1. Since all the instant petitions involve a common controversy, though with marginal variation in the contextual facts, therefore, for the purposes of the present analogous adjudication, the facts and the prayer clauses are being taken from the above-numbered S.B. Civil Writ Petition No. 12367/2022, while treating the same as a lead case.
2. The prayer clauses read as under:
"In the aforesaid circumstances, the Petitioners most humbly pray before your Lordship and by way of an appropriate writ, order or direction:
a. The office order dated 22.08.2022 (Annex.12) passed by the Respondent No. 3 on behalf of Respondent No. 1 may kindly be quashed and set aside;
b. The Respondents may kindly be directed and stopped to not announce the conclude a fresh e-auction;
c. Respondents may kindly be directed to continue their dispatches on the same sale consideration as agreed between the parties pursuant to the purchase order dated 17.01.2022 (Annex.4) immediately;
d. Further, the respondents may kindly be directed not to change any of the conditions of the purchase order dated 17.01.2022 as initially raised by the petitioner firm and accepted by the respondent corporation;
e. To issue order(s), direction(s), writ(s) or any other relief(s) as this Hon'ble Court deems fit and proper in the facts and circumstances of the case and in the interest of justice;
f. To award Costs of and incidental to this application be paid by the Respondents;
And for this act of kindness, the Petitioners shall, as in duty bound, ever pray."
3. Brief facts of the case, as placed before this Court by learned counsel for the petitioner, are that the petitioner-Firm is engaged in the trading of Lignite. The respondent-Rajasthan State Mines and Minerals Limited (RSMML) issued a notice for sale (through e-auction) of Run of Mine (ROM) Lignite produced from the Matasukh Mines, Nagaur, for a period of two years from the date of closure of the e-auction, for the maximum quantity of 15,00,000 Metric Tonnes (MT) and the said e-auction was conducted by MSTC Ltd., as appointed by the RSMML for the said purpose. The respondents also introduced the Special Terms and Conditions of e-auction for sale of ROM from the Mine in question.
3.1. The petitioner-Firm participated in the e-auction, which was held on 14.01.2022, and was awarded the e-auction No. MSTC/JPR/RAJASTHAN STATE MINES & MINERALS LIMITED/2/KHANIJ BHAWAN, C-SCHEME/21-22/26538 dated 14.01.2022. The petitioner started lifting the lignite w.e.f. 15.01.2022; a detailed purchase order dated 17.01.2022 towards purchase of 1,60,000 MT ROM Lignite was also issued by the respondents, in favour of the petitioner-Firm.
3.2. Subsequently however, the respondents vide order dated 24.03.2022 increased the basic selling price of Lignite, in respect of the mine, by Rs. 500/-PMT w.e.f. 25.03.2022. The petitioner-Firm filed a detailed representation dated 19.07.2022 before the respondents, with a request to re-look the said order dated 24.03.2022.
3.3. Thereafter, against the aforementioned order dated 24.03.2022, the petitioner preferred the above-numbered S.B. Civil Writ Petition No. 10996/2022 before this Hon'ble Court. Despite pendency of the litigation, the respondents passed another office order dated 22.08.2022, cancelling the whole e-auction with immediate effect.
4. Mr. Manish Shishodia, learned Senior Counsel assisted by Mr.Jaideep Singh Saluja; Mr. Vikas Balia, learned Senior Counsel assisted by Mr. Yogendra Singh Charan, and other learned counsel appearing on behalf of the petitioners, submitted that the respondents passed the impugned order of cancellation of the whole e-auction, which is illegal and arbitrary.
4.1. It was further submitted that the increase in the basic price by Rs. 500 per MT, comes around 25% increase in the price, and that, the said order was made effective on the physical dispatches from 25.03.2022 and the buyers concerned were directed to give their consent to the same in a unilateral manner; the same was done, despite there being a clear condition to the effect that no change in the contract would be permissible, without the consent of the parties concerned.
