REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 6077 OF 2010

(Arising out of S.L.P. (C) No. 11505 of 2010)

Zonal Manager, Central Bank of India .... Appellant (s)

Versus

M/s Devi Ispat Ltd. & Ors. .... Respondent(s)

J U D G M E N T

P. Sathasivam, J.

1) Leave granted.

2) This appeal arising out of SLP (C) No. 11505 of 2010 is

directed against the final judgment and order dated

05.04.2010 passed by the High Court at Calcutta in G.A.

No. 2441 of 2009 whereby the High Court dismissed the

appeal filed by the appellant-Bank herein against the

order of the learned single Judge dated 24.08.2009 in

W.P. No. 485 of 2009 directing the appellant-Bank to

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return forthwith the title deeds deposited by M/s Devi

Ispat Ltd., the Respondent-Company herein.

3)Brief facts :

a)Respondent No.1 is a Company incorporated under

the name and style of M/s Devi Ispat Ltd. The

Respondent-Company carries on the business of

manufacturing and trading in ingots and various other

types of steel and for the said purpose requires financial

support from the financial institutions like the appellant-

Bank. Since the very inception of the respondent-

Company, it has been banking with the appellant-Bank

and availing various credit facilities like Term Loan,

Working Capital Demand Loan, Cash Credit and Letter of

Credit facility. On 16.10.2006, the respondent-Company

wrote a letter to the appellant-Bank requesting it to review

and enhance its credit facilities. On 15.12.2006, the

appellant-Bank intimated the respondent-Company of its

decision of review and enhanced credit facilities of the

Company’s account whereby the Company was to enjoy

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two Term Loans being Term Loan I for Rs. 360 lacs being

Account No. 1103590030, Term Loan II for Rs. 215 lacs

being Account No. 1103590041, Cash Credit for Rs.300

lacs being Account No. 1103589988, Working Capital

Demand Loan for Rs.1200 lacs being Account No.

3001640109 and a Letter of Credit in favour of the West

Bengal State Electricity Board for Rs.56 lacs.

b)Due to various irregularities in the account of the

respondent-Company, the appellant-Bank by various

letters between 15.09.2008 to 24.04.2009, advised the

respondent-Company to shift its loan account to some

other Bank. On 12.01.2009, the appellant-Bank sent the

Credit Information Report of the respondent-Company to

its new Banker, namely, the State Bank of India. On

25.02.2009, the appellant-Bank received an Internal Audit

Report in respect of the fraud perpetrated in the accounts

of M/s Rajco Steel Enterprises and M/s Kali International

Pvt. Ltd., whereby crores of rupees were siphoned away to

the account of the respondent-Company. Therefore, on

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14.03.2009, the appellant-Bank filed two complaints with

the Superintendent of Police, Central Bureau of

Investigation, Kolkata complaining of the fraud and

requesting the CBI, Kolkata to investigate into the matter.

c)On 02.04.2009, Special Audit Team of the appellant-

Bank submitted its report on the fraud committed by the

respondent-Company which revealed the transfer of a

huge amount of funds from the account of M/s Rajco Steel

Enterprises and M/s Kali International Pvt. Ltd. to the

account of the respondent-Company. On 06.05.2009, the

respondent-Company requested the appellant-Bank to

handover the original title deeds of its factory premises

and all the collateral securities held by it as against the

Company as well as from Mr. Nirmal Kumar Mandhani,

Director of the Company (respondent No.2 herein) to the

State Bank of India, Chowringhee Branch, Kolkata to

whom they had transferred their account. On

09.05.2009, the State Bank of India issued a Banker’s

cheque of Rs. 15 crores to the respondent-Company which

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the appellant-Bank had encashed and appropriated in lieu

of the outstanding balances lying against the respondent-

Company. By various letters, the respondent-Company

requested the appellant-Bank to return the Security

documents and issuance of ‘No Objection Certificate’ (in

short ‘NOC’) and ‘No Due Certificate’ (in short ‘NDC’). On

29.05.2009, the respondent-Company filed W.P. No. 485

of 2009 before the High Court at Calcutta. By order dated

24.08.2009, the learned single Judge of the High court

allowed the writ petition and directed the appellant-Bank

to release the security documents. Challenging the said

judgment, the appellant-Bank filed an appeal before the

Division Bench of the High Court being G.A. No. 2441 of

2009. By order dated 05.04.2010, the High Court

dismissed the appeal filed by the appellant herein.

