Madhya Pradesh High Court
Heaven Techno System Private Limited vs The State Of Madhya Pradesh on 16 August, 2024
1
IN THE HIGH COURT OF MADHYA PRADESH AT
JABALPUR
BEFORE
HON'BLE SHRI JUSTICE RAJ MOHAN SINGH
&
HON'BLE SHRI JUSTICE DEVNARAYAN MISHRA
ON THE 16th OF AUGUST, 2024
WRIT PETITION NO.9122 OF 2024
Heaven Techno System Private Ltd.
Vs.
State of M.P. and others.
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Appearance:
Shri Brian D'Silva, learned senior Advocate with Shri
Abhishek Dilraj, Advocate for the petitioner.
Shri Naman Nagrath, learned Senior Advocate with Shri
R.S.Thakur, Advocate for the respondents No.2 and 3.
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Reserved on : 12.08.2024
Passed on : 16.08.2024
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ORDER
Per Justice Raj Mohan Singh:
2
The petitioner has preferred the present writ petition for the issuance of an appropriate writ, order or direction specially in the nature of certiorari, quashing the impugned order dated 19.3.2024 (Annexure P-8) passed by the respondent No.3 and the order dated 5.4.2024 (Annexure P-11) passed by the respondent No.3 on the representation filed by the petitioner. Further a writ in the nature of mandamus has also been sought, restoring the contract bearing No.511687782529369 dated 6.3.2024 executed in favour of the petitioner. Any other order which this Court deems fit in the facts and circumstances of the case has also been prayed. The petitioner has setup the following pleadings:
(i) The petitioner is a company registered under the provisions of Companies Act. The respondents fall under the ambit of "State", and therefore they are amendable to writ jurisdiction of this Court under Article 12 of the Constitution of India.3
(ii) The petitioner is involved in the business of providing a range of technology solutions to different organizations. These solutions include software development, network setup, data-entry setup, maintenance, cyber-security, data analytics, cloud computing and digital transformation services. The respondent No.1 floated a tender bearing No.GEM/2024/B/4601362 dated 8.2.2024 through the respondent No.2 i.e. Madhya Pradesh State Agricultural Marketing Board for the purpose of Supply, Installation, Configuration, Operation and Maintenance of CCTV surveillance across 137 Mandis of Madhya Pradesh and Establishment of Command Centre at Divisional Offices and Monitoring Centre at Bhopal Head Office. The tender was floated on Government E Marketplace (GeM) Portal, which is a Central Government public platform for online procurement in India. The bids are submitted online on the GeM Portal by the interested bidders and after evaluation of relevant documents, the tender inviting authority selects the successful bidder. On 4 selection of the successful bidder, an electronic contract is generated with the approval of the tender inviting authority, which binds the parties. The petitioner fulfilled the required eligibility criteria. The petitioner participated in the tender process. The petitioner was found to be technically eligible and therefore final bid of the petitioner was opened and the petitioner was found to be L-I bidder and the tender was awarded in favour of the petitioner. Thereafter an electronic contract bearing No.511687782529369 dated 6.3.2024 was issued in accordance with the terms and conditions of the GeM Portal with the approval of the respondent authority. The contract was binding between the parties i.e. respondent Mandi Board and the petitioner. The terms and conditions of the contract specially provide for the responsibilities of the parties to the contract. Clause B of the contract deals with Role and Responsibilities of Buyer on GeM, whereas Clause (iii) provides that buyer must ensure that they have requisite authorization to enter to enter into contract with the sellers on 5 GeM for and on behalf of the organization. Further Clause (vi) provides that before placing the order on GeM, there should be mandatory approval with prior sanction from the competent authorities, which is in accordance with procurement or other policies issued by the Government. Further Clause (vii) provides that on award of the contract, it would be construed that the buyer has obtained all necessary Administrative and Financial sanctions of the competent authority and adequate funds are available, indicating the relevant head of accounts in the awarded contract. Clause vi and vii of the buyer's responsibilities on GeM are as under:-
"vi The Buyers, before placing the order on GeM should have required the mandatory approval with prior sanction and approval of the competent authorities and shall be in compliance with and as per the procedures outlined in GFR and other procurement guidelines issued by the Government from time to time.
vii. On award of the Contract(s), it would be construed that the buyer has obtained all necessary Administrative & Financial sanctions of the competent authority and 6 adequate funds are available, indicating the relevant head of accounts in the awarded Contract(s)."
