Subodh Kumar Singh Rathour vs. The Chief Executive Officer & Ors. [July 09, 2024]
Citation: [2024] 7 S.C.R. 532; 2024 INSC 486; 2024 LiveLaw (SC) 455
Background and Facts
This Supreme Court case arose from the cancellation of a public-private partnership (PPP) tender awarded to Subodh Kumar Singh Rathour for the maintenance and advertisement rights of two underpasses in Kolkata. The Kolkata Metropolitan Development Authority (KMDA) had floated a tender in May 2022, which the appellant won as the highest bidder. After initial work commenced, the maintenance responsibility was transferred to the Kolkata Municipal Corporation (KMC), but KMDA retained advertisement revenue rights. In January 2023, KMDA issued a stop-work notice and subsequently canceled the tender, citing “technical faults” and alleged policy changes. The High Court upheld the cancellation, finding no public law element warranting writ jurisdiction. Rathour appealed to the Supreme Court.
Key Issues
Whether the cancellation of the tender was arbitrary, mala fide, or violative of Article 14 of the Constitution.
Whether the writ petition was maintainable in contractual disputes involving the State.
The scope of judicial review in public procurement and PPP contracts.
Arguments
Appellant:
Argued the cancellation was arbitrary and driven by mala fide ministerial influence, as evidenced by internal file notings.
Asserted that the tender conditions allowed termination only for specific breaches, which were absent.
Claimed that the “policy change” justification was a pretext, especially as KMDA retained advertisement rights.
Emphasized the public law element due to the impact on public interest and the need for fairness in State action.
Respondent (KMDA):
Defended the cancellation as a policy decision and within administrative discretion.
Argued that the dispute was contractual and not amenable to writ jurisdiction.
Supreme Court’s Analysis and Findings
The Court held that State actions, even in contractual matters, must adhere to fairness, transparency, and Article 14. The cancellation was found to be arbitrary, capricious, and influenced by extraneous considerations, with no valid reasons provided as per the contract.
The Court clarified that while purely contractual disputes are generally outside writ jurisdiction, when State action affects public interest or is arbitrary, judicial review is permissible. The State cannot claim immunity from court scrutiny in such cases.
The decision to cancel the tender was not based on bona fide public interest but on extraneous grounds. The Court emphasized that “public interest” cannot be used as a pretext for arbitrary action; any termination must be supported by cogent reasons and real detriment to public interest.
The appellant had made significant investments and acquired vested rights under the contract, which could not be disregarded without due process.
Conclusion and Significance
The Supreme Court allowed the appeal, quashed the cancellation notice, and set aside the High Court’s judgment.
The judgment is a landmark on the judicial review of State actions in public procurement, reinforcing that fairness, transparency, and accountability are paramount, even in contractual matters.
The ruling cautions public authorities against arbitrary cancellation of public tenders, highlighting the potential negative impact on PPP ventures and public trust.
This decision strengthens the legal framework for non-discriminatory governance and upholds the sanctity of public tenders, ensuring that State discretion is exercised within constitutional bounds.
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