Mora Tollways Limited vs The State Of Bihar & Ors

IN THE HIGH COURT OF JUDICATURE AT PATNA Letters Patent Appeal No.2158 of 2015 IN Civil Writ Jurisdiction Case No. 7259 of 2015 =========================================================== 1. Mora Tollways Limited, a company incorporated under the provisions of the Companies Act, 1956 and having its registered office at 302, Shree Amba Shanti Chambers, Opposite Hotel Leela, Andheri Kurla Road, Andhri (East), Mumbai-400059, a Special Purpose Vehicle created by Atlanta Limited, 101, Shree Amba Shanti Chambers, Opposite Hotel Leela, Andheri Kurla Road, Andhri (East), Mumbai-400059 through its authorized representative and Project In Charge, Mr. Pillai Ponipass Packiriswami, Son of Late C.K. Packiriswami, permanent resident of flat no. 306, Jalalpur City, Gola Road, Police Station- Rupaspur, District-Patna.

.... .... Appellant Versus 1. The State of Bihar through Principal Secretary, Road Construction Department, Government of Bihar, Patna. 2. The Principal Secretary, Road Construction Department, Government of Bihar, Patna. 3. Bihar State Road Development Corporation Limited through its Managing Director, office at RCD Central Mechanical Workshop Campus, Sheikhpura, Patna. 4. The Managing Director, Bihar State Development Corporation Limited, office at RCD Central Mechanical Workshop Campus, Sheikhpura, Patna. 5. The Chairman, Bihar State Development Corporation Limited, office at RCD Central Mechanical Workshop Campus, Sheikhpura, Patna. 6. The Directors, Bihar State Development Corporation Limited, office at RCD Central Mechanical Workshop Campus, Sheikhpura, Patna. 7. The Chief General Manager, Bihar State Development Corporation Limited, office at RCD Central Mechanical Workshop Campus, Sheikhpura, Patna. 8. The General Manager, Bihar State Development Corporation Limited, office at RCD Central Mechanical Workshop Campus, Sheikhpura, Patna. 9. The Deputy General Manager, Bihar State Development Corporation Limited, office at RCD Central Mechanical Workshop Campus, Sheikhpura, Patna.

.... .... Respondents WITH

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Letters Patent Appeal No. 2084 of 2015 IN Civil Writ Jurisdiction Case No. 7259 of 2015 =========================================================== 1. Bihar State Road Development Corporation Limited through its Managing Director, office at RCD Central Mechanical Workshop Campus, Sheikhpura, Patna. 2. The Managing Director, Bihar State Road Development Corporation Limited, office at RCD Central Mechanical Workshop Campus, Sheikhpura, Patna. 3. The Chairman, Bihar State Road Development Corporation Limited, office at RCD Central Mechanical Workshop Campus, Sheikhpura, Patna. 4. The Director, Bihar State Road Development Corporation Limited, office at RCD Central Mechanical Workshop Campus, Sheikhpura, Patna. 5. The Chief General Manager, Bihar State Road Development Corporation Limited, office at RCD Central Mechanical Workshop Campus, Sheikhpura, Patna. 6. The General Manager, Bihar State Road Development Corporation Limited, office at RCD Central Mechanical Workshop Campus, Sheikhpura, Patna. 7. The Deputy General Manager, Bihar State Road Development Corporation Limited, office at RCD Central Mechanical Workshop Campus, Sheikhpura, Patna.

.... .... Appellants Versus 1. Mora Tollways Limited, a company incorporated under the provisions of the Companies Act, 1956 and having its registered office at 302, Shree Amba Shanti Chambers, Opposite Hotel Leela, Andheri Kurla Road, Andhri (East), Mumbai-400059, a Special Purpose Vehicle created by Atlanta Limited, 101, Shree Amba Shanti Chambers, Opposite Hotel Leela, Andheri Kurla Road, Andhri (East), Mumbai-400059 through its authorized representative and Project In Charge, Mr. Pillai Ponipass Packiriswami, Son of Late C.K. Packiriswami, permanent resident of flat No.38, Triveni Chaul, Police Station Santa Cruz and presently residing at flat no. 306, Jalalpur City, Gola Road, Police Station- Rupaspur, District-Patna. 2. The State of Bihar through Principal Secretary, Road Construction Department, Government of Bihar, Patna. 3. The Principal Secretary, Road Construction Department, Government of Bihar, Patna.

.... .... Respondents WITH

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Letters Patent Appeal No. 2131 of 2015 IN Civil Writ Jurisdiction Case No. 7259 of 2015 =========================================================== 1. The State of Bihar through the Principal Secretary, Road Construction Department, Govt. of Bihar, Patna 2. The Principal Secretary, Road Construction Department, Govt. of Bihar, Patna .... .... Appellants Versus 1. Mora Tollways Ltd. a Company incorporated under the Provision of the Companies Act, 1956 and having its registered office at 302, Shree Amba Shanti Chambers Opposite Hotel Leela, Andheri Kurla Road, Andhari ( East ), Mumbai - 400059, a Special Purpose Vehicle Created by Atlanta Limited, 101 Shree Amba Shanti Chambers, Opposite Hotel Leela, Andhari Kurla Road, Andhari ( East Mumbai - 400059 through its Authorized representative and Project In Charge, Mr. Pillai Ponipass Packiriswami, Son of Late C.K. Packiriswami, Permanent Resident of Flat No. 38, Triveni Chaul, Police Station Santa Cruz and Presently residing at Flat No. 306 Jalalpur City, Gola Road, Police Station Rupaspur, District - Patna 2. Bihar State Road Development Corporation, Ltd., through its Managing Director, office at RCD, Central Mechanical Workshop, Campus, Sheikhpura, Patna 3. The Managing Director, Bihar State Road Development Corporation, Ltd., office at RCD, Central Mechanical Workshop, Campus, Sheikhpura, Patna 4. The Chairman, Bihar State Road Development Corporation, Ltd., office at RCD, Central Mechanical Workshop, Campus, Sheikhpura, Patna 5. The Director, Bihar State Road Development Corporation, Ltd., office at RCD, Central Mechanical Workshop, Campus, Sheikhpura, Patna 6. The Chief General Manager, Bihar State Road Development Corporation, Ltd., office at RCD, Central Mechanical Workshop, Campus, Sheikhpura, Patna 7. The General Manager, Bihar State Road Development Corporation, Ltd., office at RCD, Central Mechanical Workshop, Campus, Sheikhpura, Patna 8. The Deputy General Manager, Bihar State Road Development Corporation, Ltd., office at RCD, Central Mechanical Workshop, Campus, Sheikhpura, Patna .... .... Respondents =========================================================== Appearance : (In LPA No. 2158 of 2015) For the Appellant : Mr. Y. V. Giri, Sr. Adv. Mr. Sanjeev Kumar, Advocate Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Mr. Dayanand Singh, Advocate For the Respondents : Mr. Harish Kumar, GP 32 For the BSRDC : Mr. Lalit Kishore, PAAG Mr. Vikas Kumar, AC to AG

(In LPA No. 2084 of 2015) For the Appellants : Mr. Lalit Kishore, PAAG Mr. Vikas Kumar, AC to AG For the Respondents : Mr. Y. V. Giri, Sr. Adv. Mr. Sanjeev Kumar, Advocate

(In LPA No. 2131 of 2015) For the Appellants : Mr. Harish Kumar, Advocate Mr. Binod Kumar Sinha, Advocate For the Respondents : Mr. Lalit Kishore, PAAG Mr. Vikas Kumar, AC to AG For the BSRDC : Mr. Lalit Kishore, Sr. Adv. =========================================================== CORAM: HONOURABLE THE ACTING CHIEF JUSTICE AND HONOURABLE MR. JUSTICE CHAKRADHARI SHARAN SINGH

JUDGMENT AND ORDER CAV

(Per: HONOURABLE MR. JUSTICE CHAKRADHARI SHARAN SINGH) Date: 12-05-2016 These appeals arise out of common judgment and

order, dated 22.09.2015, passed by the learned single Judge

of this Court on a writ application filed under Article 226 of the

Constitution of India by Mora Tollways Limited, a company

incorporated under the provisions of the Companies Act, 1956

(hereinafter referred to as the „Companies‟). The said

Company is the appellant of L.P.A. No. 2158 of 2015. The

Bihar State Road Development Corporation Limited and others

(hereinafter referred to as the „Corporation‟) and its

functionaries, who were impleaded as respondent Nos. 3 to 9

in the writ proceedings before learned Single Judge, have also Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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questioned the legality of the same judgment and order passed

by the learned single Judge by filing LPA No. 2084 of 2015.

The State of Bihar has filed another appeal being L.P. A. No.

2131 of 2015, who were respondent Nos. 1 and 2 in the writ

proceedings, being aggrieved by the same judgment and order

of the learned single Judge.

2. This is the reason why all the three appeals have

been heard together, with the consent of the parties, and are

being disposed of by the present common judgment and order.

3. Before I advert to the extensive arguments

advanced on behalf of the Company, the Corporation and the

State of Bihar, it would be apt to take note of the conclusion

arrived at by learned single Judge in the order under appeal,

and legal reasoning assigned for such conclusion since

sustainability of the said order is in question, in the present

batch of appeals. For the said purpose, I have considered it

appropriate to take brief note of the admitted facts mentioned

by learned single Judge, which are foundation for arriving at

the said conclusion.

4. There was a notice/request for qualification,

dated 16.07.2010, by the Corporation for the purpose of

construction, operation and maintenance of National Highway

No.30 in the State of Bihar, including the section from km

0.000 to km 116.760 on Mohania-Ara section of National Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Highway No.30, by Four Laning on Design, Build, Finance,

Operate and Transfer ("DBFOT") basis. Atlanta Ltd., a

Company incorporating under the Companies Act, 1956 had

submitted bit in pursuance thereof and was short listed.

Cosequent upon its short listing, the Company was created as

special purpose vehicle by parent Company, and registered

under the provisions of the Companies Act, 1956 by its parent

company, viz, Atlanta Ltd. Consequent upon the short listing

of the parent Company, and creation of Mora Tollways

Company Limited, as special purpose vehicle for the said

purpose, a Concession Agreement was entered into between

the Corporation and the company, on 10.09.2011.

5. It is mystery why the Concession Agreement has

been described as between "the Governor of State of Bihar,

represented by its Managing Director, Bihar State Road

Development Corporation Limited through its Managing

Director, Central Mechanical Workshop Campus, Sheikhpura,

Patna", when the agreement appears to be between the

Corporation and the Company. I have not gone into

consequence of such recital in the agreement, in view of the

nature of dispute involved, as is being discussed hereinabove.

6. The Company, before entering into the

agreement had made demands for grant of mining lease for

stone quarries as according to it, the bid had been submitted Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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keeping in mind the facilities that were available of mining of

aggregates from stones quarries in possession of the

Government of Bihar. The bid period was extended from time

to time on four occasions. Finally, the Company entered into a

Concession Agreement on 10.09.2011. It is the case of the

Company that the bids submitted by it was conditional, subject

to making facilities for mining of aggregates from nearby

quarries in possession of the Government of Bihar.

Alternatively, according to them, procuring aggregates from

the neighbouring states would have incurred additional

expenditure and, therefore, necessitated reimbursement of

extra lead of aggregates, entry tax, toll tax etc, which would

need to be reimbursed by the Corporation.

7. The fact remains that there was no such

stipulation in the Concession Agreement entered into on

10.09.2011

. This is also not in dispute that at the time of

entering into agreement, mining of stone quarries in the State

of Bihar was impermissible.

8. The Corporation, through its Managing Director,

made request to the Collector, Rohtas to take necessary action

for relaxation of the rules in special cases in terms of Mines &

Mineral (Development & Regulation) Act, 1957. Since no

decision, to allow mining in the State of Bihar was taken by the

State Government of Bihar, the matter was referred to an Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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independent engineers engaged by the Corporation. The

independent engineers, after obtaining legal opinion

recommended either for allotment of mines or for the

reimbursement of the additional costs of procuring aggregates

from neighbouring State, estimated at Rs. 410.13/- crores, to

the Company.

9. The Corporation, however, rejected the claim of

the Company for reimbursement of the additional cost to be

incurred on procurement of aggregates from neighbouring

States through letter, dated 16.06.2014, there being no

provisions for extra lead of aggregates in the Concession

Agreement. This is evident from the minutes of the meeting

held on 05.08.2014. This made the Company to take recourse

to the provisions of Article 37.2 of the Concession Agreement

with the issuance of a notice, dated 09.08.2014, for curing the

defaults by the respondent authority within a period of 90 days

as contemplated thereunder.

10. Since Article 37.2 of the Concession

Agreement is at the core of the dispute between the parties,

the same is being extracted hereinbelow as the said Article will

be required to be discussed at subsequent stages also:-

"37.2. Termination for Authority Default 37.2.1 In the event that any of the defaults specified below shall have occurred, and the Authority fails to cure Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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such default within a Cure Period of 90 (ninety) days or such longer period as has been expressly provided in this Agreement, the Authority shall be deemed to be in default of this Agreement (the "Authority Default") unless the default has occurred as a result of any breach of this Agreement by the Concessionaire or due to Force Majeure.. the defaults referred to herein shall include:

(a) The Authority commits a material default in complying with any of the provisions of this Agreement and such default has a Material Adverse Effect on the Concessionaire;

(b) the Authority has failed to make any payment to the Concessionaire within the period specified in this Agreement; (c) the Authority repudiates this Agreement or otherwise takes any action

that amounts to or manifests an irrevocable intention not to be bound by this Agreement; or

(d) the State commits a material default in complying with the provisions of the State Support Agreement if such default has a Material Adverse Effect on the Concessionaire and the breach continues for a period of 90 (ninety) days from the date of notice given in this behalf by the Concessionaire to the Authority."

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11. It can be noted here that Article 37 of the

Concession Agreement under which Article 37.2 falls deals with

the termination of the agreement. Article 37.1 deals with

termination for Concessionaire (in the present case for

Corporation) default and Article 37.2 deals with termination for

authority (in the present case for Corporation) default. Article

37.3.2 provides the consequence of termination on account of

an authority default, and stipulates that the authority shall pay

to the Concessionaire, by way of termination payment, an

amount equal to:

(a.) Debt Due; and (b.) 150% of the Adjusted Equity.

12. Adjusted equity as defined in Article 48.1 of the

Concession Agreement means "equity funded in Indian rupees

and adjusted on the first day of current month ( the

"Reference Date"), in the manner set forth, to reflect the

change in its value on account of depreciation and variations in

WPI, and for any Reference Date as mentioned therein.

13. A team of independent engineers was

appointed by the Corporation which, after examining the issue

of additional cost of procurement of aggregates held in report,

dated 09.09.2014 that the Corporation may take a decision for

reimbursement of cost of excess lead of aggregates in public

interest and for avoiding delay in the completion of the project, Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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as according to them, the reimbursement would involve less

financial implication to the Government exchequer as

compared with the other two options, namely, the Termination

Cost payable to the petitioner and Re-tendering cost. After

having received the notice under Article 37.2 of the Concession

Agreement, a meeting appears to have taken place, on

06.11.2014, participated by the officials of the Corporation

including Chief General Manager, Chairman-cum-Managing

Director of the Company and Team Leader of the independent

Engineers (M/s ICT). From serial No. (b) of the minutes of the

said meeting, it appears that the representative of the

Company took a stand that notice under Article 37.2 of the

Concession Agreement was not a termination notice, rather, it

was notice to the authority to cure all the issues having

material adverse effect on the project within 90 days. The

Corporation took a plea that the issues raised in the said notice

under Article 37.2 shall be cured.

14. As the issue relating to reimbursement of

additional cost of aggregates could not be resolved, the

Company, considering it to be failure on the part of the

respondents to cure the defaults, issued a notice of intent to

terminate the Concession Agreement in terms of Article 37.2.2

of the agreement. The Corporation, thereafter, vide its letter,

dated 07.02.2015, asked the Company to submit the details of Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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all the materials, stores, plant machinery and equipments

available at site for the purpose of Article 37.4(b) of the

Concession Agreement. Article 37.4 of the Agreement

provides for rights and obligations of the Corporation upon

termination of agreement for any reason whatsoever which

includes the authority to "take possession and controls of all

materials, stores, implements, construction plants and

equipments or about the site" Article 37.4 (a) of the

Concession Agreement describes upon termination or any

reason whatsoever, the Authority shall "be deemed to have

taken possession and control of the project Highway

forthwith".

15. The Company finally invoked the provisions of

Article 37.2.2 by issuing a termination notice by letter, dated

20.02.2015, and thus, terminated the Concession agreement,

dated 10.09.2011. The Company demanded termination

payment of an amount of Rs. 610,52,72,733/- from the

Corporation in terms of Article 37.3.2 of the Concession

Agreement.

16. Before I proceed further, with reference to the

facts which have been taken note of, by learned single Judge,

in the order under appeal, I consider it appropriate to refer to

a communication, dated 16.02.2015, which was issued within

15 days from the date of issuance of notice under Article Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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37.2.2 of the Concession Agreement, in response to the letter,

dated 04.02.2015, issued by the Company of terminating the

concession agreement by invoking Article 37.2.2. There is a

clear provision in Article 37.2.2 for granting 15 days time to

inform the authority (in the present case the Corporation) to

make representation before issuance of final termination

notice, and only after expiry of 15 days, whether or not the

Company is in receipt of such representation, the Company

could issue termination notice. The said representation of the

Corporation is there on record by way of Annexure-16 of the

writ application. I will be referring to the contents of the said

letter, dated 16.02.2016, at subsequent stage, while dealing

with the question as to whether any dispute in fact

exists/existed between the Corporation and the Company or

not OR every fact having been admitted by the Corporation,

this Court exercising writ jurisdiction under Article 226 of the

Constitution of India can/could issue a direction for payment of

money against compensation on Corporation‟s default leading

to termination of Concession Agreement.

17. Thereafter, the Corporation recommended the

case of the Company to Intra Structure Development Authority

for obtaining approval of the Committee presided over by the

Secretary for extra demand of carriage of stone aggregates to

the Company. It was mentioned in the said letter that though Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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the Company had terminated the Concession Agreement, the

said termination was not acceptable to the Corporation and the

Company had been requested to resume the work.

18. The Company thereafter, approached this Court

by filing writ application on 29.04.2015 (registered on

07.05.2015). Thereafter, the Corporation issued a notice on

16.05.2015, invoking Article 37.1.2 of the Concession

Agreement which enables the Corporation to terminate the

agreement upon occurrence of a Concessionaire (Company)

default. The said letter was a notice of intent to terminate the

Concession Agreement giving the Company. In terms of the

said Article of the agreement, the agreement could be

terminated after 15 days. I have noticed the similar provision,

which is there for termination of the agreement by the

concessionaire on the authorities default. Finally, through

letter, dated 10.06.2015, after lapse of 15 days, the

Corporation issued a letter terminating the Concession

Agreement.

19. The two letters, dated 16.5.2015, and

10.06.2015, were put to challenge in the writ proceedings by

seeking amendment through I. A. Nos. 4607 of 2015 and 4702

of 2015 which were allowed and treated to be the part of the

writ petition, by learned single Judge. A preliminary objection

was taken on behalf of the Corporation and the State of Bihar Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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over the maintainability of the writ application on the ground of

availability of alternative remedy of arbitration as

contemplated under Article 44 of the Concession Agreement.

Relevant potion of Article 44 is being extracted hereinbelow

since the same will be required to be referred at subsequent

stages and are apposite for the present also:-

"44.1 Dispute resolution 44.1.1. Any dispute, difference or controversy whatever nature howsoever arising under or out of or in relation to this Agreement (including its interpretation) between the parties, and so notified in writing by either party to the other party (the "Dispute") shall, in the first instance, be attempted to be resolve amicable in accordance with the conciliation procedure set forth in Article 44.2.

44.1.2. The parties agree to use their best efforts for resolving all Disputes arising under or in respect of this Agreement promptly, equitably and in good faith, and further agree to provide each other with reasonable access during normal business hours to all non-privileged records, information and data pertaining to any Dispute.

44.2 Conciliation In the event of any Dispute between the Parties, either party may call upon the Independent Engineer to mediate and assist the Parties in arriving at an amicable Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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settlement thereof. Failing mediation by the Independent Engineer, or without the intervention of the Independent Engineer, either Party may require such Dispute to be referred to the Chairman of the Authority and the Chairman of the Board of Directors of the Concessionaire for amicable settlement, and upon such reference, the said persons shall meet no later than 7 (seven) days from the date of reference to discuss and attempt to amicably resolve the Dispute. If such meeting does not take place within the 7 (seven) day period or the Dispute is not amicably settled within 15 (fifteen) days of the meeting or the Dispute is not resolved as evidenced by the signing of written terms of settlement within 30 (thirty) days of the notice in writing referred to in Article 44.1.1 or such longer period as may be mutually agreed by the parties, either Party may refer the Dispute to arbitration in accordance with the provisions of Article 44.3.

44.3 Arbitration Any dispute which is not resolved amicably by conciliation, as provided in Article 44.2, shall be finally decided by reference to Bihar Arbitral Tribunal in accordance with Bihar Public Works Contracts Disputes Arbitration Tribunal Act, 2008, Rules framed thereunder or procedure prescribed by the Bihar Arbitral Tribunal. The award of Bihar Arbitral Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Tribunal shall be final and binding on the parties.

44.4 Adjudication by Regulatory Authority or Commission.

Deleted."

20. The objection was opposed on behalf of the

Company before the writ Court on the ground that foundational

facts were not is dispute. I find from the judgment and order

under appeal that specific stand was taken on behalf of the

Corporation that the Corporation cannot treat the Companies‟

termination notice as illegal and refuse to accept it as this will

amount to sitting in judgment in their own case, they

themselves being a party to the contract. A plea was also

taken on behalf of the Company that action of the Corporation

ignoring termination notice issued by the Company, dated

20.02.2015, and instead issuing termination notice, dated

10.06.2015, much after filing of the writ petition was illegal

and arbitrary.

21. The learned single Judge turned down the

preliminary objection over maintainability of the writ

application and recorded in paragraph 12 as follows:-

"12. On the merits of the present case, this Court finds no error in the action of the petitioner in issuing the Termination Notice, and the Respondent‟s contention that the petitioner ought to have first opted for arbitration cannot be accepted. The Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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request for aggregates or for reimbursement of cost of procurement thereof remained a claim of the petitioner, and it was only after the Termination notice was given to the Respondents that a dispute within the meaning of Article 44 of the Agreement can be said to have arisen.

In other words, the core dispute between the parties relates not to the issue of aggregates, but is concerned with the validity of the Termination Notice, dated 20.02.2015 in accordance with Article 37.2.2 of the Agreement. Moreover, the fact that the petitioner had terminated the Agreement by its Termination Notice cannot be disputed. Once the Agreement had been terminated by the petitioner, the question of the Respondents terminating it over again could not arise as that would amount to termination of an already terminated agreement. The Respondents could only have sought remedy against such termination as may have been available to it. The respondent-Corporation on its part could not negate such notice by unilaterally treating the same as illegal. As held in M/s J. G. Engineer Pvt. Limited Vs. Union of India and Another (AIR 2011 (SC) 2477) as also in para 16 in M/s NCC Limited Vs. The State of Bihar (2013(1) PLJR 952), if the State is a party to the contract, it cannot decide whether there was a breach of contract by the other party. The remedy Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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available to it had to be found within the terms of the agreement itself to which it was a party. If at all, therefore, the respondents might have taken recourse to Article 44 of the agreement for dispute resolution, including arbitration. Failing to do so and instead sitting in judgment to unilaterally dub the petitioner‟s Termination Notice as illegal must be as held to constitute arbitrary action on the part of the respondent-Corporation and it can safely be concluded that the respondent-Corporation has acted de hors the terms of the contract between the parties. It would further appear that the respondents‟ own Termination Notice, dated 10.06.2015 has been issued after filing of the writ petition by the petitioner, possible for the purpose of avoiding the consequences of having to make the Termination payment to the petitioner as a fallout of the Termination Notice issued by the petitioner for authority default.

22. Upon reading of paragraph 12 of the judgment

under appeal, I find that the learned single Judge concluded

that there was no error in the action of the petitioners in

issuing termination notice. Learned single Judge has held that

once the agreement has been terminated by the Company,

question of the respondents terminating it again could not

have arisen and would amount to termination of already Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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terminated agreement. Learned single Judge also concluded

that the Corporation could only have sought remedy against

such termination as it might have available to it but it could

not, on its own part, negate such notice by unilaterally treating

the same as illegal. Such remedy, according to the learned

single Judge, was available within the terms of the agreement

itself to which the Corporation was a party and the Corporation

could have taken recourse to Article 44 of the Agreement of

disputes of resolution, including arbitration.

23. Learned single Judge accordingly, quashed the

termination notice issued by the Corporation, dated

10.06.2015, which according to the learned single Judge was

issued, possibly for the purpose of avoiding the consequence of

termination of agreement for Corporation‟s default by the

Company in terms of Article 37.3.2 (supra), of the Concession

Agreement.

24. Learned Single Judge accordingly, quashed the

Corporation‟s termination notice, dated 10.06.2015, with a

liberty to the Corporation to take recourse to Article 44 of the

Concession Agreement. As regards quantification of

compensation under Article 37.3.1 of the Concession

Agreement, consequent upon termination for the authority

default the learned single Judge held that such exercise would

necessarily require detailed investigation into the facts and Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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adduction of evidence. Learned single Judge also observed

that Article 44 of the Concession Agreement contains adequate

provisions of dispute resolution which the Corporation are at

liberty to advert to, if they were aggrieved by the termination

notice, dated 20.02.2015.

25. The Company in the present appeals is

aggrieved by the decision/conclusion of learned Single Judge

as contained in paragraphs 13 and 14 of the order under

appeal, which reads thus:-

"13. As regards the quantification of consequent Termination Payment liable to be paid by the respondents with regard to the nature and extent of authority default in terms of Article 37.2.2 of the agreement, the same would necessarily require detailed investigation into facts and adduction of evidence, into the details of which this Court need not travel. There is ample provision for Dispute Resolution detailed in Article 44 of the Concession Agreement referred to above, which the respondents are at liberty to advert to if they be aggrieved by the Termination Notice, dated 20.02.2015 issued by the petitioner.

14. In the result, the respondent-

Corporation‟s Termination Notice as contained in letter No. 1382, dated 10.06.2015 (Annexure-23) is hereby set aside with liberty to the respondents to take recourse to Article 44 of the

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Concession Agreement dated 10.09.2011, if so advised. Needless to say, the petitioner shall cooperate in all such proceedings for resolution of the issues in dispute in accordance with law. The writ petition stands disposed of."

26. It is evident from paragraphs 13 and 14 that

learned single Judge has allowed the Corporation to take

recourse to the arbitration Article as contained in Article 44 of

the Concession Agreement, if they had any grievance against

the termination notice, dated 20.02.2015, issued by the

Company. Learned single Judge further held that

quantification of amount consequent upon termination of

Concession Agreement for Authority‟s default required

detailed investigation, and therefore, he refused to go into the

questions of fact which would have essentially required

detailed investigation and adduction of evidence.

27. On the other hand, the Corporation and State

of Bihar have filed the appeals aggrieved by the decision of

the learned single Judge setting aside the termination notice,

dated 10.06.2015, and holding the writ application to be

maintainable, there being arbitration Article in the Concession

Agreement for the resolution of the disputes between the

parties to the agreement.

28. From the memo of Appeal and the arguments Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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advanced by Mr. Y.V. Giri, learned Senior Counsel, appearing

on behalf of the Company, it is easily discernible that it is

Company‟s stand that learned single Judge ought not to have

given liberty to the Corporation to raise plea against

termination notice, dated 20.02.2015, by invoking Article 44

of the Concession Agreement, which provides for conciliation,

arbitration and methods for resolution of dispute since,

according Mr. Giri, learned Senior Counsel, default on the part

of the Corporation, leading to issuance of the letter of intent

of termination of agreement and final termination notice were

an admitted facts. According to him, validity of termination

notice, issued by the Company, dated 20.02.2015, could not

be called in question. It is his further case that as regards the

quantification of consequent termination payment, the same

had already been quantified by the team leader of

independent engineers, as contained in Annexure-34 of the

writ application, (being part of second supplementary

affidavit), wherein Intercontinental Consultants and

Technocrats Pvt. Limited‟s., letter, dated 09.09.2014,

addressed to the General Manager (PPP), Bihar State Road

Development Corporation Limited, have made detailed

conclusion regarding financial implication and reimbursement

of cost along with tentative cost implication for re-tendering.

