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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 ..... pass and its abutting area against a License Fee for Advertisement Rights over designated sites at each underpass, for a period of 10-years. As per the aforesaid tender, the scope of work included the regular maintenance of the aforementioned underpasses and the upkeep of its garden area and electro-mechanical fittings. The relevant portion reads as under: Sl. No Name of Work License Fee of the Yearly Charge for the 1st year (Rs.) Earnest Money (Rs.) Allotted Time Period for License & Work (1) (2) (3) (4) (5) 1. REGULAR MAINTENANCE OF BELIAGHATA UNDERPASS INCLUDING UPKEEPING OF UNDERPASS PROPER, GARDEN AREA, AT GRADE UNDERPASS AREA AND ALL ELECTRO-MECHANICAL FITTINGS AGAINST LICENSE FEE OF ADVERTISEMENT RIGHTS OVER (10) YEARS. Tender ID -2022_KMDS_380215_1 TO BE QUOTED 5,00,000.00 [Rupees Five Lakh Only] Online (Net Banking/ NEFT/RTGS) 10 (Ten) Years 2. REGULAR MAINTENANCE OF SWABHUMI UNDERPASS INCLUDING UPKEEPING OF UNDERPASS PROPER, GARDEN AREA, AT GRADE UNDERPASS AREA AND ALL ELECTRO-MECHANICAL FITTINGS AGAINST LICENSE FEE OF ADVERTISEMENT RIGHTS OVER (10) YEARS. Tender ID - 2022_KMDS_380215_1 TO BE QUOTED 5,00,000.00 [Rupees Five Lakh Only] Online (Net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and starts from northern hub Ultadanga to Garia in the South. The road length is 15.6 Km which runs along the eastern ring of the city. After careful consideration it has been decided that the maintenance of the road alongwith the drainage be handed over from KMDA to KMC with the following scope of activities. (1) The defects in carriageway would be maintained and restored by KMC henceforth. (2) The existing carriageway alongwith the surface and underground drainage would be maintained by KMC. The conservancy in and around the Eastern Bypass would also be maintained by KMC. (3) Subject to clearance from KMDA, KMC would issue NOC to all utility and service providers. The cost of road restoration from the charges to be levied is to be paid to KMC by all utility and service providers. (4) The right of collecting revenues from the advertisement displays will remain with KMDA. (5) All the structures, as the new or old Bridges, Culverts, FoBs etc. will be under the custody of KMDA. (6) All development activities along the road except for the Bridges, Culverts, FoBs etc. will be taken up by KMC. (7) KMC would remain custodian for illumination of the Bypass. (8) The green ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstruction activity and maintenance work would be refunded as per actual assessment by the divisional engineers based upon the approved drawing and execution. This is for your information with kind compliance please. Sd/- Chief Engineer-II (Bridge) Roads & Bridges Sector, KMDA 13. It is pertinent to note from the aforesaid that, no reference was made as regards handing over of the maintenance to KMC which was previously alluded to, for stopping all work pertaining to the tender. B. IMPUGNED ORDER 14. Aggrieved by the aforesaid, the Appellant preferred a writ petition being WPA No. 3381 of 2023 before the High Court of Calcutta assailing the Respondent's Notice dated 07.02.2023 cancelling the tender for work of maintenance of the two underpasses. 15. The aforesaid writ petition referred to above came to be rejected by the High Court vide its order dated 24.04.2023, wherein the Ld. Single Judge held that the decision to cancel the tender had to be taken on account of the administrative exigencies and also due to the 'change in policy'. It was further held that the decision to cancel the tender was not borne out of any ulterior motives on the part of the Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) (ii) Secondly, the Appellant could not have redressed his grievances by invoking the writ jurisdiction of the High Court Under Article 226 of the Constitution, as there was no failure of any statutory duty or public law element involved. Moreover, since the relief sought was essentially in the nature of specific performance, it could have been prayed for only under ordinary civil law and not by way of a writ petition. The relevant observations read as under: 20. It is well settled that a contractual dispute with a public law element would be amenable to writ jurisdiction. The present dispute however arises out of a private contract for maintenance of underpasses in the E.M. Bypass and advertisement rights over certain spaces within the contracted area. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ender for work. The relevant noting reads as under: Note # 91 Recently maintenance of EM Bye pass has been handed over to KMC. Thus, in this changed scenario we may cancel the work order. 03/01/2023 11:51 AM FIRHAD HAKIM CHRMN (KMDA) b) As per Note #95 dated 10.01.2023, the Respondent instructed that the tender be cancelled in view of the maintenance of the concerned underpasses being handed over to KMC. However, since the Respondent was in doubt as regards the legality & validity of such decision, it opined that the opinion of the Legal Department may be sought first before any action of cancellation is taken. However, as an interim measure, it decided to issue a notice to stop all work in respect of the tender. The relevant noting reads as under: Note # 95 [...] Now, as instructed by the competent authority of KMDA keeping in view of the recent changed scenario of handing over of maintenance of E.M. Bypass from KMDA to KMC, cancelling the work order as instructed may require judicious action towards implementing the same and to make it lawful, legal advice from Law-Cell, KMDA may be required so that, KMDA doesn't fall in any legal obligation. However, for immed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or to cancelling the Work Order. The draft of order for stopping work further is enclosed, which may kindly be seen and commented. For kind concern of Law Cell with request to revert back with further advice and opinion on above please. 