Karnataka High Court
M/S. Bbp Studio Virtual Bharat ... vs State Of Karnataka on 25 January, 2023
Bench: M.Nagaprasanna
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 25TH DAY OF JANUARY, 2023 R
BEFORE
THE HON'BLE MR.JUSTICE M.NAGAPRASANNA
WRIT PETITION NO.21308 OF 2022 (GM-RES)
BETWEEN:
M/S. BBP STUDIO VIRTUAL
BHARAT PVT. LTD.,
A COMPANY REGISTERED UNDER
COMPANIES ACT, 1956
STUDIO VIRTUAL BHARAT
101/102 POOJA,
7TH ROAD, GOLIBAR, SANTA CRUZ EAST,
MUMBAI - 400 055,
REPRESENTED BY ITS
AUTHORIZED REPRESENTATIVE,
LYNETTE DMELLO,
D/O. ANTHONY JEROME D'SOUZA,
AGED ABOUT 49 YEARS.
...PETITIONER
(BY SRI ADITYA SONDHI, SENIOR ADVOCATE A/W
SRI SWAROOP S., ADVOCATE)
AND:
1. STATE OF KARNATAKA
REPRESENTED BY ADDITIONAL
CHIEF SECRETARY,
MINISTRY OF COMMERCE AND INDUSTRY,
VIDHANA SOUDHA, AMBEDKAR ROAD,
BENGALURU - 560 001,
KARNATAKA.
2. INVEST KARNATAKA FORUM
REPRESENTED BY
2
THE CHIEF EXECUTIVE OFFICER,
NO. 49, SOUTH BLOCK,
KHANIJA BHAVAN,
RACE COURSE ROAD,
BENGALURU - 560 001.
3. MARKETING COMMUNICATION AND
ADVERTISING LTD.,
A COMPANY REGISTERED UNDER
COMPANIES ACT, 1956,
REPRESENTED BY ITS
MANAGING DIRECTOR,
MCA HOUSE, NO. 42, MILLER ROAD,
BENGALURU - 560 052.
...RESPONDENTS
(BY SRI B.V.KRISHNA, AGA FOR R-1 AND R-2;
SRI H.MOHAN KUMAR, ADVOCATE FOR R-3)
THIS WRIT PETITION FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA, PRAYING TO SET ASIDE THE EMAIL
COMMUNICATION DATED 25.10.2022 ISSUED BY THE R3
WHEREBY WORK ORDER DATED 11.08.2022 ISSUED BY THE R3
IN BEARING NO.MCA/IKF/3D-FILM/BBPDVBPL/2022-23 TO THE
PETITIONER FOR CREATING 3D FILM SHOWCASING KARNATAKA
FOR THE UPCOMING "INVEST KARNATAKA 2022 - GLOBAL
INVESTORS MEET" WHICH IS SCHEDULED TO BE HELD ON 2ND
NOVEMBER 2022 WAS WITHDRAWN ANNEXURE-B AND A AND
ETC.
THIS WRIT PETITION HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 12.01.2023, COMING ON FOR
PRONOUNCEMENT THIS DAY, THE COURT MADE THE
FOLLOWING:-
3
ORDER
The petitioner-M/s BBP Studio Virtual Bharat Private
Limited is before this Court seeking quashment of
communication dated 25-10-2022 and for other incidental reliefs.
2. Heard Sri Aditya Sondhi, learned senior counsel
appearing for the petitioner, Sri B.V.Krishna, learned Additional
Government Advocate appearing for respondents 1 and 2 and Sri
H.Mohan Kumar, learned counsel appearing for respondent No.3.
3. Sans unnecessary details, the facts in brief which are
germane for consideration of the lis are as follows:-
The petitioner claims to be a renowned film production
house engaged in the business of producing feature films,
documentaries, commercials and music videos. The petitioner
further claims to have made more than 500 television
commercials for both Indian and International brands and has
also produced albums like Vande Mataram and Jana Gana Mana
videos. Respondent No.2 is the Invest Karnataka Forum
(hereinafter referred to as 'the Forum' for short) created by
Government to promote investments and to market Karnataka
within India and globally in order to attract such investments.
The Forum was established under Section 8 of the Companies
Act as amended in the year 2013. The Chair person of the Forum
is the Minister for Large and Medium Scale Industries and is co-
chaired by the leader in the industry in the State of Karnataka.
