Braithwaite & Co. Ltd. v. Union of India, Rep. by its Chairman & CEO, Railway Board
2024-08-29
DHIRAJ SINGH THAKUR, R.RAGHUNANDAN RAO
body2024
DigiLaw.ai
JUDGMENT : Dhiraj Singh Thakur, C.J. The present writ appeal has been preferred against the judgment and order impugned, dated 14.02.2024, passed in W.P. No.1300 of 2024, whereby the petition filed by the appellant challenging the order of termination of the Contract awarded to the petitioner, was dismissed on the ground that disputed questions of fact were involved not warranting the exercise of extraordinary writ jurisdiction under Article 226 of the Constitution of India, and that there was an alternate remedy of arbitration as per the arbitration clause in the agreement between the parties. 2. Briefly stated, the material facts in the background of which the present controversy has arisen are as under: The appellant M/s Braithwaite & Co. Ltd is a Government of India undertaking. M/s Cognition Projects Pvt. Ltd is a company registered under the Companies Act. Both these companies formed a consortium called M/s. Braithwaite & Co. Ltd., & M/s. Cognition Projects Pvt. Ltd. (Consortium) in which M/s. Braithwaite & Co. Ltd is the lead member of the said consortium. The consortium responded to a notice, dated 14.06.2022, inviting proposals under two bid system from interested eligible bidders for upgradation of Visakhapatnam Railway Station on Engineering, Procurement and Construction (EPC) mode. The bid submitted by the petitioner was selected and accordingly a Letter of Acceptance (LoA) was issued on 14.09.2022, according to which, the construction was to be completed within 36 months from the 'appointed date'. The agreement was valued at Rs.388,91,00.790/-. The petitioner in terms of the LoA furnished a performance security of Rs.11,66,73,024/- on 07.10.2022. An agreement was formally executed between the parties on 15.11.2022. 3. As per the agreed terms of LoA and the agreement, dated 15.11.2022, the petitioner was supposed to complete the construction within 36 months from the 'appointed date'. 4. Article 21.1.2 of the Agreement envisaged the termination of the Agreement and consequently the contract by issuing a termination notice provided that before issuance of termination notice, the Authority informs the contractor about its intention and grants 15 days time to the contractor to make a representation, and may after the expiry of such 15 days time, issue the termination notice. A termination notice, dated 24.03.2023, came to be issued by the Chief Project Manager, East Coast Railway, Waltair, invoking Article 21.1.2 of the Agreement based upon the alleged defaults committed by the petitioner in the execution of the contract.
A termination notice, dated 24.03.2023, came to be issued by the Chief Project Manager, East Coast Railway, Waltair, invoking Article 21.1.2 of the Agreement based upon the alleged defaults committed by the petitioner in the execution of the contract. Reply was submitted by the petitioner, dated 05.04.2023, to the notice, dated 24.03.2023, which after being considered by the authorities resulted in issuance of communication, dated 22.04.2023, whereby the petitioner was given another chance to complete the project within the stipulated time i.e., by 29.11.2025 after proper planning and compliance and removal of the deficiencies crystallized in the said communication. 5. Subsequently, another notice, dated 06.11.2023, came to be issued. In this notice, it was alleged that whereas the contract was supposed to have been completed within 36 months starting from 30.11.2022 to 29.11.2025, the petitioner had failed to achieve the project milestones and also failed to comply with certain important provisions of the Contract Agreement, which constituted a default on the part of the contractor. As many as 43 items of default were enumerated in the aforementioned notice, which was issued in terms of Article 21.1.2. It was specifically stated that despite the fact that the competent authority had provided an opportunity vide its communication, dated 22.04.2023, to the petitioner to complete the project within the scheduled time with proper planning and in spite of various commitments made during progressive review meetings, the petitioner had failed to achieve any substantial progress even after lapse of more than eleven months out of a total period of 36 months envisaged as per the agreement. Through the said notice, the competent authority proposed to terminate the Agreement and therefore, required the petitioner to submit its representation in that regard. 6. The petitioner then appears to have submitted its representation, dated 16.11.2023, which was considered by the authorities leading to the passing of the order of termination of the Contract, dated 26.12.2023. 7. The order of termination then came to be challenged before the learned single Judge in W.P. No.1300 of 2024 and the same was dismissed by virtue of judgment and order, dated 14.02.2024, and hence the present writ appeal. 8.