19/01/2023 02:28 PM SUBHANKAR BHATTACHARYA CE (RBBRDG) (KMDA) f) However, before the legal cell of the Respondent could give any definite opinion on the legal implications of cancelling the tender, it appears from the records, more particularly Note #108 dated 24.01.2023 that the concerned minister during his visit instructed the officials of the Respondent on his own to cancel the tender, upon which the Respondent undertook the steps to duly comply with such instructions. The relevant noting reads as under: Note # 108 For immediate compliance of HMIC's instruction. This is as per the instruction given during his visit to Unnanyan Bhavn today in presence of KMDA Officials. 24/01/2023 05:16 PM SUBHANKAR BHATTACHARYA CE (RBBRDG) (KMDA) g) Pursuant to the above, as per Note #109 dated 02.02.2023, the Tender Committee of the Respondent convened a meeting wherein the proposal for cancellation of the aforesaid tender was finalized an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Principal Secretary to the Govt. of West Bengal 22. In view of the fact that a fresh tender had already been awarded to a third-party, coupled with the fact that the right to collect revenue from the advertisements for the concerned underpasses had been handed over to KMC, the counsel for the Respondent submitted that the matter had since become infructuous. D. SUBMISSIONS ON BEHALF OF THE APPELLANT 23. Mr. Shyam Divan, the learned Senior Counsel appearing for the Appellant submitted that the impugned notice of cancellation dated 07.02.2023 is manifestly arbitrary and tainted with extraneous considerations. He submitted that though the impugned notice purports to cancel the tender on the ground of being ambiguous and non-specific, but in reality the said action was at the behest of the concerned Minister-In-Charge who directed such cancellation without any justifiable cause. In this regard he placed strong reliance on the internal-file notings of the Respondent. 24. He submitted that the reasons assigned for cancelling the tender in the impugned notice are not to be found in the entire file of notings maintained by the Respondent. He further pointed out that the file of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent, as the file notings are only internal deliberations. Such notings cannot be construed as decisions of the Respondent and thus, creates no right in favour of the Appellant. 32. In the last, Mr. Dwivedi submitted that since during the pendency of the present appeal, the operation, maintenance and the licensing rights for the advertisements have been taken over by a third party, the present appeal has been rendered infructuous. F. POINTS FOR DETERMINATION 33. Having heard the learned Counsel appearing for the parties and having gone through the materials on record, the two pivotal questions that fall for our consideration are as under: I) What is the scope of judicial review of the actions of the State in the matters relating to contract/tender disputes under writ jurisdiction? II) 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? G. ANALYSIS i. Scope of Judicial Review of the actions of the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on the State in the contractual field or if the agreement is in the nature of a statutory contract. The relevant observations read as under: 10. [...] But, after the State or its agents have entered into the field of ordinary contract, the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines rights and obligations of the parties inter se. No question arises of violation of Article 14 or of any other constitutional provision when the State or its agents, purporting to act within this field, perform any act. In this sphere, they can only claim rights conferred upon them by contract and are bound by the terms of the contract only unless some statute steps in and confers some special statutory power or obligation on the State in the contractual field which is apart from contract. 11. In the cases before us the contracts do not contain any statutory terms or obligations and no statutory power or obligation which could attract the application of Article 14 of the Constitution is involved here. Even in cases where the question is of choice or consideration of competing claims before an entry into the field of contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Ors. reported in (1989) 2 SCC 116, wherein this Court once again reiterated that no writ can be issued in contractual disputes between the State and an aggrieved party where the rights or claims arise or stem only from the terms of the contract. The relevant observations read as under: 22. There is a line of decisions where the contract entered into between the State and the persons aggrieved is non-statutory and purely contractual and the rights are governed only by the terms of the contract, no writ or order can be issued Under Article 226 of the Constitution of India so as to compel the authorities to remedy a breach of contract pure and simple [...] (Emphasis supplied) 39. Thus, for a period of time the courts recognized that there was a clear brightline distinction between when a State or its instrumentalities could be said to be acting in its executive capacity and when it could be said to be acting in its private capacity, with the existence of a 'contractual relation' inter-se the parties being the determinative factor. Wherever, there was a contract, the State's relations and all its actions were said to be within the field of a contract i.e., within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations are commonly understood in the language of 'largesse', a term used to describe a generous donation. Terming all actions of government, ranging from social security benefits, jobs, occupational