RADHAKRISHNA AGARWAL & ORS. versus STATE OF BIHAR & ORS.

Citation: [1977] 3 S.C.R. 249 · Decided: 17-03-1977 · Supreme Court of India · Bench: M. HAMEEDULLAH BEG · Disposal: Dismissed

Cited by 11 judgment(s) · cites 2 · see the full citation network in Lexace

Judgment (excerpt)

• 
, 
249 
RADHAKRISHNA AGARWAL & ORS. 
v. 
STAIB OF BIHAR & ORS. 
March 17, 1977 
[M. H. BEG, C.J., A. C. GUPTA AND P. S. KAILASAM, JJ.J 
Constitution of India, 1950- Article 226 cannot be 
invoked for 
alleged 
breaches of contract-Remedy lies through ordinary civil .~uit for da1nages. 
Constitution of India, 1950-Article 14-Discrimination should be alleged at 
the stage of entry into the contractual area to attract the application of Art. 
14. 
Constitution of India, 1950-Articles 298 and 299-Scope of-Whether the 
State has any special obligations and privileges attached to it even when it acts 
within the contractual field. 
Plea for adjournment of the hearing of the case until after the emergency is 
lifted-Stay orders presumably obtained earlier on representation n1ade that no 
aspect of enforcen1ent of Art. 14 of the Constitution was involved-Propriety of 
A 
B 
c 
the continuance of stay. 
D 
A contract called a "lease:'' to collect and exploit sal-seeds from forest area 
was entered into in 1970, between the respondent State and the appellants in 
1970. Clause (3) in the written contract executed in accordance with the 
provisions of Art. 299 of the Constitution provided for the revision of the rate 
of royalty at the expiry of every three· years in consultation with the lessee· and 
was to be binding on the lessee. Under clause ( 4) of the lease, the lessee had 
to' establish a factory within the State of Bihar for processing of sal-seeds and 
extraction of oil therefrom within a period of five· years from the· date of the 
E 
agreement, failing which the agreement itself was to terminate. In 1974, the· 
respondent State revised the rate of royalty payable by the· appellants. and after 
that, canceUed the lease by a letter dated 15th March 1975. The \Vrit petitions 
challenging the said orders were dismissed by the Patna High Court. On appeals 
by certificates, the appellants contended : (i) the State· acting in its executive 
capacity through its Government or its officers even in the contractual field. can-
not escape the obligation imposed upon it by Part III of the Constitution; (ii) 
Article 14 of the Constitution has been infringed and (iii) Principles. of natural 
F 
justice have· been violated as no opportunity ta show cause against the cancella-
tion of lease was given. 
Dismissing the appeals the Court, 
HELD : ( 1) Article· 14 of the Constitution imports a limitation or imposes 
an obligation upon the State's executive power unde-r Art. 298 of the Consti~ 
tution. The rule of law which regulates. the operation are organs of Govern-
ment functioning under the Constitution is that all constitutional powers carry 
G 
corresponding obligations with them. [254 &F] 
Erusian Equipment & Chemicals Ltd. v. State of West Bengal and Anr. 
1975(2) SCR 674 at 677, referred to. 
(2) The State acts purely in its executive capacity and is bound by the 
obligations which dealings of_ the State with the. individual citizens import into 
every trans.action entered into in exercise of its constitutional powers, only at 
H 
the time of entry into the field of consideration of persons with 
whom the 
Govemmenl could contract at all. But, after the State or its agents have 
ent~red into the field of ordinary contract the relations are no longer gOverned 
by the constitutional provisions but by the legally valid contract which deter-
mines rights and obligations of the parties inter se. [255 C-D] 
B 
c 
D 
E 
F 
G 
H 
··· iso 
SUPREME COL'RT REPORTS 
[1977] 3 S.C.R. 
(3) Article 14 or of any _othel'. constitutional. provision is not violated when 
the State or fas agents purporting to act within the contractual field perform 
any act. 
In this sphere they can only claim rights conferred upon them by 
contract and are bound by the terms of the contract only unless some statute 
steps in and confers some special statutory power or obligation on the State in 
the contractual field which is apart from contract. In the instant case, the 
contracts do not contain any statutory terms or obligations and no statutory· 
power or obligation which could attract the application of Art. 14 of the 
Constitution is involved. [255 D-E, 260 E-F] 
(4) The doctrine· of discrimination cannot be availed of against the State's 
action purporting to be taken solely within the contractual field when no aspect 
cf any statutory or constitutional obligation appears either from incontrovertible 
facts or of facts. 
The appellants', cases do not ra

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