Is a Writ Petition Maintainable in Contracts of Government/State?

Is a Writ Petition Maintainable in Contracts of Government/State? written by Garvit Daga student of NALSAR University of Law

INTRODUCTION

A writ petition is an order issued by a higher court to a lower court as a direction to perform a specified act or restrict them from doing an act. It is a specified direction against an order of the subordinate court. Other than this, a writ is issued when any fundamental rights of an individual are violated or infringed upon as a remedial measure, to reinforce the aforementioned rights. The Indian Constitution has granted the power to issue writes to the High Courts and Supreme Court under Articles 226 and 32 respectively. Based on the above purpose for which a writ may be issued, a question may arise – How can the court entertain a writ petition in a contractual matter where the rights of the parties essentially arise out of contract and are not fundamental rights?

FACTORS AND PRINCIPLES GOVERNING MAINTAINABILITY OF WRIT PETITION IN STATE CONTRACTUAL MATTERS

The principles governing the maintainability of writ applications in Government contracts have substantially developed over decades. The courts seem to have, with time, shifted from the idea of not allowing writ applications in contractual matters of state to identifying situations where it becomes expedient in the interests of justice to allow the petitioners to claim via writ petition. The Hon’ble Supreme Court, in the case of Smt. Gunwant Kaur and Ors. v. Municipal Committee, Bhatinda and Ors. , identified certain legal principles as to the maintainability of a writ petition – a. writ petition against a state or its instrumentality arising out of a contractual obligation are maintainable in appropriate cases only;
b. a mere dispute over questions of facts cannot be a ground of refusal to entertain a writ petition in all cases as a general rule;
c. writ petition involving a consequential relief of monetary claim is also maintainable. The court further observed that the power to issue writs is plenary in nature and not limited by any other constitutional provision. However, entertaining a writ petition is at the discretion of the court. Thus, it is clear that there’s no absolute bar in entertaining writ petitions on the state’s contractual obligations. The courts have time and again illustrated various circumstances where writ petitions against the state’s contractual obligations are maintainable.

Any Government contract has, broadly speaking, 4 stages. The first stage involves calling for tenders by publishing a notice inviting tenders. The authorities are, at this stage, focusing on the formulation of terms and conditions for inviting tenders as well as contractual terms, which would govern the contracting parties. The Supreme Court has categorically observed that courts can interfere with the conditions incorporated in a tender if they are in themselves arbitrary, discriminatory, mala fide, or biased (See Directorate of Education and Ors. v. Educomp Datamatics and Ors. ). The second stage is where the decisions regarding allotment or rejection of tender or cancellation of the entire process are taken. It is this stage where the court can question the decision making process for allotment through its power of judicial review where an element of public interest is involved. It is to be noted that the decision to award the contract cannot be adjudicated upon by court under judicial review; however, the decision-making process comes within the purview of judicial review. The aforesaid opinion has been observed in the cases of TATA Cellular v. Union of India and Raunaq International Ltd. v. IVR Construction Ltd. and Ors. The next stage involves the performance of the contract. Any breach during this stage would be governed by the terms of the contract; the mere fact that the state or its instrumentality is a contracting party doesn’t make a writ petition maintainable. The final stage is when the contractor is claiming his due after the contract has been performed. This stage may be classified into two:
a. Where the amount claimed is not disputed;
b. Where the amount claimed is disputed.

The Supreme Court had, in the case of Radhakrishan Agarwal v. the State of Bihar, enumerated three illustrative categories of cases where a writ petition may be allowed in state contractual matters:
“(i) where a petitioner makes a grievance of breach of promise, on the part of the State, on the ground that on the assurance or promise made by the State, he has acted to his prejudice and predicament, but the agreement is short of a contract within the meaning of Article 299 of the Constitution; (ii) where the contract, entered into between the person aggrieved and the State, is in the exercise of a statutory power under some Act or Rules framed thereunder and the petitioner, in the case of such a statutory contract, alleges a breach of obligation on the part of the State; and (iii) where the contract, entered into between the State and the person aggrieved, is not statutory, but purely contractual and the rights and liabilities of the parties are governed by the terms of the contract and the petitioner complains about the breach of such a contract by the State.”

