ABL
International Ltd. & Anr Vs. Export Credit Guarantee Corportion of India
Limited & Ors [2003] Insc 664 (18 December 2003)
N.Santosh
Hegde & B.P.Singh. Santosh Hegde,J.
One Rassik
Woodworth Limited (4th respondent herein) entered into a contract with M/s.RVO Kazpishepromsyrio,
a State- owned Corporation of Kazakhstan (referred to as the Kazak Corporation)
for supply of 3,000 Metric Tons of tea. The said agreement was entered into on
or about 26th August,
1993. As per the
original agreement, the payment for such tea exported was to be made by the
Kazak Corporation by barter of goods mentioned in the Schedule to the said
agreement, within 120 days of the date of delivery by the exporter. The
agreement also provided that such payment to be made by the Kazak Corporation
is to be guaranteed by the Government of Kazakhstan. Clause 6 of the agreement
which provided for the mode of payment by barter of goods by the Kazak
Corporation came to be amended by an addendum on the very same day when the
original agreement was executed. By the amended agreement, it was specifically
provided that if the contract of barter of goods cannot be finalised for any
reason then the Kazak Corporation was to pay to the exporter for the goods
received by it in US Dollars within 120 days from the date of the delivery.
Such payment was to be remitted by the Kazak Corporation to the bank account of
the exporter at Delhi. This amended agreement also
provided for a guarantee being given by the Ministry of Foreign Economic
Relations of Kazakhstan for prompt payment of such consideration. The addendum
specifically stated that the same was to form an integral part of the contract
earlier entered between the parties on the same day viz. 26.8.1993.
After
the said contract was entered into by the 4th respondent with the Kazak
Corporation, by an agreement of parties, the 4th respondent assigned a part of
the said export contract to the first appellant herein on same terms. On a
direction issued by the Reserve Bank of India to cover the risk arising out of
the export of tea made by the appellants as per the said assigned contract, the
appellants approached the Export Credit Guarantee Corporation of India Ltd.
(the first respondent herein) on 23rd September, 1993 to insure the risk of
payment of consideration that is involved in the said contract of export. On 30th September, 1993, after considerable correspondence
between the parties, the first respondent issued a comprehensive risk policy
effective from 23rd
September, 1993 to 30th September, 1995 covering the risk. The Kazakhstan
Government as required in the contract through its Ministry of Foreign Economic
Relations also gave an irrevocable guarantee that in the event the Kazak
Corporation for any reason whatsoever is unable to meet its obligation of
payment due under the contract, said Government would make the payment to the
exporter in US dollars through remittance for tea delivered. It is the case of
the appellant that the payment of consideration by barter of goods could not be
finalised between the appellant and the Kazak Corporation, therefore, the said
Corporation agreed to pay the consideration amount for the goods received by it
in US dollars and also paid certain sums of money in US dollars as part payment
but failed to pay the balance amount due under the contract. It is also the
case of the appellant that even the Kazakhstan Government though admitted its
liability to pay the balance of consideration amount did not fulfil its part of
the guarantee given in the contract due to lack of funds. It is on the failure
of the Kazakhstan Government to fulfil its guarantee the appellants made a
claim on the first respondent which had covered the said risk of compensating
the loss suffered by it by the non-payment of the consideration amount for the
supply of tea made to the Kazak Corporation. The first respondent as per its
letter dated 14.12.1994, however, repudiated the claim of the appellants
stating that the appellants had changed the terms of the contract of payment
without first consulting it, therefore, it had no obligation to compensate the
appellants for the loss suffered by it. This alleged change of terms of the
contract, according to the first respondent, was due to the fact that the
appellants had rejected the barter offer made by the Kazak Corporation and had
opted for cash payment in US dollars which, according to the first respondent
was not the mode of payment contemplated in the contract between the exporter
and the Kazak Corporation. On further correspondence between the appellants and
the first respondent, the latter reiterated its right to repudiate the claim of
the appellants by its second letter dated 26.5.1995 contending that the refusal
of the barter offer by the appellants without first consulting it, amounts to a
change in the mode of recovery of dues, hence, the loss suffered by such change
in the mode of recovery took away the liability of the first respondent to pay
for such loss.
Having
failed to persuade the first respondent 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
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 said 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, 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 that the
appellants are before us.
In
this appeal, Dr. A.M. Singhvi, learned senior counsel for the appellants
contended that the High Court though noted that the writ petition involved
disputed questions of fact has not identified any such disputed questions of
fact which disentitled the appellants from seeking reliefs in a writ petition.
