Pollution Control Committee Amritsar vs Municipal Corporation Amritsar and others

Date of Decision: July 23, 2013

(i) CWP No.2032 of 2006 (O&M)

Pollution Control Committee Amritsar .....Petitioner

Versus

Municipal Corporation Amritsar and others .....Respondents

Present: Shri V.K. Kaushal, Advocate, for the petitioner.

Shri R.D. Bawa, Advocate, for respondent No. 1.

Shri H.S. Brar, Additional Advocate General, Punjab, for respondent Nos. 2, 3 and 6.

Shri D.S. Patwalia, Advocate and Shri Salil Sabhlok, Advocate, for respondent Nos. 4 & 5.

(ii) CWP No.12188 of 2010 (O&M)

M/s AKC Developers Limited .....Petitioner

Versus

State of Punjab and others .....Respondents

Present: Shri Vikram Chaudhary, Advocate, for the petitioner.

Shri H.S. Brar, Additional AG, Punjab for respondent No.1

Shri Ashok Aggarwal, Senior Advocate with Shri Mukul Aggarwal, Advocate, for respondent No 2.

Shri D.S. Patwalia, Advocate and Shri Salil Sabhlok, Advocate, for respondent No.3.

CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MR. JUSTICE FATEH DEEP SINGH

1. Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? Singh Dalbir 2013.07.23 12:02 I attest to the accuracy of this document High Court Chandigarh CWP No.2032 of 2006(O&M) (2)

Hemant Gupta, J.

1. This order shall dispose of CWP No. 2032 of 2006 (hereinafter

referred to as `the first petition') preferred by the Pollution Control

Committee, Amritsar, for directing the respondents, including the

Municipal Corporation, Amritsar to shift the dumping place of

Municipal solid waste and dead animals to an authorized and

approved place in accordance with the provisions of the Municipal

Solid Wastes (Management & Handling) Rules, 2000 (for short `the

Rules') and for scientific disposal of the Municipal solid wastes and

dead animals.

2. During the pendency of the aforesaid writ petition, on 5.5.2009,

the Municipal Corporation has granted contract of processing and

disposal of the Municipal solid waste to M/s AKC Developers Ltd., but

such contract stands cancelled vide communication dated 28.5.2010.

It is the said communication (Annexure P.32), which is subject

matter of challenge in CWP No.12188 of 2010 (hereinafter referred to

as `the second petition') preferred by the successful bidder. The said

writ petition is also being disposed of with the present writ petition.

3. A Division Bench of this Court passed an order on 7.5.2009 on

the basis of the status report furnished by the Commissioner,

Municipal Corporation, Amritsar. The order reads as:-

"Municipal Corporation, Amritsar has today filed a status report on the affidavit of Shri D.P.S. Kharbanda, Commissioner, Municipal Corporation, Amritsar. From a reading of the said affidavit, it appears that the substantial progress has been made towards setting up of a Solid Waste Treatment Plant in as much as setting up of the Plant has already been allotted to M/S A.K.C. Developers Limited Noida and the funds required for the project already arranged from JNNURM Cell of the Ministry of Urban Development and Poverty Alleviation, Delhi. Learned counsel appearing for the Municipal Corporation, Amritsar submits that according to his

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instructions, the Solid Waste Treatment Plant shall be set up within 9 to 12 months.

In the circumstances, therefore, we deem it fit to adjourn this petition by six months to be posted again on 21.12.2009 to enable the Corporation to submit a status report about the progress made by it.

We make it clear that setting up of the Solid Waste Treatment Plant shall be strictly in accordance with the provisions of the Water & Air (Prevention and Control of Pollution) Acts and all the permissions required for setting up such a plant shall be obtained form the competent authority by the Corporation before the work actually starts."

4. It is thereafter, the letter of intent was issued to M/s AKC

Developers Limited, the writ petitioner in the second writ petition. It

is pointed out by the petitioner in the first petition that the solid waste

of the city of Amritsar was being dumped at the Jhabal Road since the

partition of the country which became a source of pollution to the

locality. A processing unit of the dead animals also existed at that

place, which also added to the pollution. The petitioner submitted a

complaint to the Punjab State Human Rights Commission, but during

the pendency of the complaint, the Rules were notified and the

respondents assured the implementation of the said Rules. In

pursuance of the direction of the Punjab State Human Rights

Commission dated 24.9.2003, a status report was filed by the

Municipal Corporation that the land fill at site at Bhagtanwala

measuring 194 kanals, is now being used and an application for

authorization under the Rules, has been made to the Punjab Pollution

Control Board, which is under consideration. It is the stand of the

petitioner that such authorization has not been granted by the

Pollution Control Board under Rule 4(2) of the Rules to use the site

at Gate Bhagtanwala as the land fill. The site is said to be adjoining

the biggest grain market in the city, where large number of people

visit everyday. A copy of the status report filed before the Punjab

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State Human Rights Commission, has been appended as Annexure

