K. N. Bhattacharjee, Sr. Advocate and R. Debnath, For Petitioner; S. Deb, Sr. Advocate S. Lodh, For Respondents. Judgement The petitioner has preferred this writ petition for issue of an appropriate writ calling upon the respondents not to deduct any amount from the BILL on account of demurrage charges without compliance of the relevant provisions of the agreement. 2. This Court vide order dated 4-2-2000 passed in Civ. Misc. Appl. No. 19 of 2000 directed the respondents as an interim measure not to deduct the amount of Rs. 7,74,216/- from the petitioners BILL until further orders. Thereafter, on 18-2-2000, an order was passed by this Court directing the respondents not to deduct the demurrage charges from the petitioners Bills. This Misc. case along with Civ. Misc. Appl. 59 of 2000 filed for interim direction are also being deposed (disposed) of along with the main petition. 3. Sri K.N. Bhattacharjee, learned senior Counsel for the petitioner has submitted that the petitioner entered into a contract with the respondent No.1, namely Food Corporation of India for transporation of food grains from Churaibari and Lharmanagar to Agartala for a period of one year and that the contract provides for deduction of demurrage charges from the bill of the contractor if such demurrage is occasioned by the negligence of the contractor, and the decision in this regard that may be taken by the senior Regional Manager, shall be the final. Sri Bhattacharjee has continued that in violation of the terms the Corporation have been indulging in deduction of demurrage charges on the recommendation of the officers other than the senior Regional Manager. According to him, such deduction is not permissible under the terms of the contract unless the senior Regional Manager gives his decision as the negligence of the contractor. Clause -XII (a) providing for such term for deduction reads as follows :- "XII LIABILITY OF CONTRACTORS FOR LOSSES ETC. SUFFERED BY CORPORATION. (a) The contractors shall be liable for all cost, damages, demurrages, wharfages, for failure of wagons, registration fees, charges and expenses suffered or incurred by the Corporation due to the contractors negligence and unworkman like performances of any services under this contract, or breach of any terms thereof or their failure to carry out the work with a view to avoid incurrence of demurrages etc. and for all damages or losses occasioned to the Corporation or in particulars to any property or plant belonging to the Corporation due to any act whether negligence or otherwise of the Contractors themselves or other employees. The decision of the Sr. Regional Manager regarding such failure of the contractors and their liability for the losses, etc. suffered by Corporation shall be final and binding on the contractors." 4. It would appear from the terms of the contract that the submission made by the learned senior Counsel is true to the spirit of the terms of contract reproduced above. Mr. S. Deb, learned senior Counsel for the Corporation relying on the statements made in the counter-affidavit filed in the misc. case submitted that the payment after deduction of demurrage charges has been proposed to be made as an abundant precaution so as to adjust the amount at the time of final payment of the bills. According to him, the payment sought to be made being interim in nature and the provision of clause-XII cannot be invoked at this stage. 5. I have perused the terms of the contract. No where it is provided for any interim payment on deduction of demurrage charge before the liability of the contractor is ascertained by the senior Regional Manager as per terms of Clause-XII. Therefore, such deduction on the face of it appears to be in violation of the terms embodied in Clause-XII. The argument that the deductions are proposed to be made from the interim payments to raise sufficient security to liquidate the demurrage charges that may be eventually raised by the railway authorities. But the pleadings on records show that the petitioners has already given sufficient security for carriage of the goods. Therefore, the corporation obviously cannot insist for additional security to be raised by way of deduction of demurrage charges in violation of the terms of the contract as embodied in Clause-XII. It can safely be concluded that the proposed action of the corporation is not permissible under the terms of the contract. In my considered opinion, the proposed action of the corporation to deduct the demurrage charges before a decision in this regard given by the senior Regional Manager is not sustainable in law. 6. It can safely be concluded that the proposed action of the corporation is not permissible under the terms of the contract. In my considered opinion, the proposed action of the corporation to deduct the