PETITIONER:
RADHAKRISHNA AGARWAL & ORS.
Vs.
RESPONDENT:
STATE OF BIHAR & ORS.
DATE OF JUDGMENT17/03/1977
BENCH:
BEG, M. HAMEEDULLAH (CJ)
GUPTA, A.C.
KAILASAM, P.S.
CITATION:
1977 AIR 1496 1977 SCR (3) 249
1977 SCC (3) 457
ACT
Constitution of India, 1950-- Article 226 cannot be
invoked for alleged breaches of contract--Remedy lies
through ordinary civil suit for damages.
Constitution of India, 1950--Article 14--Discrimination
should be alleged at the stage of entry into the contractual
area to attract the application of Art. 14.
Constitution of India, 1950--Articles 298 and 299--Scope
of--Whether the State has any special obligations and privi-
leges attached to it even when it acts within the contractu-
al field.
Plea for adjournment of the hearing of the case until
after the emergency is lifted--Stay orders presumably ob-
tained earlier on representation made that no aspect of
enforcement of Art. 14 of the Constitution was
involved--Propriety of the continuance of stay.
HEADNOTE
A contract called a "lease" to collect and exploit sal-
seeds from forest area was entered into in 1970, between the
respondent State and the appellants in 1970. Clause (3) in
the written contract executed in accordance with the provi-
sions of Art. 299 of the Constitution provided for the
revision of the. rate of royalty at the expiry of every
three years in consultation with the lessee and was to be
binding on the lessee.. Under clause (4) of the. lease, the
lessee. had to establish a factory within the, State of
Bihar for processing of sal-seeds and extraction of oil
therefrom within a period of five. years from the date. of
the, agreement, failing which the agreement itself was to
terminate. In 1974, the respondent State revised the rate
of royalty payable, by the appellants and after that, can-
celled the lease by a letter dated 15th, March 1975. The
writ petitions challenging the said orders were dismissed by
the Patna High Court. On appeals by certificates, the
appellants contended: (i) the State acting in its executive
capacity through its Government or its officers even in the
contractual field cannot escape the obligation imposed upon
it by Part III of the Constitution; (ii). Article 14 of the
Constitution has been infringed and (iii) Principles. of
natural justice have. been violated as no opportunity to
show cause against the cancellation of lease was given.
Dismissing the appeals the Court,
HELD: (1) Article. 14 of the Constitution imports a
limitation or imposes an obligation upon the States execu-
tive power under Art. 298 of the Constitution. The rule of
law which regulates. the operation are organs of Government
functioning under the Constitution is that all constitution-
al powers carry’ corresponding obligations with them. [254
E-F]
Erusian Equipment & Chemicals Ltd. v. State of West
Bengal and Anr. 1975(2) SCR 674 at 677, referred to.
(2) The State acts purely in its executive capacity and
is bound by the obligations which dealings of the State with
the individual citizens import into every transaction en-
tered into in exercise of its constitutional powers, only at
the time of entry into the field of consideration of per-
sons with whom the Government could contract at all. But,
after the State or its agents have entered into the field of
ordinary contract the relations are no longer governed by
the constitutional provisions but by the legally valid
contract which determines rights and obligations of the
parties inter se. [255 C-D]
250
(3 ) Article 14 or of any other constitutional provision
is not violated when the State or its agents purporting to
act within the contractual field perform. any act. In this
sphere they can only claim rights conferred upon them by
contract and are bound by the terms of the contract only
unless some statute steps in and confers some special statu-
tory power or obligation on the State in the contractual
field which is apart from contract. In the instant case,
the contracts do not contain any statutory terms or obliga-
tions and no statutory’ power or obligation which could
attract the application of Art. 14 of the Constitution is
involved. [255 D-E, 260 E-F]
(4) The doctrine of discrimination cannot be availed of
against the State’s action purporting to be taken solely
within the contractual field when no aspect of any statutory
or constitutional obligation appears either from incontro-
vertible facts or of facts. The appellants’, cases do not
raise any question of discrimination alleged at the stage of
entry into the contractual area which could attract the
application of Article 14. [258 F-G, 259 A]
C.K..Achuthan v. State of Kerala and Ors. 1959 Supp. (1)
SCR 787, applied.