P.2, wherein it has been, inter-alia, stated that the land fill site at

village Jhabal has been abandoned and the same is covered with the

good earth. The Corporation stated to the following effect:-

"1. That in compliance with the Municipal Solid Waste Handling Rules, 2000, Schedule-I and Rules 4.2 & 4.3 page 4, the land fill site at Bhagtanwala measuring 194 kanals, is being used. Photographs of this land fill site are enclosed herewith for ready reference. It is further submitted that an application for authorisation under the Rules, was submitted in September, 2002 to the Pollution Control Board, which is still under consideration of the Board.

2. That for setting up a Solid Waste Treatment Plant, tenders were invited and are under process. A report in this regard has already been submitted before this Hon'ble Commission on dated 24.9.2003.

3. & 4. xxx xxx

5. That the Municipal Corporation, Amritsar has submitted an application for authorisation on the prescribed proforma to the Pollution Control Board vide letter No. A.C. (D)/1510 dated 23.9.2002 and the queries raised by the Board were clarified by the Municipal Corporation, Amritsar vide No. MOH/785 dated 29.10.2003. Copies of both these letters are enclosed herewith for ready reference."

5. In reply filed on behalf of the Municipal Corporation in the first

writ petition, it was asserted that the Corporation is making every

effort for the management of the Municipal solid waste as per the

Rules and also delineated the steps taken by it including the

processing of the Municipal solid waste over land measuring 194

kanals situated outside gate Bhagtanwala.

6. The Pollution Control Board in its separate reply, asserted that

the Municipal Corporation has been requested to submit a time

bound action plan in accordance with the Rules. Even a notice for

violation of the provisions of the Rules was issued on 5.12.2003. The

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Corporation was asked to submit action plan for management of the

Municipal solid waste as per the Rules, in terms of the order of the

Hon'ble Supreme Court dated 27.7.2004 passed in CWP No. 888 of

1996-Almitra H. Patel and Others v. Union of India. In an affidavit

dated 1.11.2011 filed on behalf of the Punjab Pollution Control Board,

it has been stated that there is no change in Clause (7)(d) of

Notification No.SO1533 dated 14.9.2006 as amended on 1.12.2009

and that common Municipal solid waste management facilities

requires environmental clearance from the State level Environment

Impact Assessment Authority.

7. An affidavit has been filed by the Deputy Commissioner in

respect of the actions taken by the Municipal Corporation, but there

is no averment that the Municipal Corporation has obtained

authorization in terms of Sub Rule (2) of Rule (4) of the Rules In a

status report filed on behalf of the Municipal Corporation dated

17.9.2012, it is pointed out that the contract regarding collection and

transportation of the Municipal waste was allotted to M/s Antony

Waste Handling Cell Pvt. Ltd., but the said agency closed the work

without any notice on 26.7.2012 and that the Corporation has

deployed tractor-trolleys for collection and transportation of the

garbage from the area of 40 wards allocated to the said agency.

8. Shri Navjot Singh Sidhu, Member Parliament, Amritsar, filed an

application under Order 1 Rule 8 CPC for intervening in the matter,

pointing that the piles of garbage have come up on roadsides and

streets all over the city. It is so averred in para No.4 of the application

as under:-

"4. That the current situation of garbage disposal in the entire city is very bad and is worsening with each passing day. There is practically no collection of garbage, either door to door or area wise, that is taking place in Amritsar. Similarly, the processing plant for the disposal of the collected garbage is also not functioning. As a result, piles of garbage have come up on roadsides Singh Dalbir 2013.07.23 12:02 I attest to the accuracy of this document High Court Chandigarh CWP No.2032 of 2006(O&M) (6)

and streets all over the city. Unless immediate steps are taken for cleaning of the city & regular collection as well as proper disposal of the garbage, there is high possibility of spreading of diseases in the area, especially in the current warm & humid climatic conditions."

9. Admittedly, the authorization, the reference of which finds

mention in the status report filed by the Corporation and produced in

the first petition as Annexure P.2, has not been obtained even though

there was a direction of the Punjab State Human Rights Commission

on 22.1.2004 to the Corporation that it shall ensure that the action

already initiated is completed expeditiously.

