IN THE HIGH COURT OF ANDHRA PRADESH :: AMARAVATi;s^^f^ FRIDAY, THE TWENTY EIGHTH DAY OF FEBRUARY TWO THOUSAND AND TWENTY FIVE PRESENT HONOURABLE THE CHIEF JUSTICE DHIRAJ SINGH THAKUR AND THE HONOURABLE SRI JUSTICE RAVI CHEEMALAPATI WRIT APPEAL NO: 166 OF 2007 Writ Appeal under clause 15 of the Letters Patent Appeal preferred against the judgement of the Learned Single Judge, in WP No. 14086 of 2005 dated 04-1-2007 allowing the Writ Petition and setting aside the order dated 22-3-2005 under the proceedings issued by the Appellant Corporation rejecting the representations of the respondent herein (writ petitbner) and directing him to pay the balance amount of Rs. 2,19,987/- to the Corporation towards additional expenditure incurred on account of Department movement on the file of the High Court. Between: 1. Andhra Pradesh, State Civil Supplies Corporation Ltd, (A State Government Undertaking Regd. Office: 6-3-655/1/A, Civil Supplies Bhavan, Somajiguda, Hyderabad-82, rep by its Vice- Chairman and Managing Director, 2. The District Manager, A.P.S.C.S.C.L, Vizianagaram. 3. A. Kotireddy, S/o. Sura Reddy, Aged about 57 Years, District Manager, A.P.S.C.S.C.L. Vizianagaram. ...APPELLANTS AND S Maheswar Rao, S/o. Appalaswamy, Transport Contractor, D.No.24-1/3-6 K.M. Street, Vizianagaram. ...RESPONDENT I.A. NO: 1 OF 2007fWAMP. NO: 285 OF 2007) Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to suspend the order dated 04-1-2007 passed in WP No. 14086 of 2005 pending disposal of the above Writ Appeal. I.A. NO: 2 OF 2007fWAMP. NO: 435 OF 20071 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to receive material the papers relied upon by the Petitioner herein as the additional material papers in the Writ Appeal pending the above Writ Appeal. I.A. NO: 3 OF 2007fWAMP. NO: 436 OF 2007) Between: S. Maheswar Rao, S/o. Appalaswamy, Transport Contractor, D,No.24-1/3-6 K.M. Street, Vizianagaram. ...PETITIONER/RESPONDENT AND 1. Andhra Pradesh, State Civil Supplies Corporation Ltd, (A State Government Undertaking Regd. Office: 6-3-655/1/A, Civil Supplies Bhavan, Somajiguda, Hyderabad-82, rep by its Vice- Chairman and Managing Director, 2. The District Manager, A.P.S.C.S.C.L, Vizianagaram. 3. A. Kotireddy, S/o. Sura Reddy, Aged about 57 Years, District Manager, A.P.S.C.S.C.L. Vizianagaram. ...APPELLANTS/RESPONDENTS Petition under Section 151 CPC praying that In the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to vacate the order dated 26-2-2007 in WAMP NO. 285/2007 in WA No. 166/2007, dismiss the Writ Appeal. LA. NO: 1 OF 2008(WAMP. NO: 457 OF 2008) Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to suspend the Final Notice No. PDS / MOVT / FGS (2) / 2002- 2003, DT 30-01-2008 issued by the 2"'^ Respondent pending the above Writ Appeal. I.A. NO: 2 OF 2008(WAMP. NO: 3184 OF 2008) Between: 1. Andhra Pradesh, State Civil Supplies Corporation Ltd, (A State Government Undertaking Regd. Office; 6-3-655/1/A, Civil Supplies Bhavan, Somajiguda, Hyderabad-82, rep by its Vice- Chairman and Managing Director, 2. The District Manager, A.P.S.C.S.C.L, Vizianagaram. ...PETITITIONERS/RESPONDENTS/APPELLANTS 3. B. Mohan Babu, S/o. Subba Rao, Aged 56 Years, District Manager A.P. State Civil Supplies Corporation Limited, Vizianagaram. AND S. Maheswar Rao, S/o. Appalaswamy, Transport Contractor, D.No.24-1/3-6, K.M. Street, Vizianagaram. ...1®* RESPONDENT/PETITIONER/RESPONDENT Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to vacate the interim orders dt. 1^1-10-2008 in WAMP No. 457 of 2008 in WA166 of 2007. Counsel for the Appellants : Mrs. P. PADMAVATHI APPEARING VICE Mr. P. HEMA CHANDRA (SC for Civil Supplies Corp Ltd.,) SRI CHANDRAIAH SUNKARA Counsel for the Respondents: SRI VENKATESWARA RAO GUDAPATI The Court made the following: JUDGMENT APHC010339492007 Bench Sr.No:-34 [3483] IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI WRIT APPEAL NO: 166 of 2007 Andhra Pradesh State Civil Supplies Corporation Ltd and others ...Appellants Vs. S. Maheswar Rao ...Respondent ********** Advocates for Appellants: Mrs. P. Padmavathi appearing vice Mr. P. Hema Chandra (SC for Civil Supplies Corp. Ltd.), Mr. Chandraiah Sunkara Advocate for Respondent: Mr. Venkateswara Rao Gudapati CORAM :THE CHIEFJUSTICEDHIRAJSINGHTHAKUR SRI JUSTICE RAVI CHEEMALAPATI : 28**’ February, 