Conduct Of Public Bodies Has To Be Fair & Not Arbitrary; Do Not Force Citizens To Approach Courts : Supreme Court

The Supreme Court observed that, the conduct of a public body charged to uphold the rule of law, has to be fair and not arbitrary.

The court observed thus while dismissing Gujarat Maritime Board's appeal against the High Court judgment which allowed the writ petition filed by "Asiatic Steel" Court seeking refund of contract consideration of ₹3,61,20,000/- paid by them to the Board.  

In the year 1994, Asiatic Steel was allotted a plot for ship-breaking of "very large crude carriers/ultra large crude carriers‟ as it became the highest bidder. The bid payment was made on 22.03.1995 in foreign currency, to the tune of $1,153,000, while the earnest money deposit of ₹5,00,000/- was paid on 08.11.1994. On 23.02.1995, Asiatic Steel and other allottees approached the Board citing difficulties in commencing commercial operations, on account of the connectivity to the plots and the existence of rocks inhibiting beaching of ships on the plot for the purpose of ship-breaking. The Board, through a notice dated 19.05.1998, stated that an amount of ₹3, 61, 20,000/- would be refunded, but without interest. The Asiatic Steel, therefore, approached the High Court, by filing writ petition. The Board was directed by the High Court to (i) refund the earnest money of ₹5,00,000/- with interest at 10% p.a., in accordance with the resolution of 17.12.2014; and (ii) pay interest of 6% on the Principal from 08.11.1994 to 19.05.1998. 

While upholding the High Court judgment, the bench comprising Justices Indira Banerjee and S. Ravindra Bhat observed that the Board's conduct or indifference in regard to the refund sough can be only on the premise that it wished the parties to approach the court, till a decision could be taken to refund the amounts received by it. In this context, the court observed:

"In this court's considered view, the Board's action is entirely unacceptable. As a public body charged to uphold the rule of law, its conduct had to be fair and not arbitrary. If it had any meaningful justification for withholding the amount received from Asiatic Steel, such justification has not been highlighted ever. On the other hand, its conduct reveals that it wished that the parties should approach the court, before it took a decision. This behavior of deliberate inaction to force a citizen or a commercial concern to approach the court, rather than take a decision, justified on the anvil of reason (in the present case, a decision to refund) means that the Board acted in a discriminatory manner."

The bench referred to the Supreme Court observation in Gramin Bank v. Khazan, in which the court reminded the Central Government, the State Governments and other instrumentalities to take earnest efforts to resolve the disputes at their end. The court, dismissing its appeal, observed:

"In this case, conduct of the Board betrays a callous and indifferent attitude, which in effect is that if Asiatic Steel wished for its money to be returned, it had to approach the court. This was despite its knowledge that at least three other identically placed entities had asked for return of money and, upon approaching the court, were refunded the amounts given by them promptly. In view of these facts, nothing prevented the Board from deciding to refund the amount, without forcing Asiatic Steel to approach the court."

CASE: CHIEF EXECUTIVE OFFICER AND VICE CHAIRMAN GUJARAT MARITIME BOARD vs. ASIATIC STEEL INDUSTRIES LTD [C.A. NO. 3807 OF 2020]

CORAM: Justices Indira Banerjee and S. Ravindra Bhat

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