Allahabad High Court
Ram Dhyan Singh vs State Of U.P. And Ors. on 23 April, 2004
Equivalent citations: 2004(3)AWC2559
Bench: M. Katju, R.S. Tripathi
JUDGMENT
M. Katju and R. S. Tripathi, JJ.
1. This special appeal has been filed against the impugned judgment of the learned single Judge dated 10.3.2004.
2. Heard Shri Ramendra Asthana learned counsel for the appellant and the learned standing counsel for the respondents.
3. Shri Ramendra Asthana, learned counsel has informed that the respondent No. 4 has been served through registered post.
4. There is an office report that the special appeal is not maintainable in view of the decisions of this Court in Vajara Yojna Seed Farm Kalyanpur and Ors. v. Presiding Officer, labour court-II, U. P. Kanpur and Anr., 2003 UPLBEC 496 and Sita Ram Lal v. District Inspector of Schools, Azamgarh and Ors., 1994 ACJ 180. These decisions have referred to Chapter VIII. Rule 5 of the Allahabad High Court Rules which states that an appeal lies against the judgment of a learned single Judge under Article 226 of the Constitution except when the writ petition was filed against such judgment or order or award (a) of a Tribunal, Court or statutory arbitrator, (b) of the Government or any Officer or authority, made or purported to be made in the exercise or purported exercise of appellate or revisional jurisdiction under any such Act mentioned in Chapter VIII, Rule 5. In this case, the writ petition filed before . the learned single Judge was against the order of the Commissioner who decided the appeal provided for under the Government order dated 3.7.1990. Thus, the impugned judgment before the learned single Judge, was not against an order of a Tribunal or Court or statutory arbitrator. It was also not against an order passed in exercise of appellate or revisional jurisdiction 'conferred by some Act'. In fact, the appellate jurisdiction was conferred by a Government order and not by an Act. Hence, in our opinion this special appeal is maintainable.
5. Coming to the merits of the case, we have carefully perused the impugned judgment of the learned single Judge dated 10.3.2004. The learned single Judge was of the view that the writ petition was not maintainable as it was in respect of a contractual matter. The learned single Judge has referred to several decisions of this Court and the Supreme Court e.g., Shiv Mohan Lal v. State of U. P. and Ors.. 1993 (1) AWC 196 (FB) : 1993 (21) ALR 121 and U. P. Sasta Galla Vikreta Parishad v. State of U. P. and Ors., 1992 (2) EFR 655. There is also a subsequent decision of a Division Bench of this Court in Writ Petition No. 48296 of 2003. Har Charan Sharma v. Nagar Panchayat and Ors., decided on 16.3.2004 which supports the view taken by the learned single Judge.
6. In our opinion, there is a distinction between a contract between two private persons and a contract where one of the parties is the State or an instrumentality of the State. In case of a contract where both the parties are private individuals no writ will He in relation to such a contract (though a suit or other remedy may lie). However, where one of the parties to the contract is the State or an instrumentality of the State, the position becomes totally different. In such a case. Article 14 and other provisions of the Constitution will clearly apply because the Government cannot discriminate or Act arbitrarily in respect of grant of contracts. Now-a-days the Government or instrumentality of the State grants contracts often worth hundreds of crores of rupees, and therefore, it is essential that there should be totally transparency in such contracts, otherwise the public confidence will be eroded. For example, it has often been held by the Court that such contracts are ordinarily to be awarded after advertising the same in well known newspapers having wide circulation and thereafter a public auction or public tender should be held vide Ziauddin v. Commissioner, 2003 (1) AWC 5 and V. K. Jaiswal v. State of U. P., 2004 ALJ 951, etc. The position is different with regard to contracts where both the parties are private individuals and here there is no need to advertise the contract or to hold public auction or tender. If we hold that even contracts where one of the parties is the State or the instrumentality of the State can be granted at the sweet will of the authorities to whomever they like, in whatever manner, and at whatever rate it will open the flood gates to corruption and gross financial irregularities. Moreover, it will also violate Article 14 and/or other provisions of the Constitution. It is well-settled that the State Government cannot act arbitrarily vide Maneka Gandhi v. Union of India and Ors., AIR 1978 SC 597 and Ramana Dayaram Shetty v. International Airport Authority of India and Ors., AIR 1979 SC 1628, etc. Hence even in the matter of grant of contract the Government cannot act arbitrarily and its action can be challenged in writ jurisdiction if it does so.
7. In Style (Dress Land) v. Union Territory, Chandigarh, and Anr., (1997) 7 SCC 89, the Supreme Court has observed (vide para 12) :
"Action of renewability should be gauged not on the nature of function but public nature of the body exercising that function and such action shall be open to judicial 'review even if it pertains to the contractual field.' The State action which is not informed by reason cannot be protected as it would be easy for the citizens to question such an action as being arbitrary."
8. In Jamshed Hormusji Wadia v. Board of Trustees, Port of Mumbai, (2004) 3 SCC 214 vide para 17, the Supreme Court has observed :
" It is not as if the requirements of Article 14 and contractual obligations are alien concepts which cannot coexist. Our Constitution does not envisage or permit unfairness or unreasonableness in State action in any sphere of activities contrary to the professed ideals in the Preamble. Exclusion of Article 14 in contractual matters is not permissible in our constitutional scheme."
9. In Tata Cellular v. Union of India and Ors., AIR 1996 SC 11 (vide paras 85 and 86) it has been observed :
"It cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism. However, it must be clearly stated that there are inherent limitations in exercise of that power of judicial review. Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Article 12 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down.
