The Supreme Court of India today, set aside a Division bench Judgment of Kerala High Court, reiterating the legal position that a writ court should ordinarily not entertain a writ petition, if there is a breach of Contract involving disputed questions of fact. The Apex Court, criticising the judgment by Kerala High Court observed “in the case at hand, the High Court has appointed a Commission to collect the evidence, accepted the same without calling for objections from the respondent and quashed the order of termination of contract. The procedure adopted by the High Court, if we permit ourselves to say so, is quite unknown to exercise of powers under Article 226 in a contractual matter.” Division bench comprising of Justices Dipak Misra and Prafulla C. Pant said that the Appellate Bench of Kerala High Court should have applied more restraint and proceeded in accordance with law.
In this case, the PWD entrusted a contractor with a work to be completed within 12 months. Despite issue of several notices and instructions, the contractor failed to complete the work even during the extended period. Finally the PWD terminated the contract. Termination order was challenged before Kerala High Court. The Single bench refused to interfere in the matter. The Appellate bench appointed an Advocate commission and on the basis of the report submitted by them, it held that the order of termination was founded on erroneous facts inasmuch as the competent authority had opined that more than 50% of the work remained to be done. The Division Bench opining that as there was a factual defect, the order of termination of contract was liable to be quashed and accordingly axed the same.
The State of Kerala, through a Special Leave Petition approached the Supreme Court. The issue to be decided was “whether the Appellate Bench in intra-court appeal arising from a petition under Article 226 of the Constitution, should have carried out the exercise that it has done and eventually quashed the order terminating the contract by the competent authority of a Department on the ground that it was passed on erroneous 8 Page 9 facts, for the respondent contractor, as per the Commission’s report, had done higher percentage of work”?
The Judgment refers to State of Bihar v. Jain Plastics and Chemicals Ltd,Gunwant Kaur v. Municipal Committee, Bhatinda,National Highways Authority of India v. Ganga Enterprises and ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd to highlight under what circumstances in respect of contractual claim or challenge to violation of contract can be entertained by a writ court. Opining that the court should not enter into realm of disputed facts, the court observed “we really fail to fathom how a writ jurisdiction can be extended to cause a roving enquiry through a Commission and rely on the facts collected without granting opportunity to the State to file objections to the same and in the ultimate eventuate, cancel the order of termination of contract. What precisely was the quantum of work done and whether there had been a breach by the owner or the contractor, are required to be gone into by the appropriate legal forum”.
The Apex Court also held that appointment of commissions and enquiries in a writ petition related to contractual breach involving disputed question of facts “is impermissible and by no stretch of imagination subserves any public interest.” It found it surprising that the “High Court has been entertaining series of writ petitions at the instance of the respondent, which is nothing but abuse of the process of extraordinary jurisdiction of the High Court.”
Read the Judgment here.