He also submitted that assuming that some disputed questions did arise for
consideration in the writ petition, that itself would not bar the High Court
under Article 226 of the Constitution from examining such questions of fact. He
further submitted that in the present case, the terms of the contract between
the exporter and the Kazak Corporation on one hand and the contract of
insurance between the appellants and the first respondent on the other being
crystal clear, there was no question of any difficulty in interpretation of the
said terms of the contracts and all necessary facts required for the
interpretation of the said clauses of the insurance and export contracts being
admitted, the Appellate Bench of the High Court was in error in coming to the
conclusion that the writ petition involved such disputed questions of facts
which the High Court could not decide in the writ petition. He also contended
that the observations of the High Court in the course of its judgment that the
appellants had violated the terms of the export contract or the insurance
contract, is ex facie erroneous. He submitted that this is because of the fact
that the Appellate Bench did not properly appreciate the relevant clauses of
the said contracts. He also contended that proviso (d) to Clause (xi) of the
insurance contract had no bearing whatsoever on the facts of this case. Learned
counsel then pointed out that the basis of the repudiation as could be seen
from the two letters of the first respondent was that prior permission of the
said respondent was not taken before making a change in the terms of the export
contract. According to the learned counsel, this foundation of repudiation of the
claim is based on a presumption that there was any such requirement either in
law or in the contracts to have a prior consultation with the first respondent
while making a claim to receive cash consideration from the exporter. It was
argued that apart from the fact that there was no change in the terms of the
contract as indicated in the letters of repudiation, the assumption of the
first respondent that it had to be consulted while making any such demand on
the Kazak Corporation is wholly baseless.
Learned
counsel pointed out from the terms of the contracts, what the appellants had
insured with the first respondent was not their goods. On the contrary, they
had actually insured the non-payment of consideration which under the terms of
contract, was either by barter or by cash. Therefore, it was not open to the
first respondent to repudiate the appellants' claim on the ground that the mode
of barter payment was changed without consulting it and that the contract of
insurance did not cover the risk of payment in US $.
According
to the learned counsel for the appellants, none of the terms of the contracts,
be it the export contract or the insurance contract, gives any room for
multiple interpretation nor requires any evidence being led. According to said
learned counsel, all that the writ court had to decide was whether the
appellant should adhere only to receive consideration by barter of goods or it
is also entitled to demand the consideration by cash in US $ and whether
non-payment of such consideration is covered by the contract of insurance or
not which, according to learned counsel, can be decided by examining the terms
of the contracts without having to take recourse to any external aid.
Ms. Indira
Jaising, learned senior counsel appearing for the first respondent submitted
that on facts and circumstances of this case, a writ petition was not
maintainable nor can it be construed as an appropriate remedy. She pointed out
that the subject matter is a dispute arising out of a contract and is not a
matter falling under the purview of Administrative Law. According to her, the
doctrine of fairness and reasonableness applies only in the exercise of
statutory or administrative actions of a State and not in the exercise of a
contractual obligation and issues arising out of contractual matters will have
to be decided on the basis of the law of contract and not on the basis of the
administrative law. It was her argument that at the most in matters involving
statutory contracts where action of the State involves a public duty, a writ
may lie but in the instant case, the contract was neither a statutory contract
nor the duty of the first respondent under the contract had any public law
element involved in it. According to the learned counsel, this contract was a
negotiated contract and not a standard form contract. She also supported the
finding of the Appellate Bench of the High Court that the facts involved in the
case are all disputed facts requiring evidence to be led, therefore, the
appropriate remedy could only be a suit. Hence, the impugned judgment did not
call for any interference.
As
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.
In our
opinion this question is no more res integra and is settled by a large number
of judicial pronouncements of this others. [1955 (1) SCR 305] this Court held:
"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.
..............................................
We
would 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." 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. followed subsequently by this Court in the case of The
D.F.O, 864] wherein this Court held:
"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's case (supra), 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." (Emphasis supplied) M/s. Lotus Hotels Pvt. Ltd. [1983
(3) SCC 379] this Court International Airport Authority of India [1979 (3) SCC
489] held:
"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 Corporation 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 226." The learned counsel appearing for the first
respondent however, submitted that this Court has taken a different view in
Ltd. & Ors. [ 1986 (1) SCC 264] wherein this Court held:
"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.
The
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." (Emphasis supplied).
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 Life Insurance Corporation of India (Supra) 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 (India) Ltd. [ 1996 (6) SCC 22] wherein this Court held:
"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." This 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.
(supra)
is of no assistance to the first respondent in its contention that in contractual
matters, writ petition is not maintainable.
The
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 216] wherein this Court held :
"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." 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 Smt. Gunwant
Kaur & Ors. vs. Municipal Committee, Bhatinda and Ors. [1969 (3) SCC 769]
where dealing with such a situation of disputed questions of fact in a writ
petition this Court held :
"The
High Court observed that they will not determine disputed question of fact in a
writ petition. But what 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. Exercise of the jurisdiction
is, it is true, discretionary, 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.
From
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
Collector.
In 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." The above judgment of Smt. Gunwant Kaur (supra) finds
support from another judgment of this Court in the case of Century Spinning and
Manufacturing Company Ltd. & Anr. vs. The Ulhasnagar Municipal Council
& Anr. [1970 (1) SCC 582] wherein this Court held :
"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." 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
question of fact cannot be tried in the exercise of the extraordinary
jurisdiction under Article 226 of the Constitution. But this Court held
otherwise.
