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Issues Involved:
1. Contractual Obligations and Breach 2. Issuance of Transit Permits 3. Refund of Deposits 4. Legal Right and Corresponding Duty 5. Jurisdiction of High Court under Article 226 6. Fairness and Arbitrariness of State Action Detailed Analysis: 1. Contractual Obligations and Breach: The appellant, a Government of Karnataka Undertaking, engaged in the sale of seized granite blocks under specific tender terms. The respondent participated in the tender and was required to pay the sale value plus taxes. A dispute arose regarding the balance payment and the delivery of granite blocks. The appellant claimed that the respondent failed to complete the payment within the stipulated period, leading to a breach of contract. The respondent countered that they were unable to lift the granite blocks due to the non-issuance of necessary permits by the appellant. 2. Issuance of Transit Permits: The contract required the issuance of transit permits for the transportation of granite blocks. A significant issue was the failure to issue these permits, which was compounded by a scandal involving fake permits. The Karnataka Legislative Assembly's Joint Committee objected to the issuance of permits, leading to a directive to refund the amounts paid by the purchasers. The appellant argued that it was not feasible to refund the sale price and requested the issuance of permits instead. 3. Refund of Deposits: The respondents sought a refund of the amounts paid due to the failure to obtain the necessary permits. The High Court directed the appellant to refund the amounts with interest, emphasizing that the appellant, as an agent, was bound by the instructions of the principal (State of Karnataka). The appellant's refusal to refund was based on financial constraints and the contention that the respondents failed to fulfill their contractual obligations. 4. Legal Right and Corresponding Duty: The High Court's jurisdiction under Article 226 was invoked to enforce the contractual obligations. The appellant contended that the respondents had no legal right to demand a refund and that the High Court could not enforce a contract qua contract. The respondents argued that the State's action in terminating the agency and directing a refund created a legal right for them. 5. Jurisdiction of High Court under Article 226: The High Court exercised its jurisdiction under Article 226, concluding that the appellant's actions were arbitrary and unfair. The court emphasized that while normally it would not enforce contractual terms, it could intervene when state actions violated Article 14 of the Constitution. The appellant's failure to issue permits and the subsequent refusal to refund the amounts paid were deemed arbitrary. 6. Fairness and Arbitrariness of State Action: The Supreme Court noted the appellant's dominant position and the unfairness in its actions. The appellant's suppression of facts and the State's failure to take a positive stand were criticized. The court held that the appellant's conduct was not based on legal premises but on its financial difficulties, and it was obligated to act upon the State's directive to refund the amounts. Conclusion: The Supreme Court dismissed the appeals, upholding the High Court's orders for refunds with interest. The court emphasized the importance of fairness and the obligation of the State and its agencies to act transparently and justly. The appeals were dismissed with costs, reinforcing the principle that state actions must adhere to constitutional mandates of fairness and non-arbitrariness.
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