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TMI Blog2024 (7) TMI 1598X X X X Extracts X X X X X X X X Extracts X X X X ..... wer by it in the contractual domain i.e., the cancelling of the tender carries a corresponding public duty to act in a reasonable and rationale manner. Thus, the writ petition filed by the Respondent was maintainable and the relief prayed for could have been considered by the High Court in exercise of its writ jurisdiction. The approach of the court must be to respect the expertise and discretion of administrative authorities while still protecting against arbitrary and capricious actions. Whether the action on the part of the Respondent herein in cancelling the tender vide its notice dated 07.02.2023 was amenable to the writ jurisdiction of the High Court? If so, whether the said action could be termed as arbitrary or unfair and in consequence of violation of Article 14 of the Constitution of India? - HELD THAT:- Once a decision has been officially made through proper means and channel, any internal deliberations or file notings that formed a part of that decision-making process can certainly be looked into by the Court for the purposes of judicial review in order to satisfy itself of the impeccability of the said decision. Once a decision is made, all opinions and deliberatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e.
Conclusion - i) The writ petition filed by the Appellant was maintainable, as the cancellation of the tender involved a public law element. The cancellation was not a mere contractual dispute but an arbitrary exercise of executive power. ii) The litigation at hand is nothing but a classic textbook case of an arbitrary exercise of powers by the Respondent in cancelling the tender that was issued in favour of the Appellant and that too at the behest of none other than the concerned Minister-In-Charge and thereby rendering the Notice of Cancellation dated 07.02.2023 illegal. iii) The order dated 16.09.2023 passed by the Urban Development and Municipal Affairs Department, Government of West Bengal merely transferred the operation and maintenance of the underpasses including the right to receive revenue from KMDA to KMC and therefore will have no effect on any rights that accrued in favour of the Appellant as such rights are independent of the authority in control of operations and maintenance.
The notice of cancellation dated 07.02.2023 is quashed and the impugned judgment and order passed by the High Court is hereby set aside - Appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... be the highest and was classified as 'H1' for both the underpasses. 4. Accordingly, the Respondent issued two Letter of Intents dated 27.06.2022 in favour of the Appellant, accepting the quotation offered by him and declaring his firm as the successful bidder for the aforementioned tender, and a formal Memorandum of Tender for Work was executed and issued to the Appellant. 5. As per the Memorandum of Tender for Work, the detailed 'Scope of Work' inter-alia included (i) the sweeping of floors & cleaning of the walls, stairwell, escalators, railings and glass-fixtures, (ii) regular emptying of dustbins and removal/processing of waste trash, (iii) upkeep of the garden and plants and (iv) the maintenance of light-fittings, escalators, water pumps and other electro-mechanical fixtures. 6. Furthermore, the Special Terms & Conditions of the Memorandum, more particularly Clause 35 therein stipulated that the contract would be liable to be terminated inter-alia in the event of any failure, breach or non-compliance of any of the obligations or terms delineated in the tender by the successful bidder. 7. Upon completion of all the formalities, the Work Orders dated 18.10.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken over by the KMC. However, the Order specifically, clarified that the right of collecting revenue from advertisements displayed would continue to remain with the KMDA. 10. Thereafter, in light of the aforesaid order, the Executive Engineer, KMDA under instructions issued by the competent authorities sent a notice dated 24.01.2023 to the Appellant herein asking him to stop all work in respect of the maintenance of the two underpasses with immediate effect in view of the handing over of the maintenance of the E.M. Bypass to the KMC. 11. In response to the above, the Appellant sent a letter dated 25.01.2023 inter-alia pointing out that as per the Urban Development and Municipal Affairs Department's Order dated 01.12.2022, the custody and rights of revenue of all structures, bridges, culverts etc. including the concerned underpasses, continued to remain with the Respondent, and requested to recall the notice dated 24.01.2023 asking him to stop the work. 12. However, on 07.02.2023, the Respondent issued one another notice to the Appellant stating that the tender for work of maintenance has been cancelled on account of a technical fault in the tender. It was stated therein th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ultimate cancellation notice was issued. It further observed that, since the notice of cancellation dated 07.02.2023 specifically provided the reasons for cancelling the tender i.e., the technical faults found in the tender that was floated, there was no element of arbitrariness in the said action. The relevant observations read as under: 11. [...] The effect of the administrative decision was reiterated in the stop-work request of 24.01.2023 where the reason given for the stop-work was also the "changed scenario" of handover of the maintenance work of E.M. Bypass to KMC from KMDA. Hence, the reason for the stop-work and the impugned cancellation is a change of policy for administrative convenience simpliciter. xxx xxx & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic or the obligation affecting the lives and livelihood of the general public by its very nature. M.P. Power sounded a cautionary note in such cases where the State cites monetary gains or losses as reason for termination of a contract. This is also not' the case at hand since the reasons given for cancellation were on a wholly different plane. 