JUDGMENT : Manoj Kumar Gupta, J. 1. The present reference to Larger Bench has been made for deciding the following questions : "(i) Whether a contract of service purely governed by its terms and conditions, can be subjected to examination, even when it is not challenged and willingly accepted by the contractual employee at the time of entry into the service, and writ jurisdiction be invoked when remedy under the contract is by a specific clause for invoking arbitration? (ii) Whether the judgment rendered by the Division Bench of this Court in Rajesh Bhardwaj and others Vs. Union of India and others reported in ( 2019 2 ADJ 830 ) lays down the law correctly or the judgment of the Division Bench of this Court in Prem Chandra Gupta vs. State of U.P. and 4 others (Special Appeal No.104 of 2021, rendered on 14.06.2021) should be followed?" 2. Heard Shri Samir Sharma, learned Senior Advocate assisted by Shri Himanshu Agrawal, Shri Ajay Mishra and Shri Bhawesh Pratap Singh, learned counsel for the petitioner and Shri Kunal Ravi Singh, learned Chief Standing Counsel, Shri Bipin Bihari Pandey, learned Chief Standing Counsel, Shri Rajiv Singh, learned Standing Counsel, Shri Ayush Mishra and Shri Sunil Kumar Mishra, learned counsel for the respondents. Backdrop 3. The writ petitioner was engaged on contractual basis as Conductor by U.P. State Road Transport Corporation (the first respondent) on 27.09.2011. The contract of service was renewed from time to time and there was no complaint against his conduct. On 27.05.2020, his contract was terminated, without giving opportunity of hearing to him on the ground that in an inspection made by Enforcement Team in the bus on Kanpur- Maitha Road, the petitioner was found carrying nine passengers without tickets. No show cause notice or charge-sheet was issued to him and straight away the termination order was passed. Reference to Larger Bench – 4. The Division Bench hearing the writ petition noticed conflict in two previous Division Bench judgments of this Court, namely, Rajesh Bhardwaj vs. Union of India , 2019 (2) ADJ 830 and Prem Chandra Gupta vs. State of U.P. and 4 others , Special Appeal No. 104 of 2021 decided on 14.06.2021 and therefore made the instant reference. 5. The Division Bench hearing the writ petition noticed conflict in two previous Division Bench judgments of this Court, namely, Rajesh Bhardwaj vs. Union of India , 2019 (2) ADJ 830 and Prem Chandra Gupta vs. State of U.P. and 4 others , Special Appeal No. 104 of 2021 decided on 14.06.2021 and therefore made the instant reference. 5. In Rajesh Bhardwaj, the petitioner was appointed as Manager (C& P) on 30.03.2010 in CUPGL, a joint venture of Gas Authority of India Limited and Bharat Petroleum Corporation Limited on probation of one year. He was placed under suspension on 24.05.2013 and a charge-sheet was served on him on 24.05.2013. On 01.08.2013, his services were terminated. He challenged the termination order on the ground that it was punitive in nature and therefore, principles of natural justice should have been followed but which, according to him, had not been followed. The writ petition was contested by CUPGL on the ground that the Central Government or State Government have no stake in the company; it does not perform any governmental work and therefore, is not amenable to writ jurisdiction. Moreover, the services of the petitioner were not governed by any statutory provision but by a contract and therefore, no reinstatement can be directed. 6. Four issues were framed for consideration as follows: (1) Whether CUPGL can be said to be 'State' within the meaning of Article 12 of Constitution? (2) Even if Question-(1) is answered in favour of petitioner, whether writ petition is maintainable in the matter of termination of service of employee of CUPGL when terms and conditions are not governed by any statutory provisions and are purely within the realm of contract? (3) Whether relief of reinstatement can be granted to petitioners when terms and conditions of employment are not governed by statutory provisions, if order of termination is said to be vitiated in law? (4) Whether order of termination is illegal or bad in law? 7. On the first question regarding status of CUPGL, it was held that since holding company of the Government exercised control over it and therefore, CUPGL would be ‘State’ within the meaning of Article 12 of the Constitution. 8. Issues No. 2, 3 & 4 were considered together. (4) Whether order of termination is illegal or bad in law? 7. On the first question regarding status of CUPGL, it was held that since holding company of the Government exercised control over it and therefore, CUPGL would be ‘State’ within the meaning of Article 12 of the Constitution. 8. Issues No. 2, 3 & 4 were considered together. It was held that since the petitioner was working as Manager, his terms and conditions were not governed by any Standing Order but by a contract and therefore, even if, it was wrongfully terminated, he cannot be directed to be reinstated in service. The remedy under Article 226 of the Constitution is not available to such an employee. He must avail the remedy in common law by claiming damages. The relevant observations are as follows: “30. Now we come to Questions-(2), (3) and (4), which, in our view, can be dealt with together. In the present case, terms and conditions of employment, applicable to petitioner are not challenged that such terms and conditions are arbitrary and violative of Article 14 of Constitution read with Section 23 of Indian Contract Act, 1872 (hereinafter referred to as "Act, 1872") being unfair, unreasonable or unconscionable, and against public policy. The order of termination is challenged on the ground that petitioner has not been given adequate opportunity of defence and termination is in violation of principles of natural justice. It is not in dispute that terms and conditions are not governed by any Statute or statutory provision or by any provision made under any authority of Statute. Petitioner being in the Cadre of Manager, his terms and conditions are also not governed by Standing Orders made by Employer with respect to employees governed by provisions of Industrial Employment (Standing Orders) Act, 1946 (hereinafter referred to as "Act, 1946"). In these circumstances, in the cases like petitioner, consistently it has been laid down that employment is simply a part of contract. If employment is terminated or contract of service is terminated, Court shall not grant relief of reinstatement, i.e. specific performance of contract of personal service, as it is barred by the provisions of Specific Relief Act, 1963 (hereinafter referred to as "Act, 1963") and, therefore, no remedy under Article 226 shall be available since employee, if complains about wrongful termination of service, then must avail remedy in common law by claiming damages.” 