Can the Supreme Court Rewire PSU Commercial Conduct?
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The Supreme Court censured a state public sector utility for behaving like “Shylock”—suggesting that PSUs must not pursue litigation with a “money-minded” motive
By P SESH KUMAR
NEW DELHI, August 6, 2025 — In a sharply worded observation, the Supreme Court (Gujarat Urja Vikas Nigam Ltd. v. Wind Power Producers, Supreme Court of India, reported on August 6, 2025) recently censured a state public sector utility for behaving like “Shylock”—suggesting that PSUs must not pursue litigation with a “money-minded” motive, but instead embody public interest even in commercial dealings.
This judicial intervention raises fundamental constitutional questions: Can the judiciary override the terms of lawful commercial contracts on moral grounds? Should courts impose a public service obligation on PSEs even in purely commercial transactions?
More critically, does such moral adjudication undermine the constitutional role of Parliament and State Legislatures—whose Committees on Public Undertakings and the Comptroller and Auditor General (CAG) are already mandated to examine whether PSUs are fulfilling their mixed mandates of commercial performance and social responsibility?
The Supreme Court’s recent rebuke of GUVNL for behaving “like Shylock,” insisting on profit‑only litigation with wind producers instead of behaving as a responsible corporate citizen, raises a sharp constitutional and administrative law question: is it appropriate for the Court to graft a non‑profit motive onto contracts entered by Public Sector Enterprises (PSEs)? And does this judicial intervention improperly trample Parliament’s (Legislature) supervisory domain—via the Committee on Public Undertakings and CAG audits—to hold PSEs accountable?
At bottom, the Court appears to assert that PSEs are not mere business enterprises but vehicles of public interest, expected to serve broader social purposes. That strikes one as a normative policy prescription rather than a strict legal rule. Commercial contracts are governed by commercial law; there is no statutory mandate that a contracting authority forgo legal remedies in order to appear benevolent.
To insist on non‑profit motive inside a commercial dispute is to rewrite basic contract doctrine…whatever may be the nature of the dispute. Viewed sharply, the Court’s stance risks importing moral judgments into clear‑text agreements, stretching judicial competence into policy that belongs in the legislature’s realm.
Turning next to Parliament: yes, the real oversight architecture for PSEs is precisely public scrutiny through the Committee on Public Undertakings, informed by CAG reports. The legislature annually reviews whether PSEs meet their objectives, whether they profit, break even, or suffer losses—measured against defined social, economic and strategic goals.
That forum, not the judiciary, was designed for evaluating performance, sanctioning inefficiency, and setting policy via budget and regulation. If the Court concludes that a PSE must waive litigation rights to avoid being seen as “money‑minded,” it risks undermining the legislature’s exclusive domain to define what public interest means and how trade‑offs are judged in democratic accountability.
Moreover, judicial pronouncements like these, while rhetorically appealing, may hobble the very democratic checks that exist. If PSEs fear that exercising legal rights means judicial censure, they may shy away from legitimate contractual enforcement in service of caution—not efficiency. Worse, Parliament loses its central role if courts start second‑guessing every tariff dispute or contract stance as contrary to some amorphous idea of public ethos. That turns accountability into sentiment rather than structured legislative oversight.
And yes, legislative privilege—the power of Parliament or state legislatures to summon officials, examine performance, question executives, and demand remedial action—is at odds with a judiciary that takes policy enforcement into its own hands. If the Court’s judgment becomes precedent, PSEs may become risk‑averse or politically manipulated, avoiding aggressive negotiation or litigation lest they appear to be profit‑hungry. Meanwhile, real evaluation of whether they discharged their mandate would shift from the legislature’s analytical lens to whatever the next bench thinks is “exemplary” or “public‑spirited.”
To be frank, the Court’s intervention is bold and dramatic in tone, but legally it ventures well beyond the justiciable domain. Commercial contract law does not admit a profit‑ignoring standard unless the statute says so. And Parliament has not signalled such a standard; rather, it has weighed profitability against social obligation within its own audits and committees. In effect, the judiciary risks eroding the separation of powers by placing itself in a policy role already allotted to legislative oversight. This judgment may resonate rhetorically, but constitutionally it treads on dangerous ground.
The Supreme Court’s moral commentary on PSE conduct, however well-meaning, crosses a vital line between judicial interpretation and policy prescription. By implying that public enterprises must forsake profit motives even in legally valid commercial disputes, the Court stretches the role of the judiciary beyond its constitutional boundaries.
Parliament, not the Court, is empowered to define and supervise the public interest obligations of PSEs—through CAG audits, legislative debates, and the Committee on Public Undertakings. To short-circuit that process is to risk weakening institutional accountability.
If public enterprises begin to fear litigation lest they be labelled profit-obsessed, they may refrain from exercising contractual rights, inviting inefficiency or even political manipulation. In this contest between judicial morality and legislative mandate, constitutional discipline must prevail. The public interest is best served not by episodic judicial sermons but by consistent, structured, and democratically rooted oversight of our public enterprises.
(This is an opinion piece, and views expressed are those of the author only)
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Commercial Contracts are arrived at after due negotiations giving rise to Contractual Rights and Obligations between two parties, whoever it may be.
So when one of the Party fail to adhere to the Clauses of the Contract, the aggrieved Party has to approach the Courts to ensure enforcement of the Contract.
PSCs are created out of Public Funds and they have the duty to ensure the interest of the Public Funds invested by the Government.
Why they should be expected to forego/sacrifice their Commercial interests which in turn represents the Collective Interest of the people and not enforce the Contractual Obligations against the other party ?
If the PSC happens to the defaulter, will the Court advice the aggrieved private party to be magnanimous and not act like Shylock against the PSC since it is a public Organisation investing Public money ?