Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.

p. 581 Copy page pinpoint

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: - "xiii. A lodestar, which may illumine the path of the Court, would be the dimension of public interest subserved by the Court interfering in the matter, rather than relegating the matter to the alternate Forum. xiv. Another relevant criteria is, if the Court has entertained the matter, then, while it is not tabooed that the Court should not relegate the party at a later stage, ordinarily, it would be a germane consideration, which may persuade the Court to complete what it had started, provided it is otherwise a sound exercise of jurisdiction to decide the matter on merits in the Writ Petition itself. xv. Violation of natural justice has been recognised as a ground signifying the presence of a public law element and can found a cause of action premised on breach of Article 14. [See Sudhir Kumar Singh and Others (supra)].” (Emphasis supplied)

56Copy pinpoint56. 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

p. 582 Copy page pinpoint

Digital Supreme Court Reports

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.

57Copy pinpoint57. 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.

58Copy pinpoint58. 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.

p. 583 Copy page pinpoint

59Copy pinpoint59. 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.

60Copy pinpoint60. Now coming to the facts of the case at hand, the appellant has challenged the cancellation of the tender at the instance of the respondent on the ground of being manifestly arbitrary and influenced by extraneous considerations. It is evident from the notice of cancellation dated 07.02.2023, that the tender was not terminated pursuant to any terms of the contract subsisting between the parties, rather, the respondent ‘cancelled’ the tender saying that there was technical fault in the tender that was floated.

61Copy pinpoint61. Thus, the respondent could be said to have exercised powers in its executive capacity as the action to cancel the tender falls outside the purview of the terms of the contract. Hence, it cannot be said that the present matter is purely a contractual dispute. It is also not a breach of contract, as no such breach has been imputed to the appellant in terms of the contract, but rather a plain and simple exercise of the executive powers.

62Copy pinpoint62. Thus, the present dispute even if related to a tender, cannot be termed as a pure contractual dispute, as the dispute involves a public law element. Although there is no discharge of a public function by the respondent towards the appellant yet there is a right to public law action vested in him against the respondent in terms of Article 14 of the Constitution. This is because the exercise of the executive power by it in the contractual domain i.e., the cancelling of the tender carries a corresponding public duty to act in a reasonable and rationale manner. Thus, we find that the writ petition filed by the respondent was maintainable and the relief prayed for could have been considered by the High Court in exercise of its writ jurisdiction. c. Meaning and True Import of Arbitrariness of State Actions in Contractual Disputes.

63Copy pinpoint63. In Ramana Dauaram Shetty v. The International Airport Authority of India & Ors. reported in AIR 1979 SC 1628 this Court held that the actions of the State in contractual matters must conform

p. 584 Copy page pinpoint

Digital Supreme Court Reports

to some standard or norms which is rational, non-discriminatory and not guided by extraneous considerations, otherwise the same would be in violation of Article 14 of the Constitution. The relevant observations read as under: - “This rule also flows directly from the doctrine of equality embodied in Article 14. It is now well settled as a result of the decisions of this Court in E.P. Royappa v. State of Tamil Nadu, A.I.R. 1974 S.C. 555 and Maneka Gandhi v. Union of India, A.I.R. 1978 S.C. 597 that Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. It requires that State action must not be arbitrary but must be based on some rational and relevant principle which is non discriminatory; it must not be guided by any extraneous or irrelevant consideration, because that would be denial of equality. The principle of reasonableness and rationality which is legally as well as philosophically an essential element of equality or non-arbitrariness is projected by Article 14 and it must characterise every State action, whether it be under authority of law or in exercise of executive power without making of law. The State cannot, therefore, act arbitrarily in entering into relationship, contractual or otherwise with a third party, but its action must conform to some standard or norm which is rational and non-discriminatory.” (Emphasis supplied)

64Copy pinpoint64. In Dwarkadas Marfatia & Sons (supra) this Court speaking through Sabyasachi Mukherji, CJ. (as the learned Chief Justice then was) held that every action of the State or an instrumentality of the State must be informed by reason......actions uninformed by reason may be questioned as arbitrary. The relevant observations read as under: - “22. [...] every action of the State or as instrumentality of the State, must be informed by reason. Indubitably, the respondent is an organ of the State under Article 12 of the Constitution. In appropriate cases, as was observed in the last mentioned decision, actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution. But it has to be remembered that Article 14 cannot be construed as a

p. 585 Copy page pinpoint

charter for judicial review of State action, to call upon the State to account for its actions in its manifold activities by stating reasons for such actions.” (Emphasis supplied)

65Copy pinpoint65. The meaning and true import of arbitrariness is more easily visualized than precisely stated or defined. The question, whether an impugned action is arbitrary or not, is ultimately to be answered on the facts and in the circumstances of a given case. An obvious test to apply is to see whether there is any discernible principle emerging from the impugned act and if so, does it satisfy the test of reasonableness. Where a mode is prescribed for doing an act and there is no impediment in following that procedure, the performance of the act otherwise and in a manner which does not disclose any discernible principle which is reasonable, may itself attract the vice of arbitrariness. Every State action must be informed by reason and it follows that an act uninformed by reason, is arbitrary. Rule of law contemplates governance by laws and not by humour, whims or caprices of the men to whom the governance is entrusted for the time being. It is trite that be you ever so high, the laws are above you.

66Copy pinpoint66. Control of administrative discretion is an important concern in the development of Rule of Law. According to Wade and Forsyth, the Rule of Law has four meanings, and one of them is that “government should be conducted within a framework of recognized rules and principles which restrict discretionary power”.