9. For arriving at the said conclusion, the legal principles laid down in Executive Committee of U.P. State Warehousing Corporation, Lucknow vs. C.K. Tyagi , AIR 1970 SC 1244 were taken into account. These are– "The position in law is that no declaration to enforce a contract of personal service will be normally granted. But there are certain well-recognized exceptions to this rule and they are: To grant such a declaration in appropriate cases regarding (1) a public servant, who has been dismissed from service in contravention of Article 311. (2) Reinstatement of a dismissed worker under Industrial law by Labour or Industrial Tribunals. (3). A statutory body when it has acted in breach of a mandatory obligation, imposed by statute". (emphasis supplied) 10. Reliance was also placed on the Constitution Bench judgement of the Supreme Court in Sirsi Municipality vs. Cecelia Kom Francis Tellis , (1973) 1 SCC 409 wherein it is laid as follows :- "15. The cases of dismissal of a servant fall under three broad heads. The first head relates to relationship of master and servant governed purely by contract of employment. Any breach of contract in such a case is enforced by a suit for wrongful dismissal and damages. Just as a contract of employment is not capable of specific performance similarly breach of contract of employment is not capable of finding a declaratory judgment of subsistence of employment. A declaration of unlawful termination and restoration to service in such a case of contract of employment would be indirectly an instance of specific performance of contract for personal services. Such a declaration is not permissible under the Law of Specific Relief Act. 16. The second type of cases of master and servant arises under Industrial law. Under that branch of law a servant who is wrongfully dismissed may be reinstated. This is a special provision under Industrial law. This relief is a departure from the reliefs available under the Indian Contract Act and the Specific Relief Act which do not provide for reinstatement of a servant. 17. The third category of cases of master and servant arises in regard to the servant in the employment of the State or of other public or local authorities or bodies created under statute. 18. 17. The third category of cases of master and servant arises in regard to the servant in the employment of the State or of other public or local authorities or bodies created under statute. 18. Termination or dismissal of what is described as a pure contract of master and servant is not declared to be a nullity however wrongful or illegal it may be. The reason is that dismissal in breach of contract is remedied by damages. In the case of servant of the State or of local authorities or statutory bodies, courts have declared in appropriate cases the dismissal to be invalid if the dismissal is contrary to rules of natural justice or if the dismissal is in violation of the provisions of the statute. Apart from the intervention of statute there would not be a declaration of nullity in the case of termination or dismissal of a servant of the State or of other local authorities or statutory bodies. 19. The courts keep the State and the public authorities within the limits of their statutory powers. Where a State or a public authority dismisses an employee in violation of the mandatory procedural requirements or on grounds which are not sanctioned or supported by statute the courts may exercise jurisdiction to declare the act of dismissal to be a nullity. Such implication of public employment is thus distinguished from private employment in pure cases of master and servant. (emphasis supplied) 11. The judgment in Prem Chandra Gupta taking a contrary view is in a special appeal, directed against the order of learned Single Judge dismissing the writ petition as not maintainable relying on Rajesh Bhardwaj. The principle of law laid down in paragraph 30 [quoted in Paragraph 7 of the instant order] in Rajesh Bhardwaj, was duly considered but was found to be contrary to the decisions of the Supreme Court in Bharati Reddy V. State of Karnataka , (2018) 12 SCC 61 Maharashtra Chess Association vs. Union of India , (2020) 13 SCC 285 and Shrilekha Vidyarthi Vs. State of U.P. , AIR 1991 SCC 537. The judgement of learned single judge was set aside and it was held that “even in contractual matter, a writ petition under Article 226 of the Constitution cannot be thwarted.” Analysis – 12. State of U.P. , AIR 1991 SCC 537. The judgement of learned single judge was set aside and it was held that “even in contractual matter, a writ petition under Article 226 of the Constitution cannot be thwarted.” Analysis – 12. The discussion on question No.1 would be on following aspects :- (i) Whether a contract of service purely governed by its terms and conditions, can be subjected to examination, even when it is not challenged and willingly accepted by the contractual employee at the time of entry into the service; (ii) whether writ jurisdiction can be invoked for the said purpose and scope of interference; and (iii) whether writ petition would lie or could be entertained when the parties had, by a specific clause, agreed for the arbitration. Whether contractual employee can challenge the terms of a contract – 13. The competence of a contractual employee to challenge the terms and conditions of contract of service is more or less well settled by a series of decisions of the Supreme Court. 14. In Central Inland Water Transport Corporation Limited & another v. Brojo Nath Ganguly & another, (1986) 3 SCC 156 the Supreme Court has held that the State or its instrumentalities and agencies even in matters of contract of employment are bound by the principles of non-arbitrariness and non-discrimination laid down in Article 14 of the Constitution. Where the employee has signed the contract of service on stereotype form on “take it or leave it” basis with no meaningful choice he is not bound by any term in such a contract. If challenged, the courts have power to strike down any term of such a contract which is found to be unconscionable, unfair, unreasonable, against public policy and public interest. The relevant observations are as follows: “89. Should then our courts not advance with the times? Should they still continue to cling to outmoded concepts and outworn ideologies? Should we not adjust our thinking caps to match the fashion of the day? Should all jurisprudential development pass us by, leaving us floundering in the sloughs of 19th century theories? Should the strong be permitted to push the weak to the wall? Should they be allowed to ride roughshod over the weak? Should the courts sit back and watch supinely while the strong trample underfoot the rights of the weak? We have a Constitution for our country. Should the strong be permitted to push the weak to the wall? Should they be allowed to ride