2001 (12) TMI 889 - HC - Indian Laws

High Court Upholds Power of Writ Petitions in State Contract Disputes

State of Kerala and others Versus T.V. Anil

The Full Bench held that writ petitions under Article 226 are maintainable in contractual matters involving the State, particularly when the State's ... - Issues Involved:1. Maintainability of writ petitions under Article 226 for enforcement of contractual obligations.2. Interpretation of the terms and conditions of a contract in writ petitions.3. Public law element in State contracts.4. Exercise of power by High Courts under Article 226 in contractual matters.5. Payment of contractors' bills by the State.Issue-wise Detailed Analysis:1. Maintainability of Writ Petitions under Article 226 for Enforcement of Contractual Obligations:The judgment discusses the maintainability of writ petitions under Article 226 of the Constitution for enforcing contractual obligations. It references two prior decisions: Anirudhan v. State of Kerala and State of Kerala v. K.P.W.S.W.L.C. Co-operative Society Limited. The latter decision held that a writ of mandamus cannot be issued for enforcing non-statutory contractual obligations, suggesting that petitioners should approach civil courts. However, the Full Bench clarified that writ petitions could be maintainable if the State's action is attacked as unreasonable, unfair, or against public interest, irrespective of the contractual nature.2. Interpretation of the Terms and Conditions of a Contract in Writ Petitions:The judgment highlights that disputes relating to the interpretation of contract terms and conditions typically fall outside the purview of writ petitions under Article 226. The Division Bench in State appeal cases emphasized that such disputes should be resolved in civil courts unless the State's action involves a public law element or is arbitrary and unreasonable.3. Public Law Element in State Contracts:The judgment extensively discusses the public law element in State contracts, referencing decisions like Smt. Gunwant Kaur v. Municipal Committee, Bhatinda, and Kumari Shrilekha Vidyarthi v. State of U.P. It concludes that all State actions, including those in contractual matters, are subject to judicial review if they are unreasonable, unfair, or against public interest. The presence of a public law element makes the State's actions amenable to judicial scrutiny under Article 14 of the Constitution.4. Exercise of Power by High Courts under Article 226 in Contractual Matters:The judgment reiterates that High Courts have wide powers under Article 226 to issue writs for enforcement of fundamental rights and for any other purpose. It emphasizes that the High Court's jurisdiction is not limited by the nature of the dispute, whether contractual or otherwise. The Court can exercise its discretion to entertain writ petitions in contractual matters, especially when the State's actions are arbitrary or unjust.5. Payment of Contractors' Bills by the State:The judgment addresses the issue of payment of contractors' bills by the State. It notes that the State admitted its liability to pay the amounts covered by the bills. The Court held that when the State admits its liability but fails to act fairly and reasonably, it can be compelled to act according to the Constitutional principles of fairness and reasonableness. The Court also discussed the principle of 'first done first paid' for disbursing payments to contractors.Conclusion:The Full Bench concluded that writ petitions under Article 226 are maintainable in contractual matters involving the State, especially when the State's actions are arbitrary, unfair, or against public interest. The judgment emphasizes the High Court's wide powers to ensure justice and the public law element in State contracts. The cases were sent back to the respective Benches for final orders, with guidelines for the State to follow in the payment of contractors' bills.