State Action Not Amenable To Writ Jurisdiction In Contractual Setting: Gujarat High Court
The Gujarat High Court has observed that when the State or its instrumentality enters into a contract with a contractor or bidder, they would be governed by the terms of the contract and ordinarily both the parties would be governed by the law that governs the terms and conditions of the contract. It added, that in such circumstances, the acts of the State would not be amenable to the...
The Gujarat High Court has observed that when the State or its instrumentality enters into a contract with a contractor or bidder, they would be governed by the terms of the contract and ordinarily both the parties would be governed by the law that governs the terms and conditions of the contract. It added, that in such circumstances, the acts of the State would not be amenable to the writ jurisdiction.
The Bench comprising Chief Justice Aravind Kumar and Justice Ashutosh Shastri held thus while dismissing the writ petition filed the Petitioner, a manufacturer in the healthcare sector having entered into a contract with the State for supply of certain medicine, challenging the Risk Purchase Recovery Orders issued by the Gujarat Medical Services (Respondent No. 2).
The Bench observed that the Petitioner was awarded the tender to supply medicine as a 'Substitute Rate Contract-Holder.' Respondent No. 2 issued several purchase orders between January 2020 to November 2020 and the Petitioner did not adhere to any of the orders on the ground that COVID-19 had disrupted the supply chain. Hence, the Risk Purchase Order was issued in March 2020.
The Petitioner took umbrage under the force majeure clause while relying on Vice Chairman and Managing Director, City and Industrial Development Corporation of Maharashtra Limited and another vs. Shishir Realty Private Limited and others and other precedents.
Per contra, Respondent No. 2 averred that the dispute was in the realm of contractual obligations and therefore, the petition was not maintainable. Further, the Petitioner had not supplied tablets merely on the basis of escalation in prices which could not be a ground for the frustration of a contract, it was averred.
Noting the various clauses of the Agreement, the Bench found that Respondent No. 2 had notified the Petitioner about the failure to deliver the tablets within stipulated time and the penalty for the same and yet, the Petitioner did not make the supply. Instead, cancellation of the contract was sought. Notably, the first order was placed in January 2020 when there was no pandemic. Yet the Petitioner had failed in discharging the contractual obligations.
The Bench affirmed that as per M/s.Global S.S. Construction Private Limited vs. Chief General Manager (Mechanical-I/c. Sem.), the instant issue was not amenable to the writ jurisdiction. The Bench observed from the case that when the government or its instrumentalities set up terms and conditions of the contract, they act purely in their executive capacity. Hence, judicial review is limited.
The tenderers were clearly notified that upon failure, Risk Purchase Order would be issued under Clause 5(d) of the tender document. The Bench also rejected the contention that principles of natural justice were violated since they were aware of the clause and the intimations sent to them.
Accordingly, the petition was dismissed along with stay application.
Case No.: C/SCA/19597/2021
Case Title: M/S. OVERSEAS HEALTHCARE PVT. LTD. v/s STATE OF GUJARAT
Citation: 2022 LiveLaw (Guj) 293