Scope Of Judicial Review Of State Action In A Matter Arising From A Non-Statutory Contract: Supreme Court Explains

In a judgment delivered on Wednesday (16 Nov 2022), the Supreme Court explained the scope of judicial review of action by the State in a matter arising from a non- statutory contract.The mere fact that relief is sought under a contract which is not statutory, will not entitle the State in a case by itself to ward-off scrutiny of its action or inaction under the contract, if the complaining party is able to establish that the action/ inaction is, per se, arbitrary, the bench of Justices KM Joseph and Hrishikesh Roy observed.The bench observed thus while dismissing an appeal filed against the Madhya Pradesh High Court judgment which quashed the order passed by the MP Power Management Company Limited (a wholly owned company of the Government of Madhya Pradesh) , terminating the Power Purchase Agreement (PPA), which was entered into by it with Sky Power Southeast Solar India Private Limited. In appeal, the Apex Court found that the contract in question, i.e., the PPA, is not a statutory contract. It added that even if it is a non-statutory contract, there is no absolute bar in dealing with a cause of action based on acts or omission by the State or its instrumentalities even during the course of the working of a contract. While upholding the High Court judgment, the Apex Court bench, referring to various earlier judgments, summarized the principles regarding the scope of judicial review in contractual matters:It is, undoubtedly, true that the writ jurisdiction is a public law remedy. A matter, which lies entirely within a private realm of affairs of public body, may not lend itself for being dealt with under the writ jurisdiction of the Court.The principle laid down in Bareilly Development Authority (supra) that in the case of a non - statutory contract the rights are governed only by the terms of the contract and the decisions, which are purported to be followed, including Radhakrishna Agarwal (supra), may not continue to hold good, in the light of what has been laid down in ABL (supra) and as followed in the recent judgment in Sudhir Kumar Singh (supra). The mere fact that relief is sought under a contract which is not statutory, will not entitle the respondent-State in a case by itself to ward-off scrutiny of its action or inaction under the contract, if the complaining party is able to establish that the action/ inaction is, per se, arbitrary. An action will lie, undoubtedly, when the State purports to award any largesse and, undoubtedly, this relates to the stage prior to the contract being entered into [See R.D. Shetty (supra)]. This scrutiny, no doubt, would be undertaken within the nature of the judicial review, which has been declared in the decision in Tata Cellular vs. Union of India. After the contract is entered into, there can be a variety of circumstances, which may provide a cause of action to a party to the contract with the State, to seek relief by filing a Writ Petition. Without intending to be exhaustive, it may include the relief of seeking payment of amounts due to the aggrieved party from the State. The State can, indeed, be called upon to honour its obligations of making payment, unless it be that there is a serious and genuine dispute raised relating to the liability of the State to make the payment. Such dispute, ordinarily, would include the contention that the aggrieved party has not fulfilled its obligations and the Court finds that such a contention by the State is not a mere ruse or a pretence. The existence of an alternate remedy, is, undoubtedly, a matter to be borne in mind in declining relief in a Writ Petition in a contractual matter. Again, the question as to whether the Writ Petitioner must be told off the gates, would depend upon the nature of the claim and relief sought by the petitioner, the questions, which would have to be decided, and, most importantly, whether there are disputed questions of fact, resolution of which is necessary, as an indispensable prelude to the grant of the relief sought. Undoubtedly, while there is no prohibition, in the Writ Court even deciding disputed questions of fact, particularly when the dispute surrounds demystifying of documents only, the Court may relegate the party to the remedy by way of a civil suit. The existence of a provision for arbitration, which is a forum intended to quicken the pace of dispute resolution, is viewed as a near bar to the entertainment of a Writ Petition (See in this regard, the view of this Court even in ABL (supra) explaining how it distinguished the decision of this Court in State of U.P. and others v. Bridge & Roof Co., by its observations in paragraph-14 in ABL (supra)]. The need to deal with disputed questions of fact, cannot be made a smokescreen to guillotine a genuine claim raised in a Writ Petition, when actually the resolution of a disputed question of fact is unnecessary to grant relief to a writ applicant.The reach of Article 14 enables a Writ Court to deal with arbitrary State action even ...

Scope Of Judicial Review Of State Action In A Matter Arising From A Non-Statutory Contract: Supreme Court Explains

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Scope Of Judicial Review Of State Action In A Matter Arising From A Non-Statutory Contract: Supreme Court Explains

Ashok KM

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Ashok KM

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