Union of India Vs. Graphic Industries Co  INSC 406 (28 July 1994)
A.M. (J) Ahmadi, A.M. (J) Hansaria B.L. (J)
1995 AIR 409 1994 SCC (5) 398 JT 1994 (5) 237 1994 SCALE (3)571
Judgment of the Court was delivered by HANSARIA, J.- This appeal is by Union of
India and some officers of the Central Government attached to the Ministry of
Railways and they have felt aggrieved at the judgment and order passed by a
Division Bench of the Calcutta High Court on an appeal preferred by the
respondents against the judgment of a learned Single Judge which was rendered
in a writ petition filed by the respondents under Article 226 of the
the Judgment and Order dated 2-3-1992 of the Calcutta High Court in F.M.A.T.
No. 989 of 1991 399
respondents invoked the extraordinary jurisdiction of the High Court on
payments not having been made to them of the different items of stores supplied
to the Eastern Railways. The respondents had made a grievance about the
non-payment even to the Union Minister of Railways and certain correspondence
which took place between the local M.P. and the Railway Minister and between
the Additional Private Secretary to the Minister of Railways and Controller of
Stores were sought to be relied on in seeking a mandamus for payment of a sum
of about rupees half a crore.
learned Single Judge took the view that the correspondence in question could
not be treated as decision of the President of India as visualised by Article
377 (sic) of the Constitution. Being of this view, the writ petitioners were
left with the liberty of moving appropriate forum for redressal of their
grievances including going in for arbitration as per the contract, leaving all
the questions open to be decided in an appropriate forum.
the time the appeal came to be heard by the Division Bench, a development had
taken place and the same was issuance of another letter by the aforesaid
Additional Private Secretary on 8/9-5-1991 addressed to General Manager, Eastern
Railways, Calcutta, which stated, inter alia, that Minister of Railways had
instructed to do as contained in the letter. The Bench took the view that the
instructions contained in the aforesaid letter were binding on the General
Manager, he being a subordinate authority.
non-carrying out of the instructions by the General Manager was taken to be
flouting of the order of the Minister who being the head of the Ministry of
Railways was said to be answerable to the House of the People, The Bench also
took the view that what was said in the letter was just and proper in the facts
and circumstances of the case and was in consonance with views expressed by
this Court in Hindustan Sugar Mills v. State of Rajasthan', wherein it was held
by this Court that the Central Government should honour its legal obligation
arising even out of contract and not drive a citizen to file suit. It was
reiterated in that judgment that in a democratic society governed by the rule
of law, it is the duty of the State to do what is fair and just to the citizen
and the State should not seek to defeat the legitimate claim of the citizens by
adopting a legalistic attitude but should do what fairness and justice demand.
Bench then observed that it was the duty of the General Manager to act fairly,
properly and reasonably and the goods having been accepted several years back
the Railways had no authority to sit over the matters by folding their hands.
Such an attitude was regarded as contrary rule of law by which a democratic society
is governed'. The Bench ultimately passed the following operative order:
respondents are directed to make payment of the amount stated in the schedule
of bills enclosed to the said letter after verification that the bills were
complete in all respect subject to the condition that if any 1 (1980) 1 SCC
599: 1982 SCC (Tax) 141 : AIR 1981 SC 1681 400 goods had been rejected which
has already been made from (sic over) to the petitioner though the reason for
rejection had not been communicated, the same should be communicated forthwith.
Such steps shall be taken within a period of two months from today." 6.Learned
Additional Solicitor General Shri Ahmad appearing for the appellants has
advanced two submissions in the main. He first contends that the letter of
8/9-5-1991 being not in terms of Article 377 of the Constitution had not
conferred any legal right or even legitimate expectation in favour of the
respondents to advance any legal claim on its basis. The second submission is
that the matter being purely in the realm of contract the public law remedy of
seeking mandamus by approaching under Article 226 was not available dehors the
terms of the agreement which included an arbitration clause. Relying on these
two submissions the contention of the Additional Solicitor General is that the
judgment of the Division Bench is vitiated by error of law.