(iii) In compliance of the awarding of the contract, the petitioner complied with the terms and conditions of the tender and deposited the transaction charges in a sum of Rs.37,87,328/- (0.5% of the contract value) with GeM vide receipt dated 7.3.2024.
(iv). A perusal of the contract would reveal that the petitioner had to start the execution of work and to supply product/service within a period of 90 days i.e. 4.6.2024. The required material was of particular classification, therefore the petitioner immediately placed the purchase orders to the third party vendors in order to procure the required material and equipment. The petitioner has placed the work order dated 8.3.2024, which would reveal that the petitioner has placed an order for goods amounting to Rs.53,11,33,606/-. The petitioner also entered into a Memorandum of Understanding (MoU) on 7 8.3.2024 with Covenant Systems for procuring the required material/equipment and also deposited 10% (Rs.5.3 crores) of the total amount of purchase order as security in terms of the said MoU.
(v). In compliance of the terms and conditions of the contract, the petitioner vide letter dated 13.3.2024 submitted performance security in the form of bank guarantee bearing No.0055NDLG00067324. Since the contract required the services in a time bound manner, therefore the petitioner took all steps to procure the material. To the surprise of the petitioner, the GeM Portal displayed a message, stating that the Mandi Board seeks to cancel the contract and sought approval of the petitioner in this context. The reason for cancellation of the contract was stated to be revocation of financial approval by the competent authority. It was the first attempt where the contract was sought to be cancelled, but the petitioner did not accept the said proposal of the Mandi Board, and therefore the contract continued to remain in operation on the GeM Portal. 8
(vi). In spite of declining the proposal of the respondent Board, the petitioner was again sought to receive an order dated 19.3.2024 issued by the respondent No.3 wherein it was stated that the work order issued through GeM Portal in respect of tender No.GEM/2024/B/4601362 stood cancelled on the ground that firstly the contract was not executed till date, secondly there was a reduction in the income of the Mandi Board and thirdly sanction was not taken from the Director of Board. On receiving the said order dated 19.3.2024, the petitioner filed a representation before the respondent authority on 22.3.2024 in respect of tender and contract dated 6.3.2024, submitting that the contract had already been executed between the parties on 6.3.2024. In compliance of the terms and conditions of the tender, the said contract was executed and the petitioner had already deposited an amount of Rs.3723,136/- on GeM Portal towards the transaction charges and had even submitted performance security in the form of bank guarantee in a sum of Rs.2,22,00,000/- vide bank guarantee 9 No.0055NDLG00067324 dated 13.3.2024. The terms of the tender specifically provided for prior permission and necessary approval such as availability of funds, sanction from finance department and approval of competent authority. It was specifically conveyed to the competent authority that the contract could not be cancelled unilaterally, as the petitioner had not given any consent at any point of time. It was also submitted that the petitioner had already issued purchase orders for an amount of more than Rs.50 crores for procuring the material/equipment from manufacturers and the third party vendors. In the event of unilateral cancellation of contract, the petitioner would suffer enormous losses running into more than Rs.50 crores. To the dismay of the petitioner, the respondent authorities have rejected the representation of the petitioner vide order dated 5.4.2024 (Annexure P-11). On the basis of the aforesaid pleadings, the present writ petition has been filed.
2. Learned counsel for the petitioner submitted that after passing of order dated 19.3.2024, the respondent authority 10 even filed caveat in the High Court of Madhya Pradesh Bench at Indore in the context of order dated 19.3.2024 passed in respect of cancellation of contract dated 6.3.2024 thereby admitting that the contract dated 6.3.2024 was executed. It was mentioned in the caveat application under Section 148-A of CPC that the contract dated 6.3.2024 was executed in favour of the petitioner for the supply, installation of new CCTV surveillance in Mandis but prior to execution of the aforesaid, the caveator enumerated certain mandatory conditions for execution of the aforesaid contract, but the petitioner did not complete the conditions. Surprisingly the aforesaid ground was pleaded in the caveat, which is totally against the factual position on record. Learned counsel for the petitioner further submitted that there is no breach of condition of contract. The grounds for passing the impugned order are that firstly the contract is not concluded contract, secondly the funds of Mandi have been reduced and thirdly the approval of the authority i.e. Managing Director of the Mandi Board was not taken. 11
3. By referring to the contract itself, learned counsel for the petitioner submitted that as per the recital in the contract, the Seller has given an undertaking that it has made arrangements for getting the stores from an unauthorized distributor/dealer/channel partner of the OEM of the offered product. At the time of delivery of goods, the Seller will provide necessary chain documents (in the form of GST Invoice) to prove that the supplied goods are genuine and are being sourced from an authorized distributor/dealer/channel partner of the OEM. In case of any complaint about genuineness of the supplied products, the Seller shall be responsible for providing genuine replacement supplies. In view of the aforesaid recital, the provisions was made in the contract itself, showing tripartite nature of agreement/contract. Clause 1.1 and 1.2 of the general terms and conditions are reproduced as under:-
"1.1 This contract is governed by the Gen- eral Terms and Conditions, conditions stipu-12
lated to this Product/Service as provided in the Marketplace.
