State Action Even In Contractual Realm Must Abide By Article 14 : Supreme Court

The Supreme Court observed that the State action irrespective of being in the contractual realm must abide by Article 14 of the Constitution.

The fact that a dispute falls into the contractual realm does not relieve the State of its obligation to comply with the requirements of Article 14, the bench of Justices B R Gavai, Sanjay Karol and Aravind Kumar said.

In this case, the Madras Aluminum Co. Ltd. had filed an application to reduce the contracted maximum demand (Electricity) to 10000 KVA with effect from 27th January, 2002. The issue raised in this appeal was whether such an action of the application remaining pending for an unreasonable period could in itself be classified as an arbitrary and unreasonable act.

Taking note of the factual aspects of the case, the bench observed thus:

"Keeping in view the above-stated well established principles that State action irrespective of being in the contractual realm must abide by Article 14, and that a) after passage of a considerable period of time, in July, 2004 the reduction to 10000 KVA was agreed to and a new agreement to that effect was entered into; b) irrespective of the amount of reduction in KVA sought other applications were considered within a reasonable period of time; c) no reason has been put forth for keeping such application pending; d) that the Appellant duly and repeatedly followed up with the authorities to effectuate such reduction; and e) the Appellant has been unjustifiably asked to furnish costs for unutilized electricity which, in any case should not have extended beyond the period of six months (considering ‘reasonable period’ to consider an application, to be so), for a period much larger thereto, rendering such action unquestionably unreasonable and arbitrary."

Allowing the appeal, the bench directed the Tamil Nadu Electricity Board to return the amount as may be calculated and verified, paid by the Appellant to it for 13000 KVA, in excess to its request of maximum sanctioned demand of 10000 KVA (23000-10000 = 13000 KVA).

Case details

Madras Aluminum Co. Ltd. vs  Tamil Nadu Electricity Board | 2023 LiveLaw (SC) 505 | CA 7224-7226 of 2009 | 6 July 2023

Headnotes

Constitution of India, 1950 ; Article 14 - The State action irrespective of being in the contractual realm must abide by Article 14 of the Constitution - The fact that a dispute falls into the contractual realm does not relieve the State of its obligation to comply with the requirements of Article 14 - When a power exists to effectuate a purpose it must be exercised within a reasonable time. (Para 36)

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