Supreme Court: Conduct of Public bodies has to be fair and not Arbitrary

The Supreme Court observed that a contract is void if prohibited by a statute under a penalty, even without express declaration that the contract is void

While dismissing an appeal filed by Gujarat Maritime Board, 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…”

Earlier, the High Court has allowed the Writ petition filed by “Asiatic Steel”, seeking refund of contract consideration of Rs. 3,61,20,000/- paid to the Gujarat Maritime Board.

Brief of the facts –

In 1994 Asiatic Steel was allotted a plot for ship-breaking through a bid payment of $1,153,000/- (foreign currency) as it has become highest bidder. The payment was made on 22-03-1995, while the earnest money deposit of Rs. 5,00,000/- was paid on 08-11-1994.

After that, Asiatic Steel & other allottees facing difficulties in commencing commercial operations has approached the Gujarat Maritime Board. Further, through notice dated 19-05-1998; the Board has stated that an amount of Rs. 3,61,20,000/- would be refunded, but without interest.

Therefore, the Asiatic Steel has approached the High Court; filing Writ Petition. However, the High Court has directed the Board to

(i) refund the earnest money of Rs. 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.

The bench of Justice Indira Banerjee & Justice S. Ravindra Bhat in Supreme Court has upholds the High Court Judgment and has observed that the Board’s conduct or indifferences in regard to the refund sought can be only on the premises that it wished the parties to approach the court, till a decision could be taken to refund the amounts received by it.

The Apex Court, dismissing its appeal, has observed that “…….nothing prevented the Board from deciding to refund the amount, without forcing Asiatic Steel to approach the Court.”

Case Title: Chief Executive Officer & Vice Chairman Gujarat Maritime Board vs. Asiatic Steel Industries Ltd., (CA.No. 3807/2020)

Coram: Justice Indira Banerjee & S. Ravindra Bhat.