Page 1 Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 6086 OF 2015

(@ SLP(C) NO. 19380 OF 2014)

State of Kerala & Ors. ... Appellants

Versus

M.K. Jose ... Respondent

J U D G M E N T

Dipak Misra, J.

The present appeal, by special leave, assails the

correctness of the judgment dated 24.02.2014 passed by the

High Court of Kerala at Ernakulam in W.A. No. 1912/2013

whereby the Appellate Bench has reversed the decision of

the learned Single Judge rendered in W.P.(C) No. 22541 of

2013 whereunder he had declined to interfere with the order

of the Secretary, Public Works Department, Road and

Projects of the State terminating the contract awarded to the

respondent and forfeiting the security deposit placed by the

Page 2 contractor for the work to the state and further stating that

the work had been put an end to at the cost and risk of the

contractor.

2.Exposition of facts with essential details is imperative

to appreciate the controversy in proper perspective and also

to consider the manner in which the Appellate Bench has

exercised the writ jurisdiction under Article 226 of the

Constitution in respect of a matter relating to termination of

contract. The respondent was awarded the work, namely,

“Stimulus package-improvements to

Kannavam-Idumba-Trikadaripoyil Road Km. 0/000 to

9/100 in Kannur District” and accordingly an agreement

was executed between the parties on 18.12.2010. The site

for the work was handed over to the respondent on

27.12.2010 and the work was to be completed within a

period of 12 months. Thus, the work, as requisite, under

the terms of the contract was to be completed in all respects

as on 26.12.2011. The respondent could not complete the

work in time and on a request being made, time was initially

extended up to 30.06.2012 and thereafter further extension

was granted upto 31.03.2013.

2

Page 3 3.As is perceptible from the order of termination of the

contract, despite issue of several notices and instructions,

the contractor failed to complete the work even during the

extended period. The Executive Engineer of the Department

issued a memorandum on 14.02.2013 stopping the work.

As there was some deviation of work, the revised estimate

was required to be done but the same was not sanctioned

by the Government. At that juncture, the respondent

preferred W.P.(C) No. 5672 of 2012 seeking appropriate

direction to the Government to pass orders sanctioning the

revised estimate. The High Court disposed of the writ

petition directing the Principal Secretary to take a decision

on the proposal of revised estimate. Thereafter, the

respondent filed a contempt petition which was eventually

dropped.

4.As the factual matrix would further unfurl, the

respondent submitted a representation to the Government

and thereafter filed W.P.(C) No. 23087 of 2012. The High

Court directed the Principal Secretary, PWD to consider and

pass orders on his representation. It is apt to note here that

the respondent had filed series of writ petitions, namely,

3

Page 4 W.P.(C) No. 26075 of 2012 and W.P.(C) No. 5690 of 2013

and the High Court vide order dated 08.04.2013 in W.P.(C)

No. 5690 of 2013, directed the Secretary, PWD to pass

appropriate orders in accordance with law. Eventually, as

has been stated earlier, the contract was terminated.

5.The said order of termination was assailed in WP(C)

No. 22541 of 2013. The learned Single Judge noted the

facts and took note of prayer no. (c) which was for issue of a

writ of mandamus or any other appropriate writ, order or

direction directing the respondents to take steps for

measurement of the work already completed by him and

making corresponding entries in the measurement book.

The said prayer was acceded to by the counsel for the State

of Kerala and accordingly the learned Single Judge directed

measurement of the work to be completed effecting

necessary entries in the measurement book before

finalization of the tender proceedings, if any, in respect of

balance work. The learned Single Judge had also directed

that the measurements should take place after notice to the

contractor.

4

Page 5 6.The aforesaid order was assailed in the writ appeal.

When the appeal was listed for admission, the Appellate

Bench, on 17.12.2013, passed the following order:-

“We heard the learned counsel for the appellant

at length. Ext. P15 order shows that more than

50% of the work remains to be completed. The

learned counsel for the appellant referred to

paragraph 10 of the counter affidavit filed by the

first respondent dated 15.3.2013 in W.P.(C) No.

5690 of 2013 (another writ petition filed by the

appellant) wherein it is stated that “over all 70%

of total works completed so far”. The learned

counsel for the appellant submitted that nearly

90% of the work was over and the work could not

be completed within the extended period since

the Department did not fulfil certain mandatory

requirements in order to complete the work and

since a stop memo was issued even before the

expiration of the extended period.

2.Learned counsel for the appellant submitted

that the appellant is prepared to take out a

commission to substantiate the contention that

90% of the work is over. Learned Government

pleader sought for a short time to get

instructions. Since the matter is urgent and

since the courts are going to be closed on

20.12.2013, we are inclined to grant only a day’s

time to get instructions on the prayer made by

the appellant that a commissioner may be

appointed.”