2025. PER DHIRAJ SINGH THAKUR. CJ: The present writ appeal under Clause 15 of the Letters Patent has been DATE preferred against judgment and order, dated 04.01.2007, passed in W.P.No.14086 of 2005. Briefly stated, the material facts are as under: 2. The Andhra Pradesh State Civil Supplies Corporation Limited - appellant No.1 herein called for bids from eligible entities for transportation of 2 HCJ & RC, J WA 166_2007 food grains, pulses, etc. by road from various places within and outside the district of Vizianagaram. According to the Notice Inviting Tenders (NIT), the transportation 3. quantity would vary from 7,000 MTs to 15,000 MTs, based on the allocations to each district. The petitioner also submitted its bid which was accepted and an agreement, dated 08.03.2002, came to be executed which was to hold good for the year 2002-03. It may be relevant to reproduce hereinbelow some of the clauses of the agreement, as they would be relevant for the just disposal of the present controversy. Clause 1 (a) of the agreement envisages the description of work as under: f. DESCRIPTION OF WORK: (a) The contractor shall transport food-grains, pulses, etc., from various places within the District and outside the district of Vizianagaram to various places within the State. The contract will also include transport between one point in a village/Town/City to another point in the same village/town/city.” Clause 7 of the agreement dealt with the volume of work and envisages as under: 7. VOLUME OF WORK:- The Corporation does not guarantee any volume of work at any time during the currency of agreement. The mere mention of the item of work in the agreement does not itself confer any right on the contractor to demand that the entire work should necessarily or 3 HCJ & RC, J WA 166 2007 exclusively be entrusted to him. The Corporation reserves the right to appoint one or more other contractors and distribute the work among them during the currency of this agreement at its unfettered discretion in any manner that it may decide and no claim for compensation shall lie against the corporation by any reasons whatsoever of such division of work. The decision of the Corporation in this matter shall be ifnal and binding on the contractor.” Clause 9 dealt with the conditions with regard to fulfillment of the work within the stipulated time and also envisaged imposition of penalty in case of failure. Clause 9(a) envisaged that a contractor would be responsible to engage adequate number of transport vehicles for completion of the lifting of the stocks from the date of payment and to complete the entire allotment on or before 10**^ of the current month or any date fixed by the District Manager for which food grains were allotted. Clause 9(b) envisaged that in the event of default of the conditions under 9(a), the Corporation would be at liberty to take the alternate steps for undertaking the movement of the stocks as per rates fixed by the Local Lorry Owner’s Association and further to get the work fulfilled at the risk and cost of the contractor who would be liable to make good to the Corporation all additional charges, expenditure, costs, etc. that the Corporation may incurred ui suffeied. Clause 9(c) further envisaged the recovery of penalty on account of failure of the contractor in moving the stocks within the periods specified under 4 HCJ & RC, J WA 166 2007 Clauses 9(a) and 9(b). Clause 9(c), while stipulating the imposition of penalty, prescribed the following method: Total quantity to be lifted by the contractor /1000 MTs Quantity lifted by 20‘^ of the month / 800 MTs. Balance quantity un-lifted / 200 MTs i) ii) iii) and envisaged as under: “(c) In the event of default on the part of the contractor in moving the stocks in time as stipulated in 9(a) and (b) Corporation shall without prejudice and in addition to, at available rights and remedies under the agreement have the right to recover from the contractor by way of penalty of a sum of Rs.10/- (Rupees ten only) per MT, per day for the balance unlifted quantity for the delayed period. In case the contractor fails to lift the entire quantity within the stipulated time, the penalty will be calculated as follows:- * Total quantity to be lifted by the contractor. 1000 MTs. * Quantity lifted by 20th of the month. * Balance quantity un-lifted. 