New Delhi, noting that the State is not the "absolute owner" of resources and that public tenders are meant to ensure a level playing field, the Supreme Court on Tuesday set aside the decision of the West Bengal authorities to cancel the award of a contract for maintenance of two underpasses in Kolkata to a private party without assigning any reason.
The apex court termed the cancellation of the contract a "classic case of arbitrary and capricious exercise" of power at the behest of a West Bengal minister and set aside the May 25, 2023 judgment of the Calcutta High Court that had upheld the cancellation of the contract. contract.
"Public tenders are a cornerstone of government contracting processes, as they guarantee transparency, competition and equity in the allocation of public resources." It emanates from the Public Trust Doctrine which establishes that all natural resources and Services and structures for public use are intended for the benefit and enjoyment of the public.
"The State is not the absolute owner of such resources but holds them in trust and as such cannot use them as it pleases..." said Chief Justice D Y Chandrachud and Justices JB Pardiwala and Manoj Misra .
In an 83-page judgment for the court, Justice Pardiwala said that as a steward of public resources, the State has a duty to ensure that community resources are used fairly and appropriately to ensure the benefit of the public.The verdict He said that there was an obligation on the State not to incur any favoritism or discrimination with these resources.
He also addressed the scope of judicial review of State actions in matters relating to contract and tender disputes under judicial jurisdiction.
"Relief may also be obtained by a court order under Article 226 of the Constitution against the termination or breach of a contract, provided that such action is considered to be manifestly unauthorized or arbitrary." Before diverting the parties from the appeal from a civil suit, courts must take into account whether such termination or non-compliance was within the scope of the contract or whether the State simply intended to exercise powers under the contract for some ulterior motive," it says.
Any action by the State to terminate a contract, which goes beyond the agreed terms, will be susceptible to judicial jurisdiction to determine whether such decision is imbued with arbitrariness or influenced by extraneous considerations, he said.
Referring to the facts of the case, he said: "We are of the considered opinion that the present lis (litigation or case) is nothing more than a classic textbook case of arbitrary and capricious exercise of powers by the defendant to cancel the tender which was issued to the appellant on the basis of extraneous considerations and at the instance of none other than the Minister-in-Charge concerned."He contended that there was an arbitrary exercise of powers by the state authorities in canceling the tender "that too at the instance of none other than of the Minister-in-Charge concerned and thereby rendering the Cancellation Notification dated February 7, 2023 illegal.”
“As we have held that the Cancellation Notice… is invalid, the issuance of a fresh tender to any third party in respect of the same work would not void the vested rights accruing in favor of the appellant.
“Thus, for all the reasons stated, the appeal prospers and is upheld. The cancellation notification dated 02.07.2023 is set aside and the impugned judgment and order passed by the High Court is set aside,” he said. The high court had reserved the judgment of May 8.
Referring to the facts of the case, the CJI stated that no reason had been given for cancellation of the contract.
On May 25, 2023, a bench of the high court upheld the verdict of a single-person bench that had approved cancellation of the contract awarded to a company headed by Subodh Kumar Singh Rathour. The company had bagged the contract for maintenance of two underpasses on the East Kolkata Metropolitan Bypass for 10 years.
As part of the contract, the company was allowed to place advertisements both inside and above the underpasses, for which it had to carry out some construction work.
However, the contract was terminated by the KMDA (Kolkata Metropolitan Development Authority) on February 7, 2023. The KMDA had made it clear that it would refund the license fee deposited by Rathour and the costs incurred by him in the construction activities. and maintenance, etc.
The apex court termed the cancellation of the contract a "classic case of arbitrary and capricious exercise" of power at the behest of a West Bengal minister and set aside the May 25, 2023 judgment of the Calcutta High Court that had upheld the cancellation of the contract. contract.
"Public tenders are a cornerstone of government contracting processes, as they guarantee transparency, competition and equity in the allocation of public resources." It emanates from the Public Trust Doctrine which establishes that all natural resources and Services and structures for public use are intended for the benefit and enjoyment of the public.
"The State is not the absolute owner of such resources but holds them in trust and as such cannot use them as it pleases..." said Chief Justice D Y Chandrachud and Justices JB Pardiwala and Manoj Misra .
In an 83-page judgment for the court, Justice Pardiwala said that as a steward of public resources, the State has a duty to ensure that community resources are used fairly and appropriately to ensure the benefit of the public.The verdict He said that there was an obligation on the State not to incur any favoritism or discrimination with these resources.
He also addressed the scope of judicial review of State actions in matters relating to contract and tender disputes under judicial jurisdiction.
"Relief may also be obtained by a court order under Article 226 of the Constitution against the termination or breach of a contract, provided that such action is considered to be manifestly unauthorized or arbitrary." Before diverting the parties from the appeal from a civil suit, courts must take into account whether such termination or non-compliance was within the scope of the contract or whether the State simply intended to exercise powers under the contract for some ulterior motive," it says.
Any action by the State to terminate a contract, which goes beyond the agreed terms, will be susceptible to judicial jurisdiction to determine whether such decision is imbued with arbitrariness or influenced by extraneous considerations, he said.
Referring to the facts of the case, he said: "We are of the considered opinion that the present lis (litigation or case) is nothing more than a classic textbook case of arbitrary and capricious exercise of powers by the defendant to cancel the tender which was issued to the appellant on the basis of extraneous considerations and at the instance of none other than the Minister-in-Charge concerned."He contended that there was an arbitrary exercise of powers by the state authorities in canceling the tender "that too at the instance of none other than of the Minister-in-Charge concerned and thereby rendering the Cancellation Notification dated February 7, 2023 illegal.”
“As we have held that the Cancellation Notice… is invalid, the issuance of a fresh tender to any third party in respect of the same work would not void the vested rights accruing in favor of the appellant.
“Thus, for all the reasons stated, the appeal prospers and is upheld. The cancellation notification dated 02.07.2023 is set aside and the impugned judgment and order passed by the High Court is set aside,” he said. The high court had reserved the judgment of May 8.
Referring to the facts of the case, the CJI stated that no reason had been given for cancellation of the contract.
On May 25, 2023, a bench of the high court upheld the verdict of a single-person bench that had approved cancellation of the contract awarded to a company headed by Subodh Kumar Singh Rathour. The company had bagged the contract for maintenance of two underpasses on the East Kolkata Metropolitan Bypass for 10 years.
As part of the contract, the company was allowed to place advertisements both inside and above the underpasses, for which it had to carry out some construction work.
However, the contract was terminated by the KMDA (Kolkata Metropolitan Development Authority) on February 7, 2023. The KMDA had made it clear that it would refund the license fee deposited by Rathour and the costs incurred by him in the construction activities. and maintenance, etc.
