The Supreme Court quashed a decision of the Kolkata Metropolitan Development Authority (KMDA) to cancel a contract awarded to a private contractor for maintaining two underpasses on EM Bypass on the ground that it was taken at the behest of state urban development and municipal affairs minister Firhad Hakim reflecting “a classic textbook case of an arbitrary and capricious exercise of powers”.

A bench of Chief Justice D.Y. Chandrachud, Justice J.B. Pardiwala and Justice
Manoj Misra passed the verdict while hearing an appeal filed by the aggrieved contractor Subodh Kumar Singh Rathour, challenging a Calcutta High Court order that had upheld the cancellation of the contract.

The KDMA had floated a tender on May 12, 2022, inviting bids for the maintenance of two underpasses on EM Bypass and its abutting area against a license fee for advertisement rights over designated sites at each underpass for 10 years.

Rathour had bagged the contract. However, it was abruptly cancelled on February 7, 2023, by the KMDA, purportedly on the ground of “policy change” and “technical fault” and the maintenance work being shifted to the Kolkata Municipal Corporation (KMC).

The Apex court, which examined the files including internal notings, observed that the KMDA’s internal deliberations revealed that right from the notice inviting tender till its cancellation “there is no whispers” of “any conflict or technical fault”.

“... a careful reading of the same reveals that the cancellation of the tender for work was neither due to any technical fault nor due to the policy change in the operation and maintenance of the concerned underpasses but was for altogether a different reason,” Justice J.B. Pardiwala who authored the judgment said.

“As per Note… dated 30.12.2022 of the file-notings, when the order dated 01.12.2022 of the Urban Development and Municipal Affairs Department came to be passed whereby the maintenance was handed over to KMC, it was the Minister-In-Charge as the Chairperson of the respondent authority — who suggested that in view of the change in scenario the tender be cancelled.

“It is apparent that the concerned minister during his visit specifically instructed the officials of the respondent (KDMA) 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 bench said it was none other than the concerned minister who suggested cancelling the tender, despite the KDMA’s reluctance as it wanted to obtain a legal opinion.

“Even though the opinion of the legal cell was yet to be obtained, the respondent, despite its initial reluctance, undertook immediate steps to cancel the tender after the concerned minister personally instructed the officials to do so,” the judge observed.

“Thus, it is evident that the… cancellation… was at the behest of the concerned minister. The respondent clearly recorded that, because instructions for cancellation had been received from the higher-ups, there was no option but to proceed with the cancellation. Even before the respondent could properly and thoroughly explore the possibility of acceding to such request by consulting its legal cell, the tender was cancelled only at the instance and specific instructions of the concerned minister.”

The bench noted that it was only on September 16, 2023, much after the cancellation, that the urban development department modified its earlier order to give control and the right to revenue for the underpasses to the KMC from the KMDA.

“This leaves no manner of doubt in our mind 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,” the court observed.

“... we are of the considered opinion that the present is nothing but a classic textbook case of an arbitrary and capricious exercise of powers by the respondent to cancel the tender that was issued to the appellant on the basis of extraneous considerations and at the behest of none other but the concerned Minister-In-Charge.”

It ordered: “The notice of cancellation dated 07.02.2023 is quashed and the impugned judgment and order passed by the High Court is hereby set aside.”

Calls to Hakim from The Telegraph went unanswered.