UNION OF INDIA AND ORS. versus M/S. GRAPHIC INDUSTRIES CO. AND ORS.

Citation: [1994] SUPP. 2 S.C.R. 351 · Decided: 28-07-1994 · Supreme Court of India · Bench: A.M. AHMADI, B.L. HANSARIA · Disposal: Appeal(s) allowed

Judgment (excerpt)

UNION OF INDIA AND ORS. 
A 
v. 
MIS. GRAPHIC INDUSTRIES CO. AND ORS. 
JULY 28, 1994 
[A.M. AHMADI AND B.L. HANSARIA, JJ.] 
B 
Co~titution of India, 1950 : 
Anicles 14 and 226-l'alty supplying goods to Rai/ways-<ioods ac-
cepted and payment witltlteld-Fairness in State action-Wliether Railways C 
acted unfairly-Judicial Review of State action-Coun's discretion under extra 
ordinary jurisdiction-Directing the pany to seek remedy in some other foum 
or take recourse to aroitration-Held: Proper exercise of discretion. 
The respondents supplied different items of stores to the Eastern 
Railways to the tune of about Rs. SO lakbs. Since the payment was not D 
forthcoming they made a grievance of it to the Union Minister of Railways. 
Some correspondence took place between the local M.P. and the Railway 
Minister and between the Additional Private Secretary to the Railway 
Minister and the Controller of Stores. 
The respondents tiled a Writ Petition before the High Court for 
recovery of the amount due to them. They relied on the above said cor· 
respondence. A Single Judge, who beard the matter, took the view that the 
correspondence in question could not be treated as decision of the Presi· 
dent of India as visualised by Art. 377 of the Constitution. 
E 
F 
Respondents preferred an appeal before the Division Bench and 
before it could be beard, a letter was addressed to the General Manager, 
Easter Railways by the Additional Private Secretary to the Railways by the 
Additional Private Secretary to the Railway Minister stating that the 
Minister bas Instructed to do as contained in the letter. The Bench took G 
the view that the instructions contained in the letter were binding on the 
General Manager, he being a subordinate authority. It also observed that 
it was the duty of the General Manager to act fairly, properly and 
reasonably and the goods having been accepted several years back the 
Railways had no authority to sit over the matters and directed the Railways 
to make the payment. 
H 
351 
A 
B 
c 
352 
SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R. 
In this appeal, the appellants challenge the abovesatd judgment, 
contending that the letters in question being not in terms of Art. 377 of the 
Constitution, did not confer any legal right or even legitimate expectation 
in favour of the respondents and as the matter was purely in the realm of 
contract the public law remedy of seeking mandamus under Art. 226 was 
not available dehors the terms of the agreement which included an arbitra-
tion clause. On behalf of the respondents it was contended that the appel-
lants had not acted properly and fairly in denying the payments several 
years after accepting the goods. 
, 
Allowing the appeal, this Court 
HELD : 1. It cannot be said that the Railways had acted unfairly in 
withholding the payment to the Respondents. What has been said about 
unfair.~ct of the Railways is based on what has been mentioned in the letter 
of the Additional P~vate Secretary to the Railway Minister and not on the 
basis of any 'independent examination of the matter by the Division Bench. 
D This would be clear from the fact that in the letter reference has been made 
about. rejection of materials also as to which it has been stated that the 
defects which led to the rejection of the materials be communicated to the 
firm; and it is this which the Bench too in its aforesaid operative order 
directed. It is thus clear that the view taken by the Bench relating to 
E 
F 
unfairness is solely based on what found place in the aforesaid letter. 
(356-C, 355-H] 
Hindustan Sugar Mills v. State of Rajasthan, AIR (1981) SC 1681 = 
(1980) 1 SCC 599; Kumari Shrilekha v. State of U.P., (1991] 1 SCC 212; 
Mahavir Auto Stores v. Indian Oil Corporation, (1990]] 3 SCC 752 and 
Dwarka Das Malfatia v. Board of Trustees of the Port of Bombay, (1989] 3 
sec 293, referred to. 
2. Having come to the conclusion that the materials which the 
Division Bench noted do not make out a case of unfairness, it is not 
necessary to examine the question as to whether in the field covered by 
G contractual rights and obligations it would always be permissible to invoke 
the extra ordinary jarisdiction of the High Court under Article 226 of the 
Constitution. It would be enough to say that this remedy being discretion-
ary, it would be open to the High Court to take a view on the fact situation 
before it that invocation of power under Article 226 would not be proper 
exercise of dis

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