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2025 Supreme(Online)(AP) 16531
HIGH COURT OF ANDHRA PRADESH
Dhiraj Singh Thakur, CJ, Ravi Cheemalapati, J
A.P. Mineral Development Corporation Ltd. – Appellant
Versus
M/s. IBC Limited – Respondent
Writ Appeal No: 584 of 2013
For the Appellants/Petitioners: S. Pranathi, D. Srinivas
For the Respondents: O. Manoher Reddy, N. Mohan Krishna
Promissory estoppel does not apply to a concluded contract. Acquiescence to modified terms by paying at higher rates supersedes original price clause, and such contractual disputes are not amenable to writ jurisdiction under Article 226.
Headnote:(A) The principle of promissory estoppel has no application to a concluded contract. Where a formal contract exists between the parties, the doctrine of promissory estoppel cannot be invoked to bind one party to the terms of the contract. (Paras 26-28)
(B) Acquiescence to modified terms of a contract can introduce a new implied agreement between the parties. Once a party acquiesces by accepting benefits under modified terms, it is not open to that party to insist upon compliance with the original terms. Acquiescence implies active or passive consent, and once established, it bars a party from later complaining of a violation of the original right. (Paras 33-35)
(C) Contract - Modification - Original contract for supply of mineral at Rs.221/‑ per MT with 4% annual increase - Petitioner failed to commission beneficiation plant within the stipulated time - Corporation, instead of terminating the contract, imposed a condition for supply at higher rates (Rs.394/‑ per MT, later Rs.414/‑ per MT) until commissioning of the plant - Petitioner paid and lifted mineral at higher rates - Held: By doing so, the petitioner acquiesced to the modified price terms, and the original price clause stood superseded. (Paras 29-37)
(D) Constitutional Law - Article 14 - Scope of judicial review in contractual matters - The State or its instrumentalities, even in the contractual field, are bound to act fairly and without arbitrariness. However, where the nature of the activity does not involve a public law element, the normal remedy for breach of contract lies in civil law, not under Article 226. Once the action of the State is found to be not perverse or arbitrary, a writ court will not interfere with the contractual terms. (Paras 40-47) (E) Natural Resources - Public Interest - The State is bound to ensure that the distribution of natural resources is not against public interest. Supplying a valuable mineral at a price far below the market rate is detrimental to public interest and cannot be sustained. (Para 38-39)
Facts of the case:
The appellant, a State-owned corporation, invited expressions of interest for establishing a barytes beneficiation plant as a joint venture. The respondent (investor) was selected, and an agreement was executed on 18.06.2008. The agreement fixed the sale price of low-grade barytes at Rs.221/‑ per MT with a 4% annual increase. The respondent was required to complete the beneficiation plant within two years, i.e., by 17.06.2010. The respondent failed to meet the deadline and sought an extension. The Corporation granted extension but imposed a condition that, until commissioning, the respondent would purchase the mineral at the existing sale price of Rs.394/‑ per MT (later Rs.414/‑ per MT). The respondent paid and lifted the mineral at these higher rates. Subsequently, the Corporation, through its Board, decided to renegotiate the sale price after the plant was commissioned. The respondent challenged this decision, and the learned Single Judge allowed the writ petition by invoking promissory estoppel, holding that the Corporation was bound by the original price of Rs.221/‑ per MT.
Findings of Court:
The Division Bench held that the principle of promissory estoppel does not apply to a concluded contract. By paying and lifting the mineral at the higher rates imposed by the Corporation (Rs.394/‑ and Rs.414/‑ per MT), the respondent had acquiesced to the modified price terms, superseding the original price clause. The Court further held that the Corporation's decision to renegotiate the price after the plant's commissioning was not arbitrary or perverse. Supplying the mineral at a grossly inadequate rate would be against public interest. The writ petition under Article 226 was not maintainable since the dispute primarily fell in the realm of contract without a public law element.
Issues: (i) Whether the principle of promissory estoppel can be invoked to bind a party to the terms of a concluded contract. (ii) Whether the respondent had acquiesced to the modified price terms by paying at the higher rates. (iii) Whether the decision of the Corporation to renegotiate the price was arbitrary and violative of Article 14. (iv) Whether the dispute fell within the purview of public law review under Article 226.