Erusian Equipment & Chemicals v. State of West Bengal &
Ant. (1975) SCR 674, distinguished.
(5) Before any adjudication on the question whether
Article 14 of the Constitution could possibly be held to
have been violated as between persons governed by similar
contracts, they must be properly put in issue and estab-
lished. The question whether Article 14 could at all be
held to operate within the. contractual field whenever the
State enters into such contracts is such that it cannot be
decided without a detailed adduction of evidence which is
only possible in ordinary civil suits, to establish that the
State, acting in its executive capacity through its offi-
cers, has discriminated between parties identically situat-
ed. In the instant case allegations on which a violation of
Art. 14 could be based are neither properly made nor estab-
lished. It is the contract and not the executive power
regulated by the Constitution which governed the relations
of the parties. [259 A-D]
(6) Proceedings under Art. 226 are, summary proceedings
reserved for extraordinary cases where the exceptional and
what are described perhaps not quite accurately as "preroga-
tive" powers of the court are invoked. If the facts are
disputed and require assessment of evidence, the correctness
of which can only be tested satisfactorily by taking de-
tailed evidence involving examination and cross-examination
of witnesses, the case could not be conveniently or satis-
factorily decided in proceedings under Art. 226 of the
Constitution. Even in cases where the question is of choice
or consideration of competing claims before an entry into
the field of contract facts have to be investigated and
found before the question of violation of Art. 14 could
arise. The appellants’ cases are not such in which powers
under Article 226 of the Constitution could be invoked. [255
E-G]
Lekhraj Satnam Das Lalvani v.M.M. Shah, Deputy Custodi-
an-cum-Managing Officer AIR 1966 SC 334; Banchhanidhi Rath
v. The State of Orissa & Ors. AIR 1972 SC 843 @ 845 and Har
Shankar & Ors. etc. etc. v. The Dy. Excise. & Taxation
Corotar. & Ors. 3 (1975) 3 SCR 254 @ 265, reiterated.
D.F. South Kheri v. Ram Sangi Singh AIR 1973 SC 205;
K.N. Guruswamy v. State of Mysore, AIR 1954 SC 592; Calcutta
Gas Co. (Proprietary) Ltd. v. State of West Bengal & Ors.
AIR 1962 SC 1044; Basheshat Nath v. Commissioner of Income
Tax, 1959 Supp. (1) SCR 528; State of M.P. v. Thakur Bharat
Singh 1967(2) SCR 454 and S.S. Sawhney v.D. Ramarathnam,
Assistant Pass port Officer, Govt. of India, New Delhi &
Ors. 1967 (3) SCR 525, held not applicable.
(7) The Patna High Court had very rightly divided the
types of cases in which breaches of alleged obligation by
the State or its agents can be set up into three types: (i)
Where a petitioner makes a grievance of breach of an obliga-
tion of the State in cases where on an assurance or repre-
sentation of, the State, he has acted to his prejudice and
detriment but the agreement is
251
short of a contract within the meaning of Art. 299 of the
Constitution; (ii) Where the contract entered into between
the person aggrieved and the State is in exercise of a
statutory power under certain Act or Rules framed thereunder
and the petitioner alleges a breach on the part of the
State; (iii) Where the contract entered into between the
State and the person aggrieved is nonstatutory and purely
contractual and the rights and liabilities of the parties
are governed by the terms of the contract and the petitioner
complains about breach of such contract by the State. The
High Court rightly held that the appellants cases should be
placed in the third category where questions of pure alleged
breaches of contract are involved and that no writ or order
can issue under Article 226 of the Constitution in such
cases to compel the authorities to remedy a breach of con-
tract pure and simple [255 H, 256 A-B, F-G]
Umakant Saran v. The State of Bihar AIR. 1973 SC 964 and
Lekhraj Satram Das v. N.M. Shah AIR 1966 SC 334, followed.
B.K. Sinha v. State of Bihar AIR 1974 Patna 230, approved.
Union of India v. M/s. Anglo-Afgan Agencies AIR 1968 SC
718; Century Spinning and Manufacturing Company Ltd. v.
