Supreme Court of India
SUBODH KUMAR SINGH RATHOURversusTHE CHIEF EXECUTIVE OFFICER & ORS.
- Citation
- 2024 INSC 486
- Decided
- 9 July 2024
- Disposal
- Case Allowed
- Bench
- D Y CHANDRACHUD
Holding
The cancellation of the tender was arbitrary, capricious and violative of Article 14, making the writ petition maintainable and the notice of cancellation quashed.
Summary
The appellant was awarded a PPP tender by the Kolkata Metropolitan Development Authority (KMDA) to maintain two underpasses, but KMDA later cancelled the tender citing alleged technical faults and a policy change. The appellant challenged the cancellation via a writ petition, which the High Court upheld, holding the cancellation was within administrative discretion. On appeal, the Supreme Court examined the scope of judicial review of State actions in contractual matters, emphasizing the public law element and the requirement of fairness under Article 14. It scrutinised internal file‑notings, which revealed that the cancellation was prompted by a minister’s instruction, not by any technical defect or genuine policy need, and was therefore arbitrary, capricious and violative of Article 14. The Court quashed the notice of cancellation, set aside the High Court’s order, and restored the appellant’s vested rights.
Issues considered
- The scope of judicial review of State actions in contract/tender disputes under writ jurisdiction.
- Whether the cancellation of the tender by KMDA is amenable to writ jurisdiction.
- Whether the cancellation was arbitrary or unfair, thereby violating Article 14 of the Constitution.
Legislation cited
- Constitution of Indias. Article 12, s. Article 14, s. Article 226
Subjects
contract/tender disputesjudicial reviewwrit jurisdictionArticle 14arbitrarinesspublic‑private partnershippublic law elementadministrative discretioninternal file notingsministerial directioncancellation of tenderpublic interestfairnessreasonableness
Judgment
[2024] 7 S.C.R. 532 : 2024 INSC 486
Subodh Kumar Singh Rathour
v.
The Chief Executive Officer & Ors.
(Civil Appeal No. 6741 of 2024)
09 July 2024
[Dr. Dhananjaya Y. Chandrachud, CJI,
J.B. Pardiwala* and Manoj Misra, JJ.]
Issue for Consideration
Scope of judicial review of the actions of the State in the matters
relating to contract/tender disputes under writ jurisdiction; whether
the action on the part of the respondent in cancelling the tender
was amenable to the writ jurisdiction of the High Court; if so,
whether the said action could be termed as arbitrary or unfair
and in consequence of violation of Article 14 of the Constitution
of India.
Headnotes†
Contract/tender disputes – Judicial review – Scope – Tender
awarded to the appellant on Public-Private Partnership basis
for maintenance of two underpasses was cancelled by the
respondent-Kolkata Metropolitan Development Authority
stating that there was a technical fault therein and also on
account of a change in policy whereby, the operation &
maintenance of the concerned underpasses was handed over
to another authority – Action to cancel the tender, if amenable
to writ jurisdiction and whether was arbitrary and influenced
by extraneous considerations:
Held: The tender was not terminated pursuant to any terms of the
contract subsisting between the parties – Respondent cancelled
the tender saying that there was technical fault in the tender
that was floated – Thus, the respondent exercised powers in its
executive capacity as the action to cancel the tender fell outside
the purview of the terms of the contract – Hence, the present
matter is not purely a contractual dispute even if related to a
tender, as the dispute involves a public law element – Although
there is no discharge of a public function by the respondent
* Author
[2024] 7 S.C.R. 533
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
towards the appellant yet there is a right to public law action
vested in him against the respondent in terms of Article 14 – Thus,
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 – On facts, just a month prior to
cancelling the tender, the respondent issued work stop notice to
the appellant, asking to stop all work in respect of the tender in
view of the handing over of the operation & maintenance of the
concerned underpasses by the respondent to another authority,
Kolkata Municipal Corporation – Appellant pointed out that the
work stop orders were misconceived as the respondent continued
to retain the custody as well as the advertisement rights of the
concerned 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 tender issued to the appellant – Change in policy had no
bearing on the cancellation of the tender – 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 – Furthermore,
although the internal-file notings mention about the policy change
in the operation and maintenance of the concerned underpasses,
however, the cancellation of the tender for work was neither due
to any technical fault nor due to the policy change but it was at
the behest of the concerned minister who suggested to cancel the
tender – 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 – Cancellation of the
tender was not in public interest – Present lis is a classic case of
an arbitrary and capricious exercise of powers by the respondent
to cancel the tender on the basis of extraneous considerations
and at the behest of the concerned Minister-In-Charge – Notice
of cancellation was non-est, quashed – Impugned judgment of
the High Court upholding the decision of the respondent to cancel
the tender, set aside. [Paras 60-62, 103-105, 107, 122]
Contract/tender disputes – Involving State or its
instrumentalities – Administrative actions of the State –
Judicial Review – Shift in the scope of – Earlier position of
law; misconception of the State as a Largesse – Concept of
‘Public Law’ Element in contractual matters – Development
534 [2024] 7 S.C.R.
Digital Supreme Court Reports
of principles of natural justice, reasonableness and
proportionality – Judicial review and administrative discretion
– Interplay between – Discussed.
Administrative Law – Internal-file notings – Judicial review –
Constitution of India – Article 14 – Tender awarded to the
appellant was cancelled by the respondent-Authority on the
ground that there was a technical fault therein – Challenge
to – Appellant relied on various notings made in the internal
file of the respondent in respect of the tender to contend
that the cancellation thereof was arbitrary and influenced by
extraneous considerations:
Held: 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
and whether it conforms to the principles enshrined in Article
14 of the Constitution – In the present case, if the purported
action of cancelling the tender was 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 – However, in the entire records, 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 – From the internal-file notings it is evident that the
notice of cancellation issued to the appellant was at the behest
of the concerned minister – Respondent recorded that, because
instructions for cancellation were 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. [Paras 85, 90]
Contract/tender disputes – Administrative Decisions – Public
Interest – Potential financial losses – Possibility of fetching
higher license fees if can be a ground to cancel the tender:
Held: No – Any decision to terminate a contract must be grounded
in a real and palpable public interest, duly supported by cogent
[2024] 7 S.C.R. 535
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
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 – Considerations
of public interest should not be narrowly confined to financial
aspects – 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 – Respondent’s stance of a
mere possibility of fetching higher license fees was no ground to
cancel the tender for the purposes of rectifying it, especially when
it 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. [Paras 115, 116, 118]
Tenders – Sanctity of Public-Private Partnership Tenders –
Termination of tenders – Public authorities cautioned – Duty
of Courts:
Held: 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 – Public tenders are designed to
provide level playing field for all potential bidders – Its sanctity
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 – Arbitrary terminations of contract create uncertainty and
unpredictability, thereby discouraging public participation in the
tendering process – Courts are duty bound to zealously protect the
sanctity of any tender 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 – Failure on the part of the courts to zealously protect
536 [2024] 7 S.C.R.
Digital Supreme Court Reports
the binding nature of a lawful and valid tender, would erode
public faith in contracts and tenders – Public authorities also 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. [Paras 124-126]
Contractual disputes – Judicial review – Amenability to
writ jurisdiction – Private law element vis-à-vis public law
element – Demarcation – Assessment:
Held: Demarcation between a private law element and public law
element in the context of contractual disputes, 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 does not extend to fixing contract stipulations
but ensures that the public authorities act within their authority to
prevent arbitrariness – 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 – 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, when contractual power is
being used for public purpose, it is certainly amenable to judicial
review. [Paras 57-59]
Contract/tender disputes – Contractual disputes concerning
public authorities – Arbitrary exercise of powers by public
functionaries – Challenge to – Constitution of India – Article
14 – Duty of Courts:
Held: 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
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 relation. [Para 56]
[2024] 7 S.C.R. 537
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
Contract – Contractual disputes – Arbitrariness of State
actions – Meaning and Import of – Test of reasonableness –
Vice of arbitrariness – When attracted:
Held: The question, whether an impugned action is arbitrary or
not, is 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 an act uninformed
by reason, is arbitrary – To enthuse efficiency in administration,
a balance between accountability and autonomy of action should
be carefully maintained – 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 – 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 – 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 – Another way to assess whether an action complained of
could be termed as arbitrary is by scrutinizing the reasons assigned
to such an action – However, the Court is not supposed to delve
into every minute details of the reasoning assigned, 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 – Thus,
the question to be answered in such situations is whether the
decision was based on valid considerations. [Paras 65, 67, 69-71]
Case Law Cited
Pimpri Chinchwad New Township Development Authority v.
Vishnudev Coop. Housing Society [2018] 11 SCR 310 : (2018)
538 [2024] 7 S.C.R.
Digital Supreme Court Reports
8 SCC 215; Shanti Sports Club v. Union of India [2009] 13 SCR
710 : (2009) 15 SCC 705 – distinguished.
Radhakrishna Agarwal & Ors. v. State of Bihar & Ors. [1977]
3 SCR 249 : (1977) 3 SCC 457; Premji Bhai Parmar & Ors. v.
Delhi Development & Ors. [1980] 2 SCR 704 : (1980) 2 SCC
129; Divisional Forest Officer v. Bishwanath Tea Co. Ltd. [1981]
3 SCR 662 : (1981) 3 SCC 238; Bareilly Development Authority
& Anr. v. Ajai Pal Singh & Ors. [1989] 1 SCR 743 : (1989) 2
SCC 116; M/s Indian Medicines Pharmaceuticals Corp Ltd. v.
Kerala Ayurvedic Co-operative Society Ltd. [2023] 1 SCR 473 :
(2023) SCC OnLine SC 5; M.C. Mehta v. Union of India [1987]
1 SCR 819 : (1987) 1 SCC 395; Mahabir Auto Stores & Ors. v.
Indian Oil Corporation [1990] 1 SCR 818 : (1990) 3 SCC 752;
Dwarkadas Marfatia & Sons v. Board of Trustees of the Port of
Bombay [1989] 2 SCR 751 : (1989) 3 SCC 293; LIC v. Consumer
Education & Research Centre [1995] Supp. 1 SCR 349 : (1995)
5 SCC 482; Shrilekha Vidyarthi (Kumari) v. State of U.P. [1990]
Supp. 1 SCR 625 : (1991) 1 SCC 212; Verigamto Naveen v.
Govt. of A.P. & Ors. [2001] Suppl. 3 SCR 112 : (2001) 8 SCC
344; Binny Ltd. & Anr. v. Sadasivan & Ors. [2005] Supp. 2
SCR 421 : (2005) 6 SCC 657; ABL International Ltd. v. Export
Credit Guarantee Corporation of India Ltd. (2004) 3 SCC 553;
Noble Resources Ltd. v. State of Orissa [2006] Supp. 6 SCR
53 : (2006) 10 SCC 236; Joshi Technologies International Inc.
v. Union of India & Ors. [2015] 6 SCR 1042 : (2015) 7 SCC
728; M.P. Power Management Co. Ltd., Jabalpur v. Sky Power
Southeast Solar India Pvt. Ltd. & Ors. [2022] 5 SCR 1 : (2023)
2 SCC 703; Ramana Dauaram Shetty v. The International Airport
Authority of India & Ors. [1979] 3 SCR 1014 : AIR 1979 SC
1628; Mahesh Chandra v. Regional Manager, U.P. Financial
Corporation & Ors. [1992] 1 SCR 616 : (1993) 2 SCC 279;
Tata Cellular v. UOI [1994] Supp. 2 SCR 122 : (1994) 6 SCC
651; Bachhittar Singh v. State of Punjab & Anr. [1962] Supp. 3
SCR 713 : AIR 1963 SC 395; Delhi Development Authority v.
