Electricity Laws – Electricity Act, 2003 – ss.63 and 62 – Contract – Non-statutory contract – Power Purchase Agreement (PPA) entered into by the appellant and the first respondent, if a statutory contract – Held: The PPA was not made either in purported compliance with the statutory dictate, either in the form of parent enactment or a subordinate legislation – The terms and conditions of the PPA were not transplanted into the PPA from any statutory provision – That tariff was arrived at in accordance with the transparent process of bidding, which was in tune with the guidelines u/s.63, may not be sufficient to make the PPA a Statutory Contract – A contract containing prescribed terms and conditions being mandatory under the Statute, results in the contract becoming a Statutory Contract – If this test is applied, one fails to see how reference to the bidding guidelines, under which the bids were made and finally the PPA was entered into, can be treated as tantamounting to saying that the PPA contains prescribed statutory terms and conditions as an indispensable part of a Statute – The expression ‘terms and conditions’, which are statutory in nature, must be understood as those statutory terms and conditions, which provide for rights and obligations of the contracting parties – Such reference is conspicuous by its absence in the PPA – It may not be appropriate to describe the PPA as a Statutory Contract.
Contract – Administrative action – Judicial Review – Scope of judicial review of action by the State in a matter arising from a non-statutory contract – Held: The mere fact that relief is sought under a contract which is not statutory, will not entitle the respondent-State in a case by itself to ward-off scrutiny of its action or inaction under the contract if the complaining party is able to establish that the action/inaction is per se arbitrary – Even if it is a non-statutory contract, there is no absolute bar in dealing with a cause of action based on acts or omission by the State or its instrumentalities even during the course of the working of a contract. Administrative Law – Arbitrariness in State action – When an act is to be treated as arbitrary – Held: The court must carefully attend to the facts and the circumstances of the case – It should find out whether the impugned decision is based on any principle – If not, it may unerringly point to arbitrariness – If there is absence of good faith and the action is actuated with an oblique motive, it could be characterised as being arbitrary – A total non-application of mind without due regard to the rights of the parties and public interest may be a clear indicator of arbitrary action – A wholly unreasonable decision which is little different from a perverse decision under the Wednesbury doctrine would qualify as an arbitrary decision under Art.14 – Ordinarily visiting a party with the consequences of its breach under a contract may not be an arbitrary decision – Constitution of India – Art. 14. Dismissing the appeals, the Court
HELD:1. The writ jurisdiction is a public law remedy. A matter, which lies entirely within a private realm of affairs of public body, may not lend itself for being dealt with under the writ jurisdiction of the Court. [Para 54][50-G]
2. The principle laid down in Bareilly Development Authority that in the case of a non-statutory contract the rights are governed only by the terms of the contract and the decisions, which are purported to be followed, including Radhakrishna Agarwal, may not continue to hold good, in the light of what has been laid down in ABL and as followed in the recent judgment in Sudhir Kumar Singh. [Para 54][50-G; 51-A]
3. The mere fact that relief is sought under a contract which is not statutory, will not entitle the respondent-State in a case by itself to ward-off scrutiny of its action or inaction under the contract, if the complaining party is able to establish that the action/ inaction is, per se, arbitrary. [Para 54][51-B] POWER SOUTHEAST SOLAR INDIA PVT. LTD.