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 Smt.Gunwant
Kaur (supra), this Court even went to the extent of holding that in a writ
petition, if facts required, 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.
The
learned counsel for the respondent then placed reliance on a judgment of this
Court in the case of VST Industries Ltd. vs. VST Industries Workers' Union
& Anr. [2001 (1) SCC 298]. In the said case, this Court held :
"In
Anadi Mukta case this Court examined the various aspects and the distinction
between an authority and a person and after analysis of the decisions referred
in that regard came to the conclusion that it is only in the circumstances when
the authority or the person performs a public function or discharges a public
duty that Article 226 of the Constitution can be invoked. In the present case,
the appellant is engaged in the manufacture and sale of cigarettes.
Manufacture
and sale of cigarettes will not involve any public function." Placing
reliance on the observations of this Court in the said case, learned counsel
contended unless the action challenged in the writ petition pertains to the
discharge of a public function or public duty by an authority, the courts will
not entertain a writ petition which does not involve the performance of said public
function or public duty. Learned counsel argued in the instant case while
repudiating the contract, the first respondent was not discharging any public
function or public duty.
We do
not think the above judgment in VST Industries Ltd. (supra) supports the
argument of the learned counsel on the question of maintainability of the
present writ petition. It is to be noted that VST Industries Ltd. against whom
the writ petition was filed was not a State or an instrumentality of a State as
contemplated under Article 12 of the Constitution, hence, in the normal course,
no writ could have been issued against the said industry. But it was the
contention of the writ petitioner in that case that the said industry was
obligated under the concerned statute to perform certain public functions,
failure to do so would give rise to a complaint under Article 226 against a
private body. While considering such argument, this Court held that when an
authority has to perform a public function or a public duty if there is a failure
a writ petition under Article 226 of the Constitution is maintainable. In the
instant case, as to the fact that the respondent is an instrumentality of a
State, there is no dispute but the question is: Was first respondent
discharging a public duty or a public function while repudiating the claim of
the appellants arising out of a contract ? Answer to this question, in our
opinion, is found in the judgment of this Court in the case of Kumari ShriLekha
Vidyarthi & Ors. vs. State of U.P.& Ors. [1991 (1) SCC 212] wherein
this Court held :
"The
impact of every State action is also on public interest. It is really the
nature of its personality as State which is significant and must characterize
all its actions, in whatever field, and not the nature of function, contractual
or otherwise which is decisive of the nature of scrutiny permitted for
examining the validity of its act. 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." It is clear from the above observations of this Court, once
State or an instrumentality of State is a party to the contract, it has an
obligation in law to act fairly, justly and reasonably which is the requirement
of Article 14 of the Constitution of India. Therefore, if by the impugned
repudiation of the claim of the appellants the first respondent as an
instrumentality of the State has acted in contravention of the above said requirement
of Article 14 then we have no hesitation that a writ court can issue suitable
directions to set right the arbitrary actions of the first respondent. In this
context, we may note that though the first respondent is a company registered
under the Companies Act, it is wholly owned by the Government of India. The
total subscribed share capital of this company is 2,50,000 shares out of which
2,49,998 shares are held by the President of India while one each share is held
by the Joint Secretary, Ministry of Commerce and Industry and Officer on
Special Duty, Ministry of Commerce and Industry respectively. The objects
enumerated in the Memorandum of Association of the first respondent at Para 10 states
:
"To
undertake such functions as may be entrusted to it by Government from time to
time, including grant of credits and guarantees in foreign currency for the
purpose of facilitating the import of raw materials and semi-finished goods for
manufacture or processing goods for export." Para 11 of the said object
reads thus :
"To
act as agent of the Government, or with the sanction of the Government on its
own account, to give the guarantees, undertake such responsibilities and
discharge such functions as are considered by the Government as necessary in
national interest." It is clear from the above two objects of the company
that apart from the fact that the company is wholly a Government owned company
it discharges the functions of the Government and acts as an agent of the
Government even when it gives guarantees and it has a responsibility to
discharge such functions in the national interest. In this background it will
be futile to contend that the actions of the first respondent impugned in the
writ petition do not have a touch of public function or discharge of a public
duty. Therefore, this argument of the first respondent must also fail.
The
learned counsel for the respondent then contended that though the principal
prayer in the writ petition is for quashing the letters of repudiation by the
first respondent, in fact the writ petition is one for a 'money claim' which
cannot be granted in a writ petition under Article 226 of the Constitution of
India. In our opinion, this argument of the learned counsel also cannot be
accepted in its absolute terms.
This
court in the case of U.P.Pollution Control Board & Ors. vs. Kanoria
Industrial Ltd. & Anr. [2001 (2) SCC 549] while dealing with the question
of refund of money in a writ petition after discussing the earlier case law on
this subject held :
"In
the para extracted above, in a similar situation as arising in the present
cases relating to the very question of refund, while answering the said
question affirmatively, this Court pointed out that the courts have made
distinction between those cases where a claimant approached a High Court
seeking relief of obtaining refund only and those where refund was sought as a
consequential relief after striking down of the order of assessment, etc. In
these cases also the claims made for refund in the writ petitions were
consequent upon declaration of law made by this Court.
