TaxTMI 
TaxTMI 
2010 (7) TMI 1170
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....nancial institutions like the appellant- Bank. Since the very inception of the respondent- Company, it has been banking with the appellant-Bank and availing various credit facilities like Term Loan, Working Capital Demand Loan, Cash Credit and Letter of Credit facility. On 16.10.2006, the respondent-Company wrote a letter to the appellant-Bank requesting it to review and enhance its credit facilities. On 15.12.2006, the appellant-Bank intimated the respondent-Company of its decision of review and enhanced credit facilities of the Company's account whereby the Company was to enjoy two Term Loans being Term Loan I for Rs. 360 lacs being Account No. 1103590030, Term Loan II for Rs. 215 lacs being Account No. 1103590041, Cash Credit for Rs. 300 lacs being Account No. 1103589988, Working Capital Demand Loan for Rs. 1200 lacs being Account No. 3001640109 and a Letter of Credit in favour of the West Bengal State Electricity Board for Rs. 56 lacs. b) Due to various irregularities in the account of the respondent-Company, the appellant-Bank by various letters between 15.09.2008 to 24.04.2009, advised the respondent-Company to shift its loan account to some other Bank. On 12.01.....
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....eal by way of special leave. 4. Heard Mr. Mukul Rohtagi, learned senior counsel for the appellant-Bank and Mr. C.A. Sundaram, learned senior counsel for the respondent-Company. 5. Mr. Mukul Rohtagi, learned senior counsel for the appellant-Bank, after taking us through the entire materials, at the foremost, submitted that the direction of the learned single Judge affirmed by the Division Bench for return of the title deeds deposited by the respondent- Company as a security cannot be a subject-matter of Article 226 of the Constitution of India. He further submitted that right to retain a mortgage deed is a civil dispute and proper forum is Debts Recovery Tribunal (in short "DRT") or civil court. He further submitted that if the writ of mandamus issued by the High Court is maintained, the right of the nationalized Bank which is holding public money would affect its right before the DRT. On the other hand, Mr. C.A. Sundaram, learned senior counsel for the respondent-Company, by drawing our attention to the relevant terms of the contract settlement of entire money due to the appellant-Bank by an arrangement made through another nationalized Bank, submitted that the writ petition ....
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.... and the respondent-Company is having a connection with them. It is unnecessary to find out the truth or otherwise in these proceedings. However, it is not in dispute that in respect of their dues, the respondent- Company made an arrangement with the State Bank of India and deposited a cheque of Rs. 15 Crores from the State Bank of India. In fact, the receipt of an amount of Rs. 15 Crores from the State Bank of India on and behalf of the respondent-Company has not been disputed. The letter dated 12.05.2009, addressed to the appellant-Bank, make it clear that they received a cheque of Rs. 15 Crores from the State Bank of India, Chowringhee Road Branch and the Company has also reminded the appellant-Bank to return the security documents. The said letter reads as under: Devi Ispat Ltd. 85, Netaji Subhas Road, Ist Floor, Kolkata - 700 0001 Dated: 12th May, 2009 The Zonal Manager Central Bank of India Kolkata Dear Sir, Ref: Our Account at Barabazar Branch, Kolkata. ....
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....Ltd. (1996) 6 SCC 22 this Court, in para 16, held thus: 16. Firstly, the contract between the parties is a contract in the realm of private law. It is not a statutory contract. It is governed by the provisions of the Contract Act or, maybe, also by certain provisions of the Sale of Goods Act. Any dispute relating to interpretation of the terms and conditions of such a contract cannot be agitated, and could not have been agitated, in a writ petition. That is a matter either for arbitration as provided by the contract or for the civil court, as the case may be. Whether any amount is due to the respondent from the appellant-Government under the contract and, if so, how much and the further question whether retention or refusal to pay any amount by the Government is justified, or not, are all matters which cannot be agitated in or adjudicated upon in a writ petition. The prayer in the writ petition, viz., to restrain the Government from deducting a particular amount from the writ petitioner's bill(s) was not a prayer which could be granted by the High Court under Article 226. After saying so and in the light of the various terms of the contract, the Court further ....
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....e private parties, have power to contract or deal with property. Such activities may not raise any issue of public law. In the present case, it has not been shown how the contract is statutory. The contract between the parties is in the realm of private law. It is not a statutory contract. The disputes relating to interpretation of the terms and conditions of such a contract could not have been agitated in a petition under Article 226 of the Constitution of India. That is a matter for adjudication by a civil court or in arbitration if provided for in the contract. Whether any amount is due and if so, how much and refusal of the appellant to pay it is justified or not, are not the matters which could have been agitated and decided in a writ petition. The contractor should have relegated to other remedies. 11. We have gone through the factual details in both the decisions. It is not in dispute that a specific mandamus was sought for in both the cases for implementation of a clause in a contract which was rightly negatived under Article 226. It is settled law that the disputes relating to interpretation of terms and conditions of a contract could not be examined/challenged or agita....