67Copy pinpoint67. To enthuse efficiency in administration, a balance between accountability and autonomy of action should be carefully maintained. Overemphasis on either would impinge upon public efficiency. But undermining the accountability would give immunity or carte blanche power to act as it pleases with the public at whim or vagary. Whether the public authority acted bona fide would be gauged from the impugned action and attending circumstances. The authority should justify the action assailed on the touchstone of justness, fairness and reasonableness. Test of reasonableness is more strict. The public authorities should be duty conscious rather than power charged. Its actions and decisions which touch the common man have to be tested on the touchstone of fairness and justice. That which is not fair and just is unreasonable. And what is unreasonable is arbitrary. An arbitrary action is ultra vires. It does not become bona fide and in

p. 586 Copy page pinpoint

Digital Supreme Court Reports

good faith merely because no personal gain or benefit to the person exercising discretion has been established. An action is mala fide if it is contrary to the purpose for which it was authorised to be exercised. Dishonesty in discharge of duty vitiates the action without anything more. An action is bad even without proof of motive of dishonesty, if the authority is found to have acted contrary to reason. [See: Mahesh Chandra v. Regional Manager, U.P. Financial Corporation & Ors. : (1993) 2 SCC 279]

68Copy pinpoint68. The dictum as laid in Tata Cellular v. UOI reported in (1994) 6 SCC 651 is that the judicial power of review is exercised to rein in any unbridled executive functioning. It was observed that the restraint has two contemporary manifestations viz. one is the ambit of judicial intervention and the other covers the scope of the court’s ability to quash an administrative decision on its merits. These restraints bear the hallmarks of judicial control over administrative action. It was held that the principle of judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision-making process itself. It was held that the principle of judicial review would apply to the exercise of contractual powers by the Government bodies in order to prevent arbitrariness or favouritism. It was held that the duty of the court is to confine itself to the question of legality and its concern should be whether a decision-making authority exceeded its powers; whether it committed an error of law or committed a breach of the rules of natural justice or reached a decision which no reasonable tribunal would have reached or, abused its powers. The grounds upon which an administrative action can be subjected to judicial review are classified as illegality, irrationality and procedural impropriety. In that very decision, while deducing the principles from various cases referred, it was held that the modern trend points to judicial restraint in administrative action; that the Court does not sit as a court of appeal but merely reviews the manner in which the decision was made; that the court does not have the expertise to correct the administrative decision and if a review of the administrative decision is permitted, it will be substituting its own decision, without the necessary expertise which itself may be fallible; that the terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract; and, that the government must have freedom of contract, i.e. a free-play in the joints is a necessary concomitant

p. 587 Copy page pinpoint

for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness, but must be free from arbitrariness not affected by bias or actuated by mala fides. Moreover, quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.

69Copy pinpoint69. To ascertain whether an act is arbitrary or not, the court must carefully attend to the facts and the circumstances of the case. It should find out whether the impugned decision is based on any principle. If not, it may unerringly point to arbitrariness. If the act betrays caprice or the mere exhibition of the whim of the authority it would sufficiently bear the insignia of arbitrariness. In this regard supporting an order with a rationale which in the circumstances is found to be reasonable will go a long way to repel a challenge to State action. No doubt the reasons need not in every case be part of the order as such. If there is absence of good faith and the action is actuated with an oblique motive, it could be characterised as being arbitrary. A total non-application of mind without due regard to the rights of the parties and public interest may be a clear indicator of arbitrary action.

70Copy pinpoint70. One another way, to assess whether an action complained of could be termed as arbitrary is by way of scrutinizing the reasons that have been assigned to such an action. It involves overseeing whether the reasons which have been cited if at all genuinely formed part of the decision-making process or whether they are merely a ruse. All decisions that are taken must earnestly be in lieu of the reasons and considerations that have been assigned to it. The Court must be mindful of the fact that it is not supposed to delve into every minute details of the reasoning assigned, it need not to go into a detailed exercise of assessing the pros and cons of the reasons itself, but should only see whether the reasons were earnest, genuine and had a rationale with the ultimate decision. What is under scrutiny in judicial review of an action is the decision-making process and whether there is any element of arbitrariness or mala fide.

71Copy pinpoint71. Thus, the question to be answered in such situations is whether the decision was based on valid considerations. This is undertaken to ensure that the reasons assigned were the true motivations behind the action and it involves checking for the presence of any ulterior

p. 588 Copy page pinpoint

Digital Supreme Court Reports

motives or irrelevant considerations that might have influenced the decision. The approach of the court must be to respect the expertise and discretion of administrative authorities while still protecting against arbitrary and capricious actions. Thus, now the only question that remains to be considered is whether the action of the respondent to cancel the tender could be termed as arbitrary? ii. Whether the action of cancelling the tender is arbitrary or unfair and in consequence of violation of Article 14 of the Constitution?

72Copy pinpoint72. The principal contention of the appellant is that the notice of cancellation dated 07.02.2023 that was issued by the respondent is manifestly arbitrary, unreasonable and influenced by mala fide and extraneous considerations.

73Copy pinpoint73. Before we proceed to determine whether the cancellation of tender could be termed as arbitrary, it is necessary to understand the stance of the respondent in the present litigation, as discernible from their pleadings, which has left us quite perplexed. The argument of the respondent is two-fold: - (i) First, that the tender had to be cancelled as there was a technical fault. The tender was found to be ‘non-specific’ & ‘not well defined’ as a result it created ambiguity resulting in financial losses to the respondent. (ii) Secondly, the cancellation was also on account of a change in policy whereby, the operation & maintenance of the concerned underpasses had been handed over to another authority.

74Copy pinpoint74. The primary thrust of the respondent’s contention is that the decision to cancel the tender was taken in view of the technical faults in the same, more particularly the ambiguity as to whether the advertisement boards could be put up beyond the area of the concerned underpasses.