Hence,
the High Court committed no error in entertaining the writ petitions.
In
support of the submission that a writ petition seeking mandamus for mere refund
of money was not maintainable, the decision in In AIR para 6 of the said
judgment, it is stated that - "We are of the opinion that though the High
Courts have power to pass any appropriate order in the exercise of the powers
conferred under Article 226 of the Constitution, such a petition solely praying
for the issue of a writ of mandamus directing the State to refund the money is
not ordinarily maintainable for the simple reason that a claim for such a
refund can always be made in a suit against the authority which had illegally
collected the money as a tax".
Again
in AIR para 9, the Court held:
"We,
therefore, hold that normally petitions solely praying for the refund of money
against the State by a writ of mandamus are not to be entertained. The
aggrieved party has the right of going to the civil court for claiming the
amount and it is open to the State to raise all possible defences to the claim,
defences which cannot, in most cases, be appropriately raised and considered in
the exercise of writ jurisdiction." The judgment cannot be read as laying
down the law that no writ petition at all can be entertained where claim is
made for only refund of money consequent upon declaration of law that levy and
collection of tax/cess as unconstitutional or without the authority of law. It
is one thing to say that the High Court has no power under Article 226 of the
Constitution to issue a writ of mandamus for making refund of the money
illegally collected. It is yet another thing to say that such power can be
exercised sparingly depending on facts and circumstances of each case. For
instance, in the cases on hand where facts are not in dispute, collection of
money as cess was itself without the authority of law; no case of undue
enrichment was made out and the amount of cess was paid under protest; the writ
petitions were filed within a reasonable time from the date of the declaration
that the law under which tax/cess was collected was unconstitutional. There is
no good reason to deny a relief of refund to the citizens in such cases on the
principles of public interest and equity in the light of the cases cited above.
However,
it must not be understood that in all cases where collection of cess, levy or
tax is held to be unconstitutional or invalid, the refund should necessarily
follow. We wish to add that even in cases where collection of cess, levy or tax
is held to be unconstitutional or invalid, refund is not an automatic
consequence but may be refused on several grounds depending on facts and
circumstances of a given case." Therefore, this objection must also fail
because in a given case it is open to the writ court to give such monetary
relief also.
From
the above discussion of ours, following legal principles emerge as to the
maintainability of a writ petition :-
(a) In
an appropriate case, a writ petition as against a State or an instrumentality
of a State arising out of a contractual obligation is maintainable.
(b)
Merely because some disputed questions of facts arise for consideration, same
cannot be a ground to refuse to entertain a writ petition in all cases as a matter
of rule.
(c) A
writ petition involving a consequential relief of monetary claim is also
maintainable.
However,
while entertaining an objection as to the maintainability of a writ petition
under Article 226 of the Constitution of India, the court should bear in mind
the fact that the power to issue prerogative writs under Article 226 of the
Constitution is plenary in nature and is not limited by any other provisions of
the Constitution. The High Court having regard to the facts of the case, has a
discretion to entertain or not to entertain a writ petition. The Court has
imposed upon itself certain restrictions in the exercise of this power [See:
Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai & Ors. [1998 (8)
SCC 1]. And this plenary right of the High Court to issue a prerogative writ
will not normally be exercised by the Court to the exclusion of other available
remedies unless such action of the State or its instrumentality is arbitrary
and unreasonable so as to violate the constitutional mandate of Article 14 or
for other valid and legitimate reasons, for which the court thinks it necessary
to exercise the said jurisdiction.
It is
in the above understanding of law, we will now consider the facts of the
present case to find out whether the appellants are entitled to relief or not
as prayed for in the writ petition filed by them.
While
considering this issue, it has to be noted at the outset itself that the first
respondent is an instrumentality of State for the purpose of Article 12 of the
Constitution is not disputed and rightly too. It is also not disputed that the
first respondent is a monopoly Corporation in its field.
The
fact that the appellant to the extent covered by the contract of insurance had
agreed to insure the risk of non payment of its consideration for the tea
exported to the Kazak Corporation is also not disputed;
The
fact that the appellant has exported 8.70 lakh kilograms of tea to Kazakhstan
between 8th and 30th October, 1993 is also not disputed.
The
fact that the Kazak Corporation did not pay the consideration for the tea
received by it in cash in US dollars is also not disputed.
The
fact that the Kazakhstan Government stood as a guarantor for prompt payment for
the goods received by the Kazak Corporation and that the said Government failed
to honour its guarantee is also not disputed.
The
fact that the Reserve Bank of India permitted the appellant to receive cash
consideration in the form of US $ instead of barter payment is also not
disputed.