Ganguli who advanced arguments on behalf of the respondents has not attempted,
and rightly, to support the judgment of the Division Bench by placing reliance
on what is contained in the letter in question. The learned counsel's
submission has been that independently of this letter the judgment is perfectly
legal as the appellants had the duty to act fairly which obligation has to be
discharged even in matters pertaining to contractual rights. He has contended
that perusal of the impugned judgment would show that according to the Bench
the appellants had not acted properly and fairly in denying payments to the
respondents because the goods had been accepted several years back and the
Railways had no authority to sit over the matter by folding their hands.
submission has also been advanced in this context that on the face of payments
made to other suppliers of identical articles of stores the denial of payment
to the respondents was tin act of discrimination. We do not propose to deal
with this submission because in the impugned judgment there is no mention about
this facet of respondents' case about which, according to Shri Ganguli,
averments had been made in the writ petition.
therefore, propose to confine our attention to the ground of unfairness
mentioned in the impugned judgment and see whether in the facts and
circumstances of the case it could justifiably be said that the appellants had
acted unfairly in withholding the payments of the respondents. A perusal of the
judgment shows that the Bench came to the conclusion of unfairness, not on the
basis of any independent examination of the matter by it (indeed in the absence
of a counter by the appellants no such factual assessment was possible by the
Bench), instead, what has been said about unfair act of the Railways is based
on what has been mentioned in the aforesaid letter of the Additional Private
Secretary. This would be clear from the fact that in the letter reference has
been made about rejection of materials also as to which it has been stated that
the defects which led to the rejection of the materials be communicated to the
firm; and it is this which the Bench too in its aforesaid operative order
directed. It is thus clear to us that the view taken by the 401 Bench relating
to unfairness is solely based on what found place in the aforesaid letter.
are not satisfied from what has been stated in the impugned judgment that the
Railways had acted unfairly in withholding the payment of the respondents. In
view of this we need not dilate on the submission of Shri Ganguli that even in
contractual matters public authorities have to act fairly; and if they fail to
do so approach under Article 226 would always be permissible because that would
amount to violation of Article 14 of the Constitution. In support of this
submission, Shri Ganguli has mainly relied upon a two- Judge Bench decision of
this Court in Kumari Shrilekha Vidyarthi v. State of U.P.2, of which this
aspect of the matter has been dealt with by stating that the requirement of
Article 14 being the duty to act fairly, justly and reasonably, there is
nothing which militates against the concept of requiring the State always to so
act even in contractual matters (see paragraph 24). What has been stated in
paragraph 28 is that it would be difficult and unrealistic to exclude the State
actions in contractual matters, after the contract has been made, from the
purview of the judicial review to test its validity on the anvil of Article 14.
The Bench thereafter referred to various earlier decisions of this Court on
this point including Mahabir Auto Stores v. Indian Oil Corpn.3 and Dwarkadas Marfatia
v. Board of Trustees of the Port of Bombay4.
Having come to the conclusion that the materials which the Division Bench noted
do not make out a case of unfairness, it is not necessary to examine the
question as to whether in the field covered by contractual rights and
obligations it would always be permissible to invoke the extraordinary
jurisdiction of the High Court under Article 226 of the Constitution. It would
be enough to say that this remedy being discretionary, it would be open to the
High Court to take a view on the fact situation before it that invocation of
power under Article 226 would not be proper exercise of discretion, leaving the
aggrieved person to seek remedy in some other forum, or to take recourse to
arbitration if that be visualised by the agreement between the parties.
the aforesaid view of the matter we agree with Shri Ahmad that the judgment of
the Division Bench is vitiated by error of law. We, therefore, set aside the
same and restore the judgment passed by the learned Single Judge.
The appeal stands allowed with costs assessed at Rs 10,000 to be paid by the
respondents within a period of six weeks from today.