The Forum consists of 8 Directors and all the Directors are of the
Government and the industry. This is the broad composition of
the Forum.
4. The Government of Karnataka holds Global Investors
Meet annually. Likewise a global investors meet titled "Invest
Karnataka 2022' was slated to be held between 2nd and 4th
November, 2022, with the object of projecting the State and
reflecting the role of the State for a play in the global supply
chain, the petitioner was sought to be hired for production of a
film. On 16-06-2022 the 3rd respondent/Marketing
Communication and Advertising Limited which is a subsidiary
unit of Mysore Sales International Limited issued an invitation for
expression of interest for appointment of business associates for
the event i.e., Invest Karnataka 2022 and other media services
by way of tender process. In terms of the said invitation
empanelment of business associates was called for in four
categories based on valuation of work ranging from
` 25,00,000/- to ` 1,00,00,000. On 14-07-2022 the 3rd
respondent issued a communication to the petitioner notifying its
pre-qualification and successful acceptance of the application of
the petitioner. The petitioner was called upon to furnish a
security deposit applicable to the category in which he had
applied for along with certain other post qualification formalities.
The petitioner on 18-07-2022 communicates to the 3rd
respondent with an intention to showcase the uniqueness of the
State of Karnataka through a 3D film during the Global Investors
Meet which was scheduled to be held between 2nd and 4th
November, 2022 at Bangalore Palace.
5. The Forum communicated to the 3rd respondent to
provide the costing for creation of the 3D film as was
communicated in the communication of the petitioner. The 3rd
respondent communicates a proposal to the Forum quoting a
sum of ` 4,08,87,000/- for creation of 3D film showcasing the
State of Karnataka. After these correspondences on 11-08-2022
the Forum communicates to the 3rd respondent acceptance of
proposal by its Competent Authority and directed the 3rd
respondent to execute work order as was mentioned in the
communication dated 18-07-2022. In terms of the said
communication, the 3rd respondent issues a work order to the
petitioner to execute the work which did bear the approval of the
Forum. The work order was issued with a stipulation that the
petitioner should complete the work within the budget of
` 3,89,40,000/- including taxes. Once the work order was
issued, the petitioner began to work for creation of the 3D film.
6. On 16-09-2022, the 3rd respondent again communicates
to the Forum requesting release of advance amount of
` 1,50,00,000/- towards creation of the film, which was also
released. A cheque for an amount of ` 1,42,85,714/- was
submitted by the petitioner as a guarantee for return of advance
amount in case of failure to execute the work. After all these
communications and conditions being fulfilled, on 01-10-2022
the 3rd respondent executed an agreement with the petitioner for
execution of the work order in terms of the work order dated 11-
08-2022. The petitioner claims to have begun the work and
invested huge amounts for creation of 3D film. On 25-10-2022
the petitioner claims to have been ready to deliver its work to
the 3rd respondent in completion of the work order dated 11-08-
2022. What the petitioner receives from the hands of the 3rd
respondent is cancellation/withdrawal of the contract/work by a
cryptic communication indicating no reason as to why it was
being withdrawn. The petitioner, on receipt of the
communication through electronic mail, replies to it on 27-10-
2022 placing on record the time, money and other things spent
on creation of 3D film and the project was ready to be handed
over to the 3rd respondent who had issued the work order. The
respondents did not respond. It is then, the petitioner knocked at
the doors of this Court in the subject petition.
7. This Court, in terms of its order dated 28-10-2022,
granted an interim order of stay of the communication dated
25-10-2022 withdrawing the contract and directed the matter to
be listed on 31-10-2022. On 31-10-2022 it was submitted that
the respondents are not permitting the petitioner to display 3D
film. This Court again directed to do the needful. On 03-11-2022
the matter was moved by the State without permitting the
petitioner to display 3D film. On 03.11.2022 the interim order
was modified and directed that all actions would remain subject
to the result of the writ petition. The fact remains that the film of
the petitioner was never displayed.
8. The learned senior counsel Sri Aditya Sondhi, appearing
for the petitioner would contend with vehemence that the State
which is a contracting party, in the case at hand, cannot act so
arbitrarily after entering into contract and the petitioner taking
the contract to its logical conclusion, cancel the contract without
any rhyme or reason. He would submit that the petitioner has
spent several crores on the 3D film pursuant to the agreement
entered into between the petitioner and the State. He is now left
in the lurch without permitting display of the film nor payment
made for such investment that went into creation of the film.
