-f^) n mpH COURT OF CHHATTISGARHAT B1LKSWS. W.P.tCI No. 3802/2008 PETITIONER SudhaAgrawal Versus State of Chhattis^rh and another Order for consideration Sd/- Dttirendra Mishra Judge HonTsle ShriDilip RaosahebDeshmukh.J J a^^u. • 1-1— 1-2.-2009 Dilip I Order post for 11 L=@509 ,l,pRaosahebDeshmukh judge Sd/- Judge •^- w< i-U..- w' W.GH COURT OF (^aaATtlSGAEtS AT BILASPUR W.P.iCt No. 3802/2008 L": Sudha Agrawal, wife of Shri Reun Awtai' Agi'awal, aged about 50 yeai-s, Proprietor, M/s Ayurved Health House, havingits registered ofEce at Tawati Herbal', Vyapai' Viliar Road, Maharana Pratap Chowk, Distt. Bilaspur, Chhattisgarh Vexasis SSSPONDENTS 1. State of Chhattisgarh, through the Secretary, ^riculture (Aniinal Husbandiy), Department, Mantralaya, D.K.S. Bhawan, Manti'alaya, Raipur, Chliattisgai'h 2. Director, Directorate of Veterinary Set-vices, D.K.S. Bhawan, Mantralaya, Raipur, Chhattisgarh WRIT KKriTIOH OTrDER ARTICLE SK26 OF tJSB CONSTITUTION OF INDIA TOvlsIon Bendh:- Hon'ble Shri Dhn-endra Mishra arid Hon'ble Shri Dilip Raosaheb Deshtnukh, JJ Shri Manindra Shrivastava, Sr. Advocate with Shri Axs.rito Das, Advocate, for tlie petitioner. Shri Sumesh Bajaj, Govt. Advocate, for the State. O R D BR (11-2-2009) Wbixsaai&xa. Mladua. J. With fhe consent of the paTties, the matter is heard finaUy. 2. . The petitioner 1s propnetor of M/s Ayurvedic Health House, a small scale industry, er^aged in manufactiiring Ayurvedic, Siddha aad Unani drugs. The respondents vide fhetr notice of Annexure P-6 dated 5-2-2008, invited rates for fhe drugs from fhe manufactUTers. ^ ^»:y*^^^^l fai ,-jffiysi-?;c 1 '^ The rates were to be submitted in fhe "Rates Contract Form" (Annexure P-7). The petitioner's offer for some medicines was confirmed by respondent No. 2 vide Annexure P-8 dated 26-5-2008. 'The rates contract executed wifh the successfi.il bidder is valid upto 31st March, 2009. Respondent No. 2, vide his order dated 3-6-2008, issued onlers for supply ofmedicines as detsuled in paiagraph 8.4 of the petifion. The supplies were to be made within a period of 45 days. The petitioner, after manufacturing entire bulk of medicines, dispatehed the ordered drugs to the respondents, however the supplied dru^ were not accepted by the respondents and tfae same were retumed vide niemo of Annexiire P-10 dated 9-7-2008, informing the petitioner fhat the order dated 30111 June, 2008 and 4th July, 2008, have ah'eady been cancelled vide order dated 1st July, 2008. 3. Leamed counsel for the petitioner submits that the orders of Annexure P-1 dated 30th Jime, 2008 and Annexure P-2 dated 4th July, 2008, have been passed without assigning any reason, in the most arbitrary and highhanded manner.. Before issuing the aforesaid order, the petitioner was not served any show cause notice and fhe entire decision maldng process for canGellir^ fhe work onler is vitiated on account of gross procedural irregularily aiid imiwopriety. After entering into the rate contract agreement and receiving work order, fhe petitioner manufactured the ordered drugs by uicurrinj huge investments. The rate contracts are govemed by statutory guidelines contained in C.G. Store Purchase Rules, 2002. The impugned order is arbitrary and a colourable exercise of power. Reliance isplaced in fhe matters ofMahablr Auto Stores andothei's -v- Indian 011 &>rporation and others1, Kumari Shritekha Vidvarthi -v- State of U.P. aad otherss. ABL InternaUonal Ltd. and another -v- Eitport Credlt Guarantee Corporatlon of Indla Ltd. and others3 and Natioaal Hiduwavs Authoritv of India^-v- ^n^a_Bnterff'lsesj^d aaotheiL4. 4. On fhe other hand, Shri Sumesh Bajaj, leamed Govemment Advocate, appearing for the respondents, contended fhat after entering into fhe rate contract for 4 catqgories of medicines, it was realized that all these medicines could not be purchased and, therefore, it Would not be appropriate to approve rates of all these medicines. Accordingly, a comrriittee was constituted for preparation of model mdent for tnviting rates of most useful medicines. The above exercise was undertaken in the interest of Govemment exchequer. Cancellation of the earlier rate contract was done in the interest of State Exchequer. In the Notice Inviting Rates itself, it was clearly mentioned fhat the Director of Vetermary Services shaU have exclusive power to stay or reiect the rate contract without assigning any reason for fhe same. It was fmther argued fhat the rate contract with all the manufacturers mcluding that of the petitioner, for purchase of medicines, have been canceUed wifhout any 'AIR 1990 SC 1031 2AIR 1991 SC 537 3 (2004) 3 SCC 553) 4 2003(7)8cc 410 a3B.^^;:s%-?'?">"i -y' .iil^i discrimmation. The Director, Veterinaiy Services is fully empowered under the conditions of Notice Invitmg Rates for the supply of Ayurvedic Medicines to cancel fhe rate contract. 