Patna High Court
M/S Bspcl Infrastructure Ltd vs The State Of Bihar on 14 September, 2020
Equivalent citations: AIRONLINE 2020 PAT 475
Author: Mohit Kumar Shah
Bench: Mohit Kumar Shah
IN THE HIGH COURT OF JUDICATURE AT PATNA
Civil Writ Jurisdiction Case No.7192 of 2020
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M/s BSPCL Infrastructure Ltd. having its registered office at 8-2, 502/1/A,
JIVI Towers, Road No. 7, Banjara Hills Hyderabad-500034, having its Local
Office at New Bypass Road, Patna-Bakhtiyarpur Road NH-30, Village-
Daulatpur, P.O. Garhuchak, P.S.-Fatuha, District-Patna, represented through
its Project Manager, namely Sri Prabhat Kumar, aged about 49 years (Male),
son of Ram Babu Singh, resident At 3/12, HIG Sector-7, Block-03, Quarter
No. 12, Near TV Tower, P.O.-Kankarbagh, P.S. Agamkuan, District-Patna.
... ... Petitioner/s
Versus
1. The State of Bihar
2. The Principal Secretary, Water Resources Department, Government of Bihar,
Patna.
3. The Engineer-in-Chief, Water Resources Department, Government of Bihar,
Patna.
4. The Chief Engineer (Regional), Flood Control and Drainage, Water
Resources Department, Katihar.
5. The Superintending Engineer, Mahananda Flood Control Circle, Katihar.
6. The Executive Engineer-cum-Nodal Officer, Flood Control Division,
Katihar.
7. The Executive Engineer, Flood Control Division, Kishanganj.
8. The Executive Engineer, Flood Control Division, Salmari.
... ... Respondent/s
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Appearance :
For the Petitioner/s : Mr. Y.V. Giri, Sr. Advocate
Mr.Pranav Kumar, Advocate
For the Respondent/s : Mr. Anjani Kumar, AAG-4
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CORAM: HONOURABLE MR. JUSTICE MOHIT KUMAR SHAH
C.A.V. JUDGMENT
Date : 14.09.2020
The present writ petition has been filed seeking the
following reliefs:-
"(i) To issue a writ/order/direction in the
nature of certiorari for quashing the letter no.
695 dated 02.07.2020 issued under the
Patna High Court CWJC No.7192 of 2020 dt.14-09-2020
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signature of Executive Engineer, Flood Control
Division, Katihar, whereunder the agreement
no. 01 SBD/2018-19 dated 31.08.2018 for the
work of construction of New Embankment
Kuttighat-Bagdov Mahananda Lef
Embankment (46.02 km), Nagar Right
Embankment (20.10 KM), Kuttighat Jhawa
Mahananda Right Embankment (66.23 KM),
Ratwa Lef Embankment (32.92 KM) & Ratwa
Right Embankment (33.10 KM) with 10 (Ten)
Nos. A.F.S. & Brick on Edge Soling over the Top
of the Embankment under Mahananda River
Flood Management Scheme Phase-II has been
terminated in terms of clause 14 (I) & (II) and
Clause 3(VIII) of the clauses of the contract and
further directed to forfeit the Bank Guarantee
deposited against the mobilization advance.
(ii) To issue a writ/order/direction in the nature
of certiorari for quashing the letter no. 594
dated 03.06.20920 issued under the signature
of Executive Engineer, Flood Control Division,
Katihar, whereunder the agreement no. 01
SBD/2018-19 dated 31.08.2018 for the work of
construction of New Embankment Kuttighat-
Bagdov Mahananda Lef Embankment (46.02
km), Nagar Right Embankment (20.10 KM),
Kuttighat Jhawa Mahanand Right Embankment
(66.23 KM), Ratwa Lef Embankment (32.92
Patna High Court CWJC No.7192 of 2020 dt.14-09-2020
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KM) & Ratwa Right Embankment (33.10 KM)
with 10 (Ten) Nos. A.F.S. & Brick on Edge Soiling
over the Top of the Embankment under
Mahananda River Flood Management Scheme
Phase-II has been terminated in terms of clause
14 (I) & (II) and Clause 3(VIII) of the clauses of
the contract.
(iii) To issue a writ/order/direction in the nature
of mandamus commanding the respondents to
make available the land required for the project
encumbrance free in terms of clause 40 of the
clauses of contract and allow the petitioner to
complete the work in terms of Agreement
dated 31.08.2018 bearing agreement no. 01
SBD/2018-19.
(iv) To issue a writ/order/direction in terms of
mandamus commanding the respondents not
to encash the performance bank guarantee no.
41931BGI4193IBGIS180067 dated 28.08.2018
amounting to Rs. 8,73,42,100.00 (Rupees Eight
Crore Seventy Three Lac Forty Two Thousand
One Hundred) and mobilization bank guarantee
no. 0654018BG0000108 dated 31.10.2018
amount to Rs. 5,00,00,000.00 (Rupees Five
Crores), mobilization bank guarantee no.
0654018BG0000109 dated 31.10.2018
amounting to Rs. 5,00,00,000.00 (Rupees Five
Patna High Court CWJC No.7192 of 2020 dt.14-09-2020
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Crores) and mobilization bank guarantee no.
0654018BG0000110 dated 31.10.2018
amounting to Rs. 5,00,00,000.00 (Rupees Five
Crores) mobilization bank guarantee no.
0654018BG0000111 dated 31.10.2018
amounting to Rs. 6,83,55,200.00 (Rupees Six
Crores Eighty Three Lac Fify Five Thousand
Two Hundred), which has not been encashed by
the respondents till today and the same is
unreasonable and without basis for the very
termination of the Agreement."
Shorn of the details, it would suffice to state that the
Water Resources Department, Government of Bihar, came out
with an advertisement/notice for the work of construction of
new embankment on the bank of Mahananda river. The period
of completion of work, as mentioned in the NIT was 32 months
and the date fixed for opening the technical bid was
03.08.2018. The petitioner had applied for the aforesaid work and was declared to be the lowest bidder in the technical bid, whereafter the petitioner was awarded the contract and the petitioner had entered into an agreement with the Executive Engineer, Flood Control Division, Katihar on 31.08.2018. It is the case of the petitioner that as per clause-40 of the Special Conditions of Contract, site for execution of work was to be Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 5/82 made available as soon as the work was awarded, however, till the cancellation of the tender in question, no unencumbered and encroachment free land was made available to the petitioner company so as to enable it to start the work. It is the further case of the petitioner that despite several communications made by the petitioner with the respondents, no land was provided to the petitioner company so as to enable it to commence its work.