What
is disputed is the obligation of the first respondent to cover the risk of
non-payment of consideration by cash in US currency on the ground that the risk
covered by the first respondent is a risk arising out of non-supply of goods by
the barter method only.
In our
opinion, this limited area of dispute can be settled by looking into the terms
of the contract of insurance as well as the export contract, and the same does
not require consideration of any oral evidence or any other documentary
evidence other than what is already on record. The claim of the contesting
parties will stand or fall on the terms of the contracts, interpretation of
which, as stated above, does not require any external aid.
Therefore,
we will now consider the relevant clauses of the contracts in the background of
the admitted facts recorded hereinabove.
The
contract of insurance between the appellant and the respondent is primarily
based on the contract between the exporter and the Kazak Corporation. The
relevant clause in regard to payment for the tea exported is found in the
principal contract at Clause 6 which reads thus :
"The
payment of delivered goods shall be made by barter exchange of goods within 120
days from the date of delivery being affected by the Seller. Plus interest for
the period of non-payment 15% per year. The above terms will be covered by a
guarantee for payment by the Ministry of Foreign Economic Relations of
Kazakhstan. For Barter exchange of goods Buyer presently has available for
offer goods as per supplement N2 to the present contract." This clause
came to be amended on the very day when the contract was signed by the exporter
and the Kazak Corporation by an addendum, i.e., on 26.8.1993 itself. The
addendum which formed an integral part of the original contract reads thus :
"In
case the payment terms as per clause 6 of the Contract No.1-B/9-14/93 dated
26.8.1993 are not possible that is to say if this contract for barter supply of
goods cannot be finalised for any reason or if delivery shipment under such a
contract is not made within the stipulated period, then the buyer shall pay the
seller for delivered goods in US Dollars within 120 days from the date of
delivery being effected by the seller. This payment to be made through
remittance by the buyer of the contractual amount of delivered tea, plus
interest 15% per year to the Bank Account of the seller at Canara Bank, Janpath,
New Delhi, India.
The
above payment will be guaranteed by the Ministry of Foreign Economic Relations
of Kazakhstan." If we read the original Clause 6 and the addendum
together, it is crystal clear that for some reason or the other the parties
agreed to amend original Clause 6 by the addendum which amendment brought about
a significant change in the mode of payment of consideration. In the original
Clause 6, it is seen that the Kazak Corporation agreed to pay for the delivered
tea by barter of goods. This sole mode of consideration came to be altered by
the addendum by which parties agreed if the payment of consideration by barter
of goods cannot be finalised for any reason, the buyer that is the Kazak
Corporation agreed to make the said payment in US $ within the stipulated
period of 120 days of the delivery by the exporter. This addendum replaced the
original clause (6) and from the language of the addendum it is clear that the
amended clause (6) became an integral part of the original contract in the
place of the original clause (6). The language of addendum clearly shows that
the payment of consideration by barter supply of goods was no more the sole
mode of consideration and if for any reason whatsoever such payment by barter
did not materialise between the parties then the payment had to be made in cash
in US $. In our opinion, there can be no two possible interpretations as to the
meaning of this amending clause (addendum). This was also the understanding of
the Kazakhstan Corporation which is established by the fact that after the
failure of barter it did pay a part of consideration in US$, this is also the
understanding of the Government of Kazakhstan which guaranteed the payment of
such consideration which is evident from the letter of the Ministry of Foreign
Economic Relations of the Republic of Kazakhstan dated 18th March, 1994. In the
said letter the said Government while admitting the default in payment of consideration
in clear terms stated:
"But
some difficulties related to introduction of the national currency, execution
of primary internal payments between enterprises and budgetary deficit
prevented the Kazak Party from timely repaying of the credit." It is clear
that the first respondent insured the risk of non- payment arising out of the
above said contract between the exporter and the Kazak Corporation which
included the amended Clause (6). It is also clear that the first respondent
while issuing the policy of insurance did know that payment of consideration by
Kazak Corporation could be by two modes (a) by barter (b) by cash and non
payment of consideration by either mode was to be covered by the said contract
of insurance.
It is
also an admitted fact that the Kazak Corporation did offer only some goods and
not all items included in the schedule to the appellants initially as a barter
payment, but on evaluation made by the appellants, they were not acceptable to
the appellants.
Therefore,
payment of consideration by barter of goods could not be finalised as
contemplated in amended clause (6) of the export contract and in lieu of the
same, the Kazak Corporation agreed to pay in US $ and in fact did make part
payment of the same in US $, but thereafter it defaulted in the payment of the
balance amount.
It is
also an admitted fact that the Kazakhstan Government which guaranteed the
payment of consideration for the exported goods while admitting its liability
also defaulted for its own reasons, consequently the appellants could not get
the full consideration for the tea exported by them.