roughshod over the weak? Should the courts sit back and watch supinely while the strong trample underfoot the rights of the weak? We have a Constitution for our country. Our judges are bound by their oath to "uphold the Constitution and the laws". The Constitution was enacted to secure to all the citizens of this country social and economic justice. Article 14 of the Constitution guarantees to all persons equality before the law and the equal protection of the laws. The principle deducible from the above discussions on this part of the case is in consonance with right and reason, intended to secure social and economic justice and conforms to the mandate of the great equality clause in Article 14. This principle is that the courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between parties who are not equal in bargaining power. It is difficult to give an exhaustive list of all bargains of this type. No court can visualize the different situations which can arise in the affairs of men. One can only attempt to give some illustrations. For instance, the above principle will apply where the inequality of bargaining power is the result of the great disparity in the economic strength of the contracting parties. It will apply where the inequality is the result of circumstances, whether of the creation of the parties or not. It will apply to situations in which the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them. It will also apply where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rules as part of the contract, however unfair, unreasonable and unconscionable a clause in that contract or form or rules may be. This principle, however, will not apply where the bargaining power of the contracting parties is equal or almost equal. This principle, however, will not apply where the bargaining power of the contracting parties is equal or almost equal. This principle may not apply where both parties are businessmen and the contract is a commercial transaction. In today's complex world of giant corporations with their vast infra-structural organizations and with the State through its instrumentalities and agencies entering into almost every branch of industry and commerce, there can be myriad situations which result in unfair and unreasonable bargains between parties possessing wholly disproportionate and unequal bargaining power. These cases can neither be enumerated nor fully illustrated. The court must judge each case on its own facts and circumstances. 15. In Balmer Lawrie & Co. Ltd. vs. Partha Sarathi Sen Roy , (2013) 8 SCC 345 the Supreme Court considered a clause in the letter of appointment which permitted termination of services of the employee of a Corporation by giving three calender months’ notice in writing without assigning any reason. The said clause was held to be unconscionable and violative of Article 14 of the Constitution. The relevant observations are as follows: “39. Clause 11(a) of the letter of appointment reads as under: "The Company shall have the right, at its sole discretion, to terminate your services by giving you three calendar months' notice in writing and without assigning any reason. The Company also reserves the right to pay you in lieu of notice, a sum by way of compensation equal to three months' emoluments consisting of basic salary, dearness allowance, house rent assistance and bonus entitlements, if any, after declaration of bonus." 40. Undoubtedly, the High Court has not dealt with the issue on merits with respect to the termination of the services of the respondents herein. However, considering the fact that such termination took place several decades ago, and litigation in respect of the same remained pending not only before the High Court, but also before this Court, it is desirable that the dispute come to quietus. Therefore, we have dealt with the case on merits. In keeping with this, we cannot approve the "hire and fire" policy adopted by the appellant Company, and the terms and conditions incorporated in the Manual of Officers in 1976, cannot be held to be justifiable, and the same being arbitrary, cannot be enforced. Therefore, we have dealt with the case on merits. In keeping with this, we cannot approve the "hire and fire" policy adopted by the appellant Company, and the terms and conditions incorporated in the Manual of Officers in 1976, cannot be held to be justifiable, and the same being arbitrary, cannot be enforced. In such a fact situation, Clause 11 of the appointment letter is held to be an unconscionable clause, and thus the Service Condition Rules are held to be violative of Article 14 of the Constitution to this extent. The contract of employment is also held to be void to such extent." (emphasis supplied) 16. In Pani Ram v. Union of India and others ,(2021) 9 SCC 234 the issue was regarding grant of disability pension for being invalidated out of service on account of 80% disability, attributable to military service. It was denied on the ground that there was separate scheme and service conditions for the Member of Ecological Task Force in which the appellant was working at the time of invalidation, which did not entitle him to disability pension. The appellant voluntarily agreed to the scheme and service conditions at the time of his induction. The issue was whether the appellant was entitled to be treated at par with the members of regular Army or he was bound by the Scheme of appointment contained in Ministry of Defence, letter dated 31.03.2008. The court, relying on Central Inland Water Transport Corporation Limited held as follows: “As held by this Court, a right to equality guaranteed under Article 14 of the Constitution of India would also apply to a man who has no choice or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rules as part of the contract, however unfair, unreasonable and unconscionable a clause in that contract or form or rules may be. We find that the said observations rightly apply to the facts of the present case. Can it be said that the mighty Union of India and an ordinary soldier, who having fought for the country and retired from Regular Army, seeking re-employment in the Territorial Army, have an equal bargaining power. We find that the said observations rightly apply to the facts of the present case. Can it be said that the mighty Union of India and an ordinary soldier, who having fought for the country and retired from Regular Army, seeking re-employment in the Territorial Army, have an equal bargaining power. We are therefore of the considered view that the reliance placed on the said document would also be of no assistance to the case of the respondents.” 17. In Daulat Sitaram Kodone and others vs. State of Maharashtra , (2014) 13 SCC 341 the Supreme Court declared a contract between landowners and the State Government in relation to payment of compensation to be unreasonable and unconstitutional where it found that those, who did not enter into such contract, were paid a higher compensation. 