Delhi High Court
Sahakar Global Limited Jv And Anr. vs Municipal Corporation Of Delhi on 8 April, 2025
Author: Tushar Rao Gedela
Bench: Tushar Rao Gedela
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 27.02.2025
% Judgment delivered on:08.04.2025
+ W.P.(C) 2492/2025& CM APPL. 11777/2025
SAHAKAR GLOBAL LIMITED JV AND ANR. .....Petitioners
Through: Mr. Neeraj Kishan Kaul, Sr. Adv and
Mr. Percival Billimoria, Sr. Adv. with
Mr. Mukesh Butani, Mr. Rakesh
Sinha, Mr. Pawan Kumar Bansal, Mr.
Anand Srivastava, Mr. Harsh Shukla,
Mr. Siddharth Agrawal, Mr. Ahsan
UlHaq, Ms. Rachita Sood, Mr. Tushar
Bhathija, Mr. Ritwik Mahapatra, Mr.
Varun Tyagi, Mr. Varad Kohle and
Mr. Asheesh Bhandari, Mr. Anand
Srivastava, Mr. Ajay Chawla, Advs.
versus
MUNICIPAL CORPORATION OF DELHI .....Respondent
Through: Mr. Sanjiv Sen, Sr. Adv. with Mr.
Sanjay Vashishtha, SC, MCD, Ms.
Gunjan Rathore, Mr. Prahalad Balaji,
Ms. Harshita Rai and Mr. Siddhartha
Goswami, Mr. Sumit, Advs.
Mr. Sumit Kumar, Additional Deputy
Commissioner, Toll Tax, MCD.
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE TUSHAR RAO GEDELA
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JUDGMENT
DEVENDRA KUMAR UPADHYAYA, C.J.
-: CHALLENGE :-
1. By instituting this Petition under Article 226 of the Constitution of
India, the Petitioners seek to challenge the decision of the Municipal
Corporation of Delhi [„MCD‟]/sole respondent, as embodied in the letter
dated 05.11.2024 issued by the Additional Deputy Commissioner (Toll
Tax), MCD and addressed to the Petitioner no.1 whereby, the
respondent/Corporation in its meeting held on 05.10.2024 decided – “to
explore the possibility of time gap arrangement by engaging the existing
contractor on same terms and conditions of existing contract at new „H-1‟
rate so that there is no revenue loss to MCD or any other time gap
arrangement and parallelly explore how the revenue can be increased by
bringing more competition within 6 months”.
2. In fact, the challenge is to the impugned decision whereby the notice
inviting tender bearing NIT No. ADC/TT/HQ/MCD/2024/D-894 dated
07.02.2024 (hereinafter referred to as „NIT‟) has been abandoned. Thus, the
prayer made in the writ petition is to set aside the impugned decision of the
respondent/Corporation and also to quash the letter dated 05.11.2024 and all
subsequent consequential decisions in that regard.
3. The Petitioners have further prayed for issuance of an appropriate writ
or order directing the respondent/Corporation to issue a „Letter of Award‟ in
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favour of the Petitioner no.1, being the „H-1‟ bidder in the tender issued
pursuant to the NIT dated 07.02.2024.
4. The challenge to the impugned decision of the
respondent/Corporation has been made primarilyon the ground that in the
tender process undertaken by the respondent/Corporation pursuant to the
NIT dated 07.02.2024, the Petitioner no.1 was declared as the „H-1‟ bidder,
whose bid price was higher than the reserve price and accordingly instead of
awarding the contract to the Petitioner no.1, the impugned decision has been
taken by the respondent/Corporation to explore how revenue can be
increased by bringing more competition within 6 months, as a result of
which the tender process stands cancelled.
-: FACTS : –
5. The respondent/Corporation issued a notice on 07.02.2024 inviting
tender for the engagement of a contractor for the collection of Toll and
Environment Compensation Charges to be collected at 154 border points
from specified commercial vehicles entering Delhi for a period of three
years. The reserve price for the collection of Toll Tax was fixed at
Rs.847,00,00,000/- annually.
6. Petitioner no.1 is a Joint Venture Consortium of M/s. Sahakar Global
Limited, which is the lead member and the other two firms namely, M/s.
Prakash Asphaltings& Toll Highways (India) Ltd. and M/s. Skylark Infra
Engineering Pvt. Ltd., which participated in the tender process and made
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deposit of earnest money of Rs.18.70 Crores with the
respondent/Corporation.
7. The Petitioner no.1 was declared to be technically qualified in the
meeting dated 03.04.2024 of the High Level Committee of the
respondent/Corporation, and accordingly, the said decision declaring
Petitioner no.1 to have technically qualified was communicated by way of
an email dated 04.04.2024.
8. The financial bids of the technically qualified bidders were opened on
04.04.2024, and the bid for Rs.864,18,18,999/- submitted by Petitioner no.1
was found to be the highest. It is to be noticed, at this juncture itself, that the
bid submitted by Petitioner no. 1 was higher by Rs.17.18 Crores than the
reserve price per annum.
9. The financial bids of the technically qualified bidders in response to
the subject tender dated 07.02.2024 was considered in a meeting of High
Level Committee of the respondent/Corporation, and the Petitioner no.1 was
found to be the highest bidder [„H-1‟].
10. The Petitioner no.1 having been found to be „H-1‟ requested the
respondent/Corporation, vide its letter dated 24.05.2024, to furnish the
information regarding the issuance of the Letter of Award and also enquired
about other formalities to be fulfilled for execution of the contract.
11. The respondent/Corporation, by means of a communication dated
24.05.2024, informed the Petitioner no.1 that the competent authority for
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approval of the rate in the respondent/Corporation is the „Standing
Committee‟, which has not been in existence since January 2023, and
therefore, the Corporation was not in a position to issue Letter of Award to
the Petitioner no.1. It was further informed by way of the said letter to the
Petitioner no.1 that the proposal shall be put up before the Standing
Committee as and when the same would be constituted. Since the Letter of
Award pursuant to the declaration of Petitioner no.1 as „H-1‟ bidder was not
being issued, a writ petition, being W.P. (C) 9268/2024, was instituted by
the Petitioner no.1 before this Court seeking a direction to the
respondent/Corporation to award the contract notwithstanding non-
availability of the Standing Committee. Since the validity of the bid was to
expire on 15.07.2024, the respondent/Corporation requested the Petitioner
no.1 to extend the bid validity by three months and further to extend the
validity of the Bank Guarantee submitted by the Petitioner no.1 in lieu of
earnest money deposited. On 18.07.2024, the Petitioner no.1 extended the
bid validity up to 03.11.2024 and also extended the validity of EMD Bank
Guarantee. The Commissioner, Toll Tax Department of the
respondent/Corporation sent a letter to the Municipal Secretary on
19.08.2024, informing him that a proposal had been sent to the Government
of National Capital Territory of Delhi [„GNCTD‟] and Urban Development
Department for approval of the project or delegation of powers to approve in
terms of the provisions contained in Section 202 of the Delhi Municipal
Corporation Act, 1957. It appears that in a meeting of the
respondent/Corporation held on 21.08.2024, the issue regarding the award of
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contract to the Petitioner no.1 was discussed, however, the said
consideration was postponed. The respondent/Corporation, by means of its
letter dated 22.08.2024, again requested the Petitioner no.1 to extend the
Bank Guarantee furnished in lieu of the earnest money deposited by the
Petitioner no.1. In response to the said letter dated 22.08.2024, the Petitioner
no.1 extended the Bank Guarantee and submitted the same by means of its
letter dated 28.08.2024.
12. Thereafter, a meeting of the respondent/Corporation was to be held on
25.09.2024 for consideration of certain agenda, including the agenda
relating to the grant of Letter of Award to the Petitioner no.1. However, the
said meeting was adjourned without transacting any business. On
05.10.2024, an agenda dated 05.10.2024 (Urgent Business No. 47) was
circulated to the members of the House of MCD for considering the issue
relating to the issuance of Letter of Award to the Petitioner no.1 and on
05.10.2024 itself the impugned decision was taken by the
respondent/Corporation wherein, it was directed to explore how the revenue
can be increased by bringing more competition within six months. The said
decision taken by the House of the MCD was communicated to the
Petitioner no.1 by means of a letter dated 05.11.2024, wherein the resolution
passed by the respondent/Corporation is quoted, which is as under: –
“….. Explore the possibility of time gap arrangement by engaging
the existing contractor on same terms & conditions of existing
contract of new H-1 rate so that there is no revenue loss to MCD
or any other time gap arrangement and parallelly explore how the
revenue can be increased by bringing more competition within 6
months.
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2. Accordingly, as per decision of House, the existing Toll & ECC
contractor M/s Sahakar Global SDMC JV LLP was engaged for
the subject work at a toll collection remittance @
Rs.16,61,88,827/- per week with other terms and conditions of the
Contract Agreement dated 09.04.2021, as an interim measure for
six months w.e.f. 09.10.2024 (6.00 AM) or till the engagement of
new Contractor, whichever is earlier.
3. Further action as per the decision of the Corporation is being
taken.”
13. By the said letter, it has been informed that the existing contractor,
M/s. Sahakar Global SDMC JV LLP has been engaged at Toll Collection
Remittance at the rate of Rs.16,61,88,827/- per week with other terms and
conditions of the earlier contract agreement dated 09.04.2021as an interim
measure for six months w.e.f. 09.10.2024 or till the engagement of a new
contractor, whichever was earlier.
14. Petitioner no.1 has also been informed by the said letter dated
24.10.2024 that no further action was required in respect of the letter of the
Petitioner dated 24.10.2024. The earnest money deposited by the Petitioner
no.1 in the form of a Bank Guarantee was also released, and the Petitioner
no.1 was informed that he may collect the same or it may be collected by his
authorized representative on any working day from the Office of the
Additional Deputy Commissioner (Toll Tax) of the respondent/Corporation.