4.2. It was also submitted that the respondents are having a clear monopoly over the extraction as well as selling of ROM Lignite from the Mines in question. It was thus submitted that the cancellation of the whole e-auction is highly illegal and arbitrary exercise of the powers by the respondents and also violative of Article 14 of the Constitution of India; the said action is also contrary to the principles of natural justice, as the same has been done unilaterally; the impugned action of the respondents is thus, a subject matter of judicial revision of this Hon'ble Court.
4.2.1. In support of such submissions, reliance was placed upon the judgments rendered by the Hon'ble Apex Court in case of UNITECH Ltd. & Ors. Vs. Telengana State Industrial Infrastructure Corporation (TSIIC) & Ors (Civil Appeal No. 317 of 2021, decided on 17.02.2021) and; Mihan India Ltd. Vs. GMR Airports Ltd. & Ors. (Civil Appeal No. 3699/2022, decided on 09.05.2022).
Relevant portion of the judgment rendered in Unitech Ltd. (Supra) is reproduced as hereunder:-
"E.1. Maintainability of the writ petition under Article 226
32 Much of the ground which was sought to be canvassed in the course of the pleadings is now subsumed in the submissions which have been urged before this Court on behalf of the State of Telangana and TSIIC. As we have noted earlier, during the course of the hearing, learned Senior Counsel appearing on behalf of the State of Telangana and TSIIC informed the Court that the entitlement of Unitech to seek a refund is not questioned nor is the availability of the land for carrying out the project being placed in issue. Learned Senior Counsel also did not agitate the ground that a remedy for the recovery of moneys arising out a contractual matter cannot be availed of under Article 226 of the Constitution. However, to clear the ground, it is necessary to postulate that recourse to the jurisdiction under Article 226 of the Constitution is not excluded altogether in a contractual matter. A public law remedy is available for enforcing legal rights subject to well-settled parameters.
33 A two judge Bench of this Court in ABL International Ltd. v. Export Credit Guarantee Corporation of India [ABL International] analyzed a long line of precedent of this Court to conclude that writs under Article 226 are maintainable for asserting contractual rights against the state, or its instrumentalities, as defined under Article 12 of the Indian Constitution. Speaking through Justice N Santosh Hegde, the Court held:
"27. ...the following legal principles emerge as to the maintainability of a writ petition:
(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable.
(b) Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.
(c) A writ petition involving a consequential relief of monetary claim is also maintainable." "
This exposition has been followed by this Court, and has been adopted by three-Judge Bench decisions of this Court in State of UP v. Sudhir Kumar9 and Popatrao Vynkatrao Patil v. State of Maharashtra. The decision in ABL International, cautions that the plenary power under Article 226 must be used with circumspection when other remedies have been provided by the contract. But as a statement of principle, the jurisdiction under Article 226 is not excluded in contractual matters. Article 23.1 of the Development Agreement in the present case mandates the parties to resolve their disputes through an arbitration. However, the presence of an arbitration clause within a contract between a state instrumentality and a private party has not acted as an absolute bar to availing remedies under Article 226. If the state instrumentality violates its constitutional mandate under Article 14 to act fairly and reasonably, relief under the plenary powers of the Article 226 of the Constitution would lie. This principle was recognized in ABL International:
"28. However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power. (See Whirlpool Corpn. v. Registrar of Trade Marks (1998) 8 SCC 1] [LQ/SC/1998/1044] .) And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction."