7. The order of termination then came to be challenged before the learned single Judge in W.P. No.1300 of 2024 and the same was dismissed by virtue of judgment and order, dated 14.02.2024, and hence the present writ appeal. 8. Learned counsel for the appellant would submit that the order of termination impugned in the writ petition was clearly unsustainable as being arbitrary inasmuch as the same could not have been passed as the delay was solely attributable to the respondents themselves, who had clearly failed to comply with their part of the obligations, which were clearly spelt out in the Agreement entered into between the parties. To highlight a few instances, it was stated that for seven months till 20.04.2023, no work could be executed on account of the fact that the respondents made major modifications in the already approved Master Plan, which was approved by the respondents that formed the basis of the bid documents. It was stated that Master Plan had to be prepared afresh after surveying the total area and that the revised Master Plan was finally approved by the respondents only on 20.04.2023. Apart from this, it was urged that even when the Master Plan was approved on 20.04.2023, no "change of scope order" was issued, which was otherwise a mandatory requirement as per Article 13 of the Agreement. It was also stated : (a) that Right of way to the area where construction was to be undertaken, was not provided which was otherwise envisaged as per Article 8 of the agreement. (b) that in terms of clause 4.3 of the Agreement, Environment Management Plan (EMP) submitted for approval of the authority on 20.02.2023 was approved by the Authority only on 13.11.2023 and that without the approval of the EMP, the petitioner could not have proceeded to execute the work. (c) that in terms of clause 9.4 of the Agreement, it was the obligation of the Authority to remove the trees, which caused obstruction to the execution of the project works and that almost 100 trees remained to be removed which were ultimately removed in April, 2023. 9.
(c) that in terms of clause 9.4 of the Agreement, it was the obligation of the Authority to remove the trees, which caused obstruction to the execution of the project works and that almost 100 trees remained to be removed which were ultimately removed in April, 2023. 9. In the context of the aforementioned assertions, learned counsel for the appellant would submit that the decision to terminate the Contract was, on the face of it, arbitrary inasmuch as the appointed date ought not to be calculated from 30.11.2022 as claimed by the respondents but from one of the later dates : (a) 20.04.2023 – when the revised Master Plan was approved (b) 20.05.2023 – when felling of trees was completed (c) 13.11.2023 – when the Environment Management Plan was approved. 10. The argument is that the entire basis for terminating the contract, on the face of it, was arbitrary warranting interference by this Court in its extraordinary writ jurisdiction under Article 226 of the Constitution of India when the delay was clearly attributable to the respondents and not to the petitioner inasmuch as it was the respondents, who had committed a default in discharging their part of the obligation as per the agreement and that in any case, there was no delay if the "appointed date" was to be calculated from any of the three dates mentioned hereinabove. 11. At this stage, we deem it appropriate to reproduce the definition of 'appointed date' as per the agreement : "Appointed Date" means that date which is later of: (a) The 15th day of the date of this Agreement, (b) The date on which the Authority has provided the Right of Way and forest clearances in phases of the area of the Site for the Project in conformity with the provisions of Clause 4.3 and 8.2;" 12. Learned counsel for the respondents in the aforementioned background would submit that the right of way was handed over to the appellant on 19.09.2022 after conducting a joint inspection. A note regarding handing over of right of way, dated 07.12.2022, signed by the authorized signatory of the appellant also forms part of the record. With regard to the delay in approval of the EMP, it was stated that the plan was submitted on 28.06.2023 after lapse of about 210 days from the appointed date, which was then approved by the Railway Board.