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....ere to the contract of insurance between it and the appellant, the appellant filed a writ petition before a learned Single Judge of the Calcutta High Court, inter alia, praying for quashing of the letters of repudiation issued by the first respondent. It also consequentially prayed for a direction to the first respondent to make payment of the dues to it under the contract of insurance. The learned Single Judge, after hearing the parties, came to the conclusion that though the dispute between the parties arose out of a contract, the first respondent being a 'State' for the purpose of Article 12, was bound by the terms of the contract, therefore, for such non-performance, a writ was maintainable and after considering the arguments of the parties in regard to the liability under the contract of insurance, allowed the writ petition and issued the writ and directions as prayed for by the appellants in the writ petition. In an appeal filed by the first respondent before the Appellate Bench of the same High Court, the Division Bench reversed the findings of the learned Single Judge and held that the claim of the appellant involving disputed questions of fact cannot be adjudicated....
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....this Court in the said case, though a writ was not issued on the facts of that case, this Court has held that on a given set of facts if a State acts in an arbitrary manner even in a matter of contract, an aggrieved party can approach the court by way of writ under Article 226 of the Constitution and the court depending on facts of the said case is empowered to grant the relief. This judgment in K.N. Guruswamy v. State of Mysore was followed subsequently by this Court in the case of D.F.O. v. Ram Sanehi Singh wherein this Court held: (SCC p. 865, para 4) By that order he has deprived the respondent of a valuable right. We are unable to hold that merely because the source of the right which the respondent claims was initially in a contract, for obtaining relief against any arbitrary and unlawful action on the part of a public authority he must resort to a suit and not to a petition by way of a writ. In view of the judgment of this Court in K.N. Guruswamy case there can be no doubt that the petition was maintainable, even if the right to relief arose out of an alleged breach of contract, where the action challenged was of a public authority invested with statutory power. ....
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....gement, by a resolution of the company, like any other shareholder. (emphasis supplied) 13. We do not think this Court in the above case has, in any manner, departed from the view expressed in the earlier judgments in the case cited hereinabove. This Court in the case of LIC of India proceeded on the facts of that case and held that a relief by way of a writ petition may not ordinarily be an appropriate remedy. This judgment does not lay down that as a rule in matters of contract the court's jurisdiction under Article 226 of the Constitution is ousted. On the contrary, the use of the words "court may not ordinarily examine it unless the action has some public law character attached to it" itself indicates that in a given case, on the existence of the required factual matrix a remedy under Article 226 of the Constitution will be available. The learned Counsel then relied on another judgment of this Court in the case of State of U.P. v. Bridge & Roof Co. (India) Ltd. wherein this Court held: (SCC p. 31, para 21) Further, the contract in question contains a clause providing inter alia for settlement of disputes by reference to arbitration. The arbitrators can ....
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....y the appellants would justify breach of contract by the respondent would depend upon facts and evidence and is not required to be decided or dealt with in a writ petition. Such seriously disputed questions or rival claims of the parties with regard to breach of contract are to be investigated and determined on the basis of evidence which may be led by the parties in a properly instituted civil suit rather than by a court exercising prerogative of issuing writs. 16. A perusal of this judgment though shows that a writ petition involving serious disputed questions of facts which requires consideration of evidence which is not on record, will not normally be entertained by a court in the exercise of its jurisdiction under Article 226 of the Constitution of India. This decision again, in our opinion, does not lay down an absolute rule that in all cases involving disputed questions of fact the parties should be relegated to a civil suit. In this view of ours, we are supported by a judgment of this Court in the case of Gunwant Kaur v. Municipal Committee, Bhatinda where dealing with such a situation of disputed questions of fact in a writ petition this Court held: (SCC p. 774, paras 1....
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.... 17. The above judgment of Gunwant Kaur finds support from another judgment of this Court in the case of Century Spg. and Mfg. Co. Ltd. v. Ulhasnagar Municipal Council wherein this Court held: (SCC p. 587, para 13) Merely because a question of fact is raised, the High Court will not be justified in requiring the party to seek relief by the somewhat lengthy, dilatory and expensive process by a civil suit against a public body. The questions of fact raised by the petition in this case are elementary. 18. This observation of the Court was made while negating a contention advanced on behalf of the respondent Municipality which contended that the petition filed by the appellant Company therein apparently raised questions of fact which argument of the Municipality was accepted by the High Court holding that such disputed questions of fact cannot be tried in the exercise of the extraordinary jurisdiction under Article 226 of the Constitution. But this Court held otherwise. 19. Therefore, it is clear from the above enunciation of law that merely because one of the parties to the litigation raises a dispute in regard to the facts of the case, the court ente....
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.... in exercise of its writ jurisdiction would not enforce the terms of a contract qua contract, it is trite that when an action of the State is arbitrary or discriminatory and, thus, violative of Article 14 of the Constitution of India, a writ petition would be maintainable. (See ABL International Ltd. v. Export Credit Guarantee Corporation of India Ltd.) 39. There cannot be any doubt whatsoever that a writ of mandamus can be issued only when there exists a legal right in the writ petition and a corresponding legal duty on the part of the State, but then if any action on the part of the State is wholly unfair or arbitrary, the superior courts are not powerless. 15. It is clear that, (a) in the contract if there is a clause for arbitration, normally, writ court should not invoke its jurisdiction; (b) the existence of effective alternative remedy provided in the contract itself is a good ground to decline to exercise its extraordinary jurisdiction under Article 226; and (c) if the instrumentality of the State acts contrary to the public good, public interest, unfairly, unjustly, unreasonably discriminatory and violative of Article 14 of the Constitution of India in its cont....