PATNA HIGH COURT
S.B.Sinha and Narayan Roy JJ.
Industrial Fuel Company Private Limited
Versus
Heavy Engineering Corporation Limited
Civil Writ Jurisdiction Case No. 1875 of 1993 ;
Decided On : AUGUST 19, 1993
CONTRACT DISPUTE - WRIT JURISDICTION - ARBITRATION CLAUSE - LEGITIMATE EXPECTATION - [ARTICLE 12, 14, 226] - The High Court cannot exercise its writ jurisdiction under Article 226 of the Constitution of India to enforce a contract or a qua-contract. Where there is an arbitration clause in a contract, the parties must resort to arbitration for the resolution of disputes arising out of the contract. The doctrine of legitimate expectation is not applicable to disputes arising out of a contract or a qua-contract, but only to cases of "State action."
Fact of the Case:
The petitioner entered into a contract with the respondent-Corporation for the supply of Grade B coal. The petitioner alleged that the respondent-Corporation was supplying inferior quality coal and sought a writ of mandamus directing the Corporation to forbear from giving effect to the impugned order dated 11-6-1993 issued by Respondent No. 2.
Finding of the Court:
The Court held that the writ jurisdiction of the High Court under Article 226 of the Constitution of India cannot be invoked to enforce a contract or a qua-contract. The Court further held that the doctrine of legitimate expectation is not applicable to disputes arising out of a contract or a qua-contract, but only to cases of "State action."
Issues: 1. Whether the High Court can exercise its writ jurisdiction under Article 226 of the Constitution of India to enforce a contract or a qua-contract? 2. Whether the doctrine of legitimate expectation is applicable to disputes arising out of a contract or a qua-contract?
Ratio Decidendi: 1. The High Court cannot exercise its writ jurisdiction under Article 226 of the Constitution of India to enforce a contract or a qua-contract. This is because such disputes are contractual in nature and should be resolved through arbitration or by filing a suit for damages. 2. The doctrine of legitimate expectation is not applicable to disputes arising out of a contract or a qua-contract. This is because the doctrine only checks arbitrariness on the part of the State and does not create any enforceable rights.
Final Decision: The writ application was dismissed.
S.B.Sinha, J.
1. In this application, petitioner has prayed for issuance of an appropriate writ directing the Respondent-Corporation to forbear from giving effect to or acting in pursuance of the letter dated 11-6-1993 issued by Respondent No. 2 as contained in Annexure-22 to the writ application and other incidental reliefs.
2. The fact of the matter lies in a very narrow compass.
3. The Respondent-Corporation invited tender for sale of 20, 000 Metric Tonne of Slack coal on or about 30-12-1992 which is contained in Annexure-1 to the writ application and pursuant thereto the petitioner along with others submitted tenders, In the said tender the respondents asked for an offer of price for selling Slack coal left over after meeting the requirement of coal (ID Grade non-coking long flame). In the said tender it was further mentioned that stales tax and other levies, excise duty etc, shall be payable extra as applicable on the date of delivery.
4. According to the petitioner by reason of a letter dated 20th February, 1993 as contained in Annexure-10 to the writ application, a request was made to the respondents to provide the specification of coal and in reply thereto by letter dated 23-2-1993 as contained in Annexure-11 to the writ application, result of analysis of coal was supplied. According to the petitions although in the counter affidavit initially the respondents denied the said fact but when the petitioner filed photostat copies of the original was marked as Annexure-27, the respondents admitted the same in rejoinder to the counter affidavit. It is, therefore, the contention of the petitioners that the conduct of the Respondent-Corporation did not be have the Corporation which is a State within the meaning of Article 12 of the Constitution.
5. Petitioner has contended that when it started lifting coal, it was found that the same was of inferior quality and thus, the matter was discussed with the authority of the respondents resulting in holding of two meeting, the minutes whereof are contained in Annexures-13 and 14 to the writ application. According to the said minutes of meetings, samples of coal were sent and according to the petitioner upon analysis thereof the same was found to be of C grade whereas according to the respondents it was found to be of further inferior quality, namely, D grade.
6. Petitioner, in this connection, has relied upon the minutes of the meetings which are contained in Annexure-13 of the writ application (An-nexure-1 to the counter affidavit), wherein it has been stated thus:
The T. C. members then decided to take further action in this matter only after obtaining the result of the samples of slack coal which have been sent to Coal Survey Laboratory, Namkon on 15-4-1993 and to Central Fuel Research Institute, Dhanbad on 7-5-1993 which are expected on 25-5-1993 and convence the T. C. on 26-5-1993.
7. It has further been contended that in Annexure-F which is another minutes of meetings held on 1-5-1993, 22-5-1993, 26-5-1993 and 29-5-1993, inter alia, it was resolved to follows: to give rebate of 15% on the current selling rate of Slack Coal which is Ks. 679.20 P.M.T. (after escalation) which comes to Rs. 577.32, say Rs. 578 P.M.T. i.e. now selling price will be calculated @ Rs. 578 P.M.T.
8. Mr. S. B. Gadodia, learned Counsel appearing on behalf of the petitioner submitted that from a perusal of tender notice as would appear from Annexure-1 to the writ application, it will be evident that the respondents promised to supply Grade B Coal to the petitioner but was in fact supplying inferior quality of coal and thus it being the State within the meaning of Article 12 of the Constitution of India, its action of charging more than the actual price of the coal must be held to be arbitrary. It was further submitted that in view of the fact that Respondent-Corporation has been purchasing coal from the Government-Company, no further sales tax is payable and thus tax sought to be realised from the p
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