With regard to the delay in approval of the EMP, it was stated that the plan was submitted on 28.06.2023 after lapse of about 210 days from the appointed date, which was then approved by the Railway Board. Therefore, it was stated that the approval of the EMP on 13.11.2023 would not in any manner justify the delay in the submission of the said plan for approval by the competent authority. 13. The stand of the respondents is that despite an opportunity having been granted to the petitioner to comply with the timelines as per the schedule fixed and despite the assurances given by the petitioner after the issuance of first notice, dated 24.03.2023, the petitioner had failed to make good the deficit in progress of works and that even till the time of termination of the Contract, the construction of the plinth beams had not been commenced by the petitioner and that the petitioner had made a progress of only 1.40% in the last one year. 14. Insofar as the delay on account of felling and removal of 100 trees from the site in question is concerned, the stand of the respondents in the counter-affidavit is that they had removed all the trees from the work area within the time provided under clause 9.2.1 and in any case, it was stated that the appellant itself was not ready to commence the work at site and had failed to mark the location of the structures on the ground in the absence of the survey reports which were submitted as late as 11.07.2023. In any case, it was urged that non-felling of trees would not in any manner impede at least the initiation of the project, which the appellant had failed to do in the instant case. 15. In regard to the allegation that the Master Plan submitted for approval on 09.12.2022 was approved as late as on 20.04.2023, it is the stand of the respondents that GAD/Master Plan submitted by the contractor had too many errors, which were required to be corrected and it was only after the receipt of comprehensive General Arrangement Drawings that the Railways had approved the GAD/Master Plan without loss of time.
It is not out of place here to mention all the issues, which were raised by the appellant before the learned single Judge as also before us were also specifically dealt with by the authorities in their order of termination, dated 26.12.2023 after affording the appellant an opportunity of being heard. 16. It was further stated that the writ petition was not maintainable in contractual matters more so when disputed questions of fact were involved and that the learned single Judge had rightly refused to exercise jurisdiction under Article 226 of the Constitution of India. It was urged that the petitioner if at all had any grievance, the same could be redressed through the mechanism of Arbitration as had been agreed upon by the parties in terms of Article 24 of the Agreement, as had rightly been observed and held by the learned single Judge in the judgment and order impugned in the present writ appeal. 17. We have heard learned counsel for the parties. 18. Admittedly, disputes have arisen between the parties arising out of and in connection with the agreement, dated 15.11.2022. The respondents by invoking Article 21 have terminated the Contract on the ground that the appellant had failed to achieve the milestones in terms of the schedule fixed as per the agreement. Maintainability of the writ petition under Article 226 of the Constitution of India: The scope of interference by Courts in exercise of powers under Article 226 of the Constitution of India in contractual matters where State is a party, has been a subject matter of consideration by Courts from time to time. One of the earlier cases in this regard where the issue of maintainability of the petition under Article 226 came to be considered was in the case of Radhakrishna Agarwal v. State of Bihar, (1977) 3 SCC 457 wherein the Apex Court held : "10. It is thus clear that the Erusian Equipment & Chemicals Ltd.'s case (supra) involved discrimination at the very threshold or at the time of entry into the field of consideration of persons. with whom the Government could contract at all. At this stage, no doubt, the State acts purely in its executive capacity and is bound by the obligations which dealings of the State with the individual citizens import into every transaction entered into in exercise of its constitutional powers.