15. We may notice that by the letter dated 24.10.2024, which has been
referred to in the impugned letter dated 05.11.2024, wherein it has been
stated that no further action was required in respect of the letter dated
24.10.2024, was written by the Petitioner no.1 to the Commissioner of the
respondent/Corporation stating therein that since the validity of the bid
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submitted by the Petitioner no.1 pursuant to the subject NIT was coming to
an end on 03.10.2024 and therefore, the Petitioner no.1 extended the validity
of its bid for such further period till the process for award of the new
contract to the Petitioner no.1 is completed. It is in response to the said letter
dated 24.10.2024 that Petitioner no.1 was informed by the Additional
Deputy Commissioner (Toll Tax) of the respondent/Corporation, vide his
letter dated 05.11.2024, that no further action is required at the end of the
Petitioner no.1. That is to say, the extension of validity of the bids submitted
by the Petitioner no.1 was not accepted by the respondent/Corporation. As a
result of the impugned decision, the tender floated vide NIT dated
07.02.2024 stands abandoned, and accordingly, the instant writ petition has
been filed challenging the said decision as also the letter dated 05.11.2024
whereby the proposal to extend the validity of the bid by the Petitioner no. 1
has not been accepted and the Bank Guarantee has been released and the
Petitioner no.1 has been required to collect the same. As observed above,
apart from challenging the impugned decision and the letter dated
05.11.2024, it has also been prayed on behalf of the Petitioners that an
appropriate direction be issued to the respondent/Corporation to issue the
Letter of Award in favour of the Petitioner no.1, who is „H-1‟ bidder in the
tender process undertaken pursuant to the NIT dated 07.02.2024.
-: SUBMISSION ON BEHALF OF THE PETITIONERS:-
16. Mr. Neeraj Kishan Kaul, learned Senior Advocate representing the
Petitioners has vehemently argued that the tender process in which theW.P.(C) 2492/2025 Page 8 of 63
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Petitioner no.1 was declared „H-1‟ bidder has been cancelled by the
impugned decision of the respondent/Corporation without following due
process and giving an opportunity of hearing to the Petitioner no.1 and, as
such, the same is not sustainable. Mr. Kaul has further argued that the reason
indicated in the impugned decision is also not tenable as the subject tender
was adequately publicised and due time was given to the interested parties.
He has also argued that the Commissioner of the MCD had recommended
on various occasions for issuance of a Letter of Award in favour of
Petitioner no.1, however ignoring the said recommendation, the impugned
decision has been taken which does not bear any justifiable reason or
rationale, and therefore, the same is liable to be set aside.
17. Further argument on behalf of the Petitioners is that in the absence of
any plausible and sustainable reason for cancelling the tender process in
which the Petitioner no.1 was declared to be „H-1‟, the sanctity of the tender
process has been compromised, and the legitimate expectation of the
Petitioners being treated fairly by the respondent/Corporation has been
frustrated for the reason that arbitrary cancellation of the tender process
violates such legitimate expectation of the Petitioners.
18. Mr. Kaul has also argued that the public tender process must ensure
transparency, efficiency and fair treatment to the participating bidders and
further that the mere possibility of more money in the public coffer cannot
itself constitute public interest and accordingly, the impugned decision
cannot be said to be serving any public interest and therefore, is liable to be
set aside.
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19. Mr. Kaul, drawing our attention to a Circular dated 29.10.2021 issued
by the Ministry of Finance, Department of Expenditure, Government of
India, which embodies the Procurement Policy, has argued that the practice
of going for re-tender as a safe course of action does not appear to be correct
for the reason that re-bidding entails costs in two ways; firstly, the actual
costs of re-tendering and secondly, the delay in execution of the work with
consequent delay in the attainment of the purpose for which procurement is
being done. He has emphasised that as per the said procurement policy
embodied in the Circular dated 29.10.2021 of the Government of India, lack
of competition cannot be determined solely on the basis of number of
bidders and that even when only one bid is submitted, the process should be
considered to be valid, if the procurement was satisfactorily advertised,
sufficient time was given for submission of bids, the qualification criteria
were not unduly restrictive, and further that the prices are found to be
reasonable in comparison to the market values.
20. On the aforesaid counts, it has been argued on behalf of the
Petitioners that the impugned decision cancelling the tender process in
which the Petitioner no.1 was declared to be „H-1‟ is absolutely arbitrary
and without any sustainable reason or material and hence is liable to be
struck down.
-: SUBMISSION ON BEHALF OF THE RESPONDENT/CORPORATION:-
21. Per contra, learned Senior counsel representing
respondent/Corporation, Mr. Sanjiv Sen has vehemently opposed the prayers
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made in the writ petition and has submitted that in terms of the tender
document, the respondent/Corporation reserves the right to reject any/all
applications/bids without any reasons. Referring to Note – 12 (on Page 145
of the Writ Petition) of the tender document, it has further been argued by
learned Senior counsel for the respondent/Corporation that the
Commissioner of the Corporation, on its behalf, reserves the right to accept
or reject any or all the proposals or cancel the engagement without assigning
any reason(s) whatsoever. It has also been argued on behalf of the
respondent/Corporation that merely because the Petitioner no. 1 was
declared to be „H-1‟ bidder, no vested right can be said to have accrued in its
favour for the issuance of Letter of Award or for an award of contract
pursuant to the subject NIT dated 07.02.2024. It is also argued by the
learned counsel representing the respondent/Corporation that no one has got
any indefeasible right to do business with the Government.
22. Our attention has also been drawn to „Award Criteria‟ as spelt out in
the tender document (on Page 193 of the Writ Petition), Clause – 2, which
provides that notwithstanding any clauses mentioned in the RFP, the MCD
reserves the right to accept or reject any proposal offer and to anull or
suspend the engagement process and reject all the proposals offers at any
time prior to award of contract without any assurance for costs or
consequences on the part of the applicants bidding firms as approved by the
competent authority. Clause – 2 of the Award Criteria as provided for in the
tender documents is quoted herein below:
“I. AWARD CRITERIA
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1.0 …..
2.0 MCD Right To Reject: Not withstanding any clauses mentioned
in the RFP, the MCD reserves the right to accept or reject any
Proposal offer and to null or suspend the engagement process and
reject all the proposals offers at any time prior to award of
contract without any assurance for costs or consequences on the
part of the Applicants bidding Firms as approved by the competent
authority.”
23. Reliance in this regard has also been placed on behalf of the
respondent/Corporation to Note (12) of the tender document, wherein it has
been provided that the Commissioner of the MCD on behalf of the MCD
reserves the right to accept or reject any or all the proposals or cancel the
engagement process without assigning any reasons whatsoever. Note (12)
(available at page 145 of the writ petition) is extracted below:
“12. MCD rights of rejection/acceptance: The Commissioner,
MCD on behalf of MCD reserves the Right to accept or reject any
or all the Proposals or cancel the engagement process without
assigning any reason(s) whatsoever.”
24. We have also been taken to the resolution of the House of the
respondent/Corporation wherein, the impugned decision was taken. The said
resolution is extracted hereunder:
“Urgent Business No. 47
Subject: Regarding award of contract to H-I Bidder i.e. M/s
Sahakar Global Ltd. JV for “Engagement of a
contractor by MCD for Toll & Environment
Compensation Charge (ECC) Collection at Border
Points from specifiedcommercial vehicles entering
Delhi” (NIT No.ADC/TT/HQ/MCD/2024/D-894 dated
7-2-2024).
Sh. Mukesh Kumar Goel moved and Sh. Parveen Kumar
seconded the following motion:-
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Resolution No.334 Resolved that proposal of the Commissioner as
contained in his letter No. F.33/Toll
Tax/MCD/136/C&C dated 19-8-2024, regarding award
of contract to H-1 Bidder i.e. M/sSahakar Global Ltd.-
JV for “Engagement of a contractor by MCD for Toll &
Environment Compensation Charge (ECC) Collection
at Border Points from specified commercial vehicles
entering Delhi” (NIT No.ADC/TT/HQ/MCD/2024/D-
894 dated 7-2-2024) is approved with the following
amendment:-
Explore the possibility of time gap arrangement by
engaging the existing contractor on same terms &
conditions of existing contract at new HI rate so that
there is no revenue loss to MCD or any other time gap
arrangement and parallely explore how the revenue
can be increased by bringing more competition within 6
months.
The motion was carried.”
25. It has been stated by the learned counsel representing the
respondent/Corporation that as is apparent the resolution was passed by the
House of the respondent/Corporation on the proposal of the Commissioner
of the Corporation as contained in his letter dated 19.08.2024. He has also
referred to the contents of the letter of the Commissioner dated 19.08.2024
and has submitted that though in the said proposal, the Commissioner had
recommended that the approval may be accorded for entering into a contract
with the „H-1‟ bidder i.e. the Petitioner no.1 at the rate of Rs.864,18,18,999/-
per annum (Rs.16,61,88,827/- per week) only for Toll collection with an
enhancement of 5% after two years from the date of award of the contract
with the condition to remit the weekly collection on actual basis to the
Corporation. Further recommendation made in the said proposal was that on
approval, the Commissioner of the Corporation or its authorized
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representative will enter into a contract with the Petitioner no.1 and manage
the contract as per the contract agreement. The relevant extract of the said
letter of the Commissioner dated 19.08.2024, which was considered by the
House and impugned decision was taken, is extracted herein below:
“In view of the aforesaid extraordinary prevailing situation and
facts of the case, it is proposed that as an immediate measure,
approval may be accorded towards entering into contract with the
H-1 bidder i.e. M/s. Sahakar Global Limited-JV for “Engagement
of a Contractor by MCD for Toll & Environment Compensation
Charge (ECC) collection at border points from Specified
Commercial Vehicles entering Delhi’ as per RFP/NIT @Rs.
864,18,18,999/- per annum (Rs. 16,61,88,827/- per week) only for
toll collection with the enhancement of 5% after two years from the
date of Award of Contract and with the condition to remit the
weekly ECC collection on actual basis to the MCD as per the RFP
document. On approval the Commissioner, MCD or its authorized
representative will enter into Contract with M/s. Sahakar Global
Limited-JV and manage the contract as per contract agreement.
The proposal is placed before the Corporation, in the form of
Preamble under DMC Act, 1957 (as amended till date), as an item
of Urgent Business. The matter will be ex post facto placed before
the Standing Committee as done in the past.”
26. The submission of the learned counsel for the respondent/Corporation
is that though Commissioner had proposed to the House for accepting the
Petitioner‟s bid pursuant to the subject NIT, however the House, in its
wisdom, took a decision to explore the possibility of time gap arrangement
by engaging the existing contractor on the same terms and conditions of the
existing contract at new „H-1‟ rate or any other time gap arrangement and
further to parallelly explore how the revenue can be increased by bringing
more competition within six months. It has been argued that the contents of
the agenda which was considered by the House, which culminated into the
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impugned decision, was not binding on the House and the House,
considering all the aspects, took a decision to find an appropriate time gap
arrangement and also to explore how the revenue can be increased by
bringing more competition. His submission is that, even if the contents of
the letter written by the Commissioner dated 19.08.2024 is to be treated as a
recommendation, the House was not bound by it, which in its wisdom has
taken the impugned decision in public interest.