The learned senior counsel for the petitioner has submitted that it was incumbent upon the respondent-State to acquire the land and deliver the same to the petitioner company, however, not a single inch of land was either acquired or made available to the petitioner company resulting in the petitioner company not being able to commence its work. The learned senior counsel for the petitioner has referred to the letter dated 16.12.2009 (Annexure-7 to the writ petition) in this regard to show that the petitioner company had been continuously requesting the respondent State to provide and make available unencumbered and encroachment free land for the purposes of embankment construction so that the work can be started. The learned senior counsel for the petitioner has Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 6/82 further referred to the letter of the Chief Engineer, Flood Control and Drainage, Water Resources Department, Katihar, containing the minutes of meeting dated 15.01.2020 to show that an agency namely Aymanas Infra & Sugam International Sansthan (Lucknow) Consultant Engineers & Construction had been entrusted with the task of land acquisition, however, it had failed to acquire even an inch of land and make it available to the petitioner company for the purposes of carrying out the construction work on the banks of the Mahananda river. The learned counsel for the petitioner has further submitted by referring to the said minutes dated 15.01.2020 that the Secretary, Water Resources Department had directed for expediting the land acquisition process so that the embankment construction could be expedited. The learned senior counsel for the petitioner has next referred to the letter dated 18.03.2020, issued by the Superintending Engineer, Mahananda Flood Control Circle, Katihar to the petitioner company to show that during the interregnum period i.e. till the land was acquired, the petitioner company was directed to commence the work immediately on the left banks of Mahananda river where government land was available. In this Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 7/82 regard, the learned senior counsel for the petitioner has submitted that since a long embankment was to be constructed over several kilometers, the work was required to be carried out in a systematic manner and it was not possible to do the same in bits and parts. Thus, in nutshell, the submission of the learned senior counsel for the petitioner is that the respondents have defaulted all throughout in not acquiring the land in question and making the same available to the petitioner company so that it could carry out unhindered work of construction of embankment on the bank of river Mahananda. It is also the submission of the learned senior counsel that without discharging its obligations, the respondents were pressurizing the petitioner company to commence the work which is not only unreasonable but also shows the malafide intention of the respondents.
It is next submitted by the learned senior counsel for the petitioner that despite the State having defaulted all throughout, it had issued a show cause notice dated 05.05.2020, under the pen and signature of the Executive Engineer, Flood Control Division, Katihar to the Project Manager of the petitioner company wherein it had been vaguely stated Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 8/82 that despite having requested the company on couple of occasions for commencing the work, the petitioner company had failed to commence the work and in fact had also not mobilized manpower and machinery on the site, hence it is clear that no concrete steps had been taken by the petitioner company for commencing the work despite the mobilization advance having been made available to the petitioner company, thus the petitioner company was told to file its clarification within one week as to why, on account of violation of the conditions of the agreement, action be not initiated to rescind the agreement. The petitioner company is stated to have submitted its detailed reply dated 12.05.2020 inter alia mentioning therein various grounds for not commencing the work as also stating that till the filing of the reply not a single kilometer unencumbered and encroachment free land has been made available for the purposes of embankment construction so as to enable the petitioner company to start the work, hence the allegation of not commencing the work is baseless since the company is being told to commence the work without being given the details of alignment drawing in terms of Clause-35 of the Special Condition of Contract. Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 9/82 The learned senior counsel for the petitioner has taken this Court to the impugned letter dated 03.06.2020, whereby and whereunder the agreement in question has been rescinded. It is submitted that the said impugned order dated 03.06.2020 is absolutely unreasoned and does not deal with the reply of the petitioner dated 12.05.2020, hence is illegal and fit to be set aside. In this connection, the learned senior counsel for the petitioner has referred to the following judgments, which are being detailed herein below along with the relevant extracts thereof:-
(i) (2010) 13 SCC 427 (ORYX Fisheries Private Ltd. vs. Union of India &Ors.); paragraph nos.
25, 26, 32, 35, 36 and 39 to 41 whereof are reproduced herein below:-
"25. Expressions like "a reasonable opportunity of making objection" or "a reasonable opportunity of defence" have come up for consideration before this Court in the context of several statutes. A Constitution Bench of this Court in Khem Chand v. Union of India [AIR 1958 SC 300], of Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 10/82 course in the context of service jurisprudence, reiterated certain principles which are applicable in the present case also.
26. S.R. Das, C.J. speaking for the unanimous Constitution Bench in Khem Chand [AIR 1958 SC 300] held that the concept of "reasonable opportunity"
includes various safeguards and one of them, in the words of the learned Chief Justice, is: (AIR p. 307, para 19) "(a) An opportunity to deny his guilt and establish his innocence, which he can only do if he is told what the charges leveled against him are and the allegations on which such charges are based;"
32. Therefore, while issuing a show-cause notice, the authorities must take care to manifestly keep an open mind as they are to act fairly in adjudging the guilt or otherwise of the Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 11/82 person proceeded against and specially when he has the power to take a punitive step against the person after giving him a show- cause notice.
35. Going by the aforesaid test any man of ordinary prudence would come to a conclusion that in the instant case the alleged guilt of the appellant has been prejudged at the stage of show- cause notice itself.
36. The appellant gave a reply to the show-cause notice but in the order of the third respondent by which registration certificate of the appellant was cancelled, no reference was made to the reply of the appellant, except saying that it is not satisfactory. The cancellation order is totally a non- speaking one. The relevant portion of the cancellation order is set out:
"Sub.: Registration as an Exporter of Marine Products under Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 12/82 the Mpeda Rules, 1972.
Please refer to Show-Cause Notice No. 10/3/MS/2006/MS/3634 dated 23-1-2008 acknowledged by you on 28-1-2008 directing you to show cause why the certificate of registration as an exporter, No. MAI/ME/119/06 dated 3-3- 2006 granted to you as merchant exporter should not be cancelled for the following reasons:
1. It has been proved beyond doubt that you have sent sub-standard material to M/s Cascade Marine Foods, LLC, Sharjah.
2. You have dishonoured your written agreement with M/s Cascade Marine Foods, LLC, Sharjah to settle the complaint made by the buyer as you had agreed to compensate to the extent of the value of the defective cargo sent by you and have now evaded from the responsibility.
3. This irresponsible action has brought irreparable damage to India's trade Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 13/82 relation with UAE.
