Manager, Central Bank of India Vs. M/S. Devi Ispat Ltd & Ors.  INSC 572
(30 July 2010)
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 6077 OF
2010 (Arising out of S.L.P. (C) No. 11505 of 2010) Zonal Manager, Central Bank
of India .... Appellant (s) Versus M/s Devi Ispat Ltd. & Ors. ....
This appeal arising out of SLP (C) No. 11505 of 2010 is directed
against the final judgment and order dated 05.04.2010 passed by the High Court
at Calcutta in G.A. No. 2441 of 2009 whereby the High Court dismissed the
appeal filed by the appellant-Bank herein against the order of the learned
single Judge dated 24.08.2009 in W.P. No. 485 of 2009 directing the
appellant-Bank to 1 return forthwith the title deeds deposited by M/s Devi
Ispat Ltd., the Respondent-Company herein.
Brief facts :
Respondent No.1 is a Company incorporated under the name and style of M/s Devi
Ispat Ltd. The Respondent-Company carries on the business of manufacturing and
trading in ingots and various other types of steel and for the said purpose requires
financial support from the financial 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 2 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 12.01.2009,
the appellant-Bank sent the Credit Information Report of the respondent-Company
to its new Banker, namely, the State Bank of India. On 25.02.2009, the
appellant-Bank received an Internal Audit Report in respect of the fraud
perpetrated in the accounts of M/s Rajco Steel Enterprises and M/s Kali International
Pvt. Ltd., whereby crores of rupees were siphoned away to the account of the
respondent-Company. Therefore, on 3 14.03.2009, the appellant-Bank filed two
complaints with the Superintendent of Police, Central Bureau of Investigation,
Kolkata complaining of the fraud and requesting the CBI, Kolkata to investigate
into the matter.
02.04.2009, Special Audit Team of the appellant- Bank submitted its report on
the fraud committed by the respondent-Company which revealed the transfer of a
huge amount of funds from the account of M/s Rajco Steel Enterprises and M/s
Kali International Pvt. Ltd. to the account of the respondent-Company. On
06.05.2009, the respondent-Company requested the appellant-Bank to handover the
original title deeds of its factory premises and all the collateral securities
held by it as against the Company as well as from Mr. Nirmal Kumar Mandhani,
Director of the Company (respondent No.2 herein) to the State Bank of India,
Chowringhee Branch, Kolkata to whom they had transferred their account. On
09.05.2009, the State Bank of India issued a Banker's cheque of Rs. 15 crores
to the respondent-Company which 4 the appellant-Bank had encashed and
appropriated in lieu of the outstanding balances lying against the respondent-
Company. By various letters, the respondent-Company requested the
appellant-Bank to return the Security documents and issuance of `No Objection
Certificate' (in short `NOC') and `No Due Certificate' (in short `NDC'). On
29.05.2009, the respondent-Company filed W.P. No. 485 of 2009 before the High
Court at Calcutta. By order dated 24.08.2009, the learned single Judge of the
High court allowed the writ petition and directed the appellant-Bank to release
the security documents. Challenging the said judgment, the appellant-Bank filed
an appeal before the Division Bench of the High Court being G.A. No. 2441 of
2009. By order dated 05.04.2010, the High Court dismissed the appeal filed by
the appellant herein.
by the said order, the appellant-Bank has preferred this appeal by way of
Heard Mr. Mukul Rohtagi, learned senior counsel for the
appellant-Bank and Mr. C.A. Sundaram, learned senior counsel for the
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 6 settlement of entire money
due to the appellant-Bank by an arrangement made through another nationalized
Bank, submitted that the writ petition before the High Court under Article 226
is maintainable and the High Court is fully justified in issuing direction for
return of the title deeds of the Company.
We have carefully considered the rival contentions of both the
parties and perused the relevant materials.