Hello Home Education Society (2024) 3 SCC 148; Mahadeo &
Ors. v. Sovan Devi & Ors. [2022] 11 SCR 153 : (2023) 10 SCC
807; Municipal Committee, Barwala v. Jai Narayan and Co. &
Anr. [2022] 16 SCR 897 : (2022) SCC OnLine 376; Sethi Auto
[2024] 7 S.C.R. 539
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
Service Station v. DDA [2008] 14 SCR 598 : (2009) 1 SCC 180;
State of Uttaranchal v. Sunil Kumar Vaish [2011] 13 SCR 754 :
(2011) 8 SCC 670; State of Bihar v. Kripalu Shankar [1987] 3
SCR 1 : (1987) 3 SCC 34; Vice Chariman & Managing Director,
City & Industrial Development Corporation of Maharashtra Ltd.
& Anr. v. Shishir Realty Pvt. Ltd. & Ors. [2021] 13 SCR 190 :
(2021) SCC OnLine SC 1141; Vasantkumar Radhakisan Vora
(Dead) by His Lrs. v. Board of Trustees of the Port of Bombay
[1990] 3 SCR 825 : (1991) 1 SCC 761; Har Shankar & Ors. v. Dy.
Excise and Taxation Commr. & Ors. [1975] 3 SCR 254 : (1975) 1
SCC 737; Nagar Nigam v. Al. Farheem Meat Exporters Pvt. Ltd.
[2006] Supp. 10 SCR 354 : (2006) 13 SCC 382; Sivanandan
C.T. v. High Court of Kerala [2023] 11 SCR 674 : (2024) 3 SCC
799 – referred to.
List of Acts
Constitution of India.
List of Keywords
Contract/tender disputes; Contractual matters; Operation &
maintenance of underpasses; Advertisement rights of the
underpasses; Judicial review; Writ jurisdiction; Amenability to writ
jurisdiction; Public-Private Partnership basis; Notice of cancellation;
Tender cancelled/terminated; Tender cancelled at the behest
of the minister; Administrative actions of the State; Arbitrary;
Unfair; Unreasonable; Influenced by extraneous considerations;
Non-application of mind; Capricious exercise of powers; Malice;
Contractual disputes; Dispute not purely contractual; Public law
element; Private law element; Right to public law action; Work stop
notice/order; Handing over of the operation & maintenance of the
underpasses; Change in policy, License fee in lieu of advertisement
rights; Technical faults in the tender floated; Cancellation of the
tender not in public interest; Administrative discretion; Internal
file notings; Public interest; Potential financial losses; Possibility
of fetching higher license fees; Arbitrariness; Arbitrariness of
State actions; Administrative decisions; Test of reasonableness;
Vice of arbitrariness; Wednesbury principle of reasonableness;
Public tenders; Principles of natural justice, reasonableness and
proportionality; Valid considerations; Bona-fide.
540 [2024] 7 S.C.R.
Digital Supreme Court Reports
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6741 of 2024
From the Judgment and Order dated 25.05.2023 of the High Court
at Calcutta in MAT No. 744 of 2023
Appearances for Parties
Shyam Divan, Sr. Adv., Ateev Mathur, Ajay Monga, Sanjay Gupta,
Ms. Varsha Kriplani, Anmol Sharma, Ananta Prasad Mishra, Advs.
for the Appellant.
Rakesh Dwivedi, Sr. Adv., Zoheb Hossain, Advs. for the Respondents.
Judgment / Order of the Supreme Court
Judgment
J.B. PARDIWALA, J.
For the convenience of exposition, this judgment is divided in the
following parts: -
INDEX*
A. FACTUAL MATRIX 2
B. IMPUGNED ORDER 7
C. DEVELOPMENTS THAT OCCURRED DURING THE 10
PENDENCY OF THE PRESENT APPEAL.
D. SUBMISSIONS ON BEHALF OF THE APPELLANT 15
E. SUBMISSIONS ON BEHALF OF THE RESPONDENT 17
F. POINTS FOR DETERMINATION 18
G. ANALYSIS 19
i. Scope of Judicial Review of the actions of the 19
State in matters relating to Contract / Tender
under Writ Jurisdiction.
* Ed. Note: Pagination as per the original Judgment.
[2024] 7 S.C.R. 541
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
a. Earlier Position of Law and Misconception of the 19
State as a Largesse.
b. Concept of ‘Public Law’ Element: Scope of 25
Judicial Review in Contractual Matters.
c. Meaning and True Import of Arbitrariness of State 47
Actions in Contractual Disputes.
ii. Whether the action of cancelling the tender is 53
arbitrary or unfair and in consequence of violation
of Article 14 of the Constitution?
a. Scrutiny of Internal File-Notings and Deliberations 55
of the State.
b. Concept of Public Interest in Administrative 69
Decisions.
iii. Sanctity of Public-Private Partnership Tenders 77
H. FINAL CONCLUSION 81
1. This appeal arises out of the final judgment and order dated
25.05.2023 passed by the High Court of Calcutta in M.A.T. No.
744 of 2023 (“Impugned Order”), by which the High Court upheld
the decision of the respondent to cancel the tender that had been
awarded to the appellant for the maintenance of two underpasses
on Public-Private Partnership basis, and thereby dismissed the writ
appeal filed by the appellant.
A. FACTUAL MATRIX
2. The respondent floated a tender notice dated 12.05.2022 inviting bids
for the maintenance of two underpasses on the Eastern Metropolitan
Bypass and its abutting area against a License Fee for Advertisement
Rights over designated sites at each underpass, for a period of
10-years. As per the aforesaid tender, the scope of work included
the regular maintenance of the aforementioned underpasses and
the upkeep of its garden area and electro-mechanical fittings. The
relevant portion reads as under: -
542 [2024] 7 S.C.R.
Digital Supreme Court Reports
Sl. Name of Work License Fee of the Earnest Allotted Time
No Yearly Charge for Money Period for
the 1st year (Rs.) (Rs.) License & Work
(1) (2) (3) (4) (5)
REGULAR
MAINTENANCE
OF BELIAGHATA
UNDERPASS TO BE QUOTED 5,00,000.00 10 (Ten) Years
INCLUDING
UPKEEPING OF [Rupees
UNDERPASS Five Lakh
PROPER, GARDEN Only]
AREA, AT GRADE
UNDERPASS
AREA AND Online
ALL ELECTRO- (Net
MECHANICAL Banking/
FITTINGS AGAINST NEFT/
LICENSE FEE OF RTGS)
ADVERTISEMENT
RIGHTS OVER (10)
YEARS.
Tender ID – 2022_
KMDS_380215_1
REGULAR
MAINTENANCE
OF SWABHUMI
UNDERPASS
INCLUDING
UPKEEPING OF 5,00,000.00
UNDERPASS [Rupees
PROPER, GARDEN Five Lakh
AREA, AT GRADE TO BE QUOTED 10 (Ten) Years
Only]
UNDERPASS
AREA AND
ALL ELECTRO- Online
MECHANICAL
FITTINGS AGAINST (Net
LICENSE FEE OF Banking/
ADVERTISEMENT NEFT/
RIGHTS OVER (10) RTGS)
YEARS.
Tender ID – 2022_
KMDS_380215_1
[2024] 7 S.C.R. 543
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
3. Pursuant to the aforesaid, the tendering process was undertaken
and the appellant herein on 13.06.2022 submitted his bid with a
quotation of Rs. 29,55,555/- for the Beliaghata Underpass and Rs.
23,55,555/- for the Swabhumi Underpass. Out of the total bids
received, the appellant’s quotations were found to be the highest
and was classified as ‘H1’ for both the underpasses.
4. Accordingly, the respondent issued two Letter of Intents dated
27.06.2022 in favour of the appellant, accepting the quotation
offered by him and declaring his firm as the successful bidder for
the aforementioned tender, and a formal Memorandum of Tender
for Work was executed and issued to the appellant.
5. As per the Memorandum of Tender for Work, the detailed ‘Scope
of Work’ inter-alia included (i) the sweeping of floors & cleaning of
the walls, stairwell, escalators, railings and glass-fixtures, (ii) regular
emptying of dustbins and removal / processing of waste trash, (iii)
upkeep of the garden and plants and (iv) the maintenance of light-
fittings, escalators, water pumps and other electro-mechanical fixtures.
6. Furthermore, the Special Terms & Conditions of the Memorandum,
more particularly Clause 35 therein stipulated that the contract would
be liable to be terminated inter-alia in the event of any failure, breach
or non-compliance of any of the obligations or terms delineated in
the tender by the successful bidder.
7. Upon completion of all the formalities, the Work Orders dated
18.10.2022 were issued by the Executive Engineer, pursuant to
which the appellant commenced his work in terms of the contract.
8. On 01.12.2022, the Urban Development and Municipal Affairs
Department, Government of West Bengal issued an Order directing
that the maintenance of the roads and drainage of the E.M. Bypass
including the two subject underpasses shall be handed over by
the Kolkata Metropolitan Development Authority (KMDA) i.e., the
respondent herein to the Kolkata Municipal Corporation (KMC). The
said order reads as under: -
“Government of West Bengal
Urban Development and Municipal Affairs Department
NAGARYAN, DF-8, Sector-I
Salt Lake, Kolkata - 700 064
Memo No. 5783 – UDMA-22012(14)/11/2022
Date : 01.12.2022
544 [2024] 7 S.C.R.
Digital Supreme Court Reports
ORDER
KMDA was the custodian for the maintenance of the E.M
Bypass connecting the northern and southern part of the
city and starts from northern hub Ultadanga to Garia in the
South. The road length is 15.6 Km which runs along the
eastern ring of the city. After careful consideration it has
been decided that the maintenance of the road alongwith
the drainage be handed over from KMDA to KMC with the
following scope of activities.
(1) The defects in carriageway would be maintained and
restored by KMC henceforth.
(2) The existing carriageway alongwith the surface and
underground drainage would be maintained by KMC.
The conservancy in and around the Eastern Bypass
would also be maintained by KMC.
(3) Subject to clearance from KMDA, KMC would issue
NOC to all utility and service providers. The cost of
road restoration from the charges to be levied is to
be paid to KMC by all utility and service providers.
(4) The right of collecting revenues from the advertisement
displays will remain with KMDA.
(5) All the structures, as the new or old Bridges, Culverts,
FoBs etc. will be under the custody of KMDA.
(6) All development activities along the road except for the
Bridges, Culverts, FoBs etc. will be taken up by KMC.
(7) KMC would remain custodian for illumination of the
Bypass.
(8) The green verge along the E.M. Bypass to be
maintained by KMC.
The order is issued in the interest of public service.
Sd/-
Principal Secretary
to the Govt. of West Bengal”
9. As per the aforesaid Order dated 01.12.2022, the maintenance and
restoration of carriageway, structures, underground drainage and
[2024] 7 S.C.R. 545
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
development activities of the E.M. Bypass Area was taken over by
the KMC. However, the Order specifically, clarified that the right of
collecting revenue from advertisements displayed would continue to
remain with the KMDA.
10. Thereafter, in light of the aforesaid order, the Executive Engineer,
KMDA under instructions issued by the competent authorities sent a
notice dated 24.01.2023 to the appellant herein asking him to stop
all work in respect of the maintenance of the two underpasses with
immediate effect in view of the handing over of the maintenance of
the E.M. Bypass to the KMC.
11. In response to the above, the appellant sent a letter dated 25.01.2023
inter-alia pointing out that as per the Urban Development and
Municipal Affairs Department’s Order dated 01.12.2022, the custody
and rights of revenue of all structures, bridges, culverts etc. including
the concerned underpasses, continued to remain with the respondent,
and requested to recall the notice dated 24.01.2023 asking him to
stop the work.