(emphasis supplied)
Therefore, while exercising its jurisdiction under Article 226, the Court is entitled to enquire into whether the action of the State or its instrumentalities is arbitrary or unfair and in consequence, in violation of Article 14. The jurisdiction under Article 226 is a valuable constitutional safeguard against an arbitrary exercise of state power or a misuse of authority. In determining as to whether the jurisdiction should be exercised in a contractual dispute, the Court must, undoubtedly eschew, disputed questions of fact which would depend upon an evidentiary determination requiring a trial. But equally, it is well-settled that the jurisdiction under Article 226 cannot be ousted only on the basis that the dispute pertains to the contractual arena. This is for the simple reason that the State and its instrumentalities are not exempt from the duty to act fairly merely because in their business dealings they have entered into the realm of contract. Similarly, the presence of an arbitration clause does oust the jurisdiction under Article 226 in all cases though, it still needs to be decided from case to case as to whether recourse to a public law remedy can justifiably be invoked. The jurisdiction under Article 226 was rightly invoked by the Single Judge and the Division Bench of the Andhra Pradesh in this case, when the foundational representation of the contract has failed. TSIIC, a state instrumentality, has not just reneged on its contractual obligation, but hoarded the refund of the principal and interest on the consideration that was paid by Unitech over a decade ago. It does not dispute the entitlement of Unitech to the refund of its principal.
37 The failure of title in the erstwhile APIIC and the Government of Andhra Pradesh attained finality upon the decision of this Court in State of Andhra Pradesh Through Principal Secretary v. Pratap Karan13 . The basic postulate on which the entire contract was founded stood nullified as a consequence of the failure of title. The agreement clearly provides that the ability of the Government of Andhra Pradesh/ TSIIC to convey full title to the developer forms the basis of the contract. The failure of title entitles Unitech to claim a full refund together with compensatory payment, as contractually defined. The claim does not raise a disputed question of fact requiring an evidentiary determination. Both the learned Single Judge and the Division Bench of the High Court have elaborately considered the precedents of this Court and correctly concluded that Unitech is entitled to a refund. The finding in regard to the entitlement of Unitech to a refund is unexceptionable and has correctly not been called into question at the stage of the hearing, despite the grounds which were raised in the pleadings in the proceedings initiated under Article 136 of the Constitution by TSIIC and the State of Telangana. APIIC, as an instrumentality of the erstwhile Government of Andhra Pradesh, invited bids for a public project. Having invited private entrepreneurs to submit bids on stipulated terms and conditions, it must be held down to make good its representations. The State and its instrumentalities are duty bound to act fairly under Article 14 of the Constitution. They cannot, even in the domain of contract, claim an exemption from the public law duty to act fairly. The State and its instrumentalities do not shed either their character or their obligation to act fairly in their dealings with private parties in the realm of contract. Investors who respond to the representations held out by the State while investing in public projects are legitimately entitled to assert that the representations must be fulfilled and to enforce compliance with duties which have been contractually assumed."
Relevant portion of the Mihan India Ltd. (Supra) is reproduced as hereunder:-
"47. Analysing the facts of this case in the light of the judgments in Dinesh Engineering (Supra) and Shishir Realty (Supra), after issuing the LoA in terms of Clause 3.3.5 of RFP and declaring GAL as concessionaire as per Clause 3.3.6, issuing letter of annulment of bidding process on the basis of the meeting of PMIC on 14.10.2019, which directed for re-tendering of the bid, is completely an arbitrary exercise of power, contrary to the provisions of RFP and violative of Article 14of the Constitution of India.
49. In the facts of the present case and the findings so recorded hereinabove, it is clear that the authorities have acted arbitrarily in violation of Article 14 of the Constitution of India. In such a situation, the public law remedy has rightly been availed, invoking the jurisdiction of the High Court under Article 226 of the Constitution of India. The findings recorded by the High Court to entertain the petition in paragraph 95 are just and proper and we are in full agreement to those findings. In the facts of the present case, the argument advanced by the appellants to compel GAL to take the remedy of specific performance under the provisions of Specific Relief Act is hereby repelled".