21. The above reasons persuade this Court to hold that the remedy available to the Petitioner is in the realm of private law and not Under Article 226 of the Constitution which contemplates certain tests including that the dispute must have a public law element. The complaint of the Petitioner is essentially for the specific performance of the contractual obligation of the Respondent KMDA. Doubtless, the Petitioner can avail of appropriate civil remedies for redress which would include damages for breach of the contractual terms. (Emphasis supplied) 16. Aggrieved with the aforesaid, the Appellant went in appeal before a Division Bench of the High Court by way of M.A.T. No. 744 of 2023, wherein the appeal court finding no fault in the decision of the learned Single Judge, dismissed the appeal and thereby affirmed the judgment of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PARTHA PROTIM GHOSH EE (RBBRDG) (KMDA) c) Again, in Note #96, it was noted that since the competent authority of the Respondent was desirous to cancel the tender, the Respondent was of the view that the opinion of its legal cell be obtained first before such action is taken. The relevant noting reads as under: Note # 96 [...] * As per Note#91, Competent Authority desires to cancel the Work Order. * In Note#95, a draft letter has been attached for approval towards issuance to the agency to stop any type of work related to this project. Considering the Chronological development and acceptance by Authority, the matter may kindly be viewed lawfully, so that, if it is cancelled by this end, no legal action is taken by the Agency. Submitted for necessary action. 13/01/2023 02:13 PM SANTANU PATRA SE (RBBRDG) (KMDA) d) In Note #97 dated 16.01.2023, the Respondent has noted that since the competent authority had decided to cancel the work tender there was no option but to cancel it. However, the Respondent once again insisted that a legal opinion may be sought first, in order to avoid further litigations. The relevant noting reads as under: Note # 97 Sub: Cancellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KMDA, is placed herewith for approval please. [...] 02/02/2024 02:31 PM SANTANU PATRA SE (RBBRDG) (KMDA) h) Thereafter, as per the last entry in the internal notings - Note #110 dated 03.02.2023, the Respondent floated one another proposal seeking approval to cancel the tender, which culminated into the final notice of cancellation dated 07.02.2023 which is the subject matter of challenge in the present litigation. 20. During the course of hearing of this appeal, it was brought to the notice of this Court that after the work order issued in favour of the Appellant was cancelled, the Respondent floated a fresh tender dated 15.05.2023 for the work of maintenance of the very same underpasses, the selection process for which stood completed and that the tender had been awarded along with the work order(s) to one another third-party agency. 21. This Court was further apprised of the order dated 16.09.2023 passed by the Urban Development and Municipal Affairs Department, Government of West Bengal, modifying its earlier order dated 01.12.2022 to the extent that both i) the operation & maintenance of 37 bridges, flyovers, underpasses, etc. including the concerned two underpasses a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing over of the maintenance to another authority, because even after the handover, the Respondent continued to operate & maintain the underpasses including the licensing rights for advertisements. 26. He further submitted that, although the terms of the contract provided for assigning cogent grounds for termination, yet the same was not followed and instead the Respondent arbitrarily proceeded to cancel the tender. 27. In the last, Mr. Divan submitted that the contention as regards the financial losses being suffered is erroneous, as the Respondent voluntarily accepted the bid that was submitted by the Appellant, and even as per the notings in the file the tender was generating more revenue than earlier. E. SUBMISSIONS ON BEHALF OF THE RESPONDENT 28. Mr. Rakesh Dwivedi, the learned Senior Counsel appearing for the Respondent submitted that the present matter being purely a contractual dispute was rightly not entertained by the High Court in exercise of its writ jurisdiction Under Article 226 of the Constitution of India. 29. He further submitted, that the decision to cancel the tender was bona fide and had to be taken considering the technical faults in the same. He submitted, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the critical role of administrative discretion. The judicial quest in administrative matters has always been to find a right balance between i) allowing leeway to the States in deciding the exercise of their administrative discretion in matters pertaining to policy and ii) the need to ensure fairness and propriety in such administrative actions. 35. Earlier, the position of law was that any dispute arising out of a contract entered into with the State or its instrumentalities could not be adjudicated by the court under its writ jurisdiction, as in all such cases, it could be said that the 'real grievance' was essentially only one being that of breach of a contract for which the appropriate remedy would be an ordinary suit and not a writ petition. One of the earliest judicial pronouncements in this regard is the decision of this Court in Radhakrishna Agarwal and Ors. v. State of Bihar and Ors. reported in (1977) 3 SCC 457 wherein the following relevant observations were made: 19. [...] None of these cases lays down that, when the State or its officers purport to operate within the contractual field and the only grievance of the citizen could be that the contract bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfactorily decided in proceedings Under Article 226 of the Constitution. Such proceedings are summary proceedings reserved for extraordinary cases where the exceptional and what are described as, perhaps not quite accurately, "prerogative" powers of the Court are invoked. We are certain that the cases before us are not such in which powers Under Article 226 of the Constitution could be invoked. (Emphasis supplied) 37. Similar view as above, was reiterated by this Court in Premji Bhai Parmar and Ors. v. Delhi Development and Ors. reported in (1980) 2 SCC 129 at para 8 and in Divisional Forest Officer