27. On instructions, learned counsel representing the
respondent/Corporation has stated that a period of more than one year has
elapsed from the date of issuance of subject NIT and therefore, the House of
the respondent/Corporation has taken the impugned decision as a result of
which public money/public revenue shall increase which is a valid
consideration for cancelling the tender process. He has also stated, on
instructions, that the tentative base price in the new tender shall be fixed as
more than Rs.900 Crores and on market research the tender is expected to
fetch more than Rs.1,000 Crores. Relying upon the judgment of Hon‟ble
Supreme Court in the case of Indore Vikas Praadhikaran (IDA) and
Another v. Shri Humud Jain Samaj Trust and Another, AIR 2025 SC 322,
it has been argued that in case the decision in such matters are to achieve
public interest, the same cannot be said to be arbitrary or unreasonable. He
has also placed reliance on another judgment of Hon‟ble Supreme Court in
the case of Laxmikant and Others v. Satyawan and Others, (1996) 4 SCC
208, wherein it has been held that State or its authorities or instrumentalities
are not bound to accept the highest bid and further that the acceptance of the
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highest bid is subject to various conditions. It has also been stated on behalf
of the respondent/Corporation that matter could not be considered by the
Standing Committee on account of a pending litigation in that regard in the
Hon‟ble Supreme Court.
28. The submission made by the learned counsel representing the
respondent/Corporation, thus, is that impugned decision taken by the House
of the respondent/Corporation is in public interest, for valid reasons and
therefore, the same cannot be termed to be mala fide or arbitrary so as to call
for any interference by this Court in the instant writ petition.
-: ARGUMENTS IN REJOINDER ON BEHALF OF THE
PETITIONERS :-
29. Refuting the submissions made by the learned counsel representing
the respondent/Corporation, Mr. Kaul, learned Senior counsel representing
the Petitioners has argued that one year period has elapsed only on account
of the procrastination on the part of the respondent/Corporation for which
the Petitioners are not responsible. He has further argued that, in fact, the
Petitioner‟s conduct has been unblemished.
30. Drawing our attention to the language used in the resolution passed by
the House, which has culminated in the impugned decision, it has been
stated by the learned Senior Counsel for the Petitioner, Mr. Kaul that the
said resolution at one place states that the House has approved the
recommendation made by the Commissioner of the respondent/Corporation,
however, the resolution records further that the recommendation of the
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Commissioner is approved with the amendment. His submission is that it is
this approval with the amendment to the proposal made by the
Commissioner which has resulted in the impugned decision. He has further
stated that the Petitioner no.1, ever since he was declared to be the highest
bidder, has been legitimately expecting to be treated fairly by the
respondents. However, such legitimate expectation of the Petitioner has been
frustrated by the impugned decision. It is also stated by Mr. Kaul that the
material being relied upon by the respondent to submit that more than
Rs.900 Crores may be fetched if the re-tendering is resorted to, was not
available with the House on the basis of which the impugned decision has
been taken. It is his further submission that any decision in such matters
cannot be on the ipse dixit of the House of the respondent/Corporation;
rather, the decision has to be based on some material. He has reiterated his
submission that in case the impugned decision of the
respondent/Corporation is not set aside, the sanctity of the tender process
shall be compromised.
31. In support of his submission, learned Senior counsel representing the
Petitioners, Mr. Kaul has relied on the following judgments:
(i) Subodh Kumar Singh Rathour v. Chief Executive Officer& Ors.,[2024
SCC OnLine SC 1682];
(ii) Ramana Dayaram Shetty v. International Airport Authority of India &
Ors.,[(1979) 3 SCC 489];
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(iii) Vice Chairman & Managing Director, City & Industrial Development
Corporation of Maharashtra Ltd. v. Shishir Realty Pvt. Ltd.,[(2022) 16 SCC
527];
(iv) M.P. Power Management Co. Ltd., Jabalpur v. Sky Power Southeast
Solar India Pvt. Ltd.,[(2023) 2SCC 703];
(v) Nagar Nigam v. Al Farheem Meat Exporters Pvt. Ltd.,(2006) 13 SCC
382];
(vi) LIC v. Consumer Education & Research Centre,[(1995) 5 SCC 482];
(vii) Mahabir Auto Stores v. Indian Oil Corporation,[(1990) 3 SCC 752];
(viii) Sivanandan C.Т. v. High Court of Kerala,[(2024) 3 SCC 799];
(ix) VasantkumarRadhakisan Vora v. Board of Trustees of Port of
Bombay,[(1991) 1 SCC 761];
(x) Noble Resources Ltd. v. State of Orissa,[(2006) 10 SCC 236];
(xi) ABL International Ltd. v. Export Credit Guarantee Corporation of
India Ltd.,[(2004) 3 SCC 553];
(xii) Kumari Shrilekha Vidyarthi & Ors. v. State of U.P. & Ors.,[(1991) 1
SCC 212];
(xiii) Banshidhar Construction Private Limited v. Bharat Cooking Coal
Limited and Others,(2024) 10 Supreme Court Cases 273.
-: DISCUSSION &ANALYSIS :-
(i) Scope of Judicial Review of State Action in matters relating to
Government Contracts/tenders
32. The Hon‟ble Supreme Court, on reviewing and revisiting the past
judgments, has elucidated and summed up the legal principles governing the
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scope of judicial review of the actions of the State in matters relating to
contract/tender in aThreeJudge Bench Judgment in the case of Subodh
Kumar Singh Rathour v. Chief Executive Officer and Others, (supra).
33. Elaborating the earlier decisions, concept of public law element,
scope of judicial review in contractual matters and import of arbitrariness in
State actions in contractual disputes, the Hon‟ble Supreme Court in Subodh
Kumar Singh Rathour(supra) has concluded finally that although disputes
arising out of contracts are not amenable to writ jurisdiction, yet keeping in
mind the obligation of the State to act fairly, it is well settled that when
contractual power is being used for public purpose, it is certainly amenable
to judicial review. The Hon‟ble Supreme Court has further observed that
wherever State action is found to be arbitrary, unfair or unreasonable, the
State is under obligation to comply with the principles enshrined in Article
14 of the Constitution and hence even in contractual matters, where the State
is a party to the contract, such action shall be amenable to writ jurisdiction.
34. The exception to judicial review of State action in such matters has
also been carved out by Hon‟ble Supreme Court in Subodh Kumar Singh
Rathour, (supra), according to which certain aspects of the tender process
such as matters concerning modalities of the contract, namely, the required
work, execution methods, material quality, timeframe, supervision
standards, and other aspects impacting the purpose of the tender are to be
kept out of the purview of the judicial review and parties in such matters
may be relegated to ordinary private law remedy. The conclusions in
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Subodh Kumar Singh Rathour, (supra) can be found in paragraphs 56 to 59
which are extracted herein below:
“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
instrumentalities. In view of the law laid down by this Court
in >ABL (supra), Joshi Technologies (supra) and in M.P. Power (supra), it
is difficult to accept the contention of the respondent that the writ petition
filed by the appellant before the High Court was not maintainable and the
relief prayed for was rightly declined by the High Court in exercise of its
Writ jurisdiction. Where State action is challenged on the ground of being
arbitrary, unfair or unreasonable, the State would be under an obligation
to comply with the basic requirements of Article 14 of the Constitution and
not act in an arbitrary, unfair and unreasonable manner. This is the
constitutional limit of their authority. There is a jural postulate of good
faith in business relations and undertakings which is given effect to by
preventing arbitrary exercise of powers by the public functionaries 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 whether the dispute or the controversy pertains to the
consensual aspect of the contract or tender in question or not. Judicial
review is permissible to prevent arbitrariness of public authorities and to
ensure that they do not exceed or abuse their powers in contractual
transactions and requires overseeing the administrative power of public
authorities to award or cancel contracts or any of its stipulations.
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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.”
35. As already observed above, Subodh Kumar Singh Rathour, (supra)
discusses the past judgments on the issue and has quoted with approval, the
judgment of the Apex Court in M.P. Power Management Co. Ltd, (supra)
where the scope of judicial review by the Courts in contractual disputes
concerning public authorities has been exhaustively discussed. M.P. Power
Management Co. Ltd, (supra) finds mentioned in Subodh Kumar Singh
Rathour, (supra) in paragraph 55 which is also extracted herein below:
“55. Thereafter, this Court in its decision in M.P. Power
Management Co. Ltd., Jabalpur v. Sky Power Southeast Solar
India Pvt. Ltd. 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-statutory contract. The
relevant observations read as under:–
“53. […] when the offending party is the State. In other
words, the contention is that the law in this field has
witnessed an evolution and, what is more, a revolutionW.P.(C) 2492/2025 Page 21 of 63
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of sorts and a transformatory change with a growing
realisation of the true ambit of Article 14 of
the Constitution of India. 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 as followed in the recent
judgment in Sudhir Kumar Singh (supra).
iii. The mere fact that relief is sought under a
contract which is not statutory, will not entitle
the respondent-State in a case by itself to ward-
off scrutiny of its action or inaction under the
contract, if the complaining party is able to
establish that the action/inaction is, per se,
arbitrary.”