Your reply dated 4-2-2008 to the show-cause notice is not satisfactory because the quality complaint raised by M/s Cascade Marine Foods, LLC, Sharjah have not been resolved amicably. Therefore, in exercise of the power conferred on me vide Rule 43 of the Mpeda Rules, read with Office Order Part II No. 1840/2005 dated 25-11- 2006, I hereby cancel Registration Certificate No. MAI/ME/119/06 dated 3-3-
2006 issued to you. The original certificate of registration issued should be returned to this office for cancellation immediately.
In case you are aggrieved by this order of cancellation, you may prefer an appeal to the Chairman within 30 days of the date of receipt of this order vide Rule 44 of the MPEDA Rules."
39. On the requirement of disclosing reasons by a quasi- judicial authority in support of its Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 14/82 order, this Court has recently delivered a judgment in Kranti Associates (P) Ltd. v. Masood Ahmed Khan [(2010) 9 SCC 496 :
(2010) 3 SCC (Civ) 852] on 8-9-
2010.
40. In Kranti Associates [(2010) 9 SCC 496 : (2010) 3 SCC (Civ) 852] this Court after considering various judgments formulated certain principles in SCC para 47 of the judgment which are set out below:
"(a) In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially.
(b) A quasi-judicial
authority must record
reasons in support of its
conclusions.
(c) Insistence on recording of reasons is meant to serve the wider principle of Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 15/82 justice that justice must not only be done it must also appear to be done as well.
(d) Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power.
(e) Reasons reassure that discretion has been exercised by the decision-
maker on relevant grounds and by disregarding extraneous considerations.
(f) Reasons have virtually become as indispensable a component of a decision-
making process as
observing principles of
natural justice by judicial, quasi-judicial and even by administrative bodies.
(g) Reasons facilitate the process of judicial review by superior courts.
Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 16/82
(h) The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the lifeblood of judicial decision-making justifying the principle that reason is the soul of justice.
(i) Judicial or even quasi- judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants' faith in the justice delivery system.
(j) Insistence on reason is a requirement for both Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 17/82 judicial accountability and transparency.
(k) If a judge or a quasi-
judicial authority is not candid enough about his/her decision-making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism.
(l) Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or 'rubber-stamp reasons' is not to be equated with a valid decision-making process.
(m) It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers.
Transparency in decision- making not only makes the Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 18/82 judges and decision-makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor(1987) 100 Harv. L. Rev. 731-37.)
(n) Since the requirement to record reasons emanates from the broad doctrine of fairness in decision-making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See Ruiz Torija v. Spain [(1994) 19 EHRR 553] , EHRR at p. 562, para 29 and Anya v. University of Oxford [2001 EWCA Civ 405 : 2001 ICR 847 (CA)] , wherein the Court referred to Article 6 of the European Convention of Human Rights which requires, 'adequate and intelligent Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 19/82 reasons must be given for judicial decisions'.
(o) In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of 'due process'."
41. In the instant case the appellate order contains reasons. However, absence of reasons in the original order cannot be compensated by disclosure of reason in the appellate order.
(ii) (2007)9 SCC 593 (Popcorn Entertainment &Anr. vs. City Industrial Development Corporation), paragraph nos. 21, 22, 23 & 47 whereof are reproduced herein below:-
"21. As regards non-
maintainability of the writ petition, the appellant relied upon Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 20/82 the following decisions of this Court wherein this Court has held that the writ petitions can be held to be maintainable under certain circumstances:
(i) Gunwant Kaur v. Municipal Committee, Bhatinda [(1969) 3 SCC 769]
(ii) Century Spg. and Mfg.
Co. Ltd. v. Ulhasnagar Municipal Council [(1970) 1 SCC 582]
(iii) Bal Krishna Agarwal (Dr.) v. State of U.P. [(1995) 1 SCC 614 : 1995 SCC (L&S) 356 :
(1995) 29 ATC 163]
(iv) Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1]
(v) Harbans lal Sahnia v. Indian Oil Corpn.
Ltd. [(2003) 2 SCC 107]
(vi) Corpn. of the City of Bangalore v. Bangalore Stock Exchange [(2003) 10 SCC 212]
(vii) ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd. [(2004) 3 SCC 553]
(viii) Sanjana M. Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 21/82 Wig v. Hindustan Petroleum Corpn. Ltd. [(2005) 8 SCC 242].
22. He invited our attention to Whirlpool Corpn. case [(1998) 8 SCC 1] wherein this Court has held that there are three clear-cut circumstances wherein a writ petition would be maintainable even in a contractual matter. Firstly, if the action of the respondent is illegal and without jurisdiction, secondly, if the principles of natural justice have been violated, and thirdly, if the appellants' fundamental rights have been violated.
23. According to the learned Senior Counsel, all the three principles as laid down in Whirlpool Corpn. [(1998) 8 SCC 1] have been made out in the instant case because the action of CIDCO is wholly without jurisdiction as it is seeking to resile from a concluded contract contrary to the express terms of the contract. Secondly, cidco, has Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 22/82 violated the principles of natural justice as an order affecting the right of the appellant has been passed without giving an opportunity of hearing to the appellant and thirdly, the appellants' fundamental rights as guaranteed under Article 14 of the Constitution of India have been violated because similar allotments made without calling for tenders are not sought to be cancelled and the appellant is being singled out by CIDCO while seeking to cancel the allotment in favour of the appellant.
47. We have given our careful consideration to the rival submissions made by the respective counsel appearing on either side. In our opinion, the High Court has committed a grave mistake by relegating the appellant to the alternative remedy when clearly in terms of the law laid down by this Court, this was a fit case in which the High Court should have exercised Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 23/82 its jurisdiction in order to consider and grant relief to the respective parties. In our opinion, in the instant case, 3 of the 4 grounds on which writ petitions can be entertained in contractual matter were made out and hence it was completely wrong of the High Court to dismiss the writ petitions. In the instant case, 3 grounds as referred to in Whirlpool Corpn. [(1998) 8 SCC 1] have been made out and accordingly the writ petition was clearly maintainable and the High Court has committed an error in relegating the appellant to the civil court."
