement, the renewals

and the draft renewal agreement which the petitioners

were unwilling to be a signatory too and submit that it was

evident from the letter dated 31.12.2022 written by the

respondent that it was willing to supply water and enter

into a renewal agreement. The terms and conditions

remained the same. He would invite the Court's attention

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to clause 29.1 of the agreement entered at the first point of

time and the letter of 31.12.2022.

* Mr. Parikh would submit that there existed a clause

that the purchaser shall not raise any objection for

irregular supply of water despite which the petitioners

continued to agitate on the question of short supply. Mr.

Parikh in detail would explain the modus of the petitioners

in curtailing the supply and then fall back on the ground

water supplied pursuant to NOC to seek the benefit of

clause 13.4. In his submission, a party to a contract cannot

seek recourse to a mischief and then claim that the action

of the respondent is motivated.

* Mr. Parikh, on the argument made by the learned

counsel for the petitioner on the aspect of the involvement

of public policy would submit that the action of the

petitioner drawing underground water was in fact contrary

C/SCA/1424/2023 ORDER DATED: 07/02/2023

to the clause in the agreement which prevented him, using

underground water.

10. Mr. Parikh would submit that the case of hand was not the

case of termination of a contract in an arbitrary manner but

was a case where no renewal was granted. A party to a

contract cannot be compelled to renew its contract

especially when it is found that there is no fairness on the

part of the other party. He would invite the Court's

attention to page 208 to submit that the petitioner

continued to harp upon short supply of water.

11. The GWIL according to Mr. Parikh received its water

from Narmada. If the petitioner was the only unit of the

several units to which the respondents were supplying

water which complained about inadequacy of supply and

the quality of water being poor, in fact, it was a method or

a device to use the underground water.

C/SCA/1424/2023 ORDER DATED: 07/02/2023

12. Mr. Parikh would further submit that the petitioners have

not come with clean hands. A projection is made before

this Court to suggest that the company would have to shut

down because the only source of supply that is the

respondent has not extended its contract. The averment in

the petition also is a false suggestion. In fact, the

petitioners are exploiting the underground water and the

NOC granted by the Central Ground Water Authority is

valid upto 30.11.2023.

13. In support of his submissions that, no writ would lie in

matters falling under the realm of contract, Mr. Parikh

would rely on the following decisions:

(a) Decision dated 21.11.2022 passed in SCA No.9772

of 2021 and allied matters in the case of Ahmedabad

Gymkhana Club v. Union of India.

C/SCA/1424/2023 ORDER DATED: 07/02/2023

(b) State of U.P. v. Bridge & Roof Company (India)

Limited reported in 1996(6) SCC 22

(c) Kerala State Electricity Board v. Kurien E

Kalathil reported in 2000(6) SCC 293

(d) Rajasthan State Industrial Development &

Investment Corporation and another v. Diamond &

Gem Development Corporation Limited reported in

2013(5) SCC 470

(e) Bharati Airtel Limited v. Union of India reported

in 2015(12) SCC 1.

14. Considering the submissions made by the learned

advocates for the respective parties, essentially, the Court

needs to consider whether this Court can entertain a writ

petition with the reliefs that have been prayed for. The

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answer to this question will depend upon whether can the

stand of the respondent be said to be arbitrary and / or

motivated. These two will have to be gone into keeping in

mind the position of law vis-a-vis entertaining of petition

under Article 226 of the Constitution of India in matters

which are in the realm of contract.

15. The brief recapitulation of facts indicates that GWIL

entered into an agreement with the petitioners for bulk

supply of water. The respondent supplier is a Government

of Gujarat undertaking and the resource of the water is

from the Narmada under the Sardar Sarovar Narmada

Nigam Limited. That itself may not fascinate this Court so

as to treat the contract and the scope of work being that in

the realm of public contract for a public purpose. Simply

seen, it is a contract for supply of water to a desirous

purchaser who intends to use it for running its factory. In

order to mutually fulfill these obligations, the parties

C/SCA/1424/2023 ORDER DATED: 07/02/2023

entered into a contract. The contract was initially executed

on 24.1.2008 and was to enure for a period of five years

for renewals on its expiration. The last renewal was

effective from 24.1.2018. The contract was to run its life

upto 23.1.2023.