In order to answer the above contentions, there is no need to
narrate all the factual details except which are required for the disposal of
the above appeal. It is true that the respondent-Company filed a writ petition
before the learned single Judge of the Calcutta High Court praying for issuance
of a writ of mandamus directing the Bank to forthwith take steps to release the
security documents and issue `NOC' and `NDC' pertaining to their company's
accounts without any further delay. It is also not in dispute that the
respondent-Company carries on the business of manufacturing and trading in
ingots and 7 various other types of steel and for the said purpose, it requires
financial support from the institution like the appellant-Bank. The
appellant-Bank, being a public sector Bank, discharging public functions is a `State'
in terms of Article 12 of the Constitution of India amenable to the writ
jurisdiction. In the earlier part, we have adverted to the fact that the
respondent-Company had availed various facilities such as Term Loan, Working
Capital Demand Loan, Cash Credit and Letter of Credit facility. During the
course of business, on 16.10.2006, the respondent-Company wrote to the
appellant-Bank requesting it to review and enhance its credit facilities.
was also acceded to by the Bank. After two years, between 15.09.2008 to
24.04.2009, the Bank advised the Company to shift its borrowings to some other
Bank due to certain irregularities in the accounts of the respondent-Company.
Since the Company had not complied with the direction in the letter dated 24.04.2009,
the Bank called upon the Company to close their 8 accounts. On the other hand,
the Company requested the Bank to return the title deeds and other collateral
securities to enable them to entrust the same to other Nationalized Bank. It is
seen from the materials placed that the Bank had taken such a stand requesting
the Company to shift their account to some other Bank since it came to know
that a fraud having been perpetrated by M/s Rajco Steel Enterprises & M/s
Kali International Pvt. Ltd., 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 9 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.
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.
refer to our above account which has been taken over by State Bank of India,
Chowringhee Branch, Kolkata.
Chowringhee Branch of State Bank of India had given a Banker's Cheque of Rs.
15.00 crores which have been encashed and appropriated to our outstanding
to inform that inspite of such adjustments on 9th of May, 2009, we are yet to
get our Security documents, NOC, NDC etc.
that you will appreciate that above documents are utmost important and shall be
handed over urgently. We request you to immediately arrange to deliver the
you, Yours faithfully, For DEVI ISPAT LTD.
Director Cc to: The Branch Manager Central Bank of India Barabazar Branch
contents of this letter reiterates the stand of the respondent-Company.
In view of the fact that the respondent-Company had cleared the
dues which were pending at the relevant point of time through the State Bank of
India, they are entitled to get their title deeds to enable them to deposit the
same with the State Bank of India as their security for the amount advanced. It
is also relevant to note that in four subsequent letters dated 14.05.2009, the
"statement of account" furnished by the appellant-Bank clearly show
that after settling their dues the "uncleared amount" has been
mentioned as 0.00 (nil) which read as under:
OF ACCOUNT CENTRAL BANK OF INDIA BARABA_BARABAZAR (KOLKATA) 178, MAHATMA GANDHI
ROAD, BARABAZAR Branch Code: 00102 Devi Ispat Ltd.
Netaji Subhas Road, Ist Floor, 2nd Floor, Kolkata - 700 001 Account No. :
1103589988 Product: Medium Enterprises Currency: INR Date: 14/05/2009 /tune:
10:58:05 E-mail Cleared Balance: 49,82,783.42 Cr. Uncleared Amount: 0.00 1
STATEMENT OF ACCOUNT CENTRAL BANK OF INDIA BARABA_BARABAZAR (KOLKATA) 178,
MAHATMA GANDHI ROAD, BARABAZAR Branch Code: 00102 Devi Ispat Ltd.
factual details clearly demonstrate that through an arrangement with the State
Bank of India, Chowringhee Road Branch, the respondent-Company settled a sum of
Rs. 15 Crores to the appellant-Bank and the statement of accounts prevailing as
on 14.05.2009 clearly reveal that there is no amount outstanding.
note of these undisputed factual details, the Bank, being a nationalized
institution, amenable to writ jurisdiction, the High Court has rightly issued a
writ of mandamus for return of the title deeds.