7.On the adjourned date, the counsel for the State

submitted that the respondent had no objection for

appointment of Commissioner. On the aforesaid basis, the

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Page 6 Division Bench appointed two Advocates as joint

commissioners to inspect the site and to submit the report

in respect of the disputed questions mentioned in the order

dated 17.12.2013. Thereafter, the Court passed the

following order:-

“The Commissioners would be free to seek the

help of a competent Engineer for the purpose of

enabling them to prepare a report which would

throw light on the disputed question involved in

the case. The appellant as well as respondents

would provide all assistance to the

Commissioners for execution of their work. The

Commissioners would be entitled to call for any

record from the appellant as well as respondents

3 and 4 for the purpose of executing the work

entrusted to them.”

8.The Commission appointed by the Appellate Bench

took assistance of one Retired Assistant Executive Engineer,

PWD who submitted a report to the commissioners, which

was annexed to the Commission’s report. We need not refer

to the report which has been reproduced by the impugned

order. However, the Engineer who assisted the

Commission, in his report under the heading ‘Details of

work done’, has stated thus:-

6

Page 7 “Anyhow the contractor has executed a minimum

amount of work so far up to the commission,

inspection date of 3.1.2014 of Rs.2,27,90,383/-

which is 72.24% of the revised estimate and

97.09% of the original work (Estimate PAC).

There are some minor damages in the completed

portion of BT surface and white topped portion

(concrete road) and the general condition of the

whole work executed by the contractor is

satisfactory. A detailed item wise statement is

prepared and appended herewith for perusal as

Annexure A.”

9.The Appellate Bench on the basis of the said report

came to hold that the order of termination was founded on

erroneous facts inasmuch as the competent authority had

opined that more than 50% of the work remained to be

done. The Division Bench opining that as there was a

factual defect, which was evident from the commission’s

report, the order of termination of contract was liable to be

quashed and accordingly axed the same. After quashing the

same, the High Court directed the Superintending Engineer,

PWD, (Roads and Bridges) to consider and dispose of the

matter afresh after affording an opportunity to the

contractor of being heard. It also directed that the

Commission’s report and the Engineer’s report and the

accounts shall be produced by the contractor before the

7

Page 8 competent authority who shall take the same into account

before taking final decision in the matter. After so directing,

the High Court eventually ruled that:

“Since Exhibit P15 order is passed on incorrect

data and since that data was found to be

incorrect by appointing Joint Commissioners, we

are of the view that the Government should bear

the expenses of the Commissioners and expenses

of the Engineer in submitting the reports. Before

conducting a final hearing, a sum of Rs.40,000/-

shall be paid by the first respondent to the

appellant/writ petitioner. Taking into account

the work done by the Engineer, we think that an

additional remuneration of Rs.5,000/- should be

paid to the Engineer. The appellant/writ

petitioner shall pay the said amount of

Rs.5,000/- to the Engineer within 15 days and

proof thereof shall be produced by the appellant

before this Court.”

10.We have heard Mr. Ramesh Babu M.R., learned

counsel for the appellants and Mr. K. Parmeshwar, learned

counsel for the respondent.

11.The thrust of the matter is whether the Appellate

Bench in intra-court appeal arising from a petition under

Article 226 of the Constitution, should have carried out the

exercise that it has done and eventually quashed the order

terminating the contract by the competent authority of a

Department on the ground that it was passed on erroneous

8

Page 9 facts, for the respondent contractor, as per the

Commission’s report, had done higher percentage of work.

We would not like to comment anything on the order passed

by the learned Single Judge as that was not challenged by

the State before the Appellate Court in appeal. The learned

Single Judge had directed measurement to be carried out

prior to floating of tender for the balance work. That

direction, as is evident, has been accepted by the State.

12.As the factual narration would reveal, the respondent

has been invoking the jurisdiction of the High Court under

Article 226 of the Constitution on various occasions

challenging every action which pertain to extension of time,

denial of revised estimate by the State Government and

many other facets of that nature and the High Court, we

must say, has been generously passing orders for

consideration by the appropriate authority, for grant of

opportunity of being heard to the contractor and to consider

his representation in accordance with law. This kind of

orders in a contractual matter, in our considered view, is

ill-conceived. They not only convert the controversy to a

disturbing labyrinth, but encourage frivolous litigation. The

9

Page 10 competent authority might have mentioned that more than

50% work remained to be done but that should not have

prompted the Appellate Bench hearing the intra-court

appeal to appoint a Commission of two Advocates and

granting them liberty to take assistance of a competent

Engineer. As the report would show, the Commission of two

Advocates have taken assistance of a retired Assistant

Executive Engineer and submitted the report. Though,

learned counsel for the State had not objected to the same,

yet we really fail to fathom how a writ jurisdiction can be

extended to cause a roving enquiry through a Commission

and rely on the facts collected without granting opportunity

to the State to file objections to the same and in the

ultimate eventuate, cancel the order of termination of

contract. What precisely was the quantum of work done

and whether there had been a breach by the owner or the

contractor, are required to be gone into by the appropriate

legal forum.