1.2 This contract between the Seller and the Buyer, is for the supply of the Goods and/or Services, detailed in the schedule above, in accordance with the General Terms and Conditions (GTC) unless otherwise su- perseded by Goods/Services specify Special Terms and Conditions (STC) and/or BID/Re- vise Auction Additional Terms and Conditions (ATC), as applicable."
4. Learned counsel for the petitioner further submitted that as per the definition of the contract, which is subject matter of General Terms and Conditions on GeM dated 31.1.2024 reads as under:-
"CONTRACT shall mean the purchase order created/issued by the Buyer on GeM for sup- ply of Goods/Services in electronic form which includes scope of supply, delivery in- structions and specifications etc. as ordered by Buyer against such Contract besides the subject GTC, STC/ATC as the case may be."
Learned counsel for the petitioner further submitted that the im- pugned orders have not been passed in respect of any breach of 13 conditions of the contract, rather have been passed on some non-existent grounds. The contract was duly executed. Vide the impugned order dated 19.3.2024, the respondents in clandestine manner cancelled the work order, which was issued on the basis of uploaded bid. The contract was issued only after compliance of buyer's responsibilities on GeM Portal i.e. terms and condi- tions No.vi and vii, which provided that the buyers before plac- ing the order on GeM should have the mandatory approval with prior sanction and approval of the competent authorities and shall be in compliance with and as per the procedures outlined in GFR and other procurement guidelines issued by the Gov- ernment from time to time. On award of the contract, it would be construed that the buyer has obtained all necessary Adminis- trative & Financial sanctions of the competent authority and ad- equate funds are available, indicating the relevant head of ac- counts in the awarded Contract. In view of the aforesaid Terms and Conditions on GeM 4.0 (Version 1.14) dated 31.1.2024, the grounds No.2 and 3 of the cancellation of the work order are 14 found to be non-existent and are the result of misreading of conditions No.vi and vii of the Terms and Conditions on GeM 4.0 (Version 1.14) dated 31.1.2024.
5. Learned counsel for the petitioner further referred to the stand taken by the respondents No.2 and 3 in their re- sponse that in the alleged deliberations made by the respon- dents No.2 and 3 before the order of cancellation, no notice was issued to the petitioner. The alleged proceedings dated 13.3.2024 are only after approval of the Managing Director on 6.3.2024, therefore the ground of non-approval by the Manag- ing Director is non-existing on the date of order of cancellation on 19.3.2024.
6. Learned counsel for the respondents No.2 and 3 on the other hand vehemently contended that after the contract dated 6.3.2024, deliberations were made by the competent au- thority vide deliberations dated 13.3.2024 wherein it was found that the funds of Mandi have been reduced. The decision of the Mandi Board is not bound by the individual decision of the 15 Mandi, if at all taken by any such individual Mandi. For the year 2023, there is reduction in the funds received from the Mandi fee from 964.35 to 794.32, and therefore there was re- duction in the funds of the Mandi to the extent of 17.63%. Learned counsel for the respondents No.2 and 3 on the basis of aforesaid data submitted that the respondents No.2 and 3 are justified in cancelling the contract.
7. Learned counsel for the petitioner rejoined the argu- ments on the ground that the termination of contract has to be as per the terms and conditions of the contract and not other- wise. In the deliberations of the respondents No.2 and 3 dated 12.3.2024 and 13.3.2024, there was no mention about the ten- der of the petitioner. Same committee members of both the committees i.e. the committee granting the tender and the com- mittee cancelling the work order are the same, and therefore the decision of the committee lacks transparency and in the result of malafides for all reasons best known to the committee mem- bers. Learned counsel for the petitioner with reference to the 16 steps provided in GeM Hand Book submitted that all the steps were duly taken by the petitioner, and thereafter the petitioner was found to be L-I and resultantly the contract was executed.