demurrage charges before a decision in this regard given by the senior Regional Manager is not sustainable in law. 6. Sri Deb, apart from his submission as discussed above, has raised the objection on the ground that the writ petition is not maintainable to settle the dispute relating to the execution and implementation of the contract. According to him, the jurisdiction under Article 226 can be invoked to examine the fairness of the procedure relating to the settlement of the contract and once the contract is settled, the subsequent controversy arising out of the contract with regard to its execution having disputed facts is a matter beyond the purview of the Article 226. In his opinion, the remedy lies in other forum and not before the High Court under Article 226. 7. Sri Deb has referred the decision of the Supreme Court in M/s Erusian Equipment and Chemicals Ltd., v. State of West Bengal (1975)1 SCC 70 :( AIR 1975 SC 266 ); in M/s Radhakrishna Agarwal v. State of Bihar, AIR 1977 SC 1496 , in Har Shankar v. The Dy. Excise and Taxation Commr. (1975)1 SCC 737 .: ( AIR 1975 SC 1121 ) in Divisional Forest Officer, v. Bishwanath Tea Co. Ltd. (1981)3 SCC 238 :( AIR 1981 SC 1368 ); in Bareilly Development Authority, v. Ajai Pal Singh (1989)2 SCC 116 ( AIR 1989 SC 1076 ); and in Krishan Kumar, v. Union of India (1989)2 SCC 504 :( AIR 1989 SC 1415 ). In addition, Sri Deb has also relied upon the decision in Life Insurance Corporation of India, v. Escorts Ltd. (1986)1 SCC 264 :( AIR 1986 SC 1370 ) in Raunaq International Ltd. v. I.V.R. Construction Ltd. AIR 1999 SC 393 ; and in Assistant Collector of Central Excise, Chandan Nagar, West Bengal, v. Dunlop India Ltd. AIR 1985 SC 330 . 8. The ratio available in the above decisions is not the last say of the Supreme Court. 8. The ratio available in the above decisions is not the last say of the Supreme Court. The powers of a Court under Article 226 is discretionary in nature and it has to be invoked on consideration of the facts and circumstances and the nature of the contentions and the dealings between the parties in a particular case. Where the dispute relates to arbitrary and unfair action and can be set at rest without going into factual details, the Court shall not refuse to invoke such powers to direct the parties to resort to alternative remedy for settlement of dispute. In Mahabir Auto Stores v. Indian Oil Corporation AIR 1990 SC 1031 , the Supreme Court deprecated the arbitrary action insisting for fairness from an instrumentality of the (State). The observations relevant for the purpose at hand record by the Supreme Court is quoted below :- "17. We are of the opinion that in all such cases whether public law or private law rights are involved, depends upon the facts and circumstances of the case. The dichotomy between rights and remedies cannot be obliterated by any strait-jacket formula. It has to be examined in each particular case. Mr. Salve sought to urge that there are certain cases under Article 14 of arbitrary exercise of such "power" and not cases of exercise of a right arising either under a contract or under a Statute. We are of the opinion that that would depend upon the factual matrix. 18. Having considered the facts and circumstances of the case and the nature of the contentions and the dealings between the parties and in view of the present state of law, we are of the opinion that decision of the State /public authority under Article 298 of the Constitution, is an administrative decision and can be impeached on the ground that the decision is arbitrary or violative of Article 14 of the Constitution of India on any of the grounds available in public law field. It appears to us that in respect of Corporation like IOC when without informing the parties concerned, as in the instant case of the appellant firm herein on alleged change of policy and on that basis action to seek to bring to an end the course of transaction over 18 years involving large amounts of money is not fair action, especially in view of the monopolistic nature of the power of the respondent in this field. Therefore, it is necessary to reiterate that even in the field of public law, the relevant persons concerned or to be affected, should be taken into confidence. Whether and in what circumstance that confidence should be taken into consideration cannot be laid down on any strit-jacket basis. It depends on the nature of the right involved and nature of the power sought to be exercised in a particular situation. It is true that there is discrimination (distinction) between power and right but whether the State or the instrumentality of a State has the right to function in public field or private field is a matter which, in our opinion, depends upon the facts and circumstances of the situation, but such exercise of power cannot be dealt with by the State or the instrumentality of the State without informing and taking into confidence the party whose rights and powers affected or sought to be affected, into confidence. in such situations most often people feel aggrieved by exclusion of knowledge if not being taken into confidence. 