4. An action will lie, undoubtedly, when the State purports to award any largesse and, undoubtedly, this relates to the stage prior to the contract being entered into. This scrutiny, no doubt, would be undertaken within the nature of the judicial review, which has been declared in the decision in Tata Cellular vs. Union of India. [Para 54][51-C]
5. After the contract is entered into, there can be a variety of circumstances, which may provide a cause of action to a party to the contract with the State, to seek relief by filing a Writ Petition. [Para 54][51-D]
6. It may include the relief of seeking payment of amounts due to the aggrieved party from the State. The State can, indeed, be called upon to honour its obligations of making payment, unless it be that there is a serious and genuine dispute raised relating to the liability of the State to make the payment. Such dispute, ordinarily, would include the contention that the aggrieved party has not fulfilled its obligations and the Court finds that such a contention by the State is not a mere ruse or a pretence. [Para 54][51-E-F]
7. The existence of an alternate remedy, is, undoubtedly, a matter to be borne in mind in declining relief in a Writ Petition in a contractual matter. Again, the question as to whether the Writ Petitioner must be told off the gates, would depend upon the nature of the claim and relief sought by the petitioner, the questions, which would have to be decided, and, most importantly, whether there are disputed questions of fact, resolution of which is necessary, as an indispensable prelude to the grant of the relief sought. While there is no prohibition, in the Writ Court even deciding disputed questions of fact, particularly when the dispute surrounds demystifying of documents only, the Court may relegate the party to the remedy by way of a civil suit. [Para 54][51-G; 52A-B]
8. The existence of a provision for arbitration, which is a forum intended to quicken the pace of dispute resolution, is viewed as a near bar to the entertainment of a Writ Petition. [Para 54][52-C]
9. The need to deal with disputed questions of fact, cannot be made a smokescreen to guillotine a genuine claim raised in a Writ Petition, when actually the resolution of a disputed question of fact is unnecessary to grant relief to a writ applicant. [Para 54][52-D]
10. The reach of Article 14 enables a Writ Court to deal with arbitrary State action even after a contract is entered into by the State. A wide variety of circumstances can generate causes of action for invoking Article 14. The Court’s approach in dealing with the same, would be guided by, undoubtedly, the overwhelming need to obviate arbitrary State action, in cases where the Writ remedy provides an effective and fair means of preventing miscarriage of justice arising from palpably unreasonable action by the State. [Para 54][52-E-F]
11. Termination of contract can again arise in a wide variety of situations. If for instance, a contract is terminated, by a person, who is demonstrated, without any need for any argument, to be the person, who is completely unauthorised to cancel the contract, there may not be any necessity to drive the party to the unnecessary ordeal of a prolix and avoidable round of litigation. The intervention by the High Court, in such a case, where there is no dispute to be resolved, would also be conducive in public interest, apart from ensuring the Fundamental Right of the petitioner under Article 14 of the Constitution of India. When it comes to a challenge to the termination of a contract by the State, which is a non-statutory body, which is acting in purported exercise of the powers/rights under such a contract, it would be over simplifying a complex issue to lay down any inflexible Rule in favour of the Court turning away the petitioner to alternate Fora. Ordinarily, the cases of termination of contract by the State, acting within its contractual domain, may not lend itself for appropriate redress by the Writ Court. This is, undoubtedly, so if the Court is duty-bound to arrive at findings, which involve untying knots, which are presented by disputed questions of facts. Undoubtedly, in view of ABL Limited, if resolving the dispute, in a case of repudiation of a contract, involves only appreciating the true scope of documentary material in the light of pleadings, the Court may still grant relief to an applicant. The Court must enter a caveat. POWER SOUTHEAST SOLAR INDIA PVT. LTD.
The Courts are today reeling under the weight of a docket explosion, which is truly alarming. If a case involves a large body of documents and the Court is called upon to enter upon findings of facts and involves merely the construction of the document, it may not be an unsound discretion to relegate the party to the alternate remedy. This is not to deprive the Court of its constitutional power as laid down in ABL. It all depends upon the facts of each case as to whether, having regard to the scope of the dispute to be resolved, whether the Court will still entertain the petition. [Para 54][52-G; 53-A-F]