v. Bishwanath Tea Co. Ltd. reported in (1981) 3 SCC 238 wherein it was held that any right to relief flowing from a breach of contract cannot be entertained under the extraordinary writ jurisdiction of the court, even if the action of the State or its instrumentality was unauthorized in law. The relevant observations read as under: 9. Ordinarily, where a breach of contract is complained of, a party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed, or the party may sue for damages. Such a suit wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at are in the best interest of the public and efficient governance. Government being the decision-maker of the State is said to be the best judge of when a contract or an agreement is in its interest and by its extension in the interest of the public, and as such the courts should not interfere in the State's discretion to award or terminate contracts. One another reason why contractual disputes were precluded from being espoused under the writ jurisdiction of the courts was due to the summary nature of such proceedings, which do not allow for an exhaustive review unlike civil suits. [See: Radhakrishna Agarwal (supra) at para 11] 41. This simplistic approach of the courts in deeming every act and action of the State which was complained of as nothing more than a 'contractual dispute' or a case of 'breach of contract' often led to the State abusing its position and acting unfairly under the misconceived notion, that all its actions such as award of contracts or tenders were nothing but a 'largess' - a generosity bestowed upon its citizens, which it can at its own whims choose to deny, alter, modify, or take away without any consequences. This often led t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olicy. In C.K Achuthan v. State of Kerala, AIR 1959 SC 490 a Constitution Bench of this Court held that it is open to the Government 'to choose a person to their liking, to fulfil contracts which they wish to be performed.' The Court observed that when one party is chosen over another, the aggrieved party cannot claim the protection of Article 14 since the government has the discretion to choose with whom it will contract. (Emphasis supplied) 42. Before proceeding further to discuss how the scope of judicial review came to be evolved, we would like to refer to the observations made by this Court in M.C. Mehta v. Union of India reported in (1987) 1 SCC 395 which are significant, and read as under: 31. [...] Law has to grow in order to satisfy the needs of the fast changing society and keep abreast with the economic developments taking place in the country. As new situations arise the law has to be evolved in order to meet the challenge of such new situations. Law cannot afford to remain static. We have to evolve new principles and lay down new norms which would adequately deal with the new problems which arise in a highly industrialised economy. [...] (Emphasis supplied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and non-discrimination in the type of the transactions and nature of the dealing as in the present case. 13. The existence of the power of judicial review however depends upon the nature and right involved in the facts and circumstances of the particular case. It is well settled that there can be "malice in law". Existence of such "malice in law" is part of the critical apparatus of a particular action in administrative law. Indeed "malice in law" is part of the dimension of the rule of relevance and reason as well as the rule of fair play in action. xxx xxx xxx 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; xxx 26. This Court has rejected the contention of an instrumentality or the State that its action is in the private law field and would be immuned from satisfying the tests laid Under Article 14. The dichotomy between public law and private law rights and remedies, though may not be obliterated by any strait-jacket formula, it would depend upon the factual matrix. The adjudication of the dispute arising out of a contract would, therefore, depend upon facts and circumstances in a given case. The distinction between public law remedy and private law field cannot be demarcated with precision. Each case will be examined on its facts and circumstances to find out the nature of the activity, scope and nature of the controversy. The distinction between public law and private law remedy has now become too thin and practicably obliterated. (Emphasis supplied) 47. This Court in Consumer Education & Research Centre (supra) further held that the writ jurisdiction of the courts cannot be shackl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in a given case. The distinction between the public law remedy and private law field cannot be demarcated with precision. Each case has to be examined on its own facts and circumstances to find out the nature of the activity or scope and nature of the controversy. The distinction between public law and private law remedy is now narrowed down. [...] (Emphasis supplied) 48. In another decision of this Court in Shrilekha Vidyarthi (Kumari) v. State of U.P. reported in (1991) 1 SCC 212 it was held that every action of the State that has some degree of impact on the public interest, can be challenged under writ jurisdiction to the extent that they are arbitrary, unfair or unreasonable, irrespective of the fact that the dispute falls within the domain of contractual obligations. It was further held, that it is the nature of a government body's personality which characterizes the action as having a public law element, and not the field of law where such action is taken. The relevant observation reads as under: 22. There is an obvious difference in the contracts between private parties and contracts to which the State is a party. Private parties are concerned only with their per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing from it. It is really the nature of its personality as State which is significant and must characterize all its actions, in whatever field, and not the nature of function, contractual or otherwise, which is decisive of the nature of scrutiny permitted for examining the validity of its act. The requirement of Article 14 being the duty to act fairly, justly and reasonably, there is