9. The learned counsel representing the 3rd respondent and
the learned Additional Government Advocate representing the
State i.e., respondents 1 and 2 would in unison contend that the
film of the petitioner was not up to the mark and, therefore, a
decision was taken to deny display of the film in the global
investors meet as it would be of no use to do so and it is for the
poor quality of the film the decision was taken.
10. The learned senior counsel for the petitioner in reply
would take this court through the documents appended to the
petition to contend that it is not the poor quality of the film, but
the communication of the Hon'ble Minister that led to
cancellation of contract. Therefore, the petitioner is entitled to be
compensated with exemplary damages from the hands of the
State and also recovery of the amount that is spent.
11. I have given my anxious consideration to the
submissions made by the respective learned counsel and have
perused the material on record.
12. The afore-narrated facts, dates, and link in the chain of
events are not in dispute and therefore they would not require
reiteration. For the purpose of display of film in the global
investors meet of "Invest Karnataka 2022" the 3rd respondent
which is the subsidiary of Mysore Sales International and the
Forum which is a wing of the Government began their efforts to
scout the probable's of display of the image of the State in the
said meet and therefore, sought expression of interest from the
stake holders for the said purpose. The petitioner submitted his
expression of interest and also communicated what would be the
probable cost. The expression of interest of the petitioner was
accepted. The acceptance is at the hands of the 3rd respondent,
the 3rd respondent had communicated to the 2nd
respondent/Forum, sought its approval and then accepted the
proposal of the petitioner by its communication dated
14-07-2022. The communication reads as follows:
"¸ÀASÉå:JA¹J/MJAE/1350/2022-23 ¢£ÁAPÀ:14.07.2022
mÉAqÀgïzÁgÀjUÉ,
ªÀiÁ£ÀågÉÃ,
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ªÀåªÀºÁgÀ ¸ÀºÀªÀwðUÀ¼À£ÁßV £ÉêÀÄPÁw ªÀiÁqÀĪÀ §UÉÎ.
G¯ÉèÃR: EOI ¸ÀASÉå JA¹&J/ENL/ªÀå.¸À/E-¥ÉÆÃlð¯ï/EªÉAmï-
22/2022-23 ¢£ÁAPÀ:16/06/2022.
***
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Sl. Category Amount (Rs.) GST @ 18% Total (Non
No. (Rs.) Refundable
Security
Deposit) Rs.
1 Category - I Rs.50,000/- Rs.9,000/- Rs.59,000/-
2 Category - II Rs.1,00,000/- Rs.18,000/- Rs.1,18,000/-
3 Category - III Rs.2,00,000/- Rs.36,000/- Rs.2,36,000/-
4 Category - IV (Only for Rs.25,000/- Rs.4,500/- Rs.29,500/-
Start Up Companies)
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An agreement also comes to be executed between the 3rd
respondent and the petitioner. The agreement had several
covenants of completion of the project in time. Pursuant to the
agreement, the petitioner submitted his proposal indicating the
cost of production of 3D film to be at ` 4,08,87,000/-. This is
communicated to the Forum by the 3rd respondent. The Forum
approves the same and communicates it to the 3rd respondent
directing issuance of work order. The communication dated
11-08-2022 reads as follows:
"No.IKF/DD-1/IK-Main Film/62/2022-23 Date: 11-08-2022
Managing Director,
M/s Marketing Communications & Advertising Limited,
MCA House, No.42, Millers Road,
Bengaluru-560 052.
Sir,
Sub: Creation of a 3D film showcasing Karnataka
for the upcoming "Invest Karnataka 2022:
Global Investors Meet".
Ref:1. This office letter of even no. dated 18.07.2022.
2. Your costing proposal No.MCA/IKF/Film/
OM&E/2022-23, dated 2-08-2022.
3. Govt.Order No.C1/129/SPI/2021, dated
23.07.2021.
--
With reference to subject and this office letter cited
at ref.(1) above, the costing of Rs.4,08,87,000/-
(including MC&A) Service charges and GST) provided by
you vide your proposal cited at ref.(2) above for creation
of a 3D film showcasing Karnataka for the upcoming
"Invest Karnataka 2022 - Global Investors Meet" has
been accepted by the competent authority.