13.A writ court should ordinarily not entertain a writ

petition, if there is a breach of contract involving disputed

questions of fact. The present case clearly indicates that

1

Page 11 the factual disputes are involved. In State of Bihar v.

Jain Plastics and Chemicals Ltd.

1

, a two-Judge Bench

reiterating the exercise of power under Article 226 of the

Constitution in respect of enforcement of contractual

obligations has stated:-

“It is to be reiterated that writ petition under

Article 226 is not the proper proceedings for

adjudicating such disputes. Under the law, it was

open to the respondent to approach the court of

competent jurisdiction for appropriate relief for

breach of contract. It is settled law that when an

alternative and equally efficacious remedy is open

to the litigant, he should be required to pursue

that remedy and not invoke the writ jurisdiction

of the High Court. Equally, the existence of

alternative remedy does not affect the jurisdiction

of the court to issue writ, but ordinarily that

would be a good ground in refusing to exercise

the discretion under Article 226.”

In the said case, it has been further observed:-

“It is true that many matters could be decided

after referring to the contentions raised in the

affidavits and counter-affidavits, but that would

hardly be a ground for exercise of extraordinary

jurisdiction under Article 226 of the Constitution

in case of alleged breach of contract. Whether the

alleged non-supply of road permits by the

appellants would justify breach of contract by the

respondent would depend upon facts and

evidence and is not required to be decided or

dealt with in a writ petition. Such seriously

disputed questions or rival claims of the parties

with regard to breach of contract are to be

1

(2002) 1 SCC 216

11

Page 12 investigated and determined on the basis of

evidence which may be led by the parties in a

properly instituted civil suit rather than by a

court exercising prerogative of issuing writs.”

14.In National Highways Authority of India v. Ganga

Enterprises

2

, the respondent therein had filed a writ

petition before the High Court for refund of the amount.

The High Court posed two questions, namely, (a) whether

the forfeiture of security deposit is without authority of law

and without any binding contract between the parties and

also contrary to Section 5 of the Contract Act; and (b)

whether the writ petition is maintainable in a claim arising

out of breach of contract. While dealing with the said issue,

this Court opined that:-

“It is settled law that disputes relating to

contracts cannot be agitated under Article 226 of

the Constitution of India. It has been so held in

the cases of Kerala SEB v. Kurien E. Kalathil

3

,

State of U.P. v. Bridge & Roof Co. (India) Ltd.

4

and

Bareilly Development Authority v. Ajai Pal Singh

5

.

This is settled law. The dispute in this case was

regarding the terms of offer. They were thus

contractual disputes in respect of which a writ

court was not the proper forum. Mr Dave,

however, relied upon the cases of Verigamto

Naveen v. Govt. of A.P.

6

and Harminder Singh

2

(2003) 7 SCC 410

3

(2000) 6 SCC 293

4

(1996) 6 SCC 22

5

(1989) 2 SCC 116

6

(2001) 8 SCC 344

1

Page 13 Arora v. Union of India

7

. These, however, are

cases where the writ court was enforcing a

statutory right or duty. These cases do not lay

down that a writ court can interfere in a matter of

contract only. Thus on the ground of

maintainability the petition should have been

dismissed”.

15.Having referred to the aforesaid decisions, it is

obligatory on our part to refer to two other authorities of

this Court where it has been opined that under what

circumstances a disputed question of fact can be gone into.

In Gunwant Kaur v. Municipal Committee, Bhatinda

8

, it

has been held thus:-

“14. The High Court observed that they will not

determine disputed question of fact in a writ

petition. But what facts were in dispute and what

were admitted could only be determined after an

affidavit-in-reply was filed by the State. The High

Court, however, proceeded to dismiss the petition

in limine. The High Court is not deprived of its

jurisdiction to entertain a petition under Article

226 merely because in considering the

petitioner’s right to relief questions of fact may

fall to be determined. In a petition under Article

226 the High Court has jurisdiction to try issues

both of fact and law. Exercise of the jurisdiction

is, it is true, discretionary, but the discretion

must be exercised on sound judicial principles.