29. It is evident from the grounds taken in the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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memo of Appeal that judgment and order of learned single

Judge on question of quantification of the amount liable to be

paid consequent upon termination for authorities default, is

being assailed on the following sole ground:-

"(iv) For that the Hon‟ble Single Judge has failed to appreciate that the quantification of the consequent termination payment liable to be paid by the respondents have already been quantified by the team leader of independent engineers as contained in

Annexure 34 of the writ application (being the part of second supplementary affidavit), wherein the Intercontinental Consultants and Technocrats Private Limited vide letter dated 09.09.2014 addressed to the General Manager (PPP), Bihar State Road Development Corporation Limited, wherein they have made detailed conclusion regarding financial implication reimbursement of cost of excess lead along with tentative cost implication for re-

tendering."

30. I will first deal with the pleadings on record

and submissions advanced on behalf of the Company as to

whether direction for payment of Rs. 610,52,72,733/- as

sought for in the writ application could be made in exercise of

writ jurisdiction of this Court, under Article 226 of the

Constitution of India, on the ground that there was no dispute Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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at all between the parties over the said amount and the said

amount was admittedly payable to the Company. As has been

noted, for seeking such direction, heavy reliance has been

placed on Annexure-34 of the second supplementary affidavit

filed on behalf of the Company in the writ proceeding. From

the said Annexure-34, dated 09.09.2014, it appears that

Intercontinental Consultants and Technocrats Pvt. Ltd. has

been engaged as independent engineers for Four Laning of

concerned Mohania-Ara Section of NH-30. Paragraph 7 of the

said report, dated 09.09.2014, contains the

comment/opinion on termination of agreement, concluding as

follows:-

"The tentative amount on account of termination works out to about Rs.

602.00 crores, subject to verification of actual expenditure incurred on permanent works by the Concessionaire."

31. I find from the said report that independent

engineers were giving his opinion for the purpose of exploring

possibilities of alternative solutions, in view of the dispute

which had emerged between the Company and the

Corporation in relation to execution and fulfilling the obligation

of the Concession Agreement. The said observation of the ICT

independent engineers as quoted above, can by no stretch of

imagination be treated to be an admitted amount or otherwise Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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an amount so determined, that would have bound the

Corporation to make payment. Evidently, the said conclusion

is subject to verification of actual expenditure incurred on

permanent works by the Concessionaire. This Court in my

considered view cannot hold, on the basis of the materials on

record that the said amount is admittedly payable to the

Company.

32. This Court‟s attention has been drawn to a

legal opinion, dated 31.10.2014, recorded by Mr. Lalit

Kishore, learned Senior Advocate of this Court and Principal

Additional Advocate General, as sought for by the

Corporation. Much emphasis has been laid on the said opinion

of Mr. Lalit Kishore, learned Senior Advocate by Mr. Y. V. Giri,

learned Senior Counsel to contend that the quantification of

consequent termination payment amount of Rs. 602.00 crores

was endorsed by learned Senior Advocate, Mr. Lalit Kishore.

33. Before adverting to the contents of the said

legal opinion, I record my strong displeasure over the conduct

of the appellant in bringing on record legal opinion, which is

essentially a confidentially communication between learned

Senior Counsel and the Corporation. It is not evident from

the pleadings on record as to how the Company procured a

copy of the said legal opinion. The conduct of the Company in

this regard is highly reprehensible. It would be apt to refer to Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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the Supreme Court decision in the case of R. C. Jain v. High

Court of Patna, reported in (1996) 10 SCC 5, in paragraph

11 whereof, the Apex Court has ruled thus:

"11. Along with the SLP, the appellant has filed a copy of the office note submitted by the Registrar (Inspection) dated 4-4-1996 before the learned Chief Justice for consideration of the Chief Justice. In the affidavit of urgency (available at pp. 52 to 55) filed by Shri Rajendra Kumar Jain, son of the appellant, the said office note (available at pp. 54 and 55 of the paper-book), has been reproduced. We questioned counsel for the appellant as to how the appellant was able to produce a copy of the office note dated 4-4-1996. The appellant having produced the said document, a duty is cast on him to explain the source from which he obtained the said copy and in what circumstances he could obtain the same. This is all the more so, since reference has been made in the affidavit of urgency dated 14-6-1996 to the said document. Counsel for the appellant declined to disclose the source from where he obtained a copy of the said document. On the other hand, he vehemently stated that this Court should call upon the Registrar of the Patna High Court to explain and it is no part of his duty to explain as to how he obtained a copy of the document. To say the least, we are surprised at the attitude of the appellant's counsel in totally refusing to disclose the source from which the appellant obtained a copy of the document. In our opinion, the appellant and his counsel owe a duty to this Court to Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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disclose the source or circumstances under which the said document dated 4-4-1996 was obtained. We express our strong displeasure at the attitude of the appellant and his counsel in totally refusing to disclose to the Court the manner in which a document filed in court was obtained. For the present, we do not want to say anything further in this matter, but we want to make it clear that the attitude adopted is totally reprehensible and cannot be countenanced by a court of law."

34. Further, there is nothing in the said legal

opinion of learned Senior Counsel, Mr. Lalit Kishore, to show

that in his opinion that the Company was liable for making

such payment. It contains mere reference of a fact that the

independent engineers have pointed out that in case of

termination of the contract, the concessionaire would be

entitled to payment for 602.00 crores.

35. In my view, the question whether a dispute

exists for payment of amount will arise only after an amount

has been computed explicitly, by either of the parties to an

agreement. The entire case of the Company is based on the

said opinion of the independent engineers. Further, there is

nothing on record to show that there was any agreement

between the parties the amount as might be determined by

the independent engineers shall be liable to be paid by the

parties concerned, without raising any dispute. Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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36. I am, therefore, of the considered view that

this Court, in the present facts and circumstances of the case

cannot issue a direction for payment of amount as claimed by

the Company in his writ application. Learned single Judge has

rightly held that quantification of the amount would require

detailed investigation and adduction of evidence. I do not find

any valid reason to interfere with the said order of the learned

single Judge.

37. Of course, the question of consequent

termination payment, as envisaged under Article 37.1.3 of the

Concession Agreement, would arise only if termination of the

agreement for authority default is held to be justified. Such

termination can be held to be justified, if the other side, i.e.,

the Corporation, in the present case, does not raise any

dispute against such termination and specifically accepts that

there has been default on its part. Can this Court, in a

proceeding under Article 226 of the Constitution of India,

conclusively hold, on the basis of affidavits, that the

termination notice, dated 20.02.2015, issued by the

Company, is beyond the scope of being questioned by the

Corporation or any dispute, arising out of the said notice, is

beyond the scope of arbitration Article on the ground that

default, on the part of the Corporation, is an admitted fact, is

question, which is to be kept in mind while adjudicating the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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present matter.

38. Provision for reimbursement of additional cost

of procuring aggregates from neighbouring States, in the

absence of grant of mining lease, within the State of Bihar,

was one of the main issues being consistently raised by the

Company. It is to be noted that the issue was raised by the

Company, in view of the ban on crushing of stones in the

State of Bihar. This was never a part of the agreement that

the mining lease shall be granted to the Company for

execution of the work. Article 12.1(d) of the Concession

Agreement provides thus:-

"Prior to commencement of construction works, the Concessionaire shall make its own arrangements for quarrying of materials needed for the Project Highway under and in accordance with the Applicable Laws and Applicable Permits." (Emphasis is mine)

39. The case of the Company is based on its plea

that his bid was conditional and subject to making provision for

extra leads for procuring aggregates from the neighbouring

States. It is their case that in the review meeting, held on

25.09.2013, where this issue had been raised, the General

Manager of the Corporation had given a signal to go ahead

with the installation of crushers and procurement of Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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aggregates from the neighbouring States.

40. There is a letter, dated 26.09.2013, which has

been brought on the record by way of Annexure-2 to the writ

petition, written by the authorized signatory of the Company,

which is said to be containing the minutes of the review

meeting, held on 25.09.2013.

41. I have perused Annexure-2 of the writ petition

carefully, paragraph No.2 of which refers to allotment of

mines, which is being extracted hereinbelow:-

"Allotment of Mines: Shri Vijay Shankar, GM informed that the Government has not taken a decision to allow mining in the State of Bihar and as such, the Concessionaire has to submitted that the allotment of mines at Sasaram is a precondition before signing the Concession Agreement. The procurement of the aggregate from neighbouring States has got material financial impact of more than Rs. 400 Cr. These has been vetted by the independent Engineer vide their letter No. ICT/IE/BSRDC/IND/NH-30/TL/416 dated 31.05.2013. Procuring aggregate from neighbouring States will necessitate reimbursement of extra lead charges, Entry Tax, Toll Tax etc. as brought out in the earlier correspondence. It is imperative to note that no tangible progress can be achieved without mining and crushing, even if Appointed Date is fixed.

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Shri Vijay Shankar, GM wanted to know the view of Shri A.D. Nariain, Independent Engineer on this issue. Shri A.D. Narain stated that ICT have already obtained legal opinion and have also recommended reimbursement of additional cost vide their letter dated 31.05.2013. He further stated that even otherwise, the Concessionaire is entitled for reimbursement of additional cost on account of subsequent legislation.

In view of above, Shri Vijay Shankar, GM requested the Concessionaire to go ahead with installation of crusher and procurement of aggregates from the neighbouring States. Shri Vijay Shankar, GM requested the DGM (CPIU) Shri R.P. Singh and Shri Mahesh Prasad, DGM (PPP) to initiate a note to the Government appraising financial implication."

42. I have my reservations as to whether the said

communication can be said to be containing minutes of the

meeting held on 25.09.2013.

43. This is to be noted that the case of the Company

that it was given a nod to the General Manager of the

Corporation to go ahead, with the installation of crushers and

procurement of aggregates, is based on the said

communication, dated 26.09.2013. Though, there is denial in

the counter affidavit that there was any such assurance by the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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General Manager of the Corporation in a meeting held on

25.09.2013, it has been averred in the counter affidavit, filed

on behalf of the Corporation, that proceedings of the meeting,

as represented by the Company, cannot, under any

circumstance, alter specific intent of the Concession

Agreement, which clearly specified that exclusive responsibility

of procuring input material was that of the Company. The

minutes of the said meeting have not been brought on the

record. What has been described in the said letter, dated

26.09.2013, to be the minutes of the meeting, cannot be said

to be so, as it does not bear the signature of the persons, who

had participated in the said meeting. The said document, in

my view, cannot lay the basis for coming to a definite

conclusion that the Corporation had given any assurance of

making provisions for reimbursement of additional cost to be

incurred on account of procurement of aggregates from the

neighbouring States. At the maximum, this could be a dispute,

which could be raised before the forum, prescribed under the

agreement.

44. Upon perusal of the documents, which are

there on the record, I notice that the minutes of different

meetings, held in the office of the Corporation and attended by

the officials and representatives of the Company and

independent engineer, had been duly prepared and signed by Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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the persons present. There is no clue, as to why there is no

formal minute of the meeting, said to have been held on

25.09.2013, in which the Company was asked to go ahead, as

has been noted above.

45. From the minutes of the review meeting, held

on 12.05.2014, the Company again raised an issue of payment

of extra lead of aggregates. The description of the said

meeting, in relation to the concerned item, reads thus:-

"Payment of extra lead of aggregate: The Concessionaire raised the issue of payment of extra lead of aggregate. GM (PPP) reiterated that same is under process and it is a policy matter.

The decision shall be taken as per the rules based on CA."

46. Evidently thus, upon an issue having been

raised by the Company, it was made clear that the decision

shall be taken as per the rules based on CA (Concession

Agreement). It does not contain any assurance that the

decision shall be taken de hors to the terms of Concession

Agreement.

47. The dispute, on the question of termination of

Concession Agreement, is evident from the correspondence

made between the Corporation and the Company. On

04.02.2015, notice of intent to terminate the Concession

Agreement, in terms of Article 37.2.2 of the Concession Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Agreement, was issued by the Company. Within 15 days of

the said notice, the Corporation, on 16.02.2015, responded to

the said notice, as contemplated under Article 37.2.2 of the

Concession Agreement. In the said communication, dated

16.02.2015, the Corporation dealt with all the points raised by

the Company for issuing the notice of intent of termination of

agreement. On the question of non-payment of additional cost

incurred by the Company for procurement of aggregates, it

was pointed out firstly that it was the responsibility of the

Company, in terms of Article 12.1(d) of the Concession

Agreement. Secondly, it was mentioned as follows:-

"From the above, it is inferred beyond doubt that you shall make all arrangements for procurement of aggregates or any other material needed for the Project Highway. Thus your alleged claim is contrary to the Concession Agreement and denied. Be that as it may, it is informed that the Govt. of Bihar has vide Notification no. 3085/M, Patna dated 11.08.2014 opened the mining lease for procurement of aggregates. The Govt. of Bihar has already allowed the procurement of aggregates in the month of August but you have not made any efforts for procurement of aggregates till now. In such background, your contention to claim additional cost from the BSRDCL is clearly manifests of your intention to wriggle out of Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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the Concession Agreement. Concessionaire is advised to immediately start the execution of works which are virtually suspended/ abandoned by the Concessionaire. This is in fact an admission by the Concessionaire of its inability to comply with specific contractual obligations."

48. It was specifically mentioned in the said letter,

dated 16.02.2015, that the notice of intent of termination of

agreement was illegal and invalid. The Company was asked

to withdraw his notices, dated 09.08.2014 and 04.02.2015.

49. Upon perusal of the notice of intent to

terminate the Concession Agreement, dated 04.02.2015, and

representation, dated 16.02.2015, I find that there are

disputed questions of facts with respect to alleged default by

the Corporation, which could have given the Company a valid

right to invoke Article 44 of the Concession Agreement.

50. An argument has been advanced on behalf of

the Company that after issuance of notice, dated 04.02.2015,

the Corporation, through a letter, dated 07.02.2015, had

asked the Company to submit the details of all material,

stores, plants & machineries and equipments available at the

site of the Authority, pursuant to Article 37.4(b) of the

Concession Agreement and, accordingly, the Company waived

the right of representation, under Article 37.2.2 of the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Concession Agreement. The said contention is fit to be

rejected. Article 37.4 of the Concession Agreement provides

for the rights and obligations of the Authority upon

termination for any reason whatsoever.

51. Article 37.4 provides that upon termination,

the Corporation will be deemed to have been in possession

and control of the Project Highway forthwith. This is a

deeming Article and operates automatically once the

Concession Agreement stands terminated. Article 37.4(b)

further provides for taking possession and control of all

materials, stores, implements, construction plants and

equipments on or about the site. This provision contemplates

taking actual physical possession and control of the Articles,

as mentioned above. Issuance of letter, dated 07.02.2015,

does not amount to invoking Article 37.4(b) of the Concession

Agreement. Through said letter, the Corporation merely

sought for the information and details of all materials, stores,

construction plants and equipments on or above the site, so

that, if needed, possession of the same can be taken over. It

will, in no circumstance, amount to waiving right of

representation within 15 days of issuance of termination

notice, dated 04.02.2015. This is apparent from the fact that

within 15 days of the said notice, the Corporation filed its

representation, raising the dispute, through letter, dated Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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16.02.2015.

52. In such circumstance, it cannot be held that

there was no dispute between the parties on the question of

default on the part of the Corporation, leading to issuance of

termination notice, invoking Article 37.2.2 of the Concession

Agreement. It cannot be said, in the facts and circumstances

and on the basis of materials available on the record, that

there was no scope for the Corporation to raise any dispute

against termination of Concession Agreement since the facts

are not admitted. In my view, in the given facts and

circumstances of the case, the learned Single Judge rightly

gave the Corporation and the State of Bihar an opportunity to

question the validity of the termination notice, issued by the

Company.

53. Situated thus, in my considered view, it cannot

be held that there is no dispute required to be resolved,

invoking Article 44 of the Concession Agreement. The

definition of dispute is wide, as given in Article 44 of the

Concession Agreement, which can be seen from Article 44.1.1

of the Concession Agreement and it means "any dispute,

difference or controversy of whatever nature howsoever

arising under or out of or in relation to the agreement". For

quick reference, the said Article 44.1.1. of the Concession

Agreement is being extracted hereinbelow:-

"Any dispute, difference or Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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controversy of whatever nature howsoever arising under or out of or in relation to this Agreement (including its interpretation) between the Parties, and so notified in writing by either Party to the other Party (the "Dispute") shall, in the first instance, be attempted to be resolved amicably in accordance with the conciliation procedure set forth in Article 44.2."

54. In the present matter there exists

dispute/difference/controversy between the parties worth

being resolved, in accordance with Article 44 of the

Concession Agreement, through the process of conciliation or

arbitration, as the case may be. The learned Single Judge, in

the judgment and order, under appeal, has set aside the

termination notice, issued by the Corporation, on the ground

that the Company had already terminated the Concession

Agreement and it was not within the jurisdiction of the

Corporation to decide that termination of agreement by the

Company, alleging default of the Authority, was not valid. If

the Corporation had any grievance against the said

termination notice, issued by the Company, the same could

have been raised before the forum, prescribed under the

Agreement, and could not have been unilateral decision to

treat the termination notice of the Company to be not

acceptable. The said view, adopted by learned Single Judge, Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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in my opinion, is appropriate in the present facts and

circumstances of the case.

55. The question of interference by the High Court

in exercise of power, under Article 226 of the Constitution of

India, in contractual matters, has been raised on umpteen

occasions and has been answered. This is settled now that a

settlement of facts, based on the contents of the affidavits, in

a proceeding under Article 226 of the Constitution of India, is

impermissible in dealing with the contractual disputes, though

there is no bar on the High Court. Reference in this regard

made to a recent Supreme Court decision, in case of State of

Kerala and Others vs. M.K. Jose, reported in (2015) 9

SCC 433, paragraph 13 of which reads as thus:-

"13. A writ court should ordinarily not entertain a writ petition, if there is a breach of contract involving disputed questions of fact. The present case clearly indicates that the factual disputes are involved."

56. The said decision, in case of State of Kerala

(supra) has been referred to in almost all Supreme Courts‟

decisions, on the issue, and the Supreme Court finally held in

paragraphs 20 and 21 of the judgment in following terms:-

"20. We have referred to the aforesaid authorities to highlight under what circumstances in respect of Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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contractual claim or challenge to violation of contract can be entertained by a writ court. It depends upon facts of each case.

The issue that had arisen in ABL International was that an instrumentality of a State was placing a different construction on the Articles of the contract of insurance and the insured was interpreting the contract differently. The Court thought it apt merely because something is disputed by the insurer, it should not enter into the realm of disputed questions of fact. In fact, there was no disputed question of fact, but it required interpretation of the terms of the contract of insurance. Similarly, if the materials that come on record from which it is clearly evincible, the writ court may exercise the power of judicial review but, a pregnant one, in the case at hand, the High Court has appointed a Commission to collect the evidence, accepted the same without calling for objections from the respondent and quashed the order of termination of contract.

21. The procedure adopted by the High Court, if we permit ourselves to say so, is quite unknown to exercise of powers under Article 226 in a contractual matter. We can well appreciate a Committee being appointed in a public interest litigation to assist the Court or to find out certain facts. Such an exercise is meant for public good and in public interest. For example, when Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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an issue arises whether in a particular State there are toilets for school children and there is an assertion by the State that there are good toilets, definitely the Court can appoint a Committee to verify the same. It is because the lis is not adversarial in nature. The same principle cannot be taken recourse to in respect of a contractual controversy. It is also surpassing that the respondent, which is nothing but abuse of the process of extraordinary jurisdiction of the High Court. The Appellate Bench should have applied more restraint and proceeded in accordance with law instead of making a roving enquiry. Such a step is impermissible and by no stretch of imagination subserves any public interest."

57. There cannot be any doubt that mandamus is

not a writ of right and is not granted of course but at the

discretion of the Court to which an application seeking

issuance of mandamus is made. It is equally well settled that

a High Court exercising power under Article 226 of the

Constitution of India is to be slow in issuing a writ of

mandamus if the party concerned has an alternative remedy

available. Existence of an alternative remedy, though, is not

a bar for the High Court to exercise jurisdiction under Article

226 of the Constitution of India, the High Court may in its

discretion entertain claim of a party despite availability of Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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alternative remedy, depending on facts and circumstances of

the case. At the same time, existence of an alternative

remedy is a good ground for refusing to exercise discretion

under Article 226 of the Constitution of India.

58. In case of State of Bihar. Vs. Jain Plastics

and Chemicals Limited reported in (2002)1 SCC 216, the

Supreme Court held in paragraph 3 as follows:-

"It is settled law that when an alternative and equally efficacious remedy is open to the litigant, he should be required to pursue that remedy and not invoke the writ jurisdiction of the High Court. Equally, the existence of alternative remedy does not affect the jurisdiction of the Court to issue writ, but ordinarily that would be a good ground in refusing to exercise the discretion under Article 226."

59. The Supreme Court further, held in the said case in

paragraph 7 that non-interference in contractual matter while

exercising jurisdiction under Article 226 of the Constitution of

India is the general rule and held as follows:-

"7..... It is true that many matters could be decided after referring to the contentions raised in the affidavits and counter affidavits, but that would hardly be a ground for exercise of extraordinary jurisdiction under Article Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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226 of the Constitution in case of alleged breach of contract. Whether the alleged non-supply of road permits by the appellants would justify breach of contract by the respondent would depend upon facts and evidence and is not required to be decided or dealt with in a writ petition. Such seriously disputed questions or rival claims of the parties with regard to breach of contract are to be investigated and determined on the basis of evidence which may be led by the parties in a properly instituted civil suit rather then by a court exercising prerogative of issuing writs."

60. In my opinion, therefore, in the facts and

circumstances of the case, it would not be safe to decide the

dispute between the parties on the basis of affidavits and

counter affidavits in the present proceeding of appeal under

the Letters Patent of the High Court more particularly when

learned single Judge by the order under appeal, has refused

to exercise discretion and has relegated the dispute to the

forum of arbitration as contemplated in the contract itself.

61. This is trite that in an intra Court appeal of the

present nature, the Court of appeal should not interfere with

the refusal by learned single Judge to exercise discretion

under Article 226 of the Constitution of India on the ground of

availability of an alternative remedy of arbitration. Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Entertainment of Letters Patent Appeal is discretionary and

unless there exist cogent reasons, the Division Bench would

not interfere with the reasonings assigned by the learned

single Judge.

62. Reference can be made in this regard to a

Supreme Court decision in case of Asha Devi Vs. Dukhi Sao

reported in ( 1974) 2) SCC 492.

63. I do not find that any cogent reason which

exists for interfering with the decision of the learned single

Judge.

64. A submission was advanced that once learned

single Judge has held the writ application to be maintainable,

he ought not to have relegated the appellant and the parties

to the forum of arbitration. According to Mr. Giri, learned

Senior Counsel appearing on behalf of the appellant, the

learned single Judge ought to have decided the dispute on the

basis of admitted facts and materials on record, after having

held the writ application to be maintainable. I do not find any

force in such submission. Maintainability of an application and

grant of relief sought for in the said application are two

different aspects. The writ petition filed by the Company

could not have been held to be not maintainable in the

absence of any bar against filing of such application. Existence

of an alternative remedy is not a bar in invoking writ Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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jurisdiction of the High Court under Article 226 of the

Constitution of India. Learned single Judge accordingly, held

writ application to be maintainable, despite there being

alternative remedy of arbitration. But while considering the

relief sought for, learned single Judge refused to decide the

question of quantum consequent termination payment as well

as justification of termination notice for authority‟s default

issued by the appellant-Company. Learned single Judge

rightly observed that the dispute as to whether the said notice

issued by the Company was valid or not could not have been

unilaterally decided by the Corporation which was itself a

party to the contract. Learned single Judge, therefore, rightly

held that the termination notice for concessionaire default by

the Corporation treating the termination notice for authorities

default as invalid, was not proper and the Corporation, for

that purpose could have invoked the arbitration Article under

Article 44 of the agreement. It is, however, made clear that

no observation made by learned single Judge in the order

under appeal shall be treated as finding, implied of explicit, on

correctness/validity or justifiability of the termination notices

issued by the Company.

65. In the background of the facts, as discussed

above, and settled legal position, I do not find any reason to

interfere with the judgment and order, under appeal, passed Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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by the learned single Judge. The appeal, preferred by the

Company, being L.P.A. No.2158 of 2015, has no merit and is,

accordingly, dismissed.

66. Since I have come to a conclusion that learned

single Judge has rightly quashed the termination notices,

issued by the Corporation, dated 16.05.2015 and 10.06.2015,

the appeals, preferred by the Corporation and the State of

Bihar, being L.P.A. No. 2084 of 2015 and L.P.A. No.2131 of

2015, have also no merit and are, accordingly, dismissed.

67. Before I part with this judgment, I reiterate my

observation that the conduct of the appellant of bringing on

record legal opinion tendered by a learned senior counsel of

this Court to the Corporation is highly reprehensible.

Considering the said conduct of the appellant, I am inclined to

impose exemplary cost on the appellant, so that it may have a

deterrent effect. Accordingly, I impose a cost of Rs.

5,00,000/- to be paid by the appellant to the Corporation

within a period of one month from today.

68. In terms of the above observations and

directions, these appeals shall stand disposed of.

(Chakradhari Sharan Singh, J.) Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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(Per : HONOURABLE THE ACTING CHIEF JUSTICE)

In Ramana Dayaram Shetty v. International

Airport Authority of India, (1979) 3 SCC 489, the Supreme

Court, while dealing with the diversification of State activities,

over the years, observed that today, with tremendous

expansion of welfare and social service functions, increasing

control of material and economic resources and large scale

assumption of industrial and commercial activities by the State,

the power of the executive Government to affect the lives of the

people is steadily growing. The attainment of socio-economic

justice being a conscious end of State policy, there is a vast and

inevitable increase in the frequency with which ordinary citizens

come into relationship of direct encounter with State power-

holders. This renders it necessary to structure and restrict the

power of the executive Government so as to prevent its

arbitrary application or exercise. Whatever be the concept of

the Rule of Law, whether it be the meaning given by Dicey in

his "The Law of the Constitution" or the definition given by

Hayek in his "Road to Serfdom" and "Constitution of Liberty" or

the exposition set forth by Harry Jones in his "The Rule of Law

and the Welfare State", there is, as pointed out by Mathew, J.,

in his article on "The Welfare State, Rule of Law and Natural

Justice" in "Democracy, Equality and Freedom" "substantial

agreement in juristic thought that the great purpose of the rule Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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of law notion is the protection of the individual against arbitrary

exercise of power, wherever it is found". It is indeed

unthinkable that in a democracy governed by the rule of

law the executive Government or any of its officers

should possess arbitrary power over the interests of the

individual. Every action of the executive Government

must be informed with reason and should be free from

arbitrariness. That is the very essence of the rule of law

and its bare minimal requirement. And to the application

of this principle it makes no difference whether the

exercise of the power involves affectation of some right

or denial of some privilege.

(Emphasis supplied)

70. The present batch of appeals raises issues of great

public importance, wherein the actions of the respondents, the

Instrumentalities of State Government of Bihar, have been

alleged to be arbitrary and unreasonable and, therefore, their

impugned actions are violative of Article 14 of the Constitution

of India.

71. The present appeals have been preferred, under

Clause 10 Appendix-E of the Patna High Court Rules, against

the judgment and order of a learned single Judge of this Court

in CWJC No. 7259 of 2015, whereby and whereunder the

learned single Judge has disposed of the writ petition with Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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certain directions and observations that have been put to

challenge by both the sides to the litigation.