19. . . . .* * * * * * * * * * 20. Having regard to the nature of the transaction, we are of the opinion that it would be appropriate to state that in cases where the instrumentality of the State enters the contractual field, it should be governed by the incidence of the contract. It is true that it may not be necessary to give reasons but, in our opinion, in the field of this nature fairness having regard to the large concerned, and having regard to the large number or the long period and the nature of the dealings between the parties, the appellant should have been taken into confidence. Equality and fairness at least demands this much from an instrumentality of the State dealing with a right of the State not to treat the contract as subsisting. Equality and fairness at least demands this much from an instrumentality of the State dealing with a right of the State not to treat the contract as subsisting. We must, however, evolve such process which will work." 9. The observations in para-18 show that even in the field of public law, exercise of power without informing and taking into confidence, the party whose rights and powers are going to be affected has to be taken into consideration. In the facts and circumstances of the case, the Supreme Court did not agree that in private law field, there is no scope for applying the doctrine of arbitrariness or mala fides. The Supreme Court on consideration of the circumstances peculiar to that case granted limited relief to the appellant firm which was carrying on distribution and sale of lubricants as distributor of Indian Oil Corporation for a considerable length of time. The supply of lubricants to the firm was suddenly stopped by the Indian Oil Corporation in view of change in the policy. Considering the duration and the nature of the transaction, the Supreme Court granted limited relief which is evident from para 20 of the aforesaid judgment. 10. In Kumari Shrilekha Vidyarthi v. State of U.P. AIR 1991 SC 537 , the Supreme Court held as follows : "Para- 48 In our view, bringing the State activity in contractual matters also within the purview of judicial review is inevitable and is a logical corollary to the stage already reached in the decision 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 Swarkadas Marfatia and Sons ( AIR 1989 SC 1642 ) (supra) and Mahabir Auto Stores ( AIR 1990 SC 1031 )(supra) 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 which implies scrutiny of every State action to provide an effective check against arbitrariness and abuse of power. We would much rather be wrong in saying so rather than be wrong in not saying so. This appears to be also the trend of the recent English decisions. It is in consonance with our commitment to openness which implies scrutiny of every State action to provide an effective check against arbitrariness and abuse of power. We would much rather be wrong in saying so rather than be wrong in not saying so. Non-arbitrariness, being a necessary concomitant of the rule of law, it is imperative that all actions of every public functionary, in whatever sphere, must be guided by reasons and not humour, whim, caprice or personal predilections of the persons entrusted with the task on behalf of the State and exercise of all power must be for public good instead of being of the power." 11. It would appear from the above that non-arbitrariness is an essential concomitant of the rule of law and that all actions of every public functionary, in whatever sphere, must be guided by reason. It is clear from the above that exercise of a power must be for public good instead of being an abuse of the same, and the exercise of powers of a State instrumentality emanating from the terms of the contract cannot be placed beyond the purview of judicial scrutiny. This being the law in force as on today, the arbitrary action of the respondents herein contrary to the terms to the contract cannot be allowed to continue. Since such a direction is possible in the instant case without delving deep into disputed matters, the contention of Shri Deb that this Court should not exercise its powers under Article 226 in the instant case has to be rejected. 12. In the result, the writ petition is allowed. The respondents are directed to act in strict compliance with the provisions of the terms of contract and not to deduct any amount on account of demurrage without undergoing an exercise as provided under Clause XII of the contract. 13. No order as to costs. Petition allowed.