with whom the Government could contract at all. At this stage, no doubt, the State acts purely in its executive capacity and is bound by the obligations which dealings of the State with the individual citizens import into every transaction entered into in exercise of its constitutional powers. But, after the State or its agents have entered into the field of ordinary contract, the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines rights and obligations of the parties inter se. No question arises of violation of Article 14 or of any other constitutional provision when the State of its agents, purporting to act within this field, perform any act. In this sphere, they can only claim rights conferred upon them by contract and are bound by the terms of the contract only unless some statute steps in and confers some special statutory power or obligation on the State in the contractual field which is apart from contract." 19. However, in Kumari Shrilekha Vidyarthi v. State of U.P., (1991) 1 SCC 212 , the Apex Court expanded the scope of applicability of Article 14 beyond the threshold stage of making a contract and held that even after entering into the contract, Article 14 required the State to adhere to the requirements of Article 14. It was held: ''20 ……………… Applicability of Article 14 to all executive actions of the State being settled and for the same reason its applicability at the threshold to the making of a contract in exercise of the executive power being beyond dispute, can it be said that the State can thereafter cast off its personality and exercise unbridled power unfettered by the requirements of Article 14 in the sphere of contractual matters and claim to be governed therein only by private law principles applicable to private individuals whose rights flow only from the terms of the contract without anything more? We have no hesitation in saying that the personality of the State, requiring regulation of its conduct in all spheres by requirements of Article 14, does not undergo such a radical change after the making of a contract merely because some contractual rights accrue to the other party in addition. It is not as if the requirements of Article 14 and contractual obligations are alien concepts. which cannot co-exist. 21.
It is not as if the requirements of Article 14 and contractual obligations are alien concepts. which cannot co-exist. 21. The Preamble of the Constitution of India resolves to secure to all its citizens Justice, social, economic and political; and equality of status and opportunity. Every State action must be aimed at achieving this goal. Part IV of the Constitution contains 'Directives Principles of State Policy which are fundamental in the governance of the country and are aimed at securing social and economic freedoms by appropriate State action which is complementary to individual fundamental rights guaranteed in Part III for protection against excesses of State action to realise the vision in the Preamble. This being the philosophy of the Constitution, can it be said that it contemplates exclusion of Article 14 non-arbitrariness which is basic to rule of law from State actions in contractual field when all actions of the State are meant for public good and expected to be fair and just? We have no doubt that the Constitution does not envisage or permit unfairness or unreasonableness in State actions in any sphere of its activity contrary to the professed ideals in the Preamble. In our opinion, it would be alien to the Constitutional Scheme to accept the argument of exclusion of Article 14 in contractual matters. The scope and permissible grounds of judicial review in such matters and the relief which may be available are different matters but that does not justify the view of its total exclusion. This is more so when the modern trend is also to examine the unreasonableness of a term in such contracts where the bargaining power is unequal so that these are not negotiated contracts but standard form contracts between unequals. 22. There is an obvious difference in the contracts between private parties and contracts to which the State is a party, Private parties are concerned only with their personal interest whereas the State while exercising its powers and discharging its functions, acts indubitably, as is expected of it, for public good and in public interest. The impact of every State action is also on public interest. This factor alone is sufficient to import at least the minimal requirements of public law obligations and impress with this character the contracts made by the State or its instrumentality.
The impact of every State action is also on public interest. This factor alone is sufficient to import at least the minimal requirements of public law obligations and impress with this character the contracts made by the State or its instrumentality. It is a different matter that the scope of judicial review in respect of disputes failing within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes. However, to the extent, challenge is made on the ground of violation of Article 14 by alleging that the impugned act is arbitrary, unfair or unreasonable, the fact that the dispute also fails within the domain of contractual obligations would not relieve the State of its obligation to comply with the basic requirements of Article 14. To this extent, the obligation is of a public character invariably in every case irrespective of there being any other right or obligation in addition thereto. An additional contractual obligation cannot divest the claimant of the guarantee under Article 14 of non-arbitrariness at the hands of the State in any of its actions." 20. Subsequently, in Verigamto Naveen v. Govt. of A.P., (2001) 8 SCC 344 , it was held : "21……. In cases where the decision making authority exceeded its statutory power or committed breach of rules or principles of natural justice in exercise of such power or its decision is perverse or passed an irrational order, this Court has interceded even after the contract was entered into between the parties and the Government and its agencies.