licenses, contracts and use of public resources - as government largesse results in doctrinal misconceptions. The reason is that this conflates the State's power with duty. The Constitution recognises the pursuit of the well-being of citizens as a desirable goal. In doing this the Constitution entrusts the State with a duty to ensure the well-being of citizens. Government actions aimed at ensuring the well-being of citizens cannot be perceived through the lens of a 'largess'. The use of such terminology belittles the sanctity of the social contract that the 'people of India' entered into with the State to protect and safeguard their interests. xxx xxx &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the State's actions and governance, it continued to refine its approach. This ongoing dialogue between the courts and the executive branch contributed to the development of a more accountable and transparent administrative framework, paving the way for the exercise of judicial review even in the realm of contractual disputes to achieve a fine balance between efficiency and fairness in policy decisions on the one hand and the rights of individuals and overall public interest on the other. 45. In Mahabir Auto Stores and Ors. v. Indian Oil Corporation reported in (1990) 3 SCC 752, this Court expressed doubts over the correctness of the earlier position of law, that actions of the State in the private contractual field cannot be questioned in writ jurisdiction. This Court further held that even if the inter-se relation of parties with the State is governed purely by a contract, the method, motive and decision of the State would be subject to judicial review on the grounds of relevance and reasonableness, fair play, natural justice, equality and non-discrimination. The relevant observations read as under: 12. [...] It appears to us that rule of reason and rule against arbitrari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 SCC 293 at para 27.] 46. In LIC v. Consumer Education & Research Centre reported in (1995) 5 SCC 482, the Court held that the law as it stood earlier that a State or its instrumentality whose action is hedged with public element cannot be called into question because such action was in the field of private law is no longer a good law. The relevant observations read as under: 23. Every action of the public authority or the person acting in public interest or any act that gives rise to public element, should be guided by public interest. It is the exercise of the public power or action hedged with public element (sic that) becomes open to challenge. If it is shown that the exercise of the power is arbitrary, unjust and unfair, it should be no answer for the State, its instrumentality, public authority or person whose acts have the insignia of public element to say that their actions are in the field of private law and they are free to prescribe any conditions or limitations in their actions as private citizens, simpliciter do in the field of private law. Its actions must be based on some rational and relevant principles. It must not be guided by irrational or irrelevant consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equitable, after taking objectively all the relevant options into consideration and in a manner that is reasonable, relevant and germane to effectuate the purpose for public good and in general public interest and it must not take any irrelevant or irrational factors into consideration or appear arbitrary in its decision. Duty to act fairly is part of fair procedure envisaged Under Articles 14 and 21. Every activity of the public authority or those under public duty or obligation must be informed by reason and guided by the public interest. xxx xxx xxx 29. [...] The arms of the High Court are not shackled with technical rules or procedure. The actions of the State, its instrumentality, any public authority or person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned act is arbitrary, unfair or unreasonable, the fact that the dispute also falls within the domain of contractual obligations would not relieve the State of its obligation to comply with the basic requirements of Article 14. To this extent, the obligation is of a public character invariably in every case irrespective of there being any other right or obligation in addition thereto. An additional contractual obligation cannot divest the claimant of the guarantee Under Article 14 of non-arbitrariness at the hands of the State in any of its actions. xxx xxx xxx 24. The State cannot be attributed the split personality of Dr. Jekyll and Mr. Hyde in the contractual field so as to impress on it all the characteristics of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts validity on the anvil of Article 14. (Emphasis supplied) 49. In Verigamto Naveen v. Govt. of A.P. and Ors. reported in (2001) 8 SCC 344 this Court held that where a breach of contract involves the decision-making authority exceeding its power or violating the principles of nature justice or its decision being borne out of perversity, then such cancellation of contract can certainly be scrutinized under the writ jurisdiction. This is because such an exercise of power by the authority is apart from the contract. The relevant observation reads as under: 21. [...] Though there is one set of cases rendered by this Court of the type arising in Radhakrishna Agarwal case AIR 1977 SC 1496 much water has flown in the stream of judicial review in contractual field. In cases where the decision-making authority exceeded its statutory power or committed breach of rules or principles of natural justice in exercise of such power or its decision is perverse or passed an irrational order, this Court has interceded even after the contract was entered into between the parties and the Government and its agencies. [...] Where the breach of contract involves breach of statutory obligation