10. In the second petition, the petitioner was issued letter of intent

on 5.5.2009 and in terms of the conditions of letter of intent, the

petitioner furnished Bank Guarantee for Rs.50 lacs on 14.5.2009.

Thereafter, a contract agreement was also executed on 19.5.2009.

The petitioner furnished bank guarantee in the sum of

Rs.2,57,50,000/- on 27.5.2009 for release of 10% of the mobilization

advance as per the terms of the payment in contract agreement. In

terms of the contract agreement, a lease deed of the land measuring

21 acres situated at Bhagtanwala was executed for a period of 30

years on 2.7.2009, which was registered on 3.7.2009. Thereafter, on

9.7.2009, the petitioner submitted balance performance Bank

Guarantee for Rs.78,75,000/-.

11. The Municipal Corporation on 21.10.2009 communicated that

the writ petitioner was required to obtain necessary clearance

certificate from the statutory agencies like the Pollution Control Board

and the Environment Regulatory Authority as per Clause 5.1.6 of the

agreement, but the petitioner has failed to take the necessary

clearances. In response to the said communication, the stand of the

petitioner was that the present site awarded to the petitioner is an old

dumping site which is more than five years old, therefore, in terms of Singh Dalbir 2013.07.23 12:02 I attest to the accuracy of this document High Court Chandigarh CWP No.2032 of 2006(O&M) (7)

the order dated 17.3.2009 of this Court in CWP No. 8504 of 2003 -

Sat Priya Mehamia Memorial Education Trust (Regd.) v. State of

Haryana and others, it is not necessary to take environmental impact

assessment clearance from the Punjab Pollution Control Board. The

petitioner again sought possession of the land asserting that the

petitioner does not require clearance from the Pollution Control Board

in respect of the existing dumping site. After exchange of

correspondence, it was on 28.5.2010, the contract awarded to the

petitioner was cancelled in pursuance of the communication of the

Local Department, of the Government of Punjab dated 24.5.2010.

Copy of the said communication is annexed with the writ petition as

Annexure P.32. On the said date, the petitioner was also served with

the show cause notice Annexure P.36 in terms of Clause 13 of the

lease deed as to why the lease deed be not cancelled. The petitioner

submitted reply dated 30.6.2010, which is not on record, but

produced by the Corporation and is taken on record and is marked as

Annexure P.39. After considering the reply, the lease was cancelled

and an order was passed for cancellation of lease on 5.7.2010

(Annexure P.38). The petitioner filed the writ petition seeking setting

aside of the communication dated 28.5.2010 and also sought a writ of

mandamus directing the respondents to forthwith allow the petitioner

to start the work at site and hand over the physical possession of the

site for completion of the project.

12. The stand of the Corporation again is that it had asked the

petitioner vide communications dated 21.10.2009; 9.12.2009;

24.12.2009; 25.1.2010 and 4.12.2010 to obtain necessary clearance

from the Pollution Control Board as per Clause 5.6.1 of the agreement

and also requested the Environment Engineer, to act in this regard

without delay. It is pointed out that the petitioner has not obtained

clearance from the Punjab Pollution Control Board, Patiala, therefore,

the possession of the site could not be given to the petitioner. It is

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denied that the Municipal Corporation was satisfied that the site

which has already been used for dumping the garbage does not

require any sanction from the Punjab Pollution Control Board.

13. The State filed its affidavit pointing out that the Chief Vigilance

Officer of the Local Government in his detailed report dated

23.10.2009 has reported that the Consultant of the project as well as

the functionaries of the Municipal Corporation have committed

serious and grave illegalities and irregularities and that the financial

parameters have been thrown to winds so as to extend undue favour

to the petitioner. It is pointed out that the bid of the petitioner was

accepted in disregard and disobedience of the Detailed Project Report

and that too without any tenable justification against the sanctioned

project costs. It was pointed out that one of the bidders M/s A to Z

Infrastructure stated that the consultant of the project appointed by

the Municipal Corporation had obtained blank but signed tender

document from it by misrepresentation and that tender form was

later on used to project that healthy bidding has taken place. The

rates approved in the detailed project report were exorbitant and that

the consultant of the project has throughout acted mala-fidely. Even

the Deputy Controller (Finance & Accounts), Municipal Corporation,

Amritsar, has stated that his signatures on the technical evaluation

report were obtained by distorting the facts. Reference was made to

the exorbitant rates of land in gross violation of the detailed project

report. It is also pointed out that since the petitioner-Company, was

provided the land for the project at nominal lease rate of Re.1/- sqm.