nothing which militates against the concept of requiring the State always to so act, even in contractual matters. There is a basic difference between the acts of the State which must invariably be in pubic interest and those of a private individual, engaged in similar activities, being primarily for personal gain, which may or may not promote public interest. Viewed in this manner, in which we find no conceptual difficulty or anachronism, we find no reason why the requirement of Article 14 should not extend even in the sphere of contractual matters for regulating the conduct of the State activity. xxx &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easonableness and fair play as well as public interest. After entering into a contract, in cancelling the contract which is subject to terms of the statutory provisions, as in the present case, it cannot be said that the matter falls purely in a contractual field. Therefore, we do not think it would be appropriate to suggest that the case on hand is a matter arising purely out of a contract and, therefore, interference Under Article 226 of the Constitution is not called for. This contention also stands rejected. (Emphasis supplied) 50. Similarly in Binny Ltd. and Anr. v. Sadasivan and Ors. reported in (2005) 6 SCC 657 this Court in view of the increasing trend of the State and its instrumentalities to use contracts as a means for dispensing their regulatory functions, held that whenever a contract is used for a public purpose, it will be amenable to judicial review. The relevant observations read as under: 30. A contract would not become statutory simply because it is for construction of a public utility and it has been awarded by a statutory body. But nevertheless, it may be noticed that the Government or government authorities at all levels are increasingly employing contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule. (c) A writ petition involving a consequential relief of monetary claim is also maintainable. (Emphasis supplied) 52. At the same time, this Court in ABL (supra) cautioned that the power to issue writs Under Article 226 being discretionary and plenary, the same should only be exercised to set right the arbitrary actions of the State or its instrumentality in matters related to contractual obligations. The relevant observations read as under: 28. However, while entertaining an objection as to the maintainability of a writ petition Under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs Under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power. (See Whirlpool Corporation v. Registrar o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even in contractual matters or where there are disputed questions of fact or even when monetary claim is raised. At the same time, discretion lies with the High Court which under certain circumstances, it can refuse to exercise. It also follows that under the following circumstances, "normally", the Court would not exercise such a discretion: 69.1. The Court may not examine the issue unless the action has some public law character attached to it. 69.2. Whenever a particular mode of settlement of dispute is provided in the contract, the High Court would refuse to exercise its discretion Under Article 226 of the Constitution and relegate the party to the said mode of settlement, particularly when settlement of disputes is to be resorted to through the means of arbitration. 69.3. If there are very serious disputed questions of fact which are of complex nature and require oral evidence for their determination. 69.4. Money claims per se particularly arising out of contractual obligations are normally not to be entertained except in exceptional circumstances. 70. Further, the legal position which emerges from various judgments of this Court dealing with different situations/as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion could not have been taken without observing principles of natural justice. 70.8. If the contract between private party and the State/instrumentality and/or agency of the State is under the realm of a private law and there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court Under Article 226 of the Constitution of India and invoking its extraordinary jurisdiction. 70.9. The distinction between public law and private law element in the contract with the State is getting blurred. However, it has not been totally obliterated and where the matter falls purely in private field of contract, this Court has maintained the position that writ petition is not maintainable. The dichotomy between public law and private law rights and remedies would depend on the factual matrix of each case and the distinction between the public law remedies and private law field, cannot be demarcated with precision. In fact, each case has to be examined, on its facts whether the contractual relations between the parties bear insignia of public element. Once on the facts of a particular c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The State, he points out, cannot play the Dr. Jekyll and Hyde game anymore. Its nature is cast in stone. Its character is inflexible. This is irrespective of the activity it indulges in. It will continue to be haunted by the mandate of Article 14 to act fairly. There has been a stunning expansion of the frontiers of the Court's jurisdiction to strike at State action in matters arising out of contract, based, undoubtedly, on the facts of each case. It remains open to the Court to refuse to reject a case, involving State action, on the basis that the action is, per se, arbitrary. [...] i. It is, undoubtedly, true that the writ jurisdiction is a public law remedy. A matter, which lies entirely within a private realm of affairs of public body, may not lend itself for being dealt with under the writ jurisdiction of the Court. ii. The principle laid down in Bareilly Development Authority (supra) that in the case of a non statutory contract the rights are governed only by the terms of the contract and the decisions, which are purported to be followed, including Radhakrishna Agarwal (supra), may not continue to hold good, in the light of what has been laid down in ABL (supra) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king payment, unless it be that there