when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts instrumentalities in matters related to contractual obligations can be sought under the writ jurisdiction. The relevant observations read as under: 23. It is clear from the above observations of this Court, once the State or an instrumentality of the State is a party of the contract, it has an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14 of the Constitution of India. Therefore, if by the impugned repudiation of the claim of the Appellants the first Respondent as an instrumentality of the State has acted in contravention of the abovesaid requirement of Article 14, then we have no hesitation in holding that a writ court can issue suitable directions to set right the arbitrary actions of the first Respondent. xxx xxx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cept where the action is found to be arbitrary or unreasonable. The relevant observations read as under: 15. It is trite that if an action on the part of the State is violative of the equality clause contained in Article 14 of the Constitution of India, a writ petition would be maintainable even in the contractual field. A distinction indisputably must be made between a matter which is at the threshold of a contract and a breach of contract; whereas in the former the court's scrutiny would be more intrusive, in the latter the court may not ordinarily exercise its discretionary jurisdiction of judicial review, unless it is found to be violative of Article 14 of the Constitution. While exercising contractual powers also, the government bodies may be subjected to judicial review in order to prevent arbitrariness or favouritism on their part. Indisputably, inherent limitations exist, but it would not be correct to opine that under no circumstances a writ will lie only because it involves a contractual matter. (Emphasis supplied) 54. The law on the subject with which we are dealing was laid down exhaustively by this Court in its decision in Joshi Technologies International Inc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amination of witnesses, the case could not be conveniently or satisfactorily decided in proceedings Under Article 226 of the Constitution. In such cases the Court can direct the aggrieved party to resort to alternate remedy of civil suit, etc. 70.4. Writ jurisdiction of the High Court Under Article 226 of the Constitution was not intended to facilitate avoidance of obligation voluntarily incurred. 70.5. Writ petition was not maintainable to avoid contractual obligation. Occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of contract which the parties had accepted with open eyes. It cannot ever be that a licensee can work out the licence if he finds it profitable to do so: and he can challenge the conditions under which he agreed to take the licence, if he finds it commercially inexpedient to conduct his business. 70.6. Ordinarily, where a breach of contract is complained of, the party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed. Otherwise, the party may sue for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes. (Emphasis supplied) 55. Thereafter, this Court in its decision in M.P. Power Management Co. Ltd., Jabalpur v. Sky Power Southeast Solar India Pvt. Ltd. and Ors. reported in (2023) 2 SCC 703 exhaustively delineated the scope of judicial review of the courts in contractual disputes concerning public authorities. The aforesaid decision is in the following parts: (i) Scope of Judicial Review in matters pertaining to Contractual Disputes: This Court held that the earlier position of law that all rights against any action of the State in a non-statutory contract would be governed by the contract alone and thus not amenable to the writ jurisdiction of the courts is no longer a good law in view of the subsequent rulings. Although writ jurisdiction is a public law remedy, yet a relief would still lie under it if it is sought against an arbitrary action or inaction of the State, even if they arise from a non-statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same with its own decision. The relevant observations read as under: iv. An action will lie, undoubtedly, when the State purports to award any largesse and, undoubtedly, this relates to the stage prior to the contract being entered into [See R.D. Shetty (supra)]. This scrutiny, no doubt, would be undertaken within the nature of the judicial review, which has been declared in the decision in Tata Cellular v. Union of India. (Emphasis supplied) (iii) Exercise of Writ Jurisdiction after the Contract comes into Existence: This court held that even after the contract comes into existence an action may lie by way of a writ to either (I) obviate an arbitrary or unreasonable action on part of the State or (II) to call upon it to honour its obligations unless there is a serious or genuine dispute as regards the liability of the State from honouring such obligation. Existence of an alternative remedy or a disputed question of fact may be a ground to not entertain the parties in a writ as long as it is not being used as smokescreen to defeat genuine claims of public law remedy. The relevant observations read as under: v. After the contract is entered into, there can be a variety ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same, would be guided by, undoubtedly, the overwhelming need to obviate arbitrary State action, in cases where the Writ remedy provides an effective and fair means of preventing miscarriage of justice arising from palpably unreasonable action by the State. (Emphasis supplied) (iv) Exercise of Writ Jurisdiction after Termination or Breach of the Contract: A relief by way of a writ Under Article 226 of the Constitution will also lie against a termination or a breach of a contract, wherever such action is found to either be palpably unauthorized or arbitrary. Before turning away the parties to the remedy