2003 (12) TMI 584 - SC - Indian Laws

Whether a writ petition under Article 226 of the Constitution of India is maintainable to enforce a contractual obligation of the State or its instrumentality, by an aggrieved party? Whether the appellant should adhere only to receive consideration by barter of goods or it is also entitled to demand the consideration by cash in US ? Whether non-payment of such consideration is covered by the contract of insurance or not? Held that - Appeal allowed. There is no allegation that the contracts in question were obtained either by fraud or by misrepresentation the facts of this case do not and should not inhibit the High Court or this Court from granting the relief sought for by the petitioner.

Issues Involved:
1. Maintainability of the writ petition under Article 226 for enforcing contractual obligations.
2. Interpretation of the insurance contract and the export contract, particularly concerning the mode of payment.
3. Liability of the respondent to cover the risk of non-payment in US dollars.
4. Whether the writ petition involved disputed questions of fact that required a civil suit.
5. The applicability of Article 14 to the actions of the State or its instrumentality in contractual matters.

Issue-wise Detailed Analysis:

1. Maintainability of the writ petition under Article 226 for enforcing contractual obligations:
The court examined whether a writ petition under Article 226 of the Constitution is maintainable to enforce a contractual obligation of the State or its instrumentality. It was noted that this issue is settled by previous judicial pronouncements, such as K.N. Guruswamy Vs. The State of Mysore and others and The D.F.O, South Kheri & Ors. Vs. Ram Sanehi Singh, which held that if a State acts arbitrarily in a contractual matter, an aggrieved party can approach the court by way of writ under Article 226. The court reiterated that the power to issue prerogative writs under Article 226 is plenary and not limited by any other provisions of the Constitution.

2. Interpretation of the insurance contract and the export contract, particularly concerning the mode of payment:
The court analyzed the terms of the insurance contract and the export contract. The original Clause 6 of the export contract, which provided for payment by barter, was amended by an addendum to include payment in US dollars if barter was not possible. The court held that the amended Clause 6 clearly allowed for payment in US dollars if barter failed for any reason, and this interpretation did not require any external aid or oral evidence.

3. Liability of the respondent to cover the risk of non-payment in US dollars:
The court found that the insurance contract covered the risk of non-payment of consideration, whether by barter or cash. The first respondent's repudiation of the claim on the grounds that the appellants did not accept the goods offered by the buyer without consulting the respondent was found to be unsustainable. The court held that the first respondent was liable to cover the risk of non-payment in US dollars as per the amended Clause 6 of the export contract.

4. Whether the writ petition involved disputed questions of fact that required a civil suit:
The court noted that merely because some disputed questions of fact arise for consideration, it cannot be a ground to refuse to entertain a writ petition in all cases. The court cited previous judgments, such as Smt. Gunwant Kaur & Ors. vs. Municipal Committee, Bhatinda and Ors., which held that the High Court has jurisdiction to determine questions of fact even if they are in dispute. The court concluded that the facts of the case did not require oral evidence and could be decided based on the terms of the contracts.

5. The applicability of Article 14 to the actions of the State or its instrumentality in contractual matters:
The court held that the actions of the first respondent, being an instrumentality of the State, must comply with the requirements of Article 14, which mandates fairness, justice, and reasonableness. The court cited Kumari ShriLekha Vidyarthi & Ors. vs. State of U.P.& Ors., which held that the State cannot act arbitrarily in contractual matters and must adhere to the principles of Article 14. The court found that the first respondent's repudiation of the claim was arbitrary and contrary to the constitutional guarantee of non-arbitrariness.

Conclusion:
The court set aside the judgment of the Appellate Bench of the High Court and restored the judgment of the learned Single Judge, allowing the writ petition. The court held that the first respondent was liable to compensate the appellants for the loss suffered due to the non-payment of consideration in US dollars, as per the insurance contract. The appeal was allowed with costs.

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