18. In Gas Authority of India Ltd. vs. Indian Petrochemicals Corporation Ltd. and others , (2023) 3 SCC 629 the Supreme Court has reiterated the legal principle that unconscionable terms in a contract between parties having unequal bargaining power would not be binding and in such matters, the power of judicial review under Article 226 of the Constitution is not ousted. 19. The aforesaid judgments firmly lay down that an unconstitutional term in a contract between a private party and the State or its instrumentalities when the parties are not having equal bargaining power or left with no meaningful choice can be subjected to judicial review. Mere fact that the party did not make protest at the time of entering the contract would not be a bar to subject such a clause to judicial review. Remedy under Article 226 of the Constitution and its scope in contractual matters – 20. It is now firmly established that even in contractual matters the power of judicial review is not ousted, though, it has to be exercised within the ambit of laid down parameters. Some of the earlier decisions made distinction between personality of 'State' at the time of entry into contract and after a concluded contract comes into existence. It is now firmly established that even in contractual matters the power of judicial review is not ousted, though, it has to be exercised within the ambit of laid down parameters. Some of the earlier decisions made distinction between personality of 'State' at the time of entry into contract and after a concluded contract comes into existence. Thus, the Supreme Court in Bareilly Development Authority vs. Ajay Pal Singh , (1989) 2 SCC 116 when there was a concluded non-statutory contract between the parties, held that– "Even conceding that the BDA has the trappings of a State or would be comprehended in 'other authority' for the purpose of Article 12 of the Constitution, while determining price of the houses/ flats constructed by it and the rate of monthly instalments to be paid, the 'authority' or its agent after entering into the field of ordinary contract acts purely in its executive capacity. Thereafter the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines the rights and obligations of the parties inter se. In this sphere, they can only claim rights conferred upon them by the contract in the absence of any statutory obligations on the part of the authority (i.e BDA in this case) in the said contractual field. 22. There is a line of decisions where the contract entered into between the State and the persons aggrieved is non-statutory and purely contractual and the rights are governed only by the terms of the contract, no writ or order can be issued under Article 226 of the Constitution of India so as to compel the authorities to remedy a breach of contract pure and simple Radhakrishna Agarwal v. State of Bihar (1977) 3 SCC 457 , Premji Bhai Parmar v. DDA (1980) 2 SCC 129 and Divl. Forest Officer v. Bishwanath Tea Co. Ltd. (1981) 3 SCC 238 , (1981) 3 SCR 662 " 21. Shortly came the judgement of Supreme Court in Srilekha Vidyarthi vs. State of U.P. , (1991) 1 SCC 212 while examining the validity of the State action in mass removal of Government Counsel in the State of U.P., where there was a discernible shift from the above noted legal position. Shortly came the judgement of Supreme Court in Srilekha Vidyarthi vs. State of U.P. , (1991) 1 SCC 212 while examining the validity of the State action in mass removal of Government Counsel in the State of U.P., where there was a discernible shift from the above noted legal position. The challenge to the State action in terminating the contract of all Government counsel by issuing a Government Order was contested by the State on the ground that the appointments were purely contractual and writ petition was not maintainable to enforce the contract. It was also argued on behalf of the State that Article 14 would apply only at the time of entry into contract but not after a concluded contract comes into existence. Thereafter, the relationship is governed by contract and the rights and remedies fall in the sphere of private law and not public law. However, the contention that the personality of the 'State' undergoes a change after a concluded contract comes into existence, was repelled, holding that : "Even apart from the premises that the 'office' or 'post' of DGCs has a public element which alone is sufficient to attract the power of judicial review for testing validity of the impugned circular on the anvil of Article 14, we are also clearly of the view that this power is available even without that element on the premise that after the initial appointment, the matter is purely contractual. 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. 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. (emphasis supplied) 21.1. The judgement goes on to consider the basic difference in the contracts between two private individuals and contracts, whether statutory or non statutory, where State is a party. It has been held that all State action are expected to be done for public good and public interest. This obligates the State to act in fair and reasonable manner even in the sphere of contract. The personality of the State after entering into contract does not get transformed to such extent that it is absolved of complying with the constitutional obligation under Article 14 albeit the scope of judicial review in such cases would be more limited and cases of the type far less. We may usefully quote paragraph 22 of the Law Report where the said aspect has been dealt with – "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 minimum 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 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. It is a different matter that 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. 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 falls 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." (emphasis supplied) 21.2. The Court also held that the State cannot make comparison with a private individual even in the sphere of contract. Its actions have to pass the tests of non-arbitrariness and non- discrimination laid down in Article 14 and are therefore subject to judicial review– 35. It is now too well settled that every State action, in order to survive, must not be susceptible to the vice of arbitrariness which is the crux of Article 14 of the Constitution and basic to the rule of law, the system which governs us. Arbitrariness is the very negation of the rule of law. Satisfaction of this basic test in every State action is sine qua non to its validity and in this respect, the State cannot claim comparison with a private individual even in the field of contract. This distinction between the State and a private individual in the field of contract has to be borne in the mind. 