Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 22
CASE NO.:
Appeal (civil) 5409 of 1998
PETITIONER:
ABL International Ltd. & Anr.
RESPONDENT:
Export Credit Guarantee Corportion Of India Limited & Ors.
DATE OF JUDGMENT: 18/12/2003
BENCH:
N.Santosh Hegde & B.P.Singh.
JUDGMENT:
J U D G M E N T
SANTOSH HEGDE,J.
One Rassik Woodworth Limited (4th respondent herein)
entered into a contract with M/s.RVO Kazpishepromsyrio, a State-
owned Corporation of Kazakhstan (referred to as the Kazak
Corporation) for supply of 3,000 Metric Tons of tea. The said
agreement was entered into on or about 26th August, 1993. As per
the original agreement, the payment for such tea exported was to
be made by the Kazak Corporation by barter of goods mentioned
in the Schedule to the said agreement, within 120 days of the date
of delivery by the exporter. The agreement also provided that such
payment to be made by the Kazak Corporation is to be guaranteed
by the Government of Kazakhstan. Clause 6 of the agreement
which provided for the mode of payment by barter of goods by the
Kazak Corporation came to be amended by an addendum on the
very same day when the original agreement was executed. By the
amended agreement, it was specifically provided that if the
contract of barter of goods cannot be finalised for any reason then
the Kazak Corporation was to pay to the exporter for the goods
received by it in US Dollars within 120 days from the date of the
delivery. Such payment was to be remitted by the Kazak
Corporation to the bank account of the exporter at Delhi. This
amended agreement also provided for a guarantee being given by
the Ministry of Foreign Economic Relations of Kazakhstan for
prompt payment of such consideration. The addendum specifically
stated that the same was to form an integral part of the contract
earlier entered between the parties on the same day viz. 26.8.1993.
After the said contract was entered into by the 4th respondent
with the Kazak Corporation, by an agreement of parties, the 4th
respondent assigned a part of the said export contract to the first
appellant herein on same terms. On a direction issued by the
Reserve Bank of India to cover the risk arising out of the export of
tea made by the appellants as per the said assigned contract, the
appellants approached the Export Credit Guarantee Corporation of
India Ltd. (the first respondent herein) on 23rd September, 1993 to
insure the risk of payment of consideration that is involved in the
said contract of export. On 30th September, 1993, after
considerable correspondence between the parties, the first
respondent issued a comprehensive risk policy effective from 23rd
September, 1993 to 30th September, 1995 covering the risk. The
Kazakhstan Government as required in the contract through its
Ministry of Foreign Economic Relations also gave an irrevocable
guarantee that in the event the Kazak Corporation for any reason
whatsoever is unable to meet its obligation of payment due under
the contract, said Government would make the payment to the
exporter in US dollars through remittance for tea delivered. It is the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 22
case of the appellant that the payment of consideration by barter of
goods could not be finalised between the appellant and the Kazak
Corporation, therefore, the said Corporation agreed to pay the
consideration amount for the goods received by it in US dollars
and also paid certain sums of money in US dollars as part payment
but failed to pay the balance amount due under the contract. It is
also the case of the appellant that even the Kazakhstan
Government though admitted its liability to pay the balance of
consideration amount did not fulfil its part of the guarantee given
in the contract due to lack of funds. It is on the failure of the
Kazakhstan Government to fulfil its guarantee the appellants made
a claim on the first respondent which had covered the said risk of
compensating the loss suffered by it by the non-payment of the
consideration amount for the supply of tea made to the Kazak
Corporation. The first respondent as per its letter dated 14.12.1994,
however, repudiated the claim of the appellants stating that the
appellants had changed the terms of the contract of payment
without first consulting it, therefore, it had no obligation to
compensate the appellants for the loss suffered by it. This alleged
change of terms of the contract, according to the first respondent,
was due to the fact that the appellants had rejected the barter offer
made by the Kazak Corporation and had opted for cash payment in
US dollars which, according to the first respondent was not the
mode of payment contemplated in the contract between the
exporter and the Kazak Corporation. On further correspondence
between the appellants and the first respondent, the latter reiterated
its right to repudiate the claim of the appellants by its second letter
dated 26.5.1995 contending that the refusal of the barter offer by
the appellants without first consulting it, amounts to a change in
the mode of recovery of dues, hence, the loss suffered by such
change in the mode of recovery took away the liability of the first
respondent to pay for such loss.
Having failed to persuade the first respondent 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 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 said 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, 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
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 22
High Court that the appellants are before us.