Accordingly, you are requested to execute the work
as specified in this office letter cited at ref.(1) above at
the earliest. The related tax invoice may be submitted to
this office for payment after completion of the work along
with the final approved version of the film.
This work order is issued in accordance with the
provisions of the Government Order cited at ref.(3) above."
(Emphasis added)
Advance payment of ` 1,50,00,000/- was sought to be released
from the Forum in a communication by the 3rd respondent on
16-09-2022 which was released and the petitioner issued a
cheque for ` 1,42,85,714/- as a guarantee in the event it would
not complete the work. After all the aforesaid proceedings
another agreement comes to be executed between the 3rd
respondent and the petitioner which was in furtherance of the
earlier agreement. The agreement was entered into on
01-10-2022.
13. The petitioner began to work on the film and claims to
have kept the film ready for delivery. At that juncture a
communication dated 25-10-2022 comes to the petitioner as a
bolt from the blue. The communication read as follows:
"On 25-Oct-2022, at 7.56 PM, Marketing Communication &
Advertising Limited, Bangalore. [email protected] wrote:
Dear Sir/Madam,
In continuation to the office work order towards creation
of a 3D film showcasing Karnataka for the upcoming
"Invest Karnataka 2022": Global investors Meet, this is to
inform that the work order issued stands withdrawn, as
our esteemed client M/s Invest Karnataka Forum,
Bengaluru has withdrawn their work order for the said
work (copy of the letter is attached below for the
reference).
Regards,
Marketing Communication and Advertising Limited,
Bengaluru."
The communication read that it was to inform that the work
order issued to the petitioner stood withdrawn. Except saying
this, there is no reason indicated as to why the work order has
stood withdrawn nor any notice issued to the petitioner prior to
the said communication of any shortcomings. This
communication is called in question before this Court. This Court
has passed several orders, first of which was passed on
28-10-2022 and it reads as follows:
"Heard Sri Udaya Holla, learned senior counsel for the
petitioner.
Learned Additional Government Advocate waives notice
for respondent Nos.1 and 2.
Issue emergent notice to respondent No.3.
Learned senior counsel would take this Court through the
documents appended to the petition seeking to demonstrate
that the petitioner was issued with a work order on 11.08.2022,
for creation of 3D film showcasing Karnataka for "Invest
Karnataka 2022: Global Investors Meet" and the petitioner has
also performed substantial work in terms of the work order so
issued. On 25.10.2022, an electronic mail communication is sent
to the petitioner withdrawing the said work order that was
issued on 11.08.2022, after about 2.5 months.
The order comes to the petitioner as a bolt from the blue
as the entrustment of the work was completed substantially by
the time when the impugned communication is sent. The
communication does not contain any reason, it is bald and
cryptic.
Therefore, there shall be an interim order of stay of the
electronic mail communication dated 25.10.2022, till the next
date of hearing.
List the matter on 31.10.2022."
Later on 31-10-2022 when a submission was made that the
petitioner was not being permitted to display the film, this Court
passed the following:
"Heard the learned counsel for the petitioner.
This Court by an order dated 28.10.2022, granted an
interim order of stay of the electronic mail communication dated
25.10.2022/order, cancelling the contract dated 11.08.2022.
The contract was for the purpose of creation of 3D film
showcasing Karnataka in "Invest Karnataka 2022: Global
Investors Meet" for projection of cultural heritage of Karnataka.
After the contract has been executed to a large extent, the
contract comes to be cancelled and the same is stayed by this
Court.
Learned counsel for the petitioner now submits that in the
light of the interim order of stay granted by this Court,
respondents should be directed to display or show the final
version of the 3D film in the Karnataka Investors Meet.
In the light of the stay being granted, if all other
parameters are in tune with the law, there should be no
impediment for respondent No.2 to display the film.
List the matter on 04.11.2022."
The matter was moved by the State and on hearing the learned
Advocate General, this Court on 03-11-2022 modified the order
on the submission of the learned Advocate General that an
internal committee is constituted to submit all the final versions
of what is to be displayed in the Investors Meet and the
petitioner's film has not passed through the said committee. He
assured the Court that by the end of the day the Committee
would see the film and come to the conclusion as to whether it
was in tune with the parameters for it to be displayed in the
Investors Meet. This Court directed that the aforesaid scrutiny of
the Committee would remain subject to the result of the petition
and without prejudice to the right of the State to defend its
action. After which, the film was placed before the Committee.