12. However, on 07.02.2023, the respondent issued one another notice
to the appellant stating that the tender for work of maintenance has
been cancelled on account of a technical fault in the tender. It was
stated therein that the tender was found to be ‘non-specific’ & ‘not
well defined’ and that had created ambiguity resulting in financial
losses to the respondent. The said Notice of Cancellation reads
as under: -
“Date: 07.02.2023
To,V.S. Advertising,
65/268, M.N. Sarkar Road,
Siliguri, West Bengal 7340001
Sub: Cancellation of Work/Tender
Sir,
The cited tender is hereby cancelled by the Authority in
KMDA. We would state with regret that the tender has
been found having technical fault, non-specific and not
well defined thus creating ambiguity for obvious reasons.
By this, the Authority is incurring financial loss as well.
546 [2024] 7 S.C.R.
Digital Supreme Court Reports
We regret for the inconvenience caused to you and are
ready to reimburse the cost you have so far incurred in
the work. This has been decided that the license fee
deposited by you and the cost incurred for construction
activity and maintenance work would be refunded as per
actual assessment by the divisional engineers based upon
the approved drawing and execution.
This is for your information with kind compliance please.
Sd/-
Chief Engineer-II (Bridge)
Roads & Bridges Sector, KMDA”
13. It is pertinent to note from the aforesaid that, no reference was made
as regards handing over of the maintenance to KMC which was
previously alluded to, for stopping all work pertaining to the tender.
B. IMPUGNED ORDER
14. Aggrieved by the aforesaid, the appellant preferred a writ petition
being WPA No. 3381 of 2023 before the High Court of Calcutta
assailing the respondent’s Notice dated 07.02.2023 cancelling the
tender for work of maintenance of the two underpasses.
15. The aforesaid writ petition referred to above came to be rejected
by the High Court vide its order dated 24.04.2023, wherein the Ld.
Single Judge held that the decision to cancel the tender had to be
taken on account of the administrative exigencies and also due to
the ‘change in policy’. It was further held that the decision to cancel
the tender was not borne out of any ulterior motives on the part of
the respondent. The decision of the learned Single Judge is based
on two grounds: -
(i) First, the High Court took the view that the decision
to cancel the tender cannot be termed as an arbitrary
action on the part of the respondent. The appellant was
put to prior notice as regards the change of hands of the
management of the concerned underpasses, much before
the ultimate cancellation notice was issued. It further
observed that, since the notice of cancellation dated
07.02.2023 specifically provided the reasons for cancelling
the tender i.e., the technical faults found in the tender that
[2024] 7 S.C.R. 547
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
was floated, there was no element of arbitrariness in the
said action. The relevant observations read as under: -
“11. [...] The effect of the administrative decision
was reiterated in the stop-work request of
24.01.2023 where the reason given for the
stop-work was also the “changed scenario”
of handover of the maintenance work of E.M.
Bypass to KMC from KMDA. Hence, the reason
for the stop-work and the impugned cancellation
is a change of policy for administrative
convenience simpliciter.
xxx xxx xxx
18. In the present case, the impugned
cancellation of 07.02.2023 cannot be described
as a bolt from the blue since the petitioner
was put on notice of the impending change
in circumstance on 24.01.2023 where the
reason for the change was also conveyed to
the petitioner. The order dated 01.12.2022 of
the Urban Development and Municipal Affairs
Department stating that the maintenance of
the E.M. Bypass would be handed over from
the KMDA to KMC provides the rationale
for the impugned cancellation. Seen in this
backdrop, it cannot be said that the impugned
letter of cancellation of the tender /work was
issued with an ulterior motive or for extraneous
considerations. 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
548 [2024] 7 S.C.R.
Digital Supreme Court Reports
authority, has a right to rectify the ambiguities
in the bid document by cancelling the same.”
(Emphasis supplied)
(ii) Secondly, the appellant could not have redressed his
grievances by invoking the writ jurisdiction of the High
Court under Article 226 of the Constitution, as there was
no failure of any statutory duty or public law element
involved. Moreover, since the relief sought was essentially
in the nature of specific performance, it could have been
prayed for only under ordinary civil law and not by way of
a writ petition. The relevant observations read as under: -
“20. It is well settled that a contractual dispute
with a public law element would be amenable
to writ jurisdiction. The present dispute however
arises out of a private contract for maintenance
of underpasses in the E.M. Bypass and
advertisement rights over certain spaces within
the contracted area. The rights following out of
the contract are purely private in nature and
there is nothing to show that the performance
of the contract or the consequence therefrom
would affect the public at large or even a
sizeable section of the public. A public law
element is generally understood to mean the
reach of an obligation to a large section of
the public or the obligation affecting the lives
and livelihood of the general public by its very
nature. M.P. Power sounded a cautionary note
in such cases where the State cites monetary
gains or losses as reason for termination of
a contract. This is also not’ the case at hand
since the reasons given for cancellation were
on a wholly different plane.”
21. The above reasons persuade this Court to
hold that the remedy available to the petitioner is
in the realm of private law and not under Article·
226 of the Constitution which contemplates
certain tests including that the dispute must
[2024] 7 S.C.R. 549
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
have a public law element. The complaint of
the petitioner is essentially for the specific
performance of the contractual obligation of the
respondent KMDA. Doubtless, the petitioner can
avail of appropriate civil remedies for redress
which would include damages for breach of the
contractual terms.
(Emphasis supplied)
16. Aggrieved with the aforesaid, the appellant went in appeal before
a Division Bench of the High Court by way of M.A.T. No. 744 of
2023, wherein the appeal court finding no fault in the decision of the
learned Single Judge, dismissed the appeal and thereby affirmed
the judgment of the learned Single Judge referred to above.
17. In view of the aforesaid, the appellant is here before this Court with
the present appeal.
C. DEVELOPMENTS THAT OCCURRED DURING THE
PENDENCY OF THE PRESENT APPEAL.
18. During the pendency of the present appeal, the appellant herein
preferred a RTI seeking further information on the respondent’s
internal note-file pertaining to the cancellation of the subject tender.
19. The Public Information Officer, KMDA vide its reply dated 18.08.2023
provided the internal file-notings of the respondent on the aforesaid
tender. In the internal file-notings of the respondent, the following
entries / notes are relevant: -
a) As per Note #91 dated 30.12.2022, the respondent in view of
the maintenance of the concerned underpasses being handed
over to KMC, was contemplating the possibility of cancelling the
tender for work. The relevant noting reads as under: -
“Note # 91
Recently maintenance of EM Bye pass has been
handed over to KMC. Thus, in this changed scenario
we may cancel the work order.
03/01/2023 11:51 AM FIRHAD HAKIM
CHRMN (KMDA)”
550 [2024] 7 S.C.R.
Digital Supreme Court Reports
b) As per Note #95 dated 10.01.2023, the respondent instructed
that the tender be cancelled in view of the maintenance of the
concerned underpasses being handed over to KMC. However,
since the respondent was in doubt as regards the legality &
validity of such decision, it opined that the opinion of the Legal
Department may be sought first before any action of cancellation
is taken. However, as an interim measure, it decided to issue
a notice to stop all work in respect of the tender. The relevant
noting reads as under: -
“Note # 95
[...] Now, as instructed by the competent authority
of KMDA keeping in view of the recent changed
scenario of handing over of maintenance of E.M.
Bypass from KMDA to KMC, cancelling the work order
as instructed may require judicious action towards
implementing the same and to make it lawful, legal
advice from Law-Cell, KMDA may be required so that,
KMDA doesn’t fall in any legal obligation. However,
for immediate compliance of the order, a notice to
stop the works in all respect with regards to the
two above-mentioned tenders may be served to the
agency for immediately stopping his all activities at
site till further notice. As instructed, a draft Letter is
attached herewith for his kind perusal and direction
in this regard. [...]
10/01/2023 02:55 PM PARTHA PROTIM GHOSH
EE (RBBRDG) (KMDA)”
c) Again, in Note #96, it was noted that since the competent
authority of the respondent was desirous to cancel the tender,
the respondent was of the view that the opinion of its legal
cell be obtained first before such action is taken. The relevant
noting reads as under: -
“Note # 96
[...]
As per Note#91¸Competent Authority desires to
cancel the Work Order.
[2024] 7 S.C.R. 551
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
In Note#95¸a draft letter has been attached for
approval towards issuance to the agency to stop any
type of work related to this project.
Considering the Chronological development and
acceptance by Authority, the matter may kindly be
viewed lawfully, so that, if it is cancelled by this end,
no legal action is taken by the Agency.
Submitted for necessary action.
13/01/2023 02:13 PM SANTANU PATRA
SE (RBBRDG) (KMDA)”
d) In Note #97 dated 16.01.2023, the respondent has noted that
since the competent authority had decided to cancel the work
tender there was no option but to cancel it. However, the
respondent once again insisted that a legal opinion may be
sought first, in order to avoid further litigations. The relevant
noting reads as under: -
“Note # 97
Sub: Cancellation of Work Order of Mainte-
nance of two Underpasses
A concurrence of Law Cell, KMDA may kindly be
obtained before cancelling the Work Order of the
existing agency. 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. [...]
16/01/2023 04:38 PM SUBHANKAR
BHATTACHARYA
CE (RBBRDG) (KMDA)”
e) Thereafter, it could be seen from Note #101 dated 19.01.2023,
that the other officials of the authority also concurred with the
respondent’s opinion to first seek advice of its legal cell on
the possible consequences in the event the tender for work is
cancelled. The relevant observations read as under: -
552 [2024] 7 S.C.R.
Digital Supreme Court Reports
“Note # 101
As concurred by the Authority the legal aspects and
the possible consequences may be reviewed and
opined back prior to cancelling the Work Order. The
draft of order for stopping work further is enclosed,
which may kindly be seen and commented.
For kind concern of Law Cell with request to revert
back with further advice and opinion on above please.
19/01/2023 02:28 PM SUBHANKAR
BHATTACHARYA
CE (RBBRDG) (KMDA)”
f) However, before the legal cell of the respondent could give
any definite opinion on the legal implications of cancelling the
tender, it appears from the records, more particularly Note #108
dated 24.01.2023 that the concerned minister during his visit
instructed the officials of the respondent on his own to cancel
the tender, upon which the respondent undertook the steps to
duly comply with such instructions. The relevant noting reads
as under: -
“Note # 108
For immediate compliance of HMIC’s instruction. This
is as per the instruction given during his visit to Un-
nanyan Bhavn today in presence of KMDA Officials.
24/01/2023 05:16 PM SUBHANKAR
BHATTACHARYA
CE (RBBRDG) (KMDA)”
g) Pursuant to the above, as per Note #109 dated 02.02.2023,
the Tender Committee of the respondent convened a meeting
wherein the proposal for cancellation of the aforesaid tender
was finalized and placed for approval. The relevant noting
reads as under: -
“Note # 109
As per the discussion held in the 5th meeting of
Tender Committee, KMDA, proposal for cancel-
lation of this tender, as per the Note #91 for this
[2024] 7 S.C.R. 553
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
changed scenario vide memo : 5783-UDMA-
22012(14)/11/2022 Dt. 01-12-2022 maintenance
of E.M. Bypass has been handed over to KMC
from KMDA, is placed herewith for approval
please. [...]
02/02/2024 02:31 PM SANTANU PATRA
SE (RBBRDG) (KMDA)”
h) Thereafter, as per the last entry in the internal notings – Note
#110 dated 03.02.2023, the respondent floated one another
proposal seeking approval to cancel the tender, which culminated
into the final notice of cancellation dated 07.02.2023 which is
the subject matter of challenge in the present litigation.