In this appeal, Dr. A.M. Singhvi, learned senior counsel for
the appellants contended that the High Court though noted that the
writ petition involved disputed questions of fact has not identified
any such disputed questions of fact which disentitled the appellants
from seeking reliefs in a writ petition. He also submitted that
assuming that some disputed questions did arise for consideration
in the writ petition, that itself would not bar the High Court under
Article 226 of the Constitution from examining such questions of
fact. He further submitted that in the present case, the terms of the
contract between the exporter and the Kazak Corporation on one
hand and the contract of insurance between the appellants and the
first respondent on the other being crystal clear, there was no
question of any difficulty in interpretation of the said terms of the
contracts and all necessary facts required for the interpretation of
the said clauses of the insurance and export contracts being
admitted, the Appellate Bench of the High Court was in error in
coming to the conclusion that the writ petition involved such
disputed questions of facts which the High Court could not decide
in the writ petition. He also contended that the observations of the
High Court in the course of its judgment that the appellants had
violated the terms of the export contract or the insurance contract,
is ex facie erroneous. He submitted that this is because of the fact
that the Appellate Bench did not properly appreciate the relevant
clauses of the said contracts. He also contended that proviso (d) to
Clause (xi) of the insurance contract had no bearing whatsoever on
the facts of this case. Learned counsel then pointed out that the
basis of the repudiation as could be seen from the two letters of the
first respondent was that prior permission of the said respondent
was not taken before making a change in the terms of the export
contract. According to the learned counsel, this foundation of
repudiation of the claim is based on a presumption that there was
any such requirement either in law or in the contracts to have a
prior consultation with the first respondent while making a claim to
receive cash consideration from the exporter. It was argued that
apart from the fact that there was no change in the terms of the
contract as indicated in the letters of repudiation, the assumption of
the first respondent that it had to be consulted while making any
such demand on the Kazak Corporation is wholly baseless.
Learned counsel pointed out from the terms of the contracts, what
the appellants had insured with the first respondent was not their
goods. On the contrary, they had actually insured the non-payment
of consideration which under the terms of contract, was either by
barter or by cash. Therefore, it was not open to the first respondent
to repudiate the appellants’ claim on the ground that the mode of
barter payment was changed without consulting it and that the
contract of insurance did not cover the risk of payment in US $.
According to the learned counsel for the appellants, none of the
terms of the contracts, be it the export contract or the insurance
contract, gives any room for multiple interpretation nor requires
any evidence being led. According to said learned counsel, all that
the writ court had to decide was whether the appellant should
adhere only to receive consideration by barter of goods or it is also
entitled to demand the consideration by cash in US $ and whether
non-payment of such consideration is covered by the contract of
insurance or not which, according to learned counsel, can be
decided by examining the terms of the contracts without having to
take recourse to any external aid.
Ms. Indira Jaising, learned senior counsel appearing for the
first respondent submitted that on facts and circumstances of this
case, a writ petition was not maintainable nor can it be construed
as an appropriate remedy. She pointed out that the subject matter is
a dispute arising out of a contract and is not a matter falling under
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 22
the purview of Administrative Law. According to her, the doctrine
of fairness and reasonableness applies only in the exercise of
statutory or administrative actions of a State and not in the exercise
of a contractual obligation and issues arising out of contractual
matters will have to be decided on the basis of the law of contract
and not on the basis of the administrative law. It was her argument
that at the most in matters involving statutory contracts where
action of the State involves a public duty, a writ may lie but in the
instant case, the contract was neither a statutory contract nor the
duty of the first respondent under the contract had any public law
element involved in it. According to the learned counsel, this
contract was a negotiated contract and not a standard form
contract. She also supported the finding of the Appellate Bench of
the High Court that the facts involved in the case are all disputed
facts requiring evidence to be led, therefore, the appropriate
remedy could only be a suit. Hence, the impugned judgment did
not call for any interference.
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.
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 Vs. The State of Mysore and
others. [ 1955 (1) SCR 305] this Court held:
"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."
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 Vs. The State of Mysore and others was
followed subsequently by this Court in the case of The D.F.O,
South Kheri & Ors. Vs. Ram Sanehi Singh [ 1971 (3) SCC
864] wherein this Court held:
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 22
"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’s
case (supra), 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)
In the case of Gujarat State Financial Corporation Vs
M/s. Lotus Hotels Pvt. Ltd. [1983 (3) SCC 379] this Court
following an earlier judgment in R.D. Shetty Vs.
International Airport Authority of India [1979 (3) SCC 489]
held:
"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 Corporation 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."
The learned counsel appearing for the first respondent
however, submitted that this Court has taken a different view in
the case of Life Insurance Corporation of India Vs. Escorts
Ltd. & Ors. [ 1986 (1) SCC 264] wherein this Court held:
"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
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 22
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).
We do not think this Court in the above case has, in any
manner, departed from the view expressed in the earlier
judgments in the case cited hereinabove. This Court in the case
of Life Insurance Corporation of India (Supra) 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. & Ors. Vs. Bridge & Roof Company
(India) Ltd. [ 1996 (6) SCC 22] wherein this Court held:
"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."
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
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 22
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.
(supra) is of no assistance to the first respondent in its
contention that in contractual matters, writ petition is not
maintainable.