16. In context of the subsisting agreement, which the parties

have called as "master agreement" certain clauses

essentially clause 5.6 and 13.4 read with clause 3.2 thereof

gave rise to a dispute inter se between the parties. The

dispute was with regard to the supply of water and the

billing. Admittedly, as per the case of the petitioners

apprehending disconnection of water supply, the disputed

bills were paid. Recourse to arbitration was undertaken as

a result of the claim as of now to the refund of such dues.

17. The parties to the agreement especially the petitioners

were fully aware of the life of the contract. The last

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contract of which the petitioners were aware was renewed

upto 23.1.2023. True it may be, that the petitioners six

months prior to the contract coming to an end requested

the respondents to undertake the exercise of renewal. That

letter is of 14.7.2022. The reminder is of 12.12.2022. The

respondent GWIL on 31.12.2022, acknowledged the

receipt of their application and expressed its willingness to

renew the contract albeit subject to certain conditions

which may not have formed part of the master agreement.

The renewal that the parties especially the GWIL wanted

to undertake was subject to clause 13.4 being done away

with. This intention of a party to a contract needs to be

examined in the background of the past conduct of the

parties. It is the case of the petitioners that in accordance

with clause 5.6 read with clauses 3.2 and 13.4 of the

agreement then subsisting, the petitioner was entitled to

the benefit of set off. The case of the respondent was

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otherwise. That dispute was at large between the parties

before the Arbitral Tribunal. Can a party to a contract for

supply, in this case water, be compelled to retain a clause

in a renewal agreement which has been a bone of

contention. "To borrow the terms of the counsel for the

petitioner if renewal is sought of a contract on a fresh

terms and conditions, merely because the earlier

contractual terms are a part of a dispute mechanism can by

itself be not be tainted as motivated". Parties to a contract

are at their free will to suggest, enter into a consultation

and arrive at an agreement in terms of a consensus, if

found suitable. That intention is evident from the reading

of the impugned communication. To borrow the language

of the impugned communication when read would indicate

that "for the purpose of renewal of the water supply

agreement, we had shared a drat of the agreement on

6.1.2023 in pursuance of your letter dated 3.1.2023.

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Thereafter, a meeting was convened between the parties on

11.1.2023 so as to iron out the issues. During the said

meeting, we were given to understand that PCBL has

agreed to the terms and conditions of the draft agreement

and that apart from the issues which are already subject

matter of arbitration proceedings, no further issues are

arising which could kindle renewal of the agreement.... It

appears that there is no meeting of minds and that the

parties are unable to agree to final terms and conditions

which are acceptable to both the parties."

18. The contention of the learned counsel for the respective

parties on the maintainability of the petition has to be

examined in light of this controversy.

19. Merely because, pursuant to an NOC granted to the

petitioners pursuant to some notification issued under the

Environmental Laws permits the petitioners to extract part

C/SCA/1424/2023 ORDER DATED: 07/02/2023

of its need of water cannot give the contract a colour of "a

public policy" so as to bring it within the jurisdiction of

this Court to examine certainly can't the Court entertain a

petition to compel the respondent to renew a contract with

an unwilling partner. In the case of Bharti Airtel Limited

(Supra), the Hon'ble Supreme Court considering the issue

of the right to extension of a licence, observed that neither

under the contract a licenser or a licensee has a right to

insist that the other party should continue with the contract

even if such other party is not willing to accept it. In a writ

under Article 226 of the Constitution of India, if the Court

were to exercise jurisdiction and entertain the prayers

made in this petition it would clearly be a case of the

nature of enforcement of a contract between two unwilling

partners.

20. Much has been said on the question of law as to whether a

writ under Article 226 can be entertained for the reliefs in

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the nature which the petitioners have prayed for. Decisions

have been cited by the respective parties. This Court had

the benefit of considering these decisions in the case of

Ahmedabad Gymkhana Club (Supra). While

considering the decisions of the Supreme Court on the

issue on hand, this Court held as under:

"7 Reading of the aforesaid paras would indicate that when the State Officers purport to operate within the contractual field and the only grievance of the citizen could be that the contract between the parties is broken, the appropriate remedy cannot be a petition under Article 226 of the Constitution of India. The relationship between the parties is governed by the term of the agreement, and therefore, in light of the decision in the case of Joshi Technologies (supra), of which paras 65 to 72 read as under, enforcement of government contracts in respect of private law rights cannot be permitted by invocation of writ jurisdiction under Article 226 of the Constitution of India.