Aggrieved by the said order, the appellant-Bank has

preferred this appeal by way of special leave.

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4)Heard Mr. Mukul Rohtagi, learned senior counsel for

the appellant-Bank and Mr. C.A. Sundaram, learned

senior counsel for the respondent-Company.

5)Mr. Mukul Rohtagi, learned senior counsel for the

appellant-Bank, after taking us through the entire

materials, at the foremost, submitted that the direction of

the learned single Judge affirmed by the Division Bench

for return of the title deeds deposited by the respondent-

Company as a security cannot be a subject-matter of

Article 226 of the Constitution of India. He further

submitted that right to retain a mortgage deed is a civil

dispute and proper forum is Debts Recovery Tribunal (in

short “DRT”) or civil court. He further submitted that if

the writ of mandamus issued by the High Court is

maintained, the right of the nationalized Bank which is

holding public money would affect its right before the

DRT. On the other hand, Mr. C.A. Sundaram, learned

senior counsel for the respondent-Company, by drawing

our attention to the relevant terms of the contract

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settlement of entire money due to the appellant-Bank by

an arrangement made through another nationalized Bank,

submitted that the writ petition before the High Court

under Article 226 is maintainable and the High Court is

fully justified in issuing direction for return of the title

deeds of the Company.

6)We have carefully considered the rival contentions of

both the parties and perused the relevant materials.

7)In order to answer the above contentions, there is no

need to narrate all the factual details except which are

required for the disposal of the above appeal. It is true

that the respondent-Company filed a writ petition before

the learned single Judge of the Calcutta High Court

praying for issuance of a writ of mandamus directing the

Bank to forthwith take steps to release the security

documents and issue ‘NOC’ and ‘NDC’ pertaining to their

company’s accounts without any further delay. It is also

not in dispute that the respondent-Company carries on

the business of manufacturing and trading in ingots and

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various other types of steel and for the said purpose, it

requires financial support from the institution like the

appellant-Bank. The appellant-Bank, being a public

sector Bank, discharging public functions is a ‘State’ in

terms of Article 12 of the Constitution of India amenable

to the writ jurisdiction. In the earlier part, we have

adverted to the fact that the respondent-Company had

availed various facilities such as Term Loan, Working

Capital Demand Loan, Cash Credit and Letter of Credit

facility. During the course of business, on 16.10.2006,

the respondent-Company wrote to the appellant-Bank

requesting it to review and enhance its credit facilities.

The same was also acceded to by the Bank. After two

years, between 15.09.2008 to 24.04.2009, the Bank

advised the Company to shift its borrowings to some other

Bank due to certain irregularities in the accounts of the

respondent-Company. Since the Company had not

complied with the direction in the letter dated 24.04.2009,

the Bank called upon the Company to close their

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accounts. On the other hand, the Company requested the

Bank to return the title deeds and other collateral

securities to enable them to entrust the same to other

Nationalized Bank. It is seen from the materials placed

that the Bank had taken such a stand requesting the

Company to shift their account to some other Bank since

it came to know that a fraud having been perpetrated by

M/s Rajco Steel Enterprises & M/s Kali International Pvt.

Ltd., and the respondent-Company is having a connection

with them. It is unnecessary to find out the truth or

otherwise in these proceedings. However, it is not in

dispute that in respect of their dues, the respondent-

Company made an arrangement with the State Bank of

India and deposited a cheque of Rs.15 Crores from the

State Bank of India. In fact, the receipt of an amount of

Rs. 15 Crores from the State Bank of India on and behalf

of the respondent-Company has not been disputed. The

letter dated 12.05.2009, addressed to the appellant-Bank,

make it clear that they received a cheque of Rs. 15 Crores

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from the State Bank of India, Chowringhee Road Branch

and the Company has also reminded the appellant-Bank

to return the security documents. The said letter reads as

under:-

“Devi Ispat Ltd.