Per year and also suitable financial assistance given, there was no

justification to share the income of the carbon credits, revenue

generated from the sale of site for display of advertisement besides the

amount of central subsidy to be received, if any. The terms and

conditions of the similar project awarded to the consortium member of

the petitioner at Rajkot has not been taken into consideration. The

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negotiations were avoided and technical evaluation was only a farce.

The State has also produced the communication addressed by it to

the Municipal Corporation on 24.5.2010 (Annexure R.2), which was

made basis for termination of the contract.

14. In fact the consultant of the Municipal Corporation has filed an

affidavit dated 7.9.2012, a copy of which was received by the counsel

for the petitioner. However, it is intriguing that how such affidavit

came to be placed on record when the consultant is not a party to the

writ petition nor the consultant has sought permission to become a

party or even to place on record the affidavit. In the said affidavit the

consultant has justified the grant of contract to the petitioner, which

prima-facie supports the stand of the State Government that the

consultant of the project as well as the functionaries of the Municipal

Corporation has committed serious and grave illegalities and

irregularities.

15. The common question in both the cases is whether the

permission of the Pollution Control Board for use as land fill or

dumping site is required to be obtained in terms of Rule 4 of the

Rules. The relevant extracts from the Rules are as under:-

"3. Definitions.-- In these rules, unless the context otherwise requires,-

(i) xx xx xx

(ii) "authorisation" means the consent given by the Board or Committee to the "operator of a facility".

xx xx xx

4. Responsibility of municipal authority.-

1. Every municipal authority shall, within the territorial area of the municipality, be responsible for the implementation of the provisions of these rules, and for any infrastructure development for collection, storage, segregation, transportation, processing and disposal of municipal solid wastes.

2. The municipal authority or an operator of a facility shall make an application in Form-I, for grant of authorisation for setting up waste processing and disposal facility including landfills from the State Board

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or the Committee in order to comply with the implementation programme laid down in Schedule I.

3. The Municipal authority shall comply with these rules as per the implementation schedule laid down in Schedule I.

4. The municipal authority shall furnish its annual report in Form-II-

a. to the Secretary-incharge of the Department of Urban Development of the concerned State or as the case may be of the Union Territory, in case of a metropolitan city; or b. to the District Magistrate or the Deputy Commissioner concerned in case of all other towns and cities, with a copy to the State Board or the Committee on or before the 30th day of June every year.

xx xx xx

7. Management of municipal solid wastes.--

1. Any municipal solid waste generated in a city or a town, shall be managed and handled in accordance with the compliance criteria and the procedure laid down in Schedule-II.

2. The waste processing and disposal facilities to be set up by the municipal authority on their own or through an operator of a facility shall meet the specifications and standards as specified in Schedules III and IV."

Schedule III

[ See rules 6(1) and (3), 7(2) ]

Specifications for Landfill Sites

Site Selection

1. In areas falling under the jurisdiction of `Development Authorities', it shall be the responsibility of such Development Authorities to identify the landfill sites and hand over the sites to the concerned municipal authority for development, operation and maintenance. Elsewhere, this responsibility shall lie with the concerned municipal authority.

2. Selection of landfill sites shall be based on examination of environmental issues. The Department of Urban Development of the State or the Union Territory shall co- ordinate with the concerned organizations for obtaining the necessary approvals and clearances.

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3. The landfill site shall be planned and designed with proper documentation of a phased construction plan as well as a closure plan.

4. The landfill sites shall be selected to make use of nearby wastes processing facility. Otherwise, wastes processing facility shall be planned as an integral part of the landfill site.

5. The existing landfill sites which continue to be used for more than five years, shall be improved in accordance of the specifications given in this schedule."

16. The primary challenge to the cancellation/termination of the

contract is for the reason that the contract has been terminated

without granting any opportunity of hearing and thus, the action

violates the principles of natural justice. It is also alleged that the

stand of the Corporation that the petitioner requires clearance from

the Pollution Control Board in terms of the Rules is misconceived in

view of the judgment of this Court dated 17.3.2009 rendered in CWP

No.8504 of 2003 (Annexure P.2). In the said case, the disposal of the

Municipal solid waste of Rohtak Municipality on a land measuring 20

bighas and 19 biswas acquired in 1975 for dumping of the Municipal

waste was in question.

17. The sole reliance of the petitioner on the question whether the

Municipal Corporation and/or the Contractor requires authorisation

in terms of Rule 4(2) of the Rules for its land fill facility at

Bhagtanwala is based upon an order dated 17.3.2009 passed in CWP

No. 8504 of 2003 by the Division Bench of this Court (of which one of

us Hemant Gupta J.), was a member. The marked distinction between

the two cases is that the acquisition of the land for dumping the

Municipal waste in the aforesaid case was completed in the year 1975

and at that time the site was outside the Municipal limits of Rohtak.

