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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  1517  OF 2013 (Arising out of S.L.P. (C) No.2490 of 2008)

M/s A.S. Motors Pvt. Ltd. …Appellant

Versus

Union of India & Ors. …Respondents

J U D G M E N T

T.S. THAKUR, J.

1. Leave granted.

2. This appeal by special leave arises out of an order dated 8th  

August,  2007,  passed  by  a  Division  Bench  of  the  High  Court  of  

Madhya Pradesh at Jabalpur whereby Writ Appeal No.491 of 2007  

filed by the appellant has been dismissed and the order passed by the  

learned  Single  Judge  dismissing  Writ  Petition  No.720  of  2007  

affirmed. Multiple rounds of litigation between the parties have been  

aptly recapitulated in the order passed by the Single Judge of the  

High Court in Writ Petition No.720/2007 and refreshed by the Division

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Bench of the High Court while dismissing the writ appeal filed against  

the same. It is in that view unnecessary for us to recount the entire  

factual  background in  which  the  controversy  in  this  appeal  arises  

except to the extent it is absolutely necessary for us to do so for the  

disposal of this appeal.  

3. National  Highway  Authority  of  India  Ltd.  (NHAI  for  short)  

invited tenders for award of a contract for collection of fee for the use  

of National Highways from Km. 61.00 to Km.103 on Morena-Gwalior  

Section of National Highway No.3. Appellant too among others made  

an offer which was accepted by the NHAI in terms of its letter dated  

14th March, 2006 asking the appellant to submit a demand draft for a  

sum of Rs.2,20,00,125/- towards performance security and a bank  

guarantee for a similar amount to be valid for a period of 15 months  

for the due observance of the terms and conditions contained in the  

contract.  Both  these  requirements  were  satisfied by the  appellant  

with the result that a contract for collection of user fee commencing  

from 1st April,  2006 to 31st March, 2007 was finally allotted in its  

favour. It is not in dispute that pursuant to the said allotment the  

appellant started collecting the prescribed fee as per the terms and  

conditions  of  the  agreement  and  also  started  depositing  monthly  

instalments stipulated under the same.   

4. Certain  violations  were  in  due  course  noticed  by the  NHAI

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including complaints to the effect that the appellant was collecting  

excess fee from vehicles passing through Toll Plaza. This resulted in  

the termination of the collection contract by the competent authority  

in  terms of  a  letter  dated  27th July,  2006,  and forfeiture   of  the  

performance  security  of  Rs.2,20,00,125/-.  Termination  ordered  by  

the  respondent  triggered  litigation  between  the  parties  that  took  

several  rounds  before  the  High  Court.   We  are  not  immediately  

concerned  with  the  nature  of  those  proceedings  and  the  orders  

passed in the same from time to time.  What is important is that the  

termination of the contract had once been quashed by the High Court  

whereupon the same was terminated for a second time after a show-

cause notice and a personal hearing to the appellant in compliance  

with the direction issued by the High Court in its order dated 25th  

January, 2007.

5. Aggrieved by the fresh termination of the contract as also the  

forfeiture ordered by the competent authority, the appellant filed Writ  

Petition No.720 of 2007 before the High Court of Madhya Pradesh. By  

his order dated 18th June, 2007, a  Single Judge of the High Court  

allowed the said petition in part and while upholding imposition of  

penalty  and  forfeiture  of  performance  guarantee,  quashed  the  

revocation of the bank guarantee by the respondent, as unfair and  

unreasonable  having  regard  to  the  fact  that  the  respondent  had

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already  received  Rs.7,33,33,750/-  towards  collection  charges,  

Rs.2,20,00,125/- towards forfeiture of the performance security and  

a  penalty  amount  of  Rs.2,41,097/-  making  a  total  of  

Rs.9,55,74,970/- which was more than Rs.8,80,00,500/- the amount  

contracted to be paid to the respondent.  The High Court held that  

the termination of the contract and the forfeiture of the performance  

security for the breaches committed by the appellant were perfectly  

justified in the light of the report submitted by the agency deployed  

by the respondent to collect material regarding overcharging of fee  

and other violations committed by the appellant.

6. Feeling aggrieved by the order passed by the Single Judge of  

the High Court the appellant preferred Writ Appeal No.491 of 2007  

which was heard and dismissed by a Division Bench of the High Court  

by its order dated 8th August, 2007. The present appeal assails the  

correctness of the said order.