In the light of the above factual scenario, now let us consider
the decisions relied on by Mr. Rohtagi. In State 1 of U.P. and Others vs.
Bridge & Roof Company (India) Ltd., (1996) 6 SCC 22, this Court, in para
16, held thus:
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."
saying so and in the light of the various terms of the contract, the Court
Accordingly, it must be held that the writ petition filed by the respondent for
the issuance of a writ of mandamus restraining the Government from deducting or
withholding a particular sum, which according to the respondent is payable to
it under the contract, was wholly misconceived and was not maintainable in
The next decision relied on by learned senior counsel for the
appellant in Kerala State Electricity Board and Another vs. Kurien E. Kalathil
and Others, (2000) 6 1 SCC 293. He heavily placed reliance on paras 10 and 11
of this judgment which read thus:
We find that there is a merit in the first contention of Mr. Raval. Learned
counsel has rightly questioned the maintainability of the writ petition. The
interpretation and implementation of a clause in a contract cannot be the
subject-matter of a writ petition. Whether the contract envisages actual
payment or not is a question of construction of contract. If a term of a
contract is violated, ordinarily the remedy is not the writ petition under
Article 226. We are also unable to agree with the observations of the High
Court that the contractor was seeking enforcement of a statutory contract. A
contract would not become statutory simply because it is for construction of a
public utility and it has been awarded by a statutory body. We are also unable
to agree with the observation of the High Court that since the obligations
imposed by the contract on the contracting parties come within the purview of
the Contract Act, that would not make the contract statutory. Clearly, the High
Court fell into an error in coming to the conclusion that the contract in
question was statutory in nature.
statute may expressly or impliedly confer power on a statutory body to enter
into contracts in order to enable it to discharge its functions. Dispute
arising out of the terms of such contracts or alleged breaches have to be
settled by the ordinary principles of law of contract. The fact that one of the
parties to the agreement is a statutory or public body will not by itself
affect the principles to be applied. The disputes about the meaning of a
covenant in a contract or its enforceability have to be determined according to
the usual principles of the Contract Act. Every act of a statutory body need
not necessarily involve an exercise of statutory power. Statutory bodies, like
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 1 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."
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 agitated
in a petition filed under Article 226 of the Constitution. It is a matter for
adjudication by a civil court or in arbitration, if provided for in the
contract or before the DRT or under the Securitization Act. In the case on
hand, the respondent- Company has demonstrated that based on the advise of the
appellant-Bank, they shifted their accounts to another Nationalized Bank and
through an arrangement with the State Bank of India, a cheque of Rs.15 crores
was deposited by their Bank and in token of the same, by 1 statement of
accounts dated 14.05.2009 the appellant- Bank clearly mentioned that there is
no due or nil balance from the respondent-Company (Emphasis supplied). In such
circumstances, when the relief sought for does not relate to interpretation of
any terms of contract, the Bank being a Nationalized Bank, a Writ Court can
issue appropriate direction in certain circumstances as mentioned above. In
such a factual matrix, the reliance placed on these two decisions is not
helpful to the appellant-Bank.
Though Mr. Rohtagi has pointed out that after filing of the writ
petition, the respondent-Company owes money through their relationship with
other concerns, as rightly pointed out by Mr. Sundaram, the position on the
date of the filing of the writ petition is the relevant date to test the
direction of the High Court. It is not in dispute that the writ petition has
been filed by the respondent-Company before the High Court at Calcutta on 29.05.2009
that is well after settlement of their dues to the extent of Rs. 15 1 Crores by
the State Bank of India and the communication of the appellant-Bank dated
15.05.2009 intimating `nil' due. In view of the same, we hold that the date of
filing of the writ petition is the relevant date. This is also clear from the
dictum laid down by this Court in Rajahmundry Electric Supply Corporation Ltd.
vs. A. Nageshwara Rao and Others, (1955) 2 SCR 1066.
