Contract Once Cancelled By Awardee After Following Due Process Can’t Be Revived: Rajasthan HC

The Bench of Justice Dinesh Mehta said, “As a consequence of discussion foregoing, this Court answers the questions as follows:- (i). A contract once cancelled by the awardee after following due process, cannot be revived by the awardee itself. (ii) As a consequence of the discussion made, it is held that the Chairman or any other authority not being the Appellate Authority has no jurisdiction to order for revival of an already terminated contract. (iii) As this Court has held that the terminated contract cannot be revived, there arises no question of keeping the termination of contract in abeyance by the awarder itself, that too by an administrative order.”

Senior Advocates M.S. Singhvi, R.N. Mathur, Vikas Balia and Sachin Acharya appeared for the Petitioners while Senior Advocate Ravi Bhansali appeared for the Respondents.

The Respondent i.e. Rajasthan State Mines & Minerals Ltd. (‘the RSMML’) issued a notice inviting e-bids from the eligible entities for the contract of loading of limestone gitti of various sizes into tippers/dumpers etc. Technical bids were opened and a letter of acceptance came to be issued in favour of Petitioner-United Coal Carrier (‘United’), which in turn accepted to transport the quantity as per the bid document.

It was alleged that the United was supposed to commence the work within 30 days but failed to do so. When RSMML did not see any improvement, the contract was terminated and the United was blacklisted. Thereafter, PMP Infratech/Petitioner undertook the work.

However, pursuant to a call received from the Chairman of RSMML by the Managing Director the order terminating the contract with UCC and the letter of acceptance to PMP were kept in abeyance.

A petition was filed by PMP which contended that the awarding of a contract by a public sector enterprise needs to take place transparently, adhering to the principles of fairness and transparency.

The main issues for consideration of the Court were: (i) Whether the contract once cancelled by the awardee can be revived?; (ii) Whether the Chairman or any authority not being the Appellate Authority or the Court can order the revival of an already terminated contract? and (iii) Whether by way of an administrative order, the termination of the contract can be kept in abeyance.

The Court held, “One fails to comprehend or decipher as to how the order of termination, which had been approved by the competent authority (Managing Director) went before the Chairman and under what procedure? Maybe, the Chairman is administrative head of the respondent company, but the respondent RSMML has failed to show any rule or procedure, under which a day to day decision (not being a policy matter) duly finalized by the competent authority being Managing Director, had gone to the Chairman and under what compelling circumstances the Chairman had intervened.”

While relying on the judgment of Subodh Kumar Singh Rathour vs. The Chief Executive Officers & Ors. (2024 INSC 486), the court said that the judgment showed a paradigm shift in judicial approach towards the scope of interference by the constitutional courts in the matters relating to grant of award and termination of contract and the question, which used to be ‘Scope of Interference’, has now changed to ‘Requirement of Interference’.

“This Court hardly finds any substance in Dr Acharya’s argument that instant writ petition is not maintainable, as one of the prayer - “The respondents be directed to issue fresh e-bid” is also a prayer in the intra-court appeal filed by it. This Court is firmly of the view that a ‘prayer’ cannot be picked completely divorced of its context and controversy to contend that the petitioner is riding on two horses. The cause of action and challenge in the appeal before the Division Bench is acceptance of technical bid of ‘UCC’, whereas in this case, the issue is revival of its terminated contract. Both the petitions are contextually and textually different and simply because one of the prayer is common, it cannot be said that the writ petition is not maintainable.”, the Court added.

The Court said that the order impugned issued by the Managing Director was illegal because it suffered from the vice of dictatorship. It added that the grant of contract and determination thereof is within the domain of the Managing Director and his conscious and informed decision, cannot be tinkered with, howsoever high one may be in the corporate, administrative or hierarchical rung and the Chairman cannot in usual circumstances direct the competent authority to change the decision.

“An administrative order, rather an executive fiat cannot set at naught, a duly considered decision or adjudicated order, which has bearing on civil or business rights of contracting parties.”, the Court emphasized.

The Court opined that the termination of a contract after following due procedure amounts to a civil death of a business deal and the same can normally not be revived even by the court, Appellate Authority or Arbitrator, let alone by the Managing Director itself or by the Chairman of the awardee company. “This Court has no hesitation in holding that the verbal direction of the Chairman on the one hand is without authority of law and arbitrary on the other, as no reasons have been recorded.”, it highlighted.

Accordingly, the Court allowed the writ petition filed by the PMP Infratech and quashed the impugned order.

Cause Title: PMP Infratech Private Limited v. Rajasthan State Mines and Minerals Limited and Ors and others connected matters (Neutral Citation: 2024:RJ-JD:28626)

Appearances:

Petitioners: Senior Advocates M.S. Singhvi, R.N. Mathur, Vikas Balia and Sachin Acharya with Advocates Abhishek Mehta, Falgun Buch, Dinesh Kumar Godara, Devendra Singh Pidiyar, Gotam Bhadadra, Prateek Gattani and Gopal Krishna Chhangani.

Respondents: Senior Advocates Ravi Bhansali with Advocates Suniel Purohit, Udit Mathur and Mohd. Amaan.

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