7. We have heard learned counsel for the parties at some length  

who have taken us through the record including the orders passed by  

the High Court from time to time.  

8. It was argued on behalf of the appellant that termination of  

the contract between the parties was legally bad not only because the  

principles of natural justice requiring a fair hearing to the appellant  

were not complied with but also because there was no real basis for

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the respondent-authority to hold that the appellant had committed  

any breach of the terms and conditions of the contract warranting its  

termination. We find no merit in either one of the contentions.  The  

reasons are not far to see.  Rules of natural justice, it is by now fairly  

well settled, are not rigid, immutable or embodied rules that may be  

capable  of  being  put  in  straitjacket  nor  have  the  same  been  so  

evolved as to apply universally to all kind of domestic tribunals and  

enquiries.  What the Courts in essence look for in every case where  

violation of the principles of natural justice is alleged is whether the  

affected party was given reasonable opportunity to present its case  

and whether the administrative authority had acted fairly, impartially  

and reasonably.  The doctrine of audi alteram partem is thus aimed  

at  striking  at  arbitrariness  and  want  of  fair  play.   Judicial  

pronouncements on the subject have, therefore, recognised that the  

demands of natural justice may be different  in different  situations  

depending upon not only the facts and circumstances of each case  

but also on the powers and composition of the Tribunal and the rules  

and  regulations  under  which  it  functions.   A  Court  examining  a  

complaint based on violation of rules of natural justice is entitled to  

see whether the aggrieved party had indeed suffered any prejudice  

on account of such violation.  To that extent there has been a shift  

from the earlier thought that even a technical infringement of the

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rules is sufficient to vitiate the action. Judicial pronouncements on the  

subject are a legion.  We may refer to only some of the decisions on  

the subject which should in our opinion suffice.

9.       In  Suresh Koshy George v. University of Kerala, AIR  

1969 SC 198, this Court while examining the content and the sweep  

of  the  rules  approved the  view expressed in  Russel  v.  Duke of  

Norfolk, [1949] 1 All ER 109 in the following words:   

“7.  … … The rules of natural justice are not embodied rules.   The question whether the requirements of natural justice have   been  met  by  the  procedure  adopted  in  a  given  case  must   depend to a great extent on the facts and circumstances of   the case in point, the constitution of the Tribunal and the rules   under which it functions. 8. In Russel v. Duke of Norfolk, [1949] 1 All ER 109 at p.118,   Tucker, L.J., observed: “There  are,  in  my  view,  no  words  which  are  of  universal   application to every kind of inquiry and every kind of domestic   tribunal. The requirements of natural justice must depend on   the circumstances of the case, the nature of the inquiry, the   rules under which the Tribunal is acting, the subject matter   that is being dealt with, and so forth. Accordingly, I do not   derive much assistance from the definitions of natural justice   which  have  been  from  time  to  time  used,  but,  whatever   standard  is  adopted,  one  essential  is  that  the  person   concerned should have a reasonable opportunity of presenting   his case.”

10. In Keshav Mills Co Ltd. v. Union of India, (1973) 1 SCC  

380 this Court extracted with approval the observations of Lord Reid  

in Ridge v. Baldwin, (1963) 2 W.L.R. 935 and said:

“8. … … We do not think it either feasible or even desirable to   lay down any fixed or rigorous yard-stick in this manner. The   concept of natural justice cannot be put into a straight-jacket.   It  is futile,  therefore, to look for definitions or standards of   natural  justice from various decisions and then try to apply   them to the facts of any given case. The only essential point   that has to be kept in mind in all  cases is that the person  

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concerned should have a reasonable opportunity of presenting   his  case  and  that  the  administrative  authority  concerned   should  act  fairly,  impartially  and  reasonably.  Where   administrative officers are concerned, the duty is not so much   to  act  judicially  as  to  act  fairly.  See,  for  instance,  the   observations of Lord Parker in In re H.K. (an infant), (1967) 2   QB 617. It only means that such measure of natural justice   should be applied as was described by Lord Reid in Ridge v.   Baldwin case (supra) as “insusceptible of exact definition but   what a reasonable man would regard as a fair procedure in   particular  circumstances”.  However,  even  the  application  of   the concept of fair-play requires real flexibility. Everything will   depend on the actual facts and circumstances of a case. As   Tucker, L.J., observed in Russell v. Duke of Norfolk, [1949] 1   All ER 109:

“The requirements of natural justice must depend on the   circumstances  of the case,  the  nature of  the enquiry,   the rules under which the tribunal is acting, the subject- matter that is being dealt with and so forth.”