"65. Similarly, in State of Gujarat v. M.P.

Shah Charitable Trust[14], this Court reiterated the principles that if the matter is governed by a contract, the writ petition is not

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maintainable since it is a public law remedy and is not available in private law field, for example, where the matter is governed by a non-statutory contract.

66. At this stage, we would like to discuss at length the judgment of this Court in ABL International Ltd. (supra), on which strong reliance is placed upon by the counsel for both the parties. In that case, various earlier judgments right from the year 1954 were taken note of. One such judgment which the Department in support of their case had referred to was the decision of Apex Court in case LIC of India v. Escorts Ltd.[15] wherein the Court had held that ordinarily in matter relating to contractual obligations, the Court would not examine it unless the action has some public law character attached to it. The following passage from the said judgment was relied upon by the respondents:

"If the action of the State is related to contractual obligations or obligations arising out of the tort, the court may not ordinarily examine it unless the action has some public law character attached to it. Broadly speaking, the court will examine actions of State if they pertain to the public law domain and refrain from examining them if they pertain to the private law field. The difficulty will lie in demarcating the frontier between the public law domain and the private law field. It is impossible to draw the line with precision and we do not want to attempt it. The question

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must be decided in each case with reference to the particular action, the activity in which the State or the instrumentality of the State is engaged when performing the action, the public law or private law character of the action and a host of other relevant circumstances. When the State or an instrumentality of the State ventures into the corporate world and purchases the shares of a company, it assumes to itself the ordinary role of a shareholder, and dons the robes of a shareholder, with all the rights available to such a shareholder. There is no reason why the State as a shareholder should be expected to state its reasons when it seeks to change the management, by a resolution of the company, like any other shareholder."

This Court dealt with this judgment in the following manner:

"13. We do not think Court in the above case has, in any manner, departed from the view expressed in the earlier judgments in the case cited hereinabove. This Court in the case of Life Insurance Corporation of India (Supra) proceeded on the facts of that case and held that a relief by way of a writ petition may not ordinarily be an appropriate remedy. This judgment does not lay down that as a rule in matters of contract the court's jurisdiction under Article 226 of the Constitution is ousted. On the contrary, the use of the words "court may not ordinarily examine it unless the action has some public law character

C/SCA/1424/2023 ORDER DATED: 07/02/2023

attached to it" itself indicates that in a given case, on the existence of the required factual matrix a remedy under Article 226 of the Constitution will be available."

67. Insofar as the argument of the respondents in the said case that writ petition on contractual matter was not maintainable unless it is shown that the authority performs a public function or discharges a public duty, is concerned, it was answered in the following manner:

"22. We do not think the above judgment in VST Industries Ltd. (supra) supports the argument of the learned counsel on the question of maintainability of the present writ petition. It is to be noted that VST Industries Ltd. against whom the writ petition was filed was not a State or an instrumentality of a State as contemplated under Article 12 of the Constitution, hence, in the normal course, no writ could have been issued against the said industry. But it was the contention of the writ petitioner in that case that the said industry was obligated under the concerned statute to perform certain public functions, failure to do so would give rise to a complaint under Article 226 against a private body. While considering such argument, this Court held that when an authority has to perform a public function or a public duty if there is a failure a writ petition under Article 226 of the Constitution is maintainable. In the instant case, as to the fact that the respondent is an

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instrumentality of a State, there is no dispute but the question is: was first respondent discharging a public duty or a public function while repudiating the claim of the appellants arising out of a contract ? Answer to this question, in our opinion, is found in the judgment of this Court in the case of Kumari Shri Lekha Vidyarthi & Ors. vs. State of U.P.& Ors. [1991] (1) SCC 212] wherein this Court held:

"The impact of every State action is also on public interest.

XXX XXX XXX

24. It is really the nature of its personality as State which is significant and must characterize 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."

23. It is clear from the above observations of this Court, once State or an instrumentality of State is a party to the contract, it has an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14 of the Constitution of India. Therefore, if by the impugned repudiation of the claim of

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the appellants the first respondent as an instrumentality of the State has acted in contravention of the above said requirement of Article 14 then we have no hesitation that a writ court can issue suitable directions to set right the arbitrary actions of the first respondent."