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
& Ors. Vs. Jain Plastics and Chemicals Ltd. [2002 (1) SCC
216] wherein this Court held :
"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."
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
Smt. Gunwant Kaur & Ors. vs. Municipal Committee,
Bhatinda and Ors. [1969 (3) SCC 769] where dealing with
such a situation of disputed questions of fact in a writ petition
this Court held :
"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
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 22
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
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.
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.
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."
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 22
The above judgment of Smt. Gunwant Kaur (supra) finds
support from another judgment of this Court in the case of
Century Spinning and Manufacturing Company Ltd. &
Anr. vs. The Ulhasnagar Municipal Council & Anr. [1970
(1) SCC 582] wherein this Court held :
"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."
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 apparently raised questions of fact which
argument of the Municipality was accepted by the High Court
holding that such disputed question of fact cannot be tried in the
exercise of the extraordinary jurisdiction under Article 226 of
the Constitution. But this Court held otherwise.
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
Smt.Gunwant Kaur (supra), this Court even went to the extent
of holding that in a writ petition, if facts required, 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.
The learned counsel for the respondent then placed
reliance on a judgment of this Court in the case of VST
Industries Ltd. vs. VST Industries Workers’ Union & Anr.
[2001 (1) SCC 298]. In the said case, this Court held :
"In Anadi Mukta case this Court
examined the various aspects and the
distinction between an authority and a
person and after analysis of the decisions
referred in that regard came to the
conclusion that it is only in the
circumstances when the authority or the
person performs a public function or
discharges a public duty that Article 226
of the Constitution can be invoked. In
the present case, the appellant is engaged
in the manufacture and sale of cigarettes.
Manufacture and sale of cigarettes will
not involve any public function."
Placing reliance on the observations of this Court in the
said case, learned counsel contended unless the action
challenged in the writ petition pertains to the discharge of a
public function or public duty by an authority, the courts will
not entertain a writ petition which does not involve the
performance of said public function or public duty. Learned
counsel argued in the instant case while repudiating the
contract, the first respondent was not discharging any public
function or public duty.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 22
We do not think the above judgment in VST Industries
Ltd. (supra) supports the argument of the learned counsel on the
question of maintainability of the present writ petition. It is to
be noted that VST Industries Ltd. against whom the writ
petition was filed was not a State or an instrumentality of a
State as contemplated under Article 12 of the Constitution,
hence, in the normal course, no writ could have been issued
against the said industry. But it was the contention of the writ
petitioner in that case that the said industry was obligated under
the concerned statute to perform certain public functions,
failure to do so would give rise to a complaint under Article
226 against a private body. While considering such argument,
this Court held that when an authority has to perform a public
function or a public duty if there is a failure a writ petition
under Article 226 of the Constitution is maintainable. In the
instant case, as to the fact that the respondent is an
instrumentality of a State, there is no dispute but the question
is: Was first respondent discharging a public duty or a public
function while repudiating the claim of the appellants arising
out of a contract ? Answer to this question, in our opinion, is
found in the judgment of this Court in the case of Kumari
ShriLekha Vidyarthi & Ors. vs. State of U.P.& Ors. [1991
(1) SCC 212] wherein this Court held :
"The impact of every State action is also on
public interest. It is really the nature of its
personality as State which is significant and
must characterize all its actions, in whatever
field, and not the nature of function,
contractual or otherwise which is decisive of
the nature of scrutiny permitted for
examining the validity of its act. The
requirement of Article 14 being the duty to
act fairly, justly and reasonably, there is
nothing which militates against the concept
of requiring the State always to so act, even
in contractual matters."
It is clear from the above observations of this Court, once
State or an instrumentality of State is a party to the contract, it
has an obligation in law to act fairly, justly and reasonably
which is the requirement of Article 14 of the Constitution of
India. Therefore, if by the impugned repudiation of the claim of
the appellants the first respondent as an instrumentality of the
State has acted in contravention of the above said requirement
of Article 14 then we have no hesitation that a writ court can
issue suitable directions to set right the arbitrary actions of the
first respondent. In this context, we may note that though the
first respondent is a company registered under the Companies
Act, it is wholly owned by the Government of India. The total
subscribed share capital of this company is 2,50,000 shares out
of which 2,49,998 shares are held by the President of India
while one each share is held by the Joint Secretary, Ministry of
Commerce and Industry and Officer on Special Duty, Ministry
of Commerce and Industry respectively. The objects
enumerated in the Memorandum of Association of the first
respondent at Para 10 states :
"To undertake such functions as may be
entrusted to it by Government from time to
time, including grant of credits and
guarantees in foreign currency for the
purpose of facilitating the import of raw
materials and semi-finished goods for
manufacture or processing goods for
export."