72. Considering the fact that these appeals have been

filed against the same judgment and since common questions

of law arise herein, these appeals have been heard together

and are disposed of by this common judgment and order.

73. Before dealing with the rival submissions, made

on behalf of the parties, on the merits of these appeals, a brief

narration of the facts, leading to the appeals, would be

necessary.

Facts in LPA No. 2158 of 2015: -

74. The appellant, in LPA No. 2158 of 2015, filed, as

petitioner, a writ petition, giving rise to CWJC No. 7259/2015,

invoking Article 226 of Constitution of India praying therein for

certain reliefs, the principal, among them, being to issue a writ,

in the nature of mandamus, commanding the respondent

authorities to pay to the appellant company Termination

Payment amounting to Rs 610,52,72,733 (Rupees Six hundred

ten crores fifty two lacs seventy two thousand even hundred

thirty three only) with interest at contractual rate on the ground

that respondent authorities have acted illegally, arbitrarily and

without jurisdiction.

75. The writ petitioner is, admittedly, a Limited

Company registered under the Companies Act, 1956, having Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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been created as a special purpose vehicle by its parent

company, Atlanta Limited. It is further stated that pursuant to a

notice/request for qualification by the respondents, dated

16.7.2010, for the construction, operation and maintenance of

National Highway No. 30 in the State of Bihar, including the

section from 0.000 to km 116.760 on the Mohania-Ara section

of National Highway No. 30, by four laning on a Design, Build,

Finance, Operate and Transfer (DBFOT) basis, Atlanta Limited

was shortlisted and, in due course, a Concession Agreement

was entered into between the appellant company and the

Managing Director, Bihar State Road Transport Corporation,

Patna, on 10.09.2010.

76. After submission of its bid, the writ petitioner

made demands for a Mining lease for stone quarries to be made

available to it inasmuch as the bid had been submitted keeping

in mind the facilities of mining aggregates from enumerated

quarries in the possession of the Government of Bihar and it

was duly indicated that in the absence of the mining lease, it

would be practically impossible for it to execute the project. It

was only upon the expectation of grant of the Mining lease and

on the insistence of the respondents that the validity of the

original bid was extended by the writ petitioner from time to

time. After extension of the validity of the bid, on four

occasions, a Concession Agreement was finally entered into on Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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10.9.2011. On the other hand, the issue relating to provision of

aggregates, through mining leases, continued to be subject

matter of discussion. The matter was also referred to an

Independent Engineer, chosen and appointed by the

respondents, who recommended, by letter, dated 31.05.2013,

for either allotment of mines in favour of the writ petitioner or

for re-imbursement of additional cost of procuring aggregates

from neighbouring States estimated at Rs 410.13 crores to the

writ petitioner. However, in the meeting, dated 05.08.2014,

between the writ petitioner and the respondent authorities, it

was observed that the writ petitioner‟s claim, with regard to

extra lead aggregates, was not sustainable and this event led

the writ petitioner to serve a notice upon the respondent

authorities, in terms of Clause 37.2 of the Agreement, asking

the respondent authorities to cure the defaults within the

stipulated period of 90 days. Pursuant to the notice so served

under Clause 37.2 by the writ petitioner, the respondents, in a

meeting, dated 06.11.2014, agreed to cure the defaults and the

Chief General Manager of the respondent Corporation sent a

letter, dated 21.11.2014, addressed to the Principal Secretary,

Road Construction Department, Government of Bihar, seeking,

in principle, approval for payment of extra cost of carriage of

stone aggregates amounting to the tune of Rs. 435 crores to

the writ petitioner. Despite correspondences and meetings, the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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issue, relating to re-imbursement of cost of aggregates, could

not be resolved and considering this failure, on the part of the

respondents, to cure the defaults, the writ petitioner, on

04.02.2015, issued a notice of its intent to terminate the

Concession Agreement in terms of Clause 27.2.2 of the

Agreement. Acting upon such notice, the respondent

Corporation, vide letter, dated 07.02.2015, directed the writ

petitioner to submit details of all materials, etc., for the purpose

of Clause 37.4 (b). The respondents, according to the writ

petitioner, kept dilly dallying the matter in order to avoid their

liability compelling the appellant to issue termination notice,

dated 20.02.2015, thereby terminating the Concession

Agreement, dated 10.09.2011, and demanding termination

payment of an amount of Rs.610,52,72,733 with interest at

contractual rate.

77. Some further developments took place after the

termination notice was issued by the writ petitioner. The

respondent No.2, in his letter, dated 23.03.2015, recommended

the case of the writ petitioner to the Infrastructure

Development Authority for obtaining the approval of the

Committee presided over by the Secretary, Road Construction

Corporation, Government of Bihar, for payment of extra cost of

carriage of stone aggregates to the writ petitioner. It was also

observed therein that the writ petitioner had already terminated Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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the Concession Agreement, on 20.02.2015, in terms of Clause

37.2.2 of the Concession Agreement, which, however, had been

termed illegal and not accepted by the respondent Corporation

and, accordingly, the writ petitioner was requested to resume

the work. The writ petitioner, then, approached this Court by

filing the writ petition.

78. During the pendency of the writ petition, the

respondent Corporation issued a notice, on 16.05.2015,

purportedly in terms of Clause 37.1.2, for termination of the

agreement, which, later on, culminated into purported

termination of the Concession Agreement by the respondent

Corporation in terms of its letter No. 1382, dated 10.06.2015.

79. After the termination notice was issued by the

respondents, the writ petitioner filed I. A. No. 4702 of 2018 for

amendment of the prayer portion in the writ petition and

seeking quashment of the letter No. 1180, dated 16.05.2015,

as well as the letter No. 1382, dated 10.06.2015. Upon hearing

both sides, I. A. 4702 of 2018 was allowed.

80. The respondents contested the writ petition on the

ground of maintainability. It was argued that the subject-matter

of the writ petition was based on contractual obligations and,

hence, a writ would not lie.

81. Upon hearing the rival submissions, the learned

single Judge held, in the judgment, dated 22.09.2015, the writ Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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petition to be maintainable and this finding forms the subject of

LPA No. 2084 of 2015, filed by the respondent Corporation,

which is being dealt with hereinafter.

82. The writ petition was disposed of by judgment,

dated 22.09.2015, whereby the learned single Judge gave

liberty to the respondents to advert to provisions of Dispute

Resolution Agreement contained in Article 44 of the agreement

if the respondents were aggrieved by the termination notice

issued by the writ petitioner. The learned single Judge also set

aside the termination notice, dated 10.06.2015, issued by the

respondents, but granted liberty to them (respondents) to take

recourse to Article 44 of the Agreement.

83. The appellant (i.e., the writ petitioner) has also

challenged, in its appeal, some observations of the learned

single Judge, particularly, those contained in paragraph 13 and

paragraph 14 of the judgment, whereby the dispute has been

allowed to be referred to arbitration even though it was

specifically held by the learned single Judge that the

termination notice, issued by the appellant, was valid. It may

also be pointed out here that the learned single Judge has also

set aside the Termination Notice, dated 10.06.2015, issued by

the respondents holding the same to have been issued only for

the purpose of avoiding the consequences of having to make

termination payment to the writ petitioner herein. Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Facts in LPA No.2084 of 2015: -

84. LPA No. 2084 of 2015 has been preferred by the

respondent Bihar State Road Construction Corporation, who are

aggrieved by the decision of the learned single Judge negating

the plea, raised by them, that the subject matter of the dispute

is covered by Arbitration Clause as contained in Article 44 of the

Concession Agreement and, hence, no relief can be granted in

exercise of writ jurisdiction. The respondent Corporation has

also challenged the decision of learned single Judge in setting

aside their termination notice, dated 10.06.2015, as illegal and

holding that the termination notice, dated 10.06.2015, was

issued only with the intent to avoid the termination payment to

the writ petitioner.

Facts in LPA No. 2131 of 2015

85. LPA No. 2131 of 2015 has been preferred by the

respondent-State of Bihar, who, too, are aggrieved by the

judgment and order, under appeal, of the learned single Judge

and have sought to challenge the same on identical grounds as

has been sought to be raised by the respondent-Corporation.

86. I have heard the submissions advanced by Mr.

Y.V. Giri, learned Senior Counsel, appearing for the appellants

in LPA No. 2158 of 2015, and Mr. Lalit Kishore, learned Principal

Additional. Advocate General, appearing for the appellants in

LPA No. 2084 of 2015 and LPA No. 2131 of 2015.

Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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87. Before I proceed further, I may point out that in

order to maintain clarity, the parties to the three appeals are

being described hereinafter in the same manner as they stood

in the writ petition, which has given rise to the present set of

appeals. Consequently, „the writ petitioner‟ is being referred to

as „the writ petitioner‟, „the respondent Corporation‟ is being

referred to as „the respondent Corporation‟ and „the State

respondents‟ are being referred to as „the State respondents‟.

WHETHER THE WRIT PETITION WAS HEARD ONLY ON A

PRELIMINARY POINT: -

88. It has been argued by the learned Principal

Additional. Advocate General that in view of the Arbitration

Clause, the writ petition was heard only on the point of

maintainability of the writ petition. However, on perusal of the

judgment of the learned single Judge, I do not find any force in

the submissions of the learned Principal Additional Advocate

General as the learned single Judge has taken into account all

factors, including facts and documents, before arriving at the

conclusions, which were reached. Hence, the argument, on this

count needs to be rejected and is accordingly rejected.

MEANING OF THE EXPRESSION "DISPUTE" VIS-À-VIS

ARBITRATION CLAUSE: -

89. The learned Principal Additional Advocate General

invited the attention of this Court to Article 44 of the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Concession Agreement and argued that in view of the specific

clause in the Concession Agreement that all „disputes' will be

referred to arbitration, the exercise of writ jurisdiction was not

tenable.

90. In order to appreciate the above submissions,

Article 44 is being reproduced hereinbelow for reference:

"44.1 Dispute Resolution 44.1.1 Any dispute difference or controversy of whatsoever nature howsoever arising under or out of or in relation to this Agreement (including its interpretation) between the parties and so notified in writing by either Party to the other party shall in the first instances be attempted to be resolved amicably in accordance with the conciliation procedure set forth in Clause 44. 2.

44.1.2 The Parties agree to use their best efforts for resolving all Disputes arising under or in 'respect of this Agreement promptly, equitably and in good faith, and further agree to provide each other with reasonable access during normal business hours to all non-privileged records, information and data pertaining to any dispute.

44.2 Conciliation In the event of any Dispute between the Parties either party may call upon the Independent Engineer to mediate and assist the Parties in arriving at an amicable settlement thereof. Failing mediation by the Independent Engineer to without the intervention of the Independent Engineer either party may require such dispute to be referred to the Chairman of the Authority and the Chairman of the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Board of Directors of the Concessionaire for amicable settlement and upon such reference the said persons shall meet no later than 7 days from the date of reference to discuss and attempt to amicably resolve the dispute. If such meeting does not take place within the 7 days period or the Dispute is not amicably settled within 15 days of the meeting or the Dispute is not resolved as evidenced by the signing of written terms of the settlement within 30 days of the notice in writing referred to in Clause 44.1.1 or such longer period as maybe mutually agreed by the parties either party may refer the Dispute to arbitration in accordance with the provisions of Clause 44.3 44.3 Arbitration Any dispute which is not resolved amicably by conciliation as provided in Clause 44.2 shall be finally decided by reference to Bihar Arbitral Tribunal in accordance with Bihar Public Works Contracts Disputes Arbitration Tribunal Act, 2008 Rules framed thereunder or procedure prescribed by the Bihar Arbitral Tribunal. The award of Bihar Arbitral tribunal shall be final and binding on the parties.

44.4. Adjudication by Regulatory Authority or Commission.

Deleted."

91. It is the submission of the learned Principal

Additional Advocate General that in view of Article 44 of the

Agreement, the only remedy available to the writ petitioner, for

redressal of its grievances, is to approach the Tribunal

constituted under the Bihar Public Works Contracts Disputes Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Arbitration Tribunal Act, 2008.

92. In order to appreciate the submissions of the

learned Principal Additional Advocate General, it would be

necessary to advert to the relevant provisions of the Bihar

Public Works Contracts Disputes Arbitration Tribunal Act, 2008.

93. Section 2 of the Bihar Public Works Contracts

Disputes Arbitration Tribunal Act, 2008, deals with definitions

and Section 2(b) defines "Arbitration Clause" to mean a clause

in the works contract to submit present or future differences to

arbitration. Again, Section 2 (e) defines "Dispute" to mean any

difference relating to any claim arising out of the execution or

non-execution of the whole or part of a contract for works or

services or both including the act of rescinding the contract.

94. It would be seen from a reading of Section 2 (b)

and 2 (e) of the Bihar Public Works Contracts Disputes

Arbitration Tribunal Act, 2008, that the condition precedent, for

assumption of jurisdiction by the Arbitral Tribunal, is existence

of differences. Even though the expression "dispute" has been

defined in the Bihar Public Works Contracts Disputes Arbitration

Tribunal Act, 2008, yet the meaning of the "dispute" is

differences relating to any claim arising out of the execution or

non-execution of the whole or part of a contract for works or

services or both including the rescinding thereof.

95. In other words, no occasion would arise for the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Arbitral Tribunal to adjudicate if no difference exists on an

issue. Hence, in the facts of this case, the matter could have

been decided by the Bihar Public Works Contracts Disputes

Arbitration Tribunal Act, 2008, only and only if the writ petition,

when read in its entirety, revealed that a difference existed

between the writ petitioner and the respondents over any claim

arising out of the execution or non-execution of the whole or

part of a contract for works or services or both including the act

of rescission thereof. Conversely, if the averments in the writ

petition, when read in its entirety, and the circumstances,

preceding the writ petition, show that there existed no

difference with respect to any issue or claim made by any party,

the condition precedent, for referring the matter to the Bihar

Public Works Contracts Disputes Arbitration Tribunal Act, 2008,

would not be treated to have been satisfied and, in such a case,

question of resorting to arbitration by the Bihar Public Works

Contracts Disputes Arbitration Tribunal Act, 2008, would

naturally not arise.

96. In the case of P.K. Ramaiah & Co. v. NTPC,

Supp (3)SCC 126, the Supreme Court had pointed out and

held that if there is an arbitrable dispute, it shall be referred to

the named arbitrator; but there must exist a subsisting dispute.

97. Similarly, therefore, if it has to be held that the

writ petition, in the present case, is amenable to arbitration, it Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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would not be possible to do so unless I am able to hold that

there was a dispute, which was real and subsisting and that the

plea of dispute has not been raised by the respondents merely

as a clog to resist the writ petition by camouflaging the issue.

98. In P.K. Ramaiah (supra), the Supreme Court

considered the ambit of accord and satisfaction by the parties,

voluntarily entered into and disputation raised thereunder. The

Supreme Court held as follows;

"8. Admittedly the full and final satisfaction was acknowledged by a receipt in writing and the amount was received unconditionally. Thus, there is accord and satisfaction by final settlement of the claims. The subsequent allegation of coercion is an afterthought and a device to get over the settlement of the dispute, acceptance of the payment and receipt voluntarily given.... Having acknowledged the settlement and also accepted measurements and having received the amount in full and final settlement of the claim, there is accord and satisfaction. There is no existing arbitrable dispute for reference to the arbitration."

99. A similar view was expressed in the case of

Nathani Steels Ltd. v. Associated Constructions, 1995

Supp (3) SCC 324, wherein the Supreme Court held that once

the parties have arrived at a settlement in respect of any

dispute or difference arising under a contract and that the

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settlement by and between the parties, then, unless that

settlement is set aside in proper proceedings, it cannot lie in the

mouth of one of the parties to the settlement to spurn it on the

ground that it was a mistake and proceed to invoke the

Arbitration clause. If this is permitted, the sanctity of contract

would be wholly lost and it would be open to one party to take

the benefit under the settlement and, then, question the same

on the ground of mistake without having the settlement set

aside.

100. The relevant paragraph of Nathani Steels

(supra), wherein the aforesaid observations were made, is

being reproduced as follows;

"3. ... Even otherwise we feel that once the parties have arrived at a settlement in respect of any dispute or difference arising under a contract and that dispute or the difference is amicably settled by way of a final settlement by and between the parties, unless that settlement is set aside in proper proceedings, it cannot lie in the mouth of one of the parties to the settlement to spurn it on the ground that it was a mistake and proceed to invoke the Arbitration clause. If this is permitted the sanctity of contract, the settlement also being a contract, would be wholly lost and it would be open to one party to take the benefit under the settlement and then to question the same on the ground of mistake without having the settlement set aside...."

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101. Again, in the case of Ramesh Kumar v. Furze

Ram, reported in (2011) 8 SCC 613, the Supreme Court held

that there can be a reference to arbitration only if there is a

dispute and there is an agreement to settle the dispute by

arbitration. If the parties had already settled the disputes, there

was no dispute between the parties that could be referred to

arbitration. Is this the position in the present case too? This is

the question of paramount importance.

102. The analysis of the cases, referred to above,

clearly show that condition precedent for referring a dispute to

arbitration is the existence of differences on any claim. A

settlement of claim would mean that the difference has ceased

to exist and, hence, no question would arise for referral of the

difference to arbitration. In other words, arbitration, being an

adjudicatory process, must be preceded by an existing dispute,

which requires adjudication. In the absence of an issue, which

needs adjudication, question of arbitration would never arise.

103. Mustill and Boyd's The Law and Practice of

Commercial Arbitration in England, (1989 Ed), observes that a

"dispute" must be construed by reference to the subject matter

of the contract in which they are included. Thus, only by a

reference to facts of the case, it can be said whether dispute

exists or not.

104. It would be apposite to reflect herein on one of Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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the arguments made by the learned Counsel for the writ

petitioner. It has been argued that the respondents have been

deliberately confusing the expression "default" with the

expression "dispute". According to the learned Counsel for the

writ petitioner, the expression "default" has been specifically

dealt with in Article 37 of the Concession Agreement and some

of the defaults, pointed out by the writ petitioner, to the

respondents, were never denied by the respondents and,

hence, those defaults never attained the shape of a dispute

within the meaning of Article 44 of the Agreement.

105. "Dispute", as has been discussed hereinbefore,

would mean, in simple expression, difference over an issue.

"Default, on the other hand, is something, which means

omission of that which a man ought to do. (Per Dhan Singh

Ramkrishna Chaudhari v. Laxminarayan Ramkishan,

reported in (1974) 2 SCC 293.

106. In order to appreciate the rival submission as to

whether a dispute existed between the writ petitioner and the

respondents, it would be necessary to traverse some aspects of

the Concession Agreement and the written correspondences.

107. Article 37 of the Concession Agreement deals

with the topic of Termination. It would appear that termination

of the Concession Agreement is possible from either ends, one

from the side of the Concessionaire and the other from the side Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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of the Authority.

108. Clause 37.1 deals with Concessionaire default

and provides that save as otherwise provided in the Agreement,

in the event that any of the defaults, as mentioned therein,

shall have occurred and the Concessionaire fails to cure the

default within the cure period set forth or where no cure period

is specified, then, within a cure period of 60 days, the

Concessionaire shall be deemed to be in default of the

Agreement and this is known as Concessionaire default. Clause

37.1.1 also provides a list of instances, which may be termed as

Concessionaire default.

109. Clause 37.2, on the other hand, deals with

Termination for Authority default. It provides that in the event

of any of the default, specified therein, if the Authority fails to

cure such default within a period of 90 days or such longer

period as has been expressly provided in the Agreement, it shall

be termed as Authority default.

110. It may be mentioned that Clause 37.1.1, which

deals with Concessionaire default, lists as many as 23

circumstances, whereunder the Authority can terminate the

agreement; whereas Clause 37.2, which deals with Authority

default, provides a list of only four instances, when the

Concessionaire can terminate the agreement.

111. It is apparent from the language of Article 37 Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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that the agreement may be terminated even if one of the

defaults is not cured.

112. The Agreement also provides a procedure for

termination as contained in 37.1.2 and 37.2.2 for

Concessionaire default and for Authority default respectively.

The procedure is same for both the parties and the procedure is

as follows:

"Upon occurrence of Concessionaire/ Authority default the Concessionaire/Authority shall be entitled to terminate the Agreement by issuing a Termination Notice to the Concessionaire/Authority, as the case may be, provided that before issuing the Termination Notice, the Concessionaire/Authority shall by a notice inform the Concessionaire/Authority of its intention to issue such Termination Notice and grant 15 days to the Concessionaire/Authority to make representation and may after the expiry of such 15 days whether or not it is in receipt of such representation, issue the Termination Notice."

113. It may be pointed out here that so far as

Concessionaire default is concerned, there is an additional

procedure, which is not found in Authority default. The

Authority can terminate the Agreement only on compliance of

Clause 37.1.2, which provides issuance of a copy of termination

notice to the Senior Lenders of the Concessionaire. However, in

the case of Authority default, there is no such requirement.

114. Thus, the process of termination may be Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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summarized as follows;

a) Issuance of Notice to cure defaults ;

b) Time period for curing defaults elapses;

c) Notice of Intention to terminate;

d) Consideration of representation, if any, and

e) Termination of Agreement

115. Along with the process of termination of

agreement, it is equally necessary to understand the

consequences, which ensue, when Agreement is terminated.

116. Clause 37.3 deals with the Termination

Payment. Clause 37.3.1 provides that upon termination on

account of Concessionaire default, during the operation period,

the Authority shall pay to the Concessionaire, by way of

Termination Payment, an amount equal to 90 per cent of the

Debt Due less Insurance Cover provided that if any insurance

claims, forming part of the Insurance Cover, are not admitted

and paid, then, 80 per cent of such unpaid claims shall be

included in the computation of Debt due.

117. Clause 37.3.2 provides that for termination on

account of Authority Default, the Authority shall pay to the

Concessionaire, by way of termination payment, an amount

equal to;

a. Debt due; and

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118. Clause 37.4 of the Agreement deals with other

rights and obligations of the Authority and it provides, inter alia,

that upon termination for any reasons whatsoever, the

Authority shall be deemed to have taken possession and control

of the project Highway forthwith, take possession and control of

all materials stores, all implements, construction plants and

equipment on or about the site.

119. It would appear from the reading of various

clauses, referred to hereinabove, that when there is default on

the part of any of the parties, the party, suffering from the

default, must issue a notice to cure the defaults. When the

notice to cure default is issued by a party, the party, called

upon to answer the notice, may have three probable options,

namely;

a. The party, called upon to answer the notice to cure default, may admit the default and cure it. In such an event, no dispute arises;

b. The party, called upon to answer the notice, takes a prevaricating stand. In such an event, no dispute arises, because there is no specific denial of the default and, hence, the party, issuing the notice to cure defect, may proceed to the next stage, that is, issuance of notice of intent to terminate the agreement;

c. The party, called upon to answer the notice to cure, may deny the existence of default. In such an instance, dispute arises.

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120. Thus, in the present set of facts, the question

of referring the matter to the Bihar Public Works Contracts

Disputes Arbitration Tribunal Act, 2008, would arise only in the

third circumstance, because in the first two circumstances,

there exist no difference or dispute within the meaning of the

Bihar Public Works Contracts Disputes Arbitration Tribunal Act,

2008, for referral of the matter to the Tribunal.

121. It, now, needs to be determined the

circumstances, whereunder the case, set up by the writ

petitioner, falls.

122. In order to ascertain whether the disputes

arose or not, for the purpose of arbitration, it would be

necessary to consider all the circumstances preceding the writ

petition.

123. The undisputed circumstances, leading to the

writ petition, started with a news item, dated 06.06.2011,

appearing in Hindustan Times, under the caption "Mining

Operations to gradually stop in State". As the news,

regarding ban on mining operations, had a bearing on the

proposed Concession Agreement between the writ petitioner

and the respondents, the writ petitioner wrote a letter, dated

16.06.2011, Annexure 29 to the writ petition, addressed to the

respondent No. 7, namely, Chief General Manager, Bihar State

Development Corporation Limited, stating therein that while Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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submitting the bid for construction of four lane highway

between Mohania to Ara, they had envisaged mining of

aggregates from the stone quarries in the possession of

Government of Bihar. The stone quarries mentioned were as

follows:

a. Plot No. 924 (P)-Rohtas-Aggregates for concrete

works

b. Plot No. 3(P)-Rohtas-Aggregates for WMM and

Bituminous Works

c. Plot No. 4084- Kaimur-Aggregates for GSB

materials

124. In the letter (Annexure 29), the writ petitioner

mentioned that a mega project of this kind cannot be executed

without raw materials like aggregates and it will be practically

impossible to execute the project without the mining leases.

The writ petitioner also mentioned, in its letter, that importing

aggregates from neighbouring States will not only tremendously

escalate the project cost, but will also have uncertainty of

supplies and inconsistent quality. The writ petitioner

categorically stated, in its letter (Annexure 29), that the bid

validity would be extended beyond 15th June, 2011, provided

the respondent No 3, Bihar State Road Development

Corporation Limited, grants mining leases for the three plots

mentioned above for a period of 48 months failing which, it Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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would not be possible to extend the bid validity beyond the

period 15.07.2011 in view of spiraling commodity prices like

bitumen, steel, cement, etc.

125. After the letter, dated 16.06.2011 (Annexure

29), the writ petitioner issued another letter, dated 17.06.2011

(Annexure 30), addressed to the respondent No. 7, namely,

Chief General Manager, Bihar State Development Corporation

Limited, raising its concern regarding the availability of mining

leases for stone quarrying set out in the letter, dated

16.06.2011 (Annexure 29), and impressed upon the respondent

No. 7, namely, Chief General Manager, Bihar State

Development Corporation Limited, to resolve the issue before

entering into the Concession Agreement. It is, now, of immense

importance to note that the respondents, thereafter, without

adverting to the conditional bid by the writ petitioner, accepted

the conditional bid with the approval of the Cabinet.

126. Pursuant to the requests made, through

Annexure 29 and 30 the respondent No. 4, Managing Director,

Bihar State Road Development Corporation Limited, wrote a

letter, dated 03.11.2011 (Annexure 32), to the Collector,

Rohtas, Sasaram, whereby the respondent No. 4 brought to the

notice of the Collector that the writ petitioner had been issued

letter of award for four laning of Mohania-Ara section of NH 30

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and that the writ petitioner would require approximately 4

million tonnes of aggregate for completion of the project for

which a request had been submitted. The respondent No. 4,

accordingly, requested the Collector to take necessary action as

per the provisions of Mines & Minerals (Development &

Regulation) Act, 1957, Rule 36 "Relaxation of rules in special

cases".

127. The letter of the respondent No. 4 (Annexure

32), goes to show that acting on the request of the writ

petitioner, steps had, indeed, been taken by none other than

respondent No.4, who is the Managing Director of the

respondent-Corporation, to grant mining leases to the

appellant; but as would be seen, later, the mining lease was not

granted.

128. Though the days passed by, there was no

headway with respect to the request of the writ petitioner for

granting mining leases. The respondents, thereafter, sought for

the assistance of the Independent Engineers to suggest the

course of action to be adopted vis-a-vis the grievances of the

appellant. It may be pertinent to mention here that an

Independent Engineer was appointed by the respondents in

terms of the Concession Agreement to make necessary

comments on issues as and when sought for by the

respondents.

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129. In the present case, Intercontinental Consultants

and Technocrat Pvt. Ltd was appointed as Independent

Engineer. There was a meeting among the writ petitioner,

respondents and the Independent Engineer, on 05.04.2013, to

discuss the issues raised by the Concessionaire, the writ

petitioner, and accordingly, the respondents directed the

Independent Engineer to review the issues raised by the writ

petitioner and furnish comments.

130. The Independent Engineer, vide its letter, dated

31.05.2013 (Annexure 3), addressed to the respondent No. 8,

namely, General Manager of the respondent-Corporation, laid

its comments on the issues raised. The letter (Annexure 3),

among others, mentioned that if the writ petitioner is required

to bring the aggregates from the identified sources in the

districts of Mirzapur, Sonbhadra and Gaya, then, the additional

cost, bearing in mind the relevant technical factors, would come

to Rs. 410.13 crores. The Independent Engineer impressed

upon the respondents to take immediate steps to resolve the

issues in the interest of the project.