68. The Court thereafter summarized the legal position in the following manner:

"27. From the above discussion of ours, following legal principles emerge as to the maintainability of a writ petition :-

(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable.

(b) Merely because some disputed questions of facts arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.

(c) A writ petition involving a consequential relief of monetary claim is also maintainable.

28. However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having

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regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power [See: Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai & Ors. [1998 (8) SCC 1].

And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the court thinks it necessary to exercise the said jurisdiction."

69. 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:

69.1 The Court may not examine the issue unless the action has some public law character attached to it.

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69.2 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.

69.3 If there are very serious disputed questions of fact which are of complex nature and require oral evidence for their determination.

69.4 Money claims per se particularly arising out of contractual obligations are normally not to be entertained except in exceptional circumstances.

70. 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:

70.1 At the stage of entering into a contract, the State acts purely in its executive capacity and is bound by the obligations of fairness.

70.2 State in its executive capacity, even in the contractual field, is under obligation to act fairly and cannot practice some discrimination.

70.3 Even in cases where question is of choice

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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.

70.4 Writ jurisdiction of High Court under Article 226 was not intended to facilitate avoidance of obligation voluntarily incurred.

70.5 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.

70.6 Ordinarily, where a breach of contract is complained of, the party complaining of such

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breach may sue for specific performance of the contract, if contract is capable of being specifically performed. Otherwise, the party may sue for damages.

70.7 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.

70.8 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 Page 35 of 38 under ordinary civil law rather than approaching the High Court under Article 226 of the Constitutional of India and invoking its extraordinary jurisdiction.

70.9 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

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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.

70.10 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.

70.11 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

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purely contractual disputes.

71. Keeping in mind the aforesaid principles and after considering the arguments of respective parties, we are of the view that on the facts of the present case, it is not a fit case where the High Court should have exercised discretionary jurisdiction under Article 226 of the Constitution. First, the matter is in the realm of pure contract. It is not a case where any statutory contract is awarded.

72. As pointed out earlier as well, the contract in question was signed after the approval of Cabinet was obtained. In the said contract, there was no clause pertaining to Section 42 of the Act. The appellant is presumed to have knowledge of the legal provision, namely, in the absence of such a clause, special allowances under Section 42 would impermissible. Still it signed the contract without such a clause, with open eyes. No doubt, the appellant claimed these deductions in its income tax returns and it was even allowed these deductions by the Income Tax Authorities. Further, no doubt, on this premise, it shared the profits with the Government as well. However, this conduct of the appellant or even the respondents, was outside the scope of the contract and that by itself may not give any right to the appellant to claim a relief in the nature of Mandamus to direct the Government to incorporate such a clause in the contract, in the face of the specific provisions in the contract to the

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contrary as noted above, particularly, Article 32 thereof. It was purely a contractual matter with no element of public law involved thereunder."

21. Fruitful reference was made to the decision by the Hon'ble

Supreme Court in the case of Joshi Technologies

International Inc. v. Union of India reported in 2015(7)

SCC, 728. The Supreme Court had discussed the law

whether the extra ordinary remedy of writ under Article

226 of the Constitution of India can be invoked in

contractual matters. The Court had made reference to the

decisions cited by the learned counsel for the petitioner

too. In Para 70.3 of the decision, the Court to quote held as

under:

"Even in case where question is a choice or consideration of competing claims before entering into the filed of contract, facts have to be investigated and found before the question of violation of Article 14 of the Constitution could arise. If those facts are

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disputed and required assessment of evidence, the correctness of which can only be tested satisfactorily by taking detailed evidence, ...." the case could not be conveniently and satisfactorily decided in proceedings under Article 226 of the Constitution of India.

In context of the distinction between public law and

private law element in the contract with the State, the

Supreme Court held that the distinction though may be

getting blurred, the Supreme Court held as under. Relevant

paragraph Nos.70.9, 70.10 and 70.11 are reproduced

hereunder:

"70.9 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

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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.

70.10 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.

70.11 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."

22. In light of what is therefore stated hereinabove and for the

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reasons assigned, there is no merit in the petition and the

petition is accordingly dismissed. No order as to costs.

(BIREN VAISHNAV, J) VATSAL