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 22
Para 11 of the said object reads thus :
"To act as agent of the Government, or with
the sanction of the Government on its own
account, to give the guarantees, undertake
such responsibilities and discharge such
functions as are considered by the
Government as necessary in national
interest."
It is clear from the above two objects of the company that
apart from the fact that the company is wholly a Government
owned company it discharges the functions of the Government
and acts as an agent of the Government even when it gives
guarantees and it has a responsibility to discharge such
functions in the national interest. In this background it will be
futile to contend that the actions of the first respondent
impugned in the writ petition do not have a touch of public
function or discharge of a public duty. Therefore, this argument
of the first respondent must also fail.
The learned counsel for the respondent then contended
that though the principal prayer in the writ petition is for
quashing the letters of repudiation by the first respondent, in
fact the writ petition is one for a ’money claim’ which cannot
be granted in a writ petition under Article 226 of the
Constitution of India. In our opinion, this argument of the
learned counsel also cannot be accepted in its absolute terms.
This court in the case of U.P.Pollution Control Board & Ors.
vs. Kanoria Industrial Ltd. & Anr. [2001 (2) SCC 549] while
dealing with the question of refund of money in a writ petition
after discussing the earlier case law on this subject held :
"In the para extracted above, in a
similar situation as arising in the
present cases relating to the very
question of refund, while answering
the said question affirmatively, this
Court pointed out that the courts have
made distinction between those cases
where a claimant approached a High
Court seeking relief of obtaining
refund only and those where refund
was sought as a consequential relief
after striking down of the order of
assessment, etc. In these cases also
the claims made for refund in the writ
petitions were consequent upon
declaration of law made by this Court.
Hence, the High Court committed no
error in entertaining the writ petitions.
In support of the submission that a
writ petition seeking mandamus for
mere refund of money was not
maintainable, the decision in
Suganmal Vs. State of M.P. was cited.
In AIR para 6 of the said judgment, it
is stated that -
"We are of the opinion that though the
High Courts have power to pass any
appropriate order in the exercise of
the powers conferred under Article
226 of the Constitution, such a
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 22
petition solely praying for the issue of
a writ of mandamus directing the
State to refund the money is not
ordinarily maintainable for the simple
reason that a claim for such a refund
can always be made in a suit against
the authority which had illegally
collected the money as a tax".
Again in AIR para 9, the Court held:
"We, therefore, hold that normally
petitions solely praying for the refund
of money against the State by a writ
of mandamus are not to be
entertained. The aggrieved party has
the right of going to the civil court for
claiming the amount and it is open to
the State to raise all possible defences
to the claim, defences which cannot,
in most cases, be appropriately raised
and considered in the exercise of writ
jurisdiction."
The judgment cannot be read as
laying down the law that no writ
petition at all can be entertained
where claim is made for only refund
of money consequent upon
declaration of law that levy and
collection of tax/cess as
unconstitutional or without the
authority of law. It is one thing to
say that the High Court has no power
under Article 226 of the Constitution
to issue a writ of mandamus for
making refund of the money illegally
collected. It is yet another thing to
say that such power can be exercised
sparingly depending on facts and
circumstances of each case. For
instance, in the cases on hand where
facts are not in dispute, collection of
money as cess was itself without the
authority of law; no case of undue
enrichment was made out and the
amount of cess was paid under
protest; the writ petitions were filed
within a reasonable time from the date
of the declaration that the law under
which tax/cess was collected was
unconstitutional. There is no good
reason to deny a relief of refund to the
citizens in such cases on the
principles of public interest and equity
in the light of the cases cited above.
However, it must not be understood
that in all cases where collection of
cess, levy or tax is held to be
unconstitutional or invalid, the refund
should necessarily follow. We wish
to add that even in cases where
collection of cess, levy or tax is held
to be unconstitutional or invalid,
refund is not an automatic
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 22
consequence but may be refused on
several grounds depending on facts
and circumstances of a given case."
Therefore, this objection must also fail because in a given
case it is open to the writ court to give such monetary relief
also.
From the above discussion of ours, 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 facts arise for
consideration, same cannot be a 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.
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
Corporation vs. Registrar of Trade Marks, Mumbai & Ors.
[1998 (8) SCC 1]. 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.
It is in the above understanding of law, we will now
consider the facts of the present case to find out whether the
appellants are entitled to relief or not as prayed for in the writ
petition filed by them.
While considering this issue, it has to be noted at the outset
itself that the first respondent is an instrumentality of State for the
purpose of Article 12 of the Constitution is not disputed and rightly
too. It is also not disputed that the first respondent is a monopoly
Corporation in its field.
The fact that the appellant to the extent covered by the
contract of insurance had agreed to insure the risk of non payment
of its consideration for the tea exported to the Kazak Corporation
is also not disputed;
The fact that the appellant has exported 8.70 lakh kilograms
of tea to Kazakhstan between 8th and 30th October, 1993 is also not
disputed.