The site came to be within the Municipal limits only in the year 1990.

The writ petitioner had purchased 25 acres of land at a short distance

from the dumping site nearly after 20 years of the use of the dumping

site. It was a case of purchaser of land seeking shifting of dumping Singh Dalbir 2013.07.23 12:02 I attest to the accuracy of this document High Court Chandigarh CWP No.2032 of 2006(O&M) (12)

site. Thus Clause 5 of Schedule-III was interpreted to mean that the

landfill sites existing as on the date of framing of the Rules, have only

to be improved in accordance with the specifications given in the

Schedules and that there is no prohibition for use of an existing

landfill site by the Municipal Authorities.

18. In the present case, firstly, the date from which the site at

Bhagtanwala has been put to use, has not come on record. Whether

such site was in use for more than five years prior to the

promulgation of the Rules to be part of the exception is not made out.

Even otherwise, the stand of the Municipal Corporation, as per the

status report filed and also in the replies filed in the first writ petition

and the second writ petition, is that the authorization from the

Pollution Control Board is required. The petitioner was requested to

seek approval from the Pollution Control Board to comply with the

Rules. However, the petitioner has failed to seek authorization in

respect of the solid waste management site at Bhagtanwala. For its

inability to seek authorization, the possession of the leased land was

also not given. The said fact alone disentitles the petitioner to dispute

the cancellation of the contract awarded to it to manage the solid

waste of the Municipal Corporation. The Petitioner has failed to

comply with the first basic condition to set up the plant that is

authorization from the Pollution Control Board. Therefore, the

reliance of the petitioner in the second writ petition on the order

passed in respect of another Municipality, was misconceived and to

misdirect not only the Corporation, but also the Pollution Control

Board. Still further, the petitioner as an agent of the Corporation was

bound to comply with the direction of the Municipal Corporation to

obtain permission from the Pollution Control Board, which in any

case, was in the interest of the general public.

19. In respect of the second argument that the contract has been

terminated on the direction of the State Government without

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providing any opportunity of hearing, it is contended that the State or

its functionaries are bound to act fairly, reasonable, diligently, and

not arbitrarily, whimsically and unreasonably in all spheres of

activities including not only the matters of award of contract, but also

cancellation thereof. In respect of such argument, the learned counsel

for the petitioner, has relied upon the following judgments:-

1. K.N. Guruswamy v. State of Mysore, AIR 1954 SC 552.

2. Smt. Gunwant Kaur and Ors. v. Municipal Committee, Bathinda and others, AIR 1970 SC 802.

3. Century Spinning and Manufacturing Co. Ltd. v. Ulthasnagar Municipal Council and another, AIR 1971 SC 1021.

4. South Kheri v. Ram Sanehi Singh, (1971)3 SCC 864.

5. Ramana Dayaram Shetti v. International Airports Authority of India, (1979) 3 SCC 489.

6. The Gujarat State Financial Corporation v. M/s Lotus Hotels Pvt. Ltd., (1983)3 SCC 379.

7. Indian Oil Corporation Ltd. v. Amritsar Gas Service and Others, (1991)1 SCC 533.

8. Kumari Shrilekha Vidyarthi v. State of U.P., AIR 1991 SC 537.

9. Sterling Computers Ltd. v. M/s M and N Publishers Ltd., (1993)1 SCC 445.

10. Whirpool Corporation v. Registrar of Trademarks, Mumbai & Others, (1998)8 SCC page 1.

11. Modern Steel Industries v. State of U.P. (2001)10 SCC 491.

12. Harbanslal Sahnia v. Indian Oil Corporation Ltd., (2003)2 SCC 107.

13. ABL International Ltd. v. Export Credit Guarantee Corporation of India Limited and others, (2004)3 SCC 553.

20. On the other hand, Shri Ashok Aggarwal, Learned Senior

Counsel, appearing for the Corporation has also relied upon equally

on a large number of judgments pointing out that the contract in

question was a non statutory contract and, therefore, no writ can be

issued under Article 226 of the Constitution of India so as to compel

the authority to remedy the breach of contract. Reference was made

to the judgments of the Hon'ble Supreme Court reported as Bareilly

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Development Authority and another v. Ajai Pal Singh and Others,

(1989)2 SCC 116; Karnataka Power Corpo. Ltd. v. West Asia Trading

Corporation, JT 1999(10) SC 414; Kerala State Electricity Board and

another v. Kurien E. Kalathil and others, (2000)6 SCC 293 and the

judgments of this Court reported as M/s Parkash Platinum Private

Ltd. v. National Fertilizers Ltd., 1993(2) RRR 360; Munish Gupta v.