In ABL International Ltd. and Another vs. Export Credit Guarantee
Corporation of India Ltd. and Others, (2004) 3 SCC 553, Santosh Hegde, J. has
exhaustively dealt with the maintainability of writ petition under Article 226
in contractual matters. In the said case, contract of insurance was executed
between ABL International Ltd. and Another and Export Credit Guarantee
Corporation of India Ltd. and Others. Having failed to persuade the first
respondent therein, to adhere 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 1 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 in a writ proceeding
under Article 226 of the Constitution, hence, 1 set aside the judgment of the
learned Single Judge. In the course of its judgment the Appellate Bench also
incidentally came to the conclusion that the first respondent had not committed
any violation of the clauses or the terms of the insurance contract. On the
contrary, it observed that as per proviso (d) to clause (xi) of the said
insurance contract, by refusing to accept the barter of goods, the first
appellant had violated the terms of the contract disentitling it to raise any
claim on the first respondent. It is against this order of the Appellate Bench
of the Calcutta High Court, the appellants therein filed an appeal before this
Court by way of special leave. After adverting to certain factual details, the
Court framed following question:
could be seen from the arguments addressed in this appeal and as also from the
divergent views of the two courts below, one of the questions that falls for
our consideration is whether a writ petition under Article 226 of the
Constitution of India is maintainable to enforce a contractual obligation of
the State or its instrumentality, by an aggrieved party."
following discussion and conclusion are apt and relevant for our purpose. They
"9.In our opinion this question is no more res integra and is settled by a
large number of judicial pronouncements of this Court. In K.N. Guruswamy v. State
of Mysore this Court held: (AIR pp. 595-96, para 20) "20. The next
question is whether the appellant can complain of this by way of a writ. In our
opinion, he could have done so in an ordinary case. The appellant is interested
in these contracts and has a right under the laws of the State to receive the
same treatment and be given the same chance as anybody else. ...
therefore in the ordinary course have given the appellant the writ he seeks.
But, owing to the time which this matter has taken to reach us (a consequence
for which the appellant is in no way to blame, for he has done all he could to
have an early hearing), there is barely a fortnight of the contract left to go.
... A writ would therefore be ineffective and as it is not our practice to
issue meaningless writs we must dismiss this appeal and leave the appellant
content with an enunciation of the law."
10. It is
clear from the above observations of 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:
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 case1 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
the case of Gujarat State Financial Corpn. v. Lotus Hotels (P) Ltd. this Court
following an earlier judgment in Ramana Dayaram Shetty v. International Airport
Authority of India held: (SCC pp. 385-86, paras 9 & 11) The instrumentality
of the State which would be `other authority' under Article 12 cannot commit
breach of a solemn undertaking to the prejudice of the other party which acted
on that undertaking or promise and put itself in a disadvantageous position.
The appellant Corporation, created under the State Financial Corporations Act,
falls within the expression of `other authority' in Article 12 and if it backs
out from such a promise, it cannot be said that the only remedy for the
aggrieved party would be suing for damages for breach and that it could not
compel the Corporation for specific performance of the contract under Article
learned counsel appearing for the first respondent, however, submitted that
this Court has taken a different view in the case of LIC of India v. Escorts
Ltd wherein this Court held: (SCC p. 344, para 102) "If the action of the
State is related to contractual obligations or obligations arising out of the
tort, the court may not ordinarily examine it unless the action has some public
law character attached to it. Broadly speaking, the court will examine actions
of State if they pertain to the public law domain and refrain from examining
them if they pertain to the private law field.
difficulty will lie in demarcating the frontier between the public law domain
and the private law field. It is impossible to draw the line with precision and
we do not want to attempt it. The question must be decided in each case with
reference to the particular action, the activity in which the State or the
instrumentality of the State is engaged when performing the action, the public
law or private law character of the action and a host of other relevant
circumstances. When the State or an instrumentality of the State ventures into
the corporate world and purchases the shares of a company, it assumes to itself
the ordinary role of a shareholder, and dons the robes of a shareholder, with
all the rights available to such a shareholder. There is no reason why the
State as a shareholder should be expected to state its reasons when it seeks to
change the management, by a resolution of the company, like any other shareholder."
