SC rules that when disputed questions of fact arise in contractual matters adjudication in a Civil Court is more appropriate

 

The Division Bench of Justice Sanjiv Khanna and Justice M.M. Sundresh of the Apex court in the case of M/S Hornbill Consultants Vs State of Punjab and others enunciated that even though this power is plenary and unrestricted by any provision of the Constitution of India, the High Court prefers not to exercise extraordinary jurisdiction under Article 226 of the Indian Constitution in contractual matters because, typically, adjudication of disputed questions of fact in a Civil Court is more appropriate, just and fair. It was then ruled that this is not a hard and fast rule, especially when the government authorities' decisions are arbitrary, unfair, or unreasonable and when the facts are undisputed and unambiguous.

Brief Facts:

The Appellant submitted the highest bid for a mining lease of the Rurewal Mines, Punjab. The bid was accepted by Respondent No. 2.  The Appellant at the time of participating in the auction submitted the earnest money and was required to submit security at the rate of 25% of the yearly contract value within two days of the bid being accepted or the earnest money would be forfeited as per Conditions No. 24 and 25 of the E-auction Notice. There was also a stipulation that the Appellants would be barred from taking part in bids for three years.  

The Appellant successfully made two online payments. However, the amount could not be successfully transferred due to a technical glitch in the bank servers. Thereafter, a letter from HDFC Bank Ltd. was received, in which it was stated that additional RTGS transactions for one transfer in favour of the Respondents could not be completed before the end of banking/RTGS hours. 

 The Appellant spoke over the telephone with Respondent No. 2 and obtained a demand draft for Rs. 68,46,002/- on the same day. The demand draft was taken to the office of Respondent No.2 beyond working hours, however, the Respondent retained the demand draft for over 3 months. 

Thereafter, a letter was sent to the Appellant in which it was stated that the earnest amount had been forfeited and the provisional approval granted to the Appellant had been cancelled.

After, the termination of the contract, the Respondent re-auctioned the mining lease and the highest bid was only Rs. 45,00,000/- per annum. The fresh auction was strictly not at the risk of the Appellant. The Appellant filed the Writ Petition to enforce the right to carry on mining operations and, in the alternative, refund the amount paid. 

Observations of the Court: 

The Hon’ble Court observed that even though this power is plenary in nature and unrestricted by any provision of the Constitution of India, the High Court prefers not to exercise extraordinary jurisdiction under Article 226 of the Indian Constitution in contractual matters because, typically, adjudication of disputed questions of fact in a Civil Court is more appropriate, just and fair. It was then ruled that this is not a hard and fast rule, especially when the government authorities' decisions are arbitrary, unfair, or unreasonable and when the facts are undisputed and unambiguous.

Noting that the matter has remained pending for the last 6 years, the Bench allowed the Appeal in order to avoid further rounds of litigation between the parties. 

The decision of the Court: 

Based on these considerations, the Apex Court directed the Respondents to refund the earnest money deposited by the Appellant. Accordingly, the appeal was allowed.  

Case Title: M/S Hornbill Consultants Vs State of Punjab and others

 Case No: Civil Appeal No. 1546 of 2023

Citation: 2023 Latest Caselaw 162 SC  

Advocate for Petitioner: Adv. Anubha Agrawal 

Advocate for Respondent: Adv. Karan Sharma  

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 (With input from news agency language) 

 

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