R.K. Koteeswaran, Proprietor, Padmavathy Constructions vs General Manager, Southern Railway and Others

K.A. Swami, C.J.—This appeal is preferred against the order dated 20th November, 1996 passed by the learned single Judge dismissing

Writ Petition No. 16980 of 1996 in which the petitioner sought for quashing the communication dated 12.7.1996, bearing No. J/W- 148/2382/I

issued by the Divisional Railway Manager (Works) Palakkad. The said communication reads thus:-

The work PGD/W Sec. Deen Screening and making up deficiency of ballast from Km. 560/6 to 564/1 on D/L including making up deficiency in

points and classings @ PLL LDY & OTP was entrusted to the above firm (Contractors) as per Agt.No. J/505 of 28.12.1994. Since they have

failed to fulfil the contractual obligation and to complete the work, the Agreement has been terminated at his ""Risk and cost"" as per Clause 62 of

G.C.C.

Pending assessment of the extra cost that is likely to be incurred by the Railway in getting the balance work executed through agency you are

requested to withhold any payment due to the said firm (Contractors) until further advice from this office.

A NIL reply may please be sent if no contract exists with the above firm/contractor.

The learned single Judge has taken the view that as the matter relates to a contract, it is open to the petitioner/appellant to invoke the jurisdiction

of a Civil Court, and Jurisdiction under Article 226 of the Constitution is not exercisable. However, learned counsel places reliance on a judgment

of one of us siting singly, interpreting the very same Clause 61(b) of the general conditions of the contract. The learned single Judge has taken the

view that the very relief sought for itself cannot be entertained in a petition under Article 226 of the Constitution as such the decision in C.

Arumugam v. Union of India and Anr., W.P. No. 7284 of 1988 dated 5.7.1991 will not, apply to the case on hand.

On going through the judgment in C. Arumugam v. Union of India and Ors., W.P. No. 7284 of 1988 dated 5.7.1991 we find that the question

as to the entertaining of the petition pertaining to commercial contract under Article 226 of the Constitution had not been raised before the learned

single Judge and the matter had been argued on merits. Therefore, the question which we have to consider in this appeal, had not been considered

therein. Of-course, the interpretation placed on Clause 61(B) of the General conditions of Contract in W.P.No. 7284 of 1988, with which we also

agree, a Civil Court will have to follow it, if the petitioner approaches the Civil Court.

No doubt, the learned counsel places reliance on a judgment of the Supreme Court in Kumari Shrilekha Vidyarthi and Others Vs. State of U.P.

and Others, , it has been observed thus:-

Even assuming that it is necessary to import the concept of presence of some public element in a State action to attract Article 14 and permit

judicial review, we have no hesitation in saying that the intimate impact of all actions of the State or a public body being undoubtedly on public

interest, the requisite public element for this purpose is present also in contractual matters. We, therefore, find it difficult and unrealistic to exclude

the State actions in contractual matters, after the contract has been made, from the purview of judicial review to test its validity on the anvil of Act,

14.

In our view, being the State activity in contractual matters also within the purview of judicial review is inevitable and is a logic corollary to the

stage already reached in the decisions of this Court so far. Having fortunately reached this point, we should not now turn back or take a turn in a

different direction or merely stop there. In our opinion two recent decisions in Dwarkadas Marfatia and Sons Vs. Board of Trustees of the Port of

Bombay, and Mahabir Auto Stores and others Vs. Indian Oil Corporation and others, also lead in the same direction without saying so in clear

terms. This appears to be also the trend of the recent English decisions. It is in consonance with our commitment to openness which implies

scrutiny of every State action to provide an effective check against arbitrariness and abuse of power. We would much rather be wrong in saying so

rather than be wrong in not saying so. Non-arbitrariness, being a necessary concomitant of the rule of law, it is imperative that all actions of every

public functionary, in whatever sphere, must be guided by reason and not humor, whim, caprice or personal predilections of the persons entrusted

with the task on behalf of the State and exercise of all power must be for public good instead of being an abuse of the power.

We may point out here that Kumari Shrilekha Vidyarthi and Others Vs. State of U.P. and Others, was a case in which cancellation or

termination of the appointment of the Government Pleaders embolic was questioned. It was held by the Supreme Court that there did involve a

public element and therefore, the Government''s exercise of executive power, even if it may involve a contract, will attract Article 14 of the

Constitution. Therefore, we find it difficult to apply the ratio in that decision to commercial contracts. If in commercial contract matters in between

the private party and the State or institutions coming within the definition of the State as per Article 12 of the Constitution, the said ratio is applied

then it would not be necessary to have any Civil Court also. Breacher otherwise of a commercial contract depends upon performance or otherwise

of several conditions of the contract and the facts involved therein and determination of the liability involving money claim, require evidence oral

and/or documentary as the case may be. The parties will be entitled to damages also. Therefore, in the nature of things, such claims are to be

adjudicated after trial by the competent civil Court or arbitration if the contract contains an arbitration clause. Therefore, we are of the view that the

learned single Judge is right in declining to entertain the prayer holding that the proper remedy of the petitioner would be to approach the civil

Court or arbitration as the case may be.

We may also point out here that if the relief sought for by the petitioner is to be allowed it would amount to directing the respondents to pay the

amount which has to be determined after adjudicating the claim which involves evidence. We may also point out that if the clauses in the contract

provide for arbitration, it would be open to the parties to invoke that clause and have that matter adjudicated by an arbitrator. Therefore, looked

from any angle, we do not find any justification to entertain the Writ appeal.

Therefore, the writ appeal is rejected. No costs.

C.M.P. No. 17151 of 1996 is dismissed.