Arbitrary termination of power purchase contract remains reviewable, but strict default-notice procedure and finality rules still apply.

A power purchase agreement entered into by a government company was held not to be a statutory contract, because bidding under the Electricity Act and reference to Section 63 guidelines did not itself import statutory terms. Even so, State termination of a non-statutory contract can remain open to judicial review under Article 226 where arbitrariness, unfairness, or Article 14 violation is alleged. The termination failed because the contractual sequence required a default notice, three months to cure, and only then a termination notice; a show-cause notice on conditions subsequent did not satisfy that requirement. Earlier litigation also barred re-agitation of the concluded issue on conditions subsequent.

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Issues: (i) Whether the power purchase agreement was a statutory contract; (ii) whether the State's action in terminating the contract was amenable to judicial review under Article 226 on the ground of arbitrariness and public law element; (iii) whether the termination notice complied with the contractual requirement of a default notice; (iv) whether the earlier round of litigation barred re-agitation of the non-fulfilment of conditions subsequent; (v) whether disputed questions of fact and public interest warranted interference with the High Court's judgment.

Issue (i): Whether the power purchase agreement was a statutory contract.

Analysis: The agreement was entered into by a government company and not by the State in exercise of executive power. Although the tariff was discovered through competitive bidding under the Electricity Act, the contract did not incorporate statutory terms and conditions governing the rights and obligations of the parties. Reference to bidding guidelines under Section 63 did not, by itself, convert the agreement into a statutory contract.

Conclusion: The agreement was not a statutory contract.

Issue (ii): Whether the State's action in terminating the contract was amenable to judicial review under Article 226 on the ground of arbitrariness and public law element.

Analysis: The law on contractual judicial review had evolved beyond a strict private law/public law divide. Even in a non-statutory contract, State action may be reviewed if it is arbitrary, unfair, unreasonable, or violative of Article 14. The existence of contractual rights does not exclude public law scrutiny where the action has an impact in the public domain and is shown to be palpably unreasonable.

Conclusion: Judicial review was maintainable in principle where arbitrariness was alleged, though the scope remained limited.

Issue (iii): Whether the termination notice complied with the contractual requirement of a default notice.

Analysis: Article 9.1 required issuance of a default notice, grant of three months to cure the default, and only thereafter a seven-day termination notice. The notice relied upon by the appellant was a show-cause notice on conditions subsequent and did not qualify as a default notice for seller's default under Article 9.4(a). The appellant also could not bypass the contractual sequence by relying on the expiry of time without first issuing the mandated default notice.

Conclusion: The termination was not in compliance with Article 9.1 and could not be sustained on that basis.

Issue (iv): Whether the earlier round of litigation barred re-agitation of the non-fulfilment of conditions subsequent.

Analysis: The earlier judgment set aside the first termination based on non-fulfilment of conditions subsequent and granted liberty only to proceed afresh in accordance with law. That liberty did not reopen the concluded issue of conditions subsequent; it left open only a lawful fresh action consistent with the contract and the earlier ruling.

Conclusion: The appellant was barred from reopening the issue of non-fulfilment of conditions subsequent.

Issue (v): Whether disputed questions of fact and public interest warranted interference with the High Court's judgment.

Analysis: Although disputed factual contentions existed regarding readiness for commissioning, the record contained documentary material including the CEIG report and inspection reports. The alleged deficiencies were not shown to make compliance with a default notice impossible. Public interest did not justify upholding an abrupt termination contrary to the contractual procedure, especially where the project involved renewable energy and substantial investment and the contract had been procured through competitive bidding.

Conclusion: The High Court's interference was justified and no ground was made out to upset it.

Final Conclusion: The contractual termination could not be sustained because it ignored the mandatory default-notice mechanism, attempted to reopen a concluded issue from the earlier round, and was not shown to be a lawful or fair exercise of the appellant's contractual power.

Ratio Decidendi: Even in a non-statutory contract, State action remains open to judicial review for arbitrariness under Article 14, but a termination must strictly follow the contractual procedure for default and cannot resurrect an issue already concluded in earlier litigation.

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