The Committee saw the film and rejected for a display at the
meet.
14. The composition of the Committee is what is required
to be noticed. The composition of the Committee is as follows:
"List of Members attended the meeting:
1. Shri R.Ramesh,
Director (TC),
Commerce & Industries Department.
2. Shri H.M.Srinivasa,
Additional Director (MSME),
Department of Industries & Commerce.
3. Shri B.K. Shivakumar,
Chief Operating Officer,
Invest Karnataka Forum.
4. Shri Siddalingappa B.Pujari,
Managing Director,
Marketing Communication & Advertising Limited."
The composition was the Director, Commerce and Industries
Department; Additional Director of the same Department, Chief
Operating Officer of the Forum and the Managing Director of the
3rd respondent. The decision reads as follows:
"4) After detailed viewing of the film and elaborate
discussions, the following decisions are taken
unanimously.
(a) The film submitted by M/s BBP Studio Virtual
Bharat Pvt.Ltd., Mumbai is raw generic, incomplete,
unfinished and sub-standard and not meeting the
requirements as per the scope of work.
(b) The version of the film submitted by M/s BBP
Studio Virtual Bharat Pvt.Ltd., Mumbai is not
acceptable, appropriate, worthful and suitable to be
exhibited before the global dignitaries and
delegates in the flagship event of Karnataka State,
Invest Karnataka 2022: Global Investors Meet.
(c) Further, it was decided to communicate the
decision of the Committee vide this proceedings to
M/s BBP Studio Virtual Bharat Pvt.Ltd., Mumbai and
Government".
The decision was that the film is not up to the mark. There was
no expert or an independent entity to assess the film. Who
assessed the film are the persons who needed to toe the lines of
the Minister for Industries and Commerce Department. It is the
communication of the Minister that led to cancellation of the
contract with the petitioner and, therefore, the constitution of
the committee of interested persons, would inspire no confidence
of this Court for their act of rejection of the film. In the light of
the aforesaid events, it now becomes germane to notice the
communication of the Minister which has lead to the entire
litigation. The communication of the Minister for Industries and
Commerce reads as follows:
"£ÀªÉA§gï 2, 3 ªÀÄvÀÄÛ 4, 2022 gÀAzÀÄ "Invest Karnataka -
2022" eÁUÀwPÀ §AqÀªÁ¼À ºÀÆrPÉzÁgÀgÀ ¸ÀªÀiÁªÉñÀªÀ£Àß (GIM) DAiÉÆÃf¹zÀÄÝ ¸ÀzÀj
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(Emphasis added)
The Minister on 21-10-2022 communicates that the proposal of
the petitioner was too high and it was not needed for the
department and therefore, the contract was directed to be
cancelled. By then close to 3 months after issuance of work order
was over. Ultimately, the global investors meet was over
between 2nd November and 4th November, 2022. The State did
not permit the petitioner to display the film and what now
remains is the effort, money and time that was spent on the film
by the petitioner and the arbitrary action of the State in
cancelling the contract long after issuance of work order and the
petitioner executing the work under the contract. The petitioner
has also placed on record the total investment made by him,
seeking release of the said amounts which now becomes a
money claim being brought before this Court against the State.
15. The learned counsel appearing for the respondents
have in unison vehemently contended that a money claim should
not be entertained in exercise of the jurisdiction of this Court
under Article 226 of the Constitution of India. In the light of the
said averment, I deem it appropriate to notice the line of law, as
laid down by the Apex Court, on entertainment of a petition for
the purpose of money claim, against the State in exercise of
jurisdiction under Article 226 of the Constitution of India. The
Apex Court right from the judgment in the case of K.N.
