BHARAT CONSTRUCTION CO Vs. STATE OF RAJASTHAN

JUDGEMENT

(1.) THIS Special Appeal is directed against the judgment of the single Judge dated 27. 07. 1993 whereby the learned Judge has dismissed the writ petition of the petitioner on the ground that this being a pure question of contract he is not required to interfere in writ jurisdiction and left the petitioner to file a suit or pray for a remedy if there is a clause about the contract.

(2.) FACTS necessary to the noticed for the disposal of this appeal briefly stated are that the petitioner firm of which Shri Ramgopal Menda is a working partner is an A class contractor firm and was awarded a contract for conrtruc-tionof274 quarters of 75v type quarters for Indira Gandhi Nahar Project Jaisalmer in the year 1989. The copy of the work order is dated 1. 9. 89 marked as Anx. 1. The quarters could not be constructed in a period of one year mentioned in the contract. However, 130 quarters have been constructed upto roof level and construction of rest of the quarters is in progress. As the petitioner was not to be blamed for the slow progress in the work, a committee was appointed by the Additional Chief Engineer that Committee recommended for grant of extension to the petitioner for construction of these quarters up to 6-9-93 and further recommended grant of price escalation to the petitioner under clause 45 of the agreement. Accordingly the Additional Chief Engineer recommended to the Chief Engineer for grant of extension of time and price escalation. The Chief Engineer himself recommended to the Board for grant of extension upto 31. 3. 93 and further accepted to recommendation for the grant of price escalation to the petitioner and accordingly price escalation was granted to the petitioner to the tune of Rs. 8. 66 lacs. However the Board in its meeting dated 20. 06. 1992 i. e. 140th meeting not only ordered for the withdrawal of the price escalation granted to the petitioner but imposed a penalty of Rs. 10,000/- in addition to it for default and delay in completion of the work. It, however, accepted the recommendation of the Chief Engineer for extension of time to the Contractor upto 31-3-93, The petitioner has filed this writ petition claiming that this withdrawal of the price escalation and deduction of that amount from his running bill was done by the Board without giving the petitioner-appellant any notice and without affording him an opportunity of hearing and similarly the penalty of Rs. 10. 000/- was also imposed without notice and hearing to him and, therefore, it is against the principles of natural justice. Consequently, this order of the Board should be quashed and it be ordered that the respondent Board will refund to the petitioner a sum of Rs 876173 which they have deducted from his. running bill pertaining to the price escalation granted to him and benefit the amount of the penalty imposed against him, on the dual ground that firstly, it violates the principles of natural justice and secondly, the imposition of the penalty disentitles him to claim price escalation because he has been condoned unheard and it had been determined as if the delay is not due to negligence or non-cooperation of the department or on account of certain difficulties faced by the department in the shape of legal proceedings etc. , but it is due to the negligence and inaction of the peti-tioner-appellant. The learned single Judge felt that it raises number of disputed questions of fact as to whether extensions were granted to him on account of certain difficulties which were faced by the department or the delay in completion of the quarters was due to the negligence or inaction of the petitioner and therefore, according to the learned single Judge the appropriate remedy that can be availed by the petitioner is a suit; rather than a writ petition and it was further felt by the learned Single Judge that this being a case of deduction of the amount pertaining to price escalation which was granted to the petitioner by the Chief Engineer and imposition of penalty which is squarely covered by the terms of the contract and as such writ petition is not an appropriate remedy to be availed.

