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1996 Supreme(Mad) 1258
High Court of Judicature at Madras
THE HONOURABLE CHIEF JUSTICE MR. K.A. SWAMI & THE HONOURABLE MR. JUSTICE RAJU
R.K. Koteeswaran, Proprietor, M/s. Padmavathy Constructions, Tiruvellore
Versus
General Manager, Southern Railway, Chennai - 3 and others
W.A. No.1151 of 1996 and C.M.P. No.17151 of 1996
Decided On : 19-12-1996
Mr. M. Vaidyanathan, Advocate for Appellant
The termination of a commercial contract by the State is not subject to judicial review under Article 226 of the Constitution.
Headnote:
CONTRACT - TERMINATION - JUDICIAL REVIEW - WRIT PETITION - JURISDICTION - WHETHER WRIT PETITION IS MAINTAINABLE TO CHALLENGE TERMINATION OF COMMERCIAL CONTRACT BY STATE - HELD, NO - CIVIL COURT HAS JURISDICTION TO ADJUDICATE CLAIMS ARISING OUT OF COMMERCIAL CONTRACTS.
Fact of the Case:
The petitioner, a contractor, entered into a contract with the Railways for the execution of certain works. The Railways terminated the contract for breach of contractual obligations. The petitioner filed a writ petition challenging the termination of the contract.
Finding of the Court:
The court held that the writ petition was not maintainable as the dispute arose out of a commercial contract and the proper remedy for the petitioner was to approach the civil court or arbitration, as the case may be.
Issues: Whether a writ petition is maintainable to challenge the termination of a commercial contract by the State.
Ratio Decidendi: The court held that the termination of a commercial contract by the State is not subject to judicial review under Article 226 of the Constitution. The proper remedy for a party aggrieved by the termination of a commercial contract is to approach the civil court or arbitration, as the case may be.
Final Decision: The writ petition was dismissed.
K.A. Swami, CJ.
1. This appeal is preferred against the order dated 20th November, 1996 passed by the learned single Judge dismissing Writ Petition No. 16980 of 1996 in which the petitioner sought for quashing the communication dated 17. 1996, bearing No.J/W- 148/2382/1 issued by the Divisional Railway Manager (Works) Palakkad. The said communication reads thus:-
The work PGD/W Sec. Deen Screening and making up deficiency of ballast from Km. 560/6 to 564/1 on D/L including making up deficiency in points and classings @ PLL LDY & OTP was entrusted to the above firm (Contractors) as per Agt.No.J/505 of 212. 1994. Since they have failed to fulfil the contractual obligation and to complete the work, the Agreement has been terminated at his "Risk and cost" as per Clause 62 of G.C.C. Pending assessment of the extra cost that is likely to be incurred by the Railway in getting the balance work executed through agency you are requested to withhold any payment due to the said firm (Contractors) until further advice from this office. A NIL reply may please be sent if no contract exists with the above firm/contractor.
2. The learned single Judge has taken the view that as the matter relates to a contract, it is open to the petitioner/appellant to invoke the jurisdiction of a Civil Court, and Jurisdiction under Article 226 of the Constitution is not exercisable. However, learned counsel places reliance on a judgment of one of us siting singly, interpreting the very same clause 61(b) of the general conditions of the contract. The learned single Judge has taken the view that the very relief sought for itself cannot be entertained in a petition under Article 226 of the Constitution as such the decision in C. Arumugam v. Union of India and another, W.P. No. 7284 of 1988 dated 7. 1991 will not, apply to the case on hand.
3. On going through the judgment in GArumugam v. Union of India and others, W.P. No. 7284 of 1988 dated 7. 1991 we find that the question as to the entertaining of the petition pertaining to commercial contract under Article 226 of the Constitution had not been raised before the learned single Judge and the matter had been argued on merits. Therefore, the question which we have to consider in this appeal, had not been considered therein. Of-course, the interpretation placed on Clause 61(P) of the General conditions of Contract in W.P.No.7284 of 1988, with which we also agree, a Civil Court will have to follow it, if the petitioner approaches the Civil Court.
4. No doubt, the learned counsel places reliance on a judgment of the Supreme Court in Kumari Shrilekha Vidyarthi v. State of U.P. AIR 1991 SC 537 in which in paragraph Nos.28 and 48, it has been observed thus:-
28. Even assuming that it is necessary to import the concept of presence of some public element in a State action to attract Art. 14 and permit judicial review, we have no hesitation in saying that the intimate impact of all actions of the State or a public body being undoubtedly on public interest, the requisite public element for this purpose is present also in contractual matters. We, therefore, find it difficult and unrealistic to exclude the State actions in contractual matters, after the contract has been made, from the purview of judicial review to test its validity on the anvil of Act, 14
48. In our view, being the State activity in contractual matters also within the purview of judicial review is inevitable and is a logic corollary to the stage already reached in the decisions of this Court so far. Having fortunately reached this point, we should not now turn back or take a turn in a different direction or merely stop there. In our opinion two recent decisions in M/s.Dwarkadas Marfatia and Sons, AIR 1989 SC 1642 and Mahabir Auto Stores, AIR 1990 SC 1031 also lead in the same direction without saying so in clear terms. This appears to be also the trend of the recent English decisions. It is in consonance with our commitment to openness whi
