Supreme Court censures West Bengal Minister for tender cancellation

The Supreme Court on Tuesday took exception to West Bengal Minister Firhad Hakim's decision to cancel a tender for maintenance of two underpasses in Kolkata [Subodh Kumar Singh Rathour v Chief Executive Officer and Ors]..A Bench of Chief Justice of India (CJI) DY Chandrachud, Justice JB Pardiwala and Justice Manoj Misra stressed that public authorities must be circumspect in disturbing or wriggling out of contractual obligations through means beyond the terms of the contract."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," it observed.Hakim is the Minister-In-Charge Department of Urban Development and Municipal Affairs and ex-officio Chairman of Kolkata Metropolitan Development Authority (KMDA)..The top court was dealing with an appeal against Calcutta High Court's decision to uphold the cancellation of the tender issued by KMDA in 2022. In February 2023, the tender was cancelled on a purported ground of a technical fault. It was stated that the tender was ‘non-specific’ and ‘not well defined’ . .Considering the challenge against the High Court decision to uphold the cancellation of tender, the Court perused the file-noting detailing the internal deliberations of the KMDA officials.The Court found that none of the officials of KMDA had suggested cancellation of the tender but it was the Minister who had issued a directive for it."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," it said..It added 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".In this backdrop, the Court set aside the notice of cancellation..The Court also stressed on the importance of maintaining the sanctity of tenders in public-private procurement processes.The sanctity of public tenders lies in their role in upholding the principles of equal opportunity and fairness, it said."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.".Thus, the top court sounded a word of caution against cancelling public tenders."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," it added..Senior Advocate Shyam Divan appeared for the appellant, the original winner of the tender.Senior Advocate Rakesh Dwivedi appeared for the Kolkata Metropolitan Development Authority and its officials..[Read Judgment]