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 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 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 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 Dwarkadas Marfatia and Sons , (1990) 3 SCC 752 and Mahabir Auto Stores , (1984) 3 All ER 935 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. 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 reason 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 an abuse of the power." (emphasis supplied) 22. One of the submission of learned counsel for the Corporation (UPSRTC) is that the Corporation while determining the contract had acted in terms of the contract. There was no element of public law involved in the said action and therefore, the aggrieved cannot avail public law remedy. This question was answered by the Supreme Court in ABL International Ltd. and another vs. Export Credit Guarantee Corporation of India Ltd and others , (2004) 3 SCC 553 as follows :– "22. We do not think the above judgment in VST Industries Ltd. (2001) 1 SCC 298 , 2001 SCC (L&S) 227 supports the argument of the learned counsel on the question of maintainability of the present writ petition. It is to be noted that VST Industries Ltd. (2001) 1 SCC 298 , 2001 SCC (L&S) 227 against whom the writ petition was filed was not State or an instrumentality of a State as contemplated under Article 12 of the Constitution, hence, in the normal course, no writ could have been issued against the said industry. It is to be noted that VST Industries Ltd. (2001) 1 SCC 298 , 2001 SCC (L&S) 227 against whom the writ petition was filed was not State or an instrumentality of a State as contemplated under Article 12 of the Constitution, hence, in the normal course, no writ could have been issued against the said industry. But it was the contention of the writ petitioner in that case that the said industry was obligated under the statute concerned to perform certain public functions; failure to do so would give rise to a complaint under Article 226 against a private body. While considering such argument, this Court held that when an authority has to perform a public function or a public duty, if there is a failure a writ petition under Article 226 of the Constitution is maintainable. In the instant case, as to the fact that the respondent is an instrumentality of a State, there is no dispute but the question is: was the first respondent discharging a public duty or a public function while repudiating the claim of the appellants arising out of a contract? Answer to this question, in our opinion, is found in the judgment of this Court in Shrilekha Vidyarthi v. State of U.P (1991) 1 SCC 212 , wherein this Court held: '22.... The impact of every State action is also on public interest. 24. ...... It is really the nature of its personality as State which is significant and must characterise all its actions, in whatever field, and not the nature of function, contractual or otherwise, which is decisive of the nature of scrutiny permitted for examining the validity of its act. The requirement of Article 14 being the duty to act fairly, justly and reasonably, there is nothing which militates against the concept of requiring the State always to so act, even in contractual matters.' 23. It is clear from the above observations of this Court, once the State or an instrumentality of the State is a party to the contract, it has an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14 of the Constitution of India. It is clear from the above observations of this Court, once the State or an instrumentality of the State is a party to the contract, it has an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14 of the Constitution of India. Therefore, if by the impugned repudiation of the claim of the appellants the first respondent as an instrumentality of the State has acted in contravention of the abovesaid requirement of Article 14, then we have no hesitation in holding that a writ court can issue suitable directions to set right the arbitrary actions of the first respondent." (emphasis supplied) 23. Again the question, in context of public law and private law sphere was considered in Joshi Technologies International Inc. Vs. Union of India and others , 2015 (7) SCC 728 and the legal principles have been summarised :? "70. Further, the legal position which emerges from various judgments of this Court dealing with different situations/aspects relating to contracts entered into by the State/public authority with private parties, can be summarised as under: 70.1 At the stage of entering into a contract, the State acts purely in its executive capacity and is bound by the obligations of fairness. 70.2 State in its executive capacity, even in the contractual field, is under obligation to act fairly and cannot practise some discriminations. 70.3 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 of the Constitution 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 the Court can direct the aggrieved party to resort to alternate remedy of civil suit, etc. 70.4 Writ jurisdiction of the High Court under Article 226 of the Constitution was not intended to facilitate avoidance of obligation voluntarily incurred. 70.5 Writ petition was not maintainable to avoid contractual obligation. In such cases the Court can direct the aggrieved party to resort to alternate remedy of civil suit, etc. 70.4 Writ jurisdiction of the High Court under Article 226 of the Constitution was not intended to facilitate avoidance of obligation voluntarily incurred. 70.5 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 licence if he finds it profitable to do so: and he can challenge the conditions under which he agreed to take the licence, if he finds it commercially inexpedient to conduct his business. 70.6 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. 70.7 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 it 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. 70.8 If the contract between private party and the State/instrumentality and/or agency of the 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 Constitution of India and invoking its extraordinary jurisdiction. 70.9 The distinction between public law and private law element in the contract with the 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. The dichotomy between public law and private law rights and remedies would depend on the factual matrix of each case and the distinction between the public law remedies and private law field, cannot be demarcated with precision. The dichotomy between public law and private law rights and remedies would depend on the factual matrix of each case and the distinction between the 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. 