Ulhasnagar Municipal Council AIR 1971 SC 1021; Robertson v.
Minister of Pensions (1949)(1) K.B. 227; K.N. Guruswamy v.
State of Mysore AIR ;1954 SC 592; D.F. South Kheri v. Ram
Sanghi Singh AIR 1973 SC 205; M/s. Shrikrishna Gyanaday
Sugar Ltd. v. The State of Bihar AIR 1975 Patna 123, distin-
guished and held inapplicable.
(8) The object of the appellants is to hold up any
adjudication on the cases, by taking shelter behind Article
14 so that the stay orders obtained by them may continue..
To accede to the prayer to adjourn the hearing of the cases
until after the emergency is lifted and yet to continue the
stay orders is to permit circumvention of the constitutional
mandate contained in Art. 359 and to countenance gross abuse
of the process of the court. [259 D-E]
(9) The interim stay or order or injunction could not be
justified at all because so long as the Presidential Order
under Art. 359 of the. Constitution is operative, the en-
forcement of Fundamental Rights falling under Art.14 of the
Constitution is suspended. In such cases even if a petition
or a suit is entertained and can be pending no stay order
could be passed because that would amount to indirectly
enforcing the Fundamental Rights conterred by Art. 14 of the
Constitution. It is only where a prima facie case for an
injunction of stay can be made out, uqite apart from a right
governed by Art. 14 of the Constitution or of any other
Fundamental Rights whose enforcement may have been suspend-
ed, that an injunction could be granted at all in suitable
cases on suitable terms. [260 C-E]
Additional District Magistrate, Jabalpur v. Shivkant
Shukla AIR 1976. SC 1207 @ 1288--1976 Supp. SCR, 172 re-
ferred to.
(10) The appellants are not entitled to an opportunity
to show cause against the cancellation of the leases. The
question of distinguishing between an administrative and
quasi-judicial decision can only arise in the exercise of
powers exercised under statutory provisions. Rules of
natural justice are attached to the performance of certain
functions regulated by statutes or rules made thereunder
involving decisions affecting rights of parties. When a
contract is sought to be terminated by the officers of the
State purporting to act under the terms of an agreement
between parties, such action is not taken in purported
exercise of an agreement between parties, such action is not
taken in purported exercise cannot operate upon powers which
are governed by the terms of an agreement exclusively. The
only question which normally arises in such cases is whether
the action complained of is or is not in consonance with the
terms of the agreement. [259 F-H, 260 C]
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 227 and
228/ 1976.
(From the Judgment and Order dated 8-1-1976 of the Patna
High Court in C.W.J.C. No. 1053 and 1054 of 1975).
252
L.M. Singhvi, Sri Narain and K.J. John, for the appellants.
L.N. Sinha, Sol. Genl. U.P. Singh and Shambhu Nath Jha,
for the respondents.
The Judgment of the Court was delivered by
BEG, C.J. These appeals are before us after certifica-
tion of the cases, raising identical questions of law as fit
for appeal to this Court, dealt with by one judgment and
orders of a Division Bench of the, Patna High Court on two
writ petitions. The petitions were directed against orders
of the State Government passed in 1974 revising the rate of
royalty payable by the petitioners appellants under a lease
of 1970, and, after that, cancelling the lease by a letter
of’ 15th March, 1975. The petitioners’ case was that the
revision of the rate of royalty payable by the petitioners
for the lease to, collect and exploit sal-seeds from the
forest area was illegal during the subsistence of the lease,
and thereafter, cancellation of the lease itself was illegal
for various reasons.
Primarily, the case of the petitioners is that of a
breach of contract for which the State would be liable
ordinarily to pay damages if it had broken it. If the
petitioners could establish some right, either contrac-
tual or equitable, to continue in possession, the State
could be prevented, by appropriate proceedings, from ousting
the petitioners from the forest land from which the peti-
tioners have been gathering sal-seeds. The petitioners had
also set up mala fides on the part of the Conservator of
Forests, in enhancing the royalty unreasonably and then
cancelling the lease, allegedly acting under the influence
of friends and associates of the Forest Minister of Bihar.
The relevant clause relating to revision of royalty in
the written contract reads as follows :--
"The rate of royalty will be revised every
three years’ cycle in consultation with the
lessee and the decision will be binding on the
lessee".