(Emphasis supplied)
(ii) Exercise of Writ Jurisdiction in disputes at the stage prior
to the Award of Contract:–
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An action under a writ will lie even at the stage prior
to the award of a contract by the State wherever such
award of contract is imbued with procedural
impropriety, arbitrariness, favouritism or without any
application of mind. In doing so, the courts may set-
aside the decision which is found to be vitiated for the
reasons stated above but cannot substitute 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 of circumstances, which may
provide a cause of action to a party to the
contract with the State, to seek relief by filing a
Writ Petition.
vi. Without intending to be exhaustive, it may
include the relief of seeking payment of amountsW.P.(C) 2492/2025 Page 23 of 63
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due to the aggrieved party from the State. The
State can, indeed, be called upon to honour its
obligations of making 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 questions of fact, particularly
when the dispute 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 quicken the pace of
dispute resolution, is viewed as a near bar to the
entertainment of a Writ Petition (See in this
regard, the view of this Court even
in ABL (supra) explaining how it distinguished
the decision of this Court in State of
U.P. v. Bridge & Roof Co., by its observations
in paragraph-14 in ABL (supra)].
ix. The need to deal with disputed questions of
fact, cannot be made a smokescreen to
guillotine a genuine claim raised in a Writ
Petition, when actually the resolution of aW.P.(C) 2492/2025 Page 24 of 63
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disputed question of fact is unnecessary to grant
relief to a writ applicant.
x. The reach of Article 14 enables a Writ Court
to deal with arbitrary State action even after a
contract is entered into by the State. A wide
variety of circumstances can generate causes of
action for invoking Article 14. The Court’s
approach in dealing with 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 of situations. If for instance, a
contract is terminated, by a person, who is
demonstrated, without any need for any
argument, to be the person, who is completely
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not be any necessity to drive the party to the
unnecessary ordeal of a prolix and avoidable
round of litigation. The intervention by the High
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 a docket
explosion, which is truly alarming. If a case
involves a large body of documents and the
Court is called upon to enter upon findings of
facts and involves merely the construction of the
document, it may not be an unsound discretion
to relegate the party to the alternate remedy.
This is not to deprive the Court of its
constitutional power as laid down
in ABL (supra). It all depends upon the facts of
each case as to whether, having regard to the
scope of the dispute to be resolved, whether the
Court will still entertain the petition.
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xii. In a case the State is a party to the contract
and a breach of a contract is alleged against the
State, a civil action in the appropriate Forum is,
undoubtedly, maintainable. But this is not the
end of the matter. Having regard to the position
of the State and its duty to act fairly and to
eschew 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 v. State of U.P.). 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:– Lastly, this Court held that the courts may
entertain a contractual dispute under its writ jurisdiction
where (I) there is any violation of natural justice or (II) where
doing so would serve the public interest or (III) where though
the facts are convoluted or disputed, but the courts have
already undertaken an in-depth scrutiny of the same provided
that the it was pursuant to a sound exercise of its writ
jurisdiction. The relevant observations read as under:–
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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 (supra)].”
(Emphasis supplied)”
36. The facts discussed in Subodh Kumar Singh Rathour, (supra) were
that pursuant to a tender process, the appellant therein had submitted its bid
and his quotation was found to be the highest and was, accordingly,
classified as „H-1‟. On the appellant being found „H-1‟, two letters of intent
were issued in his favour, declaring his firm as the successful bidder for the
tender and, thereafter, a formal memorandum of tender for work was also
executed and issued to the appellant. Upon completion of the formalities,
the work orders were also issued to the appellant in the said case, pursuant to
which he had also commenced his work.However, the respondent in the said
case issued a notice cancelling the tender for the work issued in favour of
the appellant on account of certain alleged technical faults in the tender
itself. It was stated in the notice cancelling the tender that the tender was
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found to be „non-specific‟ and „not well defined‟, and that had created
ambiguity, resulting in financial losses to the respondent. It is this notice of
cancellation which was initially challenged before the High Court of
Calcutta by filing a writ petition, which, however, was dismissed by a
learned Single Judge on certain grounds. The appellant challenged the
judgment of the learned Single Judge before a Division Bench of Calcutta
High Cout, which too was dismissed. It is these two judgments, the one
rendered by the learned Single Judge and the other by the Division Bench of
the High Court of Calcutta, which became the subject matter of challenge
before the Hon‟ble Supreme Court in Subodh Kumar Singh
Rathour(supra). Thus, challenge to the cancellation of tender in Subodh
Kumar Singh Rathour, (supra) was made in a fact situation where the
tender was allotted pursuant to which the appellant therein was issued letters
of intent and also work orders whereupon the appellant had commenced his
work in terms of the contract.
37. The Hon‟ble Supreme Court in Subodh Kumar Singh Rathour,
(supra) further held, on review of previous judgments, that the decision to
terminate a contract must be based on public interest duly supported by
cogent materials and circumstances in order to ensure that State actions are
fair, transparent and accountable. It was further held that public interest
cannot be used as a pretext to arbitrarily terminate contracts and there has to
be a clear and demonstrable ramification or detriment in public interest to
justify any such act.
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38. Subodh Kumar Singh Rathour(supra) further underscores the
significance of the sanctity of public-private partnership tenders. The Apex
Court has observed in the said judgment that the sanctity of public tenders
lies in their role in upholding the principles of equal opportunity and fairness
and further that the sanctity of contract is a fundamental principle that
underpins the stability and predictability of legal and commercial
relationships.Paragraphs 126 and 127 of the judgment in Subodh Kumar
Singh Rathour, (supra) reads as under:
“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 fundamental principle that
underpins the stability and predictability of legal and commercial
relationships. When public authorities enter into contracts, they
create legitimate expectations that the State will honour its
obligations. Arbitrary or unreasonable terminations undermine
these expectations and erode the trust of private players from the
public 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 publicW.P.(C) 2492/2025 Page 30 of 63
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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 xxxxxx
45. The underlying basis for the application of the doctrine of
legitimate expectation has expanded and evolved to include the
principles of good administration. Since citizens repose their trust
in the State, the actions and policies of the State give rise to
legitimate expectations that the State will adhere to its assurance
or past practice by acting in a consistent, transparent, and
predictable 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)”
39. The subject matter of discussion in Subodh Kumar Singh Rathour,
(supra) was, thus, an arbitrary cancellation of contract, and it is in these
circumstances that the Hon‟ble Supreme Court has observed that
cancellation of a contract deprives a person of his very valuable rights and is
a very drastic step. It has further been observed that, therefore, public
authorities should be circumspect in disturbing their contractual obligations
through means beyond the terms of the contract in the exercise of their
executive powers. The Hon‟ble Supreme Court, however, in the same
breath, also observes that it is not that the State has no power to alter or
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cancel a contract that it has entered, however, if the State deems it necessary
to alter or cancel a contract on the grounds 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.Paragraph 129 of the judgment in Subodh Kumar Singh Rathour,
(supra) is apposite to be referred to, which reads as under:
“129. We caution the public authorities to be circumspect in
disturbing or wriggling out of its contractual obligations through
means beyond the terms of the contract in exercise of their
executive powers. We do not say for a moment that the State has no
power to alter or cancel a contract that it has entered into.
However, if the State deems it necessary to alter or 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.”
40. Thus, Subodh Kumar Singh Rathour(supra) is a case where a
contract pursuant to the tender process which was entered into, was
cancelled at a stage pursuant to the contract work by the contractor that had
already been commenced, whereas, in the instant case, no letter of award or
work order has been issued. The contract, pursuant to the declaration of the
Petitioner as „H-1‟ in pursuance of the subject tender, has also not been
constituted.
41. M.P. Power Management Co. Ltd, (supra) has been quoted with the
approval in Subodh Kumar Singh Rathour(supra) wherein it has been held
that an action under writ jurisdiction will lie even at the stage prior to award
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of contract by the State wherever such award of a contract is imbued with
procedural impropriety, arbitrariness, favouritism or without any application
of mind.
42. In Subodh Kumar Singh Rathour, (supra) while arriving at the
conclusions, the Hon‟ble Supreme Court has referred to Ramana Dayaram
Shetty(supra), apart from other earlier judgments.
43. In Vice Chairman& Managing Director, (supra), it has been held that
in the matters of Government contracts public authorities are expected to
ensure that no bias, favoritism or arbitrariness are shown during the bidding
process and further that favoritism and good faith standards are to be
observed in the contracts entered into by public authorities which connotes
that such public authorities shall conduct themselves in a non-arbitrary
manner even during the performance of their contractual obligations. It is
also to be noticed that in Vice Chairman& Managing Director (supra), the
facts as noticed by the Apex Court were that in the bidding process, a party
was declared as the highest bidder and, accordingly, a lease deed was also
executed in its favour by the appellant/ corporation. However, subsequently,
the lease deed executed by the appellant/ corporation in the said case was
cancelled, and it is the cancellation of the lease deed which became the
subject matter of challenge before the High Court of Judicature at Bombay
and the High Court in writ proceedings quashed the cancellation of the lease.
An appeal was thus preferred by the appellant/ corporation against the said
judgment of the Bombay High Court, and the Hon‟ble Supreme Court found
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that the cancellation of the lease executed was not based on non-arbitrary
reasons. Thus, it is also a case where,atthe conclusion of the bidding process,
a lease deed was executed by the tendering authority in favour of the
participating firm which had quoted the highest bid.
44. The judgment in M.P. Power Management Co. Ltd, (supra) has
extensively been quoted by the Apex Court in Subodh Kumar Singh
Rathour, (supra) which has been discussed above. The conclusions drawn
in M.P. Power Management Co. Ltd, (supra) by the Apex Court can be
found in paragraphs 82 to 82.15 of the said judgment, which are extracted
herein below:-
“82. We may cull out our conclusions in regard to the points,
which we have framed:
82.1. 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.
82.2. The principle laid down in Bareilly Development
Authority [Bareilly Development Authority v. Ajai Pal Singh,
(1989) 2 SCC 116] 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 [Radhakrishna Agarwal v. State
of Bihar, (1977) 3 SCC 457] , may not continue to hold good, in
the light of what has been laid down in ABL [ABL International
Ltd. v. Export Credit Guarantee Corpn. of India Ltd., (2004) 3
SCC 553] and as followed in the recent judgment in Sudhir Kumar
Singh [State of U.P. v. Sudhir Kumar Singh, (2021) 19 SCC 706 :
2020 SCC OnLine SC 847].
82.3. The mere fact that relief is sought under a contract which is
not statutory, will not entitle the respondent State in a case by itself
to ward off scrutiny of its action or inaction under the contract, ifW.P.(C) 2492/2025 Page 34 of 63
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the complaining party is able to establish that the action/inaction
is, per se, arbitrary.
82.4. 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 Ramana Dayaram
Shetty [Ramana Dayaram Shetty v. International Airport Authority
of India, (1979) 3 SCC 489] ). 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 [Tata
Cellular v. Union of India, (1994) 6 SCC 651].
82.5. After the contract is entered into, there can be a variety of
circumstances, which may provide a cause of action to a party to
the contract with the State, to seek relief by filing a writ petition.
82.6. Without intending to be exhaustive, it may include the relief
of seeking payment of amounts due to the aggrieved party from the
State. The State can, indeed, be called upon to honour its
obligations of making 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.
