The fundamental basis of a contract must be altered for the doctrine of frustration to apply, and mere market fluctuations or increased costs do not constitute grounds for exemption from contractual obligations.

JUDGMENT

Common Order:

1. Tamil Nadu Civil Supplies Corporation issued tender notification dated 20.12.2021 for the supply of 4 Crore nos. of Fortified RDB Palmolein oil pouches. The tender opening date was announced as 06.01.2022. The petitioners herein submitted their tenders in response to the said notification. They emerged as successful tenderers. The offers made by the petitioners were accepted by the respondent Corporation on 13.01.2022. As per the terms of the contract, the tenderers were to supply the following quantities in two spells.

2. Except the writ petitioner in W.P.No.5994 of 2022 (M/s.Arunachala Impex Private Limited) the other tenderers effected supplies under both spells. Clause 17(d) of the tender notification is as follows:

“17(d) : The Tamil Nadu Civil Supplies Corporation reserves the right to vary the quantity finally ordered to be purchased to the extent of 25% either way of the requirement of RBD Palmolein Oil pouches indicated in the e-tender document. The tenderers cannot claim it as a matter of contractual obligation to vary the quantity either way.”

3. Invoking the said clause, the impugned communications were issued directing the petitioners to supply the additional 25% quantity. Contending that the market conditions had undergone adverse change, the petitioners claimed impossibility of performance. They sent representations to that effect expressing their inability to supply the additional quantity. Since the respondent Corporation was unrelenting in their stand, these writ petitions came to be filed challenging the additional demand.

4. The learned Senior Counsel appearing for the petitioners reiterated their stand that this is a classic case in which Section 56 of the Indian Contract Act, 1872 deserves to be invoked. They pointed out that when the tenders were finalized, the parties did not envisage that war between Russia and Ukraine would break out. As a result of the outbreak of the war, Palmolein supplies got diverted to Ukraine. Since crude oil prices shot up, freight costs went up and the movement of cargo vessels also got affected severely. To add to their woes, Indonesia imposed a ban order on 27.04.2022. These factors cumulatively broke the back of the petitioners and therefore they could not supply the additional 25% quantity.

5. The learned Senior Counsel took me through various articles and called upon this Court to take judicial notice of the prevailing situation. They pointed out that the changes in the market were perceived by the respondent Corporation themselves as a force majeure event and that is why they themselves cancelled one such tender process in the second week of March 2022. They also pointed out that while the respondent Corporation insisted that the petitioners should supply the oil packets at the negotiated rate of Rs.120.25/-, the respondent Corporation entered into contract with one of the parties on 01.04.2022 for purchase of the very same quantity at a far higher price. The contention of the learned Senior Counsel is that the respondent Corporation being a State instrumentality must adopt a fair approach even in commercial dealings. Since the result of fulfilling the contractual obligations would lead to their commercial insolvency, the learned Senior Counsel wanted this Court to quash the impugned demand and allow these writ petitions. The learned Senior Counsel relied on a catena of decisions.

6. The respondent Corporation had filed a detailed counter affidavit opposing the writ prayers. The learned Advocate General reiterated the stand set out therein. He pointed out that a pure commercial dispute cannot form the subject matter of writ proceedings. In any event, the contract between the parties provides for