When the petition raises questions of fact of a

complex nature, which may for their

determination require oral evidence to be taken,

and on that account the High Court is of the view

7

(1986) 3 SCC 247

8

(1969) 3 SCC 769

1

Page 14 that the dispute may not appropriately be tried in

a writ petition, the High Court may decline to try

a petition. Rejection of a petition in limine will

normally be justified, where the High Court is of

the view that the petition is frivolous or because

of the nature of the claim made dispute sought to

be agitated, or that the petition against the party

against whom relief is claimed is not

maintainable or that the dispute raised thereby is

such that it would be inappropriate to try it in

the writ jurisdiction, or for analogous reasons.

15. From the averments made in the petition filed

by the appellants it is clear that in proof of a

large number of allegations the appellants relied

upon documentary evidence and the only matter

in respect of which conflict of facts may possibly

arise related to the due publication of the

notification under Section 4 by the Collector.

16. In the present case, in our judgment, the

High Court was not justified in dismissing the

petition on the ground that it will not determine

disputed question of fact. The High Court has

jurisdiction to determine questions of fact, even if

they are in dispute and the present, in our

judgment, is a case in which in the interests of

both the parties the High Court should have

entertained the petition and called for an

affidavit-in-reply from the respondents, and

should have proceeded to try the petition instead

of relegating the appellants to a separate suit.”

[Emphasis added]

16.In ABL International Ltd. v. Export Credit

Guarantee Corpn. of India Ltd.

9

, a two-Judge Bench after

9

(2004) 3 SCC 553

1

Page 15 referring to various judgments as well as the

pronouncement in Gunwant Kaur (supra) and Century

Spg. And Mfg. Co. Ltd. v. Ulhasnagar Municipal

Council

10

, has held thus:-

“19.Therefore, it is clear from the above

enunciation of law that merely because one of the

parties to the litigation raises a dispute in regard

to the facts of the case, the court entertaining

such petition under Article 226 of the

Constitution is not always bound to relegate the

parties to a suit. In the above case of Gunwant

Kaur this Court even went to the extent of

holding that in a writ petition, if the facts require,

even oral evidence can be taken. This clearly

shows that in an appropriate case, the writ court

has the jurisdiction to entertain a writ petition

involving disputed questions of fact and there is

no absolute bar for entertaining a writ petition

even if the same arises out of a contractual

obligation and/or involves some disputed

questions of fact.

xxxxx xxxxx xxxxx

27. From the above discussion of ours, the

following legal principles emerge as to the

maintainability of a writ petition:

(a) In an appropriate case, a writ petition as

against a State or an instrumentality of a State

arising out of a contractual obligation is

maintainable.

(b) Merely because some disputed questions of

fact arise for consideration, same cannot be a

10

(1970) 1 SCC 582

1

Page 16 ground to refuse to entertain a writ petition in all

cases as a matter of rule.

(c) A writ petition involving a consequential

relief of monetary claim is also maintainable.

While laying down the principle, the Court sounded a

word of caution as under:-

“However, while entertaining an objection as to

the maintainability of a writ petition under Article

226 of the Constitution of India, the court should

bear in mind the fact that the power to issue

prerogative writs under Article 226 of the

Constitution is plenary in nature and is not

limited by any other provisions of the

Constitution. The High Court having regard to

the facts of the case, has a discretion to entertain

or not to entertain a writ petition. The Court has

imposed upon itself certain restrictions in the

exercise of this power. (See Whirlpool Corpn. v.

Registrar of Trade Marks

11

.) And this plenary right

of the High Court to issue a prerogative writ will

not normally be exercised by the Court to the

exclusion of other available remedies unless such

action of the State or its instrumentality is

arbitrary and unreasonable so as to violate the

constitutional mandate of Article 14 or for other

valid and legitimate reasons, for which the Court

thinks it necessary to exercise the said

jurisdiction”.

17.It is appropriate to state here that in the said case, the

Court granted the relief as the facts were absolutely clear

from the documentary evidence brought which pertain to

11

(1998) 8 SCC 1

1

Page 17 interpretation of certain clauses of contract of insurance. In

that context, the Court opined:-

“.... The terms of the insurance contract which

were agreed between the parties were after the

terms of the contract between the exporter and

the importer were executed which included the

addendum, therefore, without hesitation we must

proceed on the basis that the first respondent

issued the insurance policy knowing very well

that there was more than one mode of payment of

consideration and it had insured failure of all the

modes of payment of consideration. From the

correspondence as well as from the terms of the

policy, it is noticed that existence of only two

conditions has been made as a condition

precedent for making the first respondent

Corporation liable to pay for the insured risk,

that is: (i) there should be a default on the part of

the Kazak Corporation to pay for the goods

received; and (ii) there should be a failure on the

part of the Kazakhstan Government to fulfil their

guarantee”.