82.7. 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 questions of fact, particularly when
the dispute surrounds demystifying of documents only, the Court
may relegate the party to the remedy by way of a civil suit.
82.8. The existence of a provision for arbitration, which is a forum
intended to quicken the pace of dispute resolution, is viewed as a
near bar to the entertainment of a writ petition [see in this regard,
the view of this Court even in ABL [ABL International
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SCC 553] explaining how it distinguished the decision of this
Court in State of U.P. v. Bridge & Roof Co. (India) Ltd. [State of
U.P. v. Bridge & Roof Co. (India) Ltd., (1996) 6 SCC 22] , by its
observations in SCC para 14 in ABL [ABL International
Ltd. v. Export Credit Guarantee Corpn. of India Ltd., (2004) 3
SCC 553] ].
82.9. The need to deal with disputed questions of fact, cannot be
made a smokescreen to guillotine a genuine claim raised in a writ
petition, when actually the resolution of a disputed question of fact
is unnecessary to grant relief to a writ applicant.
82.10. The reach of Article 14 enables a writ court to deal with
arbitrary State action even after a contract is entered into by the
State. A wide variety of circumstances can generate causes of
action for invoking Article 14. The Court’s approach in dealing
with 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.
82.11. Termination of contract can again arise in a wide variety of
situations. If for instance, a contract is terminated, by a person,
who is demonstrated, without any need for any argument, to be the
person, who is completely unauthorised to cancel the contract,
there may not be any necessity to drive the party to the
unnecessary ordeal of a prolix and avoidable round of litigation.
The intervention by the High 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 [ABL International Ltd. v. Export Credit Guarantee
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Corpn. of India Ltd., (2004) 3 SCC 553] , 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 a docket
explosion, which is truly alarming. If a case involves a large body
of documents and the Court is called upon to enter upon findings
of facts and involves merely the construction of the document, it
may not be an unsound discretion to relegate the party to the
alternate remedy. This is not to deprive the Court of its
constitutional power as laid down in ABL [ABL International
Ltd. v. Export Credit Guarantee Corpn. of India Ltd., (2004) 3
SCC 553]. It all depends upon the facts of each case as to whether,
having regard to the scope of the dispute to be resolved, whether
the Court will still entertain the petition.
82.12. In a case the State is a party to the contract and a breach of
a contract is alleged against the State, a civil action in the
appropriate forum is, undoubtedly, maintainable. But this is not
the end of the matter. Having regard to the position of the State
and its duty to act fairly and to eschew 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 Shrilekha Vidyarthi v. State of U.P. [Shrilekha
Vidyarthi v. State of U.P., (1991) 1 SCC 212 : 1991 SCC (L&S)
742] ). 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 mala fide, 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.
82.13. A lodestar, which may illumine the path of the Court, would
be the dimension of public interest subserved by the Court
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interfering in the matter, rather than relegating the matter to the
alternate forum.
82.14. 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.
82.15. 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 [State of U.P. v. Sudhir Kumar Singh, (2021) 19 SCC
706 : 2020 SCC OnLine SC 847] ).”
45. From the afore-quoted extract of the judgment in M.P. Power
Management Co. Ltd (supra), what we find is that it is settled that a writ
petition would lie when the State purports to award any largesse even at a
stage prior to the contract being entered into. However, the Apex Court has
further observed that such judicial scrutiny would be undertaken within the
nature of judicial review as declared by the Apex Court in its decision in
Tata Cellular v. Union of India,(1994) 6 SCC 651. Thus, there is no doubt
that the action on the part of the State or its instrumentality in the matter
relating to Government contracts will lie even to the stage prior to the
contract being executed.However, judicial review in such matters has to be
undertaken in terms of the principles declared by the Apex Court in Tata
Cellular, (supra).
46. In Nagar Nigam v. Al. Farheem Meat Exporters Pvt. Ltd, (2006) 13
SCC 382, Hon‟ble Apex Court has observed that it is well settled that having
regard to the provisions of Article 14 of the Constitution of India, the State
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or its instrumentality cannot distribute its largesse at its own sweet will and
further that the Court can ensure that statutory functions are not carried out
at the whims and caprices of the officers of the Government in an arbitrary
manner. The Apex Court has further observed that the Court cannot itself
take over such functions which are otherwise to be exercised by the
authorities concerned.
47. The Apex Court in LIC (supra)has held that every action of public
authority should be acted in the public interest and that if it is shown that the
exercise of power is arbitrary, unjust and unfair, there will be no answer for
the State or its instrumentality to say that their actions are in the field of
private law and they are free to describe any conditions or limitations in
their actions as private citizens. Paragraph 27 of the said judgment is
relevant to be extracted herein, which runs as under:
“27. In the sphere of contractual relations the State, its
instrumentality, public authorities or those whose acts bear
insignia of public element, action to public duty or obligation are
enjoined to act in a manner i.e. fair, just and 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.”
48. Similar views have been expressed and legal principles, as discussed
above, have been enunciated by the Apex Court in other judgments cited on
behalf of the Petitioner, namely Mahabir Auto Stores (supra), Noble
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Resources Ltd. (supra), ABL International Ltd. (supra), Kumari Shrileha
Vidyarthi (supra) and Banshidhar Construction (supra).
49. In view of the aforesaid discussion, the scope and extent of judicial
review of the action of the State by this Court in the exercise of its
jurisdiction under Article 226 of the Constitution in matters relating to
tender/ contract is well established which can be summarized, so far as the
same is relevant for the purpose of consideration of the issue arising in this
case, as below:
A. Judicial review of State action, even in matters of contract, is
permissible in disputes which arise after the contract is entered into
by an authority.
B. Judicial review is also permissible in relation to disputes which arise
in a tender/ contract matterthat are to be awarded by the public
authorities at the stage prior to the award of the contract.
C. Even at the stage after termination or breach of contract, actions of
the State/ instrumentality can be subjected to judicial review.
D. However, judicial review of the actions of the public authorities are
permissible on the grounds of the action complained against being
arbitrary, unfair or unreasonable, being contrary to the principle
enunciated under Article 14 of the Constitution of India.
E. The writ Court, while exercising judicial review in relation to
disputes arising at a stage prior to the award of contract, can
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undertaken within the nature of judicial review as declared by the
Apex Court in the decision in Tata Cellular (supra).
F. The writ Court can judicially review a contractual dispute where one
of the parties to the contract is a public authority and also in such a
situation where there is a violation of principles of natural justice,
where the action complained against does not serve any public
interest and the public authority has not acted in good faith.
(ii) The highest bidder has no vested right to have the contract
concluded in his favour.
50. It is the case of the Petitioners as set up in the writ petition that
pursuant to the subject tender process, Petitioner No.1 was found to be the
highest bidder on 04.04.2024 and that the High Level Committee in its
meeting held on 05.04.2024 declared the Petitioner No.1 to be the highest
bidder and further found the rates quoted by it to be higher by 9.86% than
the rates quoted in previous tender and also 4.63% higher than the present
remittance and further that it was higher than the minimum reserve price.
Accordingly, PetitionerNo.1 has been requesting the respondent/Corporation
to issue the letter of award, and for the said purpose, it has also furnished the
bank guarantee as required. However, as per the case set up by the
Petitioner, the respondent/Corporation, though the Petitioner has been
legitimately expecting, instead of issuing the letter of award, has cancelled
the tender process by the impugned decision. The question in light of these
facts, as pleaded by the Petitioner, is that merely because the Petitioner has
been declared as an „H-1‟ bidder, in the absence of a letter of award or
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execution of a contract, can any right be said to have been vested in the
PetitionerNo.1.
51. The said issue has been discussed by the Hon‟ble Supreme Court in
Indore Vikas Praadhikaran(supra), wherein it has been held that in the
absence of a concluded contract i.e. in absence of allotment letter and
acceptance of highest bid, the bidder does not acquire any vested right.
52. The facts in Indore Vikas Praadhikaran(supra), as can be gathered
from the said judgment, were that an advertisement was issued by Indore
Vikas Praadhikaran inviting bids for leasing out certain piece of land.
Pursuant to the said advertisement, three bids were received and the bid of
the respondent No.1 therein was found to be the highest („H-1‟). However,
on certain evaluation made, the tender committee of Indore Vikas
Praadhikaran arrived at a conclusion not to accept any of the bids and,
accordingly, a fresh tender was issued. The decision of the tender
committee was accepted by the Board of Indore Vikas Praadhikaran and,
accordingly, the bid of the respondent No. 1 therein was rejected. It is the
said decision of rejection of bid that became subject matter of challenge
before the Madhya Pradesh High Court. However, the writ petition was
dismissed by a learned Single Judge holding that the highest bidder does not
acquire any vested right. The judgment of the learned Single Judge was
challenged in an intra-Court appeal before the Division Bench of the
Madhya Pradesh High Court, which allowed the appeal and directed Indore
Vikas Praadhikaran to allot the plot to respondent No.1 on certain
conditions. The judgment of the Division Bench of Madhya Pradesh High
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Court was challenged before the Hon‟ble Supreme Court in appeal, and the
Hon‟ble Supreme Court, while discussing the law relating to the right of H-1
bidder and on review of earlier judgments of the Apex Court, allowed the
appeal. The Apex Court in Indore Vikas Praadhikaran(supra) also held
that in the absence of an allotment letter, no relief could have been granted
in favour of respondent No.1 as there was no concluded contract. It has
further been observed by the Hon‟ble Supreme Court in the said judgment
that the decision taken by the Tender Evaluation Committee to generate
more revenues could not have been interfered with by the Division Bench of
the Madhya Pradesh High Court.
(Emphasis supplied)
53. Paragraphs 12 to 14 of the judgment in Indore Vikas
Praadhikaran(supra) are extracted herein below:
“12. In the present case, the undisputed facts reveal that first NIT
was issued on 17.07.2020 and respondent No. 1 was certainly the
highest bidder by offering a bid of Rs. 25,671.90/- per square
meter. The Tender Evaluation Committee after examining the bid
arrived at a conclusion to cancel the tender as it came to its notice
that an outstanding property tax demand amounting to Rs.