85, Netaji Subhas Road, Ist Floor, Kolkata – 700 0001

Dated: 12

th

May, 2009

The Zonal Manager

Central Bank of India

Kolkata

Dear Sir,

Ref: Our Account at Barabazar Branch, Kolkata.

Please refer to our above account which has been taken over by State

Bank of India, Chowringhee Branch, Kolkata.

The Chowringhee Branch of State Bank of India had given a Banker’s

Cheque of Rs. 15.00 crores which have been encashed and appropriated

to our outstanding balances.

We regret to inform that inspite of such adjustments on 9

th

of May, 2009,

we are yet to get our Security documents, NOC, NDC etc.

We hope that you will appreciate that above documents are utmost

important and shall be handed over urgently. We request you to

immediately arrange to deliver the documents.

Thanking you,

Yours faithfully,

For DEVI ISPAT LTD.

SD/-

Director

Cc to: The Branch Manager

Central Bank of India

Barabazar Branch

Kolkata.”

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The contents of this letter reiterates the stand of the

respondent-Company.

8)In view of the fact that the respondent-Company had

cleared the dues which were pending at the relevant point

of time through the State Bank of India, they are entitled

to get their title deeds to enable them to deposit the same

with the State Bank of India as their security for the

amount advanced. It is also relevant to note that in four

subsequent letters dated 14.05.2009, the “statement of

account” furnished by the appellant-Bank clearly show

that after settling their dues the “uncleared amount” has

been mentioned as 0.00 (nil) which read as under:

“STATEMENT OF ACCOUNT CENTRAL BANK OF INDIA

BARABA_BARABAZAR (KOLKATA)

178, MAHATMA GANDHI ROAD,

BARABAZAR

Branch Code: 00102

Devi Ispat Ltd.

85, Netaji Subhas Road,

Ist Floor,

2

nd

Floor, Kolkata – 700 001 Account No. : 1103589988

Product: Medium Enterprises Currency: INR

Date: 14/05/2009 /tune: 10:58:05 E-mail

Cleared Balance: 49,82,783.42 Cr. Uncleared Amount: 0.00

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STATEMENT OF ACCOUNT CENTRAL BANK OF INDIA

BARABA_BARABAZAR (KOLKATA)

178, MAHATMA GANDHI ROAD,

BARABAZAR

Branch Code: 00102

Devi Ispat Ltd.

85, Netaji Subhas Road,

Ist Floor,

2

nd

Floor, Kolkata – 700 001 Account No. : 3001640109

Product: Medium Enterprises Currency: INR

Date: 14/05/2009 /tune: 10:59:12 E-mail

Cleared Balance: 0.00 Cr. Uncleared Amount: 0.00 Cr

STATEMENT OF ACCOUNT CENTRAL BANK OF INDIA

BARABA_BARABAZAR (KOLKATA)

178, MAHATMA GANDHI ROAD,

BARABAZAR

Branch Code: 00102

Devi Ispat Ltd.

85, Netaji Subhas Road,

Ist Floor,

2

nd

Floor, Kolkata – 700 001 Account No. : 1103590030

Product: Medium Enterprises Currency: INR

Date: 14/05/2009 /tune: 11:00:43 E-mail

Cleared Balance: 0.00 Cr. Uncleared Amount: 0.00

1

STATEMENT OF ACCOUNT CENTRAL BANK OF INDIA

BARABA_BARABAZAR (KOLKATA)

178, MAHATMA GANDHI ROAD,

BARABAZAR

Branch Code: 00102

Devi Ispat Ltd.

85, Netaji Subhas Road,

Ist Floor,

2

nd

Floor, Kolkata – 700 001 Account No. : 1103589988

Product: Medium Enterprises Currency: INR

Date: 14/05/2009 /tune: 10:59:52 E-mail

Cleared Balance: 0.00 Cr. Uncleared Amount: 0.00 “

The above factual details clearly demonstrate that through

an arrangement with the State Bank of India,

Chowringhee Road Branch, the respondent-Company

settled a sum of Rs. 15 Crores to the appellant-Bank and

the statement of accounts prevailing as on 14.05.2009

clearly reveal that there is no amount outstanding.

