The writ jurisdiction of the High Court under Article 226 can be exercised even in contractual dealings, if the government fails to exercise fairness or practices discrimination, the division bench of Justices Sanjay Kishan Kaul and Abhay S Oka of the Supreme Court made the observation while upholding a Gujarat High Court decision to grant relief to Indian Petrochemicals Corporation Ltd. (IPCL) in the exercise of the Court's writ jurisdiction in a contractual dispute with the Gas Authority of India Limited (GAIL).

Although the dispute arises from a commercial contract, we find that the writ petition challenging the clauses was maintainable. It is not disputed that GAIL is a Public Sector Undertaking and thus qualifies under the definition of ‘State’ as per Article 12 of the Constitution. At the time of entering into contract, GAIL was enjoying a monopolistic position with respect to the supply of natural gas in the country. IPCL, having incurred a significant expense in setting up the appropriate infrastructure, had no choice but to enter into agreement with GAIL. Thus, there was a clear public element involved in the dealings between the parties, the Court observed.

“Further, writ jurisdiction can be exercised when the State, even in its contractual dealings, fails to exercise a degree of fairness or practices any discrimination. We are fortified in our view by this Court’s decision in ABL Enterprises and Joshi Technologies. In the present case, GAIL’s action in levying ‘loss of transportation charges’ was ex facie discriminatory, insofar as IPCL was mandated to build its own pipeline in terms of the allocation letter and was not using GAIL’s HBJ pipeline at all. Thus, it cannot be said that merely because an alternative remedy was available, the Court should opt out of exercising jurisdiction under Article 226 of the Constitution and relegate the parties to a civil remedy.

For the detailed judgment;please click  M/S. GAIL (INDIA) LIMITED vs M/S. INDIAN PETROCHEMICALS CORP. LTD. & ORS. (CIVIL APPEAL Nos. 3504-3505 OF 2010)