131. Thereafter, on 25.09.2013 (vide Annexure 2), a

review meeting was held in the Conference room of BSRDC in

the presence of respondent No. 8, namely, General Manager of

the respondent-Corporation, the Independent Engineer, and the

representative of the writ petitioner.

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132. Among the various issues discussed in the

meeting, dated 25.09.2013, the important agenda, having a

bearing in the present case, was item No. 2 relating to

allotment of mines. It has been recorded in the minutes that

the respondent No. 8, namely, General Manager of the

respondent-Corporation, had informed in the meeting that the

Government had taken a decision not to allow mining in the

State of Bihar and, as such, the Concessionaire has to arrange,

in the interest of the work, mines outside the State of Bihar. As

the minutes reveal, the cost factor, for procurement of

aggregates from outside the State of Bihar, was discussed that

such a step had got material financial impact of more than Rs

400 cr.

133. The aforementioned minutes further reveal that

the respondent No. 8, namely, General Manager of the

respondent-Corporation, having discussed the matter with the

Independent Engineer, gave a 'go ahead to the writ petitioner

with the installation of crusher and procurement of aggregates

from the neighboring States'.

134. The minutes No. 2 (in Annexure 2), being

extremely relevant, is reproduced herein;

"Allotment of Mines: Shri Vijay Shankar, GM informed that the Government has not taken a decision to allow mining in the State of Bihar and as such the Concessionaire has to arrange mines outside the State of Bihar, in the interest of work. Mr. Rajhoo Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Bharot, CMD, submitted that the allotment of mines at Sasaram is a precondition before signing the Concession Agreement. The procurement of the aggregate from the neighbouring States has got material financial impact of more than Rs400 cr. This has been vetted by the Independent Engineer vide their letter no. ICT/ IE/ BSRDC/ IND/ NH-30/ TL/ 416 dated 31.5.2.2013. Procuring aggregate from the neighbouring State will necessitate re-imbursement of extra lead charges, Entry tax, toll tax etc as brought out in the earlier correspondence. It is imperative to note that no tangible progress can be achieved without mining and crushing, even if appointed date is fixed.

Shri Vijay Shankar, GM wanted to know the view of Shri A.D. Narain, Independent Engineer on this issue. Shri A.D. Narain stated that ICT have already obtained legal opinion and have also recommended re-imbursement of additional cost vide their letter dared 31.5.2013. He further stated that even otherwise the Concessionaire is entitled for re- imbursement of additional cost on account of subsequent legislation.

In view of above, Shri Vijay Shankar, GM requested the Concessionaire to go ahead with the installation of crusher and procurement ofaggregates from the neighboring States. Shri Vijay Shankar, GM requested the DGM (CPIU) Shri R.P. Singh and Shri Mahesh Prasad, DGM (PPP) to initiate a note to the Government appraising financial implication."

(Emphasis is added) Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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135. The writ petitioner, thereafter, went ahead with

the procurement of aggregates from neighbouring States in

view of the go-ahead given to him by the respondent No. 8. It

may be pointed out here that at the time of making

representation, the respondent No. 8 was fully aware of the fact

that such a step would burden the respondent Corporation with

an extra cost of more than Rs. 400 crores than the amount

contracted by the parties for the project; yet the representation

was made, which shows that respondent No. 8, namely,

General Manager, Bihar State Development Corporation

Limited, was seized of all the relevant factors before taking a

decision on the procurement of aggregates from outside the

State of Bihar.

136. On 05.08.2014, vide Annexure 33, another

meeting was held among the respondent No. 8, namely,

General Manager, Bihar State Development Corporation

Limited, the Independent Engineer, and the representative of

the writ petitioner and the proceeding of the meeting was

recorded. As against Serial No. 3, the discussion held and

decision arrived at with respect to payment of extra lead of

aggregates were recorded.

137. It was recorded in the minutes that since there

was no provision of extra lead aggregate in the CA (Concession

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has already been rejected vide letter No. BSRDCL-

772/2011/Part-II/2013-1428, dated 16.06.2014. It is further

mentioned therein that on the request of the concessionaire,

BSRDCL shall take legal opinion on this issue.

138. The minutes in Serial No. 3, in Annexure 33, is

reproduced herein as follows;

"It has been informed that there is no provision of extra lead aggregate in the CA and the claim for extra lead of aggregate has already been rejected vide their letter no.BSRDCL-772/2011/Part- II/2013-1428, dated 16.6.2014.On the request of the concessionaire, BSRDCL shall think over to take legal opinion on this issue."

139. The fallout of the minutes, vide Serial No. 3, in

Annexure 33, was issuance of Notice, dated 09.08.2014,

Annexure 6, under Clause 37.2 of the Concession Agreement,

whereby the writ petitioner invoked the Authority default clause

notifying the respondents to cure the defaults and issues within

a period of 90 days of the notice.

140. Among the various defaults and issues raised by

the appellant, the default and issue against serial No. 1 was

with respect to non-payment of additional cost incurred for the

procurement of aggregates from longer leads amounting to

Rs. 5.63 crores till date.

141. Within one month from the date of issuance of Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Annexure 6, a meeting was held, on 04.09.2014, Annexure 7,

among the respondent No. 8, the Independent Engineer, and

the representative of writ petitioner and the proceedings of the

meeting were recorded. The first item of the meeting was

regarding the Notice, under Clause 37.2, served by the writ

petitioner upon the respondents. As against this item of

discussion, the following minutes were recorded;

"The Authority advised IE to examine and submit the proposal for additional cost for procurement of aggregates involving longer leads, by 8th September, 2014 for further consideration and submission to the State Government for approval considering the following aspects:

Cost implication for extra lead to be calculated considering carriage from road 86 rail both.

Carriage cost to be calculated from latest SOR Quarry considered in PPR to be reflected in the proposal State support agreement clause to be considered It is also directed to include the financial implication to the Authority taking into account termination of contract pursuant to the notice of the Concessionaire. The Final decision in this regard will be taken by the Govt. of Bihar ........

........

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of condition precedent is, now, rejected by the Authority. The Concessionaire may take recourse of Arbitration in this regard."

(Emphasis is supplied)

142. The meeting, dated 04.09.2014, Annexure 7,

reveals two important aspects, which have great bearing on this

appeal.

143. Firstly, the respondents, again, changed their

stance, contrary to the one taken vide Annexure 33, and the

respondents agreed to consider the grievance of the writ

petitioner with respect to payment of additional cost and

directed the Independent Engineer to submit fresh proposal

bearing in view the cost implication for extra lead to be

calculated considering carriage from road and rail both, carriage

cost to be calculated from latest SOR, quarry considered in PPR

to be reflected in the proposal, and State support agreement

clause to be considered. It was also recorded in the said minute

that final decision, with respect to payment of additional cost,

would be taken by the Government of Bihar.

144. Secondly, there was another issue discussed in

item No. 1 under the title "Failure to procure satisfaction of

condition precedent". In the minutes, the relevant decision

taken against this issue was that the damages, claimed by the

Concessionaire for failure to procure satisfaction of condition

precedent, is, now, rejected by the Authority; hence, the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Concessionaire may take recourse to Arbitration in this regard.

145. Thus, when the claim, with respect to the issue

of failure of the respondents to procure satisfaction of condition

precedent, was rejected, it gave rise to a disputed claim and

accordingly, the writ petitioner was advised to take recourse to

Arbitration; but this was not so with respect to the issue of non-

payment of additional cost for procurement of aggregates from

longer leads, because there was no denial of such a claim and,

hence, no question arose for referral of the matter to

Arbitration.

146. The other important aspect of the meeting,

dated 04.09.2014 (Annexure 7), was the last recorded minute,

which stated as follows;

"Authority advised the Concessionaire to withdraw the termination notice issued by them in the light of discussion/decision held in the meeting. The concessionaire agreed for the same depending upon the recommendation of the proposal of the extra lead by the Authority to the Govt. of Bihar."

(Emphasis is added)

147. Thus, the respondents desired that the notice of

cure, issued by the writ petitioner, be withdrawn.

148. Following the minutes, recorded in the meeting,

dated 04.09.2014, against the item in serial No. 1, the

Independent Engineer submitted a fresh report to the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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respondent No. 8, vide letter, dated 09.09.2014 (Annexure 34).

It is important to note herein the subject reference of the letter,

dated 09.09.2014, which contains a reference to the Notice,

issued by the writ petitioner under Clause 37.2 of the

Agreement. Among the other technical contents of Annexure

34, the important aspect of the letter having a bearing in the

present context, is the observation contained in serial No. 1 by

which the assessment of the procurement of aggregates from

outside the State of Bihar has been reflected. The observations

are as follows;

"Cost implication for carriage of aggregate from Dalla and Dagmagpur mines in UP through Road Transport is Rs 435.28 crores Cost implication for carriage of aggregate from Dalla and Dagmagpur mines in U.P through Road and rail transport is Rs 277.288 crores."

149. The Independent Engineer also offered his

comments on the termination agreement in serial No. 7, which

may be reproduced here for the sake of understanding of the

issues.

"Article 37.3.2 of the Concession Agreement provides for quantum of payment to the Concessionaire in case of the occurrence of Default on the part of the Authority covered under clause 37.2.1 which is a sum equal to sum total of Debts due on the date of termination/ transfer date: And Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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150% of the Adjusted Equity • The following are the components of Debt Due payable to the Concessionaire upon occurrence of Default by the Authority:

The Principal Amount Outstanding to Senior Lenders under the Financing Agreements for financing the Total Project Cost (the principal) i.e the present outstanding amount from the Lenders is Rs 248.49 crores.

All accrued interest, financing fees and charges payable under the Financing Agreements on or in respect of the debt referred to in Sub clause (1) above until the transfer Date;

Any sub-ordinate debt under clause (c), in respect of Debts other than the borrowings from Lenders plus interest accruing @ maximum above the bank rate 5% thereon."

150. While concluding the comments in serial No. 7,

the Independent Engineer opined that the tentative amount on

account works out to about Rs 602.00 crores. The Independent

Engineers further commented that approximate estimated cost

for re-tendering of this project worked out to Rs 1472.50 crores

if the project is finally terminated.

151. Among the various opinions, given in the letter,

dated 09.09.2014 (Annexure 34), one of the important

observations was that BSRDC could consider paying the

additional cost due to extra lead as it will, in the overall

position, involve less financial implication to the Government Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Exchequer as compared to other two options, viz., termination

cost payable to the Concessionaire and re-tendering cost.

152. On 06.11.2014, vide Annexure 8, another

tripartite review meeting was held at the Office of BSRDCL,

Patna, in the presence of the respondents, the writ petitioner

and the Independent Engineer. In the said meeting, vide item

(b), the issue of withdrawal of termination notice was

discussed. Against this item, the following minutes were

recorded :

"It has been informed by the Concessionaire that their notice under Clause 37.2 of CA is not a termination notice since it is the notice to the Authority to cure all the issues having material adverse effect on the project within 90 days.

The Authority stated the issues raised in the Termination Notice are promised to be cured by the Authority.

Hence the Concessionaire assured that they will not issue Termination notice as per clause 37.2.2 of the Concession Agreement"

(Emphasis is supplied)

153. It is seen that by an explicit language, used in

the minutes, the respondents promised to cure the issue raised

in the Termination Notice.

154. A reading of issue, mentioned in item no. (1)

(Annexure 8), further reveals that aggregate for longer leads Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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was also discussed. A verbal representation was made by the

writ petitioner to the respondents stating that Rail cum Road

route is not feasible to complete the work within the stipulated

construction period. Hence, it requested to consider only road

route for the proposal of payment of excess cost for

procurement of aggregates form longer leads. The respondents,

as is learnt from the minutes, informed that they would write to

the concerned Railway Authority at, Allahabad, to confirm the

availability of rakes/wagons and that the decision will be taken

accordingly.

155. Situated thus, it is clear that the proposal, for

procurement of aggregates from outside the State of Bihar, was

accepted by the respondents and that is why, they had

considered writing a letter to the Railways.

156. In the meanwhile, on 28.10.2014, opinion from

Principal Additional Advocate General was also obtained and he,

too, opined that payment of extra lead for stone aggregates can

be allowed subject to approval by the Cabinet.

157. On 21.11.2014. the respondent No. 7 addressed

a letter to the respondent no. 2 (vide Annexure 35), on the

subject, seeking, in principle, approval of Rs 435 crores with

regard to extra cost carriage of stone aggregate for N.H. 30

Mohania-Ara section.

158. In the meanwhile, a joint meeting was Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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convened, wherein the lenders of the writ petitioner, namely,

Union Bank of India, Bank of Baroda, Oriental Bank of

Commerce and Punjab and Sindh Bank, were present along with

the respondent No. 8 and the writ petitioner to discuss the

progress of the project and the issues raised by the writ

petitioner. It has been recorded in the minutes that the

respondent No. 8 advised the Bank authorities that the writ

petitioner should arrange extra funds, required for procurement

of aggregates from longer leads for the project, from the

lenders, or internally, by the Company, as the State

government has not granted approval to the Authority to bear

the extra cost. However, the Authority will consider extending

concession period for the extra cost incurred by the company

based on revised cash flow.

159. It is seen that even in the joint meeting with

Bank officials, the respondents did not deny entitlement of

extra cost by the writ petitioner.

160. By now, neither the respondents paid the

additional cost to the writ petitioner nor did they deny, in

principle, that the claim of the writ petitioner is illegitimate. In

these circumstances, as is understood from the letter, dated

04.02.2015 (Annexure 11), the writ petitioner invoked Clause

37.2.2 of the Concession Agreement and issued a notice of

intent to terminate the Agreement asking the respondents to Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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make representation within the stipulated period of 15 days.

161. 1t may be mentioned that Notice to cure defaults

required that defaults be cured within 90 days and even

though it has been noticed hereinbefore that on record, the

respondents promised to cure the defaults, yet the defaults

were not cured since the date of 09.08.2014, when the notice

to cure default was, first, issued by the writ petitioner.

162. Among the list of defaults , mentioned along

with Annexure 11, item No. 1 referred to Non-payment of

additional cost incurred for the procurement of aggregates from

longer leads amounting to Rs 9,15,20,314/- till 31.12.2014 and

non-granting of permission to procure aggregates from longer

leads for road works as had been decided in the meeting, dated

25.09.2013.

163. Not barely three days had passed after the

issuance of the letter, dated 04.02.2015. Annexure 11, that the

respondents, through respondent no. 9, issued a letter, dated

07.02.2015 (Annexure 12). The contents of the letter, dated

07.02.2015, being relevant, are being reproduced ad verbatim.

"Dear Sir,

The Concessionaire given NOTICE and invoke the provisions of clause 37.2.2 of the Concession Agreement with intension of the Concessionaire to issue Termination Notice and calls upon the Authority to make representation within 15 days from the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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receipt of this Termination Notice.

In this connection, the Authority is directed to the concessionaire to submit the details all the materials stores, plant and machineries and equipment available at site to the Authority pursuant to clause 37.4 (b) of C.A for taking further action by the Authority"

(Emphasis is added)

164. It is evident from the contents of Annexure 12

that pursuant to the invocation of Clause 37.2.2 of the

Concession Agreement by the writ petitioner, and the issuance

of notice of intent to terminate the Agreement, the respondents

did not even submit a representation in terms of the rights,

conferred by the said clause; rather, they straightaway

proceeded to Clause 37.4 (b), the occasion for which would

have had arisen only when the agreement had been terminated

after exhausting the process. Therefore, a right to

representation, which existed, had been waived by the

respondents. Thus, on principle, the respondents agreed to the

termination of the agreement.

165. Ordinarily, after the issuance of the letter, dated

07.02.2015, Annexure 12, no issue, with respect to the

payment of additional cost for procurement of aggregates from

longer leads, remains alive; nonetheless; it transpires from the

letter, dated 16.02.2015, that in para 3.1, under the heading Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Non-payment of additional cost incurred by the Concessionaire

for procurement of aggregates, the respondents referred to

Clause 12.1(d) of the Agreement, which provides as follows;

"Prior to commencement of Construction works, the Concessionaire shall make its own arrangement for quarrying the materials needed for the project highway under and in accordance with applicable laws and applicable permits".

166. By referring to Clause 12.1(d), the respondents

stated that it is the responsibility of the writ petitioner to

procure aggregates or any other materials needed for the

project highway.

167. Apparently, it seems that contents of Clause

12.1(d) have not been construed in proper perspective. It

mentions that the Concessionaire, the writ petitioner, shall

make its own arrangement for quarrying the materials needed

for the project highway under, and in accordance with,

applicable laws and applicable permits. Quarrying is an act of

removal of aggregates from the quarry, which the writ

petitioner had been demanding all along; but despite repeated

applications from the writ petitioner, the respondents had done

nothing to allow quarrying in the State of Bihar by granting

mining lease; rather, they permitted the writ petitioner to bring

aggregates from outside the State of Bihar, which the writ

petitioner, admittedly, did. Hence, quarrying, in the present Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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context, does not mean quarrying even though, when the

quarrying is prohibited law.

168. A further reading of paragraph 3.1 of Annexure

16 would show that respondents contended that by then, the

Govt. of Bihar had, vide Notification No. 3085/M, Patna, dated

11.08.2014, opened the mining lease for procurement of

aggregates and even then, the writ petitioner had not made any

efforts for procurement of aggregates.

169. However, it is not understood as to how

removal of prohibition on mining would automatically lead to an

inference that the writ petitioner would have been granted

mining lease, had he made such efforts. In fact, it would not be

proper to even suggest that writ petitioner had not put up

efforts to get a mining lease within the State of Bihar. The

letters, vide Annexure 29 and 30, indicate that writ petitioner

was pressing hard for a mining lease in the State of Bihar,

pursuant to which the letter, vide Annexure 32, was written by

respondent No. 4 to the Collector, Rohtas, Sasaram, for

considering the request of the writ petitioner in view of Rule 36

of the Rules under the Mines 86 Minerals (Development 86

Regulation) Act, 1957, as a special case.

170. It, thus, clearly emerges that the plea of lifting

of prohibition on mining and alleging the writ petitioner of not

putting up efforts to get an allotment of mining lease was taken Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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only with a view to subverting the Notice of Intent to Terminate

issued by the writ petitioner. In any view of the matter, such a

reply, as contained in Annexure 16, was issued only after the

issuance of Notice of Intent to terminate in view of Authority

default.

171. Having induced the writ petitioner, by various

representations to procure aggregates from outside the State of

Bihar, a representation, as have been noticed, on which the writ

petitioner had acted upon, it was not open to the respondents

to turn around and say that it is the responsibility of the writ

petitioner to procure aggregates.

172. Nonetheless, the writ petitioner issued a

termination notice by invoking the provisions of Clause 37.2 of

the Agreement.

173. It is noteworthy that more than a month after

the issuance of Termination Notice, dated 20.02.2015, the

respondent No. 2, namely, Principal Secretary, Road

Construction Department, in his letter, dated 23.03.2015,

Annexure 26, informed the respondent No. 4, namely,

Managing Director, Bihar State Development Corporation

Limited, that the matter, as regards payment of extra cost of

carriage of stone aggregate, is being submitted for review by

Assembled Authorized Committee under the Chairmanship of

the Chief Secretary. It may be further pointed out that this Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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letter, Annexure 26, was in response to the request made by

the respondent No. 7, namely, Chief General Manager, Bihar

State Development Corporation Limited, on 21.11.2014, by a

letter to the respondent No. 2, namely, Principal Secretary,

Road Construction Department, vide Annexure 35, for granting,

in principle, approval for payment of Rs. 435 crores With regard

to extra cost carriage of stone aggregate for N.H. 30 Mohania-

Ara section.

174. The writ petitioner, then, approached the Court

by filing a writ petition, on 29.04.2015, subsequent to which

the respondents issued notices, dated 26.05.2015 and

10.06.2015, vide Annexure 22 and 23 respectively, purporting

to terminate the agreement.

175. In view of the above sequence of events, the

first question, which needs an answer is whether, till the filing

of the writ petition, a dispute existed on the point that the writ

petitioner is not entitled to payment of additional cost for

procurement of aggregates from longer leads. If the answer to

this question is in the affirmative, the writ petition would not be

maintainable in view of Article 44 containing a clause of

Arbitration. On the other hand, if the answer to the question, so

posed, is in the negative, the writ petition would be

maintainable to the extent that no dispute existed for referral to

arbitral Tribunal.

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176. Recalling, at this stage, the process for

termination of agreement, as discussed hereinbefore, the party

called upon to cure the defects has two options; namely, he

may admit the defaults, or he may deny that defaults exist. A

dispute would arise only when there is a specific denial of

defaults as mentioned in the Notice to Cure defaults.

177. In the sequence of events, pointed out above,

it would be noticed that the writ petitioner had been urging the

respondents cure the defect with respect to procurement of

aggregates from longer leads. The respondents prevaricated on

this issue and, on one occasion, made an explicit promise to

cure the default.

178. Thus, the claim, as to additional cost, was

admitted, and, hence, the writ petitioner was asked to procure

aggregates from longer leads. A promise, on which the writ

petitioner acted and incurred financial expenditure under the

impression additional cost issue would be cured, has to be held

against the respondents. However, as no solution could be

arrived at nor was the claim denied, it amounted to a default on

the part of the respondents having a material adverse effect on

the project implementation. Once the notice to cure the defaults

was issued by the writ petitioner, on the ground of, amongst

others, additional cost, and the default was not denied by the

respondent, the stage for disputing the claim was over. Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Thereafter, the only recourse, which the writ petitioner could

have taken, was to issue Notice of Intent to Terminate, which

the writ petitioner did issue. As the facts reveal, even after the

Notice of Intent to Terminate, the respondents did not deny the

contents of notice; rather, they took the follow up steps for

termination of agreement for taking possession and control of

the project in terms of Clause 37.4. Thus, a dispute was not

raised even after the Notice of Intent to terminate was issued.

Logically extended, it would mean that the stage for raising

dispute was already over.

179. Indeed, the respondent, vide letter, dated

16.02.2015 (Annexure 16), served a representation against the

Notice of Intent to Terminate issued by the writ petitioner; but

by then, the scope for raising dispute was over. If the

representation, vide Annexure 16, is construed as creating a

dispute on the claims made by the writ petitioner, then, on the

face of Annexure 12, it would amount to allowing the

respondents to approbate and reprobate. It is not permissible

for the respondents to once admit the default and take follow

up action in termination of the contract and, then, to turn

around and say that the Notice of Intent to Terminate, issued

by the writ petitioner, is illegal. It would be evident from the

conduct of the respondents that even though settlement of

financial claims was not arrived, yet so far as the termination of Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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agreement is concerned, the letter, dated 04.02.2015

(Annexure 11), amounted to accord and satisfaction so far as

the issue of termination of agreement is concerned.

180. It is, thus, found that so far as the issue raised

by the writ petitioner, regarding payment of additional cost, for

procurement of aggregates from longer leads, is concerned, the

respondents not only admitted the default by promising to cure

it, but they also omitted to cure the default and this act of the

respondents amounts to default and not a dispute. The writ

petitioner had the liberty to initiate the process of termination

of agreement in the event of any one of the default occurring

within the meaning and scope of Clause 37.2.1.

181. Thus, it would be seen that there remains no

issue for adjudication by the Arbitration Tribunal as regard the

issues relating to payment of additional cost for procurement of

aggregates from longer leads and consequential termination of

agreement. In any view of the matter, if the respondents were

aggrieved by the act of the writ petitioner in issuing Notice of

intent to Terminate, and term it as 'dispute' within the meaning

of Article 44, then, even they were at liberty to approach the

Arbitration Tribunal; but, as the records would show, the

respondents, too, never approached the Tribunal.

182. Having not approached the Arbitration Tribunal

and having admitted the default by promising to cure the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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default, it does not lie in the mouth of the respondents to say

that disputes are arbitrable. It is accordingly held, on the facts

of this case, that no occasion arose for invocation of Article 44

of the Concession Agreement.

183. Moreover, as held by the Supreme Court, in

the case of Union of India v. Tantia Construction (P) Ltd.,

(2011) 5 SCC 697, while making an observation on arbitration

clause, that it is, now, well established that an alternative

remedy is not an absolute bar to the invocation of the writ

jurisdiction of the High Court or the Supreme Court and that

without exhausting such alternative remedy, a writ petition

would be maintainable. It was further held, in Tantia

Constructions (supra), that injustice, whenever and wherever

it takes place, has to be struck down as an anathema to the

rule of law and the provisions of the Constitution. The relevant

observations, appearing in Tantia Constructions (supra),

read:

"33. Apart from the above, even on the question of maintainability of the writ petition on account of the arbitration clause included in the agreement between the parties, it is now well established that an alternative remedy is not an absolute bar to the invocation of the writ jurisdiction of the High Court or the Supreme Court and that without exhausting such alternative remedy, a writ petition would not be maintainable. The Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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various decisions cited by Mr Chakraborty would clearly indicate that the constitutional powers vested in the High Court or the Supreme Court cannot be fettered by any alternative remedy available to the authorities. Injustice, whenever and wherever it takes place, has to be struck down as an anathema to the rule of law and the provisions of the Constitution."

SCOPE OF JURISDICTION UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA WITH RESPECT TO CONTRACTS BY OR ON BEHALF OF STATE: -

184. The learned Principal Additional Advocate

General strenuously argued that the claims, made in the writ

petition, fall within the realm of contract and in view of the

several pronouncements of Supreme Court, it is, now, well

settled that contractual obligations cannot be enforced by

resorting to extraordinary jurisdiction of the High Court under

Article 226 of the Constitution. Learned Principal Additional

Advocate General placed reliance on the case of Radhakrishna

Agarwal v. State of Bihar, reported in (1977) 3 SCC 457, to

buttress his argument that a writ petition, under Article 226 of

the Constitution of India, cannot, in the present case, be

maintained for enforcing contractual obligations.

185. The basic question, which needs to be

addressed, in the present appeal, is: whether the remedy Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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available, under Article 226 of the Constitution of India, can

legitimately be resorted to in order to obtaining a direction from

the High Court for payment of amounts due and payable by the

State Government in contractual matters and if so, in what

circumstances, such a remedy can be made available?

186. While considering the question, posed above,

what needs to be noted is that a government contract, even if

commercial in nature, involves, broadly speaking, four stages.

The first stage relates to the floating of tenders by publishing

notice inviting tenders. At this stage, the authorities concerned

are required to formulate the terms and conditions subject to

which the tenders would be invited and also the terms and

conditions of the contract, which, if entered into, would govern

the parties. These terms and conditions would obviously include

all the eligibility criteria for a person to participate in the tender

process. After the notice inviting tender is published and the

tenders are received, the second stage of such a contract

commences. This stage involves the process of taking of the

decision to allot or not to allot the contract at all and cancel the

entire process. This stage would include selection of the person

or the party to whom the contract shall be allotted. This stage

ends with the allotment of the contract or with the decision not

to allot the contract at all and cancel the entire tender process.

The third stage of the contract essentially covers the stage of Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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performance of the contract. This stage would include

commencement of the performance of the allotted contract and

would, normally, end with the completion of the allotted

contract. During this stage, there may arise the question of

breach of the contract, because of non-fulfilment of the terms

and conditions of the contract by either party to the contract.

The fourth stage of such a contract arises, when, on completion

of his part of the contract, the contractor or supplier raises his

demand for making payment of his bills. This fourth stage can,

however, be divided into two categories. There may be a case,

where the amount demanded is not disputed and yet the dues

of the contractor are not paid compelling thereby the contractor

to seek avenues for obtaining payment of his dues. In this

fourth stage, there may, however, be a case, where the

correctness of the demand for payment raised by the contractor

is disputed, denied or challenged by the authority, who had

allotted the contract. In such a case, too, the contractor may be

driven to take recourse to such avenues as may be open to

him, in law, for the purpose of enabling him to obtain his dues

in terms of the demand that he may have made.