Apparently, there is no restriction, under the terms of
the contract, upon the amount by which the royalty could be
increased by a revision after a three years’ cycle under
this clause. The lessee is only entitled, under the con-
tract, to be consulted before a revision. But, the decision
of the Governmental authorities to enhance is binding
upon him after that. Hence, if this was the only term of
the contract on this question, the petitioners could not
complain of unreasonable enhancement in the revised rate of
royalty.
Under clause 4 of the lease, the lessee had to establish
a factory within the State of Bihar for processing of sal-
seeds and extraction of oil therefrom within period of five
years from the date of the agreement, failing which the
agreement itself was to terminate. The questions which
apparently arose appertained to action alleged by the State
to fall within the terms of the agreement between the par-
ties regulated by the duly signed contract which was presum-
ably executed in compliance with the provisions of Article
299 of the Constitution. Prima facie, therefore, the appel-
lants can only get their
253
remedies, if they can obtain any at all, through ordinary
suits for damages or for injunctions to restrain breaches of
contract provided they could show how the contracts were
broken or were going to be broken.
The writ petitions, however, raise questions relating
not only to action lying within the sphere regulated by the
law of contract, but, according to the petitioners, by
constitutional provisions relating to the exercise of the
executive powers of the State Government contained in Arti-
cle 298 which reads as follows :--
"298. The executive power of the Union and of
each State shall extend to the carrying on of
any trade or business and to the acquisition,
holding and disposal of property and the
making of contracts for any purpose:
Provided that--
(a) the said executive power of the Union
shall, in so far as such trade or business or
such purpose is not one with respect to which
Parliament may make laws, be subject in each
State to legislation by the State; and
(b) the said executive power of each State
shall, in so far as such trade or business or
such purpose is not one with respect to which
the State Legislature may make laws be subject
to legislation by Parliament".
It is urged vehemently by Dr. L.M. Singhvi, appearing on
behalf of the petitioners-appellants, that the State, acting
in its executive capacity through its Government or its
officers, even in the contractual field, cannot escape the
obligations imposed upon it by Part III of the Constitution.
The only article, however, in Part III of the Constitution
relied upon by Dr. Singhvi is Article 14 which says:
"14. The State shall not deny to any
person equality before the law or the equal
protection of the laws within the territory of
India".
It can be and has been urged on behalf of the State that
Governmental authorities when acting in the contractual
field, could not be controlled by Article 14 of the Consti-
tution at all. When the State had entered into contracts
with citizens who carry on their trade and pay the royal-
ties. In accordance with the agreements reached between
the State and citizens, it does not exercise any special
governmental or statutory powers. In such cases, the State
as well as the citizen with whom it contracts are both
equally subjected to the law of contract. It has been urged
on behalf of the respondent State that there has been nO
breach of contract in the cases before us. The State is,
according to the learned Solicitor General, appearing for
the State of Bihar, not claiming to be above the law of
contract governing all parties which subject themselves to
the law of contract. The dispute whether there is or there
i.s not a breach of contract should, according to the con-
tention on behalf of the State, be determined by ordinary
civil courts as in every case
254
between ordinary litigants who cannot invoke the powers of
the High Courts under Article 226 of the Constitution simply
because there is a dispute whether an agreement has been
broken or not. Equal subjection of all parties, including
the State, to the same procedural requirements, when such
disputes are to be adjudicated upon, means that the State
should be placed on the same footing as an ordinary liti-
gant. It should neither enjoy special benefits and privi-
leges, nor be subjected to special burdens and disadvan-
tages. This should, it is urged, follow from a strict
application of Article 14 if the State were to be, as a
party to a contract and a litigant, placed on the same
footing as other .parties who enter into such contracts. It
is true that the special provisions of Article 299 of the
Constitution are there to protect public interest so that
’the contracts by or on behalf of the Government have to
comply with the special requirements of form. But, once the
State enters into the contractual sphere after the require-
ments of form, contained in Article 299, have been complied
with, does it have to take its place, in the eye of law,
side by side with ordinary parties and litigants or has it
any special obligations or privileges attached to it even
when it acts within this field ?
