Scope of judicial review of State action in a matter arising from non-statutory contract on ground of arbitrariness, explained. Held, We would, therefore, sum up as to when an act is to be treated as arbitrary. The court must carefully attend to the facts and the circumstances of the case. It should find out whether the impugned decision is based on any principle. If not, it may unerringly point to arbitrariness. If the act betrays caprice or the mere exhibition of the whim of the authority it would sufficiently bear the insignia of arbitrariness. In this regard supporting an order with a rationale which in the circumstances is found to be reasonable will go a long way to repel a challenge to state action. No doubt the reasons need not in every case be part of the order as such. If there is absence of good faith and the action is actuated with an oblique motive, it could be characterised as being arbitrary. A total non- application of mind without due regard to the rights of the parties and public interest may be a clear indicator of arbitrary action. A wholly unreasonable decision which is little different from a perverse decision under the Wednesbury doctrine would qualify as an arbitrary decision under Article 14. Ordinarily visiting a party with the consequences of its breach under a contract may not be an arbitrary decision. Para 75.
If action/inaction of State is prima facie arbitrary, writ petition, held, would be maintainable even if the action of the State is in relation to a non-statutory contract. In case of a challenge to an award of largesse by State, the ground of arbitrariness of State action/inaction, held, available at a stage prior to conclusion of the contract as well. Interference by Court would depend upon the exercise of discretion by the writ court based on the facts of each case.
[M.P. Power Management Co. Ltd. v. Sky Power Southeast Solar India (P) Ltd., (2023) 2 SCC 703]