70.10 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. 70.11 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." (emphasis supplied) 24. In Maharashtra Chess Association vs. Union of India , (2020) 13 SCC 285 the Supreme Court held that the parties, by a private contract, cannot exclude the powers conferred on the High Courts by Article 226(1) of the Constitution. The power of judicial review under Article 226 is an intrinsic feature of the basic structure of the Constitution. It cannot be curtailed though it has to be exercised along the recognized lines and not arbitrarily. The relevant observations in this regard are as follows: "13. The role of the High Court under the Constitution is crucial to ensuring the rule of law throughout its territorial jurisdiction. In order to achieve these transcendental goals, the powers of the High Court under its writ jurisdiction are necessarily broad. They are conferred in aid of justice. The relevant observations in this regard are as follows: "13. The role of the High Court under the Constitution is crucial to ensuring the rule of law throughout its territorial jurisdiction. In order to achieve these transcendental goals, the powers of the High Court under its writ jurisdiction are necessarily broad. They are conferred in aid of justice. This Court has repeatedly held that no limitation can be placed on the powers of the High Court in exercise of its writ jurisdiction. In A. V. Venkateswaran v. Ramchand Sobhraj Wadhwani a Constitution Bench of this Court held that the nature of power exercised by the High Court under its writ jurisdiction is inherently dependent on the threat to the rule of law arising in the case before it: (AIR p. 1510, para 10) "10. ... We need only add that the broad lines of the general principles on which the court should act having been clearly laid down, their application to the facts of each particular case must necessarily be dependent on a variety of individual facts which must govern the proper exercise of the discretion of the Court, and that in a matter which is thus pre-eminently one of discretion, it is not possible or even if it were, it would not be desirable to lay down inflexible rules which should be applied with rigidity in every case which comes up before the court." The powers of the High Court in exercise of its writ jurisdiction cannot be circumscribed by strict legal principles so as to hobble the High Court in fulfilling its mandate to uphold the rule of law. 14. While the powers the High Court may exercise under its writ jurisdiction are not subject to strict legal principles, two clear principles emerge with respect to when a High Court's writ jurisdiction may be engaged. First, the decision of the High Court to entertain or not entertain a particular action under its writ jurisdiction is fundamentally discretionary. Secondly, limitations placed on the court's decision to exercise or refuse to exercise its writ jurisdiction are self-imposed. It is a well-settled principle that the writ jurisdiction of a High Court cannot be completely excluded by statute. First, the decision of the High Court to entertain or not entertain a particular action under its writ jurisdiction is fundamentally discretionary. Secondly, limitations placed on the court's decision to exercise or refuse to exercise its writ jurisdiction are self-imposed. It is a well-settled principle that the writ jurisdiction of a High Court cannot be completely excluded by statute. If a High Court is tasked with being the final recourse to upholding the rule of law within its territorial jurisdiction, it must necessarily have the power to examine any case before it and make a determination of whether or not its writ jurisdiction is engaged. Judicial review under Article 226 is an intrinsic feature of the basic structure of the Constitution." (emphasis supplied) 25. In Gridco Limited and Another vs. Sadananda Doloi and Others , (2011) 15 SCC 16 the Supreme Court after considering a catena of previous judgments, noticed the shift in legal position in matters relating to the power of judicial review in contractual matters, particularly, concerning breach of contractual obligations and the resultant termination of the service contract by a public authority. While it was held that the jurisdiction of the writ court to examine the validity of a termination order passed by a public authority even in contractual matters is not ousted, but the power has to be exercised with great caution and circumspection. The court cannot act as an appellate authority to decide whether a more reasonable course of action could have been taken in the circumstances of the case. The scope for interference would remain confined to cases where there is outrageous defiance of logic or patent infirmity. The following observations are relevant :— “38. A conspectus of the pronouncements of this Court and the development of law over the past few decades thus show that there has been a notable shift from the stated legal position settled in earlier decisions, that termination of a contractual employment in accordance with the terms of the contract was permissible and the employee could claim no protection against such termination even when one of the contracting parties happened to be the State. Remedy for a breach of a contractual condition was also by way of civil action for damages/ compensation. Remedy for a breach of a contractual condition was also by way of civil action for damages/ compensation. With the development of law relating to judicial review of administrative actions, a writ court can now examine the validity of a termination order passed by public authority. It is no longer open to the authority passing the order to argue that its action being in the realm of contract is not open to judicial review. 39. A writ court is entitled to judicially review the action and determine whether there was any illegality, perversity, unreasonableness, unfairness or irrationality that would vitiate the action, no matter the action is in the realm of contract. Having said that we must add that judicial review cannot extend to the Court acting as an appellate authority sitting in judgment over the decision. The Court cannot sit in the armchair of the Administrator to decide whether a more reasonable decision or course of action could have been taken in the circumstances. So long as the action taken by the authority is not shown to be vitiated by the infirmities referred to above and so long as the action is not demonstrably in outrageous defiance of logic, the writ court would do well to respect the decision under challenge.” (emphasis supplied) 26. In Central Inland Water Transport Corporation Limited , (1986) 3 SCC 156 the Supreme Court while holding that an unconscionable term in a contract of service can be challenged by the aggrieved person also held that in such cases, it is bounden duty of Constitutional Courts to entertain the challenge as the civil court does not have power to direct reinstatement. The issue has been answered thus :- "68. We now turn to the second question which falls for determination in these appeals, namely, whether an unconscionable term in a contract of employment entered into with the Corporation, which is "the State" within the meaning of the expression in Article 12, is void as being violative of Article 14. What is challenged under this head is clause (i) of Rule 9 of the said Rules. This challenge levelled by the respondent in each of these two appeals succeeded in the High Court." 