In cases where the decision making authority exceeded its statutory power or committed breach of rules or principles of natural justice in exercise of such power or its decision is perverse or passed an irrational order, this Court has interceded even after the contract was entered into between the parties and the Government and its agencies. We may advert to three decisions of this Court in Dwarkadas Marfatia & Sons v. Board of Trustees of the Port of Bombay; Mahabir Auto Stores v. Indian Oil Corporation; and Srilekha Vidyarthi v. State of U.P. Where the breach of contract involves breach of statutory obligation when the order complained of was made in exercise of statutory power by a statutory authority, though cause of action arises out of or pertains to contract, brings within the sphere of public law because the power exercised is apart from contract." In Praga Tools Corporation v. Shri C.A. Imanual, (1969) 1 SCC 585 = 1969 AIR SC 1306, it was held that if the challenged action did not have any public element, writ of mandamus could not be issued as the action would essentially be of a private character. 21. The issue was also considered at length in ABL International Limited v. Export Credit Guarantee Corporation of India Limited, (2004) 3 SCC 553 , and after noticing the various judgments on the point, the following legal principles were crystallized regarding maintainability of the writ petition:— a. In an appropriate case, a writ petition as against the State or an instrumentality of the State arising out of the contractual obligations is maintainable. b. Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases, as a matter of rule. c. A writ petition involving the consequential benefit of monetary claims is also maintainable. 22. The Court further proceeded to hold that in entertaining the writs under Article 226, the Court has the discretion to entertain or not to entertain the petition and with reference to Whirlpool Corporation v. Registrar of Trade Marks, Mumbai, (1998) 8 SCC 1 , it was held that the Court has imposed upon itself certain restrictions in the exercise of this power.
It was further held that the prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the writ jurisdiction. 23. In "Joshi Technologies International Inc. v. Union of India", (2015) 7 SCC 728 , the Apex Court on a detailed conspectus of the ratio of the judgments rendered from the said Court from time to time crystallized the legal position in regard to exercise of writ jurisdiction in paragraph Nos. 68 & 69. It was held thus:— "68. The position thus summarized in the aforesaid principles has to be understood in the context of discussion that preceded which we have pointed out above. As per this, no doubt, there is no absolute bar to the maintainability of the writ petition even in contractual matters or where there are disputed questions of fact or even when monetary claim is raised. At the same time, discretion lies with the High Court which under certain circumstances, can refuse to exercise. It also follows that under the following circumstances, 'normally', the Court would not exercise such a discretion: (a) the Court may not examine the issue unless the action has some public law character attached to it. (b) Whenever a particular mode of settlement of dispute is provided in the contract, the High Court would refuse to exercise its discretion under Article 226 of the Constitution and relegate the party to the said made of settlement, particularly when settlement of disputes is to be resorted to through the means of arbitration. (c) If there are very serious disputed questions of fact which are of complex nature and require oral evidence for their determination. (d) Money claims per se particularly arising out of contractual obligations are normally not to be entertained except in exceptional circumstances. 69. Further legal position which emerges from various judgments of this Court dealing with different situations/aspects relating to the contracts entered into by the State/public Authority with private parties, can be summarized as under: (i) At the stage of entering into a contract, the State acts purely in its executive capacity and is bound by the obligations of fairness.