'IIie contention of fhe petitioner that fhe consigiment sent by him was refused by the respondents has been denied. Itwas further argued that the dispatch of consignment by fhe petitioner and the'refusal to accept the same by the respondents is a disputed question of fact and the same cannot be decided in awrit petition. Refemng to Clause 7 of the Rate Contracts form (Annexure P-7), it was argued that in the event of dispute, the decision ofthe Director, Vetermary Services is ftnal. Ttius there is an arbitration clause in the Rate Contracts Form and the respondents without applying for arbitration, have approached this Coi-irt and in these circumstances, the petition is also liable for dismissal for avaUability of the altemative remedy. Reliance is placed tn the matters of Food Corporatlon of Indla aad others —T- Jaisuinath Dutta andother^, Iferala State Electricity Board and another ~v- Kurien B. Kalathil and othera6 and State of Blhar and others -v- Jadn Plastics and Chemlcab Ltd.7 5. We have heard leamed counsel for the parties. 6. It is not in dispute fhat the petitioner submitted his offer m response to Notice Invitii^ Rates (Annexure P-6). His offerwas fmalfy accepted for categories of medicines deseribed in the latter of acceptance of Annexure P-8 dated 26-5-2008. It has also not been 3AIR 1993 SC 1494 SAIR 2000 SC 2573 '(2002) 1SCC2I6 / -^.^I_^.'^;'t^^T^:f^S-^'^ W^f^^-.S^Vl-SSfWS^S ^^•^rsS"^'' Bl Ktl disputed fhat the petitioner issued suppty orders for 4 categories of mediciaes vide purchase /supply order of Annexure P-9 dated 3-6- 2008 and fmal bills submitted by the petitioner were retunied and he was infonned on 9-7-2008 (Annexiire P-10) fhat the medicmes to be supplied by the petitioner would not be accepted as the tender has already been cancelled vide orders dated l-7-3008 and 4-7-2008. 7. The orify question for consideration inttus petition iswhether in the facts and circi.imstances of the present case, the instant petition, which relates to cancellation ofrate contract, is maintainable ? 8. Shri Manindra Shrivastava, leamedSr. Advocate, appearing for the petitioner, did not dispute that as per the conditions of the notice inviting rates in the Rate Contract Form, fhe Director of Veterinary Services was competent to cancel the rate contract wifhout assigntof any reason, however he argued fhat it is well settled that eveiy action of the State or its instrumentality m exei-cise of its executive power must be informed by reasons. Where orders are arbitrary, urational and without any reason, fhen even in the contract matters, Article 14 is attracted and such action can be struck down in appropriate cases. The reasons assigned by fhe respondents in its retum is not reflected from fhe document of Annexure R-l, which only refers to the constitution of technical^ committee for purchase of medicines, unplements, equipments, chemicals, vaccines, etc. m accordanc^ wifh C.G. store Purchase Rules. On the other hand, Shri Sumesh Bajaj, leamed Govt. Advocate, contended that the Du-ector, Veterinaiy Services was well within his power to cancel the rate contract at any »i. stage without assigning any reason. The powers have been exa'eised on the basis of recominendations of fhe Comniittee. Apart from the petitioner's rates contract, fhe department has also cancelled flie rate conn-act with other manufacturers / suppliers without any discrimination. The grievances that the petitioner, after receiving tfae order of supply, manufacttired the drugs and dispatched lt to the respondents and fhe saine was not accepted by the respondents, is a disputed question offact. 9. The scope of interference in writ petition under Article 226 of the Constitution has been dealt with in various judgments cited by the parties. 10. In fhe matter of Mahablr Anto Stores1, fhe petitloner was lubricant distributor of fhe respondent-Indian Oil Corporation. He was recognized as authon^d dealer, distributor and agent of the Corporation. However, the Corporation stopped supply of lubricants to the petitioners and when his representations were also not considered, fhe petition was ffled. The Hon?ble Supreme Court while dealing wifh maintainability of the above petition, held fhat in appropriate cases, action of the State or its instrumentalities, uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution. Where there is arbitrariness in State action of this type of enterii^ or not enterins into contracts, Article 14 springs up and judicial review strikes such an action down. Every action ofthe State execution authoritv must be @a f.<"^ !S>h^ 1 /' subject to rule of law and must be mformed by reasori. So, whatever be fhe activity or semi-monopoly dealings, it should nieet the test of Article 14 of fhe Constitution. If a Ckweminent action even in the inatters ofentering or not entering into contracts, faHs to s^isty fhe test of reasonableness, fhe same would be unreasonable. 