M/S Chaithanya Geo Surveys vs. State Of Karnataka

Held

The Court held that the State, as a party to a contract, has a legal obligation to act fairly, justly, and reasonably, as mandated by Article 14 of the Constitution. The Court found that Respondent No. 2's approval order dated September 6, 2019, for the release of Rs. 42,12,600/- subsists and has not been disputed by the State. The failure to release this admitted amount, despite the approval, was deemed arbitrary and unfair. Furthermore, the Court directed Respondent No. 2 to consider the other two pending invoices, which had been forwarded by Respondent No. 3, and the subsequent representations made by the Petitioner. The Court reasoned that withholding admitted dues and indefinitely delaying consideration of other claims violates the principles of fairness and the rule of law. The ratio decidendi is that arbitrary and unfair conduct by the State in contractual matters is amenable to judicial review under Article 14, and a writ of mandamus can be issued to enforce such obligations. The Court directed the release of payment for the first invoice within two months, with interest at 6% per annum if delayed, and ordered consideration of the other two invoices.

Facts

M/s. Chaithanya Geo Surveys (Petitioner) was awarded DGPS/Drone survey work for 'C' Category mines by the State of Karnataka (Respondent). The Petitioner completed the work and submitted three invoices: dated July 29, 2019, for Rs. 42,12,600/-; August 28, 2019, for Rs. 6,60,800/-; and September 11, 2019, for Rs. 1,42,190/-. Respondent No. 3 forwarded these invoices to Respondent No. 2. Respondent No. 2 approved the release of Rs. 42,12,600/- (including GST) on September 6, 2019, but this amount was not released. The other two invoices were yet to be considered. The Petitioner filed a writ petition seeking a mandamus to release payments with interest.

Key Issues

1. Whether a writ of mandamus can be issued to direct the respondents to release payments pursuant to a completed contract, even if it involves contractual obligations, when the State's action is arbitrary and unfair, violating Article 14 of the Constitution of India? Petitioner's Arguments: The Petitioner argued that the State's action must be fair and reasonable, even in contractual matters. They contended that the arbitrary withholding of payment after work completion, despite an approval order, warrants judicial intervention under Article 226 of the Constitution. They relied on the Apex Court's decision in ABL International Ltd. & Ors. vs. Export Credit Guarantee Corporation of India Ltd. & Ors. to assert that writ petitions are maintainable against the State for enforcing contractual obligations if the State's conduct is unfair. Respondents' Arguments: The judgment records no specific arguments from the respondents regarding the maintainability of the writ petition or the merits of the payment claims. The Additional Government Advocate sought time to take instructions regarding the implementation of the approval order.