103. What is challenged under this head is clause (i) of Rule 9 of the said Rules. This challenge levelled by the respondent in each of these two appeals succeeded in the High Court." 103. The contesting respondents could, therefore, have filed a civil suit for a declaration that the termination of their service was contrary to law on the ground that the said Rule 9(i) was void. In such a suit, however, they would have got a declaration and possibly damages for wrongful termination of service but the civil court could not have ordered reinstatement as it would have amounted to granting specific performance of a contract of personal service. As the Corporation is "the State", they, therefore, adopted the far more efficacious remedy of filing a writ petition under Article 226 of the Constitution." (emphasis supplied) 27. Even the Constitution Bench in Sirsi Municipality vs. Cecelia Kom Francis Tellis , (1973) 1 SCC 409 did not held that there is any absolute bar in entertaining writ petition in service matters arising out of non statutory contracts between the State and a private person, rather recognised that in cases of master and servant in employment of State or other public authority or body created under statute, "court have declared in appropriate cases the dismissal to be invalid if the dismissal is contrary to rules of natural justice or if the dismissal is in violation of the provisions of the statute". 28. The first principles of service jurisprudence in the sphere of contractual matters between State and individuals has succinctly been summarized in the aforesaid judgments. There is no absolute bar in entertaining the writ petition even in the matters arising out of contractual employment between State and private person but each case has to be examined on its own facts. As noted above, the dividing line between the public and private law is getting obliterated day by day and the trend is towards subjecting more and more actions of the State to the scrutiny of Article 14 unless there is absolutely no insignia of public element or adequate remedy available under private law. 29. Keeping in mind the above legal position, we feel inclined to hold that the judgment in Prem Chandra Gupta should be read as confined to the facts of the case whereas the judgment in Rajesh Bhardwaj as laying down the correct legal position. 29. Keeping in mind the above legal position, we feel inclined to hold that the judgment in Prem Chandra Gupta should be read as confined to the facts of the case whereas the judgment in Rajesh Bhardwaj as laying down the correct legal position. This shall not be construed as approval to interfere in the given set of facts of the case. We reiterate that it would depend on facts of each case. Whether arbitration clause would bar the remedy under Article 226– 30. We now proceed to dwell on the third part of Question No. 1 as to whether there is any bar in availing remedy under Article 226 when under the contract, the dispute is to be settled by way of arbitration. Once again, the law in this behalf is settled by various judgments of Supreme Court, some of which are being noted below: 31. In Union of India & others vs. Tantia Construction Pvt. Ltd., (2011) 5 SCC 697 an arbitration clause in an agreement between the contractor and railways to refer the disputes to arbitration was held not to oust the power of judicial review under Article 226 of the Constitution. Paragraphs 33 & 34 of the said judgment wherein the said issue has been dealt with are reproduced below: “33. Apart from the above, even on the question of maintainability of the writ petition on account of the arbitration clause included in the agreement between the parties, it is now well established that an alternative remedy is a not an absolute bar to the invocation of the writ jurisdiction of the High Court or the Supreme Court and that without exhausting such alternative remedy, a writ petition would not be maintainable. The various decisions cited by Mr Chakraborty would clearly indicate that the constitutional powers vested in the High Court or the Supreme Court cannot be fettered by any alternative remedy available to the authorities. Injustice, whenever and wherever it takes place, has to be struck down as an anathema to the rule of law and the provisions of the Constitution. 34. We endorse the view of the High Court that notwithstanding the provisions relating to the arbitration clause contained in the agreement, the High Court was fully within its competence to entertain and dispose of the writ petition filed on behalf of the respondent Company. 34. We endorse the view of the High Court that notwithstanding the provisions relating to the arbitration clause contained in the agreement, the High Court was fully within its competence to entertain and dispose of the writ petition filed on behalf of the respondent Company. We, therefore, see no reason to interfere with the views expressed by the High Court on the maintainability of the writ petition and also on its merits.” (emphasis supplied) 32. In Harbanslal Sahnia and another vs Indian Oil Corporation Ltd. and Ors , (2003) 2 SCC 107 the dispute was regarding validity of the termination of the dealership agreement of the appellant by the respondent-corporation. The agreement undoubtedly contained an arbitration clause and in view thereof, the High Court refused to examine challenge to the termination order. The view of the High Court was not approved and the Supreme Court laid down three contingencies where rule of exclusion of writ jurisdiction on ground of availability of alternative remedy would not normally apply. These are as under: - “7. So far as the view taken by the High Court that the remedy by way of recourse to arbitration clause was available to the appellants and therefore the writ petition filed by the appellants was liable to be dismissed, suffice it to observe that the rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case in spite of availability of the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies: (i) where the writ petition seeks enforcement of any of the Fundamental Rights; (ii) where there is failure of principles of natural justice or, (iii) where the orders or