is a serious and genuine dispute raised relating to the liability of the State to make the payment. Such dispute, ordinarily, would include the contention that the aggrieved party has not fulfilled its obligations and the Court finds that such a contention by the State is not a mere ruse or a pretence. vii. The existence of an alternate remedy, is, undoubtedly, a matter to be borne in mind in declining relief in a Writ Petition in a contractual matter. Again, the question as to whether the Writ Petitioner must be told off the gates, would depend upon the nature of the claim and relief sought by the Petitioner, the questions, which would have to be decided, and, most importantly, whether there are disputed questions of fact, resolution of which is necessary, as an indispensable prelude to the grant of the relief sought. Undoubtedly, while there is no prohibition, in the Writ Court even deciding disputed particularly when questions the dispute of fact, surrounds demystifying of documents only, the Court may relegate the party to the remedy by way of a civil suit. viii. The existence of a provision for arbitration, which is a forum intended to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court, in such a case, where there is no dispute to be resolved, would also be conducive in public interest, apart from ensuring the Fundamental Right of the Petitioner Under Article 14 of the Constitution of India. When it comes to a challenge to the termination of a contract by the State, which is a non-statutory body, which is acting in purported exercise of the powers/rights under such a contract, it would be over simplifying a complex issue to lay down any inflexible Rule in favour of the Court turning away the Petitioner to alternate Fora. Ordinarily, the cases of termination of contract by the State, acting within its contractual domain, may not lend itself for appropriate redress by the Writ Court. This is, undoubtedly, so if the Court is duty-bound to arrive at findings, which involve untying knots, which are presented by disputed questions of facts. Undoubtedly, in view of ABL Limited (supra), if resolving the dispute, in a case of repudiation of a contract, involves only appreciating the true scope of documentary material in the light of pleadings, the Court may still grant relief to an applicant. We must enter a caveat. The Courts are today reeling under the weight of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the it was pursuant to a sound exercise of its writ jurisdiction. The relevant observations read as under: xiii. A lodestar, which may illumine the path of the Court, would be the dimension of public interest subserved by the Court interfering in the matter, rather than relegating the matter to the alternate Forum. xiv. Another relevant criteria is, if the Court has entertained the matter, then, while it is not tabooed that the Court should not relegate the party at a later stage, ordinarily, it would be a germane consideration, which may persuade the Court to complete what it had started, provided it is otherwise a sound exercise of jurisdiction to decide the matter on merits in the Writ Petition itself. xv. Violation of natural justice has been recognised as a ground signifying the presence of a public law element and can found a cause of action premised on breach of Article 14. [See Sudhir Kumar Singh and Others (supra)]. (Emphasis supplied)s 56. What can be discerned from the above is that there has been a considerable shift in the scope of judicial review of the court when it comes to contractual disputes where one of the parties is the State or its instrumentalit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to award or cancel contracts or any of its stipulations. 59. Therefore, what can be culled out from the above is that although disputes arising purely out of contracts are not amenable to writ jurisdiction yet keeping in mind the obligation of the State to act fairly and not arbitrarily or capriciously, it is now well settled that when contractual power is being used for public purpose, it is certainly amenable to judicial review. 60. Now coming to the facts of the case at hand, the Appellant has challenged the cancellation of the tender at the instance of the Respondent on the ground of being manifestly arbitrary and influenced by extraneous considerations. It is evident from the notice of cancellation dated 07.02.2023, that the tender was not terminated pursuant to any terms of the contract subsisting between the parties, rather, the Respondent 'cancelled' the tender saying that there was technical fault in the tender that was floated. 61. Thus, the Respondent could be said to have exercised powers in its executive capacity as the action to cancel the tender falls outside the purview of the terms of the contract. Hence, it cannot be said that the present matter is pure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of law. The State cannot, therefore, act arbitrarily in entering into relationship, contractual or otherwise with a third party, but its action must conform to some standard or norm which is rational and non-discriminatory. (Emphasis supplied) 64. In Dwarkadas Marfatia & Sons (supra) this Court speaking through Sabyasachi Mukherji, C.J. (as the learned Chief Justice then was) held that every action of the State or an instrumentality of the State must be informed by reason actions uninformed by reason may be questioned as arbitrary. The relevant observations read as under: 22. [...] every action of the State or as instrumentality of the State, must be informed by reason. Indubitably, the Respondent is an organ of the State Under Article 12 of the Constitution. In appropriate cases, as was observed in the last mentioned decision, actions uninformed by reason may be questioned as arbitrary in proceedings Under Article 226 or Article 32 of the Constitution. But it has to be remembered that Article 14 cannot be construed as a charter for judicial review of State action, to call upon the State to account for its actions in its manifold activities by stating reasons for such actions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n action is mala fide if it is contrary to the purpose for which it was authorised to be exercised. Dishonesty in discharge of