75Copy pinpoint75. The learned Single Judge of the High Court in its order dated 24.04.2023 observed that there was an ambiguity in the Special Terms & Conditions of the Memorandum of Tender more particularly clauses 10 and 14 respectively which gave rise to a conflicting interpretation as to the placement of the signboards. This in the opinion of the High Court was a technical fault, which the respondent sought to

p. 589 Copy page pinpoint

rectify by way of cancelling the tender. The relevant observations read as under: - “18. [...] In fact, the letter of cancellation provides further reasons, namely, that the tender has been found to be non-specific and having technical faults. This would also be borne out from clauses 10 and 14 of the Special Terms and Conditions of the tender document which give rise to conflicting interpretations on the placement of the signboards. Hence, besides the administrative decision to hand over the maintenance of E.M. Bypass from KMDA to KMC, the respondent KMDA as the tendering authority, has a right to rectify the ambiguities in the bid document by cancelling the same.” (Emphasis supplied)

76Copy pinpoint76. However, interestingly, the Notice of Cancellation dated 07.02.2023 that came to be issued by the respondent makes no mention of any such lacuna. In fact, there is no reference to the aforementioned clauses or any conflict in their interpretation. The aforesaid notice only states that the tender was found to be ‘non-specific’ and ‘not well defined’ which created ambiguity due to which the respondent is incurring losses, and nothing is stated either about the ambiguity in putting up the advertisement boards or for that matter which aspect of the tender is non-specific.

77Copy pinpoint77. It is also apposite to mention that just a month prior to cancelling the tender, the respondent on 24.01.2023 issued a notice to the appellant, asking him to stop all work in respect of the tender. Remarkably, in the said notice, there is no whisper about there being any of the aforementioned technical faults in the tender floated by the respondent. In fact, a close reading of the aforesaid notice would reveal that the orders to stop the work had been issued for an altogether different reason – i.e., handing over of the operation & maintenance of the concerned underpasses to another authority i.e., KMC. a. Scrutiny of Internal File-Notings and Deliberations of the State.

78Copy pinpoint78. The appellant has in particular placed reliance on various notings made in the internal file of the respondent in respect of the tender to

p. 590 Copy page pinpoint

Digital Supreme Court Reports

79Copy pinpoint79. This Court in its decision in Bachhittar Singh v. State of Punjab & Anr. reported in AIR 1963 SC 395 held that merely because something was written in the internal files and notesheet does not amount to an order, it at best is an expression of opinion which may be changed, and it only becomes an order when such opinion is formally made into a decision. The relevant observations read as under: - “9. The question, therefore, is whether he did in fact make such an order. Merely writing something on the file does not amount to an order. Before something amounts to an order of the State Government two things are necessary. The order has to be expressed in the name of the Governor as required by clause (1) of Article 166 and then it has to be communicated. As already indicated, no formal order modifying the decision of the Revenue Secretary was ever made. Until such an order is drawn up the State Government cannot, in our opinion, be regarded as bound by what was stated in the file. [...]

10. The business of State is a complicated one and has necessarily to be conducted through the agency of a large number of officials and authorities. The Constitution, therefore, requires and so did the Rules of Business framed by the Rajpramukh of PEPSU provide, that the action must be taken by the authority concerned in the name of the Rajpramukh. It is not till this formality is observed that the action can be regarded as that of the State or here, by the Rajpramukh. [...] Indeed, it is possible that after expressing one opinion about a particular matter at

p. 591 Copy page pinpoint

a particular stage a Minister or the Council of Ministers may express quite a different opinion, one which may be completely opposed to the earlier opinion. Which of them can be regarded as the “order” of the State Government? Therefore, to make the opinion amount to a decision of the Government it must be communicated to the person concerned.” (Emphasis supplied) [See also: Delhi Development Authority v. Hello Home Education Society : (2024) 3 SCC 148 at para 17 Mahadeo & Ors. v. Sovan Devi & Ors. : (2023) 10 SCC 807 at paras 15-17; Municipal Committee, Barwala v. Jai Narayan and Co. & Anr. : (2022) SCC OnLine 376 at para 16]

80Copy pinpoint80. In Sethi Auto Service Station v. DDA reported in (2009) 1 SCC 180 this Court held that notings in a departmental file are nothing more than an opinion by an officer for internal use and consideration of other officials for the final decision making. The relevant observations read as under: - “14. It is trite to state that notings in a departmental file do not have the sanction of law to be an effective order. A noting by an officer is an expression of his viewpoint on the subject. It is no more than an opinion by an officer for internal use and consideration of the other officials of the department and for the benefit of the final decision-making authority. Needless to add that internal notings are not meant for outside exposure. Notings in the file culminate into an executable order, affecting the rights of the parties, only when it reaches the final decision-making authority in the department, gets his approval and the final order is communicated to the person concerned.” (Emphasis supplied)

81Copy pinpoint81. In Shanti Sports Club (supra) several representations were made by the landowners requesting to release their land from acquisition. After considering those representations, the concerned minister recorded in the note file that the land should be denotified on suitable terms and left the final decision to his successor. The new minister, however, rejected the request for denotification. Consequently, writ

p. 592 Copy page pinpoint

Digital Supreme Court Reports

petitions were filed, seeking the release of the land based on the note file. This Court held that the notings recorded in the official files do not become decisions and confer no right unless the same are sanctified, authenticated and communicated in the prescribed manner. It further held that any recording in the note-file can always be reviewed, reversed or overruled. The relevant observations read as under: - “43. A noting recorded in the file is merely a noting simpliciter and nothing more. It merely represents expression of opinion by the particular individual. By no stretch of imagination, such noting can be treated as a decision of the Government. Even if the competent authority records its opinion in the file on the merits of the matter under consideration, the same cannot be termed as a decision of the Government unless it is sanctified and acted upon by issuing an order in accordance with Articles 77(1) and (2) or Articles 166(1) and (2). The noting in the file or even a decision gets culminated into an order affecting right of the parties only when it is expressed in the name of the President or the Governor, as the case may be, and authenticated in the manner provided in Article 77(2) or Article 166(2). A noting or even a decision recorded in the file can always be reviewed/reversed/overruled or overturned and the court cannot take cognizance of the earlier noting or decision for exercise of the power of judicial review. xxx xxx xxx