1,25,82,262/- was not taken into account while fixing the base
price. It was resolved to issue a fresh NIT and, therefore, a fresh
NIT was issued on 17.11.2021 and for the reasons best known to
the respondent No. 1, it did not participate in the second NIT and
instead preferred a writ petition on 24.11.2021 before the High
Court of Madhya Pradesh. Learned Single Judge was justified in
dismissing the writ petition on the ground that merely by offering
highest bid, the respondent No. 1 did not acquire any vested right
for the execution of the contract in its favour. The Division Bench
of the High Court, however, allowed the writ appeal and has gone
to the extent in directing the IDA to accept the offer of respondent
No. 1 which was made before the Court for an amount of Rs.
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26,000/- per square meter in respect of the land in question, and
further directing IDA to allot the land in question to respondent
No. 1. This Court in the case of State of Jharkhand v. CWE-SOMA
Consortium (supra) while dealing with the similar issue of
annulment of tender process, in paras 21, 22 and 23 has held as
under:
“21. Observing that while exercising power of judicial review,
the Court does not sit as appellate court over the decision of
the Government but merely reviews the manner in which the
decision was made, in Tata Cellular v. Union of India [Tata
Cellular v. Union of India, (1994) 6 SCC 651], SCC in para 70
it was held as under : (SCC p. 675)
“70. It cannot be denied that the principles of judicial
review would apply to the exercise of contractual powers
by government bodies in order to prevent arbitrariness
or favouritism. However, it must be clearly stated that
there are inherent limitations in exercise of that power of
judicial review. Government is the guardian of the
finances of the State. It is expected to protect the
financial interest of the State. The right to refuse the
lowest or any other tender is always available to the
Government. But, the principles laid down in
Article 14 of the Constitution have to be kept in view
while accepting or refusing a tender. There can be no
question of infringement of Article 14 if the Government
tries to get the best person or the best quotation. The
right to choose cannot be considered to be an arbitrary
power. Of course, if the said power is exercised for any
collateral purpose the exercise of that power will be
struck down.”
22. The Government must have freedom of contract. In Master
Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd.
[Master Marine Services (P) Ltd. v. Metcalfe & Hodgkinson
(P) Ltd., (2005) 6 SCC 138], SCC in para 12 this Court held as
under : (SCC p. 147)
“12. After an exhaustive consideration of a large number of
decisions and standard books on administrative law, the
Court enunciated the principle that the modern trend points
to judicial restraint in administrative action. The court does
not sit as a court of appeal but merely reviews the manner
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in which the decision was made. The court does not have
the expertise to correct the administrative decision. 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. The Government
must have freedom of contract. In other words, fair 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 principles of
reasonableness but also must be free from arbitrariness not
affected by bias or actuated by mala fides. It was also
pointed out that quashing decisions may impose heavy
administrative burden on the administration and lead to
increased and unbudgeted expenditure. (See para 113 of the
Report, SCC para 94.)”
The Court does not have the expertise to correct the
administrative decision as held in Laxmikant v. Satyawan
[Laxmikant v. Satyawan, (1996) 4 SCC 208], the Government
must have freedom of contract.
23. The right to refuse the lowest or any other tender is always
available to the Government. In the case in hand, the
respondent has neither pleaded nor established mala fide
exercise of power by the appellant. While so, the decision of
the Tender Committee ought not to have been interfered with
by the High Court. In our considered view, the High Court
erred in sitting in appeal over the decision of the appellant to
cancel the tender and float a fresh tender. Equally, the High
Court was not right in going into the financial implication of a
fresh tender.”
13. This Court in the aforesaid case has held that while exercising
power of judicial review, the Court does not sit as an appellate
Court over the decision of the government but merely reviews the
manner in which the decision was made [Tata Cellular v. Union of
India, (1994) 6 SCC 651]. In the considered opinion of this Court,
the Division Bench should not have interfered in the matter and
could not have gone to the extent of fixing the base price/modifying
the offer made by respondent and, therefore, in light of the
aforesaid judgment as the High Court has virtually passed an
order sitting in appeal over the decision of the government in
absence of any mala fide exercise of power by the IDA, the
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judgment passed by the Division Bench of the High Court deserves
to be set aside and is, accordingly set aside. This Court in the case
of Haryana Urban Development Authority v. Orchid Infrastructure
Developers Pvt. Ltd. (supra) again dealing with the cancellation of
a bid of the highest bidder, in paragraphs 12, 13, 14, 15, 16 and 30
has held as under:
“12. Firstly, we examine the question whether there being no
concluded contract in the absence of acceptance of bid and
issuance of allotment letter, the suit could be said to be
maintainable for the declaratory relief and mandatory
injunction sought by the plaintiff. The plaintiff has prayed for a
declaration that rejection of the bid was illegal. Merely by
that, the plaintiff could not have become entitled for
consequential mandatory injunction for issuance of formal
letter of allotment. The court while exercising judicial review
could not have accepted the bid. The bid had never been
accepted by the authorities concerned. It was not a case of
cancellation of bid after being accepted. Thus, even assuming
as per the plaintiff’s case that the Administrator was not
equipped with the power and the Chief Administrator had the
power to accept or refuse the bid, there had been no decision
by the Chief Administrator. Thus, merely by declaration that
rejection of the bid by the Administrator was illegal, the
plaintiff could not have become entitled to consequential relief
of issuance of allotment letter. Thus the suit, in the form it was
filed, was not maintainable for relief sought in view of the fact
that there was no concluded contract in the absence of
allotment letter being issued to the plaintiff, which was a sine
qua non for filing the civil suit.
13. It is a settled law that the highest bidder has no vested
right to have the auction concluded in his favour. The
Government or its authority could validly retain power to
accept or reject the highest bid in the interest of public
revenue. We are of the considered opinion that there was no
right acquired and no vested right accrued in favour of the
plaintiff merely because his bid amount was highest and had
deposited 10% of the bid amount. As per Regulation 6(2) of the
1978 Regulations, allotment letter has to be issued on
acceptance of the bid by the Chief Administrator and within 30
days thereof, the successful bidder has to deposit another 15%
of the bid amount. In the instant case, allotment letter hasW.P.(C) 2492/2025 Page 46 of 63
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never been issued to the Petitioner as per Regulation 6(2) in
view of non-acceptance of the bid. Thus, there was no
concluded contract. Regulation 6 of the 1978 Regulations is
extracted hereunder:
“6. Sale of lease of land or building by auction.–(1) In the
case of sale or lease by auction, the price/premium to be
charged shall be such reserve price/premium as may be
determined taking into consideration the various factors as
indicated in sub-regulation (1) of Regulation 4 or any
higher amount determined as a result of bidding in open
auction.
(2) 10 per cent of the highest bid shall be paid on the spot
by the highest bidder in cash or by means of a demand draft
in the manner specified in sub-regulation (2) of Regulation
5. The successful bidder shall be issued allotment letter in
Form CC or C-II by registered post and another 15 per cent
of the bid accepted shall be payable by the successful
bidder, in the manner indicated, within thirty days of the
date of allotment letter conveying acceptance of the bid by
the Chief Administrator; failing which the 10 per cent
amount already deposited shall stand forfeited to the
authority and the successful bidder shall have no claim to
the land or building auctioned.
(3) The payment of balance of the price/premium, rate of
interest chargeable and the recovery of interest shall be in
the same manner as provided in sub-regulations (6) and (7)
of Regulation 5.
(4) The general terms and conditions of the auction shall be
such as may be framed by the Chief Administrator from
time to time and announced to the public before auction on
the spot.”
14. We are fortified in our view by a decision of this Court
in U.P. Avas Evam Vikas Parishad v. Om Prakash Sharma
[U.P. Avas Evam Vikas Parishad v. Om Prakash
Sharma, (2013) 5 SCC 182 : (2013) 2 SCC (Civ) 737], wherein
the questions arose for its consideration that : whether there is
any vested right upon the plaintiff bidder until the bid is
accepted by the competent authority in relation to the property
in question? Merely because the plaintiff is the highest bidder
by depositing 20% of the bid amount without there being
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approval of the same by the competent authority and it
amounts to a concluded contract in relation to the plot in
question; and whether the plaintiff could have maintained the
suit in the absence of a concluded contract? Considering the
aforesaid questions, this Court has discussed the matter thus :
(SCC pp. 195-97, paras 30-31)
“30. In support of the said proposition, the learned Senior
Counsel for the defendant, Mr. Rakesh Dwivedi has also
placed reliance upon another decision of this Court in State
of U.P. v. Vijay Bahadur Singh [State of U.P. v. Vijay
Bahadur Singh, (1982) 2 SCC 365]. The learned Senior
Counsel has rightly placed reliance upon the judgment of this
Court in Rajasthan Housing Board case [Rajasthan Housing
Board v. G.S. Investments, (2007) 1 SCC 477] which reads as
under : (SCC p. 483, para 9)
„9. This being the settled legal position, the respondent
acquired no right to claim that the auction be concluded
in its favour and the High Court clearly erred in
entertaining the writ petition and in not only issuing a
direction for consideration of the representation but also
issuing a further direction to the appellant to issue a
demand note of the balance amount. The direction
relating to issuance of the demand note for balance
amount virtually amounted to confirmation of the auction
in favour of the respondent which was not the function of
the High Court.‟
In State of Orissa v. Harinarayan Jaiswal [State of
Orissa v. Harinarayan Jaiswal, (1972) 2 SCC 36] case,
relevant paragraph of which reads as under : (SCC pp.
44-45, para 13)
„13. … There is no concluded contract till the bid is
accepted. Before there was a concluded contract, it
was open to the bidders to withdraw their bids
(see Union of India v. Bhim Sen Walaiti Ram [Union
of India v. Bhim Sen Walaiti Ram, (1969) 3 SCC
146] ). [Ed. : The matter between two asterisks has
been emphasised in Avam Evam Vikas Parishad
case, (2013) 5 SCC 182.] By merely giving bids, the
bidders had not acquired any vested rights [Ed. :
The matter between two asterisks has been
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emphasised in Avam Evam Vikas Parishad
case, (2013) 5 SCC 182: (2013 AIR SCW 2484).]
31. In view of the law laid down by this Court in the
aforesaid decisions, the learned Senior Counsel Mr. Rakesh
Dwivedi has rightly placed reliance upon the same in support
of the case of the first defendant, which would clearly go to
show that the plaintiff had not acquired any right and no
vested right has been accrued in his favour in respect of the
plot in question merely because his bid amount is highest and
he had deposited 20% of the highest bid amount along with
the earnest money with the Board. In the absence of
acceptance of bid offered by the plaintiff to the competent
authority of the first defendant, there is no concluded
contract in respect of the plot in question, which is evident
from letters dated 26-5-1977 and 8-7-1977 wherein the third
defendant had rejected the bid amount deposited by the
plaintiff and the same was refunded to him by way of demand
draft, which is an undisputed fact and it is also not his case
that the then Assistant Housing Commissioner who has
conducted the public auction had accepted the bid of the
plaintiff.”
