Navigating Maintainability of Writ Petitions in Contractual Breaches
Authored by Harshit Chowdhary (4th-year) & Adarsh Kumar Mishra (3rd-year), Law Students at Xavier Law School, Bhubaneswar
The obligations arising out of a contract deal with a private domain of law are governed mainly by the Indian Contract Act, 1872. In the event of a breach of the contractual obligations arising out of a contract, one may either sue for recovery of damages with or without interest, compensation, or even a specific relief by taking recourse to the Specific Relief Act, 1963. Whereas writ remedies usually determine issues relating to the public domain of law. Further, it is a settled provision of law that, apart from the writ of Habeas Corpus, other writs such as Mandamus, Certiorari, Quo-Warranto, and Prohibition are enforceable only against the “State” as envisaged under Article 12. This blog navigates through the jurisprudence of maintainability of writ petitions in the event of a breach of contract entered into by private individuals with governmental instrumentalities.
The issue pertinent to the maintainability of Writ Petitions in cases of breach of Governmental Contracts or Contracts entered into with Governmental Instrumentalities had a dynamic flow; on a careful perusal of relevant Supreme Court Judgments, the different stances taken by the Court in the course of disposing of such petitions, a lucid position cannot be ascertained. However, the emergence of a uniform jurisprudential flow constituting the classical jurisprudence governing the above-mentioned matter can be traced back to the decision of the Hon’ble Supreme Court in the matter of K.N. Guruswamy vs. the State of Mysore, wherein the Court allowed a Writ Petition against a Government Instrumentality filed by a party, interested in a contract, aggrieved of unequal treatment in terms of opportunity. It was held that if the process of allotting tenders is not transparent and fair, then a Writ Petition filed against a Government Instrumentality remains maintainable.
In the matter of D.F.O., South Kheri vs. Ram Sanehi Singh, after placing reliance on the judgment propounded in the case of K.N. Guruswamy, the Hon’ble Supreme Court of India held that a Writ Petition challenging the arbitrary administrative actions of a public authority made in breach of the provisions contained in a contract is maintainable. Further, in the matter of Radhakrishna Agarwal vs. the State of Bihar, clearing the position as to the maintainability of Writ Petitions, the Hon’ble Supreme Court of India held that once a Government authority purely enters into a contractual realm, it is no longer burdened with the clutches of constitutional obligations. However, Writ Petitions are maintainable in the case of statutory contracts with Government Instrumentalities squarely covered under the ambit of Article 12 for enforcement of statutory contracts conferring statutory obligations and rights. It was also held in the dictum of Radhakrishna that, to attract the application of Article 14, discrimination should be alleged at the very threshold stage of entering into a contract.
Streamlining the flow, in the matter of D.F.O. vs. Bishwanath Tea Co. Ltd., the Hon’ble Supreme Court of India held that a Writ Petition cannot be maintained if the issue being raised purely pertains to a simple breach of contract, even if such breach has been made by a Government authority. In such cases, the only remedy available is the institution of a civil suit. Further, in the matter of Bareilly Development Authority vs. Ajai Pal Singh, it was clearly established by the Hon’ble Supreme Court of India that a Writ Petition is maintainable only in disputes arising out of statutory contracts. Also, in the matter of Mahabir Auto Shores vs. Indian Oil Corporation, the Hon’ble Supreme Court of India held that once a Government authority has entered into a private realm of contract, its actions cannot be examined on the touchstone of the constitutional provisions. Holding the position of law following the classical array of judgments propounded by the Court, in the matter of NHAI vs. Ganga Enterprises, the Hon’ble Supreme Court of India ruled that Writ Petitions for enforcement of obligations that are purely contractual in nature are not maintainable and cannot be agitated under Article 226.
Deviating From the Flow
From K.N. Guruswami to NHAI vs. Ganga Enterprises, a uniform stream of flow providing for the maintainability of Writ Petitions could be observed. This flow was abruptly disturbed by the judgment of the Hon’ble Supreme Court of India in the matter of ABL International Ltd. vs. Export Credit Guarantee Corporation of India Ltd., wherein the Court held that a party to a contract squarely covered within the ambit of Article 12 is burdened with an obligation to act fairly in an unarbitrary manner as mandated by Article 14 and that a Writ Petition filed against a state or any of its instrumentalities in respect of obligations arising out of a contract is maintainable. The decision of the Court in the matter of ABL International inverted the well-settled principles established by the Court and materially expanded the extent of the application of Article 14.
The Court curtailed the abovementioned expansion in the matter of Noble Resources vs. State of Orissa, wherein the Court drew a distinction as to the restrictive application of judicial review in cases of breach of contract in contrast to those alleged at the threshold of entry. Further, restoring balance in the matter of Joshi Technologies vs. Union of India, the Hon’ble Supreme Court held that, in cases purely connected to the private realm of contracts, the writ jurisdiction of the Court under Article 226 or Article 32 cannot be invoked unless a non-statutory contract has a public law issue attached to it. It was also held in the dictum of Joshi Technologies that if an issue pertaining to public law is raised even after a contract has been entered into, the actions of the state or its instrumentalities are vulnerable to being challenged in a Writ Petition.
