Case: Verigamto Naveen Vs. Government of Andhra Pradesh and ors

agencies. We may advert to three decisions of this Court in M/s Dwarkadas Marfatia & Sons v. Board of Trustees of the Port of Bombay, 1989(3) SCC 293; Mahabir Auto Stores & Ors. v. Indian Oil Corporation & Ors., 1990(3) SCC 752; and Srilekha Vidyarthi v. State of U.P., AIr 1991 SC 537 . Where the breach of contract involves breach of statutory obligation when the order complained of was made in exercise of statutory power by a statutory authority, though cause of action arises out of a pertains to contract, brings within the sphere of public law because the power exercised is apart from contract. The freedom of the Government to enter into business with anybody it likes is subject to the condition of reasonableness and fair play as well as public interest. After entering into a contract, in cancelling the contract which is subject to terms of the statutory provisions, as in the present case, it cannot be said that the matter falls purely in a contractual field. Therefore, we do not think it would be appropriate to suggest that the case on hand is a matter arising purely out of a contract and, therefore, interference under Article 226 of the Constitution is not called for. This contention also stands rejected.21. The fact that the cancellation of sub-leases or withdrawal of consent being void flowing from the order of the Full Bench decision of the High Court has also been noticed by this Court in its interim order dated 6.10.1994 and hence the High Court proceeding on that basis in its order is not incorrect.22. There was, therefore, no impediment for the High Court to find out whether there is breach of contract so as to enable the parties to claim damages or the liability of the Corporation or the Government to make good the same. 23. For the sake of convenience, we will proceed to examine first the question as to the exercise of discretion by the High Court in extending the period of lease or sub-lease after its original period had expired. 24. In Kalayanpur Lime Works Ltd. v. State of Bihar & Anr., AIR 1954 SC 165 , the Government had entered into a contract with lime Company and when it entered into the said contract it had an imperfect title inasmuch as it could not grant a fresh lease to anyone during the existence of the previous lease in favour of another party and when the lease in favour of the another party expired the impediment in the way of the Government to grant stood removed and the Lime Companys right to get the lease revived in its favour was urged. It was held that though Section 18 of the Specific Relief Act, 1877 was attracted to the case but as substantial period of lease had already expired, relief could be given only under Section 15 of the Specific Relief Act. Therefore, in that case this Court did not think that it was a fit case for grant of decree for specific performance as there are only a few months left before unexpired portion of the lease will run out. Indeed by the time the lease comes to be extended in pursuance of the Courts order it would be scarcely worthwhile to carry on quarrying operations. 25. There are at least three weighty reasons as to why the period of sub-lease could not have been extended after the expiry of period of original lease and they are :- (i) In most of the present cases, the interruptions in respect of which the claim is made is for a period of about 10 months and in one other case an additional period of 6-1/2 months. In some cases the lease having expired as early as in the year 1995 or in others in 1998, it would not be appropriate to direct the extension of lease in the year 2001 particularly when the sub-leases have expired as a result of which the parties have to reestablish their infrastructure and put in great deal of logistical support though for a short period once over again, to work the mines which will have a pernicious effect on the mines and the parties concerned.(ii) The claim for renewal of leases has been refused already as the policy of the Government is not to grant lease or sub-lease in favour of private parties. Now to ask to the Government to enter into fresh contracts will be contrary to its policy.(iii) When several malpractices had been pointed out by House Committee, it would not be in public interest to extend the period of lease which will perpetuate the same. 26. therefore, the High Court ought not to have exercised its discretion for extension of period of sub-lease. 27. For the reasons aforesaid, we think, it would be appropriate to set aside the order made by the High Court and allow these appeals to the extent the High Court has granted the relief of extension of the sub-leases. 28. Insofar as claim for damages is concerned, it is unnecessary for us to decide the same inasmuch as it would be appropriate for the parties to work out their respective rights by making an appropriate claim in a civil suit to b filed by the each one of them. We have refused the relief of restitution by way of extension of lease period without examining the question as to whether there is breach of contract as a consequence of which the party aggrieved is entitled to damages. That aspect is left open to be considered or be dealt with in the civil suit irrespective of and uninfluenced by the observations or findings of the High Court on this aspect. If such a civil suit is filed, the cause of action should be reckoned only from the date of this order when we finally pronounced upon the rights of the parties, which protection will adequately take care of the interests of the writ petitioners.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]19. Under Section 4A of the Act the restriction to grant lease without permission of the Central Government is upon the State Government and not upon the Corporation to which the State Government had already granted lease. Hence, lease being void ab initio would not arise. The content to grant the sub0leases had been given a long before to coming into force of the amendment to Rule 37 of the Rules and inasmuch as in all sub-leases (except in the case of V. Ramalingaiah, which came into existence only in the month of May, 1991, i.e., after 20.2.1991, the date of amendment) this amended rule which required a prior approval of the Central Government is not required and, therefore, the contention that the sub-leases are valid ab initio would not arise. Therefore, the view taken by the Full bench on this aspect is correct.20. On the question that the relief as sought for and granted by the High Court arises purely in the contractual field and, therefore, the High Court ought not to have exercised its power under Article 226 of the Constitution placed very heavy reliance on the decision of the Andhra Pradesh High Court in Y.S. Raja reddy v. A.P. Mining Corporation Ltd., 1988(2) ALT 722, and the decisions of this Court in Harshankar v. Deputy Excise & Taxation Commissioner, 1975(1) SCC 737; Radhakrishna Agarwal v. State of Bihar, AIr 1977 SC 1977 SC 1496; Ram Lal & Sons v. State of Rajasthan, AIR 1976 SC 54 ; Shiv Shankar Dal Mills v. State of haryana, AIr 1980 SC 1037 ; Ramana v. I.A. Authority of India, AIR 1979 SC 1628 ; Basheeshar Nath v. Income Tax Commissioner, AIr 1959 SC 149 . Though there is one set of cases rendered by this Court of the type arising in Radhakrishna Agarwals case, much water has flown in the stream of judicial review in contractual field. In cases where the decision making authority exceeded its statutory power or committed breach of rules or principles of natural justice in exercise of such power or its decision is perverse or passed an irrational order, this Court has interceded even after the contract was entered into between the parties and the Government and its agencies. We may advert to three decisions of this Court in M/s Dwarkadas Marfatia & Sons v. Board of Trustees of the Port of Bombay, 1989(3) SCC 293; Mahabir Auto Stores & Ors. v. Indian Oil Corporation & Ors., 1990(3) SCC 752; and Srilekha Vidyarthi v. State of U.P., AIr 1991 SC 537 . Where the breach of contract involves breach of statutory obligation when the order complained of was made in exercise of statutory power by a statutory authority, though cause of action arises out of a pertains to contract, brings within the sphere of public law because the power exercised is apart from contract. The freedom of the Government to enter into business with anybody it likes is subject to the condition of reasonableness and fair play as well as public interest. After entering into a contract, in cancelling the contract which is subject to terms of the statutory provisions, as in the present case, it cannot be said that the matter falls purely in a contractual field. Therefore, we do not think it would be appropriate to suggest that the case on hand is a matter arising purely out of a contract and, therefore, interference under Article 226 of the Constitution is not called for. This contention also stands rejected.21. The fact that the cancellation of sub-leases or withdrawal of consent being void flowing from the order of the Full Bench decision of the High Court has also been noticed by this Court in its interim order dated 6.10.1994 and hence the High Court proceeding on that basis in its order is not incorrect.22. There was, therefore, no impediment for the High Court to find out whether there is breach of contract so as to enable the parties to claim damages or the liability of the Corporation or the Government to make good the same.