13. We do
not think this Court in the above case has, in any manner, departed from the
view expressed in the 2 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
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.
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 decide both questions of fact as well as questions of law.
When the contract itself provides for a mode of settlement of disputes arising
from the contract, there is no reason why the parties should not follow and
adopt that remedy and invoke the extraordinary jurisdiction of the High Court
under Article 226. The existence of an effective alternative remedy -- in this
case, provided in the contract itself -- is a good ground for the court to
decline to exercise its extraordinary jurisdiction under Article 226.
judgment again, in our opinion, does not help the first respondent in the
argument advanced on its behalf that in contractual matters remedy under Article
226 of the Constitution does not lie. It is seen from the above extract that in
that case because of an arbitration clause in the contract, the Court refused
to invoke the remedy under Article 226 of the Constitution. We have
specifically inquired from the parties to the present appeal before us and we
have been told that there is no such arbitration clause in the contract in
question. It is well known that if the parties to a dispute had agreed to
settle their dispute by arbitration and if there is an agreement in that
regard, the courts will not permit recourse to any other remedy without
invoking the remedy by way of arbitration, unless of course both the parties to
the dispute agree on another mode of dispute resolution. Since that is not the
case in the instant appeal, the observations of this Court in the said case of
Bridge & Roof Co. are of no assistance to the first respondent in its
contention that in contractual matters, writ petition is not maintainable.
learned counsel then contending that this Court will not entertain a writ
petition involving disputed questions of fact relied on a judgment of this
Court in the case of State of Bihar v. Jain Plastics and Chemicals Ltd wherein
this Court held: (SCC p. 218, para 7) "7. In our view, it is apparent that
the order passed by the High Court is, on the face of it, illegal and
erroneous. It is true that many matters could be decided after referring to the
contentions raised in the affidavits and counter-affidavits, but that would
hardly be a ground for exercise of extraordinary jurisdiction under Article 226
of the Constitution in case of alleged breach of contract. Whether the alleged
non-supply of road permits by 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."
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 14-16) "14. The High Court observed that they will not
determine disputed question of fact in a writ petition.
facts were in dispute and what were admitted could only be determined after an
affidavit-in-reply was filed by the State. The High Court, however, proceeded
to dismiss the petition in limine. The High Court is not deprived of its
jurisdiction to entertain a petition under Article 226 merely because in
considering the petitioner's right to relief questions of fact may fall to be
determined. In a petition under Article 226 the High Court has jurisdiction to
try issues both of fact and law.
of the jurisdiction is, it is true, discretionary, 2 but the discretion must be
exercised on sound judicial principles. When the petition raises questions of
fact of a complex nature, which may for their determination require oral
evidence to be taken, and on that account the High Court is of the view that
the dispute may not appropriately be tried in a writ petition, the High Court
may decline to try a petition. Rejection of a petition in limine will normally
be justified, where the High Court is of the view that the petition is
frivolous or because of the nature of the claim made dispute sought to be
agitated, or that the petition against the party against whom relief is claimed
is not maintainable or that the dispute raised thereby is such that it would be
inappropriate to try it in the writ jurisdiction, or for analogous reasons.
the averments made in the petition filed by the appellants it is clear that in
proof of a large number of allegations the appellants relied upon documentary
evidence and the only matter in respect of which conflict of facts may possibly
arise related to the due publication of the notification under Section 4 by the
the present case, in our judgment, the High Court was not justified in
dismissing the petition on the ground that it will not determine disputed
question of fact. The High Court has jurisdiction to determine questions of
fact, even if they are in dispute and the present, in our judgment, is a case
in which in the interests of both the parties the High Court should have
entertained the petition and called for an affidavit-in- reply from the
respondents, and should have proceeded to try the petition instead of
relegating the appellants to a separate suit."