8. Learned counsel for the petitioner with reference to the latest judgment of the Hon'ble Apex Court in Subodh Ku- mar Singh Rathore vs. Chief Executive Officer and others, 2024 SCC OnLine SC 1682 submitted that earlier position that all rights against any action of the State in a non-statutory con- tract would be governed by the contract alone and thus not amenable to the writ jurisdiction, is no longer a good law. The Hon'ble Apex Court has explained the scope of judicial review in the matter pertaining to contract contractual disputes. Al- though 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 Hon'ble Apex Court has relied upon the previous decision in M.P. Power Management Co. Ltd., Jabalpur Vs. Sky Power Southeast Solar India Pvt. Ltd., (2023) 2 SCC 17 703 in which the Hon'ble Apex Court has exhaustively delin- eated the scope of judicial review of the courts in contractual disputes concerning public authorities. The exercise of Writ Ju- risdiction in disputes at the stage prior to the Award of Contract has also been held on positive note. The scope of Judicial Re- view in the matters pertaining to Contractual Disputes has been discussed with the relevant observations which read as under:-
"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 subse- quent rulings. Although writ jurisdiction is a public law remedy, yet a relief would still lie under it if it is sought against an arbitrary ac- tion 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 reali- sation of the true ambit of Article of the Con- stitution of India. The State, he points out, cannot play the Dr. Jekyll and Hyde game 18 anymore. Its nature is cast in stone. Its char- acter 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, arbi- trary.
i. It is, undoubtedly, true that the writ juris- diction is a public law remedy. A matter, which lies entirely within a private realm of affairs of public body, may not lend itself for being dealt with under the writ jurisdiction of the Court.
ii. The principle laid down in Bareilly Development Authority (supra) that in the case of a non statutory contract the rights are governed only by the terms of the contract and the decisions, which are purported to be followed, including Radhakrishna Agarwal (supra), may not continue to hold good, in the light of what has been laid down in ABL (supra) and as followed in the recent judg-
ment 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 un- 19 der the contract, if the complaining party is able to establish that the action/ inaction is, per se, arbitrary."
(Emphasis supplied) For the exercise of Writ Jurisdiction in disputes at the stage prior to the Award of Contract, the Hon'ble Apex Court relied the emphasis, which reads as under:-
"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 im- bued with procedural impropriety, arbitrari- ness, 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, un- doubtedly, 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 deci-
sion in Tata Cellular vs. Union of India."
(Emphasis supplied) 20 The exercise of Writ Jurisdiction after the Contract comes in existence has been discussed in the following manner: -
"This court held that even after the contract comes into existence an action may lie by way of a writ to either (I) obviate an arbitrary or unreasonable action on part of the State or (II) to call upon it to honour its obligations unless there is a serious or genuine dispute as regards the liability of the State from hon-
ouring such obligation. Existence of an alter- native 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 pub- lic 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 gen- uine 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 obli-21
gations and the Court finds that such a con- tention 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 con- tractual 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 de- cided, and, most importantly, whether there are disputed questions of fact, resolution of which is necessary, as an indispensable pre- lude to the grant of the relief sought. Un- doubtedly, while there is no prohibition, in the Writ Court even deciding disputed partic- ularly when questions the dispute of fact, sur- rounds demystifying of documents only, the Court may relegate the party to the remedy by way of a civil suit.