52. As a result of the above discussion, we hold that the notings recorded in the official files by the officers of the Government at different levels and even the Ministers do not become decisions of the Government unless the same is sanctified and acted upon by issuing an order in the name of the President or Governor, as the case may be, authenticated in the manner provided in Articles 77(2) and 166(2) and is communicated to the affected persons. The notings and/or decisions recorded in the file do not confer any right or adversely affect the right of any person and the same can neither be challenged in a court nor made basis

p. 593 Copy page pinpoint

for seeking relief. Even if the competent authority records a noting in the file, which indicates that some decision has been taken by the authority concerned, the same can always be reviewed by the same authority or reversed or overturned or overruled by higher functionary/authority in the Government.” (Emphasis supplied) [See also: State of Uttaranchal v. Sunil Kumar Vaish : (2011) 8 SCC 670 at para 24]

82Copy pinpoint82. In Pimpri Chinchwad (supra), a revenue minister passed an order for deletion of the land of the respondent therein from acquisition proceeding, but the said order was never communicated, however, the same was mentioned in the internal note file. Sometime later, the government decided to reconsider all uncommunicated orders. As a result the respondents therein filed a writ seeking implementation of the order as mentioned in the internal note-file. This Court held that the notings in official files of the government are an internal matter and carry no legal sanctity unless they are approved and duly communicated as per the prescribed procedure. It is only when such notings are translated into formal decisions, they would create some right or claim in favour of a person. The relevant observations read as under: - “36. [...] first, a mere noting in the official files of the Government while dealing with any matter pertaining to any person is essentially an internal matter of the Government and carries with it no legal sanctity; second, once the decision on such issue is taken and approved by the competent authority empowered by the Government in that behalf, it is required to be communicated to the person concerned by the State Government. In other words, so long as the decision based on such internal deliberation is not approved and communicated by the competent authority as per the procedure prescribed in that behalf to the person concerned, such noting does not create any right in favour of the person concerned nor it partake the nature of any legal order so as to enable the person concerned to claim any benefit of any such

p. 594 Copy page pinpoint

Digital Supreme Court Reports

internal deliberation. Such noting(s) or/and deliberation(s) are always capable of being changed or/and amended or/ and withdrawn by the competent authority.” (Emphasis supplied)

83Copy pinpoint83. We are of the view that the reliance on the part of the respondent on the decisions of this Court in Pimpri Chinchwad (supra) and Shanti Sports Club (supra) to assert that no reference could be made to the internal-file notings for the purposes of judicial review of its decision is completely misplaced. In Shanti Sports Club (supra) the question before the Court was as to when an internal noting can be used to confer or claim a right. Whereas in Pimpri Chinchwad (supra) the issue for consideration before the Court was whether any internal-note or deliberation once written in the files was capable of being reconsidered, changed, modified or withdrawn.

84Copy pinpoint84. None of the aforementioned decisions lay down that the courts are completely precluded from appraising or scrutinizing the internal file notings and deliberations for the purposes of judicial review of a decision. This Court in Pimpri Chinchwad (supra) and Shanti Sports Club (supra) only went so far as to say that as long as the deliberations in the internal file notings have not been formalized into an official decision, the same cannot be relied upon to claim any right.

85Copy pinpoint85. We are of the considered opinion that once a decision has been officially made through proper means and channel, any internal deliberations or file notings that formed a part of that decision-making process can certainly be looked into by the Court for the purposes of judicial review in order to satisfy itself of the impeccability of the said decision.

86Copy pinpoint86. In the aforesaid context, we may refer to the decision of this Court in State of Bihar v. Kripalu Shankar reported in (1987) 3 SCC 34, wherein it was held that the internal file notings reflect the views and line of thinking of a particular officer. It further held that such views would amount to disobedience or contempt of court only when they are translated into a formal decision. The relevant observations read as under: - “11. After this finding, the High Court held some of the officers of the government guilty solely on the basis of the

p. 595 Copy page pinpoint

views expressed by them in the files, which were not, in fact, accepted by the Government and which were only at the stage of suggestions and views. Shri K.K. Venugopal, the learned Counsel for the State contended that it would be unsafe to initiate action in contempt merely on the strength or notings by officials on the files, expressing their views and to do so would imperil the working of various departments in a Government in a democracy and would have far-reaching consequences. Sometimes a view expressed by an officer may be incorrect. The view so expressed passes through various hands and gets translated into action only at the ultimate stage. The views so expressed are only for internal use. Such views may indicate the line of thinking of a particular officer. Until the views so expressed culminate into an executable order, the question of disobedience of court’s order does not arise. Though the State Government have been found not guilty, the State has filed the appeal to protect its officers from independent and fearless expression of opinion and to see that the order under appeal does not affect the proper functioning of the Government.” (Emphasis supplied)

87Copy pinpoint87. The above observations of this Court fortify our view that once a decision is made, all opinions and deliberations pertaining to the said decision in the internal file-notings become a part of the process by which the decision is arrived at, and can be looked into for the purposes of judicial review. In other words, any internal discussions or notings that have been approved and formalized into a decision by an authority can be examined to ascertain the reasons and purposes behind such decisions for the overall judicial review of such decision- making process and whether it conforms to the principles enshrined in Article 14 of the Constitution.

88Copy pinpoint88. One another reason why the respondent cannot claim that its internal file-notings fall outside the purview of judicial review of the courts is in view of the inviolable rule that came to be recognized by this Court in Ramana Dayaram Shetty (supra) wherein it was held that an executive authority must be rigorously held to the standard by which it professes its actions to be judged. The relevant observations read as under: -

p. 596 Copy page pinpoint

Digital Supreme Court Reports

“10. [...] It is a well-settled rule of administrative law that an executive authority must be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observe those standards on pain of invalidation of an act in violation of them. [...]” (Emphasis supplied)

89Copy pinpoint89. The aforesaid leaves no manner of doubt in our mind that if the purported action of cancelling the tender is claimed to have been taken in view of certain technical faults in the same or even a change in policy the same ought to be clearly reflected from its internal file notings as-well, pursuant to which the purported decision was taken.

90Copy pinpoint90. We have gone through the internal file-notings of the respondent on the aforesaid tender wherein the entire internal deliberations of the KMDA officials as to the tender for work have been recorded. In the entire records – right from the time the Notice Inviting Tender was being formulated till the issuance of the final Notice of Cancellation dated 07.02.2023, there is no whisper of any particular clauses of the tender that was floated nor of any conflict or technical fault in the same, as claimed by the respondent.