It is
on the above fact-situation, the appellants made a demand on the first
respondent to compensate for the loss suffered by them as per their claim dated
8.9.1994. This claim of the appellants came to be repudiated by the first
respondent as per its letter dated 14.12.1994. The basis of the repudiation of
the claim as could be seen from the said letter is as follows :
"The
buyer also did offer goods in barter exchange. You, however, chose without
consulting the Corporation not to import the goods offered by the buyer may be
for trade reasons. As a result, the bills have remained unpaid. This is clearly
a trade loss which is not covered by the Corporation. We are, therefore, not in
a position to entertain your claim, which is hereby rejected." It is seen
from this letter that the repudiation was made on the ground that the
appellants did not accept the goods offered by the buyer without consulting the
first respondent. The further ground is that the loss suffered by the
appellants was a trade loss which is not a risk covered by the Corporation. On
a protest made against the said repudiation of the claim by the appellants, the
first respondent reiterated its stand of rejection of the claim by another
letter of its dated 26th May, 1995, wherein it stated that as per its letter
dated 12.10.1993, it had covered the risk of non-payment by barter only and
said mode of payment was changed by the appellants without prior consultation
with the first respondent, therefore, this change amounted to a breach of an
insurance agreement, hence, it had no liability for the loss suffered by the
appellants.
Having
known the stand of the first respondent in regard to its liability under the
policy and having failed in its other attempts to persuade the first respondent
to make payments, the appellants filed the writ petition before the learned
Single Judge of the High Court and the said learned Judge came to the
conclusion that on facts and circumstances of the case since the first
respondent was admittedly an instrumentality of State, a writ petition was
maintainable. It also came to the conclusion that since most of the facts
involved in the case were admitted and the dispute resolved only around the interpretation
of the agreement of insurance between the parties, the learned Judge felt that
the matter could be disposed of in a writ petition without driving the parties
to a suit.
Having
perused the relevant clauses the learned Single Judge held :
"There
cannot be any doubt that barter system of payment was adhered to but the
addendum clause in the contract clearly stipulates a situation that in the
event same cannot be agreed upon, there could be a default if Kazakhstan
Government failed to pay in terms of its guarantee to the first respondent in
US$. Default clause appears to be unequivocal".
Thereafter
the learned Single Judge having perused the various correspondence between the
parties and noticing the fact that the Kazakhstan Government also admitted its
failure to comply with its guarantee came to the conclusion that there was
nothing on record to show that the appellants under the contract of insurance
was liable to consult the first respondent as regards its right to reject the
payment by barter for any reason whatsoever. On such interpretation of the
clauses of the contracts, the learned Judge felt that it was an appropriate
case in which a writ should be issued as prayed for by the petitioner and
accordingly allowed the petition.
In
appeal, the Appellate Bench took somewhat a restricted view of the power of the
High Court to entertain a writ petition under Article 226 of the Constitution
of India and came to the conclusion that the petition involved disputed
questions of fact, hence, there being an alternate remedy by way of a suit
allowed the appeal setting aside the judgment as also the relief granted by the
trial court. In the course of its judgment the appellate bench also placed
reliance on sub-clause (d) of the proviso to clause (xi) found in the contract
of insurance which reads thus:
"PROVISOS
PROVIDED ALWAYS THAT the Corporation shall not be liable for any loss:
x x x x
x (d) Which arises due to the failure or refusal on the part of the buyer to
accept the goods and/or to pay for them due to his claim that he is justified
in withholding payment of the contract price or the gross invoice value of the
said goods or any part thereof by reason of any payment, credit, set-off or
counter-claim and/or due to his claim that, for any other reason, he is excused
from performing his obligations under the contract, unless, except where the
Corporation agrees in writing to the contrary, the insured has, for the amount
of his loss, obtained by legal proceedings in a competent court of law in the
country of the buyer a final judgment enforceable against him." (emphasis
supplied) According to the Appellate Bench as per this proviso in the insurance
contract, the first respondent was not liable for any loss which arises due to
the failure or refusal on the part of the appellants to accept goods offered by
the buyer. Though this interpretation of the said proviso to the insurance
clause made by the Appellate Bench is not a conclusive finding, we think it
appropriate to deal with this view expressed by the Appellate Bench since we
intend to dispose of this appeal on merits.
Having
examined the said sub-clause in the proviso of the insurance policy, in our
opinion, the reliance placed by the appellate bench of the High Court on this
clause is wholly misplaced. The proviso especially the one in sub-clause (d)
deals with the risks arising due to the failure or refusal on the part of the
buyer to accept the goods and/or to pay for them due to his claim that he is
justified in withholding payment of the contract price or the gross invoice
value of the said goods for the reason mentioned therein. This clause pertains
to the defence that may be put forth by the buyer (in this case the Kazak
Corporation) as to its refusal to pay the consideration on the grounds
enumerated in the said sub-clause. This is not a clause which indemnifies the
insurance company from its liability to cover risk when the importer fails to
pay for the consideration for the goods received by it on grounds of its
financial inability. Therefore the reliance placed by the High Court on this
sub-clause to the proviso in the insurance contract, as stated above, is
misplaced.