11. Reference may also be made to P.D. Agrawal v. State Bank  

of  India,  (2006)  8  SCC  776,  where  this  Court  approved  the  

observations made by Mukharji, J. in Charan Lal Sahu v. Union of  

India, (Bhopal Gas Disaster)  (1990) 1 SCC 613, in the following  

words:  

“30.  The  principles  of  natural  justice  cannot  be  put  in  a   straitjacket  formula.  It  must  be  seen  in  circumstantial   flexibility.  It has separate facets. It has in recent time also   undergone a sea change. 31. In  Ajit Kumar Nag v. G.M. (PJ), Indian Oil  Corprn.   Ltd. (2005) 7 SCC 764, a three-Judge Bench of this Court   opined: (SCC pp.785-86, para 44) “44. We are aware of the normal rule that a person must have   a fair trial and a fair appeal and he cannot be asked to be   satisfied with an unfair  trial  and a fair  appeal. We are also   conscious of the general principle that pre-decisional hearing   is  better  and  should  always  be preferred to  post-decisional   hearing. We are further aware that  it  has been stated that   apart from laws of men, laws of God also observe the rule of   audi alterem partem. It has been stated that the first hearing   in human history was given in the Garden of Eden. God did   not  pass  sentence  upon  Adam  and  Eve  before  giving  an   opportunity  to  show cause  as  to  why  they  had  eaten  the   forbidden fruit. (See R. v. University of Cambridge [1723] 1   Str 557) But we are also aware that the principles of natural  

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justice are not rigid or immutable and hence they cannot be   imprisoned in a straitjacket. They must yield to and change   with  exigencies of situations. They must be confined within   their  limits  and cannot be allowed to run wild.  It  has been   stated:  “  ‘To  do  a  great  right’  after  all,  it  is  permissible   sometimes ‘to do a little wrong’.” [Per Mukharji, C.J. in Charan   Lal Sahu v. Union of India, (Bhopal Gas Disaster)  (1990) 1   SCC  613,  at  705,  para  124.]  While  interpreting  legal   provisions,  a court  of  law cannot  be unmindful  of  the hard   realities of life. In our opinion, the approach of the court in   dealing  with  such  cases  should  be  pragmatic  rather  than   pedantic,  realistic  rather  than  doctrinaire,  functional  rather   than formal and practical rather than ‘precedential’.” xxx xxx xxx xxx xxx xxx 39.  Decision of this Court in S.L. Jagmohan, (1980) 4 SCC  379, whereupon Mr Rao placed strong reliance to contend that   non-observance  of  principle  of  natural  justice  itself  causes   prejudice  or  the  same  should  not  be  read  “as  it  causes   difficulty of prejudice”, cannot be said to be applicable in the   instant  case.  The  principles  of  natural  justice  as  noticed   hereinbefore, have undergone a sea change. In view of the   decisions of this Court in State Bank of Patiala v. S.K. Sharma,   (1996)  3  SCC  364  and  Rajendra  Singh  v.  State  of  M.P.,   (1996)  5  SCC  460  the  principle  of  law  is  that  some  real   prejudice  must  have  been  caused  to  the  complainant.  The   Court has shifted from its earlier concept that even a small   violation shall result in the order being rendered a nullity. To   the  principle/doctrine  of  audi  alteram  partem,  a  clear   distinction has been laid down between the cases where there   was no hearing at all  and the cases where there was mere   technical infringement of the principle. The Court applies the   principles of natural justice having regard to the fact situation   obtaining in each case. It is not applied in a vacuum without   reference to the relevant facts and circumstances of the case.   It  is  no  unruly  horse.  It  cannot  be  put  in  a  straitjacket   formula. (See Viveka Nand Sethi v. Chairman, J&K Bank Ltd.   (2005) 5 SCC 337 and State of U.P. v. Neeraj Awasthi, (2006)   1 SCC 667. See also Mohd. Sartaj v. State of U.P., (2006) 2   SCC 315)

   (emphasis supplied)

12. In Maharashtra State Board of  Secondary and Higher  

Education v. K.S. Gandhi & Ors., (1991) 2 SCC 716, this Court  

while reiterating the legal position observed:  

“22. … … The omnipresence and the omniscience (sic) of the  

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principle  of  natural  justice  acts  as  deterrence  to  arrive  at   arbitrary  decision in  flagrant  infraction of fair  play. But  the   applicability of the principles of natural justice is not a rule of   thumb or a strait-jacket formula as an abstract proposition of   law. It depends on the facts of the case, nature of the inquiry   and the effect of the order/decision on the rights of the person   and attendant circumstances.”