11. In the matter of Kumari Shrilekha Vldvarthl -v- State ofU.?. and others2 also, fhe HonTile Supreme Court, refemng Vade's Administrative Law, 6ffa Ed., observed that fhe whole conception of iinfettered discretion is uiappropriate to a public authority, which possesses powers solely in order fhat it may use fhem for fhe public ^ood. In the later part of this judgment, it has been further obsenred fhat for the same reasons, there should, in principle, be no such thing as tin-reviewable administrative discretion, which should be iust as much a contradiction in tenns as unfettered discretion. The question which has to be asked is what is the scope ofjudicial review, and in a few special cases, the scope for the review of discretionary decisions may be minimal. It remains ariomatic that atl discretion is capable ofabuse, and that legal limits toevery power are to be found somewhere. 12; In (he matter of NaUoaal Hitdiways Authoritv of India -v- Ganea Baterprises and aaother4, the respondents participated in a tender process and submitted his bid. Along with his bid, he also fumished a bank guaranteeln thesum ofRs. 50 lacs as bid seciuity. The bank guarantee fumished was "on-demand bank guaTantee", s tycs*" which specificaUy provided that fhe bank guarantee could be enforced on demand, if fhe bidder withdraws his bid during the period of bid validity. On opening of the tender, the respondent was the highest bidder. The respondents withdrew his 'bid during validity of the offer. In these circumstances, the petitioner encashed fhe bank guarantee for Rs. 50 lacs. The respondents filed writ pgtition in the High Court for refund of fhe baiik guarantee amounfc The High Court raised two questions viz.:(a) whether fhe forfeitiire of security deposit was without aufhonty of law and without any binding contract between the parties and also contrary to Section 5 ofthe ContractAct; and (b) wheuier the writ petition was matntainable tn a claim arising out of a breach ofconteact. The High Coiut without considering the question (b), allowed the writ petition by holding fhat fhe offer was withdrawn before it was accepted. Ttius no completed contract had come into existence and it is always open to fhe parties to withdraw its offer before its acceptance. Allowing the appeal of the petitioner-authority, fhe HonTile Supreme Coiut observed that fhe High Court ought to have first answered the question (b) i.e. whether the writ petition was Diaintainable in a claim arising out of a breach of contract as it would go to fhe root of the matter. It has been fiirther observed that it is settled law fhat a dispute relating to contract cannot be agitated under Article 226 of the Constitution. Principles of law laid down in the matters of Kerala SEB -V- Kurien B. Kalathll6. State of U.P.-v- —^T—sys' fSBt ^;a: BridfiB aHd RoofCo. (Indiai Ltd.8. BareiUy Devefoomenfe Authorlty -v- Alal Pal SIafdi9 havealso beenreferred wifh approval. 13. However in the matter ofABL Internatlonal Ltd. and aaother 3 whfle dealing with maintainability'of a petition for enforcement of contractualobligation of State or its instrumentalities under Artide 226 of the Constitution of India, it has bekn held that on a groen set of facts if fhe State acts in arbitrary manner even in a matter of contract, an aggrieved party caa approach the Coiirt in a writ under Article 226 of fhe Constitution and the Gourt dependuig on facts of the said case is empowered to grant the relief. Wlien an instrumentality of the State acts contrary to public good and public interest, unfairly, unjusfly and imreasonably, in its contractual, constitutional or statutory obligations, it realfy acts contraiy to the constitutional guarantee found in Article 14 of the Constitution. Therefore, once the State or an instrumentality ofthe State is a party, it has an obligation in law to act fairly, justly and reasonabty to a contract which is the requirement of Article 14 ofthe Constitution. 14. In the matter of Food Corporatlon of India5, while considering the scope of interference wifh contTactual obligations under Ardcle 226 of the Constitution, it has been held in paragraph 5 of the judgmenf fhat:- -, - "We are of the view that the High Court was not justffied in quaslvng the impugned notice especicdly when the terms and 1996) 6 SCC 22 (1989) 2 SCC 116 /. ^^'- Y 0^ 10 15. conditions of the contract pemvctted the termination of the cigreement by either of the porties. The High Caurt shaidd not have gone into the quesUon of cantractucd obligcction m its writ jurisdiction under Art. 226 of the Constautwn. Even otherwise, the High Caurt imsread the documents on the record cmd gmssty erred in. reaching the condusion that no policy dedsion