This article is written by Dhriti Laddha, from Vidyasthali Law College, Jaipur.
Table of Contents
Introduction
Where there is a right, there is a remedy. Whenever there is a breach of contract by any party to the contract i.e. when one party to a contract has refused to perform or disabled himself from performing his promise in its entirety, the injured party is justified in treating the contract as discharged. The following below mentioned remedies are available to the injured party:
- To sue for damages.
- To sue for quantum meruit i.e. according to the quantity of work done.
- To sue for specific performance or injunction.
The Contract between the parties is a realm of private law and is to be governed by the Indian Contract Act, 1872. In case of any dispute regarding the terms and conditions, interpretation and implementation, unfulfillment of the dues or breach of contract cannot be agitated by writ petition when there is already an alternative remedy available, that, it is a matter for civil court or arbitration as provided by the contract, as the case may be.[i]
Article 12 of Constitution of India defines State as that it includes[ii]:
- The Government and Parliament of India;
- The Government and the Legislatures of each of the States; and
- All local or other authorities within the territory of India or under the control of the Government of India.
This article particularly talks about statutory contracts. Before we jump to the conclusion that writ petitions are maintainable against the State for breach of contract, specifically, statutory contract, it is very important to understand what statutory contracts actually are?
When a Contract is Not Statutory?
- Every contract with the State or Government is not a statutory contract.
For example: In a writ petition, the bills, raised by a contractor are due and are payable by State, the Hon’ble Court cannot issue the writ of mandamus commanding the State to pay the dues of the contractor.
- There is a distinction between contracts executed in exercise of statutory power and contracts which are statutory in nature.[iii]
Article 299(1) of Constitution of India says that:
- The contract made in the exercise of executive power of the Union or of a State shall be expressed by the President and Governor of the State.
- The contract must be expressed in writing.
- The contract shall be executed on behalf of the President or the Governor by such persons and in such manner as he may direct or authorise.
Therefore, any contract entered into for securing the interests of the Union or the States is not a contract that has been entered into by or on behalf of the Union or State in exercise of its executive powers[iv] i.e. under Article 299(1). In other words, contracts entered under Article 299(1) are not statutory contracts and Article 299(1) is not applicable to statutory contracts.
- Any contract entered into for the construction of public utility and has been awarded by a statutory body, does not become a statutory contract.[v]
- Just because a contract is entered by the State by exercising an enabling power given under any statute does not make that contract statutory.
Statutory Contract
A contract becomes a statutory contract only when the below-mentioned conditions are fulfilled:[vi]
- When the State or any official on behalf of the State has a power to enter into a contract under a statute.
- And also, when it is necessary to fulfil the prescribed terms and conditions given under a statute while entering into a contract.
- Also, if a contract incorporates certain terms and conditions in it which are statutory then the said contract to that extent is statutory.
Can Writ Jurisdiction be invoked in Matters Arising out of Contractual Obligations against State?
Writ petitions are filed under Article 32 or 226 of Constitution of India against the State in violation of any of the fundamental rights as given in Part III of the Constitution. Until and unless no fundamental right is violated, one cannot seek remedy through writ petitions. Therefore, it is accordingly argued that the rights arising out of a statute or out of a contract cannot be a fundamental right itself[vii] and hence no writ petition lies for the same.
Generally, it is understood that every time when there is a breach of contract or violation of terms and conditions of a contract by the State or Government, the fundamental rights of the other party are violated or the contract is arbitrary in nature. Whereas, it is always not the case. A mere breach of contract or non-payment of dues, without any other ground, does not invoke jurisdiction under Article 226.[viii] Not necessarily, every time when there is a breach of contract by the State, it is in violation of fundamental rights of the other party or against the principles of natural justice.
Writ of Mandamus
A writ of mandamus is issued when a public authority fails to perform a duty entrusted upon it by law. It means that the writ of mandamus is issued against a person, who has a legal duty to perform but has failed or neglected to do so. Therefore, this is a public remedy.
The scope of mandamus is determined by the nature of duty to be enforced rather than the identity of the authority against whom it is sought.[ix] Therefore, it can be enforced against a private body as well, who has been entrusted to discharge a public function but fails to do so or denies any right in connection to that public duty.
Now what is more important to understand is not only the distinction between public wrong and private wrong but also between public law remedy and private law remedy. The remedy under Article 32 or 226 is a public law remedy and can be resorted to enforce various public or statutory authorities to discharge their public duties or to act in the area of their public function. As mentioned above, it can be enforced again by a private body also entrusted to discharge any public function. To sum up, remedies under Article 32 or 226 can only be invoked only for the enforcement of a public duty and rights and not for declaring private rights among parties.
Now, remedy for mere breach of contract or violation of any terms and condition of a contract cannot be sought under Writ Jurisdiction of the court, whether statutory or non-statutory. A contract between the parties is a contract in the realm of private law and is to be governed by the principles of the Contract Act. Therefore, if the injured party wants to sue the other party, one needs to file a suit in the civil court only.
When does a Writ Petition is maintainable against the State on Breach of Contract?
But there are various judgements where the Hon’ble Supreme Court and the High Courts have allowed a writ petition against the breach of statutory contracts by the State in cases only when the fundamental rights of the other party have been violated.