Dr. Singhvi’s argument that the State Government had
some special obligations attached to it would have appeared
more plausible if it could be shown that the State or its
officers or agents had practised some discrimination against
the petitioners-appellants at the very threshold or at the
time of entry into the field of contract so as to exclude
them from consideration when compared with others on any
unreasonable or unsustainable ground struck by Article 14 of
the Constitution. It is true that the Article 14 of the
Constitution imports a limitation or imposes an obligation
upon the State’s executive power under Article 298 of the
Constitution. All constitutional powers carry corresponding
obligations with them. This is the rule of law which regu-
lates the operation of organs of Government functioning
under a Constitution. And, this is exactly what was meant
to be laid down by this Court in Erusian Equipment & Chemi-
cals Ltd. v. State of West Bengal & Anr.,(1) on which
learned counsel for the appellants sought to rely strongly.
It was held there (at p. 677) :--
"Under Article 298 of the Constitution the
Executive power of the Union and the State
shall extend to the carrying on of any trade
and to the acquisition, holding and dis-
posal of the property and the making of con-
tracts for any purpose. The State can carry
on executive function by making a law or
without making a law. The exercise of such
powers and functions in trade by the State is
subject to Part HI of the Constitution.
Article 14 speaks. of equality before the law
and equal protection of the laws. Equality of
opportunity should apply to matters of public
contracts. The State has the right to trade.
The State has therefore the duty to observe
equality. An ordinary individual
(1) [1975] 2 S.C.R. 674 at 677.
255
can choose not to deal with any person. The
Government cannot choose to exclude persons by
discrimination. The order of black-listing
has the effect of depriving a person of equal-
ity of opportunity in the matter of public
contract. A person who is on the approved list
is. unable to enter into advantageous rela-
tions with the Government because of the order
of black-listing. A person who has been
dealing with the Government in the matter of
sale and purchases of materials has a legiti-
mate interest or expectation. When the State
sets to the prejudice of a person it has to be
supported by legality".
It is thus clear that the Erusian Equipment & Chemicals
Ltd.’s case (supra) involved discrimination at the very
threshold or at the time of entry into the field o,f consid-
eration of persons. with whom the Government could contract
at all. At this stage, no doubt, the State acts purely in
its executive capacity and is bound by the obligations which
dealings of the State with the individual citizens import
into every transaction entered into in exercise of its
constitutional powers. But, after the State or its agents
have entered into the field of ordinary contract, the rela-
tions are no longer governed by the constitutional provi-
sions but by the legally valid contract which determines
rights and obligations of the parties inter se. No question
arises of violation of Article 14 or of any other constitu-
tional provision when the State of its agents, purporting to
act within this field, perform any act. In this sphere,_
they can only claim rights conferred upon them by contract
and are bound by the terms of the contract only unless some
statute steps in and confers some special statutory power or
obligation on the State in the contractual field which is
apart from contract.
In the cases before us the contracts do not contain any
statutory terms or obligations and no statutory power of
obligation which could attract the application of Article
14 of the Constitution is involved here. Even in cases
where the question is of choice or consideration of compet-
ing claims before an entry into the field of contract facts
have to be investigated and found before the question ,of a
violation of Article 14 could arise. If those facts are
disputed and require assessment of evidence the correctness
of which can ,only be tested satisfactorily by taking de-
tailed evidence, involving examination and cross-examina-
tion of witnesses, the case could not be conveniently or
satisfactorily decided in proceedings under Article ’226 of
the Constitution. Such proceedings are summary proceedings
reserved for extraordinary cases where the exceptional and
what are described as, perhaps not quite accurately, "pre-
rogative" powers of the Court are invoked. We are certain
that the cases before us are not such in which powers under
Article 226 of the Constitution could ’be invoked.
