# RADHAKRISHNA AGARWAL & ORS v. STAIB OF BIHAR & ORS

- **Citation:** [1977] 3 S.C.R. 249
- **Court:** Supreme Court of India
- **Decided:** 1977-03-17
- **Bench:** M. H. Beg, A. C. Gupta, P. S. Kailasam
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/radhakrishna-agarwal-ors-v-staib-of-bihar-ors-7207
- **Pages:** 12

## Headnote

Constitution of India, 1950- Article 226 cannot be
invoked for
alleged
breaches of contract-Remedy lies through ordinary civil .~uit for da1nages.
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 privileges attached to it even when it acts
within the contractual field.
Plea for adjournment of the hearing of the case until after the emergency is
lifted-Stay orders presumably obtained earlier on representation n1ade that no
aspect of enforcen1ent of Art. 14 of the Constitution was involved-Propriety of
A
B
c
the continuance of stay.
D
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
provisions 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
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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, canceUed the lease by a letter dated 15th March 1975. The \Vrit 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
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justice have· been violated as no opportunity ta 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 State's executive power unde-r Art. 298 of the Consti~
tution. The rule of law which regulates. the operation are organs of Government functioning under the Constitution is that all constitutional powers carry
G
corresponding obligations with them. [254 &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 trans.action entered into in exercise of its constitutional powers, only at
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the time of entry into the field of consideration of persons with
whom the
Govemmenl could contract at all. But, after the State or its agents have
ent~red 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]
B
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SUPREME COL'RT REPORTS
[1977] 3 S.C.R.
(3) Article 14 or of any _othel'. constitutional. provision is not violated when
the State or fas 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 statutory 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 obligations 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 doctrin

## Text

•
,
249
RADHAKRISHNA AGARWAL & ORS.
v.
STAIB OF BIHAR & ORS.
March 17, 1977
[M. H. BEG, C.J., A. C. GUPTA AND P. S. KAILASAM, JJ.J
Constitution of India, 1950- Article 226 cannot be
invoked for
alleged
breaches of contract-Remedy lies through ordinary civil .~uit for da1nages.
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 privileges attached to it even when it acts
within the contractual field.
Plea for adjournment of the hearing of the case until after the emergency is
lifted-Stay orders presumably obtained earlier on representation n1ade that no
aspect of enforcen1ent of Art. 14 of the Constitution was involved-Propriety of
A
B
c
the continuance of stay.
D
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
provisions 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
E
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, canceUed the lease by a letter dated 15th March 1975. The \Vrit 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
F
justice have· been violated as no opportunity ta 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 State's executive power unde-r Art. 298 of the Consti~
tution. The rule of law which regulates. the operation are organs of Government functioning under the Constitution is that all constitutional powers carry
G
corresponding obligations with them. [254 &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 trans.action entered into in exercise of its constitutional powers, only at
H
the time of entry into the field of consideration of persons with
whom the
Govemmenl could contract at all. But, after the State or its agents have
ent~red 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]
B
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SUPREME COL'RT REPORTS
[1977] 3 S.C.R.
(3) Article 14 or of any _othel'. constitutional. provision is not violated when
the State or fas 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 statutory 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 obligations 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
cf any statutory or constitutional obligation appears either from incontrovertible
facts or of facts.
The appellants', cases 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. [258 F·G, 259 Al
C. K. Achuthan v. Star. of Kera/a and Ors. 1959 Supp. (I) SCR 787. applied.
Erusian E.~quipment &: Chemicals v. State of West Bengal &:. Anr. (1975) 2·
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_ established'.
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 officers, has discriminated between parties identically situat-·
ed.
In the instant case allegations on which a violation of Art. 14 could be1
based are neither properly made nor established.