 13. In Maharashtra State Board of  Secondary and Higher  

Secondary Education & Anr. v. Paritosh Bhupeshkumar Sheth  

& Ors. (1984) 4 SCC 27, this Court reiterated the the observations  

made by Matthew, J.  in  Union of  India  v.  Mohan Lal  Kapoor,   

(1973) 2 SCC 836  that it was not expedient to extend the horizons  

of natural justice involved in the  audi  alteram partem rule to  the  

twilight zone of mere expectations, however great they might be.

14. We may finally refer to the decision of this Court in Aligarh  

Muslim University  v.  Mansoor  Ali  Khan,  (2000) 7 SCC 529,  

where this Court with approval quoted the following observations of  

Sir Willam Wade (Administrative Law, 9th Edn. pp.468-471)  

“… … it is not possible to lay down rigid rules as to when the   principles of natural justice are to apply, nor as to their scope   and extent… There must also have been some real prejudice   to  the  complainant;  there  is  no  such  thing  as  a  merely   technical infringement of natural justice. The requirements of   natural justice must depend on the facts and circumstances of   the case, the nature of the inquiry, the rules under which the   tribunal is acting, the subject-matter to be dealt with and so   forth.”

15. Coming to the case at hand we find that the termination of the  

contract between the parties was preceded by a show-cause notice  

issued to the appellant and a hearing provided to it by the competent

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authority.   The  show-cause notice  issued to the  appellant  on 24th  

November, 2006 enclosed with it all relevant documents including the  

complaints received against the appellant from various quarters and a  

copy of the report submitted by the agency engaged for verifying the  

allegations against the appellant.  The appellant  had unsuccessfully  

challenged the show-cause notice in Writ Petition No.6338 of 2006,  

before the High Court. The High Court had while refusing to interfere  

in the matter directed the appellant to submit a reply to the notice.  

The appellant had accordingly appeared before the authority on 12th  

January,  2007,  submitted  its  written  statement  and was heard  in  

support of its case that it had not committed any default. In the reply  

or at the hearing, the appellant had not alleged any mala fide, bias or  

prejudice against the officers dealing with the matter or the agency  

employed by them for collecting and verifying facts.   Principles of  

natural justice thus stood substantially complied with. The contention  

that the appellant should have been given an opportunity to cross-

examine the persons whose statements had been recorded by the  

agency  in  the  course  of  its  inquiry  and  verification  was  rightly  

rejected by the High Court keeping in view the nature of the inquiry  

which was primarily in the realm of contract, aimed at finding out  

whether the appellant had committed any violation of the contractual  

stipulations between the parties.  Issue of a show-cause notice and

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disclosure of material on the basis of which action was proposed to be  

taken against the appellant was in compliance with the requirement  

of  fairness  to  the  appellant  who was likely to  be  affected  by the  

proposed  termination.   Absence  of  any  allegation  of  mala  fides  

against  those taking action as also the failure of  the appellant  to  

disclose any prejudice, all indicated that the procedure was fair and in  

substantial, if not strict, compliance with the requirements of  Audi  

Alteram  Partem.  The  first  limb of  the  challenge  mounted  by  the  

appellant, therefore, fails and is hereby rejected.    

16. Coming  then  to  the  question  whether  the  respondent-

Authority had material enough to justify termination of the contract.  

The High Court has referred in detail to the report submitted by the  

agency  deployed  for  collection  of  evidence  and  verification  of  the  

allegations  and  come  to  the  conclusion  that  the  respondent  was  

perfectly justified in adopting the method and the procedure adopted  

by it in the instant case for collection of information and evidence  

regarding the alleged malpractices being committed by the appellant.  

