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1991 Supreme(Cal) 80
High Court Of Calcutta
UMESH CHANDRA BENERJEE
STEEL CRAKERS - Appellant
Versus
M.S.T.C. - Respondent
Suit 2393 Of 1990
Decided On : 02/15/1991
Governmental action must be fair and reasonable, and the courts will intervene to set right any arbitrary or unfair action by the State.
Headnote:
CONTRACT - SALE OF GOODS - FAIR DEALING - GOVERNMENTAL ACTION - ARBITRARINESS - WRIT JURISDICTION - ENFORCEABILITY OF CONTRACT - PRICE VARIATION CLAUSE - DOCTRINE OF PROMISSORY ESTOPPEL - JUDICIAL COMMITMENT TO SET RIGHT ARBITRARINESS OF GOVERNMENTAL ACTION.
Fact of the Case:
The petitioner entered into an agreement with the State-respondent, SAIL, through its agent M.S.T.C., for the purchase of certain materials at a specified price. The petitioner accepted a damaged wagon-load of C.I. Skulls as part of the deal. Subsequently, SAIL decided to sell the remaining materials through public auction, claiming that the prices had increased. The petitioner challenged this decision, contending that it was arbitrary and violative of the principle of fair dealing.
Finding of the Court:
The court held that the action of the State-respondent in holding a further auction was arbitrary and could not be sustained. It found that the State-respondent had made a representation to the petitioner, inducing it to enter into the agreement, and was estopped from contending otherwise. The court also held that the doctrine of promissory estoppel was applicable in the facts and circumstances of the case and that the State-respondent was bound by its promises.
Issues: 1. Whether the action of the State-respondent in holding a further auction was arbitrary and violative of the principle of fair dealing? 2. Whether the doctrine of promissory estoppel was applicable in the facts and circumstances of the case?
Ratio Decidendi: 1. The court held that the State-respondent's action was arbitrary because it changed its policy after the petitioner had entered into the agreement, thereby affecting the petitioner's contractual rights. The court also found that the State-respondent had not acted in a commercial manner, as it was seeking to obtain a higher price for the materials than what was agreed upon in the contract. 2. The court held that the doctrine of promissory estoppel was applicable in the facts and circumstances of the case because the State-respondent had made a representation to the petitioner, inducing it to enter into the agreement, and was estopped from contending otherwise.
Final Decision: The court allowed the writ petition and issued a writ of mandamus directing the State-respondent to desist from auctioning the goods without first effecting the delivery of the contracted quality and quantity of goods to the petitioner at the price as appears from the last published price-list of the State-respondent.
( 1 ) GOVERNMENTAL action cannot but only be fair. Fair deal, therefore, is the basis of all State action and in the event of any departure therefrom, Law Courts shall rise up to the occasion to declare it to be illegal and set right the wrong and to do so would be a plain exercise of judicial power. In the event of any judgement of complaint against a State action, being unfair and in the event the Law Court finds the same to be of substance, the Court will lend its assistance to the complainant so as to compel the State to act fairly vis a vis the complainant. Technicality may arise but in my view sheer technicality ought not to outweigh the course of justice. Law Court exists for doing justice between the parties - Law Court exists to remedy the wrong.
( 2 ) IN the present day context, State's involvement in ordinary trade and commerce cannot be undermined and as a matter of fact is a regular feature - As such State action shall have to be scrutinised and in the event of there being any departure from fair dealing, State action cannot but be struck down since the most acceptable methodology of a Governmental action is fairness as stated above.
( 3 ) AT this juncture it would be convenient to advert to the factual aspects briefly.
( 4 ) IT appears that on 15/07/1989 a wagon-load C. I. Skull arrived at Shalimar Siding of Eastern Railway from Rourkella Steel Plant of the Respondent SAIL Authority. The original purchaser did not take delivery of this particular wagon-load C. I. Skulls. M. S. T. C. being the selling agent of SAIL invited offers but apparently no one was prepared to accept the same. In the process however, the petitioner case on to the scene and there was a tacit understanding that the quantity of C. S. Skull at the listed price of Rs. 3,745. 00 shall be purchased by the petitioner from M. S. T. C. and the latter in turn agreed to sell 240 M. T. of C. I. S. Roll above 11 M. T. per piece and 300 M. T. of rejected steel rolls above 20 M. T. per piece at the prevailing prices on certain terms and conditions.
( 5 ) IT further appears on the factual score that in implementation of this transaction M. S. T. C. issued two sale orders, one in respect of cast iron roll for 240 M. T. dated 6/09/1989 and a further 352 M. T. of rejected steel rolls. In terms of its obligation admittedly the petitioner lifted the entire wagon-load of damaged C. I. Skulls which were lying at Shalimar Siding upon payment of the entire price together with a sum of Rs. 1,12,000. 00 on account of demurrage charges. The petitioner at this juncture, however, contended that the petitioners suffered a loss of approximately Rupees 2,00,000/- by reason of acceptance of such a damaged C. I. Skulls which the others have refused. Subsequently, however, some deliveries were effected of the material contracted for and payments made by the petitioner but there was a failure and neglect to effect further delivery of C. I. S. Rolls and rejected steel rolls. It is the petitioner's definite case before this Court that instead of honouring its commitment and effecting delivery of the material in terms of the agreement between the parties and in terms of the sale order issued by M. S. T. C. further attempts are being made to auction the self-same contracted goods and it is this arbitrary action according to the petitioner, which has prompted the writ petitioner to move this Court under Art. 226 of the Constitution on the ground that the action of the respondent authorities being SAIL and M. S. T. C. are violative of the Constitutional safeguard' as enshrined in Art. 14 of the Constitution.
( 6 ) BEFORE adverting to the rival contentions further two documents both emanating from M. S. T. C. to Rourkella Steel Plant (i. e. SAIL) viz. , the letter dated 7/12/1989 and the other being letter dated 16/03/1990 from the same source ought to be noted and the relevant extracts of which are set out hereinbelow :- ** ** ** ** ** ** re : Letter d