It is the contract and not
the executive power regulated by the Constitution. which governed the relation~.
of the parties. [259 A-DJ
( 6) Proceedings under, Art. 226 are: summary proceedings reserved for extra··
ordinary cases where the exceptional and what are described perhaps not quite~
accurately as ~'prerogative" 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 detailed evidence involving examination and
cross-examination of witnesses, the case could not be conveniently or satisfac··
torily decided in proceedings under Art. 226 of the Constitution. Even in casei~
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.
[253 E-G]
Lekhraj Satnam Das Lalvani v. M. M. Shah, Deputy Custodtan-cum-Manag~
ing 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. Excis(~
& Taxation Con1111r. & Ors. 3 (1975) 3 SCR 254 @ 265, reiterated.
D. F. Sout!t Kheri v. Ran1 Sanghi Singh AIR 1973 SC 205; K. N. Guruswamy v. Stare of Mysore, AIR 1954 SC 592; Calcutta Gas Co. (Proprietary')
Ltd. v. State of West Bengal & Ors. AIR 1962 SC 1044; Bas!ieshar 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 ill
which breaches of alleged obligation by the State or its agents can be set up
into three types:
(i') Where a petitioner makes a grievanc.e of breach. of m~
obligation of the State in cases where on an assurance or representation o!',
the State, he has acted to his prejudice and detriment but the agreement is
'
.....
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RADHAKRISHNA V. BlliAR (Beg, C.J.)
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 tho 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 ;md liabilities of the parties are
governed by the termSi 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 contract 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.
B
Union of lndia v. Mis. Anglo-Afgan Agencies AJR 1968 SC 718; Cenfury
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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 J954 SC 592; D. F. South Kheri v. Ram
Sang/ii Singh AIR 1973 SC 205; Mis. Shrikrishna Gyanaday Sugar Ltd. v. The
State of Bihar AIR 1975 Patna 123, distinguished 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
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until after the e1nergency is lifted and yet to continue the stay orders is to
permit circumvention of the constitutional mandate contained in Art. 359· and to
countenance gr05s 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 enforcement of Fundamental Rights, falling under Art. 14 of the
Constitution is suspended.
Jn such cases even if a petition or a suit is entertained and can be pending no stay order could be passed because that would
E
amount to indirectly enforcing the Fundamental Rights conterred by Art. 14
of the Constitution. It is only where a prima facie case {or 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 suspended, that an injunction could be granted at all in suitable cases on
suitable tertns. [260 C-El
Additional District Magistrate, Jabalpur v. Shivkant Shukla AIR 1976 SQ
1207 @ 1288-1976 Supp. SCR, 172 referred to.
F
(10) The appellai'.its are not entitled to an opportunity' to show cause against
the cancellation of the leases.
The questipn of distinguishing bet\veen an administrative and quasi-judicial decision can only arise in the exercise of powers
exercised under statutory provisions.
Rules of natural justice are attached tc.
the performance of certain functions regulated by statutes or rules made thereunder involving decisions affecting rights of pa.rties.
\.Vhen 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 upon1 powers which are governed by the terms of an agreement
exdusively. 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 Cl
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CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 227 and 228/
1976.
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(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).
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252
SUPREME COURT REPORTS
(1977] 3 S.C.R.
L. M. Singhvi, Sri Narain and K. J. John, for the appellants.
L. N. Sinha, Sol. Genl. U. P. Singh and Shambhu Nath Iha, for
the respondents.
The Judgment of the Court was delivered by
BEG, C.J.
These appeals are before us after certification 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 contractual or equitable, to continue in possession, the State
could be prevented, by appropriate proceedings, from ousting the
petitioners from the forest land from whicji the petitioners have be,en
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 ander 1:he
influence of friends and associates of the Forest Minister of Bihar.
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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,
upou 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 contract, to be consulted before a revisi.on.
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 arid 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 parties
regulated by the duly signed contract which was presumably executed in compliance with the provisions of Article 299 of the Constitution.
Prima facie, therefore, the appellants can only get their
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RADHAKRISHNA v. BlliAR (Beg, C.J.)