The Single Judge of the High Court has while dealing with this aspect  

observed:

“There  is  no allegations  of  mala  fide,  personal  prejudice or   bias against any of the members of agency which conducted   the discreet inquiry.  In the facts and circumstances of the   case I am of the considered view that the method adopted by   the National Highway Authority to detect the illegalities being   committed by the petitioner is a fair and reasonable method   and it has not caused any prejudice or bias to the petitioner.  

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There is no material available on record on the basis of which   the report submitted by the agency as contained in Annexure   R/7  can  be  discarded  by  this  Court,  this  report  cannot  be   rejected merely on the ground that it is collected behind the   back of the petitioner.  The nature of irregularity committed   by the petitioner can be detected only if a discreet enquiry in   the  manner  as  done  by  the  respondents  have  acted  in  a   manner which is violative of the principle of natural justice.   The report submitted was placed before the petitioner he was   given opportunity of submitting his defence and explanation   both  in  writing  and  personally.   Records  indicated  that   petitioner was unable to produce any cogent material to show  that this report is unsustainable and cannot be relied upon.”

17. In the appeal preferred against the above order, the appellant  

had made  a  grievance  only in  regard  to  two aspects  covered  by  

question nos. (III) and (V) , formulated by the Single Judge in the  

following words:

(III)  Whether  the  action  for  termination  of  the  contract  is   done by the competent authority and whether cancellation of   the contract  is  based on proof of breach committed by the   petitioner? (V) Whether the provision of Section 74 of the Contract Act   applies in the present case and forfeiture of the performance   security  and  revocation  of  bank  guarantee  is  arbitrary  and   unfair warranting interference by this Court?”                                                          

18. While dealing with question No.III above, the Division Bench  

held:

“In  respect  of  issue  No.  III,  the  learned  Writ  Court  while   relying  upon  various  facts  brought  on  record  gave  a   categorical finding in paragraph 21 that the modus operandi   adopted by the petitioner of charging higher rate from road   was a clear breach of contract and under clause 18(a) of the   Contract  Agreement,  the  same  was  determined,  and  also   entitled the national Highway Authority of India to impose and   realize the penalty for such breach as stipulated therein.  In   our  considered  opinion  the  Writ  Court  did  not  faulter  in   recording the aforesaid finding.”

19. There is,  in our  opinion,  no error  of  law, nor  is  there  any  

perversity  in  the  appreciation  of  the  material  available before  the

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respondents. The reports submitted by the agency employed by the  

respondent-Authority  was  damning  for  the  appellant  and  clearly  

showed that the appellant was indulging in malpractices like charging  

excess fee from the owners/drivers of the vehicles using the stretch  

of  road  covered  by  the  contract.  Nothing  in  particular  has  been  

pointed out to us to persuade us to take a contrary view. If the report  

submitted  by  the  agency  against  whom  the  appellant  has  no  

allegation of malice or other extraneous considerations to make are  

accepted, we see no reason why the same could not furnish a safe  

basis for the respondent to take action especially when the appellant  

was abusing its position as a contractor, putting the public at large to  

unnecessary  harassment  and  exaction  of  money  not  legally  

recoverable from them. The material collected could and was rightly  

made  a  basis  for  the  termination  of  contract  by  the  competent  

authority.   

20. The upshot of the findings recorded by the High Court which  

we have affirmed in the foregoing paragraphs is that the appellant  

was not entitled to claim any relief in exercise of its extra ordinary  

writ  jurisdiction  of  the  High  Court.   The  High  Court  could  have  

relegated the appellant to seek redress in an appropriate civil action  

before a competent civil Court, whether for damages or recovery of  

the amount forfeited by the respondent.  The High Court has not

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done so.  It has given partial relief to the appellant to the extent of  

holding that the invocation of the bank guarantee was not justified in  

the light of the forfeiture of performance security and the amount of  

penalty.  In any event we see no room for interfering with the order  

passed by the High Court in exercise of our jurisdiction under Article  

136 of the Constitution of India which too is both extraordinary and  

discretionary  in  nature.   We  may  in  this  connection  refer  to  the  

following  passage  from  Halsbury’s  Laws  of  England  Fourth  

Edition Vol.-16 pages 874-876, which sums up the legal position in  

England as to the right of a party who has not come to the Court with  

perfect  propriety  of  conduct  and  with  clean  hands,  to  claim  an  

equitable relief.  