And it eventually held:-

“..... We have come to the conclusion that the

amended clause 6 of the agreement between the

exporter and the importer on the face of it does

not give room for a second or another

construction than the one already accepted by

us. We have also noted that reliance placed on

sub-clause (d) of the proviso to the insurance

contract by the Appellate Bench is also misplaced

which is clear from the language of the said

clause itself. Therefore, in our opinion, it does not

require any external aid, much less any oral

evidence to interpret the above clause. Merely

because the first respondent wants to dispute

this fact, in our opinion, it does not become a

1

Page 18 disputed fact. If such objection as to disputed

questions or interpretations is raised in a writ

petition, in our opinion, the courts can very well

go into the same and decide that objection if facts

permit the same as in this case”.

18.In this regard, a reference to Noble Resources Ltd. v.

State of Orissa and Another

12

would be seemly. The

two-Judge Bench referred to the ABL International

(supra), Dwarkadas Marfatia & Sons v. Board of

Trustees, Port of Bombay

13

, Mahabir Auto Stores v.

Indian Oil Corp.

14

and Jamshed Hormusji Wadia v.

Board of Trustees, Port of Mumbai

15

and opined thus:-

“Although the scope of judicial review or the

development of law in this field has been noticed

hereinbefore particularly in the light of the

decision of this Court in ABL International Ltd.

each case, however, must be decided on its own

facts. Public interest as noticed hereinbefore,

may be one of the factors to exercise the power of

judicial review. In a case where a public law

element is involved, judicial review may be

permissible. (See Binny Ltd. v. V. Sadasivan

16

and

G.B. Mahajan v. Jalgaon Municipal Council

17

.)”

19.Thereafter, the court proceeded to analyse the facts

and came to hold that certain serious disputed questions of

12

(2006) 10 SCC 236

13

(1989) 3 SCC 293

14

(1990) 3 SCC 752

15

(2004) 3 SCC 214

16

(2005) 6 SCC 657

17

(1991) 3 SCC 91

1

Page 19 facts have arisen for determination and such disputes

ordinarily could not have been entertained by the High

Court in exercise of its power of judicial review and

ultimately the appeal was dismissed.

20.We have referred to the aforesaid authorities to

highlight under what circumstances in respect of

contractual claim or challenge to violation of contract can be

entertained by a writ court. It depends upon facts of each

case. The issue that had arisen in ABL International

(supra) was that an instrumentality of a State was placing a

different construction on the clauses of the contract of

insurance and the insured was interpreting the contract

differently. The Court thought it apt merely because

something is disputed by the insurer, it should not enter

into the realm of disputed questions of fact. In fact, there

was no disputed question of fact, but it required

interpretation of the terms of the contract of insurance.

Similarly, if the materials that come on record from which it

is clearly evincible, the writ court may exercise the power of

judicial review but, a pregnant one, in the case at hand, the

High Court has appointed a Commission to collect the

1

Page 20 evidence, accepted the same without calling for objections

from the respondent and quashed the order of termination

of contract. The procedure adopted by the High Court, if we

permit ourselves to say so, is quite unknown to exercise of

powers under Article 226 in a contractual matter. We can

well appreciate a Committee being appointed in a Public

Interest Litigation to assist the Court or to find out certain

facts. Such an exercise is meant for public good and in

public interest. For example, when an issue arises whether

in a particular State there are toilets for school children and

there is an assertion by the State that there are good toilets,

definitely the Court can appoint a Committee to verify the

same. It is because the lis is not adversarial in nature. The

same principle cannot be taken recourse to in respect of a

contractual controversy. It is also surprising that the High

Court has been entertaining series of writ petitions at the

instance of the respondent, which is nothing but abuse of

the process of extraordinary jurisdiction of the High Court.

The Appellate Bench should have applied more restraint

and proceeded in accordance with law instead of making a

2

Page 21 roving enquiry. Such a step is impermissible and by no

stretch of imagination subserves any public interest.

21.Consequently, the appeal is allowed and the judgment

and order passed by the Appellate Bench is set aside.

However, in the facts and circumstances of the case, we

refrain from imposing costs.

.............................J.

[Dipak Misra]

..........................., J.

[Prafulla C. Pant]

New Delhi

August 14, 2015

2