187. It may, now, be pointed out that at the first

stage of a contract, which requires the authorities concerned to

formulate the terms and conditions subject to which the tenders

would be invited or the contract would be allotted, many factors Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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are taken into account. The decision as to what terms shall be

included in the tender is really a policy decision, for, it is the

authority, issuing the notice inviting tender, which is the best

judge to determine as to what terms and conditions would be

required for successful completion of the work or the project

concerned. Thus, it is, primarily, for the authority issuing the

NIT to decide what particular terms and conditions should be

incorporated in the NIT. However, when the invitation to tender

is floated, the second stage, which consists of the process of

selection of the person for awarding the contract, commences

and this process comes to an end, when a decision either

awarding the contract or cancelling the entire tender process is

taken. The decision to award the contract to a person, who

participates in a tender process, is not open to judicial review,

but the decision making process, which leads to the ultimate

decision, is, according to the law laid down in Tata Cellular v.

Union of India, reported in, (1994) 6 SCC 651, open to

judicial review. In Raunaq International Ltd. v. I.V.R.

Construction Ltd. and Ors., (AIR 1999 SC 393), the Apex

Court has made it clear that though the decision to award a

contract is not open to judicial review, the decision making

process, which leads to the ultimate decision, is, indeed, open

to judicial review provided that there is an element of public

interest involved in the case requiring a review by the court of Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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the administrative decision to allot the contract.

188. What may be further noted is that at the first

and the second stage of the contracts, when the government or

any of its instrumentalities sets up the terms and conditions of

the contract or takes a decision to allot the contract, it acts

purely in its executive capacity and its action is, therefore, open

to judicial review, though in a limited way, as indicated

hereinabove. However, when the third stage is reached and a

contract is entered into by the government or its

instrumentality, on the one hand, and the contractor, on the

other, the parties are no longer governed by constitutional

provisions, but by the terms of the contract. Hence, when a

State, purporting to act within the field allotted to it under the

terms and conditions of a contract, performs an act, the rights

and obligations of the parties would be, ordinarily, governed by

the law that governs the terms and conditions of the contract.

189. What logically follows from the above

discussion is that in the third stage, which consists of the

performance of the contract, the remedy of the parties to the

contract for breach of any of the terms and conditions of the

contract would, ordinarily, lie in the civil court of competent

jurisdiction unless the parties have, under the terms of the

contract, agreed to refer such a dispute to arbitration. Thus,

ordinarily, no writ would be issued, under Article 226 of the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Constitution of India, for a mere breach of the terms and

conditions of the contract, particularly, when, for settlement of

such a dispute, there is a provision for arbitration.

190. In the fourth stage of a contract, which arises

on completion of the contract, a demand for payment of bills or

Clues, raised by the contractor, may not be amenable to

arbitration proceedings, for, the authorities concerned, who had

allotted the contract, may dispute entitlement of the contractor

to receive the dues, which the contractor has demanded, or

there may be a case, wherein although no dispute is raised by

the authorities concerned that the bills are due and payable to

the contractor, the payment is not made.

191. In a case, wherein demands are not disputed,

but payment is not made, the demand for payment may or may

not be amenable to arbitration proceeding, for, it would

essentially depend upon the terms and conditions of the

contract inasmuch as the terms and conditions of the contract

would determine if, even for realization of an admitted amount

or even when there is no dispute as regards the dues claimed,

an arbitration proceeding can or must be resorted to. If no

provision for arbitration of such a claim has been made in the

contract agreement, the remedy of the person, who demands

payment, lies, ordinarily, in instituting suit in civil courts and

not in filing petition under Article 226 of the Constitution of Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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India, seeking enforcement of the State's obligation to pay its

dues.

192. What is, now, of immense importance to note

is that there may be a case, where the demand for payment

made by a contractor is disputed or there may be a cross-claim

raised by the State against the contractor. There may, however,

be cases, wherein the claim made by the contractor is admitted

and there is no cross-claim between the parties to be

determined. In such cases, there is really no dispute as regards

the facts. Would it, in such a case, be necessary for the writ

court to revert the party to the remedies available through the

civil court?

193. The answer to the crucial question, posed

above, hinges on the principle that if an alternative efficacious

remedy is available, writ jurisdiction shall not be exercised.

What is, of course, necessary to point out is that existence of

an alternative remedy is not an absolute bar to the jurisdiction

of the court under Article 226 of the Constitution of India, but is

always a matter of exercise of discretion and remains,

therefore, in the realm of prudence. What is, however, of great

relevance to note is that though a disputed question of fact is

not, normally, entertained by a High Court in its writ

jurisdiction, it will not, as a corollary, follow that if there is no

disputed question of fact, remedy under Article 226 of the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Constitution of India would be available. The mere fact,

therefore, that in a writ petition, the bills, raised by a

contractor, are admitted to be due and payable by the State

cannot, in itself, be a ground for issuing a writ of mandamus to

the State respondents commanding them to make payment of

the dues of such a contractor. Conversely put, a State cannot

refuse to pay its dues without any good and sufficient cause or

else, its refusal would amount to its act being arbitrary and a

remedy under Article 226 of the Constitution of India, in such a

case, may not remain as an absolute bar. Necessarily,

therefore, it is the facts of a given case, which would decide

whether a writ of mandamus can be issued or not.

194. It may be further noted that a writ of

mandamus is a public remedy and this remedy lies, when a

public authority fails to perform the duty entrusted to it by law.

In other words, a writ of mandamus is issued against a person,

who has a legal duty to perform, but has failed or neglected to

do so. Distinguishing a case, wherein a public duty of a State is

sought to be enforced, and a case, wherein a contractual

obligation of a State is sought to be enforced, Professor Wade,

in his well-known treatise, 'Administrative Law', makes it clear

that while a public duty is enforceable by the public law remedy

of a writ of mandamus, a contractual duty is enforceable, as a

matter of private law, through the avenues of civil courts. The Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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observations made, in this regard, by Professor Wade read

thus:

"...A distinction which needs to be clarified is that between public duties enforceable by mandamus, which are usually statutory and duties arising merely from contract. Contractual duties are enforceable as matters of private laws by the ordinary contractual remedies, such as damages, injunction, specific performance and declaration. They are not enforceable by mandamus, which in the first place is confined to public duties and secondly is not granted where there are other adequate remedies."

195. What, now, needs to be noted is that howsoever

thin and subtle may be, there is, indeed, a real and definite line

demarcation not only between a public wrong and a private

wrong, but also between a public law remedy and private law

remedy. Article 226 of the Constitution of India is pre-eminently

a public law remedy and is not, generally, available as a remedy

against private wrongs. Resort to Article 226 of the Constitution

of India can be had to enforce various rights of the public or to

compel the public or statutory authorities to discharge their

public duties and/or to act, in the realm of their public function,

within the bounds of law. The remedy under Article 226 of the

Constitution of India can, no doubt, be availed of even against a

private body or person; but the scope of the writ of mandamus Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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is limited to, enforcement of public duty. In minimum possible

words, but with extreme exactitude, clarified the Supreme

Court, in Binny Limited and Anr. v. V. Sadasivan and Ors.,

reported in MANU/SC/0470/2005, the position of law, in this

regard, in the following words:

"29. Thus, it can be seen that a writ of mandamus or the remedy under Article 226 is pre-eminently a public law remedy and is not generally available as a remedy against private wrongs. It is used for enforcement of various rights of the public or to compel public/ statutory authorities to discharge their duties and to act within their bounds. It may be used to do justice when there is wrongful exercise of power or a refusal to perform duties. This writ is admirably equipped to serve as a judicial control over administrative actions. This writ could also be issued against any private body or person, specially in view of the words used in Article 226 of the Constitution. However, the scope of mandamus is limited to enforcement of public duty. The scope of mandamus is determined by the nature of the duty to be enforced, rather than the identity of the authority against whom it is sought. If the private body is discharging a public function and the denial of any right is in connection with the public duty imposed on such body, the public law remedy can be enforced. The duty cast on the public body may be either statutory or Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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otherwise and the source of such power is immaterial, but, nevertheless, there must be the public law element in such action."

196. Thus, in the face of succinctly laid down position

of law with regard to the issuance of a writ of mandamus under

Article 226 of the Constitution of India, what one has to bear in

mind is that in order to invoke the writ jurisdiction under Article

226 of the Constitution of India, two conditions, in a case of

private wrong, must be satisfied, namely;

(i) the identity of the person, against whom the writ is sought, as a person or body, which is amenable to writ jurisdiction, and

(ii) the nature of duty, which is sought to be enforced, is a public duty or has an element of public interest.

197. In a given case, one may, perhaps, ignore the

first pre-requisite, namely, the identity of the person or body as

a person or body amenable to writ jurisdiction, but the second

prerequisite, as indicated hereinbefore, cannot be ignored, for,

in the absence of public interest or in the absence of breach of

public duty or in the absence of any public wrong having been

committed, no recourse to Article 226 of the Constitution of

India is possible.

198. What also needs to be cautiously noted is that

constitutional or statutory duty is a public duty and enforceable Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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by a writ of mandamus. To put it differently, the rights and

duties go hand-in-hand. When a right is given to a person by a

State, the State casts upon itself a duty to enforce such a right.

Logically, therefore, when a person is given fundamental right

by the Constitution, a duty rests on the State to ensure that the

person realizes his fundamental rights.

199. In a given case, therefore, if a person, aggrieved

by a breach of contract, shows that though the breach is in the

realm of a contract, the duty, sought to be enforced, is a

constitutional or statutory duty, the remedy of a writ of

mandamus may not be refused, for, it is the constitutional

obligation of the High Court, under Article 226 of the

Constitution of India, to enforce the constitutional and statutory

duties of the State and its instrumentalities.

200. The question, therefore, is as to whether every

breach of governmental obligation to pay its dues, under a

contract, falls outside the purview of Article 226 of the

Constitution of India. This brings us to a more important

question and the question is: Will the constitutional remedy of

Article 226 of the Constitution of India never be available

against a State even if the State refuses to carry out its

contractual obligations with ulterior motives, irrationally,

arbitrarily, unreasonably, unfairly, whimsically or when its

denial suffers from mala fide, or when the State, Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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demonstratively discriminates, while making payment of its

dues? Shall the writ court withdraw its hand resignedly and

helplessly by saying that a writ of mandamus is a public law

remedy and no writ of mandamus would be issued to any State

directing it not to discriminate or act irrationally, arbitrarily,

unreasonably, unfairly, whimsically, or with ulterior motives,

while refusing or omitting to make payment of its dues arising

out of contracts or when the State‟s denial is mala fide?

Imperative, therefore, for us to ask: Can a breach of contract

ever give rise to any constitutional obligation of the State to

make payment of its dues?

201. Coming, now, to the case of Radhakrishna

(supra), as referred to by the learned Principal Additional

Advocate General, it becomes necessary to discuss, herein, the

circumstances whereunder the decision, in Radhakrishna

(supra), was rendered.

202. This was an appeal from the judgment of Patna

High Court. In Radhakrishna (supra), the petitions were

directed against orders of the State Government, passed in

1974, revising the rate of royalty payable by the petitioners-

appellants under a lease of 1970, and, thereafter, cancelling the

lease by a letter of March 15, 1975. The petitioners' case was

that the revision of the rate of royalty payable by the

petitioners for the lease to collect and exploit Sal seeds from Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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the forest area was illegal during the subsistence of the lease

and, thereafter, cancellation of the lease itself was illegal for

various reasons.

203. The relevant clause, relating to revision of

royalty in the written contract, read as follows:

"The rate of royalty will be revised every three years cycle in consultation with the lessee and the decision will be binding on the lessee."

204. The Supreme Court found that there was no

restriction, under the terms of the contract, upon the amount

by which the royalty could be increased by a revision after a

three years' cycle under the relevant clause. The lessee was

only entitled, under the contract, to be consulted before a

revision. But the decision of the Governmental authorities to

enhance royalty was binding. It was in these circumstances

that the Supreme Court, held, in Radhakrishna (supra), that

the questions, which apparently arose, appertained to action,

alleged by the State, that fall within the terms of the

agreement between the parties, regulated by the duly signed

contract, which was presumably executed in compliance with

the provisions of Article 299 of the Constitution of India and,

accordingly, the petitioners could only get their remedies, if

they can obtain any at all, through ordinary suits for damages

or for injunctions to restrain breaches of contract provided they

could show how the contracts were broken or were going to be Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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broken.

205. While considering the scope of Article 226 of the

Constitution of India with respect to contractual matters, the

Supreme Court approved, in principle, the three circumstances,

laid down by the Patna High Court, in Radhakrishna (supra),

which are likely to arise vis-a-vis a contract.

206. The circumstances were stated as follows:

b. 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 Article 299 of the Constitution;

c. 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 petitioner alleges a breach on the part of the State; and d. 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.

207. The Patna High Court had held, in

Radhakrishna (supra), that so far as the first category of Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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cases are concerned, it could be held that public bodies or the

State are as much bound as private individuals and are to carry

out obligations incurred by them, because parties, seeking to

bind the authorities, have altered their position to their

disadvantage or have acted to their detriment on the strength

of the representations made by these authorities.

208. According to the Patna High Court, in

Radhakrishna (supra), the obligation could, sometimes, in

such cases, be appropriately enforced by filing of a writ petition

even though the obligation was equitable only.

209. As against the proposition, laid down by the

Patna High Court, with respect to the first category of cases, in

Radhakrishna (supra), the Supreme Court held that they do

not propose to express any opinion on the question whether

such an obligation could be enforced in a proceeding under

Article 226 of the Constitution. However, the Supreme Court did

hold that dispute, raised in Radhakrishna (supra), does not

fall within the first category of cases. The relevant extract of the

observations made by the Supreme Court, in Radhakrishna

(supra), in this regard, are reproduced herein as follows;

"13. The High Court thought that in such cases the obligation could sometimes be appropriately enforced on a writ petition even though the obligation was equitable only. We do not propose to express an opinion here on the question whether such an obligation could be enforced in proceedings under Patna High Court LPA No.2158 of 2015 dt.12-05-2016

113/208 Article 226 of the Constitution now. It is enough to observe that the cases before us do not belong to this category."

210. On an analysis of the Radhakrisha (supra), it is

found that even though Supreme Court gave its stamp of

approval on the categorization of cases with respect to

contractual rights, yet chose not to express any opinion on the

question whether, for contractual obligations, falling under the

first category, a writ under Article 226 of the Constitution of

India would lie or never lie?

211. Thus, the ratio of Radhakrishan (supra) cannot

be held to be a law of universal principle that under no

circumstances, a writ, under Article 226 of the Constitution of

India, would lie for enforcement of contractual obligation of the

State or its instrumentalities.

212. In order to ascertain the judicial trend, it would

be proper to examine some of the relevant judicial

pronouncements, wherein the issues of contractual obligations

vis-a-vis role of the State action were involved.

213. One of the principle cases, which dealt with the

issue of enforcement of contractual obligations was the case of

Divl. Forest Officer v. Bishwanath Tea Co. Ltd., reported in

(1981) 3 SCC 238, the facts of which may be taken note of

214. The facts of the case of Bishwanath Tea Co.

Ltd. (supra) was that the respondent had filed a writ petition Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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questioning the action of the appellant, the Divisional Forest

Officer, Darrang Division, for recovering Rs 7069.37 as royalty

for cutting and felling trees from Tezalpatty Grant 1 held under

lease, dated September 27, 1932, and for a mandamus

directing the appellant to issue permits without insisting upon

payment of royalty for the trees cut and felled from the area

under lease. As against the writ petition, a preliminary objection

was raised by the appellant that the right, claimed by the

respondent, flowed from the contract of lease and such

contractual rights and obligations can only be enforced in civil

court. It was contended that apart from the fact that

interpretation of the contract of lease is, generally, not

undertaken by the High Court in exercise of its extraordinary

jurisdiction under Article 226 of the Constitution of India, it was

further contended that even if interpretation of the relevant

clause of the lease, as alleged on behalf of the respondent,

finds favour with the court, yet facts will have to be

investigated before any refund could be ordered or a blanket

injunction could be granted for all times to come against the

appellant from performing his duty, namely, of granting permit

and recovering royalty.

215. The preliminary objection was overruled and the

writ petition was allowed by Gauhati High Court.

216. In appeal, the Supreme Court, at the outset, Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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held, in Bishwanath Tea Co. Ltd. (supra), that the

respondent, being a juristic person, was not entitled to any

relief for enforcement of rights guaranteed under Article 19 of

the Constitution of India and, on this count, alone, the writ

petition would fail.

217. In order to further appreciate the ruling of the

Supreme Court, in Bishwanath Tea Estate (supra), it would

be necessary to set out the some of the other facts involved.

218. Bishwanath Co. Ltd. had taken on lease land

measuring 1107.26 acres from the Government. The lease was

to be exploited for cultivation and raising tea-garden. The

manager of the company approached the appellant seeking

permission to cut 7000 cubic feet of timber from grant N.C.

Tezalpatty 1 of Nagshankar Mouza for utilising the same for

building of staff and labourer's houses. By a reply, the appellant

noted that the timber was to be cut for constructing houses in

Partabghur and Dekorai Tea Estates and that it was necessary

to ascertain whether any of the aforementioned two tea estates

was situated within the grant evidenced by lease of N.C.

Tezalpatty 1. It was made clear that if it was not so, full royalty

will be payable by the company for cutting, felling and removing

timber. The manager, by his letter, informed the appellant that

as the lessee is Bishwanath Tea Co. Ltd., it can cut and fell

timber from any of its leased area to 'be utilised for its purposes Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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in any other division. Therefore, the manager suggested that

the permit must be issued without insisting on payment of

royalty. The appellant, by his letter, informed the manager that

as the timber was required for use in Partabghur and Dekorai

Tea Estates, which were not within N.C. Tezalpatty Grant 1 of

Nagshankar Mouza from which timber was to be felled and cut,

full royalty will be payable on timber so cut and removed,

because it was to be utilised for the purpose unconnected with

the grant. For this assertion, the appellant relied upon a portion

of clause 2 of Part IV of the lease deed, dated September 27,

1932. Correspondence further ensued between the parties and,

ultimately, the respondent Company paid an amount of Rs

7069.37 as and by way of royalty under protest and, then, filed

a petition under Article 226 of the Constitution in the High Court

alleging that upon a true construction of the relevant clause of

the grant as also the proviso to Rule 37 of the Settlement

Rules, since the timber was required for the purpose connected

with the exploitation of the grant, the company, as lessee, was

entitled to cut and remove timber without payment of royalty

and, therefore, the recovery of royalty being not supported by

law, the appellant was liable to refund the same. The company

also prayed for a mandamus directing the appellant, who was

respondent in the High Court, to issue permits without insisting

on payment of royalty, whenever timber was to be cut from the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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leased area for the purposes connected with the exploitation of

the grant.

219. The Supreme Court, on appreciation of facts,

found, in Bishwanath Tea Estate (supra), that the relief,

claimed by the respondent, was referable to nothing else but

the term of the lease viz. clause 2, Part IV and that a bare

perusal of clause 2 of Part IV of the indenture of lease and the

proviso to Rule 37 would, at a glance, show that the proviso

enables a grantee to take benefit of it by fulfilling certain

conditions, namely, by paying a reduced valuation representing

only the profit, which it is likely to derive from the use of timber

for purposes connected with the exploitation of the grant. It is,

thus, an enabling provision and the grantor of the lease may

permit this option to be enjoyed by the grantee. But whether

that has been done or not is always a question of fact. If the

pre-condition is satisfied, the benefit can be taken. That again is

a matter to be worked out by the parties to the indenture of

lease.

220. The Supreme Court held, on facts, in

Bishwanath Tea Estate (supra), that it can be demonstrably

established that the respondent was trying to enforce, through

the writ petition, the right to remove timber without the liability

to pay royalty not under the proviso to Rule 37, which was

merely an enabling provision, but on the basis of the specific Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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term of lease agreed to between the parties.

221. The Supreme Court, in Bishwanath Tea Estate

(supra), held that ordinarily, where a breach of contract is

complained of, a party, complaining of such breach, may sue

for specific performance of the contract, if contract is capable of

being specifically performed, or the party may sue for damages.

Such a suit would, ordinarily, be cognizable by the civil court.

The High Court, in its extraordinary jurisdiction, would not

entertain a petition either for specific performance of contract

or for recovering damages. A right to relief, flowing from a

contract, has to be claimed in a civil court, where a suit for

specific performance of contract or for damages could be filed.

In this regard, the Supreme Court, in Bishwanth Tea Estate

(supra), relied upon the case of Har Shankar v. Deputy

Excise & Taxation Commissioner, reported in (1975) 1 SCC

737, wherein the petitioners had offered their bids in the

auctions held for granting licences for the sale of liquor.

Subsequently, the petitioners moved to invalidate the auctions

challenging the power of the Financial Commissioner to grant

liquor licences. Rejecting this contention, the Constitution

Bench, at page 263 observed as under:

"16. Those who contract with open eyes must accept the burdens of the contract along with its benefits. The powers of the Financial' Commissioner to grant liquor licences by auction and to collect licence fees through the medium of auctions cannot by writ Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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petitions be questioned by those who, had their venture succeeded, would have relied upon those very powers to found a legal claim. Reciprocal rights and obligations arising out of contract do not depend for their enforceability upon whether a contracting party finds it prudent to abide by the terms of the contract. By such a test no contract could ever have a binding force."

222. The Supreme Court, in Bishwanth Tea Estate

(supra), already found that the subject matter, involved in the

writ petition, required evidence of facts, which could not have

been decided in writ petition. The relevant observations are

reproduced as follows;

"12....To be more specific, following facts will have to be proved for obtaining relief:

The area covered by the grant.

Felling of the trees from the area covered by the grant.

Use to which the felled timber was to be put to.

Such use will have to be one connected with the exploitation of the grant.

What is meant by the exploitation of the grant?

Could these facts be assumed without evidence? Was the High Court justified in observing that it was not Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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called upon to decide complicated questions of facts? Some averments in the petition were disputed. The appellant contended that clause 2 of the indenture of lease only means that if there is some use of timber which is being felled and removed from the area covered by the grant for the purpose connected with the exploitation of that very grant, then and only then the relief can be claimed under clause 2."

223. It will, thus, be seen from an analysis of

Bishwanath Tea Estate (supra) that since the facts involved

required assumption of evidence, the performance of contract

could not have been enforced without recording evidence.

Hence, the ratio laid down, in Bishwanath Tea Co. Ltd.

(supra), was that breach of contract, which requires detailed

inquiry of facts, cannot be enforced by resorting to extra

ordinary jurisdiction under Article 226.

224. I may, now, refer to the case of Life Insurance

Corporation of India v. Escorts Ltd., reported in,

MANU/SC/0015/1985, wherein a Constitution Bench held

that though the field of constitutional law, administrative law

and public law has forged ahead of the law in England,

uninhibited by the technical rules, which have hampered the

development of the English Law, and though every action of the

State or an instrumentality of the State must be informed by

reason and that, in appropriate cases, actions, uninformed by

reason, may be questioned as arbitrary in proceedings under Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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construed as a charter for judicial review of all State actions

and to call upon the State to account for its actions in its

manifold activities by stating reasons for such actions. The

Constitution Bench made it clear, in Escorts Ltd. (supra), that

if the action of the State is political or sovereign in character,

the court will keep away from it. The court will not debate

academic matters or concern itself with the intricacies of trade

and commerce. If the action of the State is related to

contractual obligations or obligations arising out of tort, the

court may, not, ordinarily, examine it unless the action has

some public law character attached to it. The Constitution

Bench further made it clear, in Escorts Ltd. (supra), that

broadly speaking, the court will examine actions of the State if

they pertain to the public law domain and refrain from

examining them if they pertain to the private law field, though

the difficulty will lie in demarcating the frontiers between the

public law domain and the private law field. Made it, however,

explicit the Supreme Court, in Escorts Ltd. (supra), that it is

impossible to draw the line, with precision, between the

frontiers of the public law domain and the private law field and

that the question must be decided, in each case, with reference

to the particular action, activity which the State or the

instrumentality of the State is engaged, when performing the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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action, the public law or private law character of the action and

a host of other relevant circumstances. Cautioned, however, the

Constitution Bench, in Escorts Ltd. (supra), that Article 14

cannot be used as a charter for judicial review of all actions of

the State. The relevant observations made, in this regard, in

Escorts Ltd. (supra), read as follows:

"101. It was, however, urged by the learned Counsel for the company that the Life Insurance Corporation was an instrumentality of the State and was, therefore, debarred by Article 14 from acting arbitrarily. It was, therefore, under an obligation to state to the court its reasons for the resolution once a rule nisi was issued to it. If it failed to disclose its reasons to the court, the court would presume that it had no valid reasons to give and its action was, therefore, arbitrary. The learned Counsel relied on the decisions of this Court in Sukhdev Singh; Maneka Gandhi; International Airport Authority; and Ajay Hasia. The learned Attorney General, on the other hand, contended that actions of the State or an instrumentality of the State which do not properly belong to the field of public law but belong to the field of private law are not liable to be subjected to judicial review. He relied on O'Reilly v. Mackman (1982) 3 All ER 1124; Davy v. Spelthonne (1983) 3 All ER 278; I Congress del Partido (1981) 2 All ER 1064; R. v. East Berkshire Health Authority (1984) 3 All ER 425; and Radhakrishna Agarwal and Ors. v. State of Bihar MANU/SC/0053/1977 : [1977] 3 SCR 249. While we do find considerable force in the contention of the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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learned Attorney General it may not be necessary for us to enter into any lengthy discussion of the topic, as we shall presently see. We also desire to warn ourselves against readily referring to English cases on questions of constitutional law, administrative law and public law as the law in India in these branches has forged ahead of the law in England, guided as we are by our Constitution and uninhibited as we are by the technical rules which have hampered the development of the English Law. While we do not, for a moment, doubt that every action of the State or an instrumentality of the State must be informed by reason and that, in appropriate cases, actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution, we do not construe Article 14 as a charter for judicial review of State actions and to call upon the State to account for its actions in its manifold activities by stating reasons for such actions.

102. For example, if the action of the State is political or sovereign in character, the court will keep away from it. The court will not debate academic matters or concern itself with the intricacies of trade and commerce. If the action of the State is related to contractual obligations or obligations arising out of the tort, the court may not ordinarily examine it unless the action has some public law character attached to it. Broadly speaking, the court will examine actions of State if they pertain to the public law domain and refrain from examining them if they pertain to the private law field. The difficulty will lie in demarcating the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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frontier between the public law domain and the private law field. It is impossible to draw the line with precision and we do not want to attempt it. The question must be decided in each case with reference to the particular action, the activity in which the State or the instrumentality of the State is engaged when performing the action, the public law or private law character of the action and a host of other relevant circumstances. When the State or an instrumentality of the State ventures into the corporate world and purchases the shares of a company, it assumes to itself the ordinary role of a shareholder, and dons the robes of a shareholder, with all the rights available to such a shareholder. There is no reason why the State as a shareholder should be expected to state its reasons when it seeks to change the management, by a resolution of the company like any other shareholder."

225. From the above observations made in Escorts

Ltd. (supra), it becomes clear that though Article 14 cannot be

used as a charter for judicial review of all actions of the State

and that every action of the State in contractual field may not,

ordinarily, be examined by a writ court, the fact remains that

there is no absolute bar to the exercise of writ jurisdiction under

Article 226 of the Constitution of India. Whether a High Court

will exercise such a jurisdiction or not is a question, which must

be decided in each case on the basis of its own facts, though, Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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generally, the High Court will not entertain if the action of the

State does not have any element of public interest involved. The question as to whether a High Court would interfere or not

would depend, in the light of the decision of the Apex Court, in

Escorts Ltd. (supra), on the nature of the action, which is

impugned in the writ petition; but the exercise of writ

jurisdiction is not possible without determining the distinction

between public law and private law character of the duty,

sought to be enforced, and a host of other relevant

circumstances.