12. In a case the State is a party to the contract and a breach of a contract is alleged against the State, a civil action in the appropriate Forum is, undoubtedly, maintainable. But this is not the end of the matter. Having regard to the position of the State and its duty to act fairly and to eschew arbitrariness in all its actions, resort to the constitutional remedy on the cause of action, that the action is arbitrary, is permissible. However, every case involving breach of contract by the State, cannot be dressed up and disguised as a case of arbitrary State action. While the concept of an arbitrary action or inaction cannot be cribbed or confined to any immutable mantra, and must be laid bare, with reference to the facts of each case, it cannot be a mere allegation of breach of contract that would suffice. What must be involved in the case must be action/inaction, which must be palpably unreasonable or absolutely irrational and bereft of any principle. An action, which is completely malafide, can hardly be described as a fair action and may, depending on the facts, amount to arbitrary action. The question must be posed and answered by the Court and discretion is available to the Court to grant relief in appropriate cases. [Para 54][53-G-H; 54-A-C]
13. A lodestar, which may illumine the path of the Court, would be the dimension of public interest subserved by the Court interfering in the matter, rather than relegating the matter to the alternate Forum. [Para 54][54-D]
14. Another relevant criteria is, if the Court has entertained the matter, then, while it is not tabooed that the Court should not relegate the party at a later stage, ordinarily, it would be a germane consideration, which may persuade the Court to complete what it had started, provided it is otherwise a sound exercise of jurisdiction to decide the matter on merits in the Writ Petition itself. [Para 54][54-E-F]
15. Violation of natural justice has been recognised as a ground signifying the presence of a public law element and can found a cause of action premised on breach of Article 14. [Para 54][54-F-G]
ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd. (2004) 3 SCC 553; India Thermal Power Ltd. v. State of M.P. and others (2000) 3 SCC
379 : [2000] 1 SCR 925; Ramana Dayaram Shetty v. International Airport Authority of India (1979) 3 SCC
489 : [1979] 3 SCR 1014; Shrilekha Vidyarthi (Kumari) v. State of U.P. (1991) 1 SCC 212 : [1990] 1 Suppl. SCR 625; East Coast Railway and Another v. Mahadev Appa Roa and Others (2010) 7 SCC 678 : [2010]
7 SCR 908; State of U.P. v. Sudhir Kumar Singh and Others 2020 SCC Online 847 and Tata Cellular v. Union of India (1994) 6 SCC 651 : [1994] 2 Suppl. SCR 122 – relied on.
Radhakrishna Agrawal and Others v. State of Bihar and Others (1977) 3 SCC 457 : [1977] 3 SCR 249; Bareilly Development Authority and Another v. Ajai Pal Singh and Others (1989) 2 SCC 116 : [1989] 1 SCR 743; Kerala State Electricity Board and Another v. Kurien E. Kalathil and Others (2000) 6 SCC 293 : [2000] 1 Suppl. SCR 581; Jaypee Kensington Boulevard Apartments Welfare Association and others v. NBCC (India) Ltd. and Others (2022) 1 SCC 401; Erusian Equipment and Chemicals Limited v. State of West Bengal (1975) 1 SCC
70 : [1975] 2 SCR 674; Banchhanidhi Rath v. The State of Orissa and Ors. (1972) 4 SCC 781; Har Shankar and Ors. v. The Dy. Excise and Taxation Commr. and Ors. (1975) 1 SCC 737 : [1975] 3 SCR 254; Mahabir Auto Stores and Others v. Indian Oil Corporation and Others (1990) 3 SCC 752 : [1990] 1 SCR 818; State of U.P and others v. Bridge and Roof Company (India) Ltd. (1996) 6 SCC 22 : [1996] 4 Suppl. SCR
POWER SOUTHEAST SOLAR INDIA PVT. LTD.
762; Verigamto Naveen v. Govt. of A.P. and others (2001) 8 SCC 344 : [2001] 3 Suppl. SCR 112; Binny Ltd. and Another v. V. Sadasivan and Others (2005) 6 SCC 657 : [2005] 2 Suppl. SCR 421; G. Bassi Reddy v. International Crops Research Institute and Another (2003) 4 SCC 225 : [2003] 1 SCR 1174; State of Kerala and Others v. K. Prasad and Another (2007) 7 SCC
140 : [2007] 8 SCR 115; Joshi Technologies
International Inc. v. Union of India and Others (2015)
7 SCC 728 : [2015] 6 SCR 1042; State of Kerala v. M. K. Jose (2015) 9 SCC 433 : [2015] 9 SCR 17; State of U.P. and Others v. Bridge & Roof Co. (1996) 6 SCC 22 : [1996] 4 Suppl. SCR 762; All India Power Engineer Federation and Others v. Sasan Power Limited and Others (2017) 1 SCC 487 : [2016] 9 SCR 901; Raunaq International Ltd. v. I.V.R. Construction Ltd. and Others, (1999) 1 SCC 492 : [1998] 3 Suppl. SCR 421; Michigan Rubber (India) Limited v. State of Karnataka and Others (2012) 8 SCC 216 : [2012] 8 SCR 128; Mohinder Singh Gill and another v. Chief Election Commissioner, New Delhi and Others (1978) 1 SCC 405 : [1978] 2 SCR
272 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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