The Patna High Court had, very rightly divided the types
of cases ’in which breaches of alleged obligation by the
State units agents can be set up into three types. These
were stated as follows :--
"(i) Where a petitioner makes a grievance
of breach of promise on the part of the State
in cases where an assurance
256
or promise made by the State he has acted to
his prejudice and predicament, but the agree-
ment is short of a contract within the meaning
of article 299 of the Constitution;
(ii) Where the contract entered into
between the person aggrieved and the State is
in exercise of a statutory power under certain
Act or Rules framed thereunder and the
petitioner alleges a breach on the pan of
State; and
(iii) Where the contract entered into
between the State, and the person aggrieved is
non-statutory and purely contractual and the
rights and liabilities of the parties are
governed by the terms of the contract, and the
petitioner complains about breach of such
contract by the State."
It rightly held that the cases such as Union of India v.
M/s. AngloAfghan Agencies,(1) and Century Spinning & Manu-
facturing Co. Ltd. v. Ulhasnagar Municipal Council(2); and
Robertson v. Minister of Pensions,(3) belong to the first
category where it could be held that public bodies or the
State are as much bound as private individual are to carry
out obligations incurred by them because parties seeking to
bind the authorities have altered their position to their
disadvantage or have acted to their detriment on the
strength of the representations made by these authorities.
The High Court thought that in such cases the obligation
could sometimes be appropriately enforced on a Writ Petition
even though the obligation was equitable only. We do not
propose to express an opinion here on the question whether
such an obligation could be enforced in proceedings under
Article 226 of the Constitution now. It. is enough to
observe that the cases before us do not belong to this
category.
The Patna High Court also distinguished cases which
belong to the second category, such as K.N. Guruswami v. The
State of Mysore;(4) ’ D.F. South Kheri v. Ram Sanehi
Singh;(5) and M/s. Shree Krishna Gyanoday Sugar Ltd. v. The
State of Bihar,(6) where the breach complained of was of a
statutory obligation. It correctly pointed out that the
cases before us do not belong to this class either.
It then, very rightly, held that the cases now before us
should be placed in the third category where questions of
pure alleged breaches of contract are involved. It held,
upon the strength of Umakant Saran v. The State of Bihar;(7)
and Lekhrai Sathram Das v.N.M. Shah;(8) and B.K. Sinha v.
State of Bihar(9) that no writ order can issue under
Article 226 of the Constitution in such cases "to compel the
authorities to remedy are a breach of contract pure and
simple".
(1) A.I.R. 1968 S.C. 718.
(2) A.I.R. 1971 S.C. 1021.
(3) [1949] 1 King’s Bench 227.
(4) A.I.R. 1954 S.C. 592.
(5) A.I.R. 1973 S.C. 205.
(6) A.I.R. 1975 Patna 123.
(7) A.I.R. 1973 S.C. 964.
(8) A.I.R. 1966 S.C. 334.
(9) A.I.R. 1974 Patna 230.
257
Learned counsel for the appellants has, however, relied
upon a passage from Lekhraj Sathram Das’s case (supra)
where this Court observed (at p. 231);
" .... until and unless in the breach is
involved violation of certain legal and public
duties or violation of statutory duties to the
remedy of which the petitioner is entitled by
issuance of a writ of mandamus, mere breach of
contract cannot be remedied by the Court in
exercise of its powers under Article 226 of
the Constitution".
Learned counsel contends that in the cases before us
breaches of public duty are involved. The submission made
before us is that, whenever a State or its agents or offi-
cers deal with the citizen, either when making a transaction
or, after making it, acting in exercise of powers under the
terms of contract between the parties, there is a dealing
between the State and the citizen which involves performance
of "certain legal and public duties." If we were to accept
this very wide proposition every case of a breach of con-
tract by the State or its agents or its officers would call
for interference under Article 226 of the Constitution.
We do. not consider this to be a sound proposition at all.
Learned counsel for the appellants cited certain author-
ities in an attempt to support his submission that the State
and its Officers are clothed with special Constitutional
obligations, including those under Article 14 of the Consti-
tution, in all their dealings with the public even when a
contract is there to regulate such dealings. The authori-
ties cited were: D.F. South Kheri v. Ram Sanehi Singh
(supra) where all that was decided, relying upon K.N. Gurus-
wamy v. The State of Mysore (supra), was that, where the
source of a right was contractual but the action complained
of was the purported exercise of a statutory power, relief
could be claimed under Article 226; and, Calcutta Gas Co.