15. This Court in Om Prakash Sharma case [U.P. Avas Evam
Vikas Parishad v. Om Prakash Sharma, (2013) 5 SCC
182 : (2013) 2 SCC (Civ) 737] has held that in the absence of
a concluded contract which takes place by issuance of
allotment letter, suit could not be said to be maintainable as
there is no vested right in the plaintiff without approval of the
bid by the competent authority. Thus, in the wake of the
aforesaid decision, in the absence of a concluded contract, the
suit could not have been decreed for mandatory injunction. It
amounted to enforcing of contract in the absence thereof.
16. In the light of the aforesaid discussion, it is evident that in
the absence of a concluded contract i.e. in the absence of
allotment letter and acceptance of highest bid, the suit filed by
the plaintiff was wholly misconceived. Even if non-acceptance
of the bid was by an incompetent authority, the court had no
power to accept the bid and to direct the allotment letter to be
issued. Merely on granting the declaration which was sought
that rejection was illegal and arbitrary and by incompetent
authority, further relief of mandatory injunction could not have
been granted, on the basis of findings recorded, to issue the
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allotment letter, as it would then become necessary to forward
the bid to competent authority–Chief Administrator–for its
acceptance, if at all it was required.
30. In Meerut Development Authority v. Assn. of
Management Studies [Meerut Development
Authority v. Assn. of Management Studies, (2009) 6 SCC
171 : (2009) 2 SCC (Civ) 803], this Court has laid down
that a bidder has no right in the matter of bid except of fair
treatment in the matter and cannot insist for further
negotiation. The authority has a right to reject the highest
bid. This Court has laid down thus : (SCC p. 182, paras 27
& 29)
“27. The bidders participating in the tender process
have no other right except the right to equality and fair
treatment in the matter of evaluation of competitive
bids offered by interested persons in response to notice
inviting tenders in a transparent manner and free from
hidden agenda. One cannot challenge the terms and
conditions of the tender except on the above stated
ground, the reason being the terms of the invitation to
tender are in the realm of the contract. No bidder is
entitled as a matter of right to insist the authority
inviting tenders to enter into further negotiations unless
the terms and conditions of notice so provided for such
negotiations.
29. The Authority has the right not to accept the highest
bid and even to prefer a tender other than the highest
bidder, if there exist good and sufficient reasons, such
as, the highest bid not representing the market price
but there cannot be any doubt that the Authority’s
action in accepting or refusing the bid must be free
from arbitrariness or favouritism.”
14. Keeping in view of the aforesaid judgments, this Court is of the
considered opinion that in the absence of allotment letter and
acceptance of highest bid, no relief could have been granted in
favour of respondent No. 1 as there was no concluded contract in
the matter and the decision taken by the Tender Evaluation
Committee to generate more revenues could not have been
interfered with in the manner and method as has been done by the
Division Bench of the High Court of Madhya Pradesh at Indore
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Bench. The bidder has no right in the matter of bid except of fair
treatment and cannot insist for further negotiation as has been
done in the present case. The terms and conditions of NIT,
particularly condition No. 6, empowers the IDA to accept or reject
any or all bids. In the present case, the bid was rejected for valid
and cogent reasons and, therefore, the order passed by the
Division Bench of the High Court of Madhya Pradesh is set
aside.”
54. In Laxmikant and Others, (supra), the Hon‟ble Supreme Court has
held that the State or any of its instrumentalities is not bound to accept the
highest bid or tender. Paragraph 4 of the judgment in Laxmikant and
Others, (supra) is extracted herein below:
“4. Apart from that the High Court overlooked the conditions of
auction which had been notified and on basis of which the
aforesaid public auction was held. Condition No. 3 clearly said
that after the auction of the plot was over, the highest bidder had
to remit 1/10 of the amount of the highest bid and the balance of
the premium amount was to be remitted to the trust office within
thirty days “from the date of the letter informing confirmation of
the auction bid in the name of the person concerned”. Admittedly,
no such confirmation letter was issued to the respondent.
Conditions Nos. 5, 6 and 7 are relevant:
“5. The acceptance of the highest bid shall depend on the
Board of Trustees.
6. The Trust shall reserve to itself the right to reject the
highest or any bid.
7. The person making the highest bid shall have no right to
take back his bid. The decision of the Chairman of the Board
of Trustees regarding acceptance or rejection of the bid shall
be binding on the said person. Before taking the decision as
above and informing the same to the individual concerned, if
the said individual takes back his bid, the entire amount
remitted as deposit towards the amount of bid shall be
forfeited by the Trust.”
From a bare reference to the aforesaid conditions, it is apparent
and explicit that even if the public auction had been completed and
the respondent was the highest bidder, no right had accrued to him
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till the confirmation letter had been issued to him. The conditions
of the auction clearly conceived and contemplated that the
acceptance of the highest bid by the Board of Trustees was a must
and the Trust reserved the right to itself to reject the highest or any
bid. This Court has examined the right of the highest bidder at
public auctions in the cases of Trilochan Mishra v. State of
Orissa [(1971) 3 SCC 153] , State of Orissa v. Harinarayan
Jaiswal [(1972) 2 SCC 36] , Union of India v. Bhim Sen Walaiti
Ram [(1969) 3 SCC 146 : (1970) 2 SCR 594] and State of
U.P. v. Vijay Bahadur Singh [(1982) 2 SCC 365] . It has been
repeatedly pointed out that State or the authority which can be
held to be State within the meaning of Article 12 of the
Constitution is not bound to accept the highest tender or bid. The
acceptance of the highest bid is subject to the conditions of holding
the public auction and the right of the highest bidder has to be
examined in context with the different conditions under which such
auction has been held. In the present case no right had accrued to
the respondent either on the basis of the statutory provision under
Rule 4(3) or under the conditions of the sale which had been
notified before the public auction was held.”
55. The above discussion does not leave any room of doubt that the
admitted legal position is that merely because a tenderer has been declared
to be the highest (H-1) or the lowest (L-1) bidder, as the case may be,
depending on the nature of tender, he will not acquire any vested right. The
tendering authority should be given adequate room to play and take
appropriate decisions in such a situation, which should, of course, be in
conformity with the principles governing State actions emanating from
Article 14 of the Constitution of India that is to say, such action should not
be arbitrary or unfair or unreasonable and further it should be in public
interest.
(iii) Scope of power of respondent Corporation to accept or reject a
proposal without assigning any reasons.
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56. One of the submissions made by learned counsel for the respondent
Corporation placing reliance on Note (12) of the tender document (on page
145 of the writ petition) is that it is well within the right of the respondent
corporation to reject any proposal without assigning any reason whatsoever
and cancellation of the tender process by the respondent corporation is thus
referrable to such condition of the tender document. It has been argued that
exercising such a right, which was known to the Petitioner as one of the
terms of the tender document, the tender process has been cancelled, that too
in the public interest and hence, there is no illegality in the impugned
decision.
57. No doubt such a right is available to the respondent Corporation,
however, if such a right is exercised by the respondent Corporation without
any plausible or cogent reason touching upon the public interest, such an
action would be in complete breach of the legal principles discussed above.
In our opinion, though such a right is available to the respondent
Corporation, albeit, it is to be exercised for tenable reasons, and such power
cannot be exercised arbitrarily or in an unfair manner.
58. Reference in this regard may be made to a Division Bench judgment
of this Court in PKF Sridhar and Santhanam v. Airports Economic
Regulatory Authority of India, 2022 SCC Online Del 122. In the said case,
one of the conditions of the tender process was that “The issue of this RFP
does not imply that AERA is bound to select an Applicant or to appoint the
Selected Applicant, as the case may be, for the Consultancy. AERA reserves
the right to reject all or any of the Proposals without assigning any reasons
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whatsoever.” However, this Court, considering the said condition, observed
that the fact that the respondent in the said case was a public authority
cannot be lost sight of and, further, that every public authority dealing with
public funds discharges a public trust and that such authority is bound to act
with financial prudence.The Court has further observed that the tender
inviting authority cannot act arbitrarily or whimsically or out of mala fides
in the matter of awarding or cancelling the tender. Further observation made
in the judgment is that even the clause which stipulates that the tendering
authority may not give reasons for not accepting any bid or rejecting the bid,
does not mean that they should not have any valid reasons to justify their
conduct. Paragraphs13 and 14 of the judgment in PKF Sridhar and
Santhanam, (supra) are relevant to be noticed here, which read as under:
“13. We cannot lose sight of the fact that the respondent is a public
authority, and it is on the public exchequer that the burden would
fall of the consultancy fee that the respondent would be required to
defray in favour of the selected consultant. Every public authority
dealing with public funds discharges a public trust, and is bound to
act with financial prudence. There may be certain exceptions to
their general rule – such as defence procurements, but the present
case certainly does not fall in any such exception. To construe the
language of Clause 1.5 to mean that the respondent is bound to
accept the L-1 bidder, can lead to disastrous results in a situation
where the lowest quoted prices are also found to be uncompetitive
or very high.
14. No doubt, the tender-inviting authority cannot act arbitrarily
or whimsically, or out of mala fides in the matter of awarding or
cancelling the tendering process. Even the clause which stipulates
that they may not assign reasons for not accepting any bid, or
rejecting the bids, does not mean that they should not have any
valid reasons to justify their conduct.”
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59. Thus, even if a clause in the tender conditions stipulating that the
tendering authority may reject a bid without assigning any reasons is
available, it would not mean that the tendering authority can do it without
having any valid reason to justify cancellation of the bid.
-: CONCLUSION :-
60. Having discussed the law and the legal principles as evolved by the
Hon‟ble Supreme Court in relation to the issue at hand in this matter, we
now need to consider the facts of the case pleaded on behalf of the
respective parties in light of these principles.
61. Admittedly, Petitioner no.1 was declared to be „H-1‟ bidder pursuant
to the tender process initiated by issuing the NIT dated 07.02.2024.
However, no Letter of Award has been issued in favour of the Petitioner
no.1, nor has any contract to perform the tender work has been constituted
between the parties.