1305. He who comes into equity must come with clean hands.   A court of equity refuses relief to a plaintiff whose conduct in   regard  to  the  subject  matter  of  the  litigation  has  been   improper. This was formerly expressed by the maxim "he who  has committed iniquity shall not have equity", and relief was   refused where a transaction was based on the plaintiff's fraud   or misrepresentation, or where the plaintiff sought to enforce a   security improperly obtained, or where he claimed a remedy   for  a  breach  of  trust  which  he  had  himself  procured  and   whereby he had obtained money. Later it  was said that the   plaintiff in equity must come with perfect propriety of conduct,   or with clean hands. In application of the principle a person will   not be allowed to assert his title to property which he has dealt   with so as to defeat his creditors or evade tax, for he may not   maintain an action by setting up his own fraudulent design.

The maxim does not,  however,  mean  that  equity  strikes  at   depravity in a general way; the cleanliness required is to be   judged  in  relation  to  the  relief  sought,  and  the  conduct   complained of must have an immediate and necessary relation   to the equity sued for; it must be depravity in a legal as well   as  in  a  moral  sense.  Thus,  fraud  on  the  part  of  a  minor   deprives him of his right to equitable relief notwithstanding his   disability.  Where  the  transaction  is  itself  unlawful  it  is  not  

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necessary to have recourse to this principle. In equity, just as   at  law,  no  suit  lies  in  general  in  respect  of  an  illegal   transaction, but this is on the ground of its illegality, not by   reason of the plaintiff's demerits."

21. Judged in the light of the above, the appellant had breached  

the contractual stipulations, harassed innocent citizens to cough up  

more  than  what  they  were  in  law  required  to  pay  and  thus  

undeservedly enriched itself before it turned to the Court to claim  

relief  in  the  extraordinary  writ  jurisdiction  of  the  High  Court  on  

equitable considerations.  Such an attempt could and ought to have  

been  frustrated  by the  High Court,  as  indeed has  been  done,  no  

matter only partially.

22. That brings us to the only other ground of challenge relating  

to  invocation  of  the  Bank  Guarantee  by  the  National  Highway  

Authority of India which according to the appellant was arbitrary and  

unfair in the facts and circumstances of the case.  The High Court has  

taken the view that apart from a penalty of Rs.2,41,097/-, National  

Highway Authority had already recovered a sum of Rs.2,20,00,125/-  

out  of  the  bank  drafts  furnished  by  the  appellant  towards  

performance  security.   The  total  amount,  thus,  received  by  the  

authority was more than the amount payable to it under the contract  

if the same had been performed diligently till the end of the contract

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period. Invocation of the bank guarantee for recovery of any further  

amount was in that view held to be unjustified by the High Court.

23. There is no appeal by the Authority against that part of the  

judgment, although it was argued on behalf of the Authority that in  

terms of clause 18(b) of the contract, the Authority had the right to  

estimate  the  excess  of  collection  by  the  appellant-contractor  and  

recover the same from it.  Clause 18 may be extracted in extenso at  

this stage:

“18. Penalty for charging excess fee :

(a) In  case,  it  is  observed  and/or  established  to  the   satisfaction  of  the  Authority  that  the  Contractor  has   charged  fee  in  excess  of  the  prescribed  rate,  the   Authority may terminate the contract forthwith and/or   may impose a penalty  of  Rs. One lakh or an amount   equivalent of one day’s fee receivable by the Authority,   which  ever  is  higher  and  may  provide  the  Contractor   another  opportunity  of  continuing  the  Fee  Collection.   However,  in  no  case,  the  authority  shall  afford  more   than one opportunity to the Contractor.

(b) The Authority  also, reserves the right to estimate the   excess  collection  of  fee  made  by  the  Contractor  and  recover  the  same,  which  will  be  over  and  above  the   penalty  imposed  and  to  be  recovered  from  the   Contractor.

(c) The  termination  under  this  clause  shall  make  the   Contractor  liable  for  unconditional  forfeiture  of  the   Performance Security.”