viii. The existence of a provision for arbitra- tion, which is a forum intended to quicken the pace of dispute resolution, is viewed as a near bar to the entertainment of a Writ Peti- tion (See in this regard, the view of this Court even in ABL (supra) explaining how it distin- guished 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)].22
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 over-
whelming need to obviate arbitrary State ac- tion, 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) For the exercise of Writ Jurisdiction after termination or breach of the contract, the Hon'ble Apex Court has discussed the con- cept, which is as under:-
"A relief by way of a writ under Article 226 of the Constitution will also lie against a termi- nation 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 23 such termination or breach was within the contractual domain or whether the State was merely purporting to exercise powers under the contract for any ulterior motive. Any ac- tion of the State to cancel or terminate a con- tract which is beyond the terms agreed there- under 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 argu- ment, 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 avoid- able round of litigation. The intervention by the High Court, in such a case, where there is no dispute to be resolved, would also be con- ducive in public interest, apart from ensuring the Fundamental Right of the petitioner un- der Article 14 of the Constitution of India. When it comes to a challenge to the termina- tion 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 com- plex issue to lay down any inflexible Rule in favour of the Court turning away the peti- tioner to alternate Fora. Ordinarily, the cases of termination of contract by the State, acting 24 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 in- volve 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 plead- ings, the Court may still grant relief to an ap- plicant. 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 dis- cretion 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 con-
tract and a breach of a contract is alleged against the State, a civil action in the appro- priate 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 arbi- 25
trary, 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 ac- tion. 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 con-
tract that would suffice. What must be in-
volved in the case must be action/inaction, which must be palpably unreasonable or ab-
solutely irrational and bereft of any principle. An action, which is completely malafide, can hardly be described as a fair action and may, depending on the facts, amount to arbitrary action. The question must be posed and an-
swered 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) The other relevant considerations for exercise of Writ Jurisdic- tion have been enumerated as under:-
"Lastly, this Court held that the courts may entertain a contractual dispute under its writ jurisdiction where (I) there is any violation of 26 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 inter- fering 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 rele- gate 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 pres- ence 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) 27
9. Learned counsel for the petitioner further submitted that the law in this field has seen a revolution of sorts and a transformatory change with a growing realization of the true ambit of Article 14 of the Constitution of India. The state action will be tested at the threshold of mandate of Article 14 of the Constitution of India to act fairly. An action under a writ will lie even at the stage prior to the award of a contract and even after the contract comes into existence. The relief by way of writ pe- tition will also lie against termination or breach of contract, wherever such action is found to be arbitrary. The Hon'ble Apex Court has held that the courts must be mindful to see whether such termination or breach was within the contractual domain i.e. whether the termination of contract is on account of violation of terms and conditions or whether the State is merely purporting to exercise powers under the contract for any ulte- rior 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 28 imbued with arbitrariness or influenced by any extraneous con- siderations.
10. Learned counsel for the petitioner also relied upon paras No. 123, 124, 126, 127, 128, 129, 130 and 132 of the aforesaid judgment and contended that the public tenders are a cornerstone of governmental procurement processes, ensuring transparency, competition, and fairness in the allocation of pub- lic resources. It is based on 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, rather owns it in trust and therefore it cannot utilize these re- sources as it pleases. It is the duty of the State to ensure that community resources are put to fair and proper use for the ben- efit of public. It is onerous obligation on the part of the State not indulge in any favouritism or discrimination with these re- sources. The award of government contracts through public auction/public tender is to ensure transparency in the public 29 procurement, to maximize economy and efficiency in govern- ment procurement, to promote healthy competition among the tenderers, to provide for fair and equitable treatment of all ten- derers, and to eliminate irregularities, interference and corrupt practices by the authorities. While observing in the aforesaid context, the Hon'ble Apex Court relied upon the earlier judg- ment passed in Nagar Nigam, Meerut Vs. Al Faheem Meat Exports Pvt. Ltd & Ors., (2006) 13 SCC 382.
11. The sanctity of public tenders lies in their role in upholding the principles of equal opportunity and fairness. 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 con- tracts are not sidelined by a capricious or arbitrary exercise of power by the State. It is the duty of the courts to interfere in contractual matters that have fallen prey to an arbitrary action of the authorities in the guise of technical faults, policy change or public interest etc. 30
12. In the instant case there is no technical fault nor there was any policy change. At the time of awarding of con- tract, the financial status of the respondents was known to the competent authority, still the competent authority awarded the contract in favour of the petitioner. Award of contract preceded with the conditions as reproduced in the earlier part of the order i.e. vi and vii. The award of contract was only after necessary Administrative & Financial approval granted by the competent authority. Those approvals were granted after ascertaining the financial status of the petitioner, therefore the respondents can- not be allowed to act arbitrary. The action of the respondents is found to be against the public interest particularly when the pe- titioner has taken necessary steps in furtherance of the contract, which was a time bound contract with a period of 90 days.
