Equity and Public Interest Override Promissory Estoppel in Enforcement of Long-Term Supply Contracts for Natural Resources

The petitioner, carrying on business as "Satyam Sales," entered into a long-term agreement with Damodar Valley Corporation (DVC) in 2007 for the supply of dry fly ash from the Mejia Thermal Power Plant.

This agreement was amended in 2009 (valid for 20 years) and again on January 1, 2019, providing for the supply of 1000 metric tons of fly ash per day free of cost, subject only to administrative charges of ₹6 per metric ton.

Following observations by a Division Bench of the Calcutta High Court in a PIL (WPA 12311 of 2019) that fly ash had become a valuable commodity that should fetch market prices, DVC requested the petitioner to match e-auction rates.

When the petitioner refused, DVC stopped the supply on July 12, 2022, and issued a letter on July 19, 2022, requiring a fresh agreement based on successful participation in e-auctions. The petitioner challenged this letter, seeking specific performance of the 2019 agreement.

1. Whether the petitioner, having already invoked an arbitration clause, can be permitted to invoke the extraordinary writ remedy under Article 226.

2. Whether the respondent can be compelled to continue the contract at a discounted price or is estopped from denying supply citing public interest.

3. Whether the Writ Court should grant the relief of specific performance of a contract.

4. Whether the writ petition is maintainable given the existence of disputed questions of fact.

The Court applied the principle that the exclusion of jurisdiction due to an alternative remedy (arbitration) is a rule of discretion, not compulsion, especially when fundamental rights or Article 14 violations are alleged, as held in Whirlpool Corporation v. Registrar of Trade Marks and Harbanslal Sahnia v. Indian Oil Corporation Ltd.

It relied on the doctrine of "Promissory Estoppel," which must yield to "overwhelming public interest" and equity, as established in Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh and Sharma Transport v. Government of Andhra Pradesh.

The Court applied the principle from Natural Resources Allocation, In Re and Kasturi Lal Lakshmi Reddy v. State of Jammu and Kashmir that the State must maximize revenue when disposing of natural resources for commercial exploitation.

It followed Sri Ram Builders v. State of Madhya Pradesh and Surjeet Singh Sahni v. State of Uttar Pradesh, which hold that a writ of mandamus for specific performance of a contract is generally not maintainable under Article 226.

The Court first affirmed maintainability, noting that a Co-ordinate Bench had already ruled that the petitioner's right to carry on trade (Art. 19(1)(g)) and allegations of arbitrariness (Art. 14) justified exercising writ jurisdiction despite the arbitration clause.

On the merits, the Court found that while a contract existed, the nature of fly ash had evolved from a hazardous waste to a "valuable commodity" generating significant revenue via e-auctions.

Applying the 'Equity' exception to Promissory Estoppel, the Court reasoned that compelling DVC to provide fly ash for free (charging only nominal service fees) while other entities paid market rates in e-auctions would be contrary to public interest and cause loss to the exchequer.

The Court observed that the petition essentially sought "specific performance" and involved disputed facts regarding the actual cost of evacuation and the ratio of dry-to-wet ash, which cannot be adjudicated in a summary writ proceeding.

The Court declined to order specific performance of the contract, stating such relief is not generally available under Article 226, and relegated the parties to the arbitral process to resolve claims for damages or contractual disputes.

The challenge to the letter dated July 19, 2022, failed, and the writ petition and connected applications were disposed of without any order as to costs.