GURUSWAMY v. STATE OF MYSORE AND OTHERS - AIR
1954 SC 592 has held that on given set of facts, if the State
acts in an arbitrary manner, even in a matter of contract, an
aggrieved party can approach the Court under Article 226 of the
Constitution of India and depending upon the facts of the case
the Courts are empowered to grant such relief. This principle is
reiterated by the Apex Court in the case of ABL
INTERNATIONAL LIMITED AND ANOTHER v. EXPORT
CREDIT GUARANTEE CORPORATION OF INDIA AND
OTHERS1 wherein the Apex Court has held as follows:-
"23. It is clear from the above observations of this Court,
once the State or an instrumentality of the State is a party of
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 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
in holding that a writ court can issue suitable directions to set
(2004) 3 SCC 553
right the arbitrary actions of the first respondent. In this
context, we may note that though the first respondent is a
company registered under the Companies Act, it is wholly owned
by the Government of India. The total subscribed share capital
of this Company is 2,50,000 shares out of which 2,49,998
shares are held by the President of India while one share each is
held by the Joint Secretary, Ministry of Commerce and Industry
and Officer on Special Duty, Ministry of Commerce and Industry
respectively. The objects enumerated in the memorandum of
association of the first respondent at para 10 read:
"To undertake such functions as may be entrusted
to it by the Government from time to time, including
grant of credits and guarantees in foreign currency for the
purpose of facilitating the import of raw materials and
semi-finished goods for manufacture or processing goods
for export."
Para 11 of the said object reads thus:
"To act as agent of the Government, or with the
sanction of the Government on its own account, to give
the guarantees, undertake such responsibilities and
discharge such functions as are considered by the
Government as necessary in national interest."
24. It is clear from the above two objects of the Company
that apart from the fact that the Company is wholly a
Government-owned company, it discharges the functions of the
Government and acts as an agent of the Government even when
it gives guarantees and it has a responsibility to discharge such
functions in the national interest. In this background it will be
futile to contend that the actions of the first respondent
impugned in the writ petition do not have a touch of public
function or discharge of a public duty. Therefore, this argument
of the first respondent must also fail.
25. The learned counsel for the respondent then
contended that though the principal prayer in the writ petition is
for quashing the letters of repudiation by the first respondent, in
fact the writ petition is one for a "money claim" which cannot be
granted in a writ petition under Article 226 of the Constitution of
India. In our opinion, this argument of the learned counsel also
cannot be accepted in its absolute terms. This Court in the case
of U.P. Pollution Control Board v. Kanoria Industrial Ltd. [(2001)
2 SCC 549] while dealing with the question of refund of money
in a writ petition after discussing the earlier case-law on this
subject held: (SCC pp. 556-58, paras 12 & 16-17)
"12. In the para extracted above, in a similar
situation as arising in the present cases relating to the
very question of refund, while answering the said question
affirmatively, this Court pointed out that the courts have
made distinction between those cases where a claimant
approached a High Court seeking relief of obtaining refund
only and those where refund was sought as a
consequential relief after striking down of the order of
assessment etc. In these cases also the claims made for
refund in the writ petitions were consequent upon
declaration of law made by this Court. Hence, the High
Court committed no error in entertaining the writ
petitions.
***
16. In support of the submission that a writ petition
seeking mandamus for mere refund of money was not
maintainable, the decision in Suganmal v. State of
M.P. [AIR 1965 SC 1740] was cited. In AIR para 6 of the
said judgment, it is stated that
'we are of the opinion that though the High Courts have
power to pass any appropriate order in the exercise of the
powers conferred under Article 226 of the Constitution,
such a petition solely praying for the issue of a writ of
mandamus directing the State to refund the money is not
ordinarily maintainable for the simple reason that a claim
for such a refund can always be made in a suit against the
authority which had illegally collected the money as a
tax'.
17. Again in AIR para 9, the Court held:
'We, therefore, hold that 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 defences to the claim, defences which cannot, in
most cases, be appropriately raised and considered in the
exercise of writ jurisdiction.'
This judgment cannot be read as laying down the law that no
writ petition at all can be entertained where claim is made for
only refund of money consequent upon declaration of law that
levy and collection of tax/cess is unconstitutional or without the
authority of law. It is one thing to say that the High Court has
no power under Article 226 of the Constitution to issue a writ of
mandamus for making refund of the money illegally collected. It
is yet another thing to say that such power can be exercised
sparingly depending on facts and circumstances of each case.
For instance, in the cases on hand where facts are not in
dispute, collection of money as cess was itself without the
authority of law; no case of undue enrichment was made out
and the amount of cess was paid under protest; the writ
petitions were filed within a reasonable time from the date of
the declaration that the law under which tax/cess was collected
was unconstitutional. There is no good reason to deny a relief of
refund to the citizens in such cases on the principles of public
interest and equity in the light of the cases cited above.