Taking note of these undisputed factual details, the Bank,

being a nationalized institution, amenable to writ

jurisdiction, the High Court has rightly issued a writ of

mandamus for return of the title deeds.

9)In the light of the above factual scenario, now let us

consider the decisions relied on by Mr. Rohtagi. In State

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of U.P. and Others vs. Bridge & Roof Company (India)

Ltd., (1996) 6 SCC 22, this Court, in para 16, held thus:

“16. Firstly, the contract between the parties is a

contract in the realm of private law. It is not a statutory

contract. It is governed by the provisions of the Contract

Act or, maybe, also by certain provisions of the Sale of

Goods Act. Any dispute relating to interpretation of the

terms and conditions of such a contract cannot be

agitated, and could not have been agitated, in a writ

petition. That is a matter either for arbitration as

provided by the contract or for the civil court, as the

case may be. Whether any amount is due to the

respondent from the appellant-Government under the

contract and, if so, how much and the further question

whether retention or refusal to pay any amount by the

Government is justified, or not, are all matters which

cannot be agitated in or adjudicated upon in a writ

petition. The prayer in the writ petition, viz., to restrain

the Government from deducting a particular amount

from the writ petitioner’s bill(s) was not a prayer which

could be granted by the High Court under Article 226.”

After saying so and in the light of the various terms of the

contract, the Court further held:

“18. Accordingly, it must be held that the writ petition

filed by the respondent for the issuance of a writ of

mandamus restraining the Government from deducting

or withholding a particular sum, which according to the

respondent is payable to it under the contract, was

wholly misconceived and was not maintainable in law.”

10)The next decision relied on by learned senior counsel

for the appellant in Kerala State Electricity Board and

Another vs. Kurien E. Kalathil and Others, (2000) 6

1

SCC 293. He heavily placed reliance on paras 10 and 11

of this judgment which read thus:

“10. We find that there is a merit in the first contention

of Mr. Raval. Learned counsel has rightly questioned the

maintainability of the writ petition. The interpretation

and implementation of a clause in a contract cannot be

the subject-matter of a writ petition. Whether the

contract envisages actual payment or not is a question

of construction of contract. If a term of a contract is

violated, ordinarily the remedy is not the writ petition

under Article 226. We are also unable to agree with the

observations of the High Court that the contractor was

seeking enforcement of a statutory contract. A contract

would not become statutory simply because it is for

construction of a public utility and it has been awarded

by a statutory body. We are also unable to agree with

the observation of the High Court that since the

obligations imposed by the contract on the contracting

parties come within the purview of the Contract Act,

that would not make the contract statutory. Clearly, the

High Court fell into an error in coming to the conclusion

that the contract in question was statutory in nature.

11. A statute may expressly or impliedly confer power

on a statutory body to enter into contracts in order to

enable it to discharge its functions. Dispute arising out

of the terms of such contracts or alleged breaches have

to be settled by the ordinary principles of law of

contract. The fact that one of the parties to the

agreement is a statutory or public body will not by itself

affect the principles to be applied. The disputes about

the meaning of a covenant in a contract or its

enforceability have to be determined according to the

usual principles of the Contract Act. Every act of a

statutory body need not necessarily involve an exercise

of statutory power. Statutory bodies, like private parties,

have power to contract or deal with property. Such

activities may not raise any issue of public law. In the

present case, it has not been shown how the contract is

statutory. The contract between the parties is in the

realm of private law. It is not a statutory contract. The

disputes relating to interpretation of the terms and

conditions of such a contract could not have been

agitated in a petition under Article 226 of the

Constitution of India. That is a matter for adjudication

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by a civil court or in arbitration if provided for in the

contract. Whether any amount is due and if so, how

much and refusal of the appellant to pay it is justified or

not, are not the matters which could have been agitated

and decided in a writ petition. The contractor should

have relegated to other remedies.”