69. Further legal position which emerges from various judgments of this Court dealing with different situations/aspects relating to the contracts entered into by the State/public Authority with private parties, can be summarized as under: (i) At the stage of entering into a contract, the State acts purely in its executive capacity and is bound by the obligations of fairness. (ii) State in its executive capacity, even in the contractual field, is under obligation to act fairly and cannot practice some discriminations. (iii) Even in cases where question is of choice or consideration of competing claims before entering into the field of contract, facts have to be investigated and found before the question of a violation of Article 14 could arise. If those facts are disputed and require assessment of evidence the correctness of which can only be tested satisfactorily by taking detailed evidence, Involving examination and cross-examination of witnesses, the case could not be conveniently or satisfactorily decided in proceedings under Article 226 of the Constitution. In such cases court can direct the aggrieved party to resort to alternate remedy of civil suit etc. (iv) Writ jurisdiction of High Court under Article 226 was not intended to facilitate avoidance of obligation voluntarily incurred. (v) Writ petition was not maintainable to avoid contractual obligation. Occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of contract which the parties had accepted with open eyes. It cannot ever be that a licensee can work out the license if he finds it profitable to do so : and he can challenge the conditions under which he agreed to take the license, if he finds it commercially inexpedient to conduct his business. (vi) Ordinarily, where a breach of contract is complained of, the party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed. Otherwise, the party may sue for damages.
(vi) Ordinarily, where a breach of contract is complained of, the party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed. Otherwise, the party may sue for damages. (vii) Writ can be issued where there is executive action unsupported by law or even in respect of a corporation there is denial of equality before law or equal protection of law or if can be shown that action of the public authorities was without giving any hearing and violation of principles of natural justice after holding that action could not have been taken without observing principles of natural justice. (viii) If the contract between private party and the State/instrumentality and/or agency of State is under the realm of a private law and there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court under Article 226 of the Constitutional of India and invoking its extraordinary jurisdiction. (ix) The distinction between public law and private law element in the contract with State is getting blurred. However, it has not been totally obliterated and where the matter falls purely in private field of contract. This Court has maintained the position that writ petition is not maintainable. Dichotomy between public law and private law, rights and remedies would depend on the factual matrix of each case and the distinction between public law remedies and private law, field cannot be demarcated with precision. In fact, each case has to be examined, on its facts whether the contractual relations between the parties bear insignia of public element. Once on the facts of a particular case it is found that nature of the activity or controversy involves public law element, then the matter can be examined by the High Court in writ petitions under Article 226 of the Constitution of India to see whether action of the State and/or instrumentality or agency of the State is fair, just and equitable or that relevant factors are taken into consideration and irrelevant factors have not gone into the decision making process or that the decision is not arbitrary.
(x) Mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirements of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness. (xi) The scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes." 24. In K.K. Saksena v. International Commission on Irrigation & Drainage, (2015) 4 SCC 670 , the Court held that even when a body was performing a public duty and was amenable to writ jurisdiction, its decisions would not be subject to judicial review except those which had a public law element therein. While elucidating as to what constituted a public function amenable to judicial review, reliance was placed upon R. (Hopley) v. Liverpool Health Authority, [2002 EWHC 1723 (Admin) : 2002 Lloyd's Med Rep 494] (unreported)(30-7-2002) and held : "50. ...In R. (Hopley) v. Liverpool Health Authority [2002 EWHC 1723 (Admin) : 2002 Lloyd's Med Rep 494] (unreported)(30-7-2002), Justice Pitchford helpfully set out three things that had to be identified when considering whether a public body with statutory powers was exercising a public function amenable to judicial review or a private function. They are : (i) whether the defendant was a public body exercising statutory powers; (ii) whether the function being performed in the exercise of those powers was a public or a private one; and (iii) whether the defendant was performing a public duty owed to the claimant in the particular circumstances under consideration." 25.