20. During the course of hearing of this appeal, it was brought to the
notice of this Court that after the work order issued in favour of
the appellant was cancelled, the respondent floated a fresh tender
dated 15.05.2023 for the work of maintenance of the very same
underpasses, the selection process for which stood completed and
that the tender had been awarded along with the work order(s) to
one another third-party agency.
21. This Court was further apprised of the order dated 16.09.2023
passed by the Urban Development and Municipal Affairs Department,
Government of West Bengal, modifying its earlier order dated
01.12.2022 to the extent that both i) the operation & maintenance
of 37 bridges, flyovers, underpasses, etc. including the concerned
two underpasses along with ii) the right to collect revenue towards
the advertisement rights for the said structures, shall be taken over
by KMC from KMDA. The said letter reads as under: -
“Government of West Bengal
Urban Development and Municipal Affairs
Department
NAGARYAN, DF-8, Sector-I
Salt Lake, Kolkata - 700 064
Memo No. 5271 – UDMA-22012(14)/11/2022
Date : 16.09.2023
554 [2024] 7 S.C.R.
Digital Supreme Court Reports
ORDER
In continuation with the order issued vide no. 5783-UDMA-
22012(14)/11/2022 dated 01.12.2022, it has been further
decided that the operation and maintenance of the 37
bridges, flyovers, foot over bridges, under pass & culverts
attached herewith to be taken over by KMC from KMDA.
In that case the revenues earned from advertisements
and displays erected on these assets (including the piers
of the bridges) to be accrued to KMC.
This order shall take immediate effect.
Sd/-
Principal Secretary
to the Govt. of West Bengal”
22. In view of the fact that a fresh tender had already been awarded to
a third-party, coupled with the fact that the right to collect revenue
from the advertisements for the concerned underpasses had been
handed over to KMC, the counsel for the respondent submitted that
the matter had since become infructuous.
D. SUBMISSIONS ON BEHALF OF THE APPELLANT
23. Mr. Shyam Divan, the learned Senior Counsel appearing for the
appellant submitted that the impugned notice of cancellation dated
07.02.2023 is manifestly arbitrary and tainted with extraneous
considerations. He submitted that though the impugned notice
purports to cancel the tender on the ground of being ambiguous and
non-specific, but in reality the said action was at the behest of the
concerned Minister-In-Charge who directed such cancellation without
any justifiable cause. In this regard he placed strong reliance on the
internal-file notings of the respondent.
24. He submitted that the reasons assigned for cancelling the tender in
the impugned notice are not to be found in the entire file of notings
maintained by the respondent. He further pointed out that the file of
the internal notings indicate that, before the respondent could take
a judicious call the concerned minister issued a specific direction on
the basis of which the cancellation was undertaken & that to without
any application of mind.
[2024] 7 S.C.R. 555
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
25. Mr. Divan also submitted that no orders to stop the work could have
been issued by the respondent on account of handing over of the
maintenance to another authority, because even after the handover,
the respondent continued to operate & maintain the underpasses
including the licensing rights for advertisements.
26. He further submitted that, although the terms of the contract provided
for assigning cogent grounds for termination, yet the same was not
followed and instead the respondent arbitrarily proceeded to cancel
the tender.
27. In the last, Mr Divan submitted that the contention as regards the
financial losses being suffered is erroneous, as the respondent
voluntarily accepted the bid that was submitted by the appellant,
and even as per the notings in the file the tender was generating
more revenue than earlier.
E. SUBMISSIONS ON BEHALF OF THE RESPONDENT
28. Mr. Rakesh Dwivedi, the learned Senior Counsel appearing for the
respondent submitted that the present matter being purely a contractual
dispute was rightly not entertained by the High Court in exercise of
its writ jurisdiction under Article 226 of the Constitution of India.
29. He further submitted, that the decision to cancel the tender was bona
fide and had to be taken considering the technical faults in the same.
He submitted, that there was ambiguity in the tender as regards
whether it was lawful to put up advertisements at the places outside
the underpasses, due to which, many interested bidders might not
have participated in the tender. The respondent was of the view that
a higher license fee could be fetched by rectifying such ambiguity.
30. Mr. Dwivedi also submitted that the decision to cancel the tender
had to be taken to enable the respondent to float separate tenders,
one for the maintenance of the underpasses and the other for the
licensing advertisement rights. Thus, the decision was taken in
public interest. He submitted that the decision to cancel the tender
was on the basis of a change in the policy, and thus cannot be
said to be arbitrary.
31. He further submitted that no reliance could have been placed on the
notings in the file maintained by the respondent, as the file notings
556 [2024] 7 S.C.R.
Digital Supreme Court Reports
are only internal deliberations. Such notings cannot be construed
as decisions of the respondent and thus, creates no right in favour
of the appellant.
32. In the last, Mr Dwivedi submitted that since during the pendency of
the present appeal, the operation, maintenance and the licensing
rights for the advertisements have been taken over by a third party,
the present appeal has been rendered infructuous.
F. POINTS FOR DETERMINATION
33. Having heard the learned counsel appearing for the parties and
having gone through the materials on record, the two pivotal questions
that fall for our consideration are as under: -
I) What is the scope of judicial review of the actions of the State
in the matters relating to contract / tender disputes under writ
jurisdiction?
II) Whether the action on the part of the respondent herein in
cancelling the tender vide its notice dated 07.02.2023 was
amenable to the writ jurisdiction of the High Court? If so,
whether the said action could be termed as arbitrary or unfair
and in consequence of violation of Article 14 of the Constitution
of India?
G. ANALYSIS
i. Scope of Judicial Review of the actions of the State in
matters relating to Contract / Tender under Writ Jurisdiction.
a. Earlier Position of Law and Misconception of the State as
a Largesse.
34. Over the years, the scope of judicial review and the extent to which a
Court can interfere in disputes arising out of contracts or tenders has
seen a significant development, marked by a nuanced understanding
of the critical role of administrative discretion. The judicial quest
in administrative matters has always been to find a right balance
between i) allowing leeway to the States in deciding the exercise of
their administrative discretion in matters pertaining to policy and ii) the
need to ensure fairness and propriety in such administrative actions.
35. Earlier, the position of law was that any dispute arising out of a
contract entered into with the State or its instrumentalities could not
[2024] 7 S.C.R. 557
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
be adjudicated by the court under its writ jurisdiction, as in all such
cases, it could be said that the ‘real grievance’ was essentially only
one being that of breach of a contract for which the appropriate
remedy would be an ordinary suit and not a writ petition. One of
the earliest judicial pronouncements in this regard is the decision
of this Court in Radhakrishna Agarwal & Ors. v. State of Bihar &
Ors. reported in (1977) 3 SCC 457 wherein the following relevant
observations were made: -
“19. [...] None of these cases lays down that, when the
State or its officers purport to operate within the contractual
field and the only grievance of the citizen could be that
the contract between the parties is broken by the action
complained of, the appropriate remedy is by way of a
petition under Article 226 of the Constitution and not an
ordinary suit. There is a formidable array of authority
against any such a proposition. [...]”
(Emphasis supplied)
36. It was further explained by this Court in Radhakrishna Agarwal
(supra) that once the State or its instrumentalities enter into a
contract, any dispute arising out of that contract cannot be decided
in writ jurisdiction as their relations no longer remain governed by the
constitutional provisions, and it is only the contract which thereafter
determines the rights and obligations of the parties. Any claim to a
right flowing from a contract cannot be redressed through the writ
jurisdiction except where some statute steps in and confers some
special statutory power or obligation on the State in the contractual
field or if the agreement is in the nature of a statutory contract. The
relevant observations read as under: -
“10. [...] But, after the State or its agents have entered into
the field of ordinary contract, the relations are no longer
governed by the constitutional provisions but by the legally
valid contract which determines rights and obligations
of the parties inter se. No question arises of violation of
Article 14 or of any other constitutional provision when
the State or its agents, purporting to act within this field,
perform any act. In this sphere, they can only claim rights
conferred upon them by contract and are bound by the
terms of the contract only unless some statute steps in
558 [2024] 7 S.C.R.
Digital Supreme Court Reports
and confers some special statutory power or obligation
on the State in the contractual field which is apart from
contract.
11. In the cases before us the contracts do not contain any
statutory terms or obligations and no statutory power or
obligation which could attract the application of Article 14
of the Constitution is involved here. Even in cases where
the question is of choice or consideration of competing
claims before an entry into the field of contract facts
have to be investigated and found before the question
of a violation of Article 14 could arise. If those facts
are disputed and require assessment of evidence the
correctness of which can only be tested satisfactorily
by talking detailed evidence, involving examination and
cross-examination of witnesses, the case could not be
conveniently or satisfactorily decided in proceedings
under Article 226 of the Constitution. Such proceedings
are summary proceedings reserved for extraordinary
cases where the exceptional and what are described as,
perhaps not quite accurately, “prerogative” powers of the
Court are invoked. We are certain that the cases before
us are not such in which powers under Article 226 of the
Constitution could be invoked.”
(Emphasis supplied)
37. Similar view as above, was reiterated by this Court in Premji Bhai
Parmar & Ors. v. Delhi Development & Ors. reported in (1980) 2
SCC 129 at para 8 and in Divisional Forest Officer v. Bishwanath
Tea Co. Ltd. reported in (1981) 3 SCC 238 wherein it was held
that any right to relief flowing from a breach of contract cannot be
entertained under the extraordinary writ jurisdiction of the court, even
if the action of the State or its instrumentality was unauthorized in
law. The relevant observations read as under: -
“9. Ordinarily, where a breach of contract is complained of,
a party complaining of such breach may sue for specific
performance of the contract, if contract is capable of being
specifically performed, or the party may sue for damages.
Such a suit would ordinarily be cognizable by the civil
[2024] 7 S.C.R. 559
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
court. The High Court in its extraordinary jurisdiction would
not entertain a petition either for specific performance of
contract or for recovering damages. A right to relief flowing
from a contract has to be claimed in a civil court where a
suit for specific performance of contract or for damages
could be filed. This is so well-settled that no authority is
needed.
10. In substance, this was a suit for refund of a royalty
alleged to be unauthorisedly recovered and that could
hardly be entertained in exercise of the writ jurisdiction
of the High Court.”
(Emphasis supplied)
38. We do not propose to dwell any further, on the position of law that
existed earlier, and leave it at rest with one last reference to the
decision of this Court in Bareilly Development Authority & Anr. v.
Ajai Pal Singh & Ors. reported in (1989) 2 SCC 116, wherein this
Court once again reiterated that no writ can be issued in contractual
disputes between the State and an aggrieved party where the rights
or claims arise or stem only from the terms of the contract. The
relevant observations read as under: -
“22. There is a line of decisions where the contract entered
into between the State and the persons aggrieved is non-
statutory and purely contractual and the rights are governed
only by the terms of the contract, no writ or order can be
issued under Article 226 of the Constitution of India so as
to compel the authorities to remedy a breach of contract
pure and simple [...]”
(Emphasis supplied)
39. Thus, for a period of time the courts recognized that there was a clear
brightline distinction between when a State or its instrumentalities could
be said to be acting in its executive capacity and when it could be said
to be acting in its private capacity, with the existence of a ‘contractual
relation’ inter-se the parties being the determinative factor. Wherever,
there was a contract, the State’s relations and all its actions were said
to be within the field of a contract i.e., within the realm of private law,
and the courts would resile from interfering with the same under their
writ jurisdiction or embarking upon a judicial review of such actions.
560 [2024] 7 S.C.R.