226. Closely following the decision of the Constitution

Bench, in Escorts Ltd. (supra), is the case of Dwarkadas

Marfatia and Sons a Board of Trustees of the Port of

Bombay, reported in, [1989] 2 SCR 751. In this case, the

appellant, M/s. Dwarkadas & Sons, had been a tenant on a

portion of a land of the respondent corporation, namely,

Bombay Port Trust, for over 40 years, Bombay Port Trust

having been constituted as a statutory corporation under the

Major Ports Act. The structures, standing on the said land, were

used as a part of a rice mill. Pursuant to a Town Planning

Scheme of 1957, the plots were reconstituted and the port trust

framed a policy to let out the reconstituted plot to the person,

who was in occupation of the major portion of the plot. In terms

of this policy, the trust initiated eviction proceeding against the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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appellant by giving them one month's notice sometime in

October 1977. As the appellant had not vacated the said

structures, the trust instituted a suit in December 1977, in the

small causes court. The appellant pleaded mala fide and

favouritism and also that the one month notice was bad in law.

The trial court dismissed the suit on the ground of improper

notice and did not enter into the question of mala fide. When

the appellate court reversed the decision upholding the validity

of the notice and also held that the question of mala fide or

arbitrariness was not relevant for the eviction proceeding, a writ

petition under Article 227 was filed in the High Court. As the

High Court concurred with the decision of the appellate court,

the matter was carried to the Supreme Court.

227. In its decision, in Dwarkadas Marfatia (supra),

a Three Judge Bench of the Supreme Court, having taken note

of Rampratap Jaydayal v. Dominion of India, reported in,

MANU/MH/0096/1953: AIR 1953 Bona 170 and Escorts

Ltd. (supra) , held that though the field of letting and eviction

of tenants is, normally, governed by the Rent Act and port trust

is statutorily exempted from the operation of the Rent Act on

the basis of its public/ government character, legislative

assumption or expectation, as noted in the observations of

Chagla, C.J in Rampratap Jaydayal (supra), cannot make

such conduct a matter of contract pure and simple and that Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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these corporations must act in accordance with certain

constitutional conscience and whether they have so acted, must

be discernible from the conduct of such corporations. The Apex

Court clarified, in Dwarkadas Marfatia (supra), that it is not

correct to suggest that in the light of the decision in

Radhakrishna (supra), a State's contractual dealings do not

ever fall under public law domain and is not subject to judicial

review. The court, in Dwarkadas Marfatia (supra), also

clarified that even the Constitution Bench decision, in Escorts

Ltd. (supra), does not wholly exclude State's all actions, in

contractual matters, from the court's power of judicial review.

228. The Apex Court further made it clear, in

Dwarkadas Marfatia (supra), that every action/activity of the

trust, which is a State within the meaning of Article 12, must be

subject to Article 14 and must be reasonable and taken only

upon lawful and relevant grounds of public interest and

whenever there is arbitrariness in the State's action, Article 14

springs in and judicial review strikes such an action down.

Making its views emphatic, the Supreme Court further made it

clear, in Dwarkadas Marfatia (supra), that whatever be the

activity of the public authority, it should meet the test of Article

14 and that the decision in Escorts Ltd. (supra), if read

properly, does not detract from the aforesaid principles.

229. The Apex Court further made it clear, in Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Dwarkadas Marfatia (supra), that every action/activity of the

trust, which is a State within the meaning of Article 12, must

be subject to Article 14 and must be reasonable and taken only

upon lawful and relevant grounds of public interest and

whenever there is arbitrariness in the State's action, Article 14

springs in and judicial review strikes such an action down.

Making its views emphatic, the Supreme Court further made it

clear, in Dwarkadas Marfatia (supra), that whatever be the

activity of the public authority, it should meet the test of Article

14 and that the decision in Escorts Ltd. (supra), if read

properly, does not detract from the aforesaid principles.

230. The observations made, in this regard, by the

Apex Court, in Dwarkadas Marfatia (supra), read as under:

"22. Our attention was drawn to the observations of this Court in Radhakrishna Agarwal and Ors. v. State of Bihar and Ors.[1977] 3 SCR

249. Reliance was also placed on the observations of this Court in Life Insurance Corporation of India v. Escorts Ltd. and Ors. 1985 Suppl. (3) SCR 909 in support of the contention that the public corporations' dealing with tenants is a contractual dealing and it is not a matter for public law domain and is not subject to judicial review. However, it is not the correct position. The Escorts' decision reiterated that every action of the State or an instrumentality of the State, must be informed by reason. Indubitably, the respondent is an organ of the State under Article 12 of the Constitution. In Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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appropriate cases, as was observed in the last mentioned decision, actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution. But it has to be remembered that Article 14 cannot be construed as a charter for judicial review of State action, to call upon the State to account for its actions in its manifold activities by stating reasons for such actions.

23. The contractual privileges are made immune from the protection of the Rent Act for the respondent because of the public position occupied by the respondent authority. Hence, its actions are amenable to judicial review only to the extent that the State must act validly for a discernible reason, not whimsically for any ulterior purpose. Where any special right privilege is granted to any public or statutory body on the presumption that it must act in certain manner, such bodies must make good such presumption while acting by virtue of such privileges. Judicial review to oversee if such bodies are so acting is permissible.

24. The field of letting and eviction of tenants is normally governed by the Rent Act. The port trust is statutorily exempted from the operation of Rent Act on the basis of its public/ government character. The legislative assumption or expectation as noted in the observations of Chagla, CJ in Rampratap Jaidayal's case cannot make such conduct a matter of contract pure and simple'. These corporations must act in accordance with certain constitutional conscience and whether they have so acted, must be discernible from the conduct Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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of such corporations. In this connection, reference may be made to the observations of this Court in S.P. Rekhi v. Union of India, reiterated in M.C. Mehta and Anr. v. Union of India and Ors. 1VIA.NU/ SC/ 0092/ 1986: [1987] 1 SCR 819, wherein at p. 148, this Court observed:

It is dangerous to exonerate corporations from the need to have constitutional conscience; and so, that interpretation, language permitting, which

makes governmental agencies, whatever their mien, amenable to constitutional limitations must be adopted by the court as against the alternative of permitting them to flourish as an imperium in imperio.

25. Therefore, Mr. Chinai was right in contending that every action/activity of the Bombay Port Trust which constituted "State" within Article 12 of the Constitution in respect of any right conferred or privilege granted by any statute is subject to Article 14 and must be reasonable and taken only upon lawful and relevant grounds of public interest. Reliance may be placed on the observations of this Court in E.P. Royappa v. State of Tamil Nadu MANU/ SC/ 0380/ 1973: (1974) ILLJ 172 SC; Maneka Gandhi v. Union of India MANU/ SC/ 0133/ 1978: /1978 12 SCR 621 Ramana Dayaram Shetty v. International Airport Authority of India and Ors.

MANU/ SC/ 0048/ 1979 Kasturi Lai Lakshmi Reddy v. State of J&K and another, MANU/ SC/ 0079/ 1980 :

[1980] 3 SCR 1338; and Ajay Hasiay. Khalid Mujib Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Sehravardi and Ors.etc. MANU/ SC/ 0498/ 1980. Where there is arbitrariness in State action, Article 14 springs in and judicial review strikes such an action down. Every action of the Executive Authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public authority, it should meet the test of Article 14. The observations in paras 101 and 102 of the Escorts' case, read properly, do not detract from the aforesaid principles.

27. We are inclined to accept the submission that every activity of a public authority, especially in the background of the assumption on which such authority enjoys immunity from the rigours of the Rent Act, must be informed by reason and guided by the public interest. All exercise of discretion or power by public authorities as the respondent, in respect of dealing with tenants in respect of which they have been treated separately and distinctly from other landlords on the assumption that they would not act as private landlords, must be judged by that standard. If a governmental policy or action even in contractual matters fails to satisfy the test of reasonableness, it would be unconstitutional.

See, the observations of this Court in Kasturi Lai Lakshmi Reddy and RamanaDayaram Shetty v. International Airport Authority of India and Ors. MANU/SC/0048/1979."

(Emphasis is supplied) Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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231. If the decision, in Dwarkadas Marfatia (supra),

is carefully read, it becomes more than abundantly clear that

though at the first blush, the decision, in Radhakrishna

(supra), appears to have laid down that the remedy of every

breach of contract lies in civil suits and writ jurisdiction would

never be applicable to enforce even constitutional obligations of

the State in contractual matters, the later decision of the Apex

Court, in Dwarkadas Marfatia (supra), clearly shows that

having considered the decision, in Radhakrishna (supra), and

also the Constitution Bench decision, in Escorts Ltd. (supra), it

has clearly held that there is no absolute bar to the exercise of

jurisdiction under Article 226 in a contractual matter,

particularly, when the act or conduct of the State or its

instrumentality is challenged on the anvil of Article 14. It is

also clear from Dwarkadas Marfatia (supra) that a writ court

will enforce even a contractual obligation of the State if the

breach of obligation by the State fails to satisfy the test of

reasonableness under Article 14, for, in such a case, what the

writ court would be enforcing is the constitutional duty of the

State, though such a duty might have arisen in the realm of

contractual obligation. It has been further made clear, in

Dwarkadas Marfatia (supra), that even in contractual

matters, the State's action must be reasonable, lawful and on

relevant ground of public interest.

Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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232. What emerges from the above discussion is

that when a writ petition is filed alleging breach of contractual

obligation by the State or its instrumentality, the High Court

shall determine whether the writ petitioner is merely

demanding to enforce his contractual rights or he has raised

some important questions of law and/or constitutional issues. If

he aims at merely enforcing his contractual rights and raises no

important question of law or constitutional issue, writ

jurisdiction will not be invoked; but if the writ petitioner raises

a constitutional issue, there is no absolute bar to the exercise

of jurisdiction under Article 226 even in a contractual matter.

This position of law was made clear in Life Insurance

Corporation of India v. Asha Goel, reported in, (2001) 2

SCC 160, wherein the court observed as under:

"10. Article 226 of the Constitution confers extraordinary jurisdiction on the High Court to issue high prerogative writs for enforcement of the fundamental rights or for any other purpose. It is wide and expansive. The Constitution does not place any fetter on exercise of the extraordinary jurisdiction. It is left to the discretion of the High Court. Therefore, it cannot be laid down as a general proposition of law that in no case the High Court can entertain a writ petition under Article 226 of the Constitution to enforce a claim under a life insurance policy. It is neither possible nor proper to enumerate exhaustively the circumstances in which such a claim can or cannot be enforced by filing a Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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writ petition. The determination of the question depends on consideration of several factors like, whether a writ petitioner is merely attempting to enforce his/her contractual rights or the case raises important questions of law and constitutional issues, the nature of the dispute raised; the nature of inquiry necessary for determination of the dispute, etc. The matter is to be considered in the facts and circumstances of each case. While the jurisdiction of the High Court to entertain a writ petition under Article 226 of the Constitution cannot be denied altogether, courts must bear in mind the self-imposed restriction consistently followed by High Courts all these years after the constitutional power came into existence in not entertaining writ petitions filed for enforcement of purely contractual rights and obligations which involve disputed questions of facts. The courts have consistently taken the view that in a case where for determination of the dispute raised, it is necessary to inquire into the facts for determination of which it may become necessary to record oral' evidence, a proceeding under Article 226 of the Constitution is not the appropriate forum. The position is also well settled that if the contract entered between the parties provides an alternate forum for resolution of disputes arising from the contract, then the parties should approach the forum agreed by them and the High Court in writ jurisdiction should not permit them to bypass the agreed forum of dispute resolution. At the cost of repetition it may be stated that in the above discussions we have only indicated some of the circumstances in which the High Courts Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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have declined to entertain petitions filed under Article 226 of the Constitution for enforcement of contractual rights and obligations; the discussions are not intended to be exhaustive. This Court from time to time disapproved of a High Court entertaining a petition under Article 226 of the Constitution in matters of enforcement of contractual rights and obligations particularly where the claim by one party is contested by the other and adjudication of the dispute requires inquiry into facts. We may notice a few such cases--Mohd. Hanif U. State of Assam MANU/ SC/ 0370/1969 : [1970] 2 SCR 197 ; Banchhanidhi Rath v. State of Orissa MANU/ SC/ 0652 / 1971 : AIR 1972 SC 843 ; Rukmanibai Gupta v. Collector, Jabalpur MANU/ SC/ 0002/ 1980 : AIR 1981 SC 479 ; Food Corporation of India v. Jagannath Dutta 1993 Suppl. (3) SCC 635; and State of H.P. v. Raja Mahendra Pal MANU/ SC/ 0227/ 1999 : [1999] 2 SCR 323."

233. The position that emerges from the

discussions in the decided cases is that, ordinarily, the High

Court should not entertain a writ petition, filed under Article

226 of the Constitution, for mere enforcement of a claim under

a contract of insurance. Where an insurer has repudiated the

claim, in case such a writ petition is filed, the High Court has to

consider the facts and circumstances of the case, the nature of

the dispute raised and the nature of the inquiry necessary to be

made for determination of the questions raised and other

relevant factors before taking a decision whether it should Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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entertain the writ petition or reject it as not maintainable. It

has also to be kept in mind that in case an insured or nominee

of the deceased insured is refused relief merely on the ground

that the claim relates to contractual rights and obligations and

he/she is driven to a long drawn litigation in the civil court it

will cause serious prejudice to the claimant/ other beneficiaries

of the policy. The pros and cons of the matter in the context of

the fact situation of the case should be carefully weighed and

appropriate decision should be taken. In a case where claim by

an insured or a nominee is repudiated raising a serious dispute

and the court finds the dispute to be a bona fide one which

requires oral and documentary evidence for its determination

then the appropriate remedy is a civil suit and not a writ

petition under Article 226 of the Constitution. Similarly, where

a plea of fraud is pleaded by the insurer and on examination is

found prima facie to have merit and oral and documentary

evidence may become necessary for determination of the issue

raised, then a writ petition is not an appropriate remedy.

234. Moreover, when a writ court finds that the

refusal to extend constitutional remedy of Article 226 of the

Constitution of India to enforce a contractual right or obligation

would drive a person, knocking at the doors of a writ court, to

a long drawn litigation in the civil court causing serious

prejudice to the person seeking relief against the State, the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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writ court may not, according to Asha Goel decline to interfere

in such a matter and hence, reminds the Apex Court, in Asha

Goel (supra), thus:

"The pros and cons of the matter in the context of the fact situation of the case should be carefully weighed and appropriate decision should be taken."

235. From the law, as laid down, in Asha Goel,

(supra), it becomes transparent that when non-interference by

a writ court would drive a person to a long drawn civil litigation

causing serious prejudice to him, the writ court‟s interference is

not only desirable, but even necessary. As a corollary to this

proposition of law, one can safely say that when a contractor's

dues are admitted by a State and the fact situation of a given

case satisfies the writ court that asking the contractor to take

recourse to the civil court would cause serious prejudice to the

contractor, the writ court should step in.

236. From the decision, in Asha Goel (supra),

what emerges is that ordinarily, a High Court should not

entertain a writ petition, under Article 226 of the Constitution

of India, for mere enforcement of claims under a contract of

insurance; however, the Constitution having not placed any

fetters on the exercise of extraordinary jurisdiction by the High

Court under Article 226 of the Constitution of India, it is in the

discretion of the High Court to interfere or not to interfere in a Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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contractual matter. No exercise of discretionary power can be

unfettered, unguided, unsettled or arbitrary, and, hence, the

position of law, on a given subject, should not be completely

unforeseen and legal decisions must have some standards or

parameters in order to enable the people at large to know as to

what the position of law, on a given subject, is. Considered

thus, exercise of jurisdiction under Article 226 of the

Constitution of India cannot be unfettered or arbitrary.

However, it is not possible to enumerate exhaustively the

circumstances in which a writ application even in contractual

matter would lie, for exercise of jurisdiction would depend upon

a considerable number of factors, such as, the question as to

whether the writ petitioner is merely attempting to enforce his

or her contractual rights or has raised important questions of

law or constitutional issues, the nature of the dispute raised

and the nature of enquiry necessary for determination of the

dispute, etc. In short, exercise of jurisdiction would depend on

the facts and circumstances of each given case. While

jurisdiction of the High Court to entertain a writ petition, under

Article 226 of the Constitution of India, cannot be denied

altogether, the courts must bear in mind the self-imposed

restrictions constitutionally followed by the High Courts not to,

ordinarily, entertain writ petitions for enforcement of purely

contractual rights and obligations, particularly, when Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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determination of such questions necessitates taking of oral

evidence or when the parties had agreed to resolve their

disputes arising out of the contract, in the alternative forum

selected by them.

237. I, now, turn to the case of Shrilekha

Vidyarthi (Kumari) v. State of U.P., (1991) 1 SCC 212. While considering the case of Kumari Shrilekha Vidyarthi

(supra) what may be borne in mind is that it was a case in

which the Government of Uttar Pradesh terminated, with the

help of a general order, appointments of all the government

counsel in all the districts of the State of Uttar Pradesh with

effect from 28.02.1990 and directed preparation of fresh panel

to make appointments in place of existing incumbents

irrespective of the fact whether the term of the incumbent had

expired or was subsisting. Validity of this action of the State

was challenged by way of a number of writ petitions. In the

backdrop of these facts, a Two Judge Bench of the Supreme

Court, speaking through J.S. Verma, J. (as His Lordship then

was), posed the question as to whether guarantee of non-

arbitrariness, which is basic to the rule of law under Article 14,

stands excluded from the State's action in contractual field.

238. In answer to the momentous question, posed

above, the Court made it clear, in Kumari Shrilekha

Vidyarthi (supra), that the Constitution does not envisage or Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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permit unfairness in State actions in any sphere of its activity. Leaving no room open for doubt, the Apex Court held, in

Kumari Shrilekha Vidyarthi (supra), that it would be alien to

the constitutional scheme to accept the argument of exclusion

of Article 14 in contractual matters. The Court, however,

hastened to add that the scope and grounds on which judicial

review would be permissible in contractual matters may be a

different matter, but contractual matters cannot be wholly

excluded from the purview of judicial review.

239. Drawing distinction between the contracts to

which the State is a party, and the contracts to which the

private parties are involved, the Court, in Kumari Shrilekha

Vidyarthi (supra), pointed out that while private parties are

concerned with their personal interest, the State, while

exercising its powers and discharging its functions, acts

indubitably for public good and in public interest, for, the

impact of every State action is also on the public interest and

this factor alone is sufficient to import, at least, the minimal

requirements of public law obligations even in the actions of

the State in contractual matters.

240. The Court also pointed out, in Kumari

Shrilekha Vidyarthi (supra), that though the scope of judicial

review in respect of disputes, falling within the domain of

contractual obligations, may be limited, the fact remains that Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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to the extent that a challenge is posed on the ground of

violation of Article 14 by alleging that the impugned action is

arbitrary, unfair or unreasonable, the mere 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, reiterated the

Court, in Kumari Shrilekha Vidyarthi (supra), the obligation

of a State is of a public character and that contractual

obligation cannot divest the person aggrieved of the guarantee

under Article 14 of non-arbitrariness at the hands of the State

in all its actions.

241. Symbolizing the nature of character of the

State, when it enters into contractual relationships, the Apex

Court made it clear, in Kumari Shrilekha Vidyarthi (supra),

that the State cannot be attributed the split personality of Dr.

Jekyll and Mr. Hyde in the contractual field so as to impress on

it all the characteristics of the State at the threshold, while

entering into a contract, and, thereafter, casting off its garb of

a State and adorn the new robe of a private body during the

subsistence of the contract enabling it thereby to act arbitrarily

subject only to the contractual obligations and the remedies

flowing from it. The requirement of Article 14 being the duty to

act fairly, justly and reasonably, there is nothing, observed the

Court, in Kumari Shrilekha Vidyarthi (supra), which militates Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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against the concept of requiring the State always so to act,

even in contractual matters.

242. Drawing strength for the conclusion, reached

above, from the decision in Dwarkadas Marfatia (supra), the

Court, in Kumari Shrilekha Vidyarthi (supra), further held

that if the State is unable to produce materials to justify its

action as fair and reasonable, burden on the person, alleging

arbitrariness, must be held to have been discharged and the

scope of judicial review, howsoever limited in contractual

matters, must remain open to ensure that State action is not

vitiated by the vice of arbitrariness.

243. In Kumari Shrilekha Vidyarthi (supra), the

Court also took the view that even assuming that it is

necessary to import the concept of presence of some public

element in a State action, in the realm of contractual

obligations, to attract Article 14, the fact remains that the

ultimate impact of all actions of the State or a public body

being on public interest, requisite public element is also present

in contractual matters. Held, therefore, the Court, in Kumari

Shrilekha Vidyarthi (supra), that it finds it difficult and

unrealistic to exclude from the purview of judicial review the

State actions in contractual matters after the contract has been

made, in order to test the validity of the actions of the State on

the anvil of Article 14. The relevant observations, made at Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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paras 21, 22, 23, 24, 28, 29, 30 and 33, in Kumari Shrilekha

Vidyarthi (supra), are reproduced hereinbelow:

"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 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 14non-arbitrariness which is basic to 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 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 Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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standard form contracts between unequals.

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 minimal 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 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 cannot divest the claimant of the guarantee under Article 14 of non- arbitrariness at the hands of the State in any of its actions.

23. Thus, in a case like the present, if it is shown that Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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the impugned State action is arbitrary and, therefore, violative of Article 14 of the Constitution, there can be no impediment in striking down the impugned act irrespective of the question whether an additional right, contractual or statutory, if any, is also available to the aggrieved persons.

24. The State cannot be attributed the split personality of Dr. Jekyll and Mr. Hyde in the contractual field so as to impress on it all the characteristics of the State at the threshold while making a contract requiring it to fulfil the obligation of Article 14 of the Constitution and thereafter permitting it to cast off its garb of State to adorn the new robe of a private body during the subsistence of the contract enabling it to act arbitrarily subject only to the contractual obligations and remedies flowing from it. It is really the nature of its personality as State which is significant and must characterize all its actions, in whatever field, and not the nature of function, contractual or otherwise, which is decisive of the nature of scrutiny permitted for examining the validity of its act. The requirement of Article 14 being the duty to act fairly, justly and reasonably, there is nothing which militates against the concept of requiring the State always to so act, even in contractual matters. There is a basic difference between the acts of the State which must invariably be in public interest and those of a private individual, engaged in similar activities, being primarily for personal gain, which may or may not promote public interest. Viewed in this manner, in which we find no conceptual difficulty or anachronism, we find no reason why the requirement of Article 14 should not extend Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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even in the sphere of contractual matters for regulating the conduct of the State activity.

28. Even assuming that it is necessary to import the concept of presence of some public element in a State action to attract Article 14 and permit judicial review, we have no hesitation in saying that the ultimate impact of all actions of the State or a public body being undoubtedly on public interest, the requisite public element for this purpose is present also in contractual matters. We, therefore, find it difficult and unrealistic to exclude the State actions in contractual matters, after the contract has been made, from the purview of judicial review to test its validity on the anvil of Article 14.

29. It can no longer be doubted at this point of time that Article 14 of the Constitution of India applies also to matters of governmental policy and if the policy or any action of the government, even in contractual matters, fails to satisfy the test of reasonableness, it would be unconstitutional. See Ramana Dayaram Shetty v. International Airport Authority of India MANU/SC/0048/1979 : (1979) II LLJ 217 SC and Kasturi Lal Lakshmi Reddy v. State of Jammu and Kashmir MANU/SC/0079/1980 : [1980] 3 SCR 1338 . In Col. A.S. Sangwan v. Union of India 1980 Suppl. SCC 559 : 1981 SCC (L&S) 378 while the discretion to change the policy in exercise of the executive power, when not trammelled by the statute or rule, was held to be wide, it was emphasized as imperative and implicit in Article 14 of the Constitution that a change in policy must be made fairly and should not give the impression that it was so done arbitrarily or by any Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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ulterior criteria. The wide sweep of Article 14 and the requirement of every State action qualifying for its validity on this touchstone, irrespective of the field of activity of the State, has long been settled. Later decisions of this Court have reinforced the foundation of this tenet and it would be sufficient to refer only to two recent decisions of this Court for this purpose.

30. In Divarkadas Marfatia and Sons v. Board of Trustees of the Port of Bombay MANU/SC/0330/1989 : [1989] 2 SCR 751 , the matter was re-examined in relation to an instrumentality of the State for applicability of Article 14 to all its actions. Referring to the earlier decisions of this Court and examining the argument for applicability of Article 14, even in contractual matters, Sabyasachi Mukharji, J. (as the learned Chief Justice then was), speaking for himself and Kania, J. reiterated that: (SCC p. 304, para

22) "every action of the State or an instrumentality of the State, must be informed by reason...actions uninformed by reasons may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution". Ranganathan, J. did not express any opinion on this point but agreed with the conclusion of the other learned judges on the facts of the case. It is obvious that the conclusion on the facts of the case could not be reached by Ranganathan, J. without examining them and this could be done only on the basis that it was permissible to make the judicial review. Thus, Ranganathan, J. also applied that principle without saying so. In view of the wide ranging and, in essence, all pervading sphere of State activity in discharge of its welfare functions, the question Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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assumes considerable importance and cannot be shelved. The basic requirement of Article 14 is fairness in action by the State and we find it difficult to accept that the State can be permitted to act otherwise in any field of its activity, irrespective of the nature of its functions when it has the uppermost duty to be governed by the rule of law. Non-arbitrariness, in substance, is only fair play in action. We have no doubt that this obvious requirement must be satisfied by every action of the State or its instrumentality in order to satisfy the test of validity.

33. No doubt, it is true, as indicated by us earlier, that there is a presumption of validity of the State action and the burden is on the person who alleges violation of Article 14 to prove the assertion. However, where no plausible reason or principle is indicated nor is it discernible and the impugned State action, therefore, appears to be ex facie arbitrary, the initial burden to prove the arbitrariness is discharged shifting onus on the State to justify its action as fair and reasonable. If the State is unable to produce material to justify its action as fair and reasonable, the burden on the person alleging arbitrariness must be held to be discharged. The scope of judicial review is limited as indicated in Dwarkadas Marfatia case to oversee the State action for the purpose of satisfying that it is not vitiated by the vice of arbitrariness and no more. The wisdom of the policy or the lack of it or the desirability of a better alternative is not within the permissible scope of judicial review in such cases. It is not for the courts to recast the policy or to substitute it with another which is considered to be more appropriate, once the attack Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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on the ground of arbitrariness is successfully repelled by showing that the act which was done, was fair and reasonable in the facts and circumstances of the case. As indicated by Diplock, LJ in Council for Civil Services Union v. Minister of Civil Service (1984) 3 All ER 935 the power of judicial review is limited to the grounds of illegality, irrationality and procedural impropriety. In the case of arbitrariness, the defect of irrationality is obvious."

244. What emerges from the observations made, in

Kumari Shrilekha Vidyarthi (supra), is that even after having

entered into a contract, the State cannot act arbitrarily,

unreasonably or unfairly merely because of the fact that its

actions are in the realm of a contract.

245. In the case of Biman Krishna Bose v. United

India Insurance Co. Ltd., (2001) 6 SCC 477, the appellant

and his wife had taken a mediclaim policy from the United India

Insurance Company. During the subsistence of insurance policy,

the wife of the appellant fell ill and, on the advice of doctor, she

was admitted to hospital and, for her treatment, a certain

amount was spent. When the appellant staked a claim with the

Insurance Company,' it refused to honour the bill leading a

series of litigations before the Consumer Forum. Eventually,

when the matter went to the Supreme Court, a direction was

given to the Insurance Company to pay Rs 20,000.00 to the

appellant. In the meantime, the Insurance policy fell due for Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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renewal. Under such circumstances, the appellant sent a letter

along with a cheque of Rs 1,796.00 to the Insurance Company

requesting for renewal of his existing mediclaim policy.

However, the Insurance Company declined to renew the

mediclaim policy as per the advice of the competent authority

of the Company.