Judicial quest in administrative matters has been to find the right balance between the administrative discretion to decide matters whether contractual or political in nature or issues of social policy ; thus, they are not essentially justiciable and the need to remedy any unfairness. Such an unfairness is set right by Judicial review."
10, In Sterling Computers Ltd. v. M. and N. Publications Ltd, and Ors., 1993 (1) SCC 445, it has been held that "State action in commercial/contractual transaction with private parties must be in consonance with Article 14 of the Constitution." In para 14 of the said judgment the Supreme Court has observed :
"That action or the procedure adopted by the authorities which can be held to be State within the meaning of Article 12 of the Constitution, while awarding contracts in respect of properties belonging to the State can be Judged and tested in the light of Article 14 of the Constitution, is settled by the judgments of this Court in the cases of Ramana Dayaram Shetty v. International Airport Authority India : Kasturi Lal Lakshim Reddy v. State of J&K, Fertilizer Corporation. Kamagar Union (Regd.). Sindri v. Union of India : Ram and Shyam Co. v. State of Haryana ; Hazi T, M. Hassan Rawther v. Kerala Financial Corporation : Mahabir Auto Stores v. Indian Oil Corporation and Shrilekha Vidyarthi v. State of U. P. It has been said by this Court in Kasturi Lal: (SCC p 13 para 14) :
"It must follow as a necessary corollary from this proposition that the Government cannot act in a manner which would benefit a private party at the cost of the State ; such an action would be both unreasonable and contrary to public interest. The Government, therefore, cannot, for example, give a contract or sell or lease out its property for a consideration less than the highest that can be obtained for it, unless of course there are other considerations which render it reasonable and in public interest to do so."
11. In M. I. Builders Pvt. Ltd. v. Radhey Shyam Sahu and Ors., 1999 (3) AWC 2508 (SC) ; (1999) 6 SCC 464, the Supreme Court has held that "even in contractual matters the Municipal Corporation cannot act unreasonably or arbitrarily and there can be judicial review of its decision based on Wednesbury unreasonableness principles." A similar view was taken in Monarch infrastructure Pvt. Ltd. v. Commissioner Ulhasnagar Municipal Corporation and Ors., (2000) 5 SCC 287.
12. In Y. Srinivasa Rao v. J. Veeraiah, AIR 1993 SC 929, it was held that a writ will lie in relation to fair price shops. In A.B.L. International Ltd. v. Export Credit Guarantee Corporation of India Ltd., JT 2003 (10) SC 300. the. Supreme Court observed (vide para 10) :
"On a given set of facts if a State acts in an arbitrary manner even in a matter of contract, an aggrieved party can approach the Court by way of writ under Article 226 of the Constitution." In this decision the Supreme Court considered several earlier decisions and held that Article 14 applies to Government contracts, and a writ will He if it is violated."
13. Thus, there are a plethora of decisions holding that even in contractual matters a writ will He where one of the parties to the contract is the State or is an instrumentality of the State. In our opinion, to hold otherwise would mean that the State can grant contracts to only members of one particular religion, race, caste, sex or place of birth, thus violating the mandate of Article 15(1) of the Constitution. This would violate the equality provision of Article 14 of the Constitution. To hold that only a suit will lie in cases of non-statutory contracts may well make the relief nugatory as it is well known that in our country suits take 10 or even 20 years to decide and by that time the period of the contract may well expire.
14. In Shiv Mohan Lal v. State of U. P. and Ors. (supra), and U. P. Sasta Galla Vikreta Parishad v. State of U. P. and Ors. (supra), however, Full Bench decisions of this Court have taken the view that where the contract which has been entered into between the State and the person aggrieved is non-statutory no writ under Article 226 will lie. In our opinion the aforesaid decisions and the decision of the Division Bench in Har Charan Sharma v. State of U. P. and Ors. (supra) have not been correctly decided as they are inconsistent with the decisions of the Supreme Court referred to above. Hence they require to be reconsidered by a larger Bench. In our opinion the distinction between cases of statutory contract and non-statutory contract is really this.
15. In the case of a non-statutory contract, a writ will lie if there is violation of Article 14 or some other provision of the Constitution. However, in the case of a statutory contract, a writ will lie not only on the above mentioned (constitutional) ground but will also lie on the ground that there is violation of the statutory provisions relating to that contract. In other words, in the case of a non-statutory contract, a writ will only lie on constitutional grounds, but in the case of a statutory contract, a writ will lie on both grounds viz., constitutional as well as statutory grounds. This is really the essential distinction between the cases of a statutory and non-statutory contract. Hence, it cannot be said that no writ will lie in the case of a non-statutory contract.
16. It may be noticed that the decision of Supreme Court referred to above in which it was held that a writ will lie in contractual matters do not appear to relate to a statutory contract. They appear to be related to non-statutory contracts or at least no distinction was made in those decisions between statutory and non-statutory contracts but yet it was held that a writ will lie. We are of the considered opinion, therefore, that the decisions of the Full Bench of this Court in Shiv Mohan Lal v. State of U. P. and Ors. (supra) and U. P. Sasta Galla Vikreta Parishad v. State of U. P. and Ors. (supra) and the decision in Har Charan Sharma v. Nagar Panchayat (supra) require reconsideration by a larger Bench of this Court as we are of the opinion that they were incorrectly decided. Let the papers of this case be laid before tge Hon'ble the Chief Justice for constitution of a larger Bench of this Court for deciding the following questions :
"(1) Whether a writ will lie even in the matter of non-statutory contract?
(2) Whether a writ will lie in cases relating to fair price shops e.g., grant, cancellation, suspension, etc. of fair price shops."