1997 Supreme(Mad) 1156

High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE SHIVARAJ PATIL, THE HONOURABLE MR. JUSTICE Y. VENKATACHALAM AND THE HONOURABLE MR. JUSTICE K. GNANAPRAKASAM
Aluminium Industries Ltd., Madras - Appellant
Versus
Minerals and Metals Trading Corporation of India Ltd. and Others - Respondents
Writ Appeals Nos. 299 of 1990 and 363 of 1990
Decided On : 21 October 1997

The power of judicial review under Art. 226 of the Constitution of India is not totally curtailed or absolutely excluded in examining and testing the validity of State action, even in matters of enforcement of contractual obligations in extraordinary cases.

Headnote:

WRIT PETITION - MAINTAINABILITY - ENFORCEMENT OF CONTRACTUAL OBLIGATIONS - STATE AS A PARTY - POWER OF JUDICIAL REVIEW UNDER ART. 226 OF THE CONSTITUTION OF INDIA - SCOPE AND EXTENT - EXTRAORDINARY AND EXCEPTIONAL CASES - JUDICIAL CONSCIENCE - FACTS AND CIRCUMSTANCES OF THE CASE.

Fact of the Case:

The petitioner, a public limited company, entered into a contract with the respondent, a Government of India undertaking, for the import of Aluminium. The respondent was vested with the exclusive power to import Aluminium and was cast with statutory liability, accountability, to ensure fair, formal and rational distribution of Aluminium to the Conductors and Cable manufacturer. The respondent allotted to the petitioner company 1803 M.T. of Aluminium for the first half, and 2137 M.T. for the second half, totalling to 3940 M.T. for the year 1980-81. The respondent used to issue sale notes on the primary users, notifying a particular date within which the buyer should make financial arrangement for lifting the monthly allocation. Such financial arrangement was to be made through opening of irrevocable letters of credit through financial institutions in favour of respondent, thereby the respondent used to release monthly Aluminum quota for the allottees. After the sale notes were issued and financial arrangements were made, despatch instructions were given, and respondent No. 1 used to issue delivery orders to their godowns, and the transport operators of the petitioner used to take delivery of the goods from the godowns of the respondent. The allocation of 1803 M.T. of Aluminium was completed in the month of November/December, 1980 for the first half year. In the same way the allocation for the next quarter i.e. January to March, 1981 was agreed to be distributed equally in three months, and the respondent No. 1 issued sale notes. The petitioner made financial arrangements and opened letters of credit in favour of the respondent in L.C. No. 22/81 dated 10-3-1981 for Rs 18 lakhs for 100 M.T. rods, and L.C. No. 5/81 dated 6-3-1981 for Rs. 64.10 lakhs for 375 M.T. rods. The petitioner submitted these letters of credit to the respondent on 12-3-1981 and 13-3-1981. Respondent No. 1 issued delivery notes to its Godown, bearing No. 2681 dated 20-3-1981 in respect of 100 M.T. of Aluminium for Hyderabad works, but the person in charge of the godown of the respondent informed the petitioner's representative, as well as their authorised transporters, that no delivery would be effected, without assigning any reason. It was the normal practice that delivery notes were issued to the godown, and the authorised transport operator used to collect the Aluminium for despatch to the petitioner's company. First respondent had issued the delivery notes and was contemplating to deliver the remaining quantity, but had deliberately deferred in effecting supplies based on the speculation of increase in price. The petitioner was entitled to delivery of a total of 475 M.T. of Aluminium. Having come to know of the refusal to deliver the metal, the petitioner approached the respondent on 21-3-1981, but the petitioner was informed that the delivery order was taken back for unexplained reasons. The authorised transporter of the petitioner approached the respondent number of times, subsequently for collection, but they were not allowed to load the materials, and the reason given by the respondent orally was "stock taking". In view of the difficulties the petitioner sent two telegrams, one on 23-3-1981 and the other on 27-3-1981, requesting supply of Aluminium as agreed. He did not receive any reply explaining for what reasons the supply was withheld. In the meanwhile there was report in the newspapers about the increase in the price of Aluminium, which was confirmed by the issue of Gazette Notification by the Government of India on 27-3-1981 increasing the sale price of indigenous and imported Aluminium. The respondent was having in its godown, metal imported prior to 20th March, 1981. Even the metal imported prior to Nov. 1980 was lying with the respondent, for which th petitioner had made necessary financial arrangement. The respondent went to the extent of issuing a trade Notice in Press and dailies on 28-3-1981 demanding the allottees, who had already made financial arrangements, to pay the difference in price of Aluminium for collecting their quota. This, according to the petitioner clearly indicated the motive of the respondent No. 1 for withholding supplies. The increased rate would apply only to the Aluminium imported on or after the Gazette Notification dated 27-3-1981, and that would not have retrospective operation. The respondent was bound to deliver goods at the agreed rate. Under the circumstances, the writ petition was filed to call for the records relating to the Trade Notice No. AL/11/81 dated 28-3-1981 issued by the respondent No. 1, and to issue a writ of certiorarified Mandamus, quashing the same as illegal, and without jurisdiction so far as the petitioner was concerned, and to direct the respondents to deliver the aluminium metal covered by the sale order No. ECR.1/1980 and ECR. 14/80 under L.C. Nos. 22/81 and 5/81 at the old rate prevailing up to 26-3-1981.

Finding of the Court:

The learned single Judge had also disposed of similar writ petitions Nos. 2334, 2335, 2071, 2467 and 2468 of 1981 on 8-2-1990 and 14-2-1990 respectively. The first respondent M.M.T.C. was the writ petitioner in those writ petitions. Since those writ petitions had been allowed accepting the claim of the petitioners, respondent No. 1 M.M.T.C. filed Writ Appeal Nos. 328, 329, 434, 504 and 505/90 which were dismissed by the Division Bench of this Court to which one of us (Shivaraj Patil, J.) was a party, on 28-2-1997 confirming the order of the learned single Judge. Similarly the same Division Bench dismissed another writ appeal No. 260/90 on the same day which was filed against the order dated 14-2-1990 passed by a learned single Judge in W.P. No. 3309/81, following the order passed in Writ Appeal No. 328/90 and batch of cases mentioned above.

Issues: 1. Whether the writ petition was maintainable for enforcement of the terms of contract, under Art. 226 of the Constitution of India? 2. Whether the power of judicial review under Art. 226 of the Constitution of India is totally curtailed or absolutely excluded in examining and testing the validity of State action, even in matters of enforcement of contractual obligations in extraordinary cases?

Ratio Decidendi: 1. The power of judicial review available under Art. 226 of the Constitution of India, in extraordinary and exceptional cases relating to contractual obligations even in regard to concluded contracts with State or authority, is not excluded in testing the action of the State or authority, even in such matters on the touchstone of Art. 14 of the Constitution of India, because application of Art. 14 to any action of the State or authority cannot be excluded. 2. The requirement of Art. 14 cannot be excluded even in the sphere of contractual matters in regulating the State activity. In our opinion it would not be correct to say that this Court, acting under Art. 226 of the Constitution of India cannot at all adjudicate in exercise of judicial review, and that no writ or order could be issued under Art. 226, to compel the authorities to remedy the breach of contract under any circumstances. But it is for the Court to consider and decide on the facts and circumstances of each case, whether to entertain the writ petition to exercise such a power of judicial review in extraordinary cases where the judicial conscience is shaken.

Final Decision: These writ appeals being devoid of any merit, are liable to be dismissed, and accordingly they are dismissed.