62. Thus, this Court has been called upon to judicially scrutinize the
action on behalf of the respondent/Corporation at a stage prior to the award
of the contract. Hon‟ble Supreme Court in M.P. Power Management Co.
Ltd. (supra), which has been quoted with approval in Subodh Kumar Singh
Rathour(supra), has already held that an action to judicially review such a
decision taken at the stage prior to award of contract will lie, however such
judicial scrutiny has to be undertaken within the nature of judicial review as
declared by the Hon‟ble Supreme Court in its decision in Tata Cellular
(supra).
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63. In Tata Cellular (supra), Hon‟ble Supreme Court, after discussing the
law relating to judicial scrutiny of such matters in detail, has concluded that
the duty of the Court in such matters is confined to the question of legality
and further that the concern of the Court should be, whether the decision
making authority has exceeded its powers, whether decision making
authority has committed an error or committed a breach of rules of natural
justice or has reached the decision which no reasonable Tribunal would have
reached, or it has abused its powers. Paragraphs 76 and 77 of Tata Cellular
(supra) are extracted below:
“76. In R. v. Panel on Take-overs and Mergers, ex p in Guinness
plc [(1990) 1 QB 146 : (1989) 1 All ER 509] , Lord Donaldson,
M.R. referred to the judicial review jurisdiction as being
supervisory or „longstop‟ jurisdiction. Unless that restriction on
the power of the court is observed, the court will, under the guise
of preventing the abuse of power, be itself guilty of usurping
power.
77. The duty of the court is to confine itself to the question of
legality. Its concern should be:
1. Whether a decision-making authority exceeded its
powers?
2. Committed an error of law,
3. committed a breach of the rules of natural justice,
4. reached a decision which no reasonable tribunal
would have reached or,
5. abused its powers.
Therefore, it is not for the court to determine whether a particular
policy or particular decision taken in the fulfilment of that policy is
fair. It is only concerned with the manner in which those decisions
have been taken. The extent of the duty to act fairly will vary from
case to case. Shortly put, the grounds upon which an
administrative action is subject to control by judicial review can be
classified as under:
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(i) Illegality: This means the decision-maker must
understand correctly the law that regulates his decision-
making power and must give effect to it.
(ii) Irrationality, namely, Wednesbury unreasonableness.
(iii) Procedural impropriety.
The above are only the broad grounds but it does not rule out
addition of further grounds in course of time. As a matter of fact,
in R. v. Secretary of State for the Home Department, ex
Brind [(1991) 1 AC 696] , Lord Diplock refers specifically to one
development, namely, the possible recognition of the principle of
proportionality. In all these cases the test to be adopted is that the
court should, “consider whether something has gone wrong of a
nature and degree which requires its intervention”.”
64. The Apex Court in Tata Cellular (supra) has deduced the legal
principles governing judicial review of contractual actions, where one of the
parties is the State or its instrumentality, in paragraph 94 of the report, which
is also extracted herein below:
94. The principles deducible from the above are:
(1) The modern trend points to judicial restraint in
administrative action.
(2) The court does not sit as a court of appeal but merely
reviews the manner in which the decision was made.
(3) The court does not have the expertise to correct the
administrative decision. 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.
(4) The terms of the invitation to tender cannot be open to
judicial scrutiny because the invitation to tender is in the
realm of contract. Normally speaking, the decision to
accept the tender or award the contract is reached by
process of negotiations through several tiers. More often
than not, such decisions are made qualitatively by
experts.
(5) The Government must have freedom of contract. In
other words, a fair play in the joints is a necessary
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administrative sphere or quasi-administrative sphere.
However, the decision must not only be tested by the
application of Wednesbury principle of reasonableness
(including its other facts pointed out above) but must be
free from arbitrariness not affected by bias or actuated by
mala fides.
(6) Quashing decisions may impose heavy administrative
burden on the administration and lead to increased and
unbudgeted expenditure.
Based on these principles we will examine the facts of this case
since they commend to us as the correct principles.
65. As already discussed above, the respondent/Corporation, under the
terms of the tender, as can be found in the tender document itself, has been
vested with the authority to either accept or reject any or all of the proposals
or even to cancel the engagement process. However, such an authority by
the respondent/Corporation cannot be exercised without any plausible and
legally tenable reason. It also cannot be exercised arbitrarily, and the
respondent/Corporation is bound to observe the principle of fairness even
while cancelling the proposal submitted by the Petitioner no.1, which was
adjudged as „H-1‟.
66. Thus, though the respondent/Corporation was not bereft of its
authority of cancelling the bid submitted by the Petitioner no.1, which was
adjudged „H-1‟, however, the cancellation needs to be justified by the
respondent/Corporation as non-arbitrary and in the public interest, if, the
impugned has to be sustained. It is also noticeable that the State or its
instrumentality must have freedom of contract and fair play in the joints,
which is necessary for an administrative body, however, such an
administrative decision must be tested on Wednesbury principle of
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reasonableness, and further, it must be free from arbitrariness not affected by
bias or actuated by mala fides. In this regard, we may note the reasons given
by the respondent/Corporation for cancelling the bid of the Petitioner no.1,
which are as follows: –
a. A period of more than one year has elapsed from the date of
issuance of NIT and the decision could not be taken at an
earlier stage for the reason that Standing Committee of the
respondent/Corporation was not available/functioning due to
some litigation in Hon‟ble Supreme Court;
b. By making interim arrangements, which shall continue till the
new tender is finalized, no loss to revenue will occur;
c. The recommendation made by the Commissioner of the
respondent/Corporation in his letter dated 19.08.2024 was not
binding on the House of the respondent/Corporation, which has
taken the impugned decision in the public interest;
d. As a result of the impugned decision, public revenue of the
respondent/Corporation shall increase which is a valid
consideration for cancelling the tender process;
e. The tentative base price in the fresh tender is likely to be fixed
at more than Rs.900 Crores, and on market research, the tender
is expected to fetch Rs.1000 Crores, which is an amount more
than what would have been gained by awarding the tender to
the Petitioner no.1 pursuant to the NIT dated 07.02.2024; andW.P.(C) 2492/2025 Page 59 of 63
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f. The reasons as aforesaid constitute valid grounds for taking the
impugned decision, which is in the public interest, and as such,
the same cannot be said to be unreasonable or arbitrary.
67. While dealing with the aforementioned reasons as argued on behalf of
the respondent/Corporation for cancelling the tender process and not
accepting the bid of the Petitioner no.1, what we find is that the impugned
decision has been taken by the House of the respondent/Corporation which
seems to be the final decision making body on behalf of the
respondent/Corporation. The submission of the learned Senior counsel
appearing for the Petitioners that the delay of one year in taking the final
decision has occurred on account of procrastination on the part of the
respondent/Corporation merits rejection for the reason that earlier the
Standing Committee was not available on account of certain litigation and
the same was not in function.
68. In a period of one year from the date of issuance of the NIT on
07.02.2024, much water has flown down the river Yamuna and accordingly,
in our considered opinion, on account of the changed situation and
circumstances, if the decision by the House of the respondent/Corporation
has been taken to go for inviting fresh tender, the same cannot be faulted
with.
69. It is also to be noticed that it is not that during the intervening period
i.e. till the new tender process is finalized, the respondent/Corporation shall
suffer any loss of revenue as during the interregnum, the Toll is to be
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collected by the existing contractor at the rate offered by the Petitioner no.1
(„H-1‟) pursuant to the subject NIT dated 07.02.2024.
70. In case, on the basis of market research by floating the new tender the
respondent/Corporation is likely to fetch more revenue, the decision to
cancel the earlier tender process seems to be in consonance with the
financial prudence exercised by the respondent/Corporation.
71. Further, as laid down by the Hon‟ble Supreme Court in Tata Cellular
(supra), the respondent/Corporation must be given freedom of contract, and
the respondent/Corporation also needs to be given ample space for fair play
in the joints, which is a necessary concomitant for an administrative
authority functioning in an administrative sphere, as laid down in Tata
Cellular (supra).
72. As held in Tata Cellular (supra), impugned decision has also to be
tested on the principles of Wednesbury unreasonableness. Tata Cellular
(supra) explains that the principles of Wednesbury unreasonableness applies
to a decision which is so outrageous in its defiance of logic or accepted
moral standards that no sensible person, who had applied his mind to the
question to be decided, could have arrived at.
73. In our opinion, if the impugned decision is tested on the principles of
Wednesbury unreasonableness, the same cannot be termed to be either
irrational or unreasonable for the reason that the decision has been taken on
valid considerations by the respondent/Corporation. The relevant aspects
which were taken into account by the respondent/Corporation for arriving at
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the impugned decision cancelling the bid submitted by the Petitioner no.1
have already been discussed above, that include:- (i) after a lapse of a period
of one year, which might have brought changes in the circumstances, there
is a possibility of fetching more public revenue by floating the new tender,
and (ii) there being no loss to the public revenue of the
respondent/Corporation as during the interregnum an arrangement has been
made to realise the Toll at the rate offered by the Petitioner no.1 („H-1‟)
pursuant to the subject NIT dated 07.02.2024, that is to be collected by the
existing contractor.
74. For the aforesaid reasons, we may observe that the impugned decision
cannot be said to be outrageous in its defiance of logic. It also cannot in any
manner be said that the impugned decision could not have been arrived at by
any sensible person of common prudence. In this view, the impugned
decision does not appear to be hit by the principle of Wednesbury
unreasonableness.
75. In view of the discussion made and reasons given above, we find
ourselves unable to agree with the submissions made by the learned Senior
counsel representing the Petitioners that the impugned decision suffers from
the vice of unreasonableness, unfairness or arbitrariness. The impugned
decision also, in our opinion, does not suffers from any proved mala fide as
well on the part of the respondent/Corporation.
76. Resultantly, the Writ Petition, along with the application(s), if any, is
dismissed.
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Digiltally Signed
By:SREERAM L
Signing Date:08.04.2025
14:32:09
77. However, there will be no order as to costs.
(DEVENDRA KUMAR UPADHYAYA)
CHIEF JUSTICE
(TUSHAR RAO GEDELA)
JUDGE
APRIL 08, 2025
“shailndra”/N.Khanna
W.P.(C) 2492/2025 Page 63 of 63
Signature Not Verified
Digiltally Signed
By:SREERAM L
Signing Date:08.04.2025
14:32:09
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