The fact that the Kazak Corporation did not pay the
consideration for the tea received by it in cash in US dollars is also
not disputed.
The fact that the Kazakhstan Government stood as a
guarantor for prompt payment for the goods received by the Kazak
Corporation and that the said Government failed to honour its
guarantee is also not disputed.
The fact that the Reserve Bank of India permitted the
appellant to receive cash consideration in the form of US $ instead
of barter payment is also not disputed.
What is disputed is the obligation of the first respondent to
cover the risk of non-payment of consideration by cash in US
currency on the ground that the risk covered by the first respondent
is a risk arising out of non-supply of goods by the barter method
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 22
only.
In our opinion, this limited area of dispute can be settled by
looking into the terms of the contract of insurance as well as the
export contract, and the same does not require consideration of any
oral evidence or any other documentary evidence other than what
is already on record. The claim of the contesting parties will stand
or fall on the terms of the contracts, interpretation of which, as
stated above, does not require any external aid.
Therefore, we will now consider the relevant clauses of the
contracts in the background of the admitted facts recorded
hereinabove.
The contract of insurance between the appellant and the
respondent is primarily based on the contract between the exporter
and the Kazak Corporation. The relevant clause in regard to
payment for the tea exported is found in the principal contract at
Clause 6 which reads thus :
"The payment of delivered goods shall be
made by barter exchange of goods within 120 days
from the date of delivery being affected by the
Seller. Plus interest for the period of non-payment
15% per year. The above terms will be covered by
a guarantee for payment by the Ministry of Foreign
Economic Relations of Kazakhstan. For Barter
exchange of goods Buyer presently has available
for offer goods as per supplement N2 to the
present contract."
This clause came to be amended on the very day when the
contract was signed by the exporter and the Kazak Corporation by
an addendum, i.e., on 26.8.1993 itself. The addendum which
formed an integral part of the original contract reads thus :
"In case the payment terms as per clause 6
of the Contract No.1-B/9-14/93 dated 26.8.1993
are not possible that is to say if this contract for
barter supply of goods cannot be finalised for any
reason or if delivery shipment under such a
contract is not made within the stipulated period,
then the buyer shall pay the seller for delivered
goods in US Dollars within 120 days from the date
of delivery being effected by the seller. This
payment to be made through remittance by the
buyer of the contractual amount of delivered tea,
plus interest 15% per year to the Bank Account of
the seller at Canara Bank, Janpath, New Delhi,
India.
The above payment will be guaranteed by
the Ministry of Foreign Economic Relations of
Kazakhstan."
If we read the original Clause 6 and the addendum
together, it is crystal clear that for some reason or the other the
parties agreed to amend original Clause 6 by the addendum
which amendment brought about a significant change in the
mode of payment of consideration. In the original Clause 6, it is
seen that the Kazak Corporation agreed to pay for the delivered
tea by barter of goods. This sole mode of consideration came to
be altered by the addendum by which parties agreed if the
payment of consideration by barter of goods cannot be finalised
for any reason, the buyer that is the Kazak Corporation agreed
to make the said payment in US $ within the stipulated period
of 120 days of the delivery by the exporter. This addendum
replaced the original clause (6) and from the language of the
addendum it is clear that the amended clause (6) became an
integral part of the original contract in the place of the original
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 22
clause (6). The language of addendum clearly shows that the
payment of consideration by barter supply of goods was no
more the sole mode of consideration and if for any reason
whatsoever such payment by barter did not materialise between
the parties then the payment had to be made in cash in US $. In
our opinion, there can be no two possible interpretations as to
the meaning of this amending clause (addendum). This was also
the understanding of the Kazakhstan Corporation which is
established by the fact that after the failure of barter it did pay a
part of consideration in US$, this is also the understanding of
the Government of Kazakhstan which guaranteed the payment
of such consideration which is evident from the letter of the
Ministry of Foreign Economic Relations of the Republic of
Kazakhstan dated 18th March, 1994. In the said letter the said
Government while admitting the default in payment of
consideration in clear terms stated:
"But some difficulties related to
introduction of the national currency, execution of
primary internal payments between enterprises
and budgetary deficit prevented the Kazak Party
from timely repaying of the credit."
It is clear that the first respondent insured the risk of non-
payment arising out of the above said contract between the
exporter and the Kazak Corporation which included the amended
Clause (6). It is also clear that the first respondent while issuing the
policy of insurance did know that payment of consideration by
Kazak Corporation could be by two modes (a) by barter (b) by
cash and non payment of consideration by either mode was to be
covered by the said contract of insurance.
It is also an admitted fact that the Kazak Corporation did
offer only some goods and not all items included in the schedule to
the appellants initially as a barter payment, but on evaluation made
by the appellants, they were not acceptable to the appellants.
Therefore, payment of consideration by barter of goods could not
be finalised as contemplated in amended clause (6) of the export
contract and in lieu of the same, the Kazak Corporation agreed to
pay in US $ and in fact did make part payment of the same in US
$, but thereafter it defaulted in the payment of the balance amount.