800 MTs. 200 MTs. Suppose the transport lifts the un-lifted quantities of food grains, as follows, then the penalty will be levied as detailed below:- Date of lifting Qts. Lifted No. of days delayed. Penalty 21st of that month 50 1 50x1x10 = Rs.500.00/- 22'^ of that month 60 2 60x2x10 ^ Rs. 1,200.00/- 23'^'^ of that month 90 3 90x3x10 = Rs.2,700.00/- Total penalty to be collected from the contractor will be Rs.4,400.00/- HCJ & RC, J WA 166 2007 The purpose of reproducing Clause 9(c) hereinabove is to only show that the quantities which were expected to be lifted by the petitioner as per the agreement read in the context of the NIT, were approximately 1,000 MTs a month which would fall within the minimum of 7,000 MTs to a maximum of 4. 15,000 MTs as was otherwise notified in the NIT. In the backdrop of the aforementioned contractual terms, it appears that the petitioner was asked to lift a minimum of 1,000 MTs per day from the operational godowns of the respondents - Corporation to the delivery points. The heavy movement of stocks was attributed to the drought situation which was prevailing in the State, pursuant to which the Government of India is stated to have allotted rice under the Food For Work Program. Subsequently, it appears that the petitioner was directed by the Joint Collector in the district to lift a minimum of 2,000 MTs per day. 5. The petitioner - transport contractor, expressed his financial problem and requested the release of Rupees Five Lakhs as advance payment for lifting of the required quantities for which an amount of Rs.2,50,000/- was stated to have been released, failing which the Corporation took up the task of transporting the said stocks at the risk and cost of the contractor, in terms of Clause 9 of the agreement. Since, the stocks were being moved by engaging trucks, according to the rates fixed by the Local Lorry Owner’s Association, the petitioner moved the official respondents to stop the said movement. While the movement of 6 HCJ & RC, J WA_166_2007 stocks in terms of Clause 9(c), therefore, by attributing alternative measures was not stopped, according to the stand of the appellants, the petitioner was also permitted to move the stocks simultaneously, which was done by him only from 13.02.2003 to 21.03.2003. 6. On account of having engaged trucks from the local Lorry Owner’s Association, the department is stated to have incurred a cost of Rs.23,21,879/- out of which an amount of Rs.21,01,891/- was adjusted by revoking the Bank Guarantee and Security Deposit, which was furnished by the petitioner. An amount of Rs.2,19,987/- still was due and payable, which was sought to be recovered from the petitioner by virtue of the order impugned dated 22.03.2005. The stand of the petitioner before the learned single Judge while challenging the order impugned dated 22.03.2005 was that the authorities could not have directed the petitioner to transport the rice under the Public Distribution System which was limited to 15,000 MTs and that the petitioner was not at all obliged to transport rice in excess of the quantity for which the petitionerhad submitted its bid. Distribution of rice under the Food For Work Program was under a different scheme and therefore, transportation of the said quantity could not have been burdened upon the petitioner. 7. 8. The stand of the petitioner was accepted by the learned single Judge, who by virtue of the judgment and order impugned, allowed the writ petition and set aside the order, dated 22.03.2005. HCJ & RC, J WA_166 2007 9. We have heard learned counsel for the parties. In the present writ appeal, learned Standing Counsel for the appellant - Corporation, challenges the judgment and order impugned primarily on the ground that it was erroneous on the part of the learned single Judge to have held that the petitioner was obliged to transport food grains etc. only up to 15,000 MTs. Reference was made to Clause 1(a) to support the proposition that the transportation of food grains did not prescribe any fixed limit. Reliance was also placed on Clause 7 of the agreement with regard to volume of work, with a view to establish that the volume of work during the currency of agreement being indefinite, could have been increased or decreased during the currency of the agreement. 