of civil suit, the courts must be mindful to see whether such termination or breach was within the contractual domain or whether the State was merely purporting to exercise powers under the contract for any ulterior motive. Any action of the State to cancel or terminate a contract which is beyond the terms agreed thereunder will be amenable to the writ jurisdiction to ascertain if such decision is imbued with arbitrariness or influenced by any extraneous considerations. The relevant observations read as under: xi. Termination of contract can again arise in a wide variety o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w arbitrariness in all its actions, resort to the constitutional remedy on the cause of action, that the action is arbitrary, is permissible (See in this regard Kumari Shrilekha Vidyarthi and others v. State of U.P. and others). However, it must be made clear that every case involving breach of contract by the State, cannot be dressed up and disguised as a case of arbitrary State action. While the concept of an arbitrary action or inaction cannot be cribbed or confined to any immutable mantra, and must be laid bare, with reference to the facts of each case, it cannot be a mere allegation of breach of contract that would suffice. What must be involved in the case must be action/inaction, which must be palpably unreasonable or absolutely irrational and bereft of any principle. An action, which is completely malafide, can hardly be described as a fair action and may, depending on the facts, amount to arbitrary action. The question must be posed and answered by the Court and all we intend to lay down is that there is a discretion available to the Court to grant relief in appropriate cases. (Emphasis supplied) (v) Other relevant considerations for Exercise of Writ Jurisdiction: La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctionaries in contractual matters with private individuals. With the rise of the Social Service State more and more public-private partnerships continue to emerge, which makes it all the more imperative for the courts to protect the sanctity of such relations. 57. It is needless to state that in matters concerning specific modalities of the contract ' such as required work, execution methods, material quality, timeframe, supervision standards, and other aspects impacting the tender's purpose ' the court usually refrains from interference. State authorities, like private individuals, have a consensual element in contract formation. The stipulations or terms in the underlying contract purpose are part of the consensual aspect, which need not be entertained by the courts in writ jurisdiction and the parties may be relegated to ordinary private law remedy. Judicial review does not extend to fixing contract stipulations but ensures that the public authorities act within their authority to prevent arbitrariness. 58. Thus, the demarcation between a private law element and public law element in the context of contractual disputes if any, may be assessed by ascertaining whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and the relief prayed for could have been considered by the High Court in exercise of its writ jurisdiction. c. Meaning and True Import of Arbitrariness of State Actions in Contractual Disputes. 63. In Ramana Dauaram Shetty v. The International Airport Authority of India and Ors. reported in AIR 1979 SC 1628 this Court held that the actions of the State in contractual matters must conform to some standard or norms which is rational, non-discriminatory and not guided by extraneous considerations, otherwise the same would be in violation of Article 14 of the Constitution. The relevant observations read as under: This rule also flows directly from the doctrine of equality embodied in Article 14. It is now well settled as a result of the decisions of this Court in E.P. Royappa v. State of Tamil Nadu, A.I.R. 1974 S.C. 555 and Maneka Gandhi v. Union of India, A.I.R. 1978 S.C. 597 that Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. It requires that State action must not be arbitrary but must be based on some rational and relevant principle which is non discriminatory; it must not be guided by any extraneous or irrelevant considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernance by laws and not by humour, whims or caprices of the men to whom the governance is entrusted for the time being. It is trite that be you ever so high, the laws are above you. 66. Control of administrative discretion is an important concern in the development of Rule of Law. According to Wade and Forsyth, the Rule of Law has four meanings, and one of them is that "government should be conducted within a framework of recognized rules and principles which restrict discretionary power". 67. To enthuse efficiency in administration, a balance between accountability and autonomy of action should be carefully maintained. Overemphasis on either would impinge upon public efficiency. But undermining the accountability would give immunity or carte blanche power to act as it pleases with the public at whim or vagary. Whether the public authority acted bona fide would be gauged from the impugned action and attending circumstances. The authority should justify the action assailed on the touchstone of justness, fairness and reasonableness. Test of reasonableness is more strict. The public authorities should be duty conscious rather than power charged. Its actions and decisions which touch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was made; that the court does not have the expertise to correct the administrative decision and if a review of the administrative decision is permitted, it will be substituting its own decision, without the necessary expertise which itself may be fallible; that the terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract; and, that the government must have freedom of contract, i.e. a free-play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness, but must be free from arbitrariness not affected by bias or actuated by mala fides. Moreover, quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. 