Enforce Contractual Obligations Under Article 226: Liability Determined in US Dollars

The court held that the writ petition under Article 226 was maintainable to enforce contractual obligations of the State. It interpreted the insurance and export contracts, determining liability for non-payment in US dollars. The court found the respondent liable for non-payment risks and rejected claims of disputed facts requiring a civil suit. Emphasizing the application of Article 14 to state actions in contracts, it set aside the High Court's decision, ruling in favor of the appellants for compensation in US dollars. The appeal was allowed with costs.

---

---

Issues Involved:
1. Maintainability of the writ petition under Article 226 for enforcing contractual obligations.
2. Interpretation of the insurance contract and the export contract, particularly concerning the mode of payment.
3. Liability of the respondent to cover the risk of non-payment in US dollars.
4. Whether the writ petition involved disputed questions of fact that required a civil suit.
5. The applicability of Article 14 to the actions of the State or its instrumentality in contractual matters.

Issue-wise Detailed Analysis:

1. Maintainability of the writ petition under Article 226 for enforcing contractual obligations:
The court examined whether a writ petition under Article 226 of the Constitution is maintainable to enforce a contractual obligation of the State or its instrumentality. It was noted that this issue is settled by previous judicial pronouncements, such as K.N. Guruswamy Vs. The State of Mysore and others and The D.F.O, South Kheri & Ors. Vs. Ram Sanehi Singh, which held that if a State acts arbitrarily in a contractual matter, an aggrieved party can approach the court by way of writ under Article 226. The court reiterated that the power to issue prerogative writs under Article 226 is plenary and not limited by any other provisions of the Constitution.

2. Interpretation of the insurance contract and the export contract, particularly concerning the mode of payment:
The court analyzed the terms of the insurance contract and the export contract. The original Clause 6 of the export contract, which provided for payment by barter, was amended by an addendum to include payment in US dollars if barter was not possible. The court held that the amended Clause 6 clearly allowed for payment in US dollars if barter failed for any reason, and this interpretation did not require any external aid or oral evidence.

3. Liability of the respondent to cover the risk of non-payment in US dollars:
The court found that the insurance contract covered the risk of non-payment of consideration, whether by barter or cash. The first respondent's repudiation of the claim on the grounds that the appellants did not accept the goods offered by the buyer without consulting the respondent was found to be unsustainable. The court held that the first respondent was liable to cover the risk of non-payment in US dollars as per the amended Clause 6 of the export contract.

4. Whether the writ petition involved disputed questions of fact that required a civil suit:
The court noted that merely because some disputed questions of fact arise for consideration, it cannot be a ground to refuse to entertain a writ petition in all cases. The court cited previous judgments, such as Smt. Gunwant Kaur & Ors. vs. Municipal Committee, Bhatinda and Ors., which held that the High Court has jurisdiction to determine questions of fact even if they are in dispute. The court concluded that the facts of the case did not require oral evidence and could be decided based on the terms of the contracts.

5. The applicability of Article 14 to the actions of the State or its instrumentality in contractual matters:
The court held that the actions of the first respondent, being an instrumentality of the State, must comply with the requirements of Article 14, which mandates fairness, justice, and reasonableness. The court cited Kumari ShriLekha Vidyarthi & Ors. vs. State of U.P.& Ors., which held that the State cannot act arbitrarily in contractual matters and must adhere to the principles of Article 14. The court found that the first respondent's repudiation of the claim was arbitrary and contrary to the constitutional guarantee of non-arbitrariness.

Conclusion:
The court set aside the judgment of the Appellate Bench of the High Court and restored the judgment of the learned Single Judge, allowing the writ petition. The court held that the first respondent was liable to compensate the appellants for the loss suffered due to the non-payment of consideration in US dollars, as per the insurance contract. The appeal was allowed with costs.

---