253
remedies, if they can obtain any at all, through ordinary suits for
A
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
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the exercise of the executive powers of the State Government contained in Article 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 :
c
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 Jaws, 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 executiw
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'8ays :
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"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".
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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 Constitution at all.
When the
State had entered into contracts with citizens who carry on their
trade and pay the royalties. In accordance ·with the agreemenfs
reached between the State and citizens, it does not exercise any
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special governmental or statutory powers.
In such cases, the State
as well as the citizen with whom it contracts are both eqnally subiected 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
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to the law of contract. The dispute whether there is or there is not
a breach of contract should, according to the contention on behalf of
the State, be determined by ordinary civil courts as in every case
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SUPREME COURT REPORTS
[1977] 3 S.C.R.
bdween 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 subjec;tion of all parties, including the State, to the same procedural reqwrements, when such disputes are to be adjudicated upon,
means that the State 'should be placed on the same footing a,, an
ordinary litigant.
It should neither enjoy special benefits and privileges, nor be subjected to special burdens and disadvantages.
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 contraotual
sphere after the requirements 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 plaiisible
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 Jaw which regulates 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 & Chemicals
Ltd. v. State of Wset Bengal & Anr.,(') 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 carryin2
on of any trade and to the
acquisition,
holding
and
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disposal of the property and the making of contracts for any
purpose.
The State can carry on executive function by
making a law or without making a Jaw.
The exercise of
such powers and functions in trade by the State is subjeot
to Part ill of the Constitutiori.
Article 14 speaks of
equality before the law and equal protection of the laws.
Equality of opportunity should apply to matters of public
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contracts.
The State has the right to trade. The State has
therefore the duty to observe equality. An ordinary individual
r (I) [19751 2 S.C.R. 674 at 677.
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RADHAKRISHNA v. BIHAR (Beg, CJ.)
<:an 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 equality of opportunity in the matter of public contract.
A person who is on the. approved list is unable to enter into
advantageous relations 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 puchases of matt>-
rials has a legitimate interest or expectation.
When the State
255
· 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
ease (supra) involved discrimination at the very threshold or at the
time 0£ entry into the field of consideration 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 indivilual citizens importinto 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 relations are no longer governed by
the constitutional provisions but by the legally valid contract which
determines right& and obligations of the parties inter se. No question
•arises of violation of Article 14 or of any other constitutional provision when the Sta~ or 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 sfeps in and confers some special
statutory power or obligation on the State in the contractual field
which i~ 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 competing claims before an entry into the field of
contract facts have to be investigated and found before the question
<>f a violation of Article 14 could arise. If those facts are dis puled
and require assessment of evidence the correctness of which can
·only be tested satisfactorily by taking detailed
evidence,
involving
examination and cross-examination 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, "prerogative" 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
i;et up into three types. These were st_ated as follows :-
"(i) Where a petitioner makes a grievance of breach of
promise on the part of the State in rnses where an assurance
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256
SUPREME COURT REPORTS
[1977] 3 S.C.R.
or promise made by the State he has acted to his prejudice
and predicament, bnt the agreement is short of a contract
within the meaning of article 299 of the Cpnstitution;
(ii) Where the contract entered into between the person
aggrieved and the State is in exercise of a statutory power
under cerl'ain Act or Rules framed -thereunder and the
petitiol!er alleges a breach on the part 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,(') and Century Spinning & Manufacturing Co. Ltd.
v. U!hasnagar Municipal Council('); and, Robertson v. Minister of
Pensions,(") belong to the first category where it could be held that
public bodies or the State are as much bound as private individaal are
to carry out obligations incurred by them because parties seeking to
bind the authorities have ,altered, their position to their disadvantage
or have >acled to their detnment 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 P'atna High Court also distinguished cases which belong to the
second category, such as K. N. Guruswami v. The State of Mysore;(•)
D. F. South Kheri v. Ram Sanehi Singh;(") 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 cfo 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 U makant Saran
v. The State of Bihar;(') and Lekhrai Sathram Das v. N. M. Shah;(')
and B. K. Sinha v.
