New Delhi, Feb 17 (PTI) The Supreme Court on Wednesday shot down an argument that high courts should not exercise extraordinary writ powers in dealing commercial disputes governed by agreements, saying this power is a “valuable constitutional safeguard against an arbitrary exercise of state power or a misuse of authority”.
The Article 226 empowers high courts to issue “directions, orders or writs” to any person, the government and its instrumentalities to enforce the directions and this power is usually invoked to safeguard fundamental rights of citizens.
“While exercising its (high court) jurisdiction under Article 226 (power to issue writs) , the Court is entitled to inquire into whether the action of the State or its instrumentalities is arbitrary or unfair and in consequence, in violation of Article 14. The jurisdiction under Article 226 is a valuable constitutional safeguard against an arbitrary exercise of state power or a misuse of authority,” said the bench comprising justices D Y Chandrachud and M R Shah. The observations were made in a judgement by which the top court directed Telangana State Industrial Infrastructure Corporation (TSIIC) to refund Rs 165 crores with interest to Unitech Ltd which could not be handed over about 350 acres of land to develop an integrated township project in Ranga Reddy District.
In determining as to whether the writ jurisdiction should be exercised in a contractual dispute, the court must, undoubtedly eschew, disputed questions of fact which would depend upon an evidentiary determination requiring a trial, the judgement said.
“But equally, it is well-settled that the jurisdiction under Article 226 cannot be ousted only on the basis that the dispute pertains to the contractual arena. This is for the simple reason that the State and its instrumentalities are not exempt from the duty to act fairly merely because in their business dealings they have entered into the realm of contract,” said Justice Chandrachud writing the judgement for the bench.
The presence of an arbitration clause does oust the jurisdiction under Article 226 in all cases though, it still needs to be decided from case to case as to whether recourse to a public law remedy can justifiably be invoked, it said.
“The jurisdiction under Article 226 was rightly invoked by the Single Judge and the Division Bench of Telangana High Court in this case, when the foundational representation of the contract has failed.
“TSIIC, a state instrumentality, has not just reneged on its contractual obligation, but hoarded the refund of the principal and interest on the consideration that was paid by Unitech over a decade ago. It does not dispute the entitlement of Unitech to the refund of its principal,” the apex court said. PTI SJK RKS RKS