13. The sanctity of the contract 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 31 will honour its commitment and obligations. Arbitrary or unreasonable terminations undermine these expectations and erode the trust and faith of the tenderers. 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 and conditions of the contract. In the present case there is no such breach or non- compliance of the contract. The work order based on contract has been terminated not on account of any breach of conditions of the contract, rather the same are on non-existent grounds viz. the contract is not concluded contract, the funds of Mandi have been reduced and the approval of the competent authority i.e. Managing Director of the Mandi Board was not taken. All these grounds are contrary to record, wherein the execution of contract is writ large on the face of the record. The termination of work order based on contract presupposes that there is a contract in existence. The factum of reduction of funds of the 32 Mandis was well within the knowledge of the competent authority at the time of granting financial and administrative approval in view of Clause vi and vii of the buyer's responsibilities on GeM.
14. The approval of the competent authority was the condition precedent before granting the contract in question. Since there was no breach of any terms and conditions of the contract, therefore the ratio of Shiva Nandan CT and others Vs. High Court of Kerala, (2024) 3 SCC 799 will squarely apply in the instant case. In the aforesaid cited judgment, the Hon'ble Apex Court has held that 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 recognizes 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 doctrine of 33 legitimate expectation has been expanded and now that evolved to include the principles of good administration as well. The action or 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.
15. On the basis of the aforesaid ratio, learned counsel for the petitioner concluded his argument by saying that the cancellation of contract is not based on any such ground, and therefore the impugned orders are liable to be quashed.
16. Per contra, learned counsel for the respondents No.2 and 3 also relied upon the decision of the Hon'ble Apex Court in the case of Subodh Kumar Singh Rathore (supra) and submitted that the cancellation of contract was on account of valid grounds. Learned counsel for the respondents No.2 and 3 relied upon the paras No.70, 71, 85, 114, 115, 119 and 129 and submitted that the cancellation of work order was done in view of public interest.
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17. After hearing the learned counsel for the parties, we find that in view of ratio of Subodh Kumar Singh Rathore's case (supra), the action of the respondents No.2 and 3 in cancelling the work order based on the contract is not a transparent decision and is malafide, as the same is not on the basis of any violation of terms and conditions of the contract. All the three grounds i.e. the contract being not concluded contract, the funds of Mandi have been reduced and the approval of the authority i.e. Managing Director of the Mandi Board was not taken are non-existing in view of material on record. The cancellation of work order based on contract would presupposes the existence of a contract. As per the Clause vi and vii of the buyer's responsibilities on GeM, the contract was awarded only after ensuring financial status, financial approval and administrative approval by the competent authority and thereafter the contract was awarded. In view of the aforesaid, the respondents No.2 and 3 cannot be allowed to say that the contract was non-executable in view of the aforesaid grounds of 35 cancellation. The judicial review is permissible when the action of the respondents is found to be not transparent and is the result of malafides. The writ jurisdiction is available even at the stage of prior to the award of the contract or even thereafter and also in case of termination or breach of contract as held by the Hon'ble Apex Court in the aforesaid judgments. After the award of contract, the petitioner has a reasonable expectation of carry forward the contract in terms of completion of work assignment without there being any hurdle. The stand taken by the respondents No.2 and 3 in respect of available of alternative remedy of arbitration is also not sustainable in view of the law laid down by the Hon'ble Apex Court in the case of Sky Power Southeast Solar India Pvt. Ltd. Vs. M.P. Power Management Co.Ltd., 2020 SCC OnLine 3017, wherein it was held that the availability of alternative remedy under the statute is not an absolute bar when the order of termination of the contract is found to be arbitrary and wholly unjustified and suffers from malafide. The High Court can interfere without 36 relegating the petitioner to avail the alternative remedy. In this regard reference can also be made to Union of India and others Vs. Tantia Construction Pvt. Ltd., (2011) 5 SCC 697, wherein it was held that the constitutional powers vested in the High Court and the Supreme Court cannot be fettered by any alternative remedy available to the authorities. Injustice whenever and wherever takes place has to be struck down as an anathema to the rule of law and the provisions of the Constitution.
18. For the reasons recorded hereinabove, we deem it appropriate to quash the impugned orders dated 19.3.2024 (Annexure P-8) and 5.4.2024 (Annexure P-11) passed by the respondent No.3. As a result of the aforesaid legal consequences shall follow.
19. Accordingly, the instant petition stands allowed and disposed of.
(Raj Mohan Singh) (Devnarayan Mishra)
Judge Judge
16/08/2024 16/08/2024
MANZOOR AHMED
2024.08.17 10:35:09 +05'30'