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."
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 2 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
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 entertaining such petition under Article 226 of the
Constitution is not always bound to relegate the parties to a suit. In the
above case of Gunwant Kaur this Court even went to the extent of holding that
in a writ petition, if the facts require, even oral evidence can be taken. This
clearly shows that in an appropriate case, the writ court has the jurisdiction
to entertain a writ petition involving disputed questions of fact and there is
no absolute bar for entertaining a writ petition even if the same arises out of
a contractual obligation and/or involves some disputed questions of fact."
holding so, this Court has concluded as under:
From the above, it is clear that when an instrumentality of the State acts
contrary to public good and public interest, unfairly, unjustly and
unreasonably, in its contractual, constitutional or statutory obligations, it
really acts contrary to the constitutional guarantee found in Article 14 of the
Constitution. Thus if we apply the above principle of applicability of Article
14 to the facts of this case, then we notice that the first respondent being an
instrumentality of the State and a monopoly body had to be approached by the
appellants by compulsion to cover its export risk. The policy of insurance
covering the risk of the appellants was issued by the first respondent after
seeking all required information and after receiving huge sums of money as
premium exceeding Rs. 16 lakhs. On facts we have found that the terms of the
policy do not give room to any ambiguity as to the risk covered by the first
respondent. We are also of the considered opinion that the liability of the
first respondent under the policy arose when the default of the exporter
occurred and thereafter when the Kazakhstan Government failed to fulfil its
no allegation that the contracts in question were obtained either by fraud or
factual situation, we are of the opinion, the facts of this case do not and
should not inhibit the High 2 Court or this Court from granting the relief
sought for by the petitioner."
14) In a
recent decision in Karnataka State Forest Industries Corporation vs. Indian
Rocks, (2009) 1 SCC 150, while considering the similar issue, S.B. Sinha, J.
for the Bench reiterated thus:
Although ordinarily a superior court 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 Corpn. of India Ltd.)
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 Art.
(c) if the instrumentality of the State acts contrary to the public good,
public interest, unfairly, 2 unjustly, unreasonably discriminatory and
violative of Art.
14 of the
Constitution of India in its contractual or statutory obligation, writ petition
would be maintainable.
a legal right must exist and corresponding legal duty on the part of the State
and if any action on the part of the State is wholly unfair or arbitrary, writ
courts can exercise their power.
the light of the legal position, writ petition is maintainable even in
contractual matters, in the circumstances mentioned in the earlier paragraphs.
In the case on hand, it is not in dispute that the appellant- Bank, being a
public sector Bank, discharging public functions is "State" under Article
12. In view of the settlement of the dues on the date of filing of the writ
petition by arrangement made through another Nationalized Bank, namely, State
Bank of India and the statement of accounts furnished by the appellant-Bank
subsequent to the same i.e. on 14.05.2009 is 0.00 (nil) outstanding, we hold
that the High Court was fully 2 justified in issuing a writ of mandamus for
return of its title deeds. In the light of the above conclusion, we are unable
to accept the claim of the appellant-Bank and on the other hand, we are in
entire agreement with the direction issued by the learned Single Judge affirmed
by the Division Bench. Consequently, the appeal of the Bank is dismissed. The
appellant-Bank is directed to return the title deeds deposited by the respondent-Company
within a period of two weeks from today. With the above direction, the civil
appeal is dismissed. No order as to costs.
..........................................J. (P. SATHASIVAM)
..........................................J. (ANIL R. DAVE)
JULY 30, 2010.