However, it must not be understood that in all cases where
collection of cess, levy or tax is held to be unconstitutional or
invalid, the refund should necessarily follow. We wish to add
that even in cases where collection of cess, levy or tax is held to
be unconstitutional or invalid, refund is not an automatic
consequence but may be refused on several grounds depending
on facts and circumstances of a given case."
26. Therefore, this objection must also fail because
in a given case it is open to the writ court to give such
monetary relief also.
27. From the above discussion of ours, the 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 fact
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 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
Corpn. v. Registrar of Trade Marks [(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."
(Emphasis supplied)
The said judgment is followed by the Apex Court in SURYA
CONSTRUCTIONS v. STATE OF UTTAR PRADESH AND
OTHERS2 wherein the Apex Court has held as follows:
"2. By an order dated 21-10-2013 [Surya
Construction v. State of U.P.,2013 SCC OnLine All 14604], the
High Court asked the appellant to make a representation and
finally, in a contempt petition moved on 7-2-2014, directed
[Surya Construction v. Rajendra Kumar, 2014 SCC OnLine All
16549] Uttar Pradesh Jal Nigam to answer this representation.
The representation so made was answered by Uttar Pradesh Jal
Nigam as follows:
"Due to aforesaid facts and description it is clear
that Rs 113.29 lakhs has to be released by
Government/Mela Administration against the Budget
presented by U.P. Jal Nigam, Magh Mela 2008 of 2009.
There is no money available under account of Magh Mela
2008 of 2009 of U.P. Jal Nigam. And could not obtain the
(2019) 16 SCC 794
rest of amount from the Mela Administration/Government.
Therefore, payment regarding M/s Surya Construction,
323/3, Alopibagh, Allahabad will be paid after availability
of the money from the Government."
3. It is clear, therefore, from the aforesaid order
dated 22-3-2014 that there is no dispute as to the
amount that has to be paid to the appellant. Despite this,
when the appellant knocked at the doors of the High
Court in a writ petition being Writ Civil No. 25216 of
2014, the impugned judgment dated 2-5-2014 [Surya
Construction v. State of U.P., 2014 SCC OnLine All 6071]
dismissed the writ petition stating that disputed
questions of fact arise and that the amount due arises out
of a contract. We are afraid the High Court was wholly
incorrect inasmuch as there was no disputed question of
fact. On the contrary, the amount payable to the appellant
is wholly undisputed. Equally, it is well settled that where
the State behaves arbitrarily, even in the realm of
contract, the High Court could interfere under Article 226
of the Constitution of India (ABL International
Ltd. v. Export Credit Guarantee Corpn. of India Ltd. [ABL
International Ltd. v. Export Credit Guarantee Corpn. of
India Ltd., (2004) 3 SCC 553])
4. This being the case and the work having been
completed long back in 2009, we direct Uttar Pradesh Jal
Nigam to make the necessary payment within a period of
four weeks from today. Given the long period of delay,
interest @ 6% p.a. may also be awarded."
(Emphasis supplied)
The aforesaid principle is again followed by the Apex Court in its
later judgment in the case of UNITECH LIMITED AND OTHERS
v. TELANGANA STATE INDUSTRIAL INFRASTRUCTURE
CORPORATION AND OTHERS3 wherein the Apex Court has
held as follows:
2021 SCC OnLine SC 99
"E.1. Maintainability of the writ petition under
Article 226
38. Much of the ground which was sought to be
canvassed in the course of the pleadings is now
subsumed in the submissions which have been urged
before this Court on behalf of the State of Telangana and
TSIIC. As we have noted earlier, during the course of the
hearing, learned Senior Counsel appearing on behalf of
the State of Telangana and TSIIC informed the Court that
the entitlement of Unitech to seek a refund is not
questioned nor is the availability of the land for carrying
out the project being placed in issue. Learned Senior
Counsel also did not agitate the ground that a remedy for
the recovery of moneys arising out a contractual matter
cannot be availed of under Article 226 of the Constitution.
However, to clear the ground, it is necessary to postulate
that recourse to the jurisdiction under Article 226 of the
Constitution is not excluded altogether in a contractual
matter. A public law remedy is available for enforcing
legal rights subject to well-settled parameters.