It is also an admitted fact that the Kazakhstan Government which
guaranteed the payment of consideration for the exported goods
while admitting its liability also defaulted for its own reasons,
consequently the appellants could not get the full consideration for
the tea exported by them.
It is on the above fact-situation, the appellants made a
demand on the first respondent to compensate for the loss suffered
by them as per their claim dated 8.9.1994. This claim of the
appellants came to be repudiated by the first respondent as per its
letter dated 14.12.1994. The basis of the repudiation of the claim as
could be seen from the said letter is as follows :
"The buyer also did offer goods in barter
exchange. You, however, chose without consulting
the Corporation not to import the goods offered by
the buyer may be for trade reasons. As a result, the
bills have remained unpaid. This is clearly a trade
loss which is not covered by the Corporation. We
are, therefore, not in a position to entertain your
claim, which is hereby rejected."
It is seen from this letter that the repudiation was made on
the ground that the appellants did not accept the goods offered by
the buyer without consulting the first respondent. The further
ground is that the loss suffered by the appellants was a trade loss
which is not a risk covered by the Corporation. On a protest made
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 22
against the said repudiation of the claim by the appellants, the first
respondent reiterated its stand of rejection of the claim by another
letter of its dated 26th May, 1995, wherein it stated that as per its
letter dated 12.10.1993, it had covered the risk of non-payment by
barter only and said mode of payment was changed by the
appellants without prior consultation with the first respondent,
therefore, this change amounted to a breach of an insurance
agreement, hence, it had no liability for the loss suffered by the
appellants.
Having known the stand of the first respondent in regard to
its liability under the policy and having failed in its other attempts
to persuade the first respondent to make payments, the appellants
filed the writ petition before the learned Single Judge of the High
Court and the said learned Judge came to the conclusion that on
facts and circumstances of the case since the first respondent was
admittedly an instrumentality of State, a writ petition was
maintainable. It also came to the conclusion that since most of the
facts involved in the case were admitted and the dispute resolved
only around the interpretation of the agreement of insurance
between the parties, the learned Judge felt that the matter could be
disposed of in a writ petition without driving the parties to a suit.
Having perused the relevant clauses the learned Single Judge held :
"There cannot be any doubt that barter
system of payment was adhered to but the
addendum clause in the contract clearly stipulates
a situation that in the event same cannot be agreed
upon, there could be a default if Kazakhstan
Government failed to pay in terms of its guarantee
to the first respondent in US$. Default clause
appears to be unequivocal".
Thereafter the learned Single Judge having perused the
various correspondence between the parties and noticing the fact
that the Kazakhstan Government also admitted its failure to
comply with its guarantee came to the conclusion that there was
nothing on record to show that the appellants under the contract of
insurance was liable to consult the first respondent as regards its
right to reject the payment by barter for any reason whatsoever. On
such interpretation of the clauses of the contracts, the learned
Judge felt that it was an appropriate case in which a writ should be
issued as prayed for by the petitioner and accordingly allowed the
petition.
In appeal, the Appellate Bench took somewhat a restricted
view of the power of the High Court to entertain a writ petition
under Article 226 of the Constitution of India and came to the
conclusion that the petition involved disputed questions of fact,
hence, there being an alternate remedy by way of a suit allowed the
appeal setting aside the judgment as also the relief granted by the
trial court. In the course of its judgment the appellate bench also
placed reliance on sub-clause (d) of the proviso to clause (xi)
found in the contract of insurance which reads thus:
"PROVISOS
PROVIDED ALWAYS THAT the
Corporation shall not be liable for any loss:
x x x x x
(d) Which arises due to the failure or refusal
on the part of the buyer to accept the goods and/or
to pay for them due to his claim that he is justified
in withholding payment of the contract price or the
gross invoice value of the said goods or any part
thereof by reason of any payment, credit, set-off or
counter-claim and/or due to his claim that, for any
other reason, he is excused from performing his
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 22
obligations under the contract, unless, except
where the Corporation agrees in writing to the
contrary, the insured has, for the amount of his
loss, obtained by legal proceedings in a competent
court of law in the country of the buyer a final
judgment enforceable against him." (emphasis
supplied)
According to the Appellate Bench as per this proviso in
the insurance contract, the first respondent was not liable for
any loss which arises due to the failure or refusal on the part of
the appellants to accept goods offered by the buyer. Though this
interpretation of the said proviso to the insurance clause made
by the Appellate Bench is not a conclusive finding, we think it
appropriate to deal with this view expressed by the Appellate
Bench since we intend to dispose of this appeal on merits.