State of Bihar(')
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 s'mple".
(I) A.LR. 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.LR. 1973 S.C. 205.
(6) AI.R. 1975 Patna 123.
(7) A.LR. 1973 S.C. 964.
(8) A.LR. 1966 S.C. 334.
(9) A.LR. 1974 Patna 230.
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RADHAKRISHNA v. BIHAR (Beg, C.J.)
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 involv_ed 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 officers 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 contract by the State or its agents
or its officers would call for interlerence under Article 226 of the
Constitution. We do not consider this to be a sound proposition at
al!.
I.earned counsel for the appe_llants cited certain authorities 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 Constitution, in all their dealings with the public
even when a contract is there to regulate such dealings. The anthorities cited were : D. F. South Kheri v. Ram Sanehi Singh (supra)
where all that was decided, relying upon K. N. Guruswamy v. The State
of Mysore (supra), was that, where the source of a right was contractual but the action compfained 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.,(') where the real question considered was whether the petitioner
had a locus standi to question the validity of an enactment; Basheshar
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.(') which lays that even executive action must not be
exercised arbitrarily but must have the authoritv of law to support it;
S. S. Sawhney v. D. Ramarathnam, Assistant Passport Officer. Govt.
of India, New Delhi & Ors.,(') which repeats requirements of action
which satisfy Article 14 and 21 of the Constitution where compliance
with these provisions is obligatory.
(1) A.l.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.
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SUPREME COURT REPORTS
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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 tlrat the contract between
the parties is broken by the action complained of,
the appropriate
remedy is by way of a petitio11- under Article 226 of the Constitution
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-Ma1111ging
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 contract 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(l) 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 observed (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 contractual 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 possibili!y 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 governed 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 no aspect of any statutory or constitutional
obligation appears either from incontrovertible facts or applicable legal
provisions.
Indeed, it has been held in C. K. Achutan v. State of
Kerala & Ors.,(') that no question of a violation of Article 14 arises
even where one out of the several persons' is selected by the State for a
particular contractual transaction. 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 c~se (supra). We think that the two cases are distinguishable
on facts. The propositions of law laid dO\vn in the two cases must
b<: read in the context of facts established in each case. In any event,
(I) A.l.R. 1972 S.C. 843 at 845.
(2) [l975] 3 S.C.R. 254 at 265
(3) 119591 Suppl. (I) S.C.R. 787.
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RADHAKRISHNA V. BIHAR (Beg, C.J.)
the cases before us 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.
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 whether 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
established. Even if the appellants could be said to have raised any
aspect of Article 14 of the Constitution and this Article 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 Officers, has discriminated between parties
identically sitirated.
On the allegations and affidavit evidence before
us we cannot reach such a conclusion. Moreover, as we have already
inidicated 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 facfs apparent in the cases before us.
The real object of the appellants seems to be to hold up a,ny 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 oaspect 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 jg that they were entitled to an opportunity to
show cause against the cancellation of the leases. It was urged, on the
sfrength 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 irrelevoant inasmuch as a question of the distinction between
an administrative and quasi-iudicial 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
stoatutes 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 smtutorv
power at all.
· ·
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In Adlfilional District Maiistrate, Jabalpur, v. Shivakant Shukla,(•)
1t was pmnted out (at p. 1288):
(\) \1970] 1 S.C.R. 457.
(2) A.l.R. 1976 S.C. 1207 at 1288.
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SUPREME COURT REPORTS
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"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 !imitations 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 complained of i's .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 discriminatory
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 acceptable 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 indirectly
enforcing the fundamental rights conferred by Article 14 of the Constitution. It is only where a prima fade 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 t)lis 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.
SR.
Appeals dismissed.
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