duty vitiates the action without anything more. An action is bad even without proof of motive of dishonesty, if the authority is found to have acted contrary to reason. [See: Mahesh Chandra v. Regional Manager, U.P. Financial Corporation and Ors. : (1993) 2 SCC 279] 68. The dictum as laid in Tata Cellular v. UOI reported in (1994) 6 SCC 651 is that the judicial power of review is exercised to rein in any unbridled executive functioning. It was observed that the restraint has two contemporary manifestations viz. one is the ambit of judicial intervention and the other covers the scope of the court's ability to quash an administrative decision on its merits. These restraints bear the hallmarks of judicial control over administrative action. It was held that the principle of judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision-making process itself. It was held that the principle of judicial review would apply to the exercise of contractual powers by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 70. One another way, to assess whether an action complained of could be termed as arbitrary is by way of scrutinizing the reasons that have been assigned to such an action. It involves overseeing whether the reasons which have been cited if at all genuinely formed part of the decision-making process or whether they are merely a ruse. All decisions that are taken must earnestly be in lieu of the reasons and considerations that have been assigned to it. The Court must be mindful of the fact that it is not supposed to delve into every minute details of the reasoning assigned, it need not to go into a detailed exercise of assessing the pros and cons of the reasons itself, but should only see whether the reasons were earnest, genuine and had a rationale with the ultimate decision. What is under scrutiny in judicial review of an action is the decision-making process and whether there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e signboards. This in the opinion of the High Court was a technical fault, which the Respondent sought to rectify by way of cancelling the tender. The relevant observations read as under: 18. [...] In fact, the letter of cancellation provides further reasons, namely, that the tender has been found to be non-specific and having technical faults. This would also be borne out from clauses 10 and 14 of the Special Terms and Conditions of the tender document which give rise to conflicting interpretations on the placement of the signboards. Hence, besides the administrative decision to hand over the maintenance of E.M. Bypass from KMDA to KMC, the Respondent KMDA as the tendering authority, has a right to rectify the ambiguities in the bid document by cancelling the same. (Emphasis supplied) 76. However, interestingly, the Notice of Cancellation dated 07.02.2023 that came to be issued by the Respondent makes no mention of any such lacuna. In fact, there is no reference to the aforementioned clauses or any conflict in their interpretation. The aforesaid notice only states that the tender was found to be 'non-specific' and 'not well defined' which created ambiguity due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 166 and then it has to be communicated. As already indicated, no formal order modifying the decision of the Revenue Secretary was ever made. Until such an order is drawn up the State Government cannot, in our opinion, be regarded as bound by what was stated in the file. [...] 10. The business of State is a complicated one and has necessarily to be conducted through the agency of a large number of officials and authorities. The Constitution, therefore, requires and so did the Rules of Business framed by the Rajpramukh of PEPSU provide, that the action must be taken by the authority concerned in the name of the Rajpramukh. It is not till this formality is observed that the action can be regarded as that of the State or here, by the Rajpramukh. [...] Indeed, it is possible that after expressing one opinion about a particular matter at a particular stage a Minister or the Council of Ministers may express quite a different opinion, one which may be completely opposed to the earlier opinion. Which of them can be regarded as the "order" of the State Government? Therefore, to make the opinion amount to a decision of the Government it must be communicated to the person concerned. (Emphas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity records its opinion in the file on the merits of the matter under consideration, the same cannot be termed as a decision of the Government unless it is sanctified and acted upon by issuing an order in accordance with Articles 77(1) and (2) or Articles 166(1) and (2). The noting in the file or even a decision gets culminated into an order affecting right of the parties only when it is expressed in the name of the President or the Governor, as the case may be, and authenticated in the manner provided in Article 77(2) or Article 166(2). A noting or even a decision recorded in the file can always be reviewed/reversed/overruled or overturned and the court cannot take cognizance of the earlier noting or decision for exercise of the power of judicial review. xxx xxx &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on such internal deliberation is not approved and communicated by the competent authority as per the procedure prescribed in that behalf to the person concerned, such noting does not create any right in favour of the person concerned nor it partake the nature of any legal order so as to enable the person concerned to claim any benefit of any such internal deliberation. Such noting(s) or/and deliberation(s) are always capable of being changed or/and amended or/and withdrawn by the competent authority. (Emphasis supplied) 83. We are of the view that the reliance on the part of the Respondent on the decisions of this Court in Pimpri Chinchwad (supra) and Shanti Sports Club (supra) to assert that no reference could be made to the internal-file notings for the purposes of judicial review of its decision is completely misplaced. In Shanti Sports Club (supra) the question before the Court was as to when an internal noting can be used to confer or claim a right. Whereas in Pimpri Chinchwad (supra) the issue for consideration before the Court was whether any internal-note or deliberation once written in the files was capable of being reconsidered, changed, modified or withdrawn. 84. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icers from independent and fearless expression of opinion and to see that the order under appeal does not affect the proper functioning of the Government. (Emphasis supplied) 87. The above observations of this Court fortify our view that once a decision is made, all opinions and deliberations pertaining to the said decision in the internal file-notings become a part of the process by which the decision is arrived at, and can be looked into for the purposes of judicial review. In other words, any internal discussions or notings that have been approved and formalized into a decision by an authority can be examined to ascertain the reasons and purposes behind such decisions for the overall judicial review of such decision-making process and whether it conforms to the principles enshrined in Article 14 of the Constitution. 88. One another reason why the Respondent cannot claim that its internal file notings fall outside the purview of judicial review of the courts is in view of the inviolable rule that came to be recognized by this Court in Ramana Dayaram Shetty (supra) wherein it was held that an executive authority must be rigorously held to the standard by which it professes its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, as no specific reasons had been assigned as to what effect the policy change had impacted the feasibility or practicality of the tender. This is especially because, none of the officials of the Respondent suggested that the tender be cancelled, rather it was the concerned minister who did so. 94. In Note #95 dated 10.01.2023 it has been clearly recorded by the officials of the Respondent that it was the competent authority of the KMDA that instructed to cancel the tender in view of the aforesaid change in the policy. However, since the officials of the Respondent were in doubt regarding the legality of such action, it insisted on first obtaining the advice or opinion from its legal cell before proceeding further. Furthermore, the aforesaid note clearly indicates that the work stop order had to be issued only with a view to comply with the instructions of the competent authority while it decided upon the aspect of cancellation of the tender. 95. In Note #97, the Respondent has recorded the following - "There is no different opinion than to get this cancelled, once this has been decided by the Authority but a legal opinion may be sought for avoiding further litigations". This al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther it was driven by some personal discretion or motives. This can be discerned by first understanding the change in policy that took place. 100. The Urban Development and Municipal Affairs Department by way of its Order dated 01.12.2022 decided that the maintenance of the roads and drainage of the E.M. Bypass shall be handed over by the Respondent to the KMC. 101. As per the Note #91 dated 30.12.2022, the concerned minister for the first time proposed cancellation of the tender in view of the aforesaid change in scenario as a result of the maintenance of the E.M. Bypass being handed over from the Respondent to the KMC. 102. However, it is pertinent to note that in the aforesaid order of the Urban Development and Municipal Affairs Department it has been specifically stated that the right to collect revenue from the advertisements as-well as the control of the E.M. Bypass shall continue to remain with the Respondent herein. 103. Thus, the Respondent at the relevant point of time was not only in control of the two underpasses, but was also empowered to continue collecting revenue from the advertisements displayed at the underpasses. As such the Respondent even after the change i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rol along with the right to revenue for the said structures were handed over to KMC from the Respondent. This leaves no manner of doubt in our mind that the concerned minister's decision to cancel the tender on account of purported 'change in policy' was without any application of mind, capricious and influenced by malice. b. Concept of Public Interest in Administrative Decisions. 108. The reluctance on the part of the Respondent to cancel the tender is also evident from Note #97, wherein the authority expressed its concern over the potential consequences of such cancellation. The Respondent apprehended that in the event the tender for work was being cancelled, the routine maintenance of the underpasses would be disrupted. Due to this, the underpasses would have to be closed until some other agency could take over the maintenance. The relevant observations read as under: Note # 97 [...] Besides, the underpasses are being maintained by the bidder. Once the contract is cancel led, the routine maintenance would be an issue till the work is awarded thru tender. The E&M Sector may be asked to do the maintenance by engaging one of the existing agency from their set up. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to it. This further undermines the claims of technical faults or potential financial losses, and suggests that the decision to cancel the tender was not based on genuine financial concerns but rather on other, possibly extraneous factors. 