69. To ascertain whether an act is arbitrary or not, 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 arbitrarin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ? 72. The principal contention of the Appellant is that the notice of cancellation dated 07.02.2023 that was issued by the Respondent is manifestly arbitrary, unreasonable and influenced by mala fide and extraneous considerations. 73. Before we proceed to determine whether the cancellation of tender could be termed as arbitrary, it is necessary to understand the stance of the Respondent in the present litigation, as discernible from their pleadings, which has left us quite perplexed. The argument of the Respondent is two-fold: (i) First, that the tender had to be cancelled as there was a technical fault. The tender was found to be 'non-specific' & 'not well defined' as a result it created ambiguity resulting in financial losses to the Respondent. (ii) Secondly, the cancellation was also on account of a change in policy whereby, the operation & maintenance of the concerned underpasses had been handed over to another authority. 74. The primary thrust of the Respondent's contention is that the decision to cancel the tender was taken in view of the technical faults in the same, more particularly the ambiguity as to whether the advertisement boards could be pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Deliberations of the State. 78. The Appellant has in particular placed reliance on various notings made in the internal file of the Respondent in respect of the tender to contend that the cancellation of the same was arbitrary and influenced by extraneous considerations. The Respondent on the other hand submitted that the internal file-notings cannot be used or relied upon to impute any ill-motives to the decision of cancelling the tender as they only reflect the opinion of a particular individual and cannot be construed or interpreted as the decision of the Respondent. In this regard, reliance has been placed on the following decisions: i. Pimpri Chinchwad New Township Development Authority v. Vishnudev Coop. Housing Society (2018) 8 SCC 215. ii. Shanti Sports Club v. Union of India (2009) 15 SCC 705. 79. This Court in its decision in Bachhittar Singh v. State of Punjab and Anr. reported in AIR 1963 SC 395 held that merely because something was written in the internal files and notesheet does not amount to an order, it at best is an expression of opinion which may be changed, and it only becomes an order when such opinion is formally made into a decision. The relevant ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the other officials of the department and for the benefit of the final decision-making authority. Needless to add that internal notings are not meant for outside exposure. Notings in the file culminate into an executable order, affecting the rights of the parties, only when it reaches the final decision-making authority in the department, gets his approval and the final order is communicated to the person concerned. (Emphasis supplied) 81. In Shanti Sports Club (supra) several representations were made by the landowners requesting to release their land from acquisition. After considering those representations, the concerned minister recorded in the note file that the land should be denotified on suitable terms and left the final decision to his successor. The new minister, however, rejected the request for denotification. Consequently, writ petitions were filed, seeking the release of the land based on the note file. This Court held that the notings recorded in the official files do not become decisions and confer no right unless the same are sanctified, authenticated and communicated in the prescribed manner. It further held that any recording in the note-file can always be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same can always be reviewed by the same authority or reversed or overturned or overruled by higher functionary/authority in the Government. (Emphasis supplied) [See also: State of Uttaranchal v. Sunil Kumar Vaish (2011) 8 SCC 670 at para 24] 82. In Pimpri Chinchwad (supra), a revenue minister passed an order for deletion of the land of the Respondent therein from acquisition proceeding, but the said order was never communicated, however, the same was mentioned in the internal note file. Sometime later, the government decided to reconsider all uncommunicated orders. As a result the Respondents therein filed a writ seeking implementation of the order as mentioned in the internal note-file. This Court held that the notings in official files of the government are an internal matter and carry no legal sanctity unless they are approved and duly communicated as per the prescribed procedure. It is only when such notings are translated into formal decisions, they would create some right or claim in favour of a person. The relevant observations read as under: 36. [...] first, a mere noting in the official files of the Government while dealing with any matter pertaining to any person i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid context, we may refer to the decision of this Court in State of Bihar v. Kripalu Shankar reported in (1987) 3 SCC 34, wherein it was held that the internal file notings reflect the views and line of thinking of a particular officer. It further held that such views would amount to disobedience or contempt of court only when they are translated into a formal decision. The relevant observations read as under: 11. After this finding, the High Court held some of the officers of the government guilty solely on the basis of the views expressed by them in the files, which were not, in fact, accepted