They are : (i) whether the defendant was a public body exercising statutory powers; (ii) whether the function being performed in the exercise of those powers was a public or a private one; and (iii) whether the defendant was performing a public duty owed to the claimant in the particular circumstances under consideration." 25. In a recent judgment, the Apex Court in M.P. Power Management Company Limited, Jabalpur v. Sky Power Southeast Solar India Private Limited and Others, (2023) 2 SCC 703 on a conspectus of the law as it developed starting from the case of Radhakrishna Agarwal (supra) held that the principle of law laid down in Radhakrishna Agarwal (supra) would not hold good in view of the law laid down in ABL International Limited v. Export Credit Guarantee Corporation of India Limited, (2004) 3 SCC 553 and further held that even if a contract was non-statutory in character, it would not entitle the State to ward off scrutiny of its action or inaction under the contract if it was established that such action or inaction, per se, was arbitrary and further held that Article 14 enabled the writ Court to deal with arbitrary action even after contract was entered into by the State. The Supreme Court in the aforementioned judgment while holding that existence of an arbitration provision would be viewed as a near bar to the entertainment of a writ petition and existence of an alternate remedy was to be borne in mind in declining relief in a writ petition in a contractual matter, yet there was no prohibition in the writ Court in deciding even disputed questions of fact particularly when the dispute pertained only to demystifying of documents. It was further held : "82.12. In a case the State is a party to the contract and a breach of a contract is alleged against the State, a civil action in the appropriate forum is, undoubtedly, maintainable. But this is not the end of the matter. Having regard to the position of the State and its duty to act fairly and to eschew arbitrariness in all its actions, resort to the constitutional remedy on the cause of action, that the action is arbitrary, is permissible (see in this regard Shrilekha Vidyarthi v. State of U.P., (1991) 1 SCC 212 : 1991 SCC (L&S) 742).
Having regard to the position of the State and its duty to act fairly and to eschew arbitrariness in all its actions, resort to the constitutional remedy on the cause of action, that the action is arbitrary, is permissible (see in this regard Shrilekha Vidyarthi v. State of U.P., (1991) 1 SCC 212 : 1991 SCC (L&S) 742). However, it must be made clear that every case involving breach of contract by the State, cannot be dressed up and disguised as a case of arbitrary State action. While the concept of an arbitrary action or inaction cannot be cribbed or confined to any immutable mantra, and must be laid bare, with reference to the facts of each case, it cannot be a mere allegation of breach of contract that would suffice. What must be involved in the case must be action/inaction, which must be palpably unreasonable or absolutely irrational and bereft of any principle. An action, which is completely mala fide, can hardly be described as a fair action and may, depending on the facts, amount to arbitrary action. The question must be posed and answered by the Court and all we intend to lay down is that there is a discretion available to the Court to grant relief in appropriate cases." 26. Testing the facts of the present case on the touchstone of the law discussed hereinabove, we have no hesitation in holding that even in non-statutory contracts where State is a party, in case of arbitrariness by the State in terminating contract, this Court would not hesitate in exercising its writ jurisdiction under Article 226 of the Constitution provided the impugned action of the State is so palpably unreasonable, irrational, perverse and unsustainable when tested on the Wednesbury principle. 27. In the present case, however, we cannot persuade ourselves to come to a conclusion that the decision of the official respondents to terminate the contract is per se arbitrary or perverse inasmuch as there is an explanation given to every argument, which was sought to be made as a basis for terming the said decision as perverse. Whether the explanation rendered is ultimately sustainable or not would be a matter to be gone into in depth after evidence is led by the parties to the agreement.
Whether the explanation rendered is ultimately sustainable or not would be a matter to be gone into in depth after evidence is led by the parties to the agreement. Taking a cue from the judgments of the Apex Court as mentioned hereinabove that the existence of an alternate remedy by way of arbitration should be considered as a near bar to the exercise of writ jurisdiction by Courts under Article 226 of the Constitution of India, we find that this is not a case where one could arrive at a conclusion simply by looking at the documents that the decision to terminate the contract was arbitrary or perverse. We are, therefore, of the opinion that it would be appropriate for the parties to be relegated to the remedy of arbitration in terms of Article 24 of the agreement, dated 15.11.2022. Consequently, we find no reason for interference with the judgment and order passed by the learned single Judge. Be that as it may, the writ appeal is found to be without any merit and is, accordingly, dismissed. No costs. Pending miscellaneous applications, if any, shall stand closed.