The
learned counsel appearing for the appellants in this appeal contended that the
one and the only stand taken by the appellants in their two letters of
repudiation is that the appellants have changed the mode of receipt of
consideration without consulting the first respondent which ground according to
the learned counsel is not one of the conditions of the insurance contract. He
further submitted that an imposition of a condition of that nature requiring a
prior consultation would be beyond the terms of the insurance contract,
therefore, impermissible. While learned counsel appearing for the first
respondent Corporation contended that the ground of repudiation is not so much
the lack of prior consultation but, according to learned counsel, is that the
first respondent was not liable to pay for the loss suffered by the exporter by
agreeing to accept the consideration in cash because that mode of consideration
was not covered by the risk insured by the respondent. According to the learned
counsel, one and the only mode of payment of consideration covered by the said
respondent is by barter of goods. Therefore, even though in the letters of repudiation
the prior consultation before change in the mode of consideration is pointed
out as one of the grounds, the same is not the primary ground.
From
the terms of the contract, we have noticed in Clause (6) as amended by the
addendum, consideration by way of barter of goods is not the sole
consideration. The said clause contemplates alternate modes of payment of
consideration one of them being by barter of goods and the other by cash
payment in US $. The terms of the insurance contract which was agreed between
the parties were after the terms of the contract between the exporter and the
importer were executed which included the addendum, therefore, without
hesitation we must proceed on the basis that the first respondent issued the
insurance policy knowing very well that there was more than one mode of payment
of consideration and it had insured failure of all the modes of payment of
consideration. From the correspondence as well as from the terms of the policy,
it is noticed that existence of only two conditions have been made as a
condition precedent for making the first respondent Corporation liable to pay
for the insured risk, that is,
(i) there
should be a default on the part of the Kazak Corporation to pay for the goods received;and
(ii) there
should be a failure on the part of the Kazakhstan Government to fulfil their
guarantee. This is clear from the terms of the insurance contract read with the
letter of the first respondent dated 8th September, 1993 wherein at Clause 3A, it is stated
: "Our liability will arise only after default has been established on the
guarantee of the Ministry." From the above, it is clear both the grounds
as put forth by the learned counsel for the respondent before us as well as in
the two letters of repudiation issued by the first respondent are
unsustainable. In our opinion, the first respondent insured the export risk of
the appellants in regard to the non payment of the consideration for the tea
exported whether it arose from the non fulfillment of the barter clause or for
the non fulfillment of the cash payment clause. The argument advanced on behalf
of the respondent that the appellants refused to accept the barter by goods
offered by the first respondent which amounted to a default under the contract
on the part of the appellants has no legs to stand in view of the clear
language of the amended Clause 6 of the agreement which as noted above states
that the obligation of the buyer, namely, Kazak Corporation to pay for the
goods received by it in US $ arises when payment by barter fails for "any
reason whatever". The use of the words "any reason whatever" in
the said amended clause includes the reasons of refusal by the appellants to
accept the goods offered in barter.
On the
face of the said language of amended clause, there could be no room for two
opinions at all in regard to the liability of the first respondent to pay for
the loss suffered by the appellants even in cases where payment by barter fails
at the instance of the appellant. The learned counsel for the respondent
contended for a correct interpretation of this amended clause and the other
clauses of the contracts i.e. the contract of export and the contract of
insurance between the parties there is need for oral evidence being led without
which a proper interpretation of this clause is not possible, therefore, it is
fit case in which the appellants should be directed to approach the Civil Court
to establish its claim. We find no force in this argument. We have come to the
conclusion that the amended Clause 6 of the agreement between the exporter and
the importer on the face of it does not give room for a second or another
construction than the one already accepted by us. We have also noted that
reliance placed on sub-clause (d) of the proviso to the insurance contract by
the Appellate Bench is also misplaced which is clear from the language of the
said clause itself. Therefore, in our opinion, it does not require any external
aid much less any oral evidence to interpret the above clause. Merely because
the first respondent wants to dispute this fact, in our opinion, it does not
become a disputed fact. If such objection as to disputed questions or
interpretations are raised in a writ petition, in our opinion, the courts can
very well go into the same and decide that objection if facts permit the same
as in this case. We have already noted the decisions of this court which in
clear terms have laid down that mere existence of disputed questions of fact
ipso facto does not prevent a writ court from determining the disputed
questions of fact. (See: Gunwant Kaur (supra)).