In the context of the first category, it has been opined that such a case would attract Article 226 for enforcement of the doctrine of estoppel because the state or its instrumentalities are no less bound than private individuals in carrying out the obligations signed up for by them. This is because the party seeking to bind the state has altered its position to its own detriment or disadvantage, relying on the representations made by the state or its instrumentalities. With reference to the second category, it has been observed that the rights and obligations arising out of statutory contracts would essentially be statutory in nature; thus, the aggrieved party can seek the remedy of a writ for enforcement of such contractual obligations (of statutory nature). The contracts under the third category relate to cases of breach of pure and simple contracts; any writ u/a 226 cannot be issued in cases of mere demand for recovery of money because it is a private right, whilst writs are meant to protect public rights. Thus, no remedy under article 226 shall be available ordinarily unless any element of public interest or breach of public right is shown.

In cases where the claim made is undisputed, without any counter-claims or cross-claims, the maintainability of a writ petition is contingent upon the availability of an alternative efficacious remedy; however, this doesn’t mean that where an alternative remedy exists, a writ application is barred. Maintainability essentially remains a subject matter of exercise of discretion of the courts. It has been reiterated time and again that for invoking the writ jurisdiction under article 226, two vital conditions that need to be satisfied, namely are: a. the identity of the person, against whom the writ is sought, as a person or body, which is amenable to writ jurisdiction, and (ii) the nature of duty, which is sought to be enforced, is a public duty or has an element of public interest. Out of the above two, the second prerequisite can under no circumstances be ignored. However, in situations where the state or instrumentalities are not clearing the dues of the contractor mala fide, with ulterior motives or arbitrarily; or when the state discriminates while making the payment of the dues of contractors – such decisions or acts of the state of not paying cannot be wholly made out of the scope of article 226 because in such cases what the petitioner is essentially asking the writ court is to order the state to act in accordance with its constitutional obligations by adhering to the letter and spirit of Article 14 and 21. This opinion has been voiced by the court in Abdul Kasem Ali Ahmed vs. State of Assam and Ors. in the interests of justice. As a caution, it has to be noted that not every state action in its contractual matters can be subjected to a writ petition. It was further observed in Kumari Shrilekha Vidyarthi and Ors. v. State of UP and Ors that in case the state is unable to present before the court evidence for justifying its action as fair, just and reasonable, the burden of proving arbitrariness on the shoulders of the petitioner will be held to have been discharged; and, the scope for the court to question the state over its unreasonableness, howsoever limited in contractual matters, must remain open to ensure that the state doesn’t act arbitrarily and unreasonably. Therefore, it has now been settled that in a case where an instrumentality of the State acts unfairly, unreasonably, unjustly and contrary to the public interest and public good, in its contractual, constitutional or statutory obligations, it acts, in reality, contrary to the constitutional fundamental rights guaranteed under article 14 of the Constitution of India. (See, ABL International Ltd. v. Export Credit Guarantee Ltd ). For deciding over the maintainability of the writ petition, the court also has to ensure that only those petitions are allowed that raise a constitutional or legal issue in addition to mere demand for enforcement of contractual rights. ( See, Life Insurance Corporation of India v. Asha Goel )

Another factor that needs to be considered while determining the question over maintainability of the writ application is that whether non-interference by the writ court would force the petitioner to be driven into long-drawn civil litigation, causing him serious prejudice and injustice. In such cases, if the court considers it just and reasonable, interference by allowing the writ petition becomes not only desirable but also necessary. This factor was brought to light by the Supreme Court in Asha Goel (supra). In situations where the state or its instrumentality cancels the work order, it is necessary for the court to look into the reason constituting the basis of such cancellation, meaning thereby, whether the cancellation is based on breach of any terms of the contract or is de hors the said contract. Justice dictates that the writ petition should be allowed in the latter case only as the former is a purely contractual dispute. Moreover, it can be said that where an agreement executed in accordance with Article 299 of the Constitution is canceled on a ground which is not referable to any of the terms of the contract and is per se violative of Article 14 of the Constitution, this Court can exercise the jurisdiction under Article 226 of the Constitution. This has also been opined by the Hon’ble Gujrat High Court in Aakash Exploration Services Limited vs. Oil and Natural Gas Corporation Limited.
Therefore, it has now become evident that writ petitions in contractual matters of state or its instrumentality are maintainable depending on the circumstances in that case and if in such a case it is just, reasonable, fair, necessary, and desirable that the court interfere in the case and prevent the state from acting unjustly, unreasonably, arbitrarily and unconstitutionally.