Sri Murali Krishna Industry vs Food Corporation of India

P. Ramakrishnam Raju, J.—The petitioner is seeking for a writ of Mandamus by declaring the letter No.PROC.9(8)/91-CM/KRMR dated 21-1-1993 of the respondent- Corporation as illegal and invalid.

In response to an advertisement, the petitioner submitted its tender for Milling of paddy stock offered by the respondent at Jammikunta Depot (Open Storage). According to the tender notice, paddy will be delivered "as is where is" basis and the petitioner should undertake to deliver the resultant Parboiled rice. As per the terms of the agreement the petitioner agreed to make good any shortfall in the rice at 1 1/2 times of the economic cost of the concerned variety. There is a clause which provides that the outturn ratio of conversion of paddy into Parboiled rice should be 71 per cent. Although it is indicated in the notification that the paddy is of the year 1991-92 procurement, in fact it was of the year 1990-91. As the petitioner has given bank guarantee, the respondent was threatening to encash the bank guarantee since the petitioner has failed to convert and supply 71 per cent of rice out of the paddy supplied from the open Godown as the paddy was exposed to Sun and rain by keeping it in open Godown. The terms of the contract are one sided and the bargaining power is not evenly balanced. Hence the writ petition for a direction not to enforce the terms of the contract.

Sri S. Venkat Reddy, the learned Senior Advocate appearing for the petitioner submits that although the petitioner is given the impression that the paddy was of the year 1991-92 procurement, but in fact it was of the year 1990-91. Further as the paddy was kept in open Godown subject to damage due to Cyclonic storm during the year 1990, the yield by way of resultant rice was very much affected. In fact in Sarangapur Rice Mill owned by the F.C.I. the same type of paddy was supplied to the said Rice Mill and the outturn was only 58 to 62 per cent for every 100 Kgs. of paddy supplied. When that is the factual situation, the respondent cannot insist the petitioner to supply 71 per cent of resultant rice.

Sri V. Rajagopal Reddy, the learned Standing Counsel for the respondent- Corporation, on the other hand contended that the writ petition is not maintainable for enforcement of contractual rights and obligations arising out of the terms of the contract. He relies on a Division Bench judgment of this Court in National Thermal Power Corporation Ltd. Vs. Bhanu Construction Co. P. Ltd. and Others, wherein Justice Jeevan Reddy as he then was speaking for the Court observed as follows:-

"Merely because the Government, or an officer of the Government, or an agency or instrumentality of the State enters into a contract for execution of certain works with another person, it cannot be said to be acting in the public law field. Its rights and obligations are the same as those of any other person entering into a contract. The only limitation is that before entering into the contract, it must act consistent with the guarantee contained in Article 14."

In Kumari Shrilekha Vidyarthi and Others Vs. State of U.P. and Others, ., the Supreme Court observed thus:

"It is a different matter that the scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes. However, to the extent, challenge is made on the ground of violation of Article 14 by alleging that the impugned act is arbitrary, unfair or unreasonable, the fact that the dispute also falls within the domain of contractual obligations would not relieve the State of its obligations to comply with the basic requirements of Article 14."

In Union of India and others Vs. M/s. Graphic Industries Co. and others, , the Supreme Court observed thus:

"Even in contractual matters public authorities have to act fairly; and if they fail to do so approach under Article 226 would always be permissible because that would amount to violation of Article 14 of the Constitution."

In LIC of India and Another Vs. Consumer Education and Research center and Others, , the Supreme Court while reiterating the same view, observed that the distinction between public law remedy and private law field cannot be demarcated with precision and each case has to be decided on its own facts to find out the nature of the activity or scope of the controversy.

A recent judgment of a Division Bench of this Court in APSRTC v. V. Mallesh 1995 (2) AnW.R. 539 : 1995 (5) ALD 898, on a review of the case law held that if the dispute pertains to the realm of contract, writ does not lie. It observed thus:

"From the above, it is seen that while a dispute arising out of a contract entered into between the parties is not amenable to writ jurisdiction, the process of awarding a contract by the State or any of its instrumentalities can be reviewed to ascertain whether there is any infirmity in the decision making process."

Therefore, applying these principles as enunciated by the Supreme Court, it has to be seen whether there is any element of public interest in the contract in question or the rights and obligations of the Corporation are the same as that of any other person entering into a contract. In my view, no public interest is involved in the contract in question. It is purely of a private nature. Therefore, the writ petition is not the appropriate remedy for enforcing the contractual rights, or for settlement of disputes arising from the contract. Whether there is any misrepresentation on the part of the respondent-Corporation by disclosing that the stock of paddy relates to 1991-92 procurement, while in fact it relates to 1990-91 where the stock was exposed to Cyclonic storm during the year 1990, and therefore, it is impossible to recover 71 per cent of the resultant rice; whether similar paddy was entrusted to Sarangapur Rice Mill owned by Food Corporation of India which recovered only 58 to 62 per cent for every 100 Kgs., and whether the contract is discriminatory or impossible of performance are all matters to be decided after adducing evidence. Therefore, I am of the view that writ petition is not the appropriate remedy in the circumstances of the case.

The writ petition, therefore, fails and is accordingly dismissed. No costs.