Union of India and others, 2009(2) PLR 110. It is also argued that the

contract of such nature in its very nature is determinable on account

of default of any of the parties, therefore, in view of Section 14(1)(c) of

the Specific Relief Act, 1963, such contract cannot be enforced. Even

if the termination of the contract is illegal, only damages can be

claimed from the Civil Court and/or through Arbitration. Reliance is

placed upon the judgments reported as Indian Oil Corporation Ltd.

v. Amritsar Gas Service and others, (1991)1 SCC 533 and

E.Venkatakrishna v. Indian Oil Corporation and another, (2000)7

SCC 764. It is also pointed out that the agreement entered between

the parties contains an Arbitration Clause i.e. Clause 12.2, therefore,

the Petitioner is bound to avail the remedy agreed upon by the

parties.

21. Learned counsel for the Municipal Corporation has also pointed

out that the power of judicial review conferred on this Court under

Article 226 of the Constitution of India could be invoked in

contractual matters only if the public law element is present and not

in respect of the contracts falling within the realm of private law.

Reference is made to judgments reported as M/s Radhakrishna

Agarwal and others v. State of Bihar and others, (1977)3 SCC 457

and G.B. Mahajan and others v. Jalgaon Municipal Council and

others, (1991)3 SCC 91.

22. In Radha Krishna Agarwal's case (supra), a three-Judge Bench

judgment of the Hon'ble Supreme Court, upheld the judgment of the

Patna High Court dividing the contracts into three categories i.e. i)

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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; ii) where the contract entered into between the

person aggrieved and the State is in exercise of a statutory power

under certain Act or Rules framed thereunder and the petitioner

alleges a breach on the part of the State; and iii) where the contract

entered into between the State and the person aggrieved is non-

statutory and purely contractual and the rights and liabilities of the

parties are governed by the terms of the contract, and the petitioner

complains about breach of such contract by the State.

23. The first set of cases relates to the doctrine of promissory

estoppel, which is not relevant in the present case, nor the present

case falls in the second set of the cases, which contemplates the

contract entered by the State in exercise of the statutory powers in

certain cases. The present is a case of a contract, which falls in the

third set of cases i.e. non statutory contracts. The Hon'ble Supreme

Court has held as under:-

"15. It then very rightly held that the cases now before us should be placed in the third category where questions of pure alleged breaches of contract are involved. It held, upon the strength of Umkant Saran v. The State of Bihar, (1973)1 SCC 485 and Lekhraj Satramdas v. Deputy Custodian-cum- Managing Officer, AIR 1966 SC 334 and B.K. Sinha v. State of Bihar, IR 1974 Pat 230, that no writ or order can issue under Article 226 of the Constitution in such case "to compel the authorities to remedy a breach of contract pure and simple".

24. Another three-Judge Bench judgment in G.B. Mahajan's case

(supra), was examining award of the contract by the Municipal

Council to a developer of a real estate for the execution of a project for

Administrative Building' and a Commercial Complex on a plot of land

belonging to the Municipality. The Court observed as under:-

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"46. While it is true that principles of judicial review apply to the exercise by a government body of its contractual powers, the inherent limitations on the scope of the inquiry are themselves a part of those principles. For instance, in a matter even as between the parties, there must be shown a public law element to the contractual decision before judicial review is invoked. In the present case the material placed before the court falls for short of what the law requires to justify interference."

25. In Bareilly Development Authority's case (supra), the Supreme

Court, while examining the judgments in Ramana Dayaram Shetti's

case (supra) (Three-Judge Bench Judgment) and Radha Krishna

Agarwal's case (supra), held that the contract awarded by the Bareilly

Development Authority for construction of dwelling units for the

people belonging to different income groups, is a non statutory

contract. The Court observed as under:-

"21. This finding, in our view, is not correct in the light of the facts and circumstances of this case because in Ramana Dayaram Shetty's case there was no concluded contract as in this case. Even conceding that the BDA has the trappings of a State or would be comprehended in 'other authority' for the purpose of Article 12 of the Constitution while determining price of the houses/flats constructed by it and the rate of monthly instalments to be paid, the 'authority' or its agent after entering into the field of ordinary contract acts purely in its executive capacity. Thereafter the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines the rights and obligations of the parties inter-se. In this sphere, they can only claim rights conferred upon them by the contract in the absence of any statutory obligations on the part of the authority (i.e. BDA in this case) in the said contractual field.

