A bench led by CJI Chandrachud expressed strong disapproval of West Bengal Minister Firhad Hakim’s decision to cancel a tender for the maintenance of two underpasses in Kolkata. The court emphasized that public authorities must exercise caution when attempting to evade contractual obligations through methods not stipulated within the contract terms.
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NEW DELHI: The Supreme Court expressed strong disapproval of West Bengal Minister Firhad Hakim’s decision to cancel a tender for the maintenance of two underpasses in Kolkata.
A Bench comprising Chief Justice of India (CJI) DY Chandrachud, Justice JB Pardiwala, and Justice Manoj Misra underscored the necessity for public authorities to exercise caution when attempting to evade contractual obligations through methods not stipulated within the terms of the contract.
The Bench emphasized,
“Public authorities must be circumspect in disturbing or wriggling out of contractual obligations through means beyond the terms of the contract.”
In a sharp critique, the Court observed,
“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.”
Firhad Hakim serves as the Minister-In-Charge of the Department of Urban Development and Municipal Affairs and is the ex-officio Chairman of the Kolkata Metropolitan Development Authority (KMDA).
This case arose from an appeal against the Calcutta High Court’s decision to uphold the KMDA’s cancellation of a tender issued in 2022. In February 2023, the tender was annulled on the grounds of a purported technical fault. It was argued that the tender was “non-specific” and “not well defined.”
Upon reviewing the High Court’s decision and the internal deliberations of the KMDA officials, the Supreme Court found that no KMDA official had recommended the cancellation. Instead, it was the Minister who directed the cancellation.
The Court detailed this finding, stating,
“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.”
The Court further criticized the Minister’s rationale for the cancellation, labeling it as
“without any application of mind, capricious and influenced by malice.”
Given these findings, the Supreme Court set aside the notice of cancellation and highlighted the critical importance of preserving the integrity of public tenders in procurement processes. The Court emphasized,
“The sanctity of public tenders lies in their role in upholding the principles of equal opportunity and fairness.”
The Bench elaborated on the stringent conditions for terminating contracts, asserting,
“Once a contract has come into existence through a valid tendering process, its termination must adhere strictly to the terms of the contract, with the executive powers to be exercised only in exceptional cases by the public authorities and that too in loathe. The courts are duty bound to zealously protect the sanctity of any tender that has been duly conducted and concluded by ensuring that the larger public interest of upholding bindingness of contracts are not sidelined by a capricious or arbitrary exercise of power by the State. It is the duty of the courts to interfere in contractual matters that have fallen prey to an arbitrary action of the authorities in the guise of technical faults, policy change or public interest etc.”
In concluding, the Supreme Court issued a cautionary note regarding the cancellation of public tenders, stating,
“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.”
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