39. A two judge Bench of this Court in ABL International
Ltd. v. Export Credit Guarantee Corporation of India [ABL
International] analyzed a long line of precedent of this Court to
conclude that writs under Article 226 are maintainable for
asserting contractual rights against the state, or its
instrumentalities, as defined under Article 12 of the Indian
Constitution. Speaking through Justice N Santosh Hegde, the
Court held:
"27. ...the 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 fact
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."
40. This exposition has been followed by this Court, and
has been adopted by three-judge Bench decisions of this Court
in State of UP v. Sudhir Kumar and Popatrao Vynkatrao
Patil v. State of Maharashtra. The decision in ABL International,
cautions that the plenary power under Article 226 must be used
with circumspection when other remedies have been provided by
the contract. But as a statement of principle, the jurisdiction
under Article 226 is not excluded in contractual matters. Article
23.1 of the Development Agreement in the present case
mandates the parties to resolve their disputes through an
arbitration. However, the presence of an arbitration clause
within a contract between a state instrumentality and a private
party has not acted as an absolute bar to availing remedies
under Article 226. If the state instrumentality violates its
constitutional mandate under Article 14 to act fairly and
reasonably, relief under the plenary powers of the Article 226 of
the Constitution would lie. This principle was recognized in ABL
International:
"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 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
Corpn. v. Registrar of Trade Marks [(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."
(emphasis supplied)
41. 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."
(Emphasis supplied)
The Apex Court in the case of UNITECH, formulates a specific
issue of maintainability of a writ petition under Article 226 of the
Constitution of India and answers it by following ABL
International and holding that in certain circumstances, even on
a money claim, the writ would be maintainable, if the action of
the State smacks arbitrariness.
16. On a coalesce of the judgments rendered by the Apex
Court as quoted hereinabove, what would unmistakably emerge
is that in an appropriate case a writ petition against a State or its
instrumentality arising out of a contractual obligation is
maintainable; merely because some disputed question of fact
arise for consideration, it would not be a ground to refuse
entertainment of writ petition; a writ petition involving a
consequential relief of a monetary claim is also maintainable and
a writ for such monetary claim would be maintainable
notwithstanding an arbitration clause existing in any agreement.
All the aforesaid circumstances would be the reason for
maintaining or entertaining a writ petition, if the action of the
State challenged is arbitrary. Therefore, it is such arbitrariness
that empowers the Court to entertain a petition arising out of a
contractual obligation or for a monetary claim.
17. On the bedrock of the principles so laid down by the
Apex Court, if the facts of the case as narrated hereinabove are
considered, it cannot but be held to be arbitrary. The reason for
such arbitrariness, is that the expression of interest submitted by
the petitioner was accepted by the 3rd respondent on the
approval of the Forum - 2nd respondent. After its approval the
contract was awarded in favour of the petitioner, agreement was
executed for execution of the work and the petitioner executed
the work and took the execution of such work to its logical
conclusion. Just before delivery of the final product the contract
is cancelled, not on any merit/quality of the film, but on political
interference i.e., a communication of the Minister (quoted
supra). Therefore, this becomes a classic case where
arbitrariness is writ large.
18. As held by the Apex Court, if it is once established that
the action of the respondents which are instrumentalities of the
State is vitiated by non-observation of the constitutional tenets
of Article 14 of the Constitution of India and arbitrariness in such
action is writ large, the State cannot claim comparison with a
private individual even in the field of contract. If the aforesaid
facts are present in any given case, the person aggrieved can
approach the constitutional Court by way of a writ petition under
Article 226 of the Constitution of India and the Court depending
on the facts of the case, would be empowered to grant the relief
and not relegate such a petitioner to approach the civil Court or
direct him to explore the option of arbitration for redressal of his
grievance, as Article 14 is that golden thread that is woven
through the entire fabric of Constitution of India and
every bead of State action should pass through that
golden thread. Action of the State cannot be arbitrary.
19. For the aforesaid reasons, I pass the following:
ORDER
(i) The Writ Petition is allowed in part.
(ii) The impugned communication dated 25-10-2022
issued by the 3rd respondent stands quashed.
(iii) A mandamus issues to the 1st respondent/State to
release balance payments due to the petitioner in
terms of its invoice dated 27-10-2022.
(iv) The petitioner is at liberty to seek arbitration of any
other dispute that remains unresolved, apart from
what is considered in the case at hand.
Pending applications also stand disposed, as a
consequence.
Sd/-
JUDGE
bkp