by the Government and which were only at the stage of suggestions and views. Shri K.K. Venugopal, the learned Counsel for the State contended that it would be unsafe to initiate action in contempt merely on the strength or notings by officials on the files, expressing their views and to do so would imperil the working of various departments in a Government in a democracy and would have far-reaching consequences. Sometimes a view expressed by an officer may be incorrect. The view so expressed passes through various hands and gets translated into action only at the ultimate stage. The vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the KMDA officials as to the tender for work have been recorded. In the entire records - right from the time the Notice Inviting Tender was being formulated till the issuance of the final Notice of Cancellation dated 07.02.2023, there is no whisper of any particular clauses of the tender that was floated nor of any conflict or technical fault in the same, as claimed by the Respondent. 91. We are in seisin of the fact that although the internal-file notings mention about the policy change in the operation and maintenance of the concerned underpasses, yet a careful reading of the same reveals that the cancellation of the tender for work was neither due to any technical fault nor due to the policy change in the operation and maintenance of the concerned underpasses but was for altogether a different reason. 92. As per Note #91 dated 30.12.2022 of the file-notings, when the Order dated 01.12.2022 of the Urban Development and Municipal Affairs Department came to be passed whereby the maintenance was handed over to KMC, it was the Minister-In-Charge as the Chairperson of the Respondent authority - who suggested that in view of the change in scenario the tender be cancelled. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrated sequence of events, it is evident that it was none other but the concerned minister who suggested to cancel the tender. The Respondent was reluctant to immediately cancel the tender for work and continued to insist on obtaining the opinion from its legal cell. Even though the opinion of the legal cell was yet to be obtained, the Respondent, despite its initial reluctance, undertook immediate steps to cancel the tender after the concerned minister personally instructed the officials to do so. 98. Thus, it is evident that the Notice of Cancellation dated 07.02.2023, issued to the Appellant, was at the behest of the concerned minister. The Respondent clearly recorded that, because instructions for cancellation had been received from the higher-ups, there was no option but to proceed with the cancellation. Even before the Respondent could properly and thoroughly explore the possibility of acceding to such request by consulting its legal cell, the tender was cancelled only at the instance and specific instructions of the concerned minister. 99. The aforesaid aspect can be looked at from one another angle. The concerned Minister-In-Charge had instructed to cancel the tender in v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At the relevant point of time, there could have been no occasion for the Respondent to cancel the tender on the basis of the Urban Development and Municipal Affairs Department's order dated 01.12.2022. We say so because: (i) First, as per the aforesaid order, it was explicitly clarified that the Respondent would continue to retain the operation & maintenance as-well as the advertisement rights of the concerned underpasses. (ii) Secondly, only the structural maintenance and restoration of the E.M. Bypass's carriageway, roads, underground drainage etc. were to be handed over to the KMC. Indisputably, the tender that was issued in favour of the Appellant was distinct from the maintenance that was handed over to KMC inasmuch as the scope of work of tender was limited to cleaning the roads, walls, floors etc., maintaining the electric-fixtures and upkeep of the gardens. (iii) Thirdly, despite the stance of the Respondent of "change in scenario" due to the handing over of the maintenance, we find that after cancelling the tender and during the pendency of the present appeal, it was the Respondent who floated fresh tender for the work of maintenance in respect of the same u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than any hoarding installed on E.M. Bypass. [...] 29/12/2022 02:52 PM SANTANU PATRA SE (REBBRDG) (KMDA) Note # 89 [...] The cost of revenue generation would be enhanced at a rate 5% at the end of each year, whereas, the authority need not to bother about the routine annual maintenance cost of appurtenances and labours, security force etc. which would increase as well. By this way two simultaneous benefits go in favour of the Authority. [...] 30/12/2022 05:54 PM SUBHANKAR BHATTACHARYA CE (REBBRDG) (KMDA) 110. Thus, the Respondent's reasoning in the Notice of Cancellation dated 07.02.2023 that it was incurring financial losses from the aforesaid tender does not hold well either. It has been contended by the Respondent that due to the ambiguity in tender as regards placement of advertisements, many interested bidders might not have been able to submit their bids. Thus, the Respondent formed the view that if the ambiguity is corrected a higher license fee could be fetched. 