11)We have gone through the factual details in both the

decisions. It is not in dispute that a specific mandamus

was sought for in both the cases for implementation of a

clause in a contract which was rightly negatived under

Article 226. It is settled law that the disputes relating to

interpretation of terms and conditions of a contract could

not be examined/challenged or agitated in a petition filed

under Article 226 of the Constitution. It is a matter for

adjudication by a civil court or in arbitration, if provided

for in the contract or before the DRT or under the

Securitization Act. In the case on hand, the respondent-

Company has demonstrated that based on the advise of

the appellant-Bank, they shifted their accounts to another

Nationalized Bank and through an arrangement with the

State Bank of India, a cheque of Rs.15 crores was

deposited by their Bank and in token of the same, by

1

statement of accounts dated 14.05.2009 the appellant-

Bank clearly mentioned that there is no due or nil

balance from the respondent-Company (Emphasis

supplied). In such circumstances, when the relief sought

for does not relate to interpretation of any terms of

contract, the Bank being a Nationalized Bank, a Writ

Court can issue appropriate direction in certain

circumstances as mentioned above. In such a factual

matrix, the reliance placed on these two decisions is not

helpful to the appellant-Bank.

12)Though Mr. Rohtagi has pointed out that after filing

of the writ petition, the respondent-Company owes money

through their relationship with other concerns, as rightly

pointed out by Mr. Sundaram, the position on the date of

the filing of the writ petition is the relevant date to test the

direction of the High Court. It is not in dispute that the

writ petition has been filed by the respondent-Company

before the High Court at Calcutta on 29.05.2009 that is

well after settlement of their dues to the extent of Rs. 15

1

Crores by the State Bank of India and the communication

of the appellant-Bank dated 15.05.2009 intimating ‘nil’

due. In view of the same, we hold that the date of filing of

the writ petition is the relevant date. This is also clear

from the dictum laid down by this Court in Rajahmundry

Electric Supply Corporation Ltd. vs. A. Nageshwara

Rao and Others, (1955) 2 SCR 1066.

13)In ABL International Ltd. and Another vs. Export

Credit Guarantee Corporation of India Ltd. and

Others, (2004) 3 SCC 553, Santosh Hegde, J. has

exhaustively dealt with the maintainability of writ petition

under Article 226 in contractual matters. In the said

case, contract of insurance was executed between ABL

International Ltd. and Another and Export Credit

Guarantee Corporation of India Ltd. and Others. Having

failed to persuade the first respondent therein, to adhere

to the contract of insurance between it and the appellant,

the appellant filed a writ petition before a learned Single

Judge of the Calcutta High Court, inter alia, praying for

1

quashing of the letters of repudiation issued by the first

respondent. It also consequentially prayed for a direction

to the first respondent to make payment of the dues to it

under the contract of insurance. The learned Single

Judge, after hearing the parties, came to the conclusion

that though the dispute between the parties arose out of a

contract, the first respondent being a ‘State’ for the

purpose of Article 12, was bound by the terms of the

contract, therefore, for such non-performance, a writ was

maintainable and after considering the arguments of the

parties in regard to the liability under the contract of

insurance, allowed the writ petition and issued the writ

and directions as prayed for by the appellants in the writ

petition.In an appeal filed by the first respondent before

the Appellate Bench of the same High Court, the Division

Bench reversed the findings of the learned Single Judge

and held that the claim of the appellant involving disputed

questions of fact cannot be adjudicated in a writ

proceeding under Article 226 of the Constitution, hence,

1

set aside the judgment of the learned Single Judge. In the

course of its judgment the Appellate Bench also

incidentally came to the conclusion that the first

respondent had not committed any violation of the clauses

or the terms of the insurance contract. On the contrary, it

observed that as per proviso (d) to clause (xi) of the said

insurance contract, by refusing to accept the barter of

goods, the first appellant had violated the terms of the

contract disentitling it to raise any claim on the first

respondent. It is against this order of the Appellate Bench

of the Calcutta High Court, the appellants therein filed an

appeal before this Court by way of special leave. After

adverting to certain factual details, the Court framed

following question:

“As could be seen from the arguments addressed in this

appeal and as also from the divergent views of the two

courts below, one of the questions that falls for our

consideration is whether a writ petition under Article

226 of the Constitution of India is maintainable to

enforce a contractual obligation of the State or its

instrumentality, by an aggrieved party.”