91Copy pinpoint91. We are in seisin of the fact that although the internal-file notings mention about the policy change in the operation and maintenance of the concerned underpasses, yet a careful reading of the same reveals that the cancellation of the tender for work was neither due to any technical fault nor due to the policy change in the operation and maintenance of the concerned underpasses but was for altogether a different reason.

92Copy pinpoint92. As per Note #91 dated 30.12.2022 of the file-notings, when the Order dated 01.12.2022 of the Urban Development and Municipal Affairs Department came to be passed whereby the maintenance was handed over to KMC, it was the Minister-In-Charge as the Chairperson of the respondent authority – who suggested that in view of the change in scenario the tender be cancelled. In the aforesaid note, the following has been recorded - “Recently maintenance of EM Bye pass has been handed over to KMC. Thus, in this changed scenario we may cancel the work order”.

93Copy pinpoint93. The words “may cancel the work order” clearly indicate, that the respondent at that stage by no means was of the opinion that the

p. 597 Copy page pinpoint

tender was required to be cancelled, as no specific reasons had been assigned as to what effect the policy change had impacted the feasibility or practicality of the tender. This is especially because, none of the officials of the respondent suggested that the tender be cancelled, rather it was the concerned minister who did so.

94Copy pinpoint94. In Note #95 dated 10.01.2023 it has been clearly recorded by the officials of the respondent that it was the competent authority of the KMDA that instructed to cancel the tender in view of the aforesaid change in the policy. However, since the officials of the respondent were in doubt regarding the legality of such action, it insisted on first obtaining the advice or opinion from its legal cell before proceeding further. Furthermore, the aforesaid note clearly indicates that the work stop order had to be issued only with a view to comply with the instructions of the competent authority while it decided upon the aspect of cancellation of the tender.

95Copy pinpoint95. In Note #97, the respondent has recorded the following – “There is no different opinion than to get this cancelled, once this has been decided by the Authority but a legal opinion may be sought for avoiding further litigations”. This also clearly indicates that as the competent authority had decided that the tender be cancelled, the officials of the respondent had no other choice but to cancel the tender. However, the respondent continued insisting on first obtaining the opinion from its legal cell before cancelling the same.

96Copy pinpoint96. However, thereafter, as per Note #108 dated 24.01.2023 it is apparent that the concerned minister during his visit specifically instructed the officials of the respondent to cancel the tender. Pursuant to which, the respondent as per Note #109 dated 02.02.2023 immediately convened a meeting to undertake the steps for cancellation even though the advice from the legal cell had yet to be obtained. It thereafter prepared a proposal for cancellation, which culminated into the ultimate notice of cancellation dated 07.02.2023.

97Copy pinpoint97. From the above narrated sequence of events, it is evident that it was none other but the concerned minister who suggested to cancel the tender. The respondent was reluctant to immediately cancel the tender for work and continued to insist on obtaining the opinion from its legal cell. Even though the opinion of the legal cell was yet to be obtained, the respondent, despite its initial reluctance, undertook

p. 598 Copy page pinpoint

Digital Supreme Court Reports

immediate steps to cancel the tender after the concerned minister personally instructed the officials to do so.

98Copy pinpoint98. Thus, it is evident that the Notice of Cancellation dated 07.02.2023, issued to the appellant, was at the behest of the concerned minister. The respondent clearly recorded that, because instructions for cancellation had been received from the higher-ups, there was no option but to proceed with the cancellation. Even before the respondent could properly and thoroughly explore the possibility of acceding to such request by consulting its legal cell, the tender was cancelled only at the instance and specific instructions of the concerned minister.

99Copy pinpoint99. The aforesaid aspect can be looked at from one another angle. The concerned Minister-In-Charge had instructed to cancel the tender in view of the change in policy whereby the operation & maintenance of the underpasses was vested in another authority. To ascertain whether the decision of the concerned minister to cancel the tender was arbitrary or not, we must first consider whether the reason for such cancellation was genuinely on the basis of the aforesaid change in policy or whether it was driven by some personal discretion or motives. This can be discerned by first understanding the change in policy that took place.

100Copy pinpoint100. The Urban Development and Municipal Affairs Department by way of its Order dated 01.12.2022 decided that the maintenance of the roads and drainage of the E.M. Bypass shall be handed over by the respondent to the KMC.

101Copy pinpoint101. As per the Note #91 dated 30.12.2022, the concerned minister for the first time proposed cancellation of the tender in view of the aforesaid change in scenario as a result of the maintenance of the E.M. Bypass being handed over from the respondent to the KMC.

102Copy pinpoint102. However, it is pertinent to note that in the aforesaid order of the Urban Development and Municipal Affairs Department it has been specifically stated that the right to collect revenue from the advertisements as-well as the control of the E.M. Bypass shall continue to remain with the respondent herein.

103Copy pinpoint103. Thus, the respondent at the relevant point of time was not only in control of the two underpasses, but was also empowered to continue collecting revenue from the advertisements displayed at

p. 599 Copy page pinpoint

the underpasses. As such the respondent even after the change in policy, remained well within its rights to continue charging license fee in lieu of the advertisement rights by way of the aforesaid tender that was issued to the appellant.

104Copy pinpoint104. When the respondent issued the work stop orders to the appellant on 24.01.2023 in view of the handing over of the maintenance of the E.M. Bypass to the KMC, the appellant in response, pointed out that the work stop orders were completely misconceived as the respondent continued to retain the custody as-well as the advertisement rights of the concerned underpasses.

105Copy pinpoint105. It was only after the appellant highlighted why the work stop orders were misconceived and uncalled for, that the respondent immediately flipped its stance and in its notice of cancellation that was issued just 1-month later, it attributed ‘technical faults’ in the tender floated.