112. Even assuming for a moment that there was a technical fault in the tender, which if rectified had the possibility of generating more revenue, the same by no stretch could be said to be a cogent reason for cancelling an already existing tender. In this regard reference may be made to the decision of this Court in Vice Chariman & Managing Director, City & Industrial Development Corporation of Maharashtra Ltd. and Anr. v. Shishir Realty Pvt. Ltd. and Ors. reported in (2021) SCC OnLine SC 1141 wherein it was held that mere possibility of more money in public coffers does not in itself serve 'public interest'. A blanket claim by the State claiming loss of public money cannot be used to forgo contractual obligations, especially when it is not based on any evidence or examination as the larger interest of upholding contracts is also in the play. The relevant observations read as under: 58. When a contract is being evaluated, the mere pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest. We do not go on to say that consideration of public interest should not at all enter the mind of the court when it deals with a case involving repudiation of a claim under a contract or for that matter in the termination of the contract. However, there is a qualitative State enters into the contract, rights are created. If the case is brought to the constitutional court and it is invited to interfere with State action on the score that its action is palpably arbitrary, if the action is so found then an appeal to public interest must be viewed depending on the facts of each case. If the aspect of public interest flows entirely on the basis that the rates embodied in the contract which is arbitrarily terminated has with the passage of time become less appealing to the State or that because of the free play of market forces or other developments, there is a fall in the rate of price of the services or goods then this cannot become determinative of the question as to whether court should decline jurisdiction. In this case, it is noteworthy that the rates were in fact settled on the basis of international competitive bidding and in which as many as 182 bidders participated and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... auction and to collect licence fees through the medium of auctions cannot by writ petitions be questioned by those who, had their venture succeeded, would have relied upon those very powers to found a legal claim. Reciprocal rights and obligations arising out of contract do not depend for their enforceability upon whether a contracting party finds it prudent to abide by the terms of the contract. By such a test no contract could ever have a binding force. (Emphasis supplied) 118. Thus, we are of the view that the Respondent's stance of a mere possibility of fetching higher license fees was no ground to cancel the tender issued to the Appellant for the purposes of rectifying it, especially when the Respondent completely failed to demonstrate as to how there was a technical fault in the tender or how potential interested bidders did not participate due to it or how fetching higher license fees was more than a mere possibility. 119. At this stage, we may also answer one another submission that was canvassed on behalf of the Respondent as regards the other aspect of public interest besides the monetary gain. It was submitted on behalf of the Respondent that the decision to canc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uctures are intended for the benefit and enjoyment of the public. The State is not the absolute owner of such resources and rather owns it in trust and as such it cannot utilize these resources as it pleases. As a trustee of the public resources, the State owes i) a duty to ensure that community resources are put to fair and proper use that enures to the benefit of the public as-well as ii) an obligation to not indulge in any favouritism or discrimination with these resources. The State with whatever free play it has in its joints decides to award a contract, to hold up the matter or to interfere with the same should be accompanied by a careful consideration of the harm to public interest. 125. Public tenders are designed to provide a level playing field for all potential bidders, fostering an environment where competition thrives, and the best value is obtained for public funds. The integrity of this process ensures that public projects and services are delivered efficiently and effectively, benefiting society at large. The principles of transparency and fairness embedded in public tender processes also help to prevent corruption and misuse of public resources. In this regard we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic procurement processes and tenders. Once a contract is entered, there is a legitimate expectation, that the obligations arising from the contract will be honoured and that the rights arising from it will not be arbitrarily divested except for a breach or non-compliance of the terms agreed thereunder. In this regard we may make a reference to the decision of this Court in Sivanandan C.T. v. High Court of Kerala reported in (2024) 3 SCC 799 wherein it was held that a promise made by a public authority will give rise to a legitimate expectation that it will adhere to its assurances. The relevant portion reads as under: 18. The basis of the doctrine of legitimate expectation in public law is founded on the principles of fairness and non-arbitrariness in Government dealings with individuals. It recognises that a public authority's promise or past conduct will give rise to a legitimate expectation. The doctrine is premised on the notion that public authorities, while performing their public duties, ought to honour their promises or past practices. The legitimacy of an expectation can be inferred if it is rooted in law, custom, or established procedure xxx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cancel a contract on the ground of public interest or change in policy then such considerations must be bona-fide and should be earnestly reflected in the decision-making process and also in the final decision itself. We say so because otherwise, it would have a very chilling effect as participating and winning a tender would tend to be viewed as a situation worse than losing one at the threshold. H. FINAL CONCLUSION 130. We are of the considered opinion that the litigation at hand is nothing but a classic textbook case of an arbitrary exercise of powers by the Respondent in cancelling the tender that was issued in favour of the Appellant and that too at the behest of none other than the concerned Minister-In-Charge and thereby rendering the Notice of Cancellation dated 07.02.2023 illegal. 131. During the course of hearing, we were informed that the Appellant herein pursuant to the terms of the subject tender had erected multiple structures at different sites on the concerned underpasses for displaying advertisements at a huge personal cost. He has made significant investments pursuant to the tender. 132. As, we have held the Notice of Cancellation dated 07.02.2023 to be non- ..... 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