Ratio Decidendi: The court ruled that promissory estoppel has no application where a formal contract exists. The respondent's conduct in paying and lifting mineral at the higher rates, after being notified of the modified terms, constituted acquiescence, which introduced a new implied agreement. The original price clause stood superseded. The Corporation's decision to seek renegotiation was not arbitrary, and the dispute being primarily contractual, the writ petition under Article 226 was not maintainable.
Result: The judgment and order of the learned Single Judge were set aside. The Writ Appeal was allowed. The parties were left free to negotiate the price of the mineral. No costs.
| Table of Content |
|---|
| 1. appeal against judgment invoking promissory estoppel (Para 1) |
| 2. factual background and agreement terms for barytes supply (Para 2 , 3 , 4 , 5) |
| 3. extension requests and price modification communications (Para 6 , 7 , 8 , 9 , 10 , 11 , 12) |
| 4. parties' arguments on contract terms and estoppel (Para 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25) |
| 5. court analysis on promissory estoppel inapplicability and acquiescence (Para 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47) |
| 6. appeal allowed; parties to renegotiate price (Para 48) |
Per DHIRAJ SINGH THAKUR, CJ:
The present Writ Appeal has been preferred against the judgment and order, dated 04.01.2013, passed in W.P. No.375 of 2012.
The writ petitioner had challenged the proceedings, dated 09.11.2011, of the appellant herein, whereby it had rejected the request of the petitioner for supply of low grade (C + D + waste) varieties of Baryte in accordance with the rates fixed under the Agreement, dated 18.06.2008. The learned single Judge, by virtue of judgment and order impugned, allowed the petition by invoking the doctrine of promissory estoppel and held that the appellant had to honour the promise to supply low grade Barytes at the rate of Rs.221/- per MT subject to increase in price at the rate of 4% over the price of the previous year in accordance with the Agreement, dated 18.06.2008.
With a view to understand the background in the context of which the present controversy has arisen, it would be appropriate to refer briefly to some of the material facts:
2. Barytes is a mineral composed of barium sulphate, which on account of its properties finds application in a lot of industries. The Barytes ore is found in abundance in two villages i.e., Mangampet and Anantharajupet in the State of Andhra Pradesh, and keeping in view the value of its mineral and its utility and its export market, the Government of Andhra Pradesh constituted an expert group to study all relevant aspects of productions, sale and export of Barytes by taking into consideration the global trends and long term sustainability of mineral resources.
Apart from the expert group, the Government of Andhra Pradesh also constituted a Cabinet Sub-Committee to make recommendations in regard to integration of mining beneficiation and marketing in the long term.
One of the recommendations made by the Committee was to setup a Beneficiation Plant.
3. The issue was also placed before the Board of Directors of the Andhra Pradesh Mineral Development Corporation Limited (APMDCL) at its 330th meeting held on 10.04.2006 where it was resolved to invite Expression of Interest (EoI) for establishment of Beneficiation Plant to beneficiate low grade Barytes as a joint venture. The eligibility criteria were to be fixed by the Vice Chairman and Managing Director of APMDCL.
Expression of Interest was invited by the Vice Chairman and Managing Director of APMDCL under joint venture vide notification, dated 28.07.2006. Four companies namely M/s Gimpex Limited, Chennai, M/s IBC Limited, Chennai (writ petitioner), M/s Trimex Industries, Chennai and M/s SICAL Logistics Limited, Chennai, responded to the notification.
The Government, after careful consideration of the matter, accorded permission to three companies, which included the petitioner IBC Limited, Chennai, to establish the Beneficiation Plants not exceeding Two Lakh tones capacity per annum in joint venture with APMDCL.
4. At this stage, it would be pertinent to mention that in the Expression of Interest floated by the APMDCL, 11% free equity had to be allotted by the investor to APMDCL in the JVC in consideration of supply of low grade Barytes on priority basis on payment of the sale price as mentioned in clause ‗9‘ of the said notification. Clause 9 envisaged sale price of Rs.210 per MT loose on ex-Mangampet mine basis, exclusive of statutory levies with a further condition that there would be increase in price every year by