106Copy pinpoint106. At the relevant point of time, there could have been no occasion for the respondent to cancel the tender on the basis of the Urban Development and Municipal Affairs Department’s order dated 01.12.2022. We say so because:- (i) First, as per the aforesaid order, it was explicitly clarified that the respondent would continue to retain the operation & maintenance as-well as the advertisement rights of the concerned underpasses. (ii) Secondly, only the structural maintenance and restoration of the E.M. Bypass’s carriageway, roads, underground drainage etc. were to be handed over to the KMC. Indisputably, the tender that was issued in favour of the appellant was distinct from the maintenance that was handed over to KMC inasmuch as the scope of work of tender was limited to cleaning the roads, walls, floors etc., maintaining the electric-fixtures and upkeep of the gardens. (iii) Thirdly, despite the stance of the respondent of “change in scenario” due to the handing over of the maintenance, we find that after cancelling the tender and during the pendency of the present appeal, it was the respondent who floated fresh tender for the work of maintenance in respect of the same underpasses and not KMC, thus fortifying our view that the aforesaid change in policy had no bearing on the cancellation of the tender.

p. 600 Copy page pinpoint

Digital Supreme Court Reports

107Copy pinpoint107. It is only on 16.09.2023 i.e., much after the cancellation of the tender that the Urban Development and Municipal Affairs Department, Government of West Bengal modified its earlier order whereby both, the control along with the right to revenue for the said structures were handed over to KMC from the respondent. This leaves no manner of doubt in our mind that the concerned minister’s decision to cancel the tender on account of purported ‘change in policy’ was without any application of mind, capricious and influenced by malice. b. Concept of Public Interest in Administrative Decisions.

108Copy pinpoint108. The reluctance on the part of the respondent to cancel the tender is also evident from Note #97, wherein the authority expressed its concern over the potential consequences of such cancellation. The respondent apprehended that in the event the tender for work was being cancelled, the routine maintenance of the underpasses would be disrupted. Due to this, the underpasses would have to be closed until some other agency could take over the maintenance. The relevant observations read as under: - “Note # 97 [...] Besides, the underpasses are being maintained by the bidder. Once the contract is cancel led, the routine maintenance would be an issue till the work is awarded thru tender. The E&M Sector may be asked to do the maintenance by engaging one of the existing agency from their set up. 0therwise, both the underpasses should be under the lock and key or police custody. 16/01/2023 04:38 PM SUBHANKAR BHATTACHARYA CE (REBBRDG) (KMDA)”

109Copy pinpoint109. From the above it is evident that the cancellation of the tender was not in public interest. It may also not be out of place to mention that as per the internal file-notings the respondent had itself acknowledged that the revenue model of the aforesaid tender for work was far more beneficial and was fetching higher rates than the existing models of other agencies on the E.M. Bypass. The relevant observations read as under: -

p. 601 Copy page pinpoint

“Note # 88 [...] In this model KMDA is saving Rs. 90.00 Lacs per year mentioned in Note#49 and earned Rs.62,67,110/- per year with 5% increment for each year. [...] So it appears that the rate of this current Revenue model tender are receiving much higher rate than any hoarding installed on E.M. Bypass. [...] 29/12/2022 02:52 PM SANTANU PATRA SE (REBBRDG) (KMDA) Note # 89 [...] The cost of revenue generation would be enhanced at a rate 5% at the end of each year, whereas, the authority need not to bother about the routine annual maintenance cost of appurtenances and labours, security force etc. which would increase as well. By this way two simultaneous benefits go in favour of the Authority. [...] 30/12/2022 05:54 PM SUBHANKAR BHATTACHARYA CE (REBBRDG) (KMDA)”

110Copy pinpoint110. Thus, the respondent’s reasoning in the Notice of Cancellation dated 07.02.2023 that it was incurring financial losses from the aforesaid tender does not hold well either. It has been contended by the respondent that due to the ambiguity in tender as regards placement of advertisements, many interested bidders might not have been able to submit their bids. Thus, the respondent formed the view that if the ambiguity is corrected a higher license fee could be fetched.

111Copy pinpoint111. However, we are not impressed with the above submission. As discussed in the preceding paragraphs of this judgment, nothing to this effect is even remotely indicated from the internal file notings of the respondent or the materials on record. There is nothing to suggest that there was a technical fault in the tender resulting in financial losses or that there was a possibility of fetching higher license fees. On the contrary, it can be seen that the respondent itself was of the opinion that the tender for work was financially beneficial to it. This further undermines the claims of technical faults or potential financial losses, and suggests that the decision to cancel the tender was not

p. 602 Copy page pinpoint

Digital Supreme Court Reports

based on genuine financial concerns but rather on other, possibly extraneous factors.

112Copy pinpoint112. Even assuming for a moment that there was a technical fault in the tender, which if rectified had the possibility of generating more revenue, the same by no stretch could be said to be a cogent reason for cancelling an already existing tender. In this regard reference may be made to the decision of this Court in Vice Chariman & Managing Director, City & Industrial Development Corporation of Maharashtra Ltd. & Anr. v. Shishir Realty Pvt. Ltd. & Ors. reported in (2021) SCC OnLine SC 1141 wherein it was held that mere possibility of more money in public coffers does not in itself serve ‘public interest’. A blanket claim by the State claiming loss of public money cannot be used to forgo contractual obligations, especially when it is not based on any evidence or examination as the larger interest of upholding contracts is also in the play. The relevant observations read as under: - “58. When a contract is being evaluated, the mere possibility of more money in the public coffers, does not in itself serve public interest. A blanket claim by the State claiming loss of public money cannot be used to forgo contractual obligations, especially when it is not based on any evidence or examination. The larger public interest of upholding contracts and the fairness of public authorities is also in play. Courts need to have a broader understanding of public interest, while reviewing such contracts.” (Emphasis supplied)

