1977 (3) TMI 159 - SC - Indian Laws

Summary

Issues Involved:
1. Legality of the revision of the rate of royalty during the subsistence of the lease.
2. Legality of the cancellation of the lease.
3. Applicability of Article 14 of the Constitution in contractual disputes involving the State.
4. Jurisdiction of High Courts under Article 226 for breach of contract claims.

Summary:

1. Legality of the Revision of the Rate of Royalty:
The petitioners contended that the revision of the rate of royalty payable for the lease to collect and exploit sal-seeds from the forest area was illegal during the subsistence of the lease. The relevant clause in the contract stated, "The rate of royalty will be revised every three years' cycle in consultation with the lessee and the decision will be binding on the lessee." The Court found that there was no restriction on the amount by which the royalty could be increased after a three-year cycle, and the lessee was only entitled to be consulted before a revision. Hence, the petitioners could not complain of unreasonable enhancement in the revised rate of royalty.

2. Legality of the Cancellation of the Lease:
The petitioners argued that the cancellation of the lease was illegal for various reasons, including mala fides on the part of the Conservator of Forests. The Court noted that under clause 4 of the lease, the lessee had to establish a factory within the State of Bihar for processing sal-seeds within five years from the date of the agreement, failing which the agreement was to terminate. The Court held that the appellants could only seek remedies through ordinary suits for damages or injunctions to restrain breaches of contract, provided they could show how the contracts were broken or were going to be broken.

3. Applicability of Article 14 of the Constitution:
The petitioners argued that the State, acting in its executive capacity, could not escape the obligations imposed by Part III of the Constitution, particularly Article 14, which ensures equality before the law. The Court held that once the State enters into the contractual sphere, the relations are governed by the legally valid contract, and no question of violation of Article 14 arises. The Court distinguished between cases involving discrimination at the threshold of entering into a contract and those involving alleged breaches of contract, stating that the latter do not attract the application of Article 14.

4. Jurisdiction of High Courts under Article 226:
The Court reaffirmed that breaches of contract by the State or its agents do not fall within the purview of Article 226 of the Constitution. The Patna High Court had correctly categorized the types of cases where breaches of obligation by the State could be set up, and the present cases fell into the third category, involving pure breaches of contract. The Court cited previous judgments to support the view that writ petitions are not an appropriate remedy for enforcing contractual obligations and that such disputes should be resolved through ordinary civil suits.

Conclusion:
The appeals were dismissed with costs, and the stay orders were discharged. The Court emphasized that the correct remedy for the appellants was through ordinary civil suits and not writ petitions under Article 226 of the Constitution.