246. Under the aforesaid circumstances, the appellant

filed a writ petition, under Article 226 of the Constitution before

the Calcutta High Court, challenging the order passed by the

respondent Insurance Company refusing to renew the

mediclaim policy. The said writ petition was allowed and the

order, refusing to renew the policy, was set aside and a

direction was issued to the Insurance Company to renew the

mediclaim policy earlier taken out by the appellant. Aggrieved,

the Insurance Company filed an appeal against the judgment of

learned Single Judge. The Division Bench of the Calcutta High

Court while agreeing with the view taken by the learned Single

Judge, substantially, dismissed the appeal; yet, the High Court

directed the appellant to take a fresh mediclaim policy on the

ground that the renewal of mediclaim policy cannot be granted

with retrospective effect, as the period, for which renewal, was

required has already expired. It is against this part of that the

order the appellant preferred an appeal to the Supreme Court.

247. The Supreme Court held, in Biman Krishna Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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provisions of the General Insurance Business (Nationalisation)

Act, 1972, has assumed monopoly in the business of general

insurance in the country and, thus, acquired the trappings of

the "State" being other authorities under Article 12 of the

Constitution. It must satisfy the requirement of reasonableness

and fairness, while dealing with its customers. Even in an area

of contractual relations, observed the Supreme Court, in Biman

Krishna Bose (supra), that the State and its instrumentalities

are enjoined with the obligations to act with fairness and, in

doing so, can take into consideration only the relevant materials

and that they must not take any irrelevant and extraneous

consideration, while arriving at a decision. Further observed the

Supreme Court, in Biman Krishna Bose (supra), that

arbitrariness should not appear in their actions or decisions of

the State or its instrumentalities.

248. Biman Krishna Bose (supra) can be considered

as an authority on the point that State, in its contractual

obligations, cannot take an arbitrary decision; rather, the

decision must be taken considering only relevant materials

devoid of any arbitrariness.

249. In the case of ABL International Ltd. v.

Export Credit Guarantee Corpn. of India Ltd., (2004) 3

SCC 553, the facts were that there was an export contract Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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between two companies wherein Kazakhstan Government was

also involved. In this regard the appellants had approached the

respondent, Export Credit Guarantee Corporation of India Ltd,

(EGCIL, in short) for a risk cover, which was granted. Later on,

upon the failure of Kazakhstan Government to fulfil its

guarantee, the appellants made a claim before the first

respondent, which had covered the said risk of compensating

the loss. EGCIL, however, repudiated the claim on the ground

that the appellants had changed the terms of the contract of

payment without first consulting it and, therefore, it had no

obligation to compensate the appellants for the loss suffered by

it.

250. The appellant, then, filed a writ petition before

the Calcutta High Court, inter alia, praying for quashing of the

letters of repudiation issued by the EGCIL with consequential

direction to the first respondent to make payment of the dues

to it under the contract of insurance. The learned Single Judge

came to the conclusion that though the dispute between the

parties arose out of a contract, EGCIL, being a State for the

purpose of Article 12, was bound by the terms of the contract

and, therefore, a writ was maintainable for such non-

performance, and, upon considering the arguments of the

parties, with regard to the liability under the contract of

insurance, allowed the writ petition and issued the writ and Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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directions as prayed for by the appellants in the writ petition.

251. In an appeal filed by the EGCIL before the

Appellate Bench of the Calcutta High Court, the Bench reversed

the findings of the learned single Judge and held that the claim

of the appellant, involving disputed questions of fact, cannot be

adjudicated in a writ proceeding under Article 226 of the

Constitution; hence, the judgment of the learned single Judge

was set aside.

252. In the Supreme Court, EGCIL carried the same

arguments on which the Division Bench of the Calcutta High

Court had ruled. It was argued that the subject-matter is a

dispute arising out of a contract and is not a matter falling

under the purview of administrative law. It was also argued that

the doctrine of fairness and reasonableness applies only in the

exercise of statutory or administrative actions of a State and

not in the exercise of a contractual obligation and issues, arising

out of contractual matters, will have to be decided on the basis

of the law of contract and not on the basis of the administrative

law. It was further argued that at the most, in matters,

involving statutory contracts, where action of the State involves

a public duty, a writ may lie; but in the instant case, the

contract was neither a statutory contract nor did the duty of the

EGCIL, under the contract, have any public law element

involved in it.

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253. In view of the submissions made by the EGCIL,

the same question, once again, stared at the Supreme Court as

to whether a writ petition, under Article 226 of the Constitution

of India, is maintainable to enforce a contractual obligation of

the State or its instrumentality by an aggrieved party.

254. Placing reliance on K.N. Guruswamy v. State

of Mysore, (AIR 1954 SC 592), the Supreme Court held that

it is clear from its observations, in K.N. Guruswamy (supra),

that on a given set of facts, if a State is found to have acted in

an arbitrary manner even in a matter of contract, an aggrieved

party can approach by way of writ under Article 226 of the

Constitution of India and the Court, depending on facts of the

case, is empowered to grant relief.

255. Having taken note of the case of Ram Sanehi

Singh (supra), which followed K.N. Guruswamy (supra) and

also Gujarat State Financial Corporation v. Lotus Hotels

Pvt. Ltd. reported in MANU/SC/0036/1983 : AIR 1983 SC 848 ,

which followed Ramana Dayaram Shetty v. International

Airport Authority of India, reported in MANU/SC/0048/1979

: (1979) II LLJ 217 SC and, then, having referred to the case of

Escorts Ltd. (supra), the court, in ABL International Ltd.

(supra), has pointed out that the decision in Escorts Ltd.

(supra) does not lay down, as a rule, that in matters of

contract, the courts' jurisdiction under Article 226 stands wholly Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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ousted. On the contrary, points out the Supreme Court, in ABL

International Ltd. (supra), the Constitution Bench's use, in

Escorts Ltd. (supra), of the words 'court may not ordinarily

examine it unless the action has some public law character

attached to it' indicates that in a given case, on the existence of

the required factual matrix, a remedy under Article 226 will be

available.

256. Having analysed several other pronouncements

governing the field, the Supreme Court, in ABL International

Ltd. (supra), laid down the following legal principles:

(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State, arising out of a contractual obligation, is maintainable.

(b) Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.

(c) A writ petition involving a consequential relief of monetary claim is also maintainable.

(Emphasis is added)

257. Striking, however, a word of caution, the

Supreme Court, in ABL International Ltd. (supra), held that

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 Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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prerogative writs, under Article 226 of the Constitution, is

plenary in nature and is not limited by any other provisions of

the Constitution. The High Court, having regard to the facts of

the case, has a discretion to entertain or not to entertain a writ

petition. The Court has imposed upon itself certain restrictions

in the exercise of this power and this plenary power of the High

Court to issue a prerogative writ will not, normally, be exercised

by the Court to the exclusion of other available remedies unless

such action of the State or its instrumentality is arbitrary and

unreasonable so as to violate the constitutional mandate of

Article 14 or for other valid and legitimate reasons for which the

Court thinks it necessary to exercise the said jurisdiction.

258. It will be seen that the decision, in ABL

International Ltd. (supra), follows the line of reasoning as

propounded in Shrilekha Vidyarthi (supra).

259. The relevant observations, appearing in ABL

International Ltd (supra), are being reproduced hereinbelow:

"27. From the above discussion of ours, the following legal principles emerge as to the maintainability of a writ petition:

In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable. Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.

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A writ petition involving a consequential relief of monetary claim is also maintainable.

28. However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power. (See Whirlpool Corpn. V. Registrar of Trade Marks.) And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction."

(Emphasis is supplied)

260. In the case of Gujarat State Financial

Corpn. v. Lotus Hotels (P) Ltd., (1983) 3 SCC 379, the

question before the Supreme Court was whether a writ of

mandamus can be issued for enforcement of contractual

obligations. The facts of this case were that respondent had

applied before the appellant for financial assistance to set up a

5 star hotel. The terms and conditions were settled and the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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respondent wrote a letter accepting the terms and conditions

on which the Corporation had agreed to advance the loan. As a

part of the deal, the Company had to create an equitable

mortgage in favour of the Corporation for securing the loan. All

the documentations had taken place for the purpose of loan

and, in order to materialize the project, the respondent

invested huge sum of money for the project. Later, due to

complaints against the promoter of the company, the appellant

refused to advance the loan on the ground that loan was

dependent on refinance, by the Industrial Development Bank of

India and since the said Bank has refused to refinance it would

not be possible to advance the loan to the respondent.

261. Ultimately, the respondent moved a petition

under Article 226 of the Constitution in the High Court of

Gujarat. A learned Single Judge issued a mandamus directing

the appellant to disburse the promised loan to the Company,

forthwith, in accordance with its letter of offer followed by the

agreement. The appellant Corporation preferred a Letters

Patent Appeal. The Division Bench, hearing the Letters Patent

Appeal, agreed with the conclusion reached by the learned

Single Judge and dismissed the appeal.

262. In the Supreme Court, one of the contentions

raised by the appellant, Gujarat State Financial Corpn. v.

Lotus Hotels (P) Ltd. (supra), was that the dispute, raised in Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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the writ, falls within the realm of contract and at best, the

Corporation can be charged with breach of contract for which

the remedy was by way of damages or any other remedy

available to the respondent for breach of contract; but, in no

case, a writ of mandamus can be issued compelling the

Corporation to perform its part of the contract.

263. Repelling the arguments, the Supreme Court

held, Gujarat State Financial Corpn. v. Lotus Hotels (P)

Ltd. (supra), that it is too late in the day to contend that the

instrumentality of the State, which would be "other authority"

under Article 12 of the Constitution, can commit breach of a

solemn undertaking on which other side has acted and, then,

contend that the party, suffering by the breach of contract,

may sue for damages, but cannot compel specific performance

of the contract.

264. It further held that in the back drop of

incontrovertible fact situation, the principle of promissory

estoppel would also come into play and, subsequently, placed

reliance on the case of Motilal Padampat Sugar Mills Co.

(P) Ltd. v. State of U.P, (1979) 2 SCC 409. The

observations, in Motilal (supra), were reproduced as follows;

8. "The true principle of promissory estoppel, therefore, seems to be that where one party has by his words of conduct made to the other a clear and unequivocal promise which is intended to create legal relations or affect a legal relationship Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so having regard to the dealings which have taken place between the parties, and this would be so irrespective of whether there is any pre-existing relationship between the parties or not."

265. The concluding remarks, in Lotus Hotels

(supra), are very important, wherein the Supreme Court held

that if appellant entered into a solemn contract in discharge

and performance of its statutory duty and the respondent acted

upon it, the statutory corporation cannot be allowed to act

arbitrarily so as to cause harm and injury, flowing from its

unreasonable conduct, to the respondent. In such a situation,

the court is not powerless from holding the appellant to its

promise and it can be enforced by a writ of mandamus

directing it to perform its statutory duty. A petition, under

Article 226 of the Constitution, would certainly lie to direct

performance of a statutory duty by "other authority" as

envisaged by Article 12 and accordingly, the High Court was

fully justified in issuing a writ of mandamus to disburse the

loan.

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266. The relevant observations, appearing in

Gujarat State Financial Corpn. v. Lotus Hotels (P) Ltd.,

(supra), are quoted as follows;

"13. Now if appellant entered into a solemn contract in discharge and performance of its statutory duty and the respondent acted upon it, the statutory corporation cannot be allowed to act arbitrarily so as to cause harm and injury, flowing from its unreasonable conduct, to the respondent. In such a situation, the court is not powerless from holding the appellant to its promise and it can be enforced by a writ of mandamus directing it to perform its statutory duty. A petition under Article 226 of the Constitution would certainly lie to direct performance of a statutory duty by "other authority"

as envisaged by Article 12.

14. The High Court accordingly was fully justified in issuing a writ of mandamus to disburse the loanand therefore the appeal fails."

267. In the case of United India Insurance Co.

Ltd. v. Manubhai Dharmasinhbhai Gajera, (2008) 10 SCC

404, the Supreme Court had the occasion to deal with various

grievances of the public with respect to their Insurance claims.

268. The Supreme Court, while dwelling on the role of

State and its instrumentalities, held, in Manubhai

Dharmasinhbhai Gajera (supra), that one important facet of

the matter, which must be taken note of, is the duty, on the

part of a State, to act fairly. Such a fair dealing is expected at Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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the hands of State within the meaning of Article 12 of the

Constitution of India. It further held that there cannot be any

doubt whatsoever that Article 14 of the Constitution of India,

which encompasses, within its fold, obligations on the part of

the State to act fairly, operates also in the contractual field.

269. The other important aspect of the case of

Manubhai Dharmasinhbhai Gajera (supra) was that the

Supreme Court analysed several previous cases of Supreme

Court, which dealt with the issue of contractual obligations of

State.

270. Among the various cases analyzing, in

Manubhai Dharmasinhbhai Gajera (supra), one was the

case of Excise Commissioner vs. lssac Peter, (1994) 4 SCC

450. It was pointed out that a bare perusal of the decision

would show that the same was rendered in the context of

contracts entered into between the State and its citizens

pursuant to public auction of tenders or by negotiation. The

respondents therein sought to get new term incorporated in the

contract on the specious plea of fairness. The said plea was

rightly rejected. The fact, however, remains that the ratio, in

Issac (supra), is not applicable to the facts of the present case

not because the duty to act fairly on the part of a State has no

application in the field of a contract, but the same would not

apply for the purpose of alterations or modifications of a term of Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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contract.

271. Elaborating further, on the contention that the

writ court would, ordinarily, not grant specific performance of a

contract even if it is found that there exists a renewal clause or

there has been a breach of contract on the part of the appellant

the Supreme Court observed, in Manubhai Dharmasinhbhai

Gajera (supra), that, ordinarily, it is so. A writ of mandamus

shall not issue in case of a breach of contract. The court shall

also not, ordinarily, issue a writ of mandamus directing a party

to perform a specific performance of the contract in exercise of

its writ jurisdiction, however, as would be noticed that this is

the ordinary law as has been held in Hardesh Ores (P) Ltd. v.

Hede & Co. (2007) 5 SCC 614, and Divl. Forest Officer v.

Bishwanath Tea Co. Ltd. (1981) 3 SCC 238. In

Bishwanath Tea Co. (supra), the Supreme Court had used the

word "ordinarily" whereas Hardesh (supra), was a case arising

out of a civil suit. The question, which arose therein was as to

whether exercise of option for renewal by company was itself

sufficient where the execution of a fresh document is necessary.

272. The Supreme Court, thereafter, in Manubhai

Dharmasinhbhai Gajera (supra), went on to observe that

while determining a lis having public law domain, the courts

would be entitled to take a broader view. It would not consider

it to be a case involving contract-qua-contract question only. Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Even cases, involving contracts, may be determined by the High

Court in exercise of its jurisdiction tinder Article 226 of the

Constitution of India.

273. Coming, now, to the case of Central Bank of

India v. Devi Ispat Ltd., (2010) 11 SCC 186, I may point

out that it related to a dispute between an individual with

respect to non-furnishing of "No objection certificate" by the

Bank. As the facts reveal, in terms of the advice of the

appellant Bank, the respondent had shifted its account to

another Bank and all pending dues with the appellant Bank

were cleared. The respondent, thereafter, applied for a return of

the security documents and, for issuance of "no-objection

certificate" and "no-dues certificate". Thereafter, the

respondent filed a writ petition before the Calcutta High Court.

A learned Single Judge of the High Court allowed the writ

petition and directed the appellant Bank to release the security

documents. Challenging the said decision, the appellant Bank

filed an appeal before the Division Bench of the High Court but

the appeal was dismissed.

274. The argument, before the Supreme Court, in

Devi Ispat Ltd, (supra), was that the direction of the learned

Single Judge, affirmed by the Division Bench, for return of the

title deeds deposited by the respondent Company, as a

security, cannot be a subject-matter of Article 226 of the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Constitution of India and that the right to retain a mortgage

deed is a civil dispute and proper forum is the Debts Recovery

Tribunal or civil court.

275. Appreciating the submissions of the appellant in

the light of previous pronouncements of the Supreme Court, it

was held, in Devi Ispat (supra), that it is settled law that the

disputes, relating to interpretation of terms and conditions of a

contract, could not be examined/challenged or agitated in a

petition filed under Article 226 of the Constitution. It is a matter

for adjudication by a civil court or in arbitration, if provided for

in the contract or before DRT or under the Securitisation Act.

However, when the relief, sought for, does not relate to

interpretation of any terms of contract, the Bank being a

nationalised bank, a writ court can issue appropriate direction.

276. What follows from the judgment of Devi Ispat

(supra) is that when a contractual dispute against the State is

raised in a writ, then, the writ Court would have jurisdiction to

pass necessary direction provided that the relief sought for does

not relate to interpretation of any terms of contract.

277. Eventually, the Supreme Court, in Devi Ispat

(supra), having discussed several cases, most of which have

been discussed hereinbefore, laid down the following principles:

(a) in the contract, if there is a clause for arbitration,

normally, a writ court should not invoke its Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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jurisdiction;

(b) the existence of effective alternative remedy,

provided in the contract itself, is a good ground to

decline to exercise its extraordinary jurisdiction

under Article 226; and

(c) if the instrumentality of the State acts contrary to

the public good, public interest, unfairly, unjustly,

unreasonably discriminatory and violative of Article

14 of the Constitution of India in its contractual or

statutory obligation, writ petition would be

maintainable. However, a legal right must exist and

corresponding legal duty on the part of the State and

if any action on the part of the State is wholly unfair

or arbitrary, writ courts can exercise their power. In

the light of the legal position, writ petition is

maintainable even in contractual matters, in the

circumstances mentioned in the earlier paragraphs.

278. The relevant paragraph of Devi Ispat (supra),

containing the directions, is reproduced as follows;

"28. It is clear that (a) in the contract if there is a clause for arbitration, normally, a writ court should not invoke its jurisdiction; (b) the existence of effective alternative remedy provided in the contract itself is a good ground to decline to exercise its extraordinary jurisdiction under Article 226; and (c) if the instrumentality of the State acts contrary to the public Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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good, public interest, unfairly, unjustly, unreasonably discriminatory and violative of Article 14 of the Constitution of India in its contractual or statutory obligation, writ Petition would be maintainable. However, a legal right must exist and corresponding legal duty on the part of the State and if any action on the part of the State is wholly unfair or arbitrary, writ courts can exercise their power. In the light of the legal position, writ petition is maintainable even in contractual matters, in the circumstances mentioned in the earlier paragraphs."

279. In a recent decision rendered by the Supreme

Court in the case of State of Kerala v. M.K. Jose, (2015) 9

SCC 433, the Supreme Court has taken into consideration all

the cases, discussed hereinbefore, and has held that it depends

upon facts of each case, under what circumstances contractual

claim or challenge to violation of contract can be sustained in a

writ court.

280. Having discussed the trend of authorities

discussed hereinbefore, the following principles may be suitably

culled out;

(a) 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 Article 299 of the Constitution, a writ petition would not be maintainable. Radhakrishna (supra).

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(b) Where for granting relief, disputed questions of fact would be required to be gone into a writ cannot be maintained Biswanath T. E. (supra).

(c) If the right to relief arose out of an alleged breach of contract, because of any breach of duty imposed upon a statutory power, a writ petition, under Article 226, would be maintainable Ram Sanehi Singh, (supra)

(d) If appellant entered into a solemn contract in discharge and performance of its statutory duty and the respondent acted upon it, the statutory corporation cannot be allowed to act arbitrarily so as to cause harm and injury, flowing from its unreasonable conduct, to the respondent. In such a situation, the court is not powerless from holding the appellant to its promise and it can be enforced by a writ of mandamus directing it to perform its statutory duty. A petition under Article 226 of the Constitution would certainly lie to direct performance of a statutory duty by "other authority"

as envisaged by Article 12 Lotus Hotel (supra)

(e) If 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. Shrilekha Vidyarthi (supra)

(f) The ultimate impact of all actions of the State or a Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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public body being undoubtedly on public interest, the requisite public element for this purpose is present also in contractual matters and, hence, it is difficult and unrealistic to exclude the State actions in contractual matters, after the contract has been made, from the purview of judicial review to test its validity on the anvil of Article 14. Shrilekha Vidyarthi (supra)

(g) The State, in its contractual obligations, cannot take an arbitrary decision; rather, the decision must be taken considering only relevant materials devoid of any arbitrariness Biman Krishna Bose (supra)

(h) In an appropriate case, a writ petition, as against a State or an instrumentality of a State arising out of a contractual obligation, is maintainable. ABL International (supra)

(i) Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule. ABL International (supra)

(j) A writ petition involving a consequential relief of monetary claim is also maintainable. ABL International (supra)

(k) If in a contract, there is a clause for arbitration, a writ court should not invoke, normally, its jurisdiction;

Devi Ispat (supra)

(l) The existence of effective alternative remedy provided Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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in the contract itself is a good ground to decline to exercise its extraordinary jurisdiction under Article

226. Devi Ispat, (supra)

(m) If the instrumentality of the State acts contrary to the public good, public interest, unfairly, unjustly, unreasonably discriminatory and violative of Article 14 of the Constitution of India in its contractual or statutory obligation, writ petition would be maintainable. However, a legal right must exist and corresponding legal duty on the part of the State and if any action on the part of the State is wholly unfair or arbitrary, writ courts can exercise their power. In the light of the legal position, writ petition is maintainable even in contractual matters. Devi Ispat, (supra)

281. Having laid down the general principles, which

governs a writ involving contractual matters, it would, now, be

necessary to adjudge the appeals in the light of attending facts.

ACTION OF THE RESPONDENTS: WHETHER ARBITRARY?

ROLE OF RESPONDENT CORPORATION

282. It has been alleged by the writ petitioner that

action of the respondents, all throughout, have been arbitrary,

unfair and prejudicial to the writ petitioner. It, therefore, needs

to be examined whether the action of the respondents, in the

course of contract with the writ petitioner, has been arbitrary so

as to attract a violation of Article 14 of the Constitution. Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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283. In the case of Shrilekha Vidyarthi (supra), the

Supreme Court, while dealing with the aspects of arbitrariness,

held that every State action, in order to survive, must not be

susceptible to the vice of arbitrariness, which is the crux of

Article 14 of the Constitution and basic to the rule of law, the

system, which governs us. Arbitrariness is the very negation of

the rule of law. Satisfaction of this basic test, in every State

action, is sine qua non to its validity and, in this respect, the

State cannot claim comparison with a private individual even in

the field of contract. This distinction between the State and a

private individual, in the field of contract, has to be borne in

mind.

284. Adding further, the Supreme Court, in Shrilekha

Vidyarthi (supra), held that the meaning and true import of

arbitrariness is more easily visualized than precisely stated or

defined. The question, whether an impugned act is arbitrary or

not, is ultimately to be answered on the facts and in the

circumstances of a given case. An obvious test to apply is to

see whether there is any discernible principle emerging from

the impugned act and if so, does it satisfy the test of

reasonableness. Where a mode is prescribed for doing an act

and there is no impediment in following that procedure,

performance of the act otherwise and in a manner, which does

not disclose any discernible principle, which is reasonable, may Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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itself attract the vice of arbitrariness. Every State action must

be informed by reason and it follows that an act, uninformed by

reason, is arbitrary. Rule of law contemplates governance by

laws and not by humour, whims or caprices of the men to

whom the governance is entrusted for the time being. It is trite

that 'be you ever so high, the laws are above you'. This is what

men in power must remember always.

285. It would be proper to reproduce the relevant

paragraphs, in Shrilekha Vidyarthi (supra), which read as

follows;

"35. It is now too well settled that every State action, in order to survive, must not be susceptible to the vice of arbitrariness which is the crux of Article 14 of the Constitution and basic to the rule of law, the system which governs us. Arbitrariness is the very negation of the rule of law. Satisfaction of this basic test in every State action is sine qua non to its validity and in this respect, the State cannot claim comparison with a private individual even, in the field of contract. This distinction between the State and a private individual in the field of contract has to be borne in the mind.

36. The meaning and true import of arbitrariness is more easily visualized than precisely stated or defined. The question, whether an impugned act is arbitrary or not, is ultimately to be answered on the facts and in the circumstances of a given case. An obvious test to apply is to see whether there is any discernible principle emerging from the impugned act Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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and if so, does it satisfy the test of reasonableness. Where a mode is prescribed for doing an act and there is no impediment in following that procedure, performance of the act otherwise and in a manner which does not disclose any discernible principle which is reasonable, may itself attract the vice of arbitrariness. Every State action must be informed by reason and it follows that an act uninformed by reason, is arbitrary. Rule of law contemplates governance by laws and not by humour, whims or caprices of the men to whom the governance is entrusted for the time being. It is trite that 'be you ever so high, the laws are above you'. This is what men in power must remember, always."

(Emphasis supplied)

286. On the mode of proving arbitrariness, the

Supreme Court, in Shrilekha Vidyarthi (Kumari) (supra),

held that it is for the person alleging arbitrariness, who has to

prove his allegation. This can be done by showing, in the first

instance, that the impugned State action is uninformed by

reason inasmuch as there is no discernible principle on which it

is based or it is contrary to the prescribed mode of exercise of

the power or is unreasonable. If this is shown, then, the burden

is shifted to the State to repel the attack by disclosing the

materials and reasons, which led to the action being taken in

order to show that it was an informed decision, which was

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out, the State is unable to show that the decision is an informed

action, which is reasonable, the State action must perish as

arbitrary.

287. In the light of the law, laid down on

arbitrariness, let us traverse the facts, none of which are

disputed.

288. The chronology of events, which led to the filing

of the present writ petition, have already been set forth

hereinbefore and, hence, those facts are not being repeated

except the basic facts, which have a bearing on the discussion

in question.

289. It is clearly discernible, from the admitted facts

of the present case, that when the writ petitioner raised

concerns about the prohibition on mining in Bihar, which would

have had material financial impact on the project, the

respondent No.4 wrote a letter to the Collector, Sasaram, to

consider the request of the writ petitioner as a special case by

relaxing the provisions under Rule 36 of the Rules under the

Mines & Minerals (Dеvеlорmеnt & Regulation) Act, 1957. This

letter, by the respondent No. 4, is, in fact, an acknowledgment

of the concerns of the writ petitioner. However, as things rolled

out later, the letter (Annexure 32), was never pursued seriously

by the respondents as a result of which a situation arose, when

the writ petitioner had to, in the interest of project, fetch Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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aggregates from outside the State of Bihar. The writ petitioner

needed an assurance from the respondents that the additional

cost of more than Rs 400 crores would be re-imbursed by the

respondents. It may be pointed out that quantification of

additional cost was not done by the writ petitioner himself;

rather, such quantification was done by Independent Engineer,

Intercontinental Consultants and Technocrat Pvt. Ltd, appointed

by the respondents. It may also be pointed out that at no point

of time, the figure of Rs 435 crores, as additional cost, was ever

disputed by the respondents.

290. In the review meeting, dated 25.9.2013, held in

the Conference room of BSRDC, in the presence of respondent

No. 8, the Independent Engineer, and the representative of writ

petitioner, the minutes No. 2, in Annexure 2, of the said

meeting go to show that consent was given by the respondent

No. 8 to the writ petitioner to go ahead with the installation of

crusher and procurement of aggregates from the neighboring

States being fully aware of the additional cost involved and it

was, thereafter, acting on these representations made by the

respondent No. 8, the writ petitioner went ahead with the

procurement of aggregates from neighbouring States.

291. About a year after the meeting was held on

25.9.2013, another review meeting was held on 05.08.2014

vide Annexure 33. As against Serial No. 3, the discussion/ Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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decision reached, with respect to payment of extra lead of

aggregates, was recorded and it would be seen from the

minutes that contrary to the commitment, made before,

respondent stated that that there was no provision of extra lead

aggregate in the Concessional Agreement and the claim for

extra lead of aggregate had already been rejected. The

respondents, therefore, as is apparent, changed their stance so

far as the re-imbursement for additional cost for extra lead of

aggregates is concerned. It may be pointed out at this juncture

that no specific reason was assigned in the meeting, dated

5.8.2014, to explain the departure from the earlier stand.