113Copy pinpoint113. In Vasantkumar Radhakisan Vora (Dead) by His LRs. v. Board of Trustees of the Port of Bombay, reported in (1991) 1 SCC 761, this Court held that wherever a public authority seeks to resile or relive itself from the enforcement of a promise made or obligation undertaken in the name of public interest, it is legally bound to first show the material or circumstances by which public interest would be jeopardised if such enforcement is insisted. The relevant observations read as under: - “20. When it seeks to relieve itself from its application the government or the public authority are bound to place before the court the material, the circumstances or grounds on

p. 603 Copy page pinpoint

which it seeks to resile from the promise made or obligation undertaken by insistence of enforcing the promise, how the public interest would be jeopardised as against the private interest. It is well settled legal proposition that the private interest would always yield place to the public interest. [...]” (Emphasis supplied)

114Copy pinpoint114. We may again refer to the decision of this Court in M.P. Power Management Company Ltd. (supra) wherein this Court observed that merely because the rates embodied in a contract with the passage of time have become less appealing, the same cannot become a determinative criterion for either terminating the contract or for the courts to decline interference in such contractual disputes. The relevant observations read as under: - “88. Therefore, on a conspectus of the case law, we find that the concept of overwhelming public interest has essentially evolved in the context of cases relating to the award of contract by the State. It becomes an important consideration in the question as to whether then the State with whatever free play it has in its joints decides to award a contract, to hold up the matter or to interfere with the same should be accompanied by a careful consideration of the harm to public interest. We do not go on to say that consideration of public interest should not at all enter the mind of the court when it deals with a case involving repudiation of a claim under a contract or for that matter in the termination of the contract. However, there is a qualitative State enters into the contract, rights are created. If the case is brought to the constitutional court and it is invited to interfere with State action on the score that its action is palpably arbitrary, if the action is so found then an appeal to public interest must be viewed depending on the facts of each case. If the aspect of public interest flows entirely on the basis that the rates embodied in the contract which is arbitrarily terminated has with the passage of time become less appealing to the State or that because of the free play of market forces or other developments, there is a fall in the rate of price of the services or goods then this cannot become determinative of the question as

p. 604 Copy page pinpoint

Digital Supreme Court Reports

to whether court should decline jurisdiction. In this case, it is noteworthy that the rates were in fact settled on the basis of international competitive bidding and in which as many as 182 bidders participated and the rate offered by the first respondent was undoubtedly the lowest. The fact that power has become cheaper in the market subsequently by itself should not result in non-suiting of the complaint of the first respondent, if it is found that a case of clear arbitrariness has been established by the first respondent.

89. In other words, public interest cannot also be conflated with an evaluation of the monetary gain or loss alone.” (Emphasis supplied)

115Copy pinpoint115. What can be discerned from the above is that this Court has consistently underscored that any decision to terminate a contract must be grounded in a real and palpable public interest, duly supported by cogent materials and circumstances in order to ensure that State actions are fair, transparent, and accountable. Public interest cannot be used as a pretext to arbitrarily terminate contracts and there must be a clear and demonstrable ramification or detriment on the public interest to justify any such action.

116Copy pinpoint116. Considerations of public interest should not be narrowly confined to financial aspects. The courts must have a more holistic understanding of public interest wherever the fairness of public authorities is in question, giving due regard to the broader implications of such action on the stability of contractual obligations. Merely because the financial terms of a contract are less favourable over a period of time does not justify its termination. Such decisions must be based on a careful consideration of all relevant factors, including the potential harm to the integrity and sanctity of contractual relationships. The larger interest of upholding contracts cannot be discarded in the name of monetary gain labelled as public interest.

117Copy pinpoint117. We may make a reference to the observations made by this Court in Har Shankar & Ors. v. Dy. Excise and Taxation Commr. & Ors. reported in (1975) 1 SCC 737, wherein this Court held that those who contract with open eyes must accept the burdens of contract along with its benefit. It further held that the enforcement of rights and obligations arising out of a contract cannot depend on whether

p. 605 Copy page pinpoint

the contracting party finds it prudent to abide by it. The relevant observations read as under: - “16. [...] Those who contract with open eyes must accept the burdens of the contract along with its benefits. The powers of the Financial Commissioner to grant liquor licences by auction and to collect licence fees through the medium of auctions cannot by writ petitions be questioned by those who, had their venture succeeded, would have relied upon those very powers to found a legal claim. Reciprocal rights and obligations arising out of contract do not depend for their enforceability upon whether a contracting party finds it prudent to abide by the terms of the contract. By such a test no contract could ever have a binding force.” (Emphasis supplied)

118Copy pinpoint118. Thus, we are of the view that the respondent’s stance of a mere possibility of fetching higher license fees was no ground to cancel the tender issued to the appellant for the purposes of rectifying it, especially when the respondent completely failed to demonstrate as to how there was a technical fault in the tender or how potential interested bidders did not participate due to it or how fetching higher license fees was more than a mere possibility.

119Copy pinpoint119. At this stage, we may also answer one another submission that was canvassed on behalf of the respondent as regards the other aspect of public interest besides the monetary gain. It was submitted on behalf of the respondent that the decision to cancel the tender was also keeping in mind the considerations such as being able to engage experts for maintenance of critical public infrastructure. It is the case of the respondent that the tender was cancelled in order to float separate tenders, one for the maintenance work and another for licensing advertisement rights to ensure expertise in each respective field.

120Copy pinpoint120. We are not impressed by the above submission either. We need not refer to a copious amount of documents in this regard, as just a bare perusal of the notice inviting tender shows that the eligibility criterion for participating in the tender process prescribed a comprehensive threshold of requirement of experience in structural works and successful completion of similar natured projects, thus ensuring

p. 606 Copy page pinpoint

Digital Supreme Court Reports

that the bidders participating in the tender possess the necessary expertise for the work of maintenance.

121Copy pinpoint121. Even otherwise, if at all the respondent was very much concerned about the maintenance of the underpasses due to lack of expertise of the appellant, it was always open to the respondent to terminate the contract in terms of the termination clause as envisaged in Clause 35 of the Special Terms & Conditions of the Memorandum for the breach or non-compliance of any of the obligations or terms of the tender. Mere apprehension of lack of expertise was no ground for the respondent to cancel the tender by taking recourse to its executive powers in complete ignorance of the contractual terms that were agreed upon by them.