10. 11. On both these issues, we are of the opinion that the argument lacks merit. Clause 1(a) of the agreement relied upon by the learned Standing Counsel for the appellant reflects the description of the work i.e. transportation of food grains from various places within and outside the district of Vizianagaram to other places within the State of Andhra Pradesh and has no relevance to the quantity of food grains that was envisaged to be transported under the agreement. 12. Similarly, Clause 7 envisages that there was no guarantee that the Corporation would give any volume of work at any time during the currency of the agreement notwithstanding the fact that quantities mentioned in the NIT 13. 8 HCJ & RC, J WA 166 2007 for transportation were between 7,000 MTs and 15,000 MTs, and that the said quantity could not have been demanded by the transporters, including the petitioner, as a matter of right. In fact, as per Clause 7 of the agreement, if the corporation decided to appoint one or more contractors for distribution of food grains, it retained with itself the discretion to do so, without leaving any security for the petitioner to claim compensation in that regard. The two clauses on which overwhelming reliance was sought to be placed, therefore, do not in any manner, in our opinion, advance the case of the appellant - Corporation to justify the passing of the order, dated 22.03.2005. 14. It must at this stage be pointed out that when the petitioner responded to the NIT, it would have assessed its own capability and capacity to transport the intended stock of food grains, which was stated to be between 7,000 MTs and 15,000 MTs during the currency of the period of transportation, i.e. between April, 2002 and December, 2002. Every transporter may not be possessed of a large fleet of lorries and in case, the quantities proposed to be transported were in mega numbers, this would have dissuaded many contractors to come forward and to submit their bids, knowing fully well that they would not be in a position to carrying out this capacity and would not be position to honour the offer made in response to the NIT. Similarly, even the official respondents and the concerned committee. 15. which had invited the tenders would have gone into assessing the capacity of HCJ & RC, J WA_166 2007 the tenderer to fulfill its obligation and verified the number of vehicles required to transport the food grains. 16. In the instant case, however, the petitioner had expressed its inability to transport the quantity of 2,000 MTs per day as was required by the authorities. Even the financial help, when demanded, was not fully met by the appellants. In our opinion, even the penalty clause incorporated in the agreement indicated only 1,000 MTs to be transported on a monthly basis, although it can be said to only as an illustration, yet when coupled with the terms and conditions of the NIT, it does give us a clear picture that what was intended to be transported was never envisaged to cross 15,000 MTs during the course of the contract, as against which the petitioner had admittedly transported, approximately 1,40,000 MTs. Moreover, whatever was received by the appellants under the Food For Work Program could not have been made to be distributed through the petitioner, who had entered into a contract with the appellants for the normal distribution of food grains under the Public Distribution System (PDS). The passing of the order impugned, in those circumstances, to us, is, clearly against the express terms of the NIT. The action of the appellant - Corporation in adjusting the Bank Guarantee, the Security Deposit furnished by the petitioner, as also the action of the appellants in seeking to recover the balance amount from the petitioner was, therefore, totally arbitrary and hence. 10 HCJ & RC, J WA_166_2007 unsustainable. To that extent, we cannot persuade ourselves to take a view different from the one taken by the learned single Judge. 