2006 (9) TMI 543 - SC - Indian Laws

Whether a writ petition is maintainable in contractual matter? Whether OMC had the available stock of iron ore fines or the only ground to refuse supply thereof was the rise in international prices, are matters which could not have been fully and effectively adjudicated in the writ proceedings?

Issues Involved:
1. Maintainability of a writ petition in contractual matters.
2. Alleged breach of contract and non-supply of iron ore fines.
3. Arbitrary and unfair actions by a state-owned monopoly.
4. Disputed questions of fact and their resolution.
5. Adequacy of damages as a remedy for breach of contract.

Issue-wise Detailed Analysis:

1. Maintainability of a writ petition in contractual matters:
The core question of whether a writ petition is maintainable in contractual matters was addressed. The Supreme Court reiterated that a writ petition can be maintainable even in contractual disputes if the state or its instrumentalities act arbitrarily or unfairly, violating Article 14 of the Constitution of India. The Court emphasized that while judicial review in contractual matters is limited, it is permissible to prevent arbitrariness or favoritism. The Court cited several precedents, including ABL International Ltd. v. Export Credit Guarantee Corporation of India Ltd., to support this position.

2. Alleged breach of contract and non-supply of iron ore fines:
The parties had entered into a contract for the supply of iron ore fines, which was partially fulfilled. The appellant complained about the non-supply of the remaining quantity, attributing it to the respondent's arbitrary decision influenced by rising international prices. The respondent justified the non-supply by citing various operational constraints, including breakdowns, expired working permissions, and transportation issues. The Court noted that the contract's terms ended in September 2003, and the appellant participated in subsequent tenders without protest, indicating acceptance of the situation.

3. Arbitrary and unfair actions by a state-owned monopoly:
The appellant argued that the respondent, a state-owned monopoly, acted unfairly and unjustly by not honoring the contract due to increased international prices. The Court acknowledged that state actions must be fair and reasonable, even in contractual matters. However, it found that the respondent's actions were not solely based on price increases but also on legitimate operational constraints. The Court held that the respondent's conduct did not attract the wrath of Article 14 of the Constitution.

4. Disputed questions of fact and their resolution:
The case involved serious disputed questions of fact, such as the availability of iron ore fines and the reasons for non-supply. The Court emphasized that such disputes requiring detailed evidence and examination of witnesses are not suitable for resolution in writ proceedings under Article 226 of the Constitution. It suggested that these issues should be adjudicated in an appropriate forum where a detailed factual analysis is possible.

5. Adequacy of damages as a remedy for breach of contract:
The Court observed that specific performance of a contract is generally not enforced through a writ of mandamus, especially when damages can adequately remedy the breach. It noted that the appellant could seek damages for any loss suffered due to the respondent's breach of contract. The Court left it open for the appellant to pursue other legal remedies available in law.

Conclusion:
The Supreme Court dismissed the appeal, upholding the Orissa High Court's decision to refuse exercising its discretionary jurisdiction in the matter. The Court acknowledged that while the High Court's approach was not entirely correct, its ultimate decision was justified. The appellant was advised to seek recourse through other legal remedies. No order as to costs was made.

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