292. In view of the stance of the respondents, the

writ petitioner invoked the rights conferred by the Concession

Agreement, particular1y, Article 37.2.2, bringing to the notice

of the respondents to cure the defaults and issues within a

period of 90 days. Among the various defaults and issues

raised, by the writ petitioner, the default and issue, with respect

to serial No. 1, was concern as to non-payment of additional

cost incurred for the procurement of aggregates from longer

leads amounting to Rs 5.63 crores till date. In the review

meeting, dated 4.9.2014, which followed the Notice to cure

issued by the writ petitioner, the first item of the meeting was

regarding the Notice, under Clause 37.2, served by the writ

petitioner upon the respondents. As against this item of the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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discussion, the respondents advised the Independent Engineer

to examine and submit the proposal for additional cost, for

procurement of aggregates involving longer leads, by 8th

September, 2014, for further consideration and submission to

the State Government for approval. The minutes also reveal

that respondents advised the writ petitioner to withdraw the

notice, which the writ petitioner agreed subject to the

recommendation of the proposal of extra lead by the Authority

to the Govt. of B1har.

293. In the meeting, dated 06.11.2014, vide

Annexure 8, the respondents made an explicit promise to the

writ petitioner to cure all the issues (i.e., defects) raised by the

writ petitioner and further requested the writ petitioner not to

terminate the contract.

294. However, as the time passed by and no headway

was being made on the request of the writ petitioner for

payment of additional cost, even though the writ petitioner had

been incurring additional cost for procurement of aggregates

from neighbouring States, on the promise made by the

respondents, the lenders of the writ petitioner held a meeting

with the writ petitioner in the presence of the respondent No. 8.

In this meeting the respondent No. 8, as Annexure 36 explains,

revealed that it is the responsibility of the Company (i.e., the

writ petitioner) to arrange the aggregates. This, again, was a Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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change of stance without any remotely justifiable reasons.

295. Thereafter, the writ petitioner issued the Notice

of Intent to Terminate Agreement in view of the provisions

contained in Article 37.2.2 of the Concession Agreement.

Among several of defaults brought out, the principal one was

non-payment of cost incurred for the procurement of

aggregates and non-granting of permission to procure

aggregates form longer leads for the road works as decided in

the meeting, dated 25.9.2013, i.e, Annexure 2.

296. The options, available to the respondents, on the

receipt of the Notice of Intent to Terminate the Agreement, was

either to cure the defaults or to dispute the notice. However,

rather than curing the defaults or disputing the Notice of Intent

to Terminate, the respondents, as is apparent from Annexure-

12, admitted the default and chose to take the following-up

action under Article 37.4 of the Concession Agreement. The

opening lines of Article 37.4 reads as follows;

"Upon Termination for any reason whatsoever, the Authority shall"

297. It is, thus, clear that the respondents, too,

agreed to terminate the agreement instead of choosing to

contest the claims made by the writ petitioner and that is

precisely the reason that they opted for the follow-up action

needed to be taken by the Authority, when the agreement Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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stands terminated.

298. However, as the events further unfolded, the

respondents became the judge of their own cause and declared

the Notice of Intent to Terminate, issued by the writ petitioner,

as illegal even though, by Annexure 12, the respondents had

started taking follow-up action upon termination of the

agreement.

299. It appears from the letter, dated 16.2.2015,

Annexure 16, that in para 3.1, under the heading Non-payment

of additional cost, incurred by the Concessionaire for

procurement of aggregates, the respondent referred to Clause

12.1(d) of the Agreement, which provides as follows:

"Prior to commencement of Construction works, the Concessionaire shall make its own arrangement for quarrying the materials needed for the project highway under and in accordance with applicable laws and applicable permits".

300. By referring to clause 12.1(d), the respondents

stated that it is the responsibility of the writ petitioner to

procure aggregates or any other materials needed for the

project highway.

301. It seems that contents of clause 12.1(d) has not

been construed in proper perspective. It mentions that the

Concessionaire, the writ petitioner herein, shall make its own Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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arrangement for quarrying the materials needed for the project

highway under, and in accordance with, applicable laws and

applicable permits. Quarrying is the act of removal of

aggregates from the quarry; but despite repeated applications

from the writ petitioner, the respondents had done nothing to

allow quarrying, in the State of Bihar, by granting mining lease;

rather, they directed the writ petitioner to bring aggregates

from outside the State of Bihar, which the writ petitioner did.

The respondents, thus, as an afterthought, sought to create a

confusion over the meaning of quarrying leaving the writ

petitioner to burden the issue of procuring aggregates.

302. A further reading of paragraph 3.1 of Annexure

16 would show that respondents contended that by then, the

Government of Bihar, had, vide Notification no. 3085/M, Patna,

dated 11.08.2014, opened the mining lease for procurement of

aggregates, but even then, the writ petitioner had not made

any efforts for procurement of aggregates.

303. However, it is not understood as to how removal

of prohibition on mining would have automatically led to an

inference that the writ petitioner would have been granted

mining lease, had he taken up the matter. In fact, it would not

be proper to even suggest that writ petitioner had not put up

efforts to get a mining lease within the State of Bihar. The

letters, vide Annexure 29 and 30, indicate that writ petitioner Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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had been pressing hard for a mining lease, in the State of Bihar,

pursuant to which the letter, vide Annexure 32, was written by

respondent No. 4 to the Collector, Rohtas, Sasaram, for

considering the request of the writ petitioner in the light of Rule

36 of the Rules under the Mines & Minerals (Development &

Regulation) Act, 1957, as a special case.

304. It, thus, emerges that the plea of lifting of

prohibition on mining and alleging the writ petitioner of not

putting up efforts to get an allotment of mining lease was taken

only with a view to subvert the Notice of Intent to Terminate

issued by the writ petitioner by misrepresenting the facts. In any

view of the matter, such a reply, as contained in Annexure 16,

was issued only after the issuance of Notice of Intent to

terminate in view of Authority default. Having induced the writ

petitioner by various representations to procure aggregates from

outside the State of Bihar, a representation, as have been

noticed, affirmed on several occasions, and also acted upon by

the writ petitioner, it was not open to the respondents, on the

principles of promissory estoppel, to turn around and say that it

is the responsibility of the writ petitioner to procure aggregates.

It is apparent that respondents initiated the termination process

only to protect itself from the payment of termination amount to

the writ petitioner; hence, the representation, dated 16.02.2015,

smacks of arbitrariness and actuated with ulterior motive. Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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305. It may be pointed out here that Article 37.2.1

mentions the circumstances, whereunder the Agreement can be

terminated by the writ petitioner for default of the Authority. The

principal circumstances are as follows;

The Authority commits a material default in complying with any of the provisions of the Agreement and such default has a material adverse effect on the Concessionaire;

(a) The Authority has failed to make any payment to the Concessionaire within the period specified in the Agreement;

(b) The Authority repudiates the Agreement or otherwise taken any action that amounts to or manifests, an irrevocable intention not to be bound by the Agreement;

(c) The State commits a material default in complying with the provisions of the State Support Agreement if such a default has a material adverse effect on the Concessionaire and the breach continues for a period of 90 days from the date of notice given in this behalf by the Concessionaire to the Authority.

306. The facts, noted hereinabove, would reveal that

acting on the assurances given by the respondents, the writ

petitioner started procuring aggregates from outside the State of

Bihar Incurring certain additional cost(s), which was not part of

the contract. The entire cost would not have been a small Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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amount; rather, would have amounted to Rs 435 crores as per

the assessment made by the Independent Engineer. The conduct

of the respondents show that at no point of time, having

promised to bear the additional cost, they actually paid the cost;

rather, as the events turned out to be, the respondents,

suddenly, termed the claim of the writ petitioner as illegal, which

was arbitrary, unreasonable and unfair as a measure of

subsequent or after thought. I, therefore, find no infirmity in the

findings of learned Single Judge that the termination notice,

issued by the respondents on 10.6.2015, is illegal being served

only to avoid termination payment to the writ petitioner. In any

view of the matter, there could not have been any further

termination of the agreement, from the end of respondents, in

view of Annexure 12, whereby they accepted the notice of intent

to terminate issued by the writ petitioner.

307. Subjecting the aforementioned facts to the test of

arbitrariness as laid down in the case of Shrilekha Vidyarthi

(Kumari) (supra), it is found that despite the recommendation

of the Independent Engineer to provide mining lease to the writ

petitioner or to make additional cost, in the alternative to the

writ petitioner, the respondents, having made explicit promise to

the writ petitioner to make additional payments, kept

dillydallying the issue of additional cost leading the writ

petitioner to issue notice of intent to terminate. Thereafter, Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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accepting the notice and taking follow up action upon

termination, the respondents, again, took a somersault and

termed the notice of intent to terminate as illegal.

308. Thus, the conduct of the respondents is

uninformed by reason inasmuch as there is no discernible

principle on which decisions were taken. The initial onus to show

arbitrariness and unreasonable on the part of the respondents

having been discharged by the writ petitioner, no material

and/or sustainable reason have been shown by the respondents,

in this appeal, which led to the action being taken in order to

show that it was an informed decision, which was reasonable.

The State respondents, being unable to show that their decision,

to first, assure the writ petitioner to bear the additional cost,

inducing the writ petitioner to bring aggregates from outside the

State of Bihar, and, eventually, retracting from their assurances

and promise, is not found to be an informed action, which is

reasonable and, hence, the respondents' action must perish as

arbitrary and, consequently, violative of Article 14 of the

Constitution of India.

ROLE OF STATE GOVT OF BIHAR

309. It is also necessary to mention at this juncture

that the project was not only ventured by the respondents, but

the Govt. of Bihar equally had a stake in it. The approval for the

project, along with the request of the writ petitioner, to provide Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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mining leases, was approved by the State Cabinet. It would

appear from the letter, dated 21.11.2014, vide Annexure 35,

that according to RFP (Request for Proposal), the Bid was not

sanctioned within 120 days by the State Cabinet; hence, the writ

petitioner was requested to extend its bid validity beyond

02.03.2011. The writ petitioner extended the validity of the Bid

for one month. In the meantime, the file for projects State VGF

(Viability Gap Funding) share, for theoretical consent was with

the Finance Department, and, therefore, BSRDC, the

respondents herein, requested the writ petitioner to extend the

validity of the Bid for next two months. Based on the request,

the writ petitioner extended its validity of the Bid by one more

month. The writ petitioner was, again, requested to extend the

Bid validity for the third time, which the writ petitioner complied

by extending the Bid by one more month. On the fourth

occasion, when the writ petitioner extended its Bid, its

extension, on 16.06.2011 was subject, admittedly, to the

granting of the mining lease. It is further revealed from the

Annexure 35 that, as the proceedings for approval of the project

were at the final stage before the Govt of Bihar, the respondents

further requested the writ petitioner to extend the Bid, which

writ petitioner did. Eventually, the conditional bid was approved

by the State Cabinet.

310. It is, thus, apparent that at the time, when the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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State Cabinet approved the project, the conditions, set out by

the writ petitioner, that mining leases shall be granted to the

writ petitioner, were already brought to the notice of State

Cabinet. The opinion of the Principal Additional Advocate

General, in his letter, dated 28.10.2014, also contains a

reference to the approval by the State Cabinet. In this regard,

Clause (d) to Article 37.2.1 provided that if the State commits a

material default in complying with the provisions of the State

Support Agreement and if such default has a Material adverse

effect on the Concessionaire and the breach continues for a

period of 90 days from the date of notice given, in this behalf, by

the Concessionaire to the Authority, the Concessionaire shall be

entitled to terminate the agreement.

311. Mining plots were exclusively under the

possession of State and mining was essential for the

construction of the project. If mining was prohibited, then, the

State Government should have either allowed mining within the

State of Bihar, in the interest of the project, or could have

granted permission for additional cost likely to be incurred by

the writ petitioner. However, despite seeking several extensions

of bid from the writ petitioner, and, eventually, approving the

project with the knowledge of the conditions of mining set out by

the writ petitioner, the State Government continued to sit idle

over the matter, that too, with respect to a project involving Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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huge amount of money. In Annexure 19, the Termination Notice,

issued by the writ petitioner, it has been categorically mentioned

that in view of the delay in the decision as to payment of

additional cost, it would be impossible to complete the project

and commence toll collection from 15.3.2016, the agreed date,

on the basis of which entire financial viability of the project was

worked out.

312. Thus, the Govt. of Bihar, by not taking decision

on the payment of additional cost, not only materially and

adversely affected the project, but also put the writ petitioner to

risk of committing a default in not completing the project in

time. Seen from the perspective of Clause 37.1.1 (e) of the

Concession agreement, such a delay could have been a ground

for the Authority to terminate the agreement, that too, for no

fault of the writ petitioner. It may be pointed out here, as

submitted by the learned Senior Counsel for the writ petitioner,

that if the writ petitioner would not have agitated the issue of

additional cost of aggregates, from the longer leads, the project

would have gone in indeterminate state since the financial close

of Rs 1200 crores did not include the additional cost of Rs 435

crores for procurement of aggregates from longer leads. Hence,

it is evident that, apart from the actions of respondent

Corporation, even the action of State Government is

undoubtedly unfair, unreasonable, arbitrary and, therefore, Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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violative of Article 14 of the Constitution of India.

WHETHER THE WRIT PETITION DISCLOSES DISPUTED QUESTIONS OF FACT?

313. One of the prohibitions, which regulates the grant

of relief in exercise of the extraordinary writ jurisdiction, under

Article 226 of the Constitution of India, is whether the pleadings,

when taken in its entirety, raise disputed questions of fact.

314. In the present case, the pleadings and materials

on record, when read as a whole, reveal no disputed fact. The

contents of the documents, relied upon, by the writ petitioners,

are also admitted. The only issue, which may require

adjudication, even though not specifically disputed, is the

quantum of the money claimed in the writ petition.

315. Clause 37.3.2 of the Concession Agreement deals

with Termination Payment on account of default by the

Authority. It provides that upon termination of agreement on

account of Authority default, the Authority shall pay to the

Concessionaire an amount equal to

a. Debt due; and

b. 150% of the Adjusted Equity.

316. Termination payment shall become due and

payable to the Concessionaire within 15 days of a demand being

made by the Concessionaire to the Authority with the necessary

particulars and, in the event of delay, Authority shall pay interest Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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at the rate equal to 3% above the Bank rate on the amount of

termination payment remaining unpaid.

317. In the present case, the quantum of termination

payment has been worked out by the Independent Engineer

appointed by the respondents themselves. This was done in

terms of the review meeting, dated 04.09.2014. In the report of

Independent Engineer, dated 09.09.2014, Annexure 34, it has

been specifically stated that the amount, on account of

termination, works out to Rs 602 crores by applying the

standards mentioned in Clause 37.3.2, though it may be pointed

that the figure of Rs 602 crores were till the date of report, i.e.,

09.09.2014, which, by stipulated calculation method, has gone

up, on account of interest, as the writ was filed in the month of

May, 2015, which is more or less eight months after the report,

Annexure 34, was submitted. The writ petitioner, along with

Termination Notice, dated 20.02.2015, Annexure 19, had

annexed the calculation for termination payment, supported by

the certificate from the Lead Bank of the Consortium of Banks,

for debt disbursed till that date, which is not disputed on record.

318. Apart from the report of Independent Engineer,

the respondents have themselves got the figures of equity and

debt verified through the Concurrent Auditor, appointed by the

respondents, as can be seen from the minutes of the meetings,

dated 04.09.2014 and 06.11.2014, Annexure 7 and 8, Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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respectively. It would be seen that vide a letter, dated

16.2.2015, respondent No. 7, addressed a letter to the

Department of Economic Affairs, Ministry of Finance, Govt. of

India, vide letter no. BSRDCL-1548/2014-39, dated 16.02.2015,

wherein they have certified that the Concessionaire, the present

writ petitioner, has subscribed Rs 202.00 crores against Equity

support.

319. Again, the lenders of the writ petitioner also

addressed a letter, vide letter No. ADV:KO:2069/14-15, to the

respondent No.8, namely, General Manager of the respondent-

Corporation, on the subject of disbursement made to the writ

petitioner, wherein they have stated that till 16.02.2015, the

lenders have disbursed Rs 3,08,28,389 to the writ petitioner.

The amounts of equity and debt are, thus, not disputed at any

point. Hence, the claim cannot, but be held to be true and

legitimate, which I do.

320. With regard to the findings of the learned single

Judge, in paragraph 13 of the judgment, that "As regards the

quantification of the consequent Termination Payment liable to

be paid by the respondents with regard to the nature and extent

of authority default in terms of Clause 37.2.2 of the of the

agreement, the same would necessarily require a detailed

investigation into facts and adduction of evidence, into the

details of which this Court need not travel" is found to be not in Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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consonance with the admitted position of the case. As already

pointed out, the calculation method of termination payment and

the quantum of payment have never been disputed by the

respondents; hence, no detailed investigation of facts is required

in the present case.

321. Now, the law as provided in Section 70 of the

Contract Act is that even if the contract is illegal, but, in

execution of such a contract, a party has derived benefit, the

party, who derives and accepts the benefit, has to compensate

the person from whom such benefit is derived and accepted.

Hence, though a contract is illegal, the fact remains that if, in

terms of the contract, the State has derived benefit, or received

delivery of property, the State has to compensate the person,

who delivers the property, or from whom benefit is derived by

the State. Though, in the present case there is no question of

illegality of contract as the contract was lawfully entered into but

the fact remains that the respondents have received the benefits

of the work done by the appellant, i.e. construction of road by

procuring aggregates from outside the State of Bihar. In these

circumstances, when the appellant was allowed to execute the

contract, in question, it will be highly iniquitous not to let the

respondents compensate the appellant for the benefits, which

the respondents have derived, because of the execution of the

contract by the appellant. The compensation, in the present Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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case, would be one which has been worked out by the

Independent Engineers in terms of Clause 37.3.2.

322. It would be proper to refer, in this context, to one

of the observations made by the Supreme Court in the case of

Gunwant Kaur v. Municipal Committee, Bhatinda, (1969) 3

SCC 769, wherein it has been held that the High Court is not

deprived of its jurisdiction to entertain a petition under Article

226 of the Constitution of India merely because in considering

the petitioner‟s right to relief, questions of fact may fall to be

determined. In a petition under Article 226 of the Constitution of

India, the High Court has jurisdiction to try issues both of fact

and law.

323. Even though no disputed questions of fact have

been found in this case; yet, it may be proper to quote one of

the observations made in the case of Century Spg. And Mfg.

Co. Ltd. V. Ulhasnagar Municipal Council, (1970) 1 SCC

582, with respect to a submission made therein that the

appellant had raised questions of fact and, hence, remedy under

writ jurisdiction is not appropriate. To this submission the Apex

Court responded as follows;

"13. Mr. Gokhale appearing on behalf of the Municipality urged that the petition filed by the Company apparently raised questions of fact which in the view of the High Court could not appropriately be tried in the exercise of the extraordinary jurisdiction under Article 226. But the High Court has not said so, Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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and on a review of the averments made in the petition this argument cannot be sustained. Merely because a question of fact is raised, the High Court will not be justified in requiring the party to seek relief by the somewhat lengthy, dilatory and expensive process by a civil suit against a public body. The questions of fact raised by the petition in this case are elementary."

(Emphasis is added)

324. In view of the fact that the quantum of

compensation has never been disputed by the respondents, the

findings of the learned single Judge, in paragraph 13, referring

the matter to arbitration and direction to the writ petitioner to

co-operate in the arbitration, are not justified in the context of

this case and, accordingly, needs to be interfered with.

325. The facts of this case are similar to that of Lotus

Hotels (P) Ltd. (supra). In the present case, too, same as

Lotus Hotels (supra), the respondents assured the writ

petitioner that they will bear the additional cost of procurement

of aggregates from outside the State of Bihar. The writ petitioner

had acted on the assurances and promise and invested huge

sums of money to procure aggregates from outside the State of

Bihar; but, later on, not only the respondents resiled from their

promise, but also termed the writ petitioner‟s claim as illegal.

326. I have had the pleasure of reading the judgment

of my learned brother, Justice Chakradhari Sharan Singh, and Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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even though I appreciate the efforts put in by my learned

brother, yet I am unable to persuade myself to agree to the

conclusions reached by my learned brother on some of the vital

aspects of the case.

327. The learned single Judge, in paragraph 12 of his

judgment, has held that "on merits of the present case, this

Court finds no error in the action of the petitioner in

issuing the termination notice and the Respondent's

contention that the petitioner ought to have first opted for

arbitration cannot be accepted".

(Emphasis is added)

328. Thus, the learned single Judge has held that not

only the termination notice of the petitioner is proper, but the

contention of the respondents that petitioner ought to have

taken recourse to arbitration, too, did not find favour with the

learned single Judge. In this regard, while going through the

findings of my learned brother, I notice that this finding of the

learned single Judge has not been disturbed in any manner.

329. The learned single Judge, having held that

termination of the notice by the appellant is proper, has,

however, held that so far as quantification of termination

amount is concerned, the same would require adducing of

evidence and investigation of facts. Such an observation seems

to have been upheld by my learned brother, though the Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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materials on record make it, to my mind, amply clear that even

the amount is not in dispute, or to be more precise, the

termination amount has been admitted.

330. Now, it is an admitted position that at the time of

entering into agreement, mining operations were prohibited in

the State of Bihar and that is why, the bid of the appellant was

conditional that mining would be permitted. The conditional bid

was approved on 2.8.2011 by the State Cabinet. A

reference to the Cabinet approval is found in Annexure 35 and

Annexure 26, the contents whereof have not been in dispute.

The Concession Agreement signed by the parties contains all the

correspondences regarding the conditional bid and allotment of

mines.

331. I, therefore, find myself in disagreement with the

observation made by my learned brother that there was no

stipulation in the Concession Agreement that mining lease would

be granted to the appellant for execution of work. My learned

brother has incorporated the provisions of Article 12 of the

Agreement, which specifically provides that prior to the

commencement of works, the Concessionaire shall make its own

arrangements for quarrying the materials needed for the project

highway.

332. Article 12.1 (d) provided that the appellant shall

quarry the materials needed for the project highway in Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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accordance with applicable laws and applicable permits. The act

of quarrying, as agreed, was the sole responsibility of the

appellant; but such an act of quarrying was subject to applicable

laws and permits. Since, admittedly, mining operations stood

prohibited at the relevant point of time, the question arose as

regards procuring materials from outside the State of Bihar

requiring additional cost. It is not the case of the Corporation

that even for mining operation in Bihar, the appellant was asking

for additional cost. In this regard, when the matter was referred

to Independent Engineers, appointed by the Corporation, they,

too, gave an opinion, vide Annexure 6, that BSRDC, the

respondents herein, may take a decision either to impress upon

the State Government to allow mining or re-imburse the

additional cost of Rs 410.13 crores based on SOR-8th edition of

Road Construction Department, Bihar. The mining operations in

Bihar was, admittedly, never allowed to the appellant.

333. My learned brother has, while referring to

Annexure 2, held that Annexure 2 does not contain any

admission on the part of the respondents permitting the

appellant to procure aggregates from outside the State of Bihar

in view of the mining prohibitions in the State of Bihar and has

further held that since Annexure 2 does not contain the

signatures of the respondents, it cannot form basis of any

assurance. While considering Annexure 2, it needs to be Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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carefully noted that the contents and contentions embodied in

Annexure-2 have never been in dispute between the parties

concerned and, therefore, I am unable to fall in agreement with

my learned brother that Annexure 2 does not contain an

admission. It is apparent from Annexure 6, the notice issued by

the appellant to the respondents for curing the defects/defaults,

that till 31.7.2014, the appellant had already incurred an

expenditure of Rs 5.63 cores for procuring aggregates from

outside the State of Bihar. This amount went upto Rs

9,15,20,314/- as can be seen from Annexure 11. In my

considered view, therefore, the conduct of the respondents in

not prohibiting the appellant from incurring expenditures goes to

show that the respondents wanted the appellant to go ahead

with the assurance. Hence, Annexure 2 has to be treated as

clear admission on the part of the respondents that in view of

the requirement to complete the project in time and also in view

of the mining prohibitions, they had allowed the appellant to

procure aggregates from longer leads. The absence of signatures

of respondents in Annexure 2 is of little importance since the

respondents have not disputed the document, Annexure 2,

and/or the conditions therefor. This apart even Annexure 33,

which is also a minute relied upon by the appellant, bears only

the signature of respondents.

334. It has been held in Nagubai Ammal v. B. Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Shama Rao, (AIR 1956 SC 593) that an admission is not

conclusive as to the truth of the matters stated therein. It is only

a piece of evidence, the weight to be attached to which must

depend on the circumstances under which it is made. It can be

shown to be erroneous or untrue, so long as the person to

whom it was made has not acted upon it to his detriment,

when it might become conclusive by way of estoppel.

335. It may be stated here that the case of the

respondents is that they are denying the entitlement of the

appellant to the money claimed and not the computation. The

entitlement has been upheld by the learned Single Judge, while

holding that termination of agreement was correct on the facts

of this case.

336. It may be pointed out that in para 7 of Annexure

34, the Independent Engineers have mentioned the expression

tentative, but the method of computation of the amount is,

admittedly, in terms of the Concession Agreement, as reflected

in Article 37.3.2. Article 37.3.2 of the Concession Agreement

deals with Termination Payment on account of default by the

Authority. It provides that upon termination of agreement on

account of Authority default, the Authority shall pay to the

Concessionaire an amount equal to;

a. Debt due; and

b. 150% of the Adjusted Equity.

Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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337. The Independent Engineers had prepared the

report on 9.4.2014 and they had taken into account the

components as available and admitted on the day of preparation

of report. On that day, the principal amount outstanding to

Senior lenders of the appellant was Rs 248.49 crores, which, at

the time of filing of writ petition, was Rs 3,08,28,18,389/- vide,

Annexure I.

338. It is also pertinent to point out that the

Independent Engineers were directed by the respondents

themselves to visit the appellant‟s headquarter along with the

Concurrent Auditor, appointed by the respondents, for the

scrutiny of papers related to VGF grants and to submit a

scrutinized report by 15.9.2014. The VGF grant is based on

equity and debt by the banks. The Independent Engineers and

the Concurrent Auditors scrutinized the accounts of the appellant

at the appellant‟s headquarters as can be seen from the

minutes, dated 6.11.2014, and after all these compliances, the

respondents decided to process the release of grant by the State

and the Central government. This would mean that the debt

amount and equity amount has been verified and were found to

be true as can be seen from the minutes of the meetings, dated

04.09.2014 and 06.11.2014, Annexure 7 and 8, respectively.

339. It would be seen that respondent No. 7,

addressed the Department of Economic Affairs, Ministry of Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Finance, Govt. of India, letter No. BSRDCL-1548/2014-39, dated

16.02.2015, (Annexure a, page 123), wherein they have

certified that the Concessionaire, the present appellant, has

subscribed Rs 202.00 crores against Equity support. If the

equity amount is Rs 202 crore, then, 150% of 202 crore comes

to Rs 303 crore. Thus, the figure of Rs 602 crores is sum total of

figures of Rs 303 crores and 248.49 crore along with interest.

340. The case of the appellant is, thus, not based on

the report of Independent Engineer alone, but also on the

scrutiny of the Independent Engineer and the Concurrent

Auditor as per minutes, dated 4.9.2014 and 6.11.2014, and the

unequivocal admissions of the respondents about the equity and

debt, while recommending release of grant to the Government

of India read with confirmation letter of the lenders.

341. Thus, if the finding of the learned single Judge

that appellants had rightly terminated the agreement has been

upheld, the denial of relief on the grounds that termination

payment would require adducing evidence and investigation of

facts is not borne out of records. Such quantification is simple

arithmetic based on agreed formula. In any view the matter, the

respondents have never disputed the computation method as

projected by the appellant. No question of any agreement on the

binding force of Independent Engineers‟ report arises for the

reason that it is nobody‟s case. However, what is binding is Patna High Court LPA No.2158 of 2015 dt.12-05-2016

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Article 37.3.2, which deals with the method of computation of

termination payment in the event of Authority default. That