The following discussion and conclusion are apt and

relevant for our purpose. They are:

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“9.In our opinion this question is no more res integra

and is settled by a large number of judicial

pronouncements of this Court. In K.N. Guruswamy v.

State of Mysore this Court held: (AIR pp. 595-96, para

20)

“20. The next question is whether the appellant can

complain of this by way of a writ. In our opinion, he

could have done so in an ordinary case. The appellant is

interested in these contracts and has a right under the

laws of the State to receive the same treatment and be

given the same chance as anybody else. ...

We would therefore in the ordinary course have given

the appellant the writ he seeks. But, owing to the time

which this matter has taken to reach us (a consequence

for which the appellant is in no way to blame, for he has

done all he could to have an early hearing), there is

barely a fortnight of the contract left to go. ... A writ

would therefore be ineffective and as it is not our

practice to issue meaningless writs we must dismiss

this appeal and leave the appellant content with an

enunciation of the law.”

10. It is clear from the above observations of this Court

in the said case, though a writ was not issued on the

facts of that case, this Court has held that on a given

set of facts if a State acts in an arbitrary manner even in

a matter of contract, an aggrieved party can approach

the court by way of writ under Article 226 of the

Constitution and the court depending on facts of the

said case is empowered to grant the relief. This

judgment in K.N. Guruswamy v. State of Mysore was

followed subsequently by this Court in the case of

D.F.O. v. Ram Sanehi Singh wherein this Court held:

(SCC p. 865, para 4)

“By that order he has deprived the respondent of a

valuable right. We are unable to hold that merely

because the source of the right which the respondent

claims was initially in a contract, for obtaining relief

against any arbitrary and unlawful action on the part of

a public authority he must resort to a suit and not to a

petition by way of a writ. In view of the judgment of this

Court in K.N. Guruswamy case

1

there can be no doubt

that the petition was maintainable, even if the right to

relief arose out of an alleged breach of contract, where

the action challenged was of a public authority invested

with statutory power.”

(Emphasis supplied)

2

11. In the case of Gujarat State Financial Corpn. v. Lotus

Hotels (P) Ltd. this Court following an earlier judgment

in Ramana Dayaram Shetty v. International Airport

Authority of India held: (SCC pp. 385-86, paras 9 & 11)

The instrumentality of the State which would be

‘other authority’ under Article 12 cannot commit breach

of a solemn undertaking to the prejudice of the other

party which acted on that undertaking or promise and

put itself in a disadvantageous position. The appellant

Corporation, created under the State Financial

Corporations Act, falls within the expression of ‘other

authority’ in Article 12 and if it backs out from such a

promise, it cannot be said that the only remedy for the

aggrieved party would be suing for damages for breach

and that it could not compel the Corporation for specific

performance of the contract under Article 226.

12. The learned counsel appearing for the first

respondent, however, submitted that this Court has

taken a different view in the case of LIC of India v.

Escorts Ltd wherein this Court held: (SCC p. 344, para

102)

“If the action of the State is related to contractual

obligations or obligations arising out of the tort, the

court may not ordinarily examine it unless the action has

some public law character attached to it. Broadly

speaking, the court will examine actions of State if they

pertain to the public law domain and refrain from

examining them if they pertain to the private law field.

The difficulty will lie in demarcating the frontier between

the public law domain and the private law field. It is

impossible to draw the line with precision and we do not

want to attempt it. The question must be decided in

each case with reference to the particular action, the

activity in which the State or the instrumentality of the

State is engaged when performing the action, the public

law or private law character of the action and a host of

other relevant circumstances. When the State or an

instrumentality of the State ventures into the corporate

world and purchases the shares of a company, it

assumes to itself the ordinary role of a shareholder, and

dons the robes of a shareholder, with all the rights

available to such a shareholder. There is no reason why

the State as a shareholder should be expected to state

its reasons when it seeks to change the management, by

a resolution of the company, like any other

shareholder.”(emphasis supplied)

13. We do not think this Court in the above case has, in

any manner, departed from the view expressed in the

2

earlier judgments in the case cited hereinabove. This

Court in the case of LIC of India proceeded on the facts

of that case and held that a relief by way of a writ

petition may not ordinarily be an appropriate remedy.