(iii) 2013 (1) PLJR 952 (M/s NCC Ltd. vs. State of Bihar &Ors.), paragraph nos. 16, 21 to 25 whereof are reproduced herein below:-
"16. It is also the contention of learned counsel that the authorities being party to the contract it is not open to them to unilaterally take a decision that Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 24/82 the petitioners are defaulters when the petitioners have not admitted any such fault and have alleged liability and fault on the part of the State authorities in the matter and the said issue can only be decided by an impartial adjudicatory body. In support of the said proposition learned counsel relies upon a decision of the Apex Court in the case of M/s J.G. Engineers Pvt. Ltd. Vs. Union of India &Anr.:
AIR 2011 SC 2477, in paragraph- 15 of which it has been held as follows:-
15. In fact the question whether the other party committed breach cannot be decided by the party alleging breach. A contract cannot provide that one party will be the arbiter to decide whether he committed breach or the other party committee breach. That question can only be decided by only an adjudicatory forum, that is, a court or an Arbitral Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 25/82 Tribunal. In State of Karnataka Vs. Shree Rameshwara Rice Mills, (1987)2 SCC 160: AIR 1987 SC 1359), this Court held that adjudication upon the issue relating to a breach of condition of contract and adjudication of assessing damages arising out of the breach are two different and distinct concepts and the right to assess damages arising out of a breach would not include a right to adjudicate upon as to whether there was any breach at all. This Court held that one of the parties to an agreement cannot reserve to himself the power to adjudicate whether the other party has committed breach. This Court held (Paras 7 and 8 of AIR):--
"Even assuming for argument's sake that the terms of Clause 12 afford scope for being construed as empowering the officer of the State to decide upon the question of breach as Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 26/82 well as assess the quantum of damages, we do not think that adjudication by the other officer regarding the breach of the contract can be sustained under law because a party to the agreement cannot be an arbiter in his own cause.
Interests of justice and equity require that where a party to a contract disputes the committing of any breach of conditions the adjudication should be by an independent person or body and not by the other party to the contract. The position will, however, be different where there is no dispute or there is consensus between the contracting parties regarding the breach of conditions. In such a case the officer of the State, even though a party to the contract will be well within Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 27/82 his rights in assessing the damages occasioned by the breach in view of the specific terms of Clause 12.
We are, therefore, in agreement with the view of the Full Bench that the powers of the State under an agreement entered into by it with a private person providing for assessment of damages for breach of conditions and recovery of the damages will stand confined only to those cases where the breach of conditions is admitted or it is not disputed."
21.He also relies upon a decision of the Apex Court in the case of Radhakrishna Agarwal and Others Vs. State of Bihar and Others: AIR 1977 SC 1496 [1977 PLJR (SC) 593], in paragraphs-12 & 15 of which it has been held as follows:-
Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 28/82
12. The Patna High Court had, very rightly, divided the types of cases in which breaches of alleged obligation by the State or its agents can be set up into three types. These were stated as follows:--
(i) Where a petitioner makes a grievance of breach of promise on the part of the State in cases where on assurance or promise made by the State he has acted to his prejudice and predicament, but the agreement is short of a contract within the meaning of Art. 299 of the Constitution;
(ii) Where the contract entered into between the person aggrieved and the State is in exercise of a statutory power under certain Act or Rules framed thereunder and the Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 29/82 petitioner alleges a breach on the part of the State;
and
(iii) Where the contract entered into between the State and the person aggrieved is non-statutory and purely contractual and the rights and liabilities of the parties are governed by the terms of the contract, and the petitioner complains about breach of such contract by the State.
15. It then, very rightly, held that the cases now before us should be placed in the third category where questions of pure alleged breaches of contract are involved. It held, upon the strength of Dr. Umakant Saran Vs. State of Bihar and Others, AIR 1973 SC 964 and Lekhraj Satramdas, vs. N.M. Shah, AIR 1966 SC 334 and B.K. Sinha Vs. State of Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 30/82 Bihar and Others, AIR1974 Pat, 230 that no writ or order can issue under Art.
226 of the Constitution in such cases "to compel the authorities to remedy a breach of contract pure and simple.
In reply, in support of their stand on the issue of maintainability of the writ petition in contractual matters learned counsel for the petitioners has also relied upon a decision of the Apex Court in the case of Popcorn Entertainment and Another vs. City Industrial Development Corporation &Anr:
(2007)9 SCC 593, in paragraph 47 of which it has been held as follows:-
47. We have given our careful consideration to the rival submissions made by the respective counsel appearing on either side. In our opinion, the High Court has committed a grave Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 31/82 mistake by relegating the appellant to the alternative remedy when clearly in terms of the law laid down by this Court, this was a fit case in which the High Court should have exercised its jurisdiction in order to consider and grant relief to the respective parties. In our opinion, in the instant case, 3 of the 4 grounds on which writ petitions can be entertained in contractual matter were made out and hence it was completely wrong of the High Court to dismiss the writ petitions. In the instant case, 3 grounds as referred to in Whirlpool Corpn. have been made out and accordingly the writ petition was clearly maintainable and the High Court has committed an error in relegating the appellant to the civil court.
22. Learned counsel for the petitioners further submits that no reliance can be placed on the Circular dated 25.11.2011, apart from the submissions made Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 32/82 earlier, on the ground that the impugned orders have been passed prior to the issuance of the said Circular and it is not open to the respondents to rely upon the said Circular for declaring the petitioners as defaulters. It is also the contention of learned counsel for the petitioners that the Circular is otherwise bad in terms the law laid down by the Apex Court in M/s J.G. Engineers Pvt.
Ltd.'s case (supra). Learned counsel for the petitioners also relies upon a decision of the Apex Court in which similar proposition has been laid down by the Apex Court in the case of The Executive Engineer, Southern Electricity Supply Company of Orissa Ltd (Southco) &Anr. Vs. Sri Seetaram Rice Mill: (2012)2 SCC 108. It is submitted that so far as the reliance placed by learned counsel for the State in the case of M/s Master Marine Services (supra) is concerned, the said decision has no relevance in the present Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 33/82 matter as it related to the award of contract and the principles laid down therein and thus cannot be applied in the present matter. Similarly the law laid down in Radhakrishna Agarwal's case (supra) was in the context of pure alleged breach of contract and thus cannot cover the present matters.
23. I have considered the rival submissions of learned counsel for the parties. So far as the issue of maintainability is concerned, it has been clearly held by the Apex Court in the aforesaid Popcorn Entertainment case (supra) relying upon the earlier decision in Whirlpool Corporation Vs. Registrar of Trade Marks:
(1998)8 SCC 1 that even in contractual matters or where there is existence of alternative remedy there is no absolute bar to exercise of jurisdiction by this Court if issues of jurisdiction and violation of natural justice arise.
The present matter cannot be Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 34/82 treated as action by the respondent authorities of the State purely in exercise of power under the contract; rather the power exercised is of declaring the petitioners defaulter and debarring from participating in future tenders which was not part of the contract entered into between the State and the petitioners and even if could have formed part of the contract would be considered as going beyond the purview of contract, so far as it relates to the existing contractual obligation between the State and the petitioners.
