Case: Indian Explosives Ltd. &amp; Another Vs. Coal India Ltd. &amp; Others

The appellants in the three appeals who had approached the High Court under Article 226 of the Constitution of India have beend on the ground that the contract entered into by them with the Coal India Ltd. for supply of explosives was in the realm of a private contract involving no public law element and, hence, not amenable to scrutiny in the exercise of jurisdiction under Article 226 of the Constitution. Aggrieved these appeals have been filed.

Reasoning: 6. This Court has consistently taken the view that a private contract entered by the State, so long as it disclose a public law element would have to meet the test of Article 14 of the Constitution of India so far as its terms and conditions and application thereof are concerned. In view of the Corporate structure (shareholdings) of Coal India Limited and the decision of this Court in Coal India Ltd. (supra), we do not see how the fairness of the actions of Coal India Limited called into question in the writ petitions would not be liable to be tested on the anvil of Article 14 of the Constitution of India if we are to hold that the unilateral insertion of the supplementary clause in the contract between the parties amounted to a novation of the contract and the changed terms have been given effect to the prejudice of the appellant7. Having perused Clause XV of the Original agreement and the Supplementary Clause (extracted above) we are inclined to hold that the Supplementary Clause clearly travels beyond the intent of the parties as expressed in the original agreement. The said clause has been thrust upon the contractor(s) and has been worked, as subsequent events discloses, to his/its detriment. The State cannot be expected to conduct its affairs even in commercial matters in a manner which expressly negates the mandate of Article 14 of the Constitution. In the present case, not only that, the supplementary clause has been given retrospective effect from the date of the original agreement8. It is, therefore, our considered view that the supplementary clause constitutes a novation of the contract which could not have been done unilaterally and such unilateral action on the part of the Coal India Limited violates Article 14 of the Constitution of India and, therefore, liable to correction in exercise of the writ jurisdiction. No question of appreciation of evidence can and does arise to answer the above question which to us ist from a mere examination of the two clauses in question. If the action of the State is per se arbitrary as we are inclined to hold in the present case we do not think it to be in consonance with the cause of justice to relegate the aggrieved party to an alternative remedy as has been done by the High Court. To secure justice is the ultimate aim of all principle of law and we must hold accordingly.