On violation of Article 14 of the Constitution of India and arbitrariness by the State
In Shiv Mohan Lal v. State of U.P. and Ors.[x] and U.P. Sasta Galla Vikreta Parishad V. State of U.P. and Ors.[xi], it was held that in case of a non-statutory contract, writ jurisdiction can be invoked only if there lies a violation of Article 14 or some other provisions of the Constitution. However, in case of a statutory contract, a writ will lie not only for the constitutional grounds but also on the ground if there is violation of any statutory provision or provisions relating to that contract.
In other words, in the case of a non-statutory contract, a writ will lie only on the constitutional grounds, but in the case of a statutory contract a writ will lie on both grounds i.e. constitutional as well as statutory grounds.
This means that whenever there is a violation of Article 14 of the Constitution, a writ is maintainable not only against the State but also even private parties because the right to equality is available to every citizen and non-citizen of India and the same is a duty of State and every citizen and non-citizen of India to not to do any act in violation of this right. Hence, it cannot be said that no writ will lie in the case of a non-statutory contract.
In addition to this, in Directorate of Education and Ors. v. Educomp Datamatics Ltd. and Ors.[xii], it was clarified by the Apex Court that the court can also interfere in the matters where the terms incorporated in a tender are arbitrary, discriminatory, mala fide or biased in nature and it will eventually be open for judicial review.
But, it was held in Life Insurance Corporation of India v. Escorts Ltd.[xiii] that every time a writ on the ground of Article 14 will not be entertained to be used as a charter for judicial review against all actions of the State and also that every action of the State in the contractual field may not be examined by a writ court, although the fact remains that there is no absolute bar to exercise the writ jurisdiction under Article 226.
The above-mentioned ruling is justified on the basis that if the action of the State is political or sovereign in nature, the court will not interfere in it. If the action of the State is related to contractual obligations, the writ court may not ordinarily examine unless and until the action of the State has some public law character attached to it.
Whether a writ jurisdiction can be invoked to enforce a contractual obligation of the State or its instrumentality was made clear by the Apex Court in K.N. Guruswamy v. State of Mysore[xiv], wherein it was held that when a party, interested in a contract, claims that he has not received the same treatment and has not been given a chance as someone else, he is entitled to maintain a petition under Article 226. The doctrine of fair and reasonableness will be equally applicable there.
On violation of Principles of Natural justice
In D.F.O., South Kheri v. Ram Sanehi Singh[xv], one thing is clear that even when there is a breach of contract, a writ petition is maintainable if the administrative order passed by a public authority, in breach of the terms of the contract, is against the principle of natural justice.
Conclusion
Well now, this is clear that every contract entered into with the State is not a statutory contract and will be governed by the provisions of the Contract Act in case of breach of contract for whatever reason. Writ petition being a public law remedy can be invoked only whenever the State or its instrumentalities fail to discharge any public function that they are obligated to do under any statute, not for private laws because contract between two parties is a realm of private law.
The Apex Court and various High Courts have already settled this problem in so many case laws. There are many such cases where the writ jurisdiction is invoked only on the basis that the other party to the contract is the State. But it is also already settled that every contract with the State does not constitute a statutory contract until and unless the conditions regarding the same are fulfilled. And it is also to be understood that even on the breach of statutory contracts, it will be a ‘pure and simple’ matter of contract law and will be governed by it only with the remedies as provided, the writ court can not interfere.
Writ jurisdiction under Article 32 or 226 can be invoked only if there is violation of fundamental rights, arbitrariness or violation of principles of natural justice. As already held in Radhakrishna Agarwal v. State of Bihar (supra) that in cases involving statutory contracts, creating rights and obligations of a statutory nature, such obligations can be enforced by taking resort to writ jurisdiction. But at first it is important to prove that:
- The other party is the State or State instrumentality under Article 12 of the Constitution of India or any other statute.
- The contract is a statutory contract.
- There must be a public law character attached to it.
- And all such violations because of which the writ jurisdiction can be invoked.
References
[i]Pimpri Chinchwad Municipal Corporation and Ors. V. M/S Gayatri Construction Company and Anr., 2008 (8) SCC 172.
[ii] Definition of State under Article 12 of Constitution of India.
[iii] State of Haryana and Ors. V. Lal Chand and Ors., 1984 AIR 1326.
[iv] Ram Ratan Gupta v. State of M.P., AIR 1974 MP 101.
[v] Kerala State Electricity Board and Anr. V. Kurien E. Kalathil and Ors., 2000 (6) SCC 293.
[vi] India Thermal Power Ltd. v. State of M.P., 2000 (3) SCC 379.
[vii] Express Newspapers Pvt. Ltd. And Ors. V. Union of India and Ors., 1986 AIR 872.
[viii] Radhakrishna Agarwal v. State of U.P., 1977 AIR 1496.
[ix] Binny Limited and Anr. v. V. Sadasivan and Ors., (2005) 6 SCC 657.
[x] 1993 (1) AWC 196 (FB).
[xi] 1992 (2) EFR 655.
[xii] 2004 (4) SCC 19.
[xiii] AIR 1986 SC 1370.
[xiv] 1954 AIR 592.
[xv] AIR 1973 SC 205.
LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join:
