Modern Food Industries (India) Ltd. vs State of Uttar Pradesh and Others

Vikramajit Sen, J.—The question that arises for determination in this Writ Petition is whether the Petitioner is entitled to enforce a Guarantee extended by the State of Uttar Pradesh (Respondent No. 1) for payment of interest and repayment of the principal sum invested by the Petitioners with the U.P. Co-operative Spinning Mills Federation Ltd. (Respondent No. 2). Modern Food Industries (India) Ltd. Contributory Provident Fund Trust (MBI-CPF-Trust) [Petitioner No. 2] had invested a sum of Rs. 15,00,000/-from its collections/receipt of Provident Fund from its Workmen with Respondent No. 2. In December 1998 the MBI-CPF-Trust received interest amounting to Rs. 1,15,118/- for the period 21.6.1998 to 25.12.1998. A sum of Rs. 1,73,980/- was paid in July 2000 towards interest due on 25.12.99. Thereafter, no further payments either towards interest or towards the principal investment has been made by Respondent No. 2. It is conceded by learned counsel for Respondent No. 2 that its debts are twice as much as its assets. It has not been controverted that a Court Receiver of Respondent No. 2 has been appointed by the Bombay High Court for recovery of a sum of Rs. 5.89 crores in favour of a third party. Receipt of a legal notice dated 10.12.2003 u/s 80 of the CPC has been admitted. Opportunities for filing Counter Affidavits were granted on 11.2.2005 and 26.10.2005, but they were not availed of. Consequently, the right to file Counter Affidavit was closed on 3.10.2005. Even thereafter the matter was adjourned on joint request on 26.10.2005. In the absence of any pleadings by the Respondent the facts asseverated in the Writ Petition must be deemed to be correct.

Rule.

Learned counsel for the Respondent have raised a Preliminary Objection with regard to the maintainability of the Writ Petition. It stands uncontroverted that Respondent No. 1 had extended its sovereign guarantee to the Bonds issued in favour of investors, such as the Petitioners, issued by Respondent No. 2. Over thirty years ago the Hon''ble Supreme Court had clarified in The Gujarat State Financial Corporation Vs. Lotus Hotels Pvt. Ltd., that it was too late in the day to contend that the ''''State can commit breach of a solemn undertaking on which other side has acted and then contend that the party suffering by the breach of contract may sue for damages but cannot compel specific performance of the contract''''. The Apex Court applied the principle of promissory estoppel for enforcement of such contractual undertakings. Thereafter, similar views have been expressed in Kumari Shrilekha Vidyarthi and Others Vs. State of U.P. and Others, by a Bench comprising J.S. Verma, J. (as the learned Chief Justice then was) and R.M. Sahai, J.

It was opined that ''''the primary source of the public law proceedings stems from the prerogative writs and the courts have, therefore, to evolve ''new tools'' to give relief in public law by moulding it according to the situation with a view to preserve and protect the Rule of Law''''.

In ABL International Ltd. and Another Vs. Export Credit Guarantee Corporation of India Ltd. and Others, the following principles were culled out and explained :

From the above discussion of ours, following legal principles emerge as to the maintainability of a writ petition:-

(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable.

(b) Merely because some disputed questions of facts arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.

Contemporaneously, the Bench presided by Sabyasachi Mukharji (as the learned Chief Justice then was) and S. Ranganathan, J. held in Salonah Tea Co. Ltd. and Others Vs. Superintendent of Taxes, Nowgong and Others, that a Writ Court was competent to order a refund of tax deposited under a mistaken understanding of the law. In Smt. Nilabati Behera alieas Lalita Behera Vs. State of Orissa and others, he Apex Court did not find any fetters in granting relief to heirs of a victim of custodial death on the foundation of an infraction of fundamental rights guaranteed under Article 21 of the Constitution of India and observed as follows:

''''Adverting to the grant of relief to the heirs of a victim of custodial death for the infraction or invasion of his rights guaranteed under Article 21 of the Constitution of India, it is not always enough to relegate him to the ordinary remedy of a civil suit to claim damages for the tortuous act of the State as that remedy in private law indeed is available to the aggrieved party. The citizen complaining of the infringement of the indefeasible right under Article 21 of the Constitution cannot be told that for the established violation of the fundamental right of life, he cannot get any relief under the public law by the Courts exercising writ jurisdiction. The primary source of the public law proceedings stems from the prerogative writs and the Courts have, therefore, to evolve ''new tools'' to give relief in public law by moulding it according to the situation with a view to preserve and protect the Rule of Law. While concluding his first Hamlyn Lecture in 1949 under the tile ''Freedom under the law'' Lord Denning in his own style warned:

''''No one can suppose that the executive will never be guilty of the sins that are common to all of us. You may be sure that they will sometimes do things which they ought not to do: and will not do things that they ought to do. But if and when wrongs are thereby suffered by any of us what is the remedy? Our procedure for securing our personal freedom is efficient, our procedure for preventing the abuse of power if not. Just as the pick and shovel is no longer suitable for the winning of coal, so also the procedure of mandamus, certiorari, and actions on the case are not suitable for the winning of freedom in the new age. They must be replaced by new and up-do-date machinery, by declarations, injunctions and actions for negligence. This is not the task of Parliament, the Court must do this. Of all the great tasks that lie ahead this is the greatest. Properly exercised the new powers of the executive lead to the welfares state; but abused they lead to a totalitarian state. None such must ever be allowed in this country''''.

(c) A writ petition involving a consequential relief of monetary claim is also maintainable.

However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the Court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The court has imposed upon itself certain restrictions in the exercise of this power [See Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and Others, And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the court thinks it necessary to exercise the said jurisdiction.

In State of Jammu and Kashmir Vs. Ghulam Mohd. Dar and Another, , after noting that writs in the nature of mandamus would not ordinarily issue for enforcement of a contract, it has been observed that a writ can issue when questions of public law character arise for consideration. The preliminary objection is wholly without substance and is rejected. The factum of the receipt of Rs. 15,00,000/- is not in dispute. The sovereign guarantee extended by the State of Uttar Pradesh stands admitted. It is not sanguine to submit that had this sovereign guarantee not been extended the Provident Funds of the Workmen would not have been invested by the Trustees with Respondent No. 2. Both the Respondents are jointly and severally liable for the repayment of the principal amount together with interest thereon at the rate of 14.90 per cent per annum. There is little likelihood of this amount being liquidated by the principal debtor, namely, Respondent No. 2 and, therefore, it would be appropriate to order recovery from the Guarantor of Respondent No. 1. I am galvanized and propelled to exercise jurisdiction vested in this Court under Article 226 of the Constitution of India keeping in perspective the fact that the amounts invested with Respondent No. 2, under sovereign guarantee of Respondent No. 1, constitute the Provident Funds of the Workmen. The Petitioners are entitled to receive the principal sum of Rs. 15,00,000/- together with interest thereon at the rate of 14.90 per cent per annum from the date of investment. The amounts already paid, that is, Rs. 1,15,118/- and Rs. 1,73,980/-aggregating Rs. 2,89,098/- shall be deducted therefrom. These amounts shall be paid by Respondent No. 1 to the Petitioners within sixty days from today. Respondent No. 1 shall be fully empowered to make recoveries from Respondent No. 2 for the amounts paid by it to the Petitioners. The Petition is allowed with costs quantified at Rs. 15,000/-.