This judgment does not lay down that as a rule in

matters of contract the court’s jurisdiction under Article

226 of the Constitution is ousted. On the contrary, the

use of the words “court may not ordinarily examine it

unless the action has some public law character

attached to it” itself indicates that in a given case, on

the existence of the required factual matrix a remedy

under Article 226 of the Constitution will be available.

The learned counsel then relied on another judgment of

this Court in the case of State of U.P. v. Bridge & Roof

Co. (India) Ltd wherein this Court held: (SCC p. 31,

para 21)

Further, the contract in question contains a clause

providing inter alia for settlement of disputes by

reference to arbitration. The arbitrators can decide both

questions of fact as well as questions of law. When the

contract itself provides for a mode of settlement of

disputes arising from the contract, there is no reason

why the parties should not follow and adopt that

remedy and invoke the extraordinary jurisdiction of the

High Court under Article 226. The existence of an

effective alternative remedy — in this case, provided in

the contract itself — is a good ground for the court to

decline to exercise its extraordinary jurisdiction under

Article 226.

14. This judgment again, in our opinion, does not help

the first respondent in the argument advanced on its

behalf that in contractual matters remedy under Article

226 of the Constitution does not lie. It is seen from the

above extract that in that case because of an arbitration

clause in the contract, the Court refused to invoke the

remedy under Article 226 of the Constitution. We have

specifically inquired from the parties to the present

appeal before us and we have been told that there is no

such arbitration clause in the contract in question. It is

well known that if the parties to a dispute had agreed to

settle their dispute by arbitration and if there is an

agreement in that regard, the courts will not permit

recourse to any other remedy without invoking the

remedy by way of arbitration, unless of course both the

parties to the dispute agree on another mode of dispute

resolution. Since that is not the case in the instant

appeal, the observations of this Court in the said case of

Bridge & Roof Co. are of no assistance to the first

respondent in its contention that in contractual

matters, writ petition is not maintainable.

2

15. The learned counsel then contending that this

Court will not entertain a writ petition involving

disputed questions of fact relied on a judgment of this

Court in the case of State of Bihar v. Jain Plastics and

Chemicals Ltd wherein this Court held: (SCC p. 218,

para 7)

“7. In our view, it is apparent that the order passed

by the High Court is, on the face of it, illegal and

erroneous. 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 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.”

16. A perusal of this judgment though shows that a writ

petition involving serious disputed questions of facts

which requires consideration of evidence which is not

on record, will not normally be entertained by a court in

the exercise of its jurisdiction under Article 226 of the

Constitution of India. This decision again, in our

opinion, does not lay down an absolute rule that in all

cases involving disputed questions of fact the parties

should be relegated to a civil suit. In this view of ours,

we are supported by a judgment of this Court in the

case of Gunwant Kaur v. Municipal Committee, Bhatinda

where dealing with such a situation of disputed

questions of fact in a writ petition this Court held: (SCC

p. 774, paras 14-16)

“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,

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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 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.”

17. The above judgment of Gunwant Kaur finds support

from another judgment of this Court in the case of

Century Spg. and Mfg. Co. Ltd. v. Ulhasnagar Municipal

Council wherein this Court held: (SCC p. 587, para 13)

“Merely because a question of fact is raised, the High

Court will not be justified in requiring the party to seek

relief by the somewhat lengthy, dilatory and expensive

process by a civil suit against a public body. The

questions of fact raised by the petition in this case are

elementary.”

18. This observation of the Court was made while

negating a contention advanced on behalf of the

respondent Municipality which contended that the

petition filed by the appellant Company therein

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apparently raised questions of fact which argument of

the Municipality was accepted by the High Court

holding that such disputed questions of fact cannot be

tried in the exercise of the extraordinary jurisdiction

under Article 226 of the Constitution. But this Court

held otherwise.

