Case Note & Summary
The petitioner, M/s. Mundhe Contractors, a partnership firm, filed a writ petition under Article 226 of the Constitution of India challenging the cancellation of a tender issued by the respondents for a road construction project under the Pradhan Mantri Gram Sadak Yojana (PMGSY). The petitioner was the lowest bidder and had submitted its bid in response to the tender notice. However, the respondents cancelled the tender without issuing any show cause notice or providing any opportunity of hearing to the petitioner. The petitioner contended that the cancellation was arbitrary, malafide, and violative of principles of natural justice. The respondents argued that the cancellation was due to administrative reasons and that the petitioner had no vested right to the contract. The court, after hearing the parties, held that the cancellation of the tender without any notice or opportunity to the petitioner was illegal and arbitrary. The court observed that the petitioner, being the lowest bidder, had a legitimate expectation that the tender would be awarded in its favour. The court set aside the cancellation order and directed the respondents to proceed with the tender process in accordance with law. The court also emphasized that the state and its instrumentalities must act fairly and reasonably in contractual matters and cannot act arbitrarily.
Headnote
A) Administrative Law - Natural Justice - Show Cause Notice - Cancellation of Tender - The petitioner, being the lowest bidder, had a legitimate expectation that the tender would be awarded in its favour. The respondents cancelled the tender without any show cause notice or opportunity of hearing, which is arbitrary and violative of principles of natural justice. Held that the cancellation order is illegal and set aside. (Paras 1-5) B) Constitutional Law - Article 14 - Arbitrariness - Tender Process - The action of the respondents in cancelling the tender without any valid reason and without affording any opportunity to the petitioner is arbitrary and violative of Article 14 of the Constitution of India. Held that the respondents must act fairly and reasonably in contractual matters. (Paras 1-5) C) Contract Law - Tender - Legitimate Expectation - The petitioner, as the lowest bidder, had a legitimate expectation that the contract would be awarded to him. The cancellation of the tender without any justification defeats this legitimate expectation and is unsustainable in law. Held that the cancellation order is quashed. (Paras 1-5)
Issue of Consideration
Whether the cancellation of a tender by the respondents without issuing a show cause notice to the petitioner, who was the lowest bidder, is arbitrary and violative of principles of natural justice.
Final Decision
The court allowed the writ petition, set aside the cancellation order, and directed the respondents to proceed with the tender process in accordance with law.
Law Points
- Natural justice
- Arbitrariness
- Tender cancellation
- Show cause notice
- Legitimate expectation
- Article 14
- Article 226