24. The effect of an order declaring defaulter is grave enough so as to debar a contractor from participating in any future tender. Clause 3.3 of the SBD itself makes it clear that if such an action is taken by any of the authorities, including any State or any public sector undertaking or even by the Central Government, then the Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 35/82 other authorities act upon the said defaulter orders and the contractor in question is practically debarred from participating in any future tender with all such authorities. Such an action would have serious consequences upon the right of a contractor to exercise his fundamental right under Article 19(1)(g) of the Constitution and hence cannot be considered as a purely contractual situation or violation of contractual right. Thus, the issue not only of jurisdiction but also of compliance of principles of natural justice would automatically arise in such cases and it cannot be assumed that such a matter is not maintainable before this Court in its writ jurisdiction. The challenge to the maintainability of the writ applications is, accordingly, rejected.
25. From a perusal of the facts and circumstances enumerated above it is evident that in the Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 36/82 present matter the petitioners have been declared defaulters in carrying out their contractual work by the authorities of the State which factual situation is denied by the petitioners who have on the other hand made allegations against the State authorities as being equally liable and at fault in the matter. The contention of learned counsel for the petitioners that in such circumstances the issue regarding default can only be decided by an impartial adjudicatory body has much force in view of the law laid down by the Apex Court in M/s J.G. Engineers case (supra). The Apex Court has clearly held that the question whether the other party has committed a breach cannot be decided by the party which alleges the breach nor the contract can provide that one party to the contract can decide whether they committed the breach or the other party committed the breach, which Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 37/82 question can only be decided by a judicial forum, i.e. a court or an Arbitral Tribunal."
(iv) Judgment dated 09.10.2017, passed by the Ld. Division Bench of the Hon'ble Patna High Court in L.P.A. No. 1153 of 2017 (Kamladitya Constructions Pvt. Ltd. vs. The State of Bihar &Ors.), relevant extract whereof is reproduced herein below:-
"That being so, it is a case where behind the back of the appellant, without hearing the appellant, and in total violation to and disregard to the principles of natural justice the impugned action is taken and as the learned Writ Court has totally ignored all these vital aspects while dismissing the writ petition, it is a fit case where the appeal should be allowed and the impugned action quashed.
Accordingly, we allow the appeal, quash the order dated 28.03.2016 passed by the Writ Court in Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 38/82 C.W.J.C. No. 4086 of 2016 and the order Annexure-6 dated 156.02.2016. All consequential action taken in pursuance to the order dated 15.02.2016 shall also stand quashed, when liberty shall be available to the department to proceed afresh in accordance with law."
(V) (2004) 3 SCC 553 (ABL International Ltd. vs. Export Credit Guarantee Corporation), paragraph nos. 16, 19, 23 & 26 whereof are reproduced herein below:-
"16. A perusal of this judgment though shows that a writ petition involving serious disputed questions of facts which requires consideration of evidence which is not on record, will not normally be entertained by a court in the exercise of its jurisdiction under Article 226 of the Constitution of India. This decision again, in our opinion, does not lay down an absolute rule that in all cases involving disputed questions of Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 39/82 fact the parties should be relegated to a civil suit. In this view of ours, we are supported by a judgment of this Court in the case of Gunwant Kaur v. Municipal Committee, Bhatinda [(1969) 3 SCC 769] where dealing with such a situation of disputed questions of fact in a writ petition this Court held: (SCC p. 774, paras 14-16) "14. The High Court observed that they will not determine disputed question of fact in a writ petition. But what facts were in dispute and what were admitted could only be determined afer an affidavit-in-reply was filed by the State. The High Court, however, proceeded to dismiss the petition in limine. The High Court is not deprived of its jurisdiction to entertain a petition under Article 226 merely because in Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 40/82 considering the petitioner's right to relief questions of fact may fall to be determined. In a petition under Article 226 the High Court has jurisdiction to try issues both of fact and law. Exercise of the jurisdiction is, it is true, discretionary, but the discretion must be exercised on sound judicial principles. When the petition raises questions of fact of a complex nature, which may for their determination require oral evidence to be taken, and on that account the High Court is of the view that the dispute may not appropriately be tried in a writ petition, the High Court may decline to try a petition. Rejection of a petition in limine will normally be justified, where the High Court is of the view that the petition is Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 41/82 frivolous or because of the nature of the claim made dispute sought to be agitated, or that the petition against the party against whom relief is claimed is not maintainable or that the dispute raised thereby is such that it would be inappropriate to try it in the writ jurisdiction, or for analogous reasons.
15. From the averments made in the petition filed by the appellants it is clear that in proof of a large number of allegations the appellants relied upon documentary evidence and the only matter in respect of which conflict of facts may possibly arise related to the due publication of the notification under Section 4 by the Collector.
16. In the present case, in our judgment, the High Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 42/82 Court was not justified in dismissing the petition on the ground that it will not determine disputed question of fact. The High Court has jurisdiction to determine questions of fact, even if they are in dispute and the present, in our judgment, is a case in which in the interests of both the parties the High Court should have entertained the petition and called for an affidavit-
in-reply from the respondents, and should have proceeded to try the petition instead of relegating the appellants to a separate suit."
19. Therefore, it is clear from the above enunciation of law that merely because one of the parties to the litigation raises a dispute in regard to the facts of the case, the court entertaining such petition under Article 226 of the Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 43/82 Constitution is not always bound to relegate the parties to a suit. In the above case of Gunwant Kaur [(1969) 3 SCC 769] this Court even went to the extent of holding that in a writ petition, if the facts require, even oral evidence can be taken. This clearly shows that in an appropriate case, the writ court has the jurisdiction to entertain a writ petition involving disputed questions of fact and there is no absolute bar for entertaining a writ petition even if the same arises out of a contractual obligation and/or involves some disputed questions of fact.
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 Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 44/82 the claim of the appellants the first respondent as an instrumentality of the State has acted in contravention of the abovesaid requirement of Article 14, then we have no hesitation in holding that a writ court can issue suitable directions to set 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:
Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 45/82 "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."
26. Therefore, this objection must also fail because in a given case it is open to the writ court to give Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 46/82 such monetary relief also."