111. However, we are not impressed with the above submission. As discussed in the preceding paragraphs of this judgment, nothing to this effect is even remotely indicated from the internal file not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces by which public interest would be jeopardised if such enforcement is insisted. The relevant observations read as under: 20. When it seeks to relieve itself from its application the government or the public authority are bound to place before the court the material, the circumstances or grounds on which it seeks to resile from the promise made or obligation undertaken by insistence of enforcing the promise, how the public interest would be jeopardised as against the private interest. It is well settled legal proposition that the private interest would always yield place to the public interest. [...] (Emphasis supplied) 114. We may again refer to the decision of this Court in M.P. Power Management Company Ltd. (supra) wherein this Court observed that merely because the rates embodied in a contract with the passage of time have become less appealing, the same cannot become a determinative criterion for either terminating the contract or for the courts to decline interference in such contractual disputes. The relevant observations read as under: 88. Therefore, on a conspectus of the case law, we find that the concept of overwhelming public interest has essentially evolved in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racts and there must be a clear and demonstrable ramification or detriment on the public interest to justify any such action. 116. Considerations of public interest should not be narrowly confined to financial aspects. The courts must have a more holistic understanding of public interest wherever the fairness of public authorities is in question, giving due regard to the broader implications of such action on the stability of contractual obligations. Merely because the financial terms of a contract are less favourable over a period of time does not justify its termination. Such decisions must be based on a careful consideration of all relevant factors, including the potential harm to the integrity and sanctity of contractual relationships. The larger interest of upholding contracts cannot be discarded in the name of monetary gain labelled as public interest. 117. We may make a reference to the observations made by this Court in Har Shankar and Ors. v. Dy. Excise and Taxation Commr. and Ors. reported in (1975) 1 SCC 737, wherein this Court held that those who contract with open eyes must accept the burdens of contract along with its benefit. It further held that the enforcement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tise for the work of maintenance. 121. Even otherwise, if at all the Respondent was very much concerned about the maintenance of the underpasses due to lack of expertise of the Appellant, it was always open to the Respondent to terminate the contract in terms of the termination clause as envisaged in Clause 35 of the Special Terms & Conditions of the Memorandum for the breach or non-compliance of any of the obligations or terms of the tender. Mere apprehension of lack of expertise was no ground for the Respondent to cancel the tender by taking recourse to its executive powers in complete ignorance of the contractual terms that were agreed upon by them. 122. From the above discussion, we are of the considered opinion that the present lis is nothing but a classic textbook case of an arbitrary and capricious exercise of powers by the Respondent to cancel the tender that was issued to the Appellant on the basis of extraneous considerations and at the behest of none other but the concerned Minister-In-Charge. iii. Sanctity of Public-Private Partnership Tenders 123. Before we close this judgment, we must also address one very important aspect as regards the importance of maintaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t procurement, to promote healthy competition among the tenderers, to provide for fair and equitable treatment of all tenderers, and to eliminate irregularities, interference and corrupt practices by the authorities concerned. This is required by Article 14 of the Constitution. (Emphasis supplied) 126. The sanctity of public tenders lies in their role in upholding the principles of equal opportunity and fairness. Once a contract has come into existence through a valid tendering process, its termination must adhere strictly to the terms of the contract, with the executive powers to be exercised only in exceptional cases by the public authorities and that too in loathe. The courts are duty bound to zealously protect the sanctity of any tender that has been duly conducted and concluded by ensuring that the larger public interest of upholding bindingness of contracts are not sidelined by a capricious or arbitrary exercise of power by the State. It is the duty of the courts to interfere in contractual matters that have fallen prey to an arbitrary action of the authorities in the guise of technical faults, policy change or public interest etc. 127. The sanctity of contracts is a funda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dictable manner. The principles of good administration require that the decisions of public authorities must withstand the test of consistency, transparency, and predictability to avoid being regarded as arbitrary and therefore violative of Article 14. (Emphasis supplied) 128. Cancellation of a contract deprives a person of his very valuable rights and is a very drastic step, often due to significant investments having already been made by the parties involved during the subsistence of the contract. Failure on the part of the courts to zealously protect the binding nature of a lawful and valid tender, would erode public faith in contracts and tenders. Arbitrary terminations of contract create uncertainty and unpredictability, thereby discouraging public participation in the tendering process. When private parties perceive that their contractual rights can be easily trampled by the State, they would be dissuaded from participating in public procurement processes which may have a negative impact on such other public-private partnership ventures and ultimately it is the public who would have to bear the brunt thereby frustrating the very object of public interest. 129. We caution t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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