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: 12th 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 9th 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,  

2nd 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,  

2nd 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,  

2nd 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

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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,  

2nd 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  

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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  

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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  

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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  

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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,  

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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 case1 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)

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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  

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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.

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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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