The State cannot avoid its contractual obligations and must act fairly and justly towards citizens, even in matters of contract. A writ petition is maintainable for enforcement of contractual obligations of the State or its instrumentalities, and the High Court can intervene if the State acts in an arbitrary manner, even in matters of contract.

1. Heard the parties. A counter affidavit has been filed by the respondents.

2. The case of the petitioner is that respondent No. 3, the Civil Surgeon-cum-Chief Medical Officer, Bettiah pursuant to certain Government policies placed orders for supply of certain medicines to M/s Rajasthan Drugs and Pharmaceuticals, a Government of India Enterprise. The petitioner is the local representative at Patna of M/s Rajasthan Drugs and Pharmaceuticals and, as such, was directed by its principal to make supplies of medicines as per purchase order and receive payments. Petitioner made supplies as far back as in the year, 2000-2001 and since then has been running around for payment. The payment is substantially not disputed yet it is not being made because of lack of fund allocation. In the counter affidavit, it is not disputed that a sum of Rs. 18,26,283.12P was payable to the petitioner as against the claim of the petitioner for Rs. 19,18,460.4 7P. Therefore, the position is that State does not deny its liability to pay at least an amount of Rs. 18,26,283.12P. This amount is due and payable since the year, 2001. That in the case of M/s Hindustan Sugar Mills vs. State of Rajasthan and others since reported in AIR 1981 Supreme Court 1681, the Apex Court has held thus:

"The Central Government should honour its legal obligation arising out of contract and not drive the citizen concerned to file a suit for recovery of the amount. In a democratic society governed by the rule of law, it is the duty of the State to do what is fair and just to the citizen, and the State should not seek to defeat the legitimate claim of the citizen by adopting a legalistic attitude but should do what fairness and justice demand."

3. Now it is too late in the day to suggest that writ application is not maintainable in matters arising out of contract between a citizen and the State. It is settled by series of decisions of the Apex Court that while acting even in contractual field, State js not relieved of its constitutional obligations under Article 14 of the Constitution of India. In other words, State cannot be permitted to say that even though I am State in contractual field, I can act arbitrarily and in most high handed manner and the Courts cannot interfere. In a recent decision of the Supreme Court in the case of ABL International Limited and Another vs. Export Credit Guarantee Corporation of India and Others (2004)3 Supreme Court Cases 553, the Apex Court has clearly held that a writ is maintainable for enforcement of contractual obligations of the State or its instrumentalities. It is held that the High Court can intervene under Article 226 of the Constitution of India if the State or its instrumentalities acts in arbitrary manner even in matter of contract. The Apex Court further held that a writ petition is maintainable to give monetary relief as well. In paragraph-27 of the said judgment, it has been held thus:

"From the above discussion of ours, the following legal principles emerge as to the maintainability of a writ petition; (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."

4. In the present case, the stand of the State is that payment could not be made because of non-allocation of adequate funds. It is not in dispute that pursuant to order, medicines were supplied and consumed. Therefore, non-payment would per se be arbitrary.

5. In the aforesaid circumstances, I am left with no option but to issue a writ in the nature of mandamus directing the respondent State to make proper and full allocation of fund for payment of petitioners claim which stands admitted to the extent indicate