Having examined the said sub-clause in the proviso of the
insurance policy, in our opinion, the reliance placed by the
appellate bench of the High Court on this clause is wholly
misplaced. The proviso especially the one in sub-clause (d)
deals with the risks arising due to the failure or refusal on the
part of the buyer to accept the goods and/or to pay for them due
to his claim that he is justified in withholding payment of the
contract price or the gross invoice value of the said goods for
the reason mentioned therein. This clause pertains to the
defence that may be put forth by the buyer (in this case the
Kazak Corporation) as to its refusal to pay the consideration on
the grounds enumerated in the said sub-clause. This is not a
clause which indemnifies the insurance company from its
liability to cover risk when the importer fails to pay for the
consideration for the goods received by it on grounds of its
financial inability. Therefore the reliance placed by the High
Court on this sub-clause to the proviso in the insurance
contract, as stated above, is misplaced.
The learned counsel appearing for the appellants in this
appeal contended that the one and the only stand taken by the
appellants in their two letters of repudiation is that the
appellants have changed the mode of receipt of consideration
without consulting the first respondent which ground according
to the learned counsel is not one of the conditions of the
insurance contract. He further submitted that an imposition of a
condition of that nature requiring a prior consultation would be
beyond the terms of the insurance contract, therefore,
impermissible. While learned counsel appearing for the first
respondent Corporation contended that the ground of
repudiation is not so much the lack of prior consultation but,
according to learned counsel, is that the first respondent was not
liable to pay for the loss suffered by the exporter by agreeing to
accept the consideration in cash because that mode of
consideration was not covered by the risk insured by the
respondent. According to the learned counsel, one and the only
mode of payment of consideration covered by the said
respondent is by barter of goods. Therefore, even though in the
letters of repudiation the prior consultation before change in the
mode of consideration is pointed out as one of the grounds, the
same is not the primary ground.
From the terms of the contract, we have noticed in Clause
(6) as amended by the addendum, consideration by way of
barter of goods is not the sole consideration. The said clause
contemplates alternate modes of payment of consideration one
of them being by barter of goods and the other by cash payment
in US $. The terms of the insurance contract which was agreed
between the parties were after the terms of the contract between
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 22
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 have 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. This is clear from the
terms of the insurance contract read with the letter of the first
respondent dated 8th September, 1993 wherein at Clause 3A, it
is stated : "Our liability will arise only after default has been
established on the guarantee of the Ministry." From the above,
it is clear both the grounds as put forth by the learned counsel
for the respondent before us as well as in the two letters of
repudiation issued by the first respondent are unsustainable. In
our opinion, the first respondent insured the export risk of the
appellants in regard to the non payment of the consideration for
the tea exported whether it arose from the non fulfillment of the
barter clause or for the non fulfillment of the cash payment
clause. The argument advanced on behalf of the respondent that
the appellants refused to accept the barter by goods offered by
the first respondent which amounted to a default under the
contract on the part of the appellants has no legs to stand in
view of the clear language of the amended Clause 6 of the
agreement which as noted above states that the obligation of the
buyer, namely, Kazak Corporation to pay for the goods
received by it in US $ arises when payment by barter fails for
"any reason whatever". The use of the words "any reason
whatever" in the said amended clause includes the reasons of
refusal by the appellants to accept the goods offered in barter.
On the face of the said language of amended clause, there could
be no room for two opinions at all in regard to the liability of
the first respondent to pay for the loss suffered by the appellants
even in cases where payment by barter fails at the instance of
the appellant. The learned counsel for the respondent contended
for a correct interpretation of this amended clause and the other
clauses of the contracts i.e. the contract of export and the
contract of insurance between the parties there is need for oral
evidence being led without which a proper interpretation of this
clause is not possible, therefore, it is fit case in which the
appellants should be directed to approach the Civil Court to
establish its claim. We find no force in this argument. 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 disputed fact. If such objection as to
disputed questions or interpretations are 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. We have already noted the decisions of this court
which in clear terms have laid down that mere existence of
disputed questions of fact ipso facto does not prevent a writ
court from determining the disputed questions of fact. (See:
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 22
Gunwant Kaur (supra)).
On the basis of the above conclusion of ours, the question
still remains why should we grant the reliefs sought for by the
appellant in a writ petition when a suitable efficacious alternate
remedy is available by way of a suit. The answer to this
question in our opinion, lies squarely in the decision of this
Court in the case of ShriLekha Vidyarthi (supra) wherein this
court held :
"The requirement of Article 14 should
extend even in the sphere of contractual
matters for regulating the conduct of the
State activity. Applicability of Article 14 to
all executive actions of the State being
settled and for the same reason its
applicability at the threshold to the making
of a contract in exercise of the executive
power being beyond dispute, the State
cannot thereafter cast off its personality and
exercise unbridled power unfettered by the
requirements of Article 14 in the sphere of
contractual matters and claim to be governed
therein only by private law principles
applicable to private individuals whose
rights flow only from the terms of the
contract without anything more. The
personality of the State, requiring regulation
of its conduct in all spheres by requirement
of Article 14, does not undergo such a
radical change after the making of a contract
merely because some contractual rights
accrue to the other party in addition. It is not
as if the requirement of Article 14 and
contractual obligations are alien concepts,
which cannot co-exist. The Constitution
does not envisage or permit unfairness or
unreasonableness in State actions in any
sphere of its activity contrary to the
professed ideals in the Preamble. Therefore,
total exclusion of Article 14 - non-
arbitrariness which is basic to rule of law -
from State actions in contractual field is not
justified. This is more so when the modern
trend is also to examine the
unreasonableness of a term in such contracts
where the bargaining power is unequal so
that these are not negotiated contracts but
standard form contracts between unequals. x
x x
Unlike the private parties the State
while exercising its powers and discharging
its functions, acts indubitably, as is expected
of it, for public good and in public interest.