Digital Supreme Court Reports
40. Such reluctance on the part of the courts stemmed from its
understanding that State or any of its instrumentalities must have
the flexibility or the discretion to take decisions that are in the best
interest of the public and efficient governance. Government being the
decision-maker of the State is said to be the best judge of when a
contract or an agreement is in its interest and by its extension in the
interest of the public, and as such the courts should not interfere in
the State’s discretion to award or terminate contracts. One another
reason why contractual disputes were precluded from being espoused
under the writ jurisdiction of the courts was due to the summary nature
of such proceedings, which do not allow for an exhaustive review
unlike civil suits. [See: Radhakrishna Agarwal (supra) at para 11]
41. This simplistic approach of the courts in deeming every act and
action of the State which was complained of as nothing more than a
‘contractual dispute’ or a case of ‘breach of contract’ often led to the
State abusing its position and acting unfairly under the misconceived
notion, that all its actions such as award of contracts or tenders were
nothing but a ‘largess’ – a generosity bestowed upon its citizens, which
it can at its own whims choose to deny, alter, modify, or take away
without any consequences. This often led to a conflation of power
with duty, and resulted in every arbitrary exercise of power by the
State under the guise of a ‘contractual dispute’ to remain unchecked
and undisputable before the courts and out of the reach of judicial
review, undermining the rights of the citizen to have their interests
safeguarded and protected. We may in this regard refer to M/s Indian
Medicines Pharmaceuticals Corp Ltd. v. Kerala Ayurvedic Co-
operative Society Ltd. reported in (2023) SCC OnLine SC 5 wherein
this Court speaking eruditely through one of us, Dr. D.Y. Chandrachud,
CJI made the following pertinent observations: -
“11 The welfare State plays a crucial role in aiding
the realisation of the socioeconomic rights which are
recognised by the Constitution. Social welfare benefits
provided by the State under the rubric of its constitutional
obligations are commonly understood in the language of
‘largesse’, a term used to describe a generous donation.
Terming all actions of government, ranging from social
security benefits, jobs, occupational licenses, contracts
and use of public resources – as government largesse
results in doctrinal misconceptions. The reason is that this
[2024] 7 S.C.R. 561
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
conflates the State’s power with duty. The Constitution
recognises the pursuit of the well-being of citizens as a
desirable goal. In doing this the Constitution entrusts the
State with a duty to ensure the well-being of citizens.
Government actions aimed at ensuring the well-being
of citizens cannot be perceived through the lens of
a ‘largess’. The use of such terminology belittles the
sanctity of the social contract that the ‘people of India’
entered into with the State to protect and safeguard
their interests.
xxx xxx xxx
13. In the early 1950s’, judicial review of the process of
concluding contracts by government was limited. The
courts allowed the State due deference on the ground of
governmental policy. In C.K Achuthan v. State of Kerala, AIR
1959 SC 490 a Constitution Bench of this Court held that
it is open to the Government ‘to choose a person to their
liking, to fulfil contracts which they wish to be performed.’
The Court observed that when one party is chosen over
another, the aggrieved party cannot claim the protection
of Article 14 since the government has the discretion to
choose with whom it will contract.”
(Emphasis supplied)
42. Before proceeding further to discuss how the scope of judicial review
came to be evolved, we would like to refer to the observations made
by this Court in M.C. Mehta v. Union of India reported in (1987) 1
SCC 395 which are significant, and read as under: -
“31. [...] Law has to grow in order to satisfy the needs
of the fast changing society and keep abreast with the
economic developments taking place in the country. As
new situations arise the law has to be evolved in order to
meet the challenge of such new situations. Law cannot
afford to remain static. We have to evolve new principles
and lay down new norms which would adequately deal
with the new problems which arise in a highly industrialised
economy. [...]”
(Emphasis supplied)
562 [2024] 7 S.C.R.
Digital Supreme Court Reports
b. Concept of ‘Public Law’ Element: Scope of Judicial Review
in Contractual Matters.
43. Over a period of time the courts recognized the crucial role of
judicial oversight in preventing the abuse of power and maintaining
public confidence in the administrative process. Courts developed
various doctrines and principles to guide their review, such as the
principles of natural justice, reasonableness and proportionality.
These principles ensured that the administrative actions are not
arbitrary, discriminatory or capricious. By enforcing such standards,
the courts also ensured that the rule of law was maintained and the
individual rights were protected.
44. The interplay between judicial review and administrative discretion
has been a dynamic process. As new challenges and complexities
kept on arising before the courts as regards the State’s actions and
governance, it continued to refine its approach. This ongoing dialogue
between the courts and the executive branch contributed to the
development of a more accountable and transparent administrative
framework, paving the way for the exercise of judicial review even in
the realm of contractual disputes to achieve a fine balance between
efficiency and fairness in policy decisions on the one hand and the
rights of individuals and overall public interest on the other.
45. In Mahabir Auto Stores & Ors. v. Indian Oil Corporation reported in
(1990) 3 SCC 752, this Court expressed doubts over the correctness
of the earlier position of law, that actions of the State in the private
contractual field cannot be questioned in writ jurisdiction. This Court
further held that even if the inter-se relation of parties with the State
is governed purely by a contract, the method, motive and decision
of the State would be subject to judicial review on the grounds of
relevance and reasonableness, fair play, natural justice, equality
and non-discrimination. The relevant observations read as under: -
“12. [...] It appears to us that rule of reason and rule
against arbitrariness and discrimination, rules of fair play
and natural justice are part of the rule of law applicable in
situation or action by State instrumentality in dealing with
citizens in a situation like the present one. Even though
the rights of the citizens are in the nature of contractual
rights, the manner, the method and motive of a decision
of entering or not entering into a contract, are subject
[2024] 7 S.C.R. 563
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
to judicial review on the touchstone of relevance and
reasonableness, fair play, natural justice, equality and non-
discrimination in the type of the transactions and nature
of the dealing as in the present case.
13. The existence of the power of judicial review however
depends upon the nature and right involved in the facts and
circumstances of the particular case. It is well settled that
there can be “malice in law”. Existence of such “malice in
law” is part of the critical apparatus of a particular action
in administrative law. Indeed “malice in law” is part of the
dimension of the rule of relevance and reason as well as
the rule of fair play in action.
xxx xxx xxx
20. [...] we are of the opinion that it would be appropriate
to state that in cases where the instrumentality of the
state enters the contractual field, it should be governed
by the incidence of the contract. It is true that it may not
be necessary to give reasons but, in our opinion, in the
field of this nature fairness must be there to the parties
concerned, and having regard to the large number or
the long period and the nature of the dealings between
the parties, the appellant should have been taken into
confidence. Equality and fairness at least demands this
much from an instrumentality of the State dealing with a
right of the State not to treat the contract as subsisting.
We must, however, evolve such process which will work.”
(Emphasis supplied)
[See also: Dwarkadas Marfatia & Sons v. Board of Trustees of
the Port of Bombay : (1989) 3 SCC 293 at para 27.]
46. In LIC v. Consumer Education & Research Centre reported in
(1995) 5 SCC 482, the Court held that the law as it stood earlier
that a State or its instrumentality whose action is hedged with public
element cannot be called into question because such action was
in the field of private law is no longer a good law. The relevant
observations read as under: -
“23. Every action of the public authority or the person acting
in public interest or any act that gives rise to public element,
564 [2024] 7 S.C.R.
Digital Supreme Court Reports
should be guided by public interest. It is the exercise of
the public power or action hedged with public element
(sic that) becomes open to challenge. If it is shown that
the exercise of the power is arbitrary, unjust and unfair,
it should be no answer for the State, its instrumentality,
public authority or person whose acts have the insignia of
public element to say that their actions are in the field of
private law and they are free to prescribe any conditions
or limitations in their actions as private citizens, simpliciter
do in the field of private law. Its actions must be based
on some rational and relevant principles. It must not be
guided by irrational or irrelevant considerations. Every
administrative decision must be hedged by reasons. [...]
xxx xxx xxx
26. This Court has rejected the contention of an
instrumentality or the State that its action is in the private
law field and would be immuned from satisfying the tests
laid under Article 14. The dichotomy between public law
and private law rights and remedies, though may not be
obliterated by any strait-jacket formula, it would depend
upon the factual matrix. The adjudication of the dispute
arising out of a contract would, therefore, depend upon
facts and circumstances in a given case. The distinction
between public law remedy and private law field cannot
be demarcated with precision. Each case will be examined
on its facts and circumstances to find out the nature of
the activity, scope and nature of the controversy. The
distinction between public law and private law remedy has
now become too thin and practicably obliterated.”
(Emphasis supplied)
47. This Court in Consumer Education & Research Centre (supra)
further held that the writ jurisdiction of the courts cannot be shackled
by technicalities and that any action of the State which has a public
law element or a public character, such actions by their nature are
required to be just, fair, reasonable & in the interest of public, and as
such they would be amenable to judicial review. As to what is meant
by actions bearing insignia of public law element, this Court held that
wherever the action of a State or its instrumentality in the sphere of
[2024] 7 S.C.R. 565
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
contractual relations is enjoined with a duty or an obligation to the
public, such actions could be said to bear the insignia of a public
element. The relevant observation reads 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.
xxx xxx xxx
29. [...] The arms of the High Court are not shackled with
technical rules or procedure. The actions of the State,
its instrumentality, any public authority or person whose
actions bear insignia of public law element or public
character are amenable to judicial review and the validity
of such an action would be tested on the anvil of Article
14. While exercising the power under Article 226 the
Court would be circumspect to adjudicate the disputes
arising out of the contract depending on the facts and
circumstances in a given case. The distinction between
the public law remedy and private law field cannot be
demarcated with precision. Each case has to be examined
on its own facts and circumstances to find out the nature
of the activity or scope and nature of the controversy. The
distinction between public law and private law remedy is
now narrowed down. [...]”
(Emphasis supplied)
48. In another decision of this Court in Shrilekha Vidyarthi (Kumari) v.
State of U.P. reported in (1991) 1 SCC 212 it was held that every
566 [2024] 7 S.C.R.
Digital Supreme Court Reports
action of the State that has some degree of impact on the public
interest, can be challenged under writ jurisdiction to the extent that
they are arbitrary, unfair or unreasonable, irrespective of the fact that
the dispute falls within the domain of contractual obligations. It was
further held, that it is the nature of a government body’s personality
which characterizes the action as having a public law element,
and not the field of law where such action is taken. The relevant
observation reads as under: -
“22. There is an obvious difference in the contracts between
private parties and contracts to which the State is a party.
Private parties are concerned only with their personal
interest whereas the State while exercising its powers and
discharging its functions, acts indubitably, as is expected of
it, for public good and in public interest. The impact of every
State action is also on public interest. This factor alone
is sufficient to import at least the minimal requirements
of public law obligations and impress with this character
the contracts made by the State or its instrumentality. It
is a different matter that the scope of judicial review in
respect of disputes falling within the domain of contractual
obligations may be more limited and in doubtful cases the
parties may be relegated to adjudication of their rights
by resort to remedies provided for adjudication of purely
contractual disputes. However, to the extent, challenge is
made on the ground of violation of Article 14 by alleging
that the impugned act is arbitrary, unfair or unreasonable,
the fact that the dispute also falls within the domain of
contractual obligations would not relieve the State of its
obligation to comply with the basic requirements of Article
14. To this extent, the obligation is of a public character
invariably in every case irrespective of there being any
other right or obligation in addition thereto. An additional
contractual obligation cannot divest the claimant of the
guarantee under Article 14 of non-arbitrariness at the
hands of the State in any of its actions.
xxx xxx xxx
24. The State cannot be attributed the split personality
of Dr Jekyll and Mr Hyde in the contractual field so as
to impress on it all the characteristics of the State at the
[2024] 7 S.C.R. 567
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
threshold while making a contract requiring it to fulfil the
obligation of Article 14 of the Constitution and thereafter
permitting it to cast off its garb of State to adorn the new
robe of a private body during the subsistence of the contract
enabling it to act arbitrarily subject only to the contractual
obligations and remedies flowing from it. It is really the
nature of its personality as State which is significant
and must characterize all its actions, in whatever field,
and not the nature of function, contractual or otherwise,
which is decisive of the nature of scrutiny permitted for
examining the validity of its act. The requirement of Article
14 being the duty to act fairly, justly and reasonably, there
is nothing which militates against the concept of requiring
the State always to so act, even in contractual matters.