122Copy pinpoint122. From the above discussion, we are of the considered opinion that the present lis is nothing but a classic textbook case of an arbitrary and capricious exercise of powers by the respondent to cancel the tender that was issued to the appellant on the basis of extraneous considerations and at the behest of none other but the concerned Minister-In-Charge. II. Sanctity of Public-Private Partnership Tenders

123Copy pinpoint123. Before we close this judgment, we must also address one very important aspect as regards the importance of maintaining the sanctity of tenders in public private procurement processes.

124Copy pinpoint124. Public tenders are a cornerstone of governmental procurement processes, ensuring transparency, competition, and fairness in the allocation of public resources. It emanates from the Doctrine of Public Trust which lays down that all natural resources and public use amenities & structures are intended for the benefit and enjoyment of the public. The State is not the absolute owner of such resources and rather owns it in trust and as such it cannot utilize these resources as it pleases. As a trustee of the public resources, the State owes i) a duty to ensure that community resources are put to fair and proper use that enures to the benefit of the public as-well as ii) an obligation to not indulge in any favouritism or discrimination with these resources. The State with whatever free play it has in its joints decides to award a contract, to hold up the matter or to interfere with the same should be accompanied by a careful consideration of the harm to public interest.

p. 607 Copy page pinpoint

125Copy pinpoint125. Public tenders are designed to provide a level playing field for all potential bidders, fostering an environment where competition thrives, and the best value is obtained for public funds. The integrity of this process ensures that public projects and services are delivered efficiently and effectively, benefiting society at large. The principles of transparency and fairness embedded in public tender processes also help to prevent corruption and misuse of public resources. In this regard we may refer to the observations made by this Court in Nagar Nigam v. Al. Farheem Meat Exporters Pvt. Ltd. reported in (2006) 13 SCC 382, which reads as under: - “16. The law is well settled that contracts by the State, its corporations, instrumentalities and agencies must be normally granted through public auction/public tender by inviting tenders from eligible persons and the notification of the public auction or inviting tenders should be advertised in well-known dailies having wide circulation in the locality with all relevant details such as date, time and place of auction, subject-matter of auction, technical specifications, estimated cost, earnest money deposit, etc. The award of government contracts through public auction/public tender is to ensure transparency in the public procurement, to maximise economy and efficiency in government procurement, to promote healthy competition among the tenderers, to provide for fair and equitable treatment of all tenderers, and to eliminate irregularities, interference and corrupt practices by the authorities concerned. This is required by Article 14 of the Constitution.” (Emphasis supplied)

126Copy pinpoint126. 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

p. 608 Copy page pinpoint

Digital Supreme Court Reports

matters that have fallen prey to an arbitrary action of the authorities in the guise of technical faults, policy change or public interest etc.

127Copy pinpoint127. 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 public authority will give rise to a legitimate expectation that it will adhere to its assurances. The relevant portion reads as under: - “18. The basis of the doctrine of legitimate expectation in public law is founded on the principles of fairness and non-arbitrariness in Government dealings with individuals. It recognises that a public authority’s promise or past conduct will give rise to a legitimate expectation. The doctrine is premised on the notion that public authorities, while performing their public duties, ought to honour their promises or past practices. The legitimacy of an expectation can be inferred if it is rooted in law, custom, or established procedure xxx xxx xxx

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,

p. 609 Copy page pinpoint

transparency, and predictability to avoid being regarded as arbitrary and therefore violative of Article 14.” (Emphasis supplied)

128Copy pinpoint128. Cancellation of a contract deprives a person of his very valuable rights and is a very drastic step, often due to significant investments having already been made by the parties involved during the subsistence of the contract. Failure on the part of the courts to zealously protect the binding nature of a lawful and valid tender, would erode public faith in contracts and tenders. Arbitrary terminations of contract create uncertainty and unpredictability, thereby discouraging public participation in the tendering process. When private parties perceive that their contractual rights can be easily trampled by the State, they would be dissuaded from participating in public procurement processes which may have a negative impact on such other public-private partnership ventures and ultimately it is the public who would have to bear the brunt thereby frustrating the very object of public interest.

129Copy pinpoint129. 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. H. FINAL CONCLUSION

130Copy pinpoint130. We are of the considered opinion that the litigation at hand is nothing but a classic textbook case of an arbitrary exercise of powers by the respondent in cancelling the tender that was issued in favour of the appellant and that too at the behest of none other than the concerned Minister-In-Charge and thereby rendering the Notice of Cancellation dated 07.02.2023 illegal.

131Copy pinpoint131. During the course of hearing, we were informed that the appellant herein pursuant to the terms of the subject tender had erected multiple structures at different sites on the concerned underpasses

p. 610 Copy page pinpoint

Digital Supreme Court Reports

for displaying advertisements at a huge personal cost. He has made significant investments pursuant to the tender.

132Copy pinpoint132. As, we have held the Notice of Cancellation dated 07.02.2023 to be non-est, the issuance of a fresh tender to any third-party in respect of the same work would not defeat the vested rights that accrued in favour of the appellant. Similarly, the handing over of the operation and maintenance of the E.M. Bypass to the KMC also would have no bearing whatsoever, on the rights that stood vested in the appellant as on the date of cancellation of the tender. Such vested rights would continue to operate notwithstanding any change in the control and maintenance of the underpasses.

133Copy pinpoint133. The order dated 16.09.2023 passed by the Urban Development and Municipal Affairs Department, Government of West Bengal merely transferred the operation and maintenance of the underpasses including the right to receive revenue from KMDA to KMC and therefore will have no effect on any rights that accrued in favour of the appellant as such rights are independent of the authority in control of operations and maintenance.

134Copy pinpoint134. Thus, for all the foregoing reasons, the appeal succeeds and is hereby allowed. The notice of cancellation dated 07.02.2023 is quashed and the impugned judgment and order passed by the High Court is hereby set aside.

135Copy pinpoint135. Pending application(s), if any, also stand disposed of.

Result of the case: Appeal allowed.

† Headnotes prepared by: Divya Pandey