The learned senior counsel for the petitioner company has referred to various judgments rendered by the Hon'ble Apex Court to impress upon this Court that in cases where the action of the respondents is illegal, is in violation of the principles of natural justice and in cases where fundamental rights have been violated, a writ petition would definitely be maintainable, even in contractual matters. The learned senior counsel, on the issue that the contractual disputes are also amenable to writ jurisdiction, has referred to the following judgments which are being enumerated herein below:-
(I) (2003) 2 SCC 107 (Harbanslal Sahnia & Anr. Vs. Indian Oil Corporation)
(ii) (1969) 3 SCC 769 (Gunwant Kaur vs. Municipal Committee Bhatinda)
(iii) (2005) 3 SCC 241 (Cholan Roadways Ltd. vs. G. Thirugnanasambandam)
(iv) (2008) 3 SCC 440 (Food Corporation of India &ors. vs. Seil Ltd. &Ors.)
(v) 2014(3) PLJR 515 (D.B.) (Md.
Nizamuddin vs. The State of Bihar & Ors.)
(vi) (2015) 7 SCC 728 (Joshi Technologies International Inc. vs. Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 47/82 Union of India & Ors.) The learned senior counsel for the petitioner has further submitted that the impugned order dated 03.06.2020 has been passed beyond the scope and ambit of Clause-14 of the General Conditions of Contract, which deals with cancellation of contract in full or part. Clause-14 of the General Conditions of Contract reads as follows:-
"(i) At any time makes default in proceeding with the works or any part of the work with due diligence and continues to do so after a notice in writing of 7 days from the Engineer-in-Charge; or
(ii) Commits default to comply with any of the terms and conditions of the contract and does not remedy it or take effective steps to remedy it within 7 days after a notice in writing is given to him in that behalf by the Engineer-in-Charge; or
iii) Fails to complete the works or items of work with individual dates of completion, on or before the date(s) of completion, and Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 48/82 does not complete then within the period specified in a notice given in writing in that behalf by the Engineer-in-Charge; or
iv) Shall offer or give or agree to give to any person in Government service or to any other person on his behalf any gift or consideration of any kind as an inducement or reward for doing or forbearing to do or for having done or forborne to do any act in relation to the obtaining or execution of this or any other contract for Government; or
v) Shall enter into a contract with Government in connection with which commission has been paid or agreed to be paid by him or to his knowledge, unless the particulars of any such commission and the terms of payment thereof have been previously disclosed in writing to the Accepting Authority/Engineer-
in-Charge; or
vi) Shall obtain a contract with Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 49/82 Government as a result of wrong tendering or other non-bonafide methods of competitive tendering; or
vii) Being an individual, or if a firm, any partner thereof shall at any time be adjudged insolvent or have a receiving order or order for administration of his estate made against him or shall take any proceedings for liquidation or composition (other than a voluntary liquidation for the purpose of amalgamation or reconstruction) under any Insolvency Act for the time being in force or make any conveyance or assignment of his effects or composition or arrangement for the benefit of his creditors or purport so to do, or if any application be made under any InsolvencyAct for the time being in force for the sequestration of his estate or if a trust deed be executed by him for benefit of his creditors; or Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 50/82
viii) Being a company, shall pass a resolution or the Court shall make an order for the winding up of the company, or a receiver or manager on behalf of the debenture holders or otherwise shall be appointed or circumstances shall arise which entitle the Court or debenture holders to appoint a receiver or manger, or
ix) Shall suffer an execution being levied on his goods and allow it to be continued for a period of 21 years; or
x) Assigns, transfers, sublets (engagement of labour on a place- work basis or of labour with materials not to be incorporated in the work, shall not be deemed to be subletting) or otherwise parts with or attempts to assign, transfer sublet or otherwise parts with the entire works or any portion thereof without the prior written approval of the Competent Authority;
Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 51/82 The Competent Authority may, without prejudice to any other right or remedy which shall have accrued or shall accrue hereafter to Government, by a notice in writing to cancel the contract as whole or only such items of work in default from the contract."
Thus, it is submitted by the learned senior counsel for the petitioner that firstly without fulfilling the reciprocal promise and its obligation under the contract i.e. of acquiring the land and providing unencumbered and encroachment free land to the petitioner company so that the petitioner could commence work, the respondents have rescinded the contract by the impugned order dated 03.06.2020, which is beyond the scope of Clause-14 of the Contract, hence the said order dated 03.06.2020 is void. It is further submitted that the impugned order dated 03.06.2020 is also illegal and bad in law inasmuch as firstly the show cause notice dated 05.05.2020 itself demonstrates that the respondents had already made up their mind to rescind the contract in question and the show cause notice had been given with a closed mind and further neither the show cause reply submitted by the petitioner company Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 52/82 dated 12.05.2020 has been dealt with in the impugned order dated 03.06.2020 nor the said order dated 03.06.2020 contains any cogent, clear and succinct reasons for rescinding the agreement in question.
Per contra, the learned senior counsel for the respondents has submitted that the NIT dated 21.07.2018 had culminated into the petitioner being awarded the contract in question whereupon an agreement was entered into on 31.08.2018, stipulating therein that the work was to be completed within 32 months i.e. by 31.03.2021. It is further submitted that mobilization advance to the tune of Rs.
21,83,55,200/- was paid to the petitioner on 23.11.2018 itself and in fact huge chunk of government land, unencumbered and encroachment free, was available for the petitioner company to commence the work but the petitioner never had the intention of commencing/completing the work and had, on one pretext or the other, refrained from commencing the work in question and in fact neither any camp/site office was ever constructed nor manpower/plant and machinery was ever mobilized by the petitioner company, hence it is apparent that the petitioner company had no intention to undertake and complete the work Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 53/82 in question which is an important work in view of the grave flood situation prevailing every year during the monsoon period because of raging Mahananda river. The learned senior counsel for the respondents has further submitted that the respondents had issued several letters dated 31.08.2018, 24.12.2019 and 26.12.2019 etc. to the petitioner company, requesting it to commence the work, however, the respondent company failed to ever commence the work in question despite it having pocketed huge amount of mobilization advance. The learned senior counsel for the respondents has further submitted that the show cause notice dated 05.05.2020 as also the impugned order dated 03.06.2020 do not suffer from any infirmity inasmuch as the petitioner has been given ample opportunity to put forth his defense, which has been considered succinctly in the impugned order dated 03.06.2020 and moreover the fact remains that the petitioner never commenced the work in question, even after lapse of several months of execution of the agreement in question, i.e on 31.08.2018, hence the agreement has been rightly rescinded on account of breach of the terms and conditions of the agreement in question by the petitioner company. It is further submitted that the present writ petition Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 54/82 is not maintainable on account of the instant case involving disputed question of facts, which cannot be decided in a writ jurisdiction under Article 226 of the Constitution of India. In this regard, the learned senior counsel for the petitioner has referred to a judgment rendered by the Hon'ble Apex Court reported in (2015)7 SCC 728 (Joshi Technologies International Inc. vs. Union of India &Ors.); paragraph nos. 55, 56, 59, 64, 65, 68, 69 and 70 whereof are reproduced herein below:-
"55. Law in this aspect has developed through catena of judgments of this Court and from the reading of these judgments it would follow that in pure contractual matters the extraordinary remedy of writ under Article 226 or Article 32 of the Constitution cannot be invoked. However, in a limited sphere such remedies are available only when the non- Government contracting party is able to demonstrate that it is a public law remedy which such party seeks to invoke, in contradistinction to the private Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 55/82 law remedy simpliciter under the contract. Some of the case law to bring home this cardinal principle is taken note of hereinafer.