22. There is a line of decisions where the contract entered into between the State and the persons aggrieved is -non-statutory and purely contractual and the rights are governed only by the terms of the contract, no writ or order can be issued under Article 226 of the Constitution of India so as to compel the authorities to remedy a breach of contract pure and simple :

Radhakrishna Agarwal v. State of Bihar (1977) 3 SCR 249,

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Premji Bhai Parmar v. Delhi Development Authority (1980) 2 SCR 704 and D.F.O. v. Biswanath Tea Company Ltd. (1981) 3 SCR 662.

23. In view of the authoritative judicial pronouncements of this Court in the series of cases dealing with the scope of interference of a High Court while exercising its writ jurisdiction under Article 226 of the Constitution of India in cases of non-statutory concluded contracts like the one in hand, we are constrained to hold that the High Court in the present case has gone wrong in its finding that there is arbitrariness and unreasonableness on the part of the appellants herein in increasing the cost of the houses/flats and the rate of monthly instalments and giving top, directions in the writ petitions as prayed for."

26. In Kerala State Electricity Board's case (supra), the contract, in

respect of which the writ petition was filed, related to construction of

a Dam for generation of electricity. The Court observed that every act

of a statutory body need not necessarily involve an exercise of

statutory power. Statutory bodies, like private parties, have power to

contract or deal with property. Such activities may not raise any issue

of public law. It was held that the contract between the parties is in

the realm of private law. It is not a statutory contract. The disputes

relating to interpretation of the terms and conditions of such a

contract could not have been agitated in a petition under Article 226

of the Constitution of India.

27. The judgments referred to by the learned counsel for the

petitioner i.e K.N. Guruswamy's case; Smt. Gunwant Kaur's case;

Century Spinning and Manufacturing Co. Ltd.'s case and Gurjarat

State Financial Corporation's case, do not relate to issuance of a writ

in the cases of breach of contract but deals with the either rule of

promissory estoppel or power of the Court to issue prerogative writs

etc. and thus not helpful to examine the issues raised. In Indian Oil

Corporation Ltd's case again the dispute arose out of the proceedings

under the Arbitration and Conciliation Act and the same does not deal

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with the jurisdiction and scope of the powers of the Writ Court in

exercising the powers under Article 226 of the Constitution of India. In Whirlpool Corporation's case (supra), the writ petition challenging

the show cause for cancellation of certificate of registration of trade

mark. In Modern Steel Industries' case (supra), the challenge was to

the recovery of minimum guarantee charges by issuing revenue

recovery certificate. The Hon'ble Supreme Court set aside the order

passed by the High Court relegating the appellant to seek remedy by

way of arbitration. The issue raised and decided is not in the context

of violation of contract in public or private law.

28. In South Kheri's case (supra), the Divisional Forest Officer

passed an order to rescind an order passed by an Officer duly

authorized. The High Court found that the order was passed by the

Divisional Forest Officer on erroneous considerations. The Hon'ble

Supreme Court dismissed the appeal, inter-alia, for the reason that

the Divisional Forest Officer did not give any hearing before passing

the order.

29. In ABL International Limited's case (supra), the writ petition

was filed for the failure of the first respondent to adhere to the

contract of insurance. Though the writ petition was allowed by the

learned Single Bench of the High Court, but the Letters Patent Bench

set aside the order and held that the disputed questions of facts

cannot be adjudicated upon in the writ proceedings. The Supreme

Court held that though normally a petition involving serious disputed

questions of facts will not be entertained in exercise of the jurisdiction

under Article 226 of the Constitution of India, but it does not lay

down an absolute rule that in all cases involving the disputed

questions of fact, the parties should be relegated to a civil suit. The

Court observed as under:-

"23. It is clear from the above observations of this Court, once State or an instrumentality of State is a party to the contract, it Singh Dalbir 2013.07.23 12:02 I attest to the accuracy of this document High Court Chandigarh CWP No.2032 of 2006(O&M) (19)

has an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14 of the Constitution of India. Therefore, if by the impugned repudiation of the claim of the appellants the first respondent as an instrumentality of the State has acted in contravention of the above said requirement of Article 14 then we have no hesitation that a writ court can issue suitable directions to set right the arbitrary actions of the first respondent...."

30. In Shrilekha Vidyarthi (Kumari) v. State of U.P, (1991) 1 SCC

212, the Court observed that 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. It was further held that 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.

31. The judgment in Harbanslal Sahnia's case (supra), is on the

similar lines, wherein the three tests i.e., (i) where the writ petition

seeks enforcement of any of the fundamental rights; (ii) where there is

failure of principles of natural justice; or (iii) where the orders or

proceedings are wholly without jurisdiction or the vires of an Act,

were delineated.