(Proprietary) Ltd. v. State of West Bengal & Ors,(1)
where the real question considered was whether the petition-
er had a locus standi to question the validity of an enact-
ment; Basheshat Nath v. The Commissioner of Income Tax,
Delhi & Rajasthan and Anr.,(2) which has nothing to do with
any breach of contract but only lays down that "Article 14
protects us from both legislative and administrative tyranny
of discrimination"; State of M.P. & Anr. v. Thakur Bharat
Singh.(3) which lays that even executive action must not be
exercised arbitrarily but must have the authority of law to
support it; S.S. Sawhney v.D. Ramarathnam, Assistant Pass-
port Officer. Govt. of India, New Delhi & Ors.,(4) which
repeats requirements of action which satisfy Article 14 and
21 of the Constitution where compliance with these provi-
sions is obligatory.
A.I.R. 1962 S.C. 1044.
(2) [1959] Suppl. 1 S.C.R. 528 at 551.
(3) [1967] 2 S.C.R. 454.
(4) [1967] 3 S.C.R. 525.
2--4365CI/77
258
We do not think that any of these cases could assist the
appellants or is at all relevant. None of these cases lays
down that, when the State or the officers purport to operate
within the contractual field and the only grievance of the
citizen could be that the contract between the parties is
broken by the action complained of, the appropriate remedy
is by way of a petition under Article 226 of the Constitu-
tion and not an ordinary suit. There is a formidable array
of authority against any such a proposition. In Lekhraj
Sathramdas Lalwani v. M.M. Shah, Deputy Custodian-cum-
Managing Officer, Bombay & Ors., (supra) this Court said
(at p. 337);
"In our opinion, any duty or obligation
falling upon a public servant out of a con-
tract entered into by him as such public
servant cannot be enforced by the machinery
of a writ under Art. 226 of the Constitution".
In Banchhanidhi Rath v. The State of Orissa & Ors(1) this
Court declared (at p. 845):
"If a right is claimed in terms of a
contract such a right cannot be enforced in a
writ petition."
In Har Shankar & Ors. etc. etc. v. The Dy. Excise & Taxation
Commr. & Ors.,(2) a Constitution Bench of this Court ob-
served (at p. 265): "The appellant have displayed ingenuity
in their search for invalidating circumstances but a writ
petition is not an appropriate remedy for impeaching con-
tractual obligations".
Learned Solicitor General, appearing for the State,
contended that there could be no aspect of Article 14 of the
Constitution "involved in a case where no comparison of the
facts and circumstances of a particular petitioner’s case
with those of other persons said to be similarly situated
is involved. In such a case, he submitted, there was no
possibility of inferring a discrimination. In reply,
learned counsel for the appellants sought to direct our
attention towards some allegations showing that there was
discrimination between appellants and other parties gov-
erned by similar contracts in other areas. We doubt very
much whether the doctrine of discrimination can be at all
availed of against the State’s section purporting to be
taken solely within the contractual field when n6 aspect of
any statutory or ConStitutional obligation appears either
from incontrovertible facts or applicable legal provisions.
Indeed, it has been held fin C.K. Achutan v. State of ’Ker-
ala & Ors.,(3) that no question of a violation of Article 14
arises even where one out of the several persons’ is: se-
lected by the State for a particular contractual transac-
tion. Learned counsel for the appellants submitted that
there was a conflict between what was laid down here and the
law declared by this Court in Erusian Equipment &
Chemicals .Ltd.’s case (supra). We think that the two cases
are distinguishable on facts. The propositions of law laid
down in the two cases must be read in the context of facts
established in each case. In any event,
A.I.R. 1972 S.C. 843 at 845.
(2) [1975] 3 S.C.R. 254 at 265
(3) [1959] Suppl. (1) S.C.R. 787.
259
the cases before us do. not raise any question of discrimi-
nation alleged at the stage of entry into the contractual
area which could attract the application of Article 14.