There is a basic difference between the acts of the State
which must invariably be in pubic interest and those of
a private individual, engaged in similar activities, being
primarily for personal gain, which may or may not promote
public interest. Viewed in this manner, in which we find no
conceptual difficulty or anachronism, we find no reason
why the requirement of Article 14 should not extend even
in the sphere of contractual matters for regulating the
conduct of the State activity.
xxx xxx xxx
28. Even assuming that it is necessary to import the concept
of presence of some public element in a State action to
attract Article 14 and permit judicial review, we have no
hesitation in saying that the ultimate impact of all actions
of the State or a public body being undoubtedly on public
interest, the requisite public element for this purpose is
present also in contractual matters. We, therefore, find
it difficult and unrealistic to exclude the State actions in
contractual matters, after the contract has been made,
from the purview of judicial review to test its validity on
the anvil of Article 14.”
(Emphasis supplied)
49. In Verigamto Naveen v. Govt. of A.P. & Ors. reported in (2001) 8
SCC 344 this Court held that where a breach of contract involves
568 [2024] 7 S.C.R.
Digital Supreme Court Reports
the decision-making authority exceeding its power or violating the
principles of nature justice or its decision being borne out of perversity,
then such cancellation of contract can certainly be scrutinized under
the writ jurisdiction. This is because such an exercise of power by
the authority is apart from the contract. The relevant observation
reads as under: -
“21. [...] Though there is one set of cases rendered by this
Court of the type arising in Radhakrishna Agarwal case
[(1977) 3 SCC 457 : AIR 1977 SC 1496] much water has
flown in the stream of judicial review in contractual field.
In cases where the decision-making authority exceeded its
statutory power or committed breach of rules or principles
of natural justice in exercise of such power or its decision
is perverse or passed an irrational order, this Court has
interceded even after the contract was entered into between
the parties and the Government and its agencies. [...]
Where the breach of contract involves breach of statutory
obligation when the order complained of was made in
exercise of statutory power by a statutory authority, though
cause of action arises out of or pertains to contract,
brings it within the sphere of public law because the
power exercised is apart from contract. The freedom
of the Government to enter into business with anybody
it likes is subject to the condition of reasonableness and
fair play as well as public interest. After entering into a
contract, in cancelling the contract which is subject to
terms of the statutory provisions, as in the present case, it
cannot be said that the matter falls purely in a contractual
field. Therefore, we do not think it would be appropriate to
suggest that the case on hand is a matter arising purely
out of a contract and, therefore, interference under Article
226 of the Constitution is not called for. This contention
also stands rejected.”
(Emphasis supplied)
50. Similarly in Binny Ltd. & Anr. v. Sadasivan & Ors. reported in (2005)
6 SCC 657 this Court in view of the increasing trend of the State
and its instrumentalities to use contracts as a means for dispensing
their regulatory functions, held that whenever a contract is used for
[2024] 7 S.C.R. 569
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
a public purpose, it will be amenable to judicial review. The relevant
observations read as under: -
“30. A contract would not become statutory simply because
it is for construction of a public utility and it has been
awarded by a statutory body. But nevertheless, it may be
noticed that the Government or government authorities at
all levels are increasingly employing contractual techniques
to achieve their regulatory aims. It cannot be said that the
exercise of those powers are free from the zone of judicial
review and that there would be no limits to the exercise
of such powers, but in normal circumstances, judicial
review principles cannot be used to enforce contractual
obligations. When that contractual power is being used
for public purpose, it is certainly amenable to judicial
review. The power must be used for lawful purposes and
not unreasonably.”
(Emphasis supplied)
51. The decision of this Court in ABL International Ltd. v. Export
Credit Guarantee Corporation of India Ltd. reported in (2004)
3 SCC 553 is significant and was the turning point in the scope of
judicial review in contractual matters. In this landmark ruling, this
Court decisively laid down and approved that a relief against a State
or its instrumentalities in matters related to contractual obligations
can be sought under the writ jurisdiction. The relevant observations
read as under: -
“23. It is clear from the above observations of this Court,
once the State or an instrumentality of the State is a
party of the contract, it has an obligation in law to act
fairly, justly and reasonably which is the requirement of
Article 14 of the Constitution of India. Therefore, if by the
impugned repudiation of the claim of the appellants the first
respondent as an instrumentality of the State has acted in
contravention of the abovesaid requirement of Article 14,
then we have no hesitation in holding that a writ court can
issue suitable directions to set right the arbitrary actions
of the first respondent.
xxx xxx xxx
570 [2024] 7 S.C.R.
Digital Supreme Court Reports
27. From the above discussion of ours, the following legal
principles emerge as to the maintainability of a writ petition:
(a) In an appropriate case, a writ petition as against a
State or an instrumentality of a State arising out of
a contractual obligation is maintainable.
(b) Merely because some disputed questions of fact
arise for consideration, same cannot be a ground
to refuse to entertain a writ petition in all cases as
a matter of rule.
(c) A writ petition involving a consequential relief of
monetary claim is also maintainable.”
(Emphasis supplied)
52. At the same time, this Court in ABL (supra) cautioned that the power
to issue writs under Article 226 being discretionary and plenary,
the same should only be exercised to set right the arbitrary actions
of the State or its instrumentality in matters related to contractual
obligations. The relevant observations read as under: -
“28. However, while entertaining an objection as to the
maintainability of a writ petition under Article 226 of the
Constitution of India, the court should bear in mind the fact
that the power to issue prerogative writs under Article 226
of the Constitution is plenary in nature and is not limited
by any other provisions of the Constitution. The High Court
having regard to the facts of the case, has a discretion to
entertain or not to entertain a writ petition. The Court has
imposed upon itself certain restrictions in the exercise of
this power. (See Whirlpool Corpn. v. Registrar of Trade
Marks) And this plenary right of the High Court to issue a
prerogative writ will not normally be exercised by the Court
to the exclusion of other available remedies unless such
action of the State or its instrumentality is arbitrary and
unreasonable so as to violate the constitutional mandate
of Article 14 or for other valid and legitimate reasons, for
which the Court thinks it necessary to exercise the said
jurisdiction.”
(Emphasis supplied)
[2024] 7 S.C.R. 571
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
53. In Noble Resources Ltd. v. State of Orissa reported in (2006) 10
SCC 236 this Court for the purposes of judicial review of contractual
disputes recognized a distinction between a matter where the contract
is at the threshold and at the stage of breach. It held that at the
threshold, the court’s scrutiny is more intrusive & expansive while
at the stage of breach it is discretionary except where the action is
found to be arbitrary or unreasonable. The relevant observations
read as under: -
“15. It is trite that if an action on the part of the State is
violative of the equality clause contained in Article 14 of the
Constitution of India, a writ petition would be maintainable
even in the contractual field. A distinction indisputably must
be made between a matter which is at the threshold of a
contract and a breach of contract; whereas in the former
the court’s scrutiny would be more intrusive, in the latter
the court may not ordinarily exercise its discretionary
jurisdiction of judicial review, unless it is found to be
violative of Article 14 of the Constitution. While exercising
contractual powers also, the government bodies may be
subjected to judicial review in order to prevent arbitrariness
or favouritism on their part. Indisputably, inherent limitations
exist, but it would not be correct to opine that under no
circumstances a writ will lie only because it involves a
contractual matter.”
(Emphasis supplied)
54. The law on the subject with which we are dealing was laid down
exhaustively by this Court in its decision in Joshi Technologies
International Inc. v. Union of India & Ors. reported in (2015) 7
SCC 728, and the position was summarised as under: -
“69. The position thus summarised in the aforesaid
principles has to be understood in the context of discussion
that preceded which we have pointed out above. As per
this, no doubt, there is no absolute bar to the maintainability
of the writ petition even in contractual matters or where
there are disputed questions of fact or even when monetary
claim is raised. At the same time, discretion lies with the
High Court which under certain circumstances, it can
refuse to exercise. It also follows that under the following
572 [2024] 7 S.C.R.
Digital Supreme Court Reports
circumstances, “normally”, the Court would not exercise
such a discretion:
69.1. The Court may not examine the issue unless the
action has some public law character attached to it.
69.2. Whenever a particular mode of settlement of dispute
is provided in the contract, the High Court would refuse to
exercise its discretion under Article 226 of the Constitution
and relegate the party to the said mode of settlement,
particularly when settlement of disputes is to be resorted
to through the means of arbitration.
69.3. If there are very serious disputed questions of fact
which are of complex nature and require oral evidence
for their determination.
69.4. Money claims per se particularly arising out of
contractual obligations are normally not to be entertained
except in exceptional circumstances.
70. Further, the legal position which emerges from various
judgments of this Court dealing with different situations/
aspects relating to contracts entered into by the State/
public authority with private parties, can be summarised
as under:
70.1. At the stage of entering into a contract, the State
acts purely in its executive capacity and is bound by the
obligations of fairness.
70.2. State in its executive capacity, even in the contractual
field, is under obligation to act fairly and cannot practise
some discriminations.
70.3. Even in cases where question is of choice or
consideration of competing claims before entering into
the field of contract, facts have to be investigated and
found before the question of a violation of Article 14 of the
Constitution could arise. If those facts are disputed and
require assessment of evidence the correctness of which
can only be tested satisfactorily by taking detailed evidence,
involving examination and cross-examination of witnesses,
the case could not be conveniently or satisfactorily decided
[2024] 7 S.C.R. 573
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
in proceedings under Article 226 of the Constitution. In
such cases the Court can direct the aggrieved party to
resort to alternate remedy of civil suit, etc.
70.4. Writ jurisdiction of the High Court under Article 226
of the Constitution was not intended to facilitate avoidance
of obligation voluntarily incurred.
70.5. Writ petition was not maintainable to avoid
contractual obligation. Occurrence of commercial difficulty,
inconvenience or hardship in performance of the conditions
agreed to in the contract can provide no justification in
not complying with the terms of contract which the parties
had accepted with open eyes. It cannot ever be that a
licensee can work out the licence if he finds it profitable
to do so: and he can challenge the conditions under which
he agreed to take the licence, if he finds it commercially
inexpedient to conduct his business.
70.6. Ordinarily, where a breach of contract is complained
of, the party complaining of such breach may sue for
specific performance of the contract, if contract is capable
of being specifically performed. Otherwise, the party may
sue for damages.
70.7. Writ can be issued where there is executive action
unsupported by law or even in respect of a corporation
there is denial of equality before law or equal protection of
law or if it can be shown that action of the public authorities
was without giving any hearing and violation of principles
of natural justice after holding that action could not have
been taken without observing principles of natural justice.
70.8. If the contract between private party and the State/
instrumentality and/or agency of the State is under the
realm of a private law and there is no element of public
law, the normal course for the aggrieved party, is to invoke
the remedies provided under ordinary civil law rather
than approaching the High Court under Article 226 of the
Constitution of India and invoking its extraordinary jurisdiction.
70.9. The distinction between public law and private law
element in the contract with the State is getting blurred.