was taken by the FCI to termmate the stQrage agencies m the State of West Bengal. We may refer to some of the documents on the record.' In the matter of Kerala State EIectricltv Board and aaother -v- Kurien E. KalatfaU aad others6, ithas beeriheld that 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. The dispute arismg out of the terms of such contracts or alleged breaches has to be settled by the ordinary piindples of law of contract. The fact that one of the parties to the agreement is a statutory or public body wffl not of itself affect the principles to be applied. Statutoiy bodies like pnvate parties, have power to contract or deal with property. Such activities may not raise any issue of public law. 16. In the matter of State of Bihar aad others -v- Jaln Plastlrai aad Chemicals Ltd. 7, in para 3, it nas.been held thus:- •'Settled law- Writ is not the remedy for enforcir^ contractual ^obligations. It is to be reiterated that the writ petition under Article 226 is not flie proper proceeding for adjudicating such disputes. Under the law, it was open to the respondent to approach the Coiirt of competent ji.irisdiction for apprbpriate relief for breach of contract It is settled law that when an 11 altemative and eqiially efficacious remedy is open to the litigant, he shoiild be required to piirsue fhat rcmedy and not invoke the writ jiirisdiction of the Hi^i Court. Equally, the existence of altemative remedy does not affect thejurisdiction of the Court to issue writ, but ordinaiily fhat would be a good ground m refusing to exercise fhe discretion under Article 226." 17. From the principles of law laid down in the aforesaid judgment, it may be said fhat normalty writ is not the remedy for enforcing contracttiaJ obligations and petition under Article 226 of the Constifution is not the proper proceeding for adjudicating such disputes. When equally efficacious remedy is avaHable, he should pursue that remedy. However, while entertaming the objection as to maintamability of the writ petition under Article 226 of the Constitution oflndia, the fact to be bome in mind is that whether the State or its mstrumentalitv acts in arbitrary manner. When the State or its instnunentality acts contrary to pubUc good and public intenest, unfairty, unjustly and unreasonably, in its contra.ctual obligation, then Article 14 of the Constitution comes into play and the High Court having regard to fhe facts of the case has a discretion to entertata or not to entertain a writ petition. 18. If we scrutinize the facts of the present case in the l^ht of the law laid down by the HonT3le Supreme Court, we find that the departmgnt of Agriculture, Animal Husbandry of the State pf Chhattisgarh through its Director, Veterinary Services invited rates for vetermaiy drugs finrn manufactiu'ers. Rate ofiered by the petitioner was approved for certata drugs and the petitioner filled in 12 the Rate Contract Fonn. The offer was valid for a period upto 31st March, 2009. The Du'ector issued supply orders for medicines, however, fhe supplies made by fhe petitioner were not accepted by the respondents on fhe pretext 'that fhe rate contract was subsequently cancelled. It is also not in dispute that the conditions nientioned In the Rate Contract Fonn empower the Director to cancel the contra.et without assignir^ any reason. It is not the grievance of the petitioner that the contract has been cancelled with any malafide intention in a discrimmatory manner, on the contraiy, the stand of the respondents State is that fhe decision to cancel fhe rate contract with all the manufacturers was taken on fhe basis of the report of the Techmcal committee in the interest of the State exchequer and rate contracts wifh all fhe manufactiirers have been cancelled. 19. In view of the aforesaid facts and taking uito consideratlon that the terms and conditions of the contract authori2ed the Director to tenninate the contract witfaout ass^ning any reason and fhere is no aUegation of malafide in canceling the rate contract, we are of the opinion fhat the action of flie respondents in canceling the rate contract in the facts and circumstances <rf the case cannot be termed as arbitrary or a colourable exercise of power by the State. 20. So far as the allegations regaTding not aceepting fhe supplied medicines even after issuance of order of suppfy for tlie said medicines, is concemed, fhis disputed fact cannot be gone into in a writ petition under Article 226 of the Gonstitution of India as the ^£) 13 same involves disputed question of fact and decision of which requires recording of evidence. Even otherwise, the petitioner ui the instant petition has not sought any relief in this regard. 21. Consequentfy, the petition fails and the same is dismissed. Sd/- DBirendra Mishra Judge Sd;- Dflip Raosaheb Deshmukh Judge yi 1