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.”

After holding so, this Court has concluded as under:

“53. From the above, it is clear that when an

instrumentality of the State acts contrary to public good

and public interest, unfairly, unjustly and

unreasonably, in its contractual, constitutional or

statutory obligations, it really acts contrary to the

constitutional guarantee found in Article 14 of the

Constitution. Thus if we apply the above principle of

applicability of Article 14 to the facts of this case, then

we notice that the first respondent being an

instrumentality of the State and a monopoly body had

to be approached by the appellants by compulsion to

cover its export risk. The policy of insurance covering

the risk of the appellants was issued by the first

respondent after seeking all required information and

after receiving huge sums of money as premium

exceeding Rs. 16 lakhs. On facts we have found that the

terms of the policy do not give room to any ambiguity as

to the risk covered by the first respondent. We are also

of the considered opinion that the liability of the first

respondent under the policy arose when the default of

the exporter occurred and thereafter when the

Kazakhstan Government failed to fulfil its guarantee.

There is no allegation that the contracts in question

were obtained either by fraud or by misrepresentation.

In such factual situation, we are of the opinion, the

facts of this case do not and should not inhibit the High

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Court or this Court from granting the relief sought for

by the petitioner.”

14)In a recent decision in Karnataka State Forest

Industries Corporation vs. Indian Rocks, (2009) 1 SCC

150, while considering the similar issue, S.B. Sinha, J.

speaking for the Bench reiterated thus:

“38. Although ordinarily a superior court in exercise of its

writ jurisdiction would not enforce the terms of a contract

qua contract, it is trite that when an action of the State is

arbitrary or discriminatory and, thus, violative of Article 14

of the Constitution of India, a writ petition would be

maintainable. (See ABL International Ltd. v. Export Credit

Guarantee Corpn. of India Ltd.)

39. There cannot be any doubt whatsoever that a writ of

mandamus can be issued only when there exists a legal

right in the writ petition and a corresponding legal duty on

the part of the State, but then if any action on the part of

the State is wholly unfair or arbitrary, the superior courts

are not powerless.”

15)It is clear that, (a) in the contract if there is a clause

for arbitration, normally, writ court should not invoke its

jurisdiction; (b) the existence of effective alternative

remedy provided in the contract itself is a good ground to

decline to exercise its extraordinary jurisdiction under Art.

226; and (c) if the instrumentality of the State acts

contrary to the public good, public interest, unfairly,

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unjustly, unreasonably discriminatory and violative of Art.

14 of the Constitution of India in its contractual or

statutory obligation, writ petition would be maintainable.

However, a legal right must exist and corresponding legal

duty on the part of the State and if any action on the part

of the State is wholly unfair or arbitrary, writ courts can

exercise their power.

16)In the light of the legal position, writ petition is

maintainable even in contractual matters, in the

circumstances mentioned in the earlier paragraphs. In

the case on hand, it is not in dispute that the appellant-

Bank, being a public sector Bank, discharging public

functions is “State” under Article 12. In view of the

settlement of the dues on the date of filing of the writ

petition by arrangement made through another

Nationalized Bank, namely, State Bank of India and the

statement of accounts furnished by the appellant-Bank

subsequent to the same i.e. on 14.05.2009 is 0.00 (nil)

outstanding, we hold that the High Court was fully

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justified in issuing a writ of mandamus for return of its

title deeds. In the light of the above conclusion, we are

unable to accept the claim of the appellant-Bank and on

the other hand, we are in entire agreement with the

direction issued by the learned Single Judge affirmed by

the Division Bench. Consequently, the appeal of the Bank

is dismissed. The appellant-Bank is directed to return the

title deeds deposited by the respondent-Company within a

period of two weeks from today. With the above direction,

the civil appeal is dismissed. No order as to costs.

...…………………………………J.

(P. SATHASIVAM)

...…………………………………J.

(ANIL R. DAVE)

NEW DELHI;

JULY 30, 2010.

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