proceedings are wholly without jurisdiction or the vires of an Act and is challenged [See Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Ors., (1998) 8 SCC 11. The present case attracts applicability of first two contingencies. Moreover, as noted, the petitioners' dealership, which is their bread and butter came to be terminated for an irrelevant and non-existent cause. In such circumstances, we feel that the appellants should have been allowed relief by the High Court itself instead of driving them to the need of initiating arbitration proceedings.” (emphasis supplied) 33. Moreover, as noted, the petitioners' dealership, which is their bread and butter came to be terminated for an irrelevant and non-existent cause. In such circumstances, we feel that the appellants should have been allowed relief by the High Court itself instead of driving them to the need of initiating arbitration proceedings.” (emphasis supplied) 33. In Unitech Limited and Others vs. Telangana State Industrial Corporation and Others , (2021) 16 SCC 35 the Supreme Court again specifically considered the issue relating to ouster of the power of judicial review of the High Court under Article 226 of the Constitution on the ground of existence of an arbitration clause in the agreement between the parties. It has been observed that presence of an arbitration clause does not oust the jurisdiction under Article 226 in all cases, though it has to be considered from case to case basis as to whether recourse to a public law remedy should be permitted or not. The relevant observations in paragraphs 39.2, 39.3, 39.4, 39.5 and 39.6 of the said judgment are reproduced below: - “39.2. The decision in ABL International, cautions that the plenary power under Article 226 must be used with circumspection when other remedies have been provided by the contract. But as a statement of principle, the jurisdiction under Article 226 is not excluded in contractual matters. 39.3. Article 23.1 of the development agreement in the present case mandates the parties to resolve their disputes through an arbitration. However, the presence of an arbitration clause within a contract between a State instrumentality and a private party has not acted as an absolute bar to availing remedies under Article 226. 39.4. If the State instrumentality violates its constitutional mandate under e Article 14 to act fairly and reasonably, relief under the plenary powers of Article 226 of the Constitution would lie. This principle was recognised in ABL International. (ABL International case, SCC p. 572, para 28) "28. However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power (See Whirlpool Corpn. v. Registrar of Trade Marks) And this plenary right of the High Court to issue a 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 said jurisdiction." (emphasis supplied) 39.5. Therefore, while exercising its jurisdiction under Article 226, the Court is entitled to enquire into whether the action of the State or its instrumentalities is arbitrary or unfair and in consequence, in violation of Article 14. The jurisdiction under Article 226 is a valuable constitutional safeguard against an arbitrary exercise of State power or a misuse of authority. 39.6. In determining as to whether the jurisdiction should be exercised in a contractual dispute, the Court must, undoubtedly eschew, disputed questions of fact which would depend upon an evidentiary determination requiring a trial. But equally, it is well settled that the jurisdiction under Article 226 cannot be ousted only on the basis that the dispute pertains to the contractual arena. This is for the simple reason that the State and its instrumentalities are not exempt from the duty to act fairly merely because in their business dealings they have entered into the realm of contract. Similarly, the presence of an arbitration clause does ( s ic not ) oust the jurisdiction under Article 226 in all cases though, it still needs to be decided from case to case as to whether recourse to a public law remedy can justifiably be invoked.” (emphasis supplied) 34. Similarly, the presence of an arbitration clause does ( s ic not ) oust the jurisdiction under Article 226 in all cases though, it still needs to be decided from case to case as to whether recourse to a public law remedy can justifiably be invoked.” (emphasis supplied) 34. Thus, an arbitration clause in a contract between the State and an individual is not an absolute bar to invoke the writ jurisdiction under Article 226. Undoubtedly, the power is to be exercised within framework of the self-imposed restrictions. 35. Shri Sameer Sharma, learned Senior Counsel for the petitioner contended that the arbitration clause in the agreement is illegal and void as the arbitral tribunal is to comprise of employees/officers of the Corporation. It was further contended that the procedure for constituting the arbitral tribunal is also illegal as the employee has no say in its constitution. These issues are specific to the agreement in the instant case, but since only larger issue has been referred to the Larger Bench, therefore, we refrain from commenting on the same and leave it open to the petitioner to raise the same before learned Single Judge. 36. As a result of above discussions, the reference is answered as follows: - Question No. 1 : The first part of the question is answered by holding that a contract of service between the State and an individual can be challenged on the ground that the contract or any term of contract is unconscionable, unfair, unreasonable or against public policy and the mere fact that it was not questioned at the time of entry into contract, would not be a bar to challenge the same. The second part of Question No. 1 is answered by holding that notwithstanding an agreement for referring the dispute to arbitration, the writ jurisdiction can be invoked by an aggrieved party. Whether the writ should be entertained or not, would be a matter of judicial discretion to be exercised within the framework of self-imposed restrictions governing the exercise of such power by the writ court. Question No. 2 : It is answered by holding that the judgment of this court in Rajesh Bhardwaj on the aspect of maintainability of writ petition should be read as confined to the facts of that case. Question No. 2 : It is answered by holding that the judgment of this court in Rajesh Bhardwaj on the aspect of maintainability of writ petition should be read as confined to the facts of that case. The subsequent Division Bench in Prem Chand Gupta is in line with the recent developments in law relating to judicial review of administrative actions in service contract between State and its servants but its application would depend on fact of each case. 37. The reference is answered accordingly. 38. Let the record of the case be placed before the appropriate Bench with our aforesaid opinion.