The impact of every State action is also on
public interest. It is really the nature of its
personality as State which is significant and
must characterize all its actions, in whatever
field, and not the nature of function,
contractual or otherwise, which is decisive
of the nature of scrutiny permitted for
examining the validity of its act. The
requirement of Article 14 being the duty to
act fairly, justly and reasonably, there is
nothing which militates against the concept
of requiring the State always to so act, even
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 22
in contractual matters. This factor alone is
sufficient to import at least the minimal
requirements of public law obligations and
impress with this character the contracts
made by the State or its instrumentality. It is
a different matter that the scope of judicial
review in respect of disputes falling within
the domain of contractual obligations may
be more limited and in doubtful cases the
parties may be relegated to adjudication of
their rights by resort to remedies provided
for adjudication of purely contractual
disputes. However, to the extent, challenge
is made on the ground of violation of Article
14 by alleging that the impugned act is
arbitrary, unfair or unreasonable, the fact
that the dispute also falls within the domain
of contractual obligations would not relieve
the State of its obligation to comply with the
basic requirements of Article 14. To this
extent, the obligation is of a public character
invariably in every case irrespective of there
being any other right or obligation in
addition thereto. An additional contractual
obligation cannot divest the claimant of the
guarantee under Article 14 of non-
arbitrariness at the hands of the State in any
of its actions. x x x "
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 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
lacs. On facts we have found that the terms of the policy does
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
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 Court or this Court from granting the relief
sought for by the petitioner.
Apart from the above reasons given by us to interfere with
the judgment of the Appellate Bench of the High Court, we have
one other good reason - why we should not drive the appellants to
a suit. The claim of the appellants was rejected by the respondent
in the year 1994. The respondent challenged the basis of rejection
by way of a writ petition in the year 1996. The objection as to the
maintainability of the petition was rejected by the High Court by
its judgment dated 15.5.1997. We are now in the end of year 2003.
We at this distance of time and stage of litigation, do not think it
proper to relegate the parties to a suit. To direct the appellants to
approach a civil court at this stage would be doing injustice to the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 21 of 22
appellants. In this view of ours, we are supported by a number of
decisions of this court like in Shambhu Prasad Agarwal & Ors. vs.
Bhola Ram Agarwal (2000 9 SCC 714), wherein this Court though
noticed the fact that the appellants had an alternate remedy for
issuance of a letter of administration it refused to dismiss the
appeal on the grounds -
"Since considerable time has elapsed the
interest of justice demands that the proceeding
should come to an end as early as possible and that
the appeal should not be dismissed merely on
highly technical ground".
In Dr.Bal Krishna Agarwal vs. State of U.P. & Ors. (1995
(1) SCC 614) this Court held :
"Having regard to the aforesaid facts and
circumstances, we are of the view that the High
Court was not right in dismissing the writ petition
of the appellant on the ground of availability of an
alternate remedy under Section 68 of the Act
especially when the writ petition that was filed in
1988 had already been admitted and was pending
in the High Court for the past more than 5 years.
Since the question that is raised involves a pure
question of law and even if the matter is referred to
the Chancellor under Section 68 of the Act it is
bound to be agitated in the court by the party
aggrieved by the order of the Chancellor, we are of
the view that this was not a case where the High
Court should have non-suited, the appellant on the
ground of availability of an alternative remedy.
We, therefore, propose to go into the merits of the
question regarding inter se seniority of the
appellant and Respondents 4 and 5. We may, in
this context, mention that Respondent 4 has
already retired in January 1994."
Similar is the view taken by the Court in the case of Kerala
State Electricity Board & Anr. vs. Kurien E.Kalathil and Ors.
(2000 6 SCC 293) and also in VST Industries Ltd. (supra).
For the reasons stated herein above, we think the appellate
bench of the High Court was not justified in reversing the
judgment of the learned Single Judge. For the reasons stated above,
the impugned judgment of the appellate bench of the High Court is
set aside and that of the learned Single Judge is restored. The
appeal is allowed with costs.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 22 of 22
1
1