24. It  is  evident  from a  simple  reading  of  the  above  that  the  

Authority was competent to terminate the contract if the appellant  

was found charging in excess of the prescribed rate of fee. Apart from

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termination of the contract any violation in the nature of excess fees  

being charged  could  result  in  imposition  of  a  penalty  in  terms of  

clause 18(a) (supra).   What is significant is that in terms of clause 18  

(b)  besides  termination  of  the  contract  and  levy  of  penalty  the  

Authority was also entitled to estimate the excess collection made by  

the appellant and recover the same from it.  There is nothing on  

record  before  us  whether  any  such  estimation  was  made  by  the  

Authority and if so the basis on which that was done. The failure of  

the  Authority  to  estimate accurately could jeopardise  its  claim for  

recovery by a simple invocation of the bank guarantee.  It may have  

been a different  matter  if  the Authority had estimated the excess  

amount accurately and sought to recover the same by invocation of  

the bank guarantee but without a proper estimation of the excess  

received  by  the  appellant,  it  was  not  open  to  the  respondent  to  

invoke  the  bank  guarantee  and  recover  the  entire  amount  of  

Rs.2,20,00,125/- covered by the same. The High Court was, in that  

view, correct in holding that invocation of bank guarantee was not  

justified having regard  to  the  fact  that  the  Authority  had already  

recovered the penalty levied by it and also forfeited the performance  

security  amount  of  Rs.2,20,00,125/-  in  the  form  of  bank  drafts  

furnished by the appellant.

Page 18

25. Insofar  as  the  recovery  of  the  performance  security  of  

Rs.2,20,00,125/-  from  out  of  the  bank  drafts  furnished  by  the  

appellant is concerned, we have no difficulty in holding that such a  

forfeiture was available to the respondent-Authority under the terms  

of the contract and the provisions of Section 74 of the Contract Act  

did not forbid the same. The scope of Section 74 has been the subject  

matter  of  several  pronouncements  of  this  Court  including  the  

Constitution  Bench  decisions  in  Fateh  Chand  v.  Balkishan Das  

AIR 1963 SC 1405, Union of India v.  Ramam Iron Foundry  

(1974)  2  SCC  231 and  SAIL  v.  Gupta  Brother  Steel  Tubes  

(2009) 10 SCC 63. The common thread that runs through all these  

pronouncements  is  that  an  aggrieved  party  is  entitled  to  receive  

compensation from the party who has broken the contract whether or  

not  actual damage or loss is proved to have been  caused by the  

breach  and  that  the  Court  has,  subject  to  the  outer  limit  of  the  

penalty  stipulated,  jurisdiction  to  award  such  compensation  as  it  

deems reasonable having regard to the circumstances of the case.  

This would essentially be a mixed question of law and fact that a Writ  

Court  could not  possibly  decide.   The  appellant  could  and indeed  

ought  to  have  sought  its  remedies  in  a  proper  civil  action  if  it  

questioned  the  reasonableness  of  the  amount  recoverable  by  the  

appellant in terms of the contractual stipulations.    

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26. In the result this appeal fails and is dismissed but in the facts  

and circumstances, without any order as to costs.

……… ……………….…..…J.        (T.S. Thakur)

     ……………………………..…J.              (Gyan Sudha Misra)

New Delhi February 21, 2013

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ITEM NO.1B               COURT NO.9             SECTION IVA

           S U P R E M E   C O U R T   O F   I N D I A                          RECORD OF PROCEEDINGS                      C.A. No........../2013 @ Petition(s) for Special Leave to Appeal (Civil) No(s).2490/2008 (From the judgement and order  dated 08/08/2007 in WA No.491/2007 of  The HIGH COURT OF M.P AT JABALPUR)

M/S. A.S. MOTORS PVT. LTD.                        Petitioner(s)

                VERSUS

U.O.I. & ORS.                                     Respondent(s)

Date: 21/02/2013  This Petition was called on for JUDGMENT today.

For Petitioner(s)    Mr. Niraj Sharma,Adv.

For Respondent(s)    Mr. Praveen Jain,Adv. Mr. T.S. Sidhu,Adv. Ms. Pallavi Mohan,Adv. Mr. Ganesh Kamath,Adv. For  M/S. M.V. Kini & Associates  

The Court made the following                                 J U D G M E N T  

Hon'ble Mr. Justice T.S. Thakur pronounced  Judgment of the  

Bench  comprising  His  Lordship  and  Hon'ble  Mrs.  Justice  Gyan  

Sudha Misra.  

Leave granted.

The appeal is dismissed in terms of the signed judgment.   

(N.K. Goel) Court Master

(Veena Khera) Court Master

(Signed “Reportable” Judgment is placed on the file)