(3.) MR. Vineet Kothari has claimed that even in contractual matters, writ jurisdiction is not totally barred. If it occasions breach of principles of natural justice and if the action of the State Government is contrary to the terms of the contract and is unreasonable and arbitrary, Court is not powerless to interfere in such matters under writ jurisdiction rather the position of law is that Court will scrupulously guard the rights of the parties where Art. 14 is violated or principles of natural justice are not complied with. He does not dispute this proposition that where disputed questions of fact are involved, the proper remedy available to the petitioner is to file a civil suit but when the facts are not disputed and the action of the State Government is arbitrary or unreasonable and has statutory overtones, then the proper remedy is by way of writ petition rather than by a civil suit. In this respect he first drew our attention to a Division Bench decision of the Orissa High Court rendered in M/s. Doki China Gurul Balu & Sons vs. State of Orissa (1), wherein the learned Judges observed that- "it cannot be said as an absolute rule of law, that in no circumstances, a writ application for issue of mandamus can lie if the right involved flows from a contract. That would be circumscribing the extra-ordinary jurisdiction of writ Court which was intended by the 'founding Fathers to function as the sentinel always on the alert. Where without any authority of law, by an executive fiat, rights are trampled arbitrarily, writ Court cannot and should not shut its door to the aggrieved party. Where valuable civil rights are taken away without any authority of law or by violation of principles of natural justice, High Court cannot fold its hands and look on as an helpless on looker asking the party to approach the civil court. " Of course the learned Judges have observed that where there are disputed questions of fact and evidence has to be led by the parties and it would be necessary to scan and assess the Same, suit is a proper remedy. But when such is not the case then of course the Court cannot fold its hands and look on as a helpless on looker to mitigate the arbitrariness of the State action. Our attention was next drawn to a single Bench decision of the Gujarat High Court rendered in Vadi and Patwa Vs. Union of India It was observed by the learned single Judge that the State has be just, fair and reasonable from the stage of entering into the contract to its conclusion. Even in respect of contractual rights and obligation of the parties the State is not relieved of its obligation to comply with the provisions of Art. 14 i. e. to act justly, fairly and reasonably. The State action should be governed by reason and should be free from arbitrariness. It has to be just and reasonable. Not only at the time of the stage of entering into the contract but also during its execution of the contract or even at the conclusion stage of the contract i. e. at all stages the State is bound by Art. 14. The decision is based on the decision of their Lordships of the Supreme Court rendered in Shri Lekha Vidhyarti Vs. State of U. P. (3) wherein their Lordships observed that in respect of the contractual rights and obligations of the parties, the State is not relieved of its obligation to comply with the provi-sions of Art. 14 of the Constitution of India i. e. to act justly, fairly and reasonably. Their Lordships observed that whenever a challenge is made on the ground of violation of Art. 14 alleging that the impugned act is arbitray, unfair or unreasonable the fact that the dispute falls within the dimension of contractual obligation would not relieve the State of its obligation to comply with the basic requirement of Art. 14. Their Lordships have observed that in addition to contractual obligation it cannot divest the claim of the petitioner guarantees under Art. 14 of non-arbitrariness at the hands of the State in any of its actions. Reliance was also placed by MR. Kothrai on the decision of their Lordships of the Supreme Court rendered in M/s Dwarkadas Marfatia and Sons Vs. Board of Trustees of Port of Bombay The Bombay Rents Hotel and Lodging House Rates Control Act exempts the State from its purview. When such an exemption is granted to the local bodies and public authorities which are State their Lordships observed that the basis of the exemption is that, such bodies will not be actuated by any profit making motive so as to unduly enhance rents for eject the tenants from their respective properties say as private landlords are or are likely to be. They are not acting for their own purpose as private landlords but must act for public purposes and in public interest being a public body even in respect of its dealings that its tenants where the relations are governed by a contract of tenancy it is expected of them to act in public interest and an infraction of that duty is amenable to examination either in a civil suit or in a writ jurisdiction. Their Lordships further observed in para 25 that where there is arbitrariness in State action, Art. 14 springs into action and judicial review directs such an action down. Every action of the Authority must be subject to rule of law and must be informed by reasons. Thus whatever be the activity of the public authority it should meet the test of Art. 14. Reliance was further placed on the decision of the Supreme Court rendered in Mahaveer Auto Store Vs. Indian Oil Corporation That was a case where a firm was carrying on business of sale and distribution of lubricants for the last 18 years. Supply to them was stopped by the Indian Oil Corporation without notice or intimation. It was held that the action is totally arbitrary and, therefore, violative of Art. 14 of the Constitution and, therefore a writ can be entertained. 9. In this respect MR. K. N. Joshi has stoutly contended that when State has entered into non-statutory contract and the rights of the parties are therefore governed by the terms of the contract and not by constitutional provisions then the proper remedy is by way of suit. In this respect he placed reliance on a decision of their Lordships of the Supreme Court rendered in Bareilly Development Authority Vs. Ajaipal Singh If the brochure itself indicated that the cost mentioned therein was only an estimated cost subject to change enhancement or amendment at the time of allotment and if the price has been increased on account of the actual cost factor, then such an action cannot be labelled as arbitrary or discriminatory and no writ petition can be entertained about it. Hence in this case the Hon'ble Judges came to the conclusion that the case is totally governed by the terms of the contract. There was no arbitrariness or discrimination. In para 19 of the judgment their Lordships have observed that in the case before them the contract between the respondents and the Bareilly Development does not contain any statutory terms and/or conditions. When the equitable possession is sought the High Court was wrong in placing reliance on the decision in Ramanna Dayaram Shetty's case