17. Another argument which was raised by learned Standing Counsel for the appellants is that the dispute raised by the petitioner in the writ petition being in the realm of a contractual dispute, ought not to have been entertained in the extraordinary writ jurisdiction by the High Court. Emphasis was laid on an interim order passed in this case on 07.09.2007, by a coordinate bench of this Court, who while staying the operation of the judgment and order impugned passed by the learned single Judge, expressed a view that issues involving breach of contract simplicitor could not have been adjudicated by the High Court, in exercise of powers under Article 226 of the Constitution of India. 18. The issue with regard to the scope of powers exercisable by the High Court under Article 226 of the Constitution of India, in contractual matters has been considered by a Division Bench of this Court, of which one of us (Thakur, J.) was a member, in the case of Braithwaite and Company Limited vs. Union of lndia\ wherein it was held: ‘26. Testing the facts of the present case on the touchstone of the law discussed hereinabove, we have no hesitation in holding that even in nonstatutory contracts where State is a party, in case of arbitrariness by the State in terminating contract, this Court would not hesitate in exercising its writ jurisdiction under Article 226 of the Constitution provided the impugned action of the State is so palpably ^ (2024) see OnLine AP 3956 11 HCJ& RC, J- WA 166 2007 unreasonable, irrational, perverse and unsustainable when tested on the Wednesbury principle. ” It is not out of place here to mention the view expressed by the Apex Court in M.P. Power Management Company Limited, Jabalpur vs. Sky Power Southeast Solar India Private Limited and others^ wherein it was 19. held: “82.12. In a case the State is a party to the contract and a breach of a contract is alleged against the State, a civil action in the appropriate forum is, undoubtedly, maintainable. But this is not the end of the matter. Having regard to the position of the State and its duty to act fairly and to eschew arbitrariness in all its actions, resort to the constitutional remedy on the cause of action, that the action is arbitrary, is permissible (see in this regard Shrilekha Vidyarthi v. State of U.P. [Shrilekha Vidyarthi v. State of U.P., (1991)1 SCO 212 : 1991 see (L&S) 742] ). However, it must be made clear that every case involving breach of contract by the State, cannot be dressed up and disguised as a case of arbitrary State action. While the concept of an arbitraryaction or inactioncannotbe cribbedor confined to any immutable mantra, and must be laid bare, with reference to the facts of each case, it cannot be a mere allegation of breach of contract that would suffice. What must be involved in the case must be action/inaction, which must be palpably unreasonable or absolutely irrational and bereft of any principle. An action, which is completely mala fide, can hardly be described as a fair action and may, depending on the facts, amount to arbitrary action. The question must be posed and answered by the Court and all we intend to lay down is that there is a discretion available to the Court to grant relief in appropriate cases. ” ^ (2023) 2 see 703 12 HCJ & RC, J WA 166 2007 Testing the facts on the touchstone of the settled legal proposition, we 20. have no hesitation in holding that notwithstanding the fact that the dispute as highlighted in the present case pertains to a concluded contract, yet, on account of a palpably unreasonable and arbitrary action of the appellant - Corporation, the extraordinary writ jurisdiction under Article 226 of the Constitution of India could be invoked, as was done in the instant case. Be that as it may, the present writ appeal is dismissed. The appellant - 21. Corporation shall return the amount that was already adjusted through encashment of the Bank Guarantee as also the Security Deposit and we also hold that the petitioner - respondent herein is entitled to receive the amount. which he is legitimately entitled to receive on account of the successful completion of the transportation of grains in terms of the contract. No order as to costs. Pending miscellaneous applications, if any, in this appeal, shall stand closed. Sd/- K TATA RAO DEPUTY REGISTRAR //TRUE COPY// SECTION OFFICER To 1. One CC to Sri Chandraiah Sunkara, Advocate [OPUC] 2. One CC to Sri Venkateswara Rao Gudapati, Advocate [OPUC] '6. I hree U.U. Copies Cnr HIGH COURT DATED:28/02/2025 k ' 2 mar 2025 \ Current Section . JUDGMENT WA.No.166 of 2007 DISMISSING THE WRIT APPEAL WITHOUT COSTS