On the
basis of the above conclusion of ours, the question still remains why should we
grant the reliefs sought for by the appellant in a writ petition when a
suitable efficacious alternate remedy is available by way of a suit. The answer
to this question in our opinion, lies squarely in the decision of this Court in
the case of ShriLekha Vidyarthi (supra) wherein this court held :
"The
requirement of Article 14 should extend even in the sphere of contractual
matters for regulating the conduct of the State activity. Applicability of
Article 14 to all executive actions of the State being settled and for the same
reason its applicability at the threshold to the making of a contract in
exercise of the executive power being beyond dispute, the State cannot
thereafter cast off its personality and exercise unbridled power unfettered by
the requirements of Article 14 in the sphere of contractual matters and claim
to be governed therein only by private law principles applicable to private
individuals whose rights flow only from the terms of the contract without
anything more. The personality of the State, requiring regulation of its
conduct in all spheres by requirement of Article 14, does not undergo such a radical
change after the making of a contract merely because some contractual rights
accrue to the other party in addition. It is not as if the requirement of
Article 14 and contractual obligations are alien concepts, which cannot
co-exist. The Constitution does not envisage or permit unfairness or
unreasonableness in State actions in any sphere of its activity contrary to the
professed ideals in the Preamble. Therefore, total exclusion of Article 14 -
non- arbitrariness which is basic to rule of law - from State actions in
contractual field is not justified. This is more so when the modern trend is
also to examine the unreasonableness of a term in such contracts where the
bargaining power is unequal so that these are not negotiated contracts but
standard form contracts between unequals. x x x Unlike the private parties the
State while exercising its powers and discharging its functions, acts
indubitably, as is expected of it, for public good and in public interest.
The
impact of every State action is also on public interest. It is really the
nature of its personality as State which is significant and must characterize
all its actions, in whatever field, and not the nature of function, contractual
or otherwise, which is decisive of the nature of scrutiny permitted for
examining the validity of its act. 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. This factor alone is sufficient to import at least the minimal
requirements of public law obligations and impress with this character the
contracts made by the State or its instrumentality. It is a different matter
that the scope of judicial review in respect of disputes falling within the
domain of contractual obligations may be more limited and in doubtful cases the
parties may be relegated to adjudication of their rights by resort to remedies
provided for adjudication of purely contractual disputes. However, to the
extent, challenge is made on the ground of violation of Article 14 by alleging
that the impugned act is arbitrary, unfair or unreasonable, the fact that the
dispute also falls within the domain of contractual obligations would not
relieve the State of its obligation to comply with the basic requirements of
Article 14. To this extent, the obligation is of a public character invariably
in every case irrespective of there being any other right or obligation in
addition thereto. An additional contractual obligation cannot divest the
claimant of the guarantee under Article 14 of non- arbitrariness at the hands
of the State in any of its actions. x x x " 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
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 lacs.
On facts we have found that the terms of the policy does 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 Kazakhstan
Government failed to fulfil its guarantee. There is no allegation that the
contracts in question were obtained either by fraud or by misrepresentation. In
such factual situation, we are of the opinion, the facts of this case do not
and should not inhibit the High Court or this Court from granting the relief
sought for by the petitioner.
Apart
from the above reasons given by us to interfere with the judgment of the
Appellate Bench of the High Court, we have one other good reason - why we
should not drive the appellants to a suit. The claim of the appellants was
rejected by the respondent in the year 1994. The respondent challenged the
basis of rejection by way of a writ petition in the year 1996. The objection as
to the maintainability of the petition was rejected by the High Court by its
judgment dated 15.5.1997. We are now in the end of year 2003.
We at
this distance of time and stage of litigation, do not think it proper to
relegate the parties to a suit. To direct the appellants to approach a civil
court at this stage would be doing injustice to the appellants. In this view of
ours, we are supported by a number of decisions of this court like in Shambhu
Prasad Agarwal & Ors. vs. Bhola Ram Agarwal (2000 9 SCC 714), wherein this
Court though noticed the fact that the appellants had an alternate remedy for
issuance of a letter of administration it refused to dismiss the appeal on the
grounds - "Since considerable time has elapsed the interest of justice
demands that the proceeding should come to an end as early as possible and that
the appeal should not be dismissed merely on highly technical ground".
In Dr.Bal
Krishna Agarwal vs. State of U.P. & Ors. (1995 (1) SCC 614) this Court held
:
"Having
regard to the aforesaid facts and circumstances, we are of the view that the
High Court was not right in dismissing the writ petition of the appellant on
the ground of availability of an alternate remedy under Section 68 of the Act
especially when the writ petition that was filed in 1988 had already been
admitted and was pending in the High Court for the past more than 5 years.
Since
the question that is raised involves a pure question of law and even if the
matter is referred to the Chancellor under Section 68 of the Act it is bound to
be agitated in the court by the party aggrieved by the order of the Chancellor,
we are of the view that this was not a case where the High Court should have
non-suited, the appellant on the ground of availability of an alternative
remedy.
We,
therefore, propose to go into the merits of the question regarding inter se seniority
of the appellant and Respondents 4 and 5. We may, in this context, mention that
Respondent 4 has already retired in January 1994." Similar is the view
taken by the Court in the case of Kerala State Electricity Board & Anr. vs.
Kurien E.Kalathil and Ors. (2000 6 SCC 293) and also in VST Industries Ltd. (supra).
For
the reasons stated herein above, we think the appellate bench of the High Court
was not justified in reversing the judgment of the learned Single Judge. For
the reasons stated above, the impugned judgment of the appellate bench of the
High Court is set aside and that of the learned Single Judge is restored. The
appeal is allowed with costs.
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