56. Significantly, in Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust v. V.R. Rudani [(1989) 2 SCC 691] as well, this Court made it clear that if the rights are purely of private character, no mandamus can be issued. Thus, even if the respondent is "State", the other condition which has to be satisfied for issuance of a writ of mandamus is the public duty. In a matter of private character or purely contractual field, no such public duty element is involved and, thus, mandamus will not lie.
59. On the basis of these facts, this Court observed that the aforesaid observations of the High Court relying upon Ramana Dayaram Shetty case [(1979) 3 SCC 489 : (1979) 2 LLJ 217] were Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 56/82 not correct. Thus observed the Court, speaking through Ratnavel Pandian, J.: (Ajai Pal Singh case [(1989) 2 SCC 116 : (1989) 1 SCR 743] , SCC pp. 125-26, paras 21-22) "21. This finding in our view, is not correct in the light of the facts and circumstances of this case because in Ramana Dayaram Shetty case [(1979) 3 SCC 489 :
(1979) 2 LLJ 217] there was no concluded contract as in this case. Even conceding that the BDA has the trappings of a State or would be comprehended in 'other authority' for the purpose of Article 12 of the Constitution, while determining price of the houses/flats constructed by it and the rate of monthly instalments to be paid, the 'authority' or its agent afer entering into the field of Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 57/82 ordinary contract acts purely in its executive capacity. Thereafer the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines the rights and obligations of the parties inter se. In this sphere, they can only claim rights conferred upon them by the contract in the absence of any statutory obligations on the part of the authority (i.e. BDA in this case) in the said contractual field.
22. There is a line of decisions where the contract entered into between the State and the persons aggrieved is non-
statutory and purely contractual and the rights are governed only by the terms of the contract, no writ or order can be issued Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 58/82 under Article 226 of the Constitution of India so as to compel the authorities to remedy a breach of contract pure and simple
-- Radhakrishna Agarwal v. State of Bihar [(1977) 3 SCC 457] , Premji Bhai Parmar v. DDA [(1980) 2 SCC 129] and Divl. Forest Officer v. Bishwanath Tea Co. Ltd.
64. The Court then examined the nature of appointment of the Government Counsel in the districts with reference to the various legal provisions including Legal Remembrance Manual and Section 24 of the Code of Criminal Procedure as well as the decisions of the Supreme Court in which character of engagement of a Government Counsel was considered. Afer analysing these provisions and case law, the Supreme Court concluded in the following manner, describing the Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 59/82 nature of appointment of District Government Counsel:
(ShrilekhaVidyarthi case [(1991) 1 SCC 212 : 1991 SCC (L&S) 742] , SCC pp. 225-37 & 242-43, paras 17-22 & 34) "17. We are, therefore, unable to accept the argument of the learned Additional Advocate General that the appointment of District Government Counsel by the State Government is only a professional engagement like that between a private client and his lawyer, or that it is purely contractual with no public element attaching to it, which may be terminated at any time at the sweet will of the Government excluding judicial review. We have already indicated the presence of public element attached to the 'office' or 'post' of District Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 60/82 Government Counsel of every category covered by the impugned circular. This is sufficient to attract Article 14 of the Constitution and bring the question of validity of the impugned circular within the scope of judicial review.
18. The scope of judicial review permissible in the present case, does not require any elaborate consideration since even the minimum permitted scope of judicial review on the ground of arbitrariness or unreasonableness or irrationality, once Article 14 is attracted, is sufficient to invalidate the impugned circular as indicated later.
We need not, therefore, deal at length with the scope of judicial review permissible in such cases since several nuances of that ticklish question do not Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 61/82 arise for consideration in the present case.
19. Even otherwise and sans the public element so obvious in these appointments, the appointment and its concomitants viewed as purely contractual matters afer the appointment is made, also attract Article 14 and exclude arbitrariness permitting judicial review of the impugned State action. This aspect is dealt with hereafer.
20. Even apart from the premises that the 'office' or 'post' of DGCs has a public element which alone is sufficient to attract the power of judicial review for testing validity of the impugned circular on the anvil of Article 14, we are also clearly of the view that Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 62/82 this power is available even without that element on the premise that afer the initial appointment, the matter is purely contractual. Applicability of Article 14 to all executive actions of the State being settled and for the same reason its applicability at the threshold to the making of a contract in exercise of the executive power being beyond dispute, can it be said that the State can thereafer cast off its personality and exercise unbridled power unfettered by the requirements of Article 14 in the sphere of contractual matters and claim to be governed therein only by private law, principles applicable to private individuals whose rights flow only from the terms of the contract without anything more?
Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 63/82 We have no hesitation in saying that the personality of the State, requiring regulation of its conduct in all spheres by requirements of Article 14, does not undergo such a radical change afer the making of a contract merely because some contractual rights accrue to the other party in addition. It is not as if the requirements of Article 14 and contractual obligations are alien concepts, which cannot co-exist.
21. The Preamble of the Constitution of India resolves to secure to all its citizens Justice social, economic and political;
and Equality of status and opportunity. Every State action must be aimed at achieving this goal. Part IV of the Constitution contains 'Directive Principles of State Policy' which are Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 64/82 fundamental in the governance of the country and are aimed at securing social and economic freedoms by appropriate State action which is complementary to individual fundamental rights guaranteed in Part III for protection against excesses of State action, to realise the vision in the Preamble. This being the philosophy of the Constitution, can it be said that it contemplates exclusion of Article 14 --
non-arbitrariness which is basic to the rule of law --
from State actions in contractual field when all actions of the State are meant for public good and expected to be fair and just? We have no doubt that the Constitution does not envisage or permit unfairness or Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 65/82 unreasonableness in State actions in any sphere of its activity contrary to the professed ideals in the Preamble. In our opinion, it would be alien to the constitutional scheme to accept the argument of exclusion of Article 14 in contractual matters. The scope and permissible grounds of judicial review in such matters and the relief which may be available are different matters but that does not justify the view of its total exclusion. This is more so when the modern trend is also to examine the unreasonableness of a term in such contracts where the bargaining power is unequal so that these are not negotiated contracts but standard form contracts between unequals.
Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 66/82
22. There is an obvious difference in the contracts between private parties and contracts to which the State is a party. Private parties are concerned only with their personal interest whereas the State while exercising its powers and discharging its functions, acts indubitably, as is expected of it, for public good and in public interest. The impact of every State action is also on public interest. This factor alone is sufficient to import at least the minimum requirements of public law obligations and impress with this character the contracts made by the State or its instrumentality. It is a different matter that the scope of judicial review in respect of disputes falling within the domain of contractual obligations Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 67/82 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.
However, to the extent, challenge is made on the ground of violation of Article 14 by alleging that the impugned act is arbitrary, unfair or unreasonable, the fact that the dispute also falls within the domain of contractual obligations would not relieve the State of its obligation to comply with the basic requirements of Article 14. To this extent, the obligation is of a public character invariably in every case irrespective of there being any other right or obligation in addition thereto. An additional contractual obligation Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 68/82 cannot divest the claimant of the guarantee under Article 14 of non-
arbitrariness at the hands of the State in any of its actions.
***
34. In our opinion, the wide sweep of Article 14 undoubtedly takes within its fold the impugned circular issued by the State of U.P. in exercise of its executive power, irrespective of the precise nature of appointment of the Government Counsel in the districts and the other rights, contractual or statutory, which the appointees may have. It is for this reason that we base our decision on the ground that independent of any statutory right, available to the appointments, and Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 69/82 assuming for the purpose of this case that the rights flow only from the contract of appointment, the impugned circular, issued in exercise of the executive power of the State, must satisfy Article 14 of the Constitution and if it is shown to be arbitrary, it must be struck down.
However, we have referred to certain provisions relating to initial appointment, termination or renewal of tenure to indicate that the action is controlled at least by settled guidelines, followed by the State of U.P. for a long time. This too is relevant for deciding the question of arbitrariness alleged in the present case."
65. Similarly, in State of Gujarat v. M.P. Shah Charitable Trust [(1994) 3 SCC 552] , this Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 70/82 Court reiterated the principles that if the matter is governed by a contract, the writ petition is not 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.
68. The Court thereafer summarised the legal position in the following manner: (ABL International Ltd. case [(2004) 3 SCC 553] , SCC pp. 572, paras 27-
28)
"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 Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 71/82 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 Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 72/82 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 Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 73/82 exercise the said jurisdiction."
69. The position thus summarised 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, it 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.
69.2. Whenever a particular mode Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 74/82 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 mode 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, the legal position which emerges from various judgments of this Court dealing with different situations/aspects relating to contracts entered into by the State/public authority with Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 75/82 private parties, can be summarised 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 practise some discriminations.
70.3. Even in cases where
question is of choice or
consideration of competing claims before entering into the field of contract, facts have to be investigated and found before the question of a violation of Article 14 of the Constitution 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 Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 76/82 case could not be conveniently or satisfactorily decided in proceedings under Article 226 of the Constitution. In such cases the Court can direct the aggrieved party to resort to alternate remedy of civil suit, etc. 70.4. Writ jurisdiction of the High Court under Article 226 of the Constitution 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 licence if he finds it profitable to do so: and he can challenge the conditions under Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 77/82 which he agreed to take the licence, 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 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 it can be shown that action of the public authorities was without giving any hearing and violation of principles of natural justice afer holding that action could not have been taken without observing principles of natural justice.
70.8. If the contract between Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 78/82 private party and the State/instrumentality and/or agency of the State is under the realm of a private law and there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court under Article 226 of the Constitution of India and invoking its extraordinary jurisdiction.
70.9. The distinction between public law and private law element in the contract with the 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. The dichotomy between public law and private law rights and remedies would depend on the factual matrix of each case and the distinction between the public law remedies and private law field, cannot be Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 79/82 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 Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 80/82 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."
I have heard the learned counsel for the parties and perused the materials on record as also gone through the various judgments referred to herein above by the learned senior counsels for the parties. First of all, as far as the preliminary objection raised by the Ld. counsel for the respondents, regarding maintainability of the present writ petition, is concerned, this Court holds that the present writ petition is definitely maintainable, in light of the legal issue Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 81/82 raised by the Ld. counsel for the petitioner company as also in view of the principles of law laid down by the Hon'ble Apex Court in the cases of Popcorn Entertainment & Anr. (Supra), M/s NCC Ltd. (Supra), ABL International Ltd. (Supra), Joshi Technologies International Inc. (Supra), Harbanslal Sahnia & Anr. (Supra), Gunwant Kaur (Supra), Cholan Roadways Ltd.
(Supra), and Food Corporation of India & Ors. (Supra).
Now adverting to the merits of the case, it is apparent from a bare perusal of the show cause notice dated 05.05.2020, the reply of the petitioner company dated 12.05.2020 and the impugned order rescinding the contract in question dated 03.06.2020, that the issues raised by the petitioner company in its show cause reply dated 12.05.2020, especially the ones pertaining to the respondents having not made available unencumbered and encroachment free land to the petitioner company and further not even a kilometer of land having been acquired for the said purpose so as to enable the petitioner to commence the work in question, have neither been dealt with nor considered by the respondents in the impugned order dated 03.06.2020 and moreover no cogent, clear and succinct reasons have been furnished in support of Patna High Court CWJC No.7192 of 2020 dt.14-09-2020 82/82 the decision to rescind the contract in question, which is an indispensable component of a decision making process, thus the order dated 03.06.2020 stands vitiated, hence this Court has no option but to quash the impugned order dated 03.06.2020 passed by the Executive Engineer, Flood Control Division, Katihar, especially in view of the said issue being squarely covered by the principles of law laid down by the Hon'ble Apex Court in the case of ORYX Fisheries Private Ltd.
(Supra). All consequential actions taken in pursuance to the order dated 03.06.2020 shall also stand quashed. However, liberty is reserved to the respondent Department to proceed afresh, in accordance with law.
The writ petition stands allowed, however without any order as to cost.
(Mohit Kumar Shah, J) S.Sb/-
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