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It was again recapitulated by the Supreme Court bench of Justice Rohinton Fali Nariman and Justice Vineet Saran, that even in matters of contract, a writ petition under Article 226 of the Constitution of India can be considered by the High Court, when the State acts arbitrarily.
The Bench observed thus in an appeal filed against the High court order dismissing a writ petition filed by a contractor. The petition was dismissed by the High Court on the ground that disputed questions of fact arise and that the amount due arises out of a contract.
The Bench allowing the appeal, observed:
"We are afraid the High Court was wholly incorrect inasmuch as there was no disputed question of fact. On the contrary, the amount payable to the appellant is wholly undisputed. Equally, it is well settled that where the State behaves arbitrarily, even in the realm of contract, the High Court could interfere under Article 226 of the Constitution of India."
The grievance raised in the writ petition was regarding the non-payment for the extra work by the Uttar Pradesh Jal Nigam which was expressly sanctioned and completed to their satisfaction. The corporation in its reply to the representation made by the contractor had admitted its liability. But the corporation denied of money available with it.
The Uttar Pradesh Jal Nigam was directed by the bench to make the necessary payments within four weeks.
The judgment of ABL International Ltd. and Another v. Export Credit Guarantee Corporation of India Ltd. and Others was referred by the court. In the said judgment, it was observed thus:
"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."
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