574 [2024] 7 S.C.R.
Digital Supreme Court Reports
However, it has not been totally obliterated and where
the matter falls purely in private field of contract, this
Court has maintained the position that writ petition is not
maintainable. The dichotomy between public law and
private law rights and remedies would depend on the
factual matrix of each case and the distinction between
the public law remedies and private law field, cannot
be demarcated with precision. In fact, each case has
to be examined, on its facts whether the contractual
relations between the parties bear insignia of public
element. Once on the facts of a particular case it is
found that nature of the activity or controversy involves
public law element, then the matter can be examined
by the High Court in writ petitions under Article 226 of
the Constitution of India to see whether action of the
State and/or instrumentality or agency of the State is
fair, just and equitable or that relevant factors are taken
into consideration and irrelevant factors have not gone
into the decision making process or that the decision is
not arbitrary.
70.10. Mere reasonable or legitimate expectation of a
citizen, in such a situation, may not by itself be a distinct
enforceable right, but failure to consider and give due
weight to it may render the decision arbitrary, and this is
how the requirements of due consideration of a legitimate
expectation forms part of the principle of non-arbitrariness.
70.11. The scope of judicial review in respect of disputes
falling within the domain of contractual obligations may
be more limited and in doubtful cases the parties may be
relegated to adjudication of their rights by resort to remedies
provided for adjudication of purely contractual disputes.”
(Emphasis supplied)
55. Thereafter, this Court in its decision in M.P. Power Management
Co. Ltd., Jabalpur v. Sky Power Southeast Solar India Pvt.
Ltd. & Ors. reported in (2023) 2 SCC 703 exhaustively delineated
the scope of judicial review of the courts in contractual disputes
concerning public authorities. The aforesaid decision is in the
following parts: -
[2024] 7 S.C.R. 575
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
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
revolution 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
576 [2024] 7 S.C.R.
Digital Supreme Court Reports
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: -
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 vs. 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
[2024] 7 S.C.R. 577
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
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 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.
vii. The existence of an alternate remedy, is,
undoubtedly, a matter to be borne in mind
in declining relief in a Writ Petition in a
contractual matter. Again, the question as to
whether the Writ Petitioner must be told off the
gates, would depend upon the nature of the
claim and relief sought by the petitioner, the
questions, which would have to be decided,
and, most importantly, whether there are
disputed questions of fact, resolution of which
is necessary, as an indispensable prelude to
the grant of the relief sought. Undoubtedly,
while there is no prohibition, in the Writ
Court even deciding disputed particularly
when questions the dispute of fact, surrounds
demystifying of documents only, the Court
578 [2024] 7 S.C.R.
Digital Supreme Court Reports
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. and others 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 a 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
[2024] 7 S.C.R. 579
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
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 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
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
580 [2024] 7 S.C.R.
Digital Supreme Court Reports
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.
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 and
others v. State of U.P. and others). However, it
must be made clear that every case involving
breach of contract by the State, cannot be
dressed up and disguised as a case of arbitrary
State action. While the concept of an arbitrary
action or inaction cannot be cribbed or confined
to any immutable mantra, and must be laid bare,
with reference to the facts of each case, it cannot
be a mere allegation of breach of contract that
would suffice. What must be involved in the case
must be action/inaction, which must be palpably
unreasonable or absolutely irrational and bereft
of any principle. An action, which is completely
malafide, can hardly be described as a fair action
and may, depending on the facts, amount to
[2024] 7 S.C.R. 581
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
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)
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
582 [2024] 7 S.C.R.
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.
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.
[2024] 7 S.C.R. 583
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
59. Therefore, what can be culled out from the above is that although
disputes arising purely out of contracts are not amenable to writ
jurisdiction yet keeping in mind the obligation of the State to act fairly
and not arbitrarily or capriciously, it is now well settled that when
contractual power is being used for public purpose, it is certainly
amenable to judicial review.
60. Now coming to the facts of the case at hand, the appellant has
challenged the cancellation of the tender at the instance of the
respondent on the ground of being manifestly arbitrary and influenced
by extraneous considerations. It is evident from the notice of
cancellation dated 07.02.2023, that the tender was not terminated
pursuant to any terms of the contract subsisting between the parties,
rather, the respondent ‘cancelled’ the tender saying that there was
technical fault in the tender that was floated.
61. Thus, the respondent could be said to have exercised powers in its
executive capacity as the action to cancel the tender falls outside
the purview of the terms of the contract. Hence, it cannot be said
that the present matter is 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.
62. 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.
63. 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
584 [2024] 7 S.C.R.
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)
64. 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
[2024] 7 S.C.R. 585
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
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)
65. 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.
66. Control of administrative discretion is an important concern in the
development of Rule of Law. According to Wade and Forsyth, the
Rule of Law has four meanings, and one of them is that “government
should be conducted within a framework of recognized rules and
principles which restrict discretionary power”.
67. To enthuse efficiency in administration, a balance between
accountability and autonomy of action should be carefully maintained.
Overemphasis on either would impinge upon public efficiency. But
undermining the accountability would give immunity or carte blanche
power to act as it pleases with the public at whim or vagary. Whether
the public authority acted bona fide would be gauged from the
impugned action and attending circumstances. The authority should
justify the action assailed on the touchstone of justness, fairness and
reasonableness. Test of reasonableness is more strict. The public
authorities should be duty conscious rather than power charged.
Its actions and decisions which touch 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
586 [2024] 7 S.C.R.
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]
68. The dictum as laid in Tata Cellular v. UOI reported in (1994) 6 SCC
651 is that the judicial power of review is exercised to rein in any
unbridled executive functioning. It was observed that the restraint
has two contemporary manifestations viz. one is the ambit of judicial
intervention and the other covers the scope of the court’s ability to
quash an administrative decision on its merits. These restraints bear
the hallmarks of judicial control over administrative action. It was
held that the principle of judicial review is concerned with reviewing
not the merits of the decision in support of which the application for
judicial review is made, but the decision-making process itself. It was
held that the principle of judicial review would apply to the exercise
of contractual powers by the 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
[2024] 7 S.C.R. 587
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
for an administrative body functioning in an administrative sphere or
quasi-administrative sphere. However, the decision must not only be
tested by the application of Wednesbury principle of reasonableness,
but must be free from arbitrariness not affected by bias or actuated
by mala fides. Moreover, quashing decisions may impose heavy
administrative burden on the administration and lead to increased
and unbudgeted expenditure.
69. To ascertain whether an act is arbitrary or not, the court must carefully
attend to the facts and the circumstances of the case. It should find
out whether the impugned decision is based on any principle. If not,
it may unerringly point to 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.
70. One another way, to assess whether an action complained of could
be termed as arbitrary is by way of scrutinizing the reasons that have
been assigned to such an action. It involves overseeing whether
the reasons which have been cited if at all genuinely formed part
of the decision-making process or whether they are merely a ruse.
All decisions that are taken must earnestly be in lieu of the reasons
and considerations that have been assigned to it. The Court must be
mindful of the fact that it is not supposed to delve into every minute
details of the reasoning assigned, it need not to go into a detailed
exercise of assessing the pros and cons of the reasons itself, but
should only see whether the reasons were earnest, genuine and
had a rationale with the ultimate decision. What is under scrutiny
in judicial review of an action is the decision-making process and
whether there is any element of arbitrariness or mala fide.
71. 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
588 [2024] 7 S.C.R.
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?
72. The principal contention of the appellant is that the notice of
cancellation dated 07.02.2023 that was issued by the respondent is
manifestly arbitrary, unreasonable and influenced by mala fide and
extraneous considerations.
73. Before we proceed to determine whether the cancellation of tender
could be termed as arbitrary, it is necessary to understand the stance
of the respondent in the present litigation, as discernible from their
pleadings, which has left us quite perplexed. The argument of the
respondent is two-fold: -
(i) First, that the tender had to be cancelled as there was a
technical fault. The tender was found to be ‘non-specific’ &
‘not well defined’ as a result it created ambiguity resulting in
financial losses to the respondent.
(ii) Secondly, the cancellation was also on account of a change in
policy whereby, the operation & maintenance of the concerned
underpasses had been handed over to another authority.
74. The primary thrust of the respondent’s contention is that the
decision to cancel the tender was taken in view of the technical
faults in the same, more particularly the ambiguity as to whether
the advertisement boards could be put up beyond the area of the
concerned underpasses.
75. 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
[2024] 7 S.C.R. 589
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
rectify by way of cancelling the tender. The relevant observations
read as under: -
“18. [...] In fact, the letter of cancellation provides further
reasons, namely, that the tender has been found to be
non-specific and having technical faults. This would also
be borne out from clauses 10 and 14 of the Special
Terms and Conditions of the tender document which give
rise to conflicting interpretations on the placement of the
signboards. Hence, besides the administrative decision to
hand over the maintenance of E.M. Bypass from KMDA
to KMC, the respondent KMDA as the tendering authority,
has a right to rectify the ambiguities in the bid document
by cancelling the same.”
(Emphasis supplied)
76. However, interestingly, the Notice of Cancellation dated 07.02.2023
that came to be issued by the respondent makes no mention of any
such lacuna. In fact, there is no reference to the aforementioned
clauses or any conflict in their interpretation. The aforesaid notice
only states that the tender was found to be ‘non-specific’ and ‘not
well defined’ which created ambiguity due 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.
77. 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.
78. The appellant has in particular placed reliance on various notings
made in the internal file of the respondent in respect of the tender to
590 [2024] 7 S.C.R.
Digital Supreme Court Reports
contend that the cancellation of the same was arbitrary and influenced
by extraneous considerations. The respondent on the other hand
submitted that the internal file-notings cannot be used or relied upon
to impute any ill-motives to the decision of cancelling the tender as
they only reflect the opinion of a particular individual and cannot be
construed or interpreted as the decision of the respondent. In this
regard, reliance has been placed on the following decisions: -
i. Pimpri Chinchwad New Township Development Authority
v. Vishnudev Coop. Housing Society : (2018) 8 SCC 215.
ii. Shanti Sports Club v. Union of India : (2009) 15 SCC 705.
79. This Court in its decision in Bachhittar Singh v. State of Punjab &
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
[2024] 7 S.C.R. 591
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
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]
80. 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)
81. In Shanti Sports Club (supra) several representations were made
by the landowners requesting to release their land from acquisition.
After considering those representations, the concerned minister
recorded in the note file that the land should be denotified on suitable
terms and left the final decision to his successor. The new minister,
however, rejected the request for denotification. Consequently, writ
592 [2024] 7 S.C.R.
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
[2024] 7 S.C.R. 593
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
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]
82. In Pimpri Chinchwad (supra), a revenue minister passed an order
for deletion of the land of the respondent therein from acquisition
proceeding, but the said order was never communicated, however,
the same was mentioned in the internal note file. Sometime later, the
government decided to reconsider all uncommunicated orders. As
a result the respondents therein filed a writ seeking implementation
of the order as mentioned in the internal note-file. This Court held
that the notings in official files of the government are an internal
matter and carry no legal sanctity unless they are approved and
duly communicated as per the prescribed procedure. It is only when
such notings are translated into formal decisions, they would create
some right or claim in favour of a person. The relevant observations
read as under: -
“36. [...] first, a mere noting in the official files of the
Government while dealing with any matter pertaining
to any person 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
594 [2024] 7 S.C.R.