With regards to what constitutes a public law issue, a writ remedy shall remain available to the party in case of breach of statutory contracts, as is evident from the ample judgments cited above and when the petitioner alleges violation of Article 14 within the contractual realm. Joshi Technologies, in a sense, upholds the jurisprudential flow that existed before the ABL International case. Instead of confining the applicability of Article 14 to contract initiation stages, Joshi Technologies extends its applicability across the entire contractual landscape. However, this consistency did not go a long way, and the jurisprudential flow guiding the dynamics of the position of law regarding the maintainability of Writ Petitions underwent a paradigm shift, arguably doing away with the public law issue prong.
In the matter of Popatrao Vyankatrao Patil vs. the State of Maharashtra, the appellant filed a Writ Petition under Article 226 seeking a refund of the amount submitted by him in the Government Treasury after the failure of the Government authorities in discharging their obligations. The petition filed was dismissed by the High Court, following which an appeal was filed before the Hon’ble Supreme Court. The Hon’ble Supreme Court of India held the act of the Government authorities arbitrary in violation of Article 14 and granted a refund to the appellant. Subsequently, in the matter of Unitech Ltd. vs. TSIIC, a refund of the sum paid in compliance with the award of the tender to develop 350 acres of land was sought by the petitioner. Though no questions as to the maintainability of the Writ Petition under Article 226 were raised, the Court upheld its maintainability and application of Article 14, placing reliance on ABL International, based on the rationale that the state and its instrumentalities ought to act fairly in an unarbitrary manner. It was also duly noted by the Hon’ble Court that the contract forming the fulcrum of the matter was unstamped and unregistered. Yet, the Court granted relief to Unitech Ltd., ordering TSIIC to make due deductions towards the statutory dues payable from the refund ordered by the court. In both of these cases, the petitioners sought a refund of money simpliciter in consequence of the contractual breach; although material breaches were made by the state instrumentalities in discharging their obligations, the breach did not tantamount to a public law issue and could have been dealt with by a civil court having jurisdiction.
In light of the recent judgments propounded by the Hon’ble Supreme Court of India, the question of the maintainability of Writ Petitions filed as a consequence of contractual breaches has taken on a new leaf. On perusal of the judgments cited in the preceding section, a more liberal approach of the Supreme Court in allowing Writ Petitions filed in consequence of contractual breaches can be inferred. From K.N. Guruswamy to NHAI vs. Ganga Enterprises, uniformity can be observed. However, the dynamics of the law have undergone a paradigm shift ever since the judgment of the Court in ABL International, which unequivocally expanded the application of Article 14. In the matter of Joshi Technologies, the Court emphasized the “public law issue” and also extended the application of Article 14 throughout the contractual landscape. Intriguingly, in the matter of Unitech Ltd., the Court upheld the maintainability of the Writ Petition filed for merely claiming the refund of the amount remitted to APIIC, materially departing from its own precedent laid down in the case of Suganmal vs. State of Madhya Pradesh, wherein the Court held that a Writ Petition solely for refund of money is not maintainable but, if such refund is being claimed as a consequential relief, the Writ Petition can be entertained. Pertinently, this decision of the Court made in Suganmal has also been reiterated in the matter of ABL International, which was followed by the Court in the matter of Unitech Ltd. In fact, in the case of Unitech Ltd., the Court even extended the applicability of Article 14 to unregistered and unstamped agreements to which a state or its instrumentality is a party, placing reliance on its decision made in the matter of Hindustan Steel Limited vs. M/s Dilip Construction Company.
Contemporarily, in light of the recent judgment propounded by the Court in the matter of Popatrao and Unitech Ltd., the Hon’ble Supreme Court of India has widened the applicability of Article 14 and maintainability of Writ Petitions in cases where the State or its Instrumentalities materially fail in performing their material obligation attributable to the subject matter of the Contract, besides instances involving breach of statutory contracts and non-statutory contracts (relating to a public law issue). Moreover, Writ Petitions directly filed for refund of money simpliciter have also been allowed by the Hon’ble Supreme Court of India in cases wherein the state or its instrumentalities have materially failed to discharge their obligations attributable to the subject matter of the contractual agreement, for example, failing to hand over the land in respect of which a contractual agreement was made. This stance of the Court has muddled the stressed jurisprudential thread by extending the maintainability of Writ Petitions in determining a pure breach of contract, departing from its own precedent laid down in the matter of D.F.O. vs. Bishwanath Tea Co. Ltd. These expansions are concerning insofar as they lay the foundation for the enforcement of contractual agreements not containing a public law issue.