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32. The Constitution Bench judgment in LIC v. Escorts Ltd., (1986)

1 SCC 264, has held that Article 14 cannot be 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. It

was held that the Court will examine the 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. The Court held to the following

effect:-

"101. ............. 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. 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 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."

33. In LIC v. Consumer Education & Research Centre, (1995) 5 SCC

482, the Court observed that the dichotomy between public law and

private law rights and remedies, though may not be obliterated by any

strait-jacket formula, it would depend upon the factual matrix. The

Court observed as under:-

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"26. This Court has rejected the contention of an instrumentality or the State that its action is in the private law field and would be immuned from satisfying the tests laid under Article 14. The dichotomy between public law and private law rights and remedies, though may not be obliterated by any strait-jacket formula, it would depend upon the factual matrix. The adjudication of the dispute arising out of a contract would, therefore, depend upon facts and circumstances in a given case. The distinction between public law remedy and private law field cannot be demarcated with precision. Each case will be examined on its facts and circumstances to find out the nature of the activity, scope and nature of the controversy. The distinction between public law and private law remedy has now become too thin and practicably obliterated."

34. The reading of the aforesaid judgments would lead to the

conclusion that the powers of the Writ Court are plenary in nature

and in exercise of such power, the Court can embark an inquiry into

the disputed questions of facts as well, but whether such powers

should be exercised or not is one of the discretion. The Power of

judicial review in the matter of awarding contract conferred by Article

14 is wide, which enjoins the public authority to act fairly, reasonably

by excluding irrationality and arbitrariness. But the power of judicial

review in a concluded contract is limited and is not all pervasive as in

the matter of awarding of contract. The Writ Court in exercise of

judicial review can intervene even in respect of concluded contracts if

the contract is statutory contract or there is a public law element in

it.

35. The contract for construction of dam as in Kerala State

Electricity Board's case (supra) and administrative and commercial

building of the Municipalities as G.B. Mahajan's case (supra), have

been held to be not involving any public law element. On the same

analogy, the contract of erection of Municipal Solid Waste

Management Plant would not be a contract involving public law

element in it.

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36. In the present case, the Corporation terminated the contract on

28.5.2010 to set up municipal solid waste management plant. On the

same day, the Corporation also served a show cause notice for

cancellation of the lease of the land on which such plant was to set up

by the Petitioner in the second petition. The possession of the land

leased was never given to the Petitioner. The Lease stands cancelled

after passing a speaking order. There is no challenge to the said

cancellation of lease of the land on which the Solid Waste

Management Plant was to be erected. Therefore, the argument that

the contract has been terminated without serving any show cause

notice is only academic.

37. The contract is to set up municipal solid waste management

plant, an obligation cast on the Municipal Corporation under a

Statute and also part of its functioning to provide clean and hygienic

living conditions to the residents within the limits of Municipal

Corporation. The first writ petition to seek shifting of dumping ground

is pending before this Court since the year 2006. The contract

awarded to the Petitioner in the second petition could not take off for

the reason that the Petitioner insisted on possession of land without

obtaining authorization under the Rules. We have already found that

such authorization is mandatory.

38. The right to seek an opportunity of hearing before cancellation

of the contract, even when the possession of the land was not

delivered and in the absence of challenge to such cancellation,

disentitles the petitioner to any indulgence of this court in the matter

of alleged breach of contract. For the reasons recorded above, we do

not find any merit in the second writ petition (CWP No.12188 of

2010), which is hereby dismissed.

39. The larger public interest warrants that the Corporation should

be directed to award contract to a person who is ready to comply with

the terms of the Rules and set up plant without any further delay.

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Therefore, the first writ petition (CWP No.2032 of 2006) is allowed

with the following directions:-

1. The Corporation shall award contract to set up Municipal

Solid Waste Management Plant within six months from

today.

2. The Municipal Corporation shall apply for authorization in

respect of its site at Bhagtanwala, but the grant of such

authorization shall not be a condition precedent for awarding

contract to set up Municipal Solid Waste Management Plant.

3. The successful contractor shall be bound to obtain

permission or to carry forward the request of the Municipal

Corporation to obtain authorization from the stage, it may be

pending at the time of grant of Contract.

4. Till such time, the contract is awarded, the Corporation shall

make all efforts to keep the Municipal Limits free from

garbage and ensure its disposal so as to minimize the

hazards which the residents may suffer.

(Hemant Gupta) Judge

(Fateh Deep Singh) Judge

July 23, 2013 ds

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