In the cases.before us, allegations on which a violation
of Article 14 could be based are neither properly made nor
established. Before any adjudication on the question wheth-
er Article 14 of the Constitution could possibly be said to
have been violated, as between persons governed by similar
contracts, they must be properly put in issue and estab-
lished. Even if the appellants could be said to have raised
any aspect of Article 14 of the Constitution and this Arti-
cle could at all be held to operate within the contractual
field whenever the State enters into such contracts, which
we gravely doubt, such questions of fact do not appear to
have been argued before the High Court. And, in any event,
they are of such a nature that they cannot be satisfactorily
decided without a detailed adduction of evidence, which is
only possible in ordinary civil suits, to establish that the
State, acting in its executive capacity through its Offi-
cers, has discriminated between parties identically situat-
ed. On the allegations and affidavit evidence before us we
cannot reach such a conclusion. Moreover, as we have al-
ready indicated earlier, the correct view is that it is the
contract and not the executive power, regulated by the
Constitution, which governs the relations of the parties on
facts apparent in the cases before us.
The real object of the appellants seems to be to hold up
any adjudication on the cases before us by taking shelter
behind Article 14 so that the stay orders obtained by them,
presumably on representations made to this Court that no
aspect of enforcement of Article 14 of the Constitution ’was
involved. We think that to accede to the prayer on behalf of
the appellants to. adjourn the hearing of these cases until
after the Emergency is lifted and. yet to continue the stay
orders is to permit a circumvention of the Constitutional
mandate contained in Article 359 and to countenance a gross
abuse of the processes of the Court.
A rather desparate argument which has been addressed to
us on behalf of the appellants is that they were entitled to
an opportunity to. show cause against the cancellation of
the leases. It was urged, on the strength of A.K. Kraipak &
Ors. etc. v. Union of India & Ors.,(1) that the distinction
made between administrative and quasi-judicial action is
thin and a vanishing one. This argument appears to. us to
be wholly irrelevant inasmuch as a question of the distinc-
tion between an administrative and quasi-judicial decision
can only arise in the exercise of powers under statutory
provisions. Rules of natural justice are attached to the
performance of certain functions regulated by statutes or
rules made thereunder involving decisions affecting rights
of parties. When a contract is sought to be terminated by
the Officers of the State, purporting to act under the terms
of an agreement between parties, such action is not taken in
purported exercise of a statutory power at all.
In Additional District Magistrate, Jabalpur, v. Shiva-
kant Shukla,(2)it was pointed out (at p. 1288):
(1) [1970] 1 S.C.R. 457.
(2) A.I.R. 1976 S.C. 1207 at 1288.
260
"The principles of natural justice which
are so implied must always hang, if one may so
put it, on pegs of statutory provisions or
necessarily follow from them. They can also
be said sometimes to be implied as necessary
parts of the protection of equality and equal
protection of laws conferred by Article 14 of
the Constitution where one of the pillars of
Dicey’s principles of the Rule of Law is found
embodied. Sometimes, they may be implied and
read the legislation dealing with rights
protected by Article 19 of the Constitution.
They could at times, be so implied because
’restrictions on rights conferred by Article
19 of the Constitution have to be reasonable".
The limitations imposed by rules of natural justice
cannot operate upon powers which are governed by the terms
of an agreement exclusively. The only question which
normally arises in such cases is whether the action com-
plained of is or is not in consonence with the terms of the
agreement. As already pointed out by us, even if by some
stretch of imagination some case of unequal or discrimina-
tory treatment by the officers of the State of persons
governed by similar contracts is sought to be made out’, a
satisfactory adjudication upon the unusual facts of such a
case would necessitate proper pleadings supported by accept-
able evidence. In that case, the interim stay order or
injunction could not be justified at all because so long as
a Residential Order, under Article 359 of the Constitution,
is operative, the enforcement of fundamental rights falling
under Article 14 is suspended. In such cases even if a
petition or suit is entertained and kept pending no stay
order could be passed because that would amount to indirect-
ly enforcing the fundamental rights conferred by Article 14
of the Constitution. It is only where a prima facie case for
an injunction or stay can be made out, quite apart from a
right covered by Article 14 of the Constitution or by any
other fundamental right whose enforcement may have been
suspended, that an injunction or stay could be granted at
all on suitable ’terms. As we have already said it was on
such an assumption that this Court had, apparently, granted
the interim stay which must now be discharged.
Consequently, we dismiss these appeals with costs
throughout, and discharge the stay orders.
S R. Appeals dismissed.
261