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)
83. We are of the view that the reliance on the part of the respondent
on the decisions of this Court in Pimpri Chinchwad (supra) and
Shanti Sports Club (supra) to assert that no reference could be
made to the internal-file notings for the purposes of judicial review of
its decision is completely misplaced. In Shanti Sports Club (supra)
the question before the Court was as to when an internal noting can
be used to confer or claim a right. Whereas in Pimpri Chinchwad
(supra) the issue for consideration before the Court was whether any
internal-note or deliberation once written in the files was capable of
being reconsidered, changed, modified or withdrawn.
84. 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.
85. 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.
86. 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
[2024] 7 S.C.R. 595
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
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)
87. The above observations of this Court fortify our view that once a
decision is made, all opinions and deliberations pertaining to the
said decision in the internal file-notings become a part of the process
by which the decision is arrived at, and can be looked into for the
purposes of judicial review. In other words, any internal discussions
or notings that have been approved and formalized into a decision by
an authority can be examined to ascertain the reasons and purposes
behind such decisions for the overall judicial review of such decision-
making process and whether it conforms to the principles enshrined
in Article 14 of the Constitution.
88. One another reason why the respondent cannot claim that its internal
file-notings fall outside the purview of judicial review of the courts
is in view of the inviolable rule that came to be recognized by this
Court in Ramana Dayaram Shetty (supra) wherein it was held that
an executive authority must be rigorously held to the standard by
which it professes its actions to be judged. The relevant observations
read as under: -
596 [2024] 7 S.C.R.
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)
89. 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.
90. 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.
91. We are in seisin of the fact that although the internal-file notings
mention about the policy change in the operation and maintenance
of the concerned underpasses, yet a careful reading of the same
reveals that the cancellation of the tender for work was neither due to
any technical fault nor due to the policy change in the operation and
maintenance of the concerned underpasses but was for altogether
a different reason.
92. As per Note #91 dated 30.12.2022 of the file-notings, when the
Order dated 01.12.2022 of the Urban Development and Municipal
Affairs Department came to be passed whereby the maintenance
was handed over to KMC, it was the Minister-In-Charge as the
Chairperson of the respondent authority – who suggested that in view
of the change in scenario the tender be cancelled. In 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”.
93. The words “may cancel the work order” clearly indicate, that the
respondent at that stage by no means was of the opinion that the
[2024] 7 S.C.R. 597
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
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.
94. In Note #95 dated 10.01.2023 it has been clearly recorded by the
officials of the respondent that it was the competent authority of the
KMDA that instructed to cancel the tender in view of the aforesaid
change in the policy. However, since the officials of the respondent
were in doubt regarding the legality of such action, it insisted on first
obtaining the advice or opinion from its legal cell before proceeding
further. Furthermore, the aforesaid note clearly indicates that the
work stop order had to be issued only with a view to comply with
the instructions of the competent authority while it decided upon the
aspect of cancellation of the tender.
95. In Note #97, the respondent has recorded the following – “There is
no different opinion than to get this cancelled, once this has been
decided by the Authority but a legal opinion may be sought for avoiding
further litigations”. This 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.
96. 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.
97. 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
598 [2024] 7 S.C.R.
Digital Supreme Court Reports
immediate steps to cancel the tender after the concerned minister
personally instructed the officials to do so.
98. Thus, it is evident that the Notice of Cancellation dated 07.02.2023,
issued to the appellant, was at the behest of the concerned minister.
The respondent clearly recorded that, because instructions for
cancellation had been received from the higher-ups, there was
no option but to proceed with the cancellation. Even before the
respondent could properly and thoroughly explore the possibility
of acceding to such request by consulting its legal cell, the tender
was cancelled only at the instance and specific instructions of the
concerned minister.
99. The aforesaid aspect can be looked at from one another angle. The
concerned Minister-In-Charge had instructed to cancel the tender in
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.
100. The Urban Development and Municipal Affairs Department by way
of its Order dated 01.12.2022 decided that the maintenance of the
roads and drainage of the E.M. Bypass shall be handed over by
the respondent to the KMC.
101. As per the Note #91 dated 30.12.2022, the concerned minister
for the first time proposed cancellation of the tender in view of the
aforesaid change in scenario as a result of the maintenance of the
E.M. Bypass being handed over from the respondent to the KMC.
102. However, it is pertinent to note that in the aforesaid order of the
Urban Development and Municipal Affairs Department it has
been specifically stated that the right to collect revenue from the
advertisements as-well as the control of the E.M. Bypass shall
continue to remain with the respondent herein.
103. Thus, the respondent at the relevant point of time was not only
in control of the two underpasses, but was also empowered to
continue collecting revenue from the advertisements displayed at
[2024] 7 S.C.R. 599
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
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.
104. 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.
105. 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.
106. 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.
600 [2024] 7 S.C.R.
Digital Supreme Court Reports
107. 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.
108. The reluctance on the part of the respondent to cancel the tender
is also evident from Note #97, wherein the authority expressed
its concern over the potential consequences of such cancellation.
The respondent apprehended that in the event the tender for work
was being cancelled, the routine maintenance of the underpasses
would be disrupted. Due to this, the underpasses would have to be
closed until some other agency could take over the maintenance.
The relevant observations read as under: -
“Note # 97
[...] Besides, the underpasses are being maintained by
the bidder. Once the contract is cancel led, the routine
maintenance would be an issue till the work is awarded
thru tender. The E&M Sector may be asked to do the
maintenance by engaging one of the existing agency from
their set up. 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)”
109. 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: -
[2024] 7 S.C.R. 601
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
“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)”
110. Thus, the respondent’s reasoning in the Notice of Cancellation dated
07.02.2023 that it was incurring financial losses from the aforesaid
tender does not hold well either. It has been contended by the
respondent that due to the ambiguity in tender as regards placement
of advertisements, many interested bidders might not have been
able to submit their bids. Thus, the respondent formed the view that
if the ambiguity is corrected a higher license fee could be fetched.
111. However, we are not impressed with the above submission. As
discussed in the preceding paragraphs of this judgment, nothing to
this effect is even remotely indicated from the internal file 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
602 [2024] 7 S.C.R.
Digital Supreme Court Reports
based on genuine financial concerns but rather on other, possibly
extraneous factors.
112. Even assuming for a moment that there was a technical fault in
the tender, which if rectified had the possibility of generating more
revenue, the same by no stretch could be said to be a cogent reason
for cancelling an already existing tender. In this regard reference
may be made to the decision of this Court in Vice Chariman &
Managing Director, City & Industrial Development Corporation
of Maharashtra Ltd. & 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)
113. 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
[2024] 7 S.C.R. 603
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
which it seeks to resile from the promise made or obligation
undertaken by insistence of enforcing the promise, how the
public interest would be jeopardised as against the private
interest. It is well settled legal proposition that the private
interest would always yield place to the public interest. [...]”
(Emphasis supplied)
114. We may again refer to the decision of this Court in M.P. Power
Management Company Ltd. (supra) wherein this Court observed that
merely because the rates embodied in a contract with the passage
of time have become less appealing, the same cannot become a
determinative criterion for either terminating the contract or for the
courts to decline interference in such contractual disputes. The relevant
observations read as under: -
“88. Therefore, on a conspectus of the case law, we find
that the concept of overwhelming public interest has
essentially evolved in 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
604 [2024] 7 S.C.R.
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)
115. 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.
116. Considerations of public interest should not be narrowly confined to
financial aspects. The courts must have a more holistic understanding
of public interest wherever the fairness of public authorities is in
question, giving due regard to the broader implications of such
action on the stability of contractual obligations. Merely because the
financial terms of a contract are less favourable over a period of time
does not justify its termination. Such decisions must be based on a
careful consideration of all relevant factors, including the potential
harm to the integrity and sanctity of contractual relationships. The
larger interest of upholding contracts cannot be discarded in the
name of monetary gain labelled as public interest.
117. We may make a reference to the observations made by this Court
in Har Shankar & 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
[2024] 7 S.C.R. 605
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
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)
118. Thus, we are of the view that the respondent’s stance of a mere
possibility of fetching higher license fees was no ground to cancel
the tender issued to the appellant for the purposes of rectifying it,
especially when the respondent completely failed to demonstrate
as to how there was a technical fault in the tender or how potential
interested bidders did not participate due to it or how fetching higher
license fees was more than a mere possibility.
119. At this stage, we may also answer one another submission that
was canvassed on behalf of the respondent as regards the other
aspect of public interest besides the monetary gain. It was submitted
on behalf of the respondent that the decision to 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.
120. 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
606 [2024] 7 S.C.R.
Digital Supreme Court Reports
that the bidders participating in the tender possess the necessary
expertise for the work of maintenance.
121. Even otherwise, if at all the respondent was very much concerned
about the maintenance of the underpasses due to lack of expertise of
the appellant, it was always open to the respondent to terminate the
contract in terms of the termination clause as envisaged in Clause
35 of the Special Terms & Conditions of the Memorandum for the
breach or non-compliance of any of the obligations or terms of the
tender. Mere apprehension of lack of expertise was no ground for the
respondent to cancel the tender by taking recourse to its executive
powers in complete ignorance of the contractual terms that were
agreed upon by them.
122. From the above discussion, we are of the considered opinion that
the present lis is nothing but a classic textbook case of an arbitrary
and capricious exercise of powers by the respondent to cancel the
tender that was issued to the appellant on the basis of extraneous
considerations and at the behest of none other but the concerned
Minister-In-Charge.
II. Sanctity of Public-Private Partnership Tenders
123. Before we close this judgment, we must also address one very
important aspect as regards the importance of maintaining the sanctity
of tenders in public private procurement processes.
124. 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.
[2024] 7 S.C.R. 607
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
125. Public tenders are designed to provide a level playing field for all
potential bidders, fostering an environment where competition thrives,
and the best value is obtained for public funds. The integrity of this
process ensures that public projects and services are delivered
efficiently and effectively, benefiting society at large. The principles
of transparency and fairness embedded in public tender processes
also help to prevent corruption and misuse of public resources. In
this regard we 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)
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
608 [2024] 7 S.C.R.
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.
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 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,
[2024] 7 S.C.R. 609
Subodh Kumar Singh Rathour v. The Chief Executive Officer & Ors.
transparency, and predictability to avoid being regarded as
arbitrary and therefore violative of Article 14.”
(Emphasis supplied)
128. Cancellation of a contract deprives a person of his very valuable rights
and is a very drastic step, often due to significant investments having
already been made by the parties involved during the subsistence
of the contract. Failure on the part of the courts to zealously protect
the binding nature of a lawful and valid tender, would erode public
faith in contracts and tenders. Arbitrary terminations of contract
create uncertainty and unpredictability, thereby discouraging public
participation in the tendering process. When private parties perceive
that their contractual rights can be easily trampled by the State, they
would be dissuaded from participating in public procurement processes
which may have a negative impact on such other public-private
partnership ventures and ultimately it is the public who would have
to bear the brunt thereby frustrating the very object of public interest.
129. We caution 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
130. We are of the considered opinion that the litigation at hand is nothing
but a classic textbook case of an arbitrary exercise of powers by
the respondent in cancelling the tender that was issued in favour
of the appellant and that too at the behest of none other than the
concerned Minister-In-Charge and thereby rendering the Notice of
Cancellation dated 07.02.2023 illegal.
131. During the course of hearing, we were informed that the appellant
herein pursuant to the terms of the subject tender had erected
multiple structures at different sites on the concerned underpasses
610 [2024] 7 S.C.R.
Digital Supreme Court Reports
for displaying advertisements at a huge personal cost. He has made
significant investments pursuant to the tender.
132. As, we have held the Notice of Cancellation dated 07.02.2023 to be
non-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.
133. 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.
134. 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.
135. Pending application(s), if any, also stand disposed of.
Result of the case: Appeal allowed.
†
Headnotes prepared by: Divya Pandey
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "contract/tender disputes"Sign in to search