4.3. Reliance was also placed upon the judgments rendered by Hon'ble Apex Court in the case of M.P. Power Management Company Ltd. Vs M/s. Sky Power Southeast Solar India Private Ltd. & Ors. (Arising out of SLP (C) Nos. 4609-4610 of 2021, decided on 16.11.2022); The Vice-Chairman & Managing Director, City and Industrial Development Corporation of Maharashtra Ltd. & Anr. Vs Shishir Reality Pvt. Ltd. & Ors. (Civil Appeal Nos. 3956-3957 of 2017 decided on 29.11.2021) and judgment passed by the Division Bench of the High Court of Gujarat in the case of Aakash Exploration Services Ltd. Through Director Heman Navinbhai Haria Vs Oil and Natural Gas Corporation Ltd. (R/Special Civil Application No. 7814 of 2019, decided on 21.06.2019).
Relevant portion of the judgment rendered in M.P. Power Management Company Ltd. (Supra) is reproduced as hereunder:-
"84. On the other hand, in Vice Chairman & Managing Director, City and Industrial Development Corporation of Maharashtra Ltd. (supra), this Court, while dealing with a case involving the question of award of contract, held as follows:
"58. When a contract is being evaluated, the mere possibility of more money in the public coffers, does not in itself serve public interest. A blanket claim by the State claiming loss of public money cannot be used to forgo contractual obligations, especially when it is not based on any evidence or examination. The larger public interest of upholding contracts and the fairness of public authorities is also in play. Courts need to have a broader understanding of public interest, while reviewing such contracts."
85. In fact, the principle of public interest has found expression in cases which involved challenge to the legality of the award of contract.[See in this regard Tata Cellular v. Union of India (1994) 6 SCC 65132 (supra) and Raunaq International Ltd. v. I.V.R. Construction Ltd. and Others, (1999) 1 SCC 492 [LQ/SC/1998/1168] .
86. In Michigan Rubber (India) Limited v. State of Karnataka and Others after referring to Tata Cellular and Raunaq International Limited (supra), the Court inter alia held as follows:-
"35. As observed earlier, the Court would not normally interfere with the policy decision and in matters challenging the award of contract by the State or public authorities. In view of the above, the appellant has failed to establish that the same was contrary to public interest and beyond the pale of discrimination or unreasonable."
87. In Raunaq International Ltd. v. I.V.R. Construction Ltd. and Others the case involved award of contract for the purpose of Thermal Power Station. In fact, the Appeals in this court were maintained against the grant of an interim order against the appellant to whom the contracts stood awarded. The case also involved relaxation of the criteria which was based on valid principles it was found. It was further found that the construction of two Thermal Power Units was being held up due to the dispute. The Court, inter alia, held as follows:-
"9. However, because the State or a public body or an agency of the State enters into such a contract, there could be, in a given case, an element of public law or public interest involved even in such a commercial transaction.
10. The elements of public interest are: (1) Public money would be expended for the purposes of the contract. (2) The goods or services which are being commissioned could be for a public purpose, such as, construction of roads, public buildings, power plants or other public utilities. (3) The public would be directly interested in the timely fulfilment of the contract so that the services become available to the public expeditiously. (4) The public would also be interested in the quality of the work undertaken or goods supplied by the tenderer. Poor quality of work or goods can lead to tremendous public hardship and substantial financial outlay either in correcting mistakes or in rectifying defects or even at times in redoing the entire work â" thus involving larger outlays of public money and delaying the availability of services, facilities or goods, e.g., a delay in commissioning a power project, as in the present case, could lead to power shortages, retardation of industrial development, hardship to the general public and substantial cost escalation.
11. When a writ petition is filed in the High Court challenging the award of a contract by a public authority or the State, the court must be satisfied that there is some element of public interest involved in entertaining such a petition. If, for example, the dispute is purely between two tenderers, the court must be very careful to see if there is any element of public interest involved in the litigation. A mere difference in the prices offered by the two tenderers may or may not be decisive in deciding whether any public interest is involved in intervening in such a commercial transaction. Price may not always be the sole criterion for awarding a contract."
Relevant portion of the judgment rendered in The Vice-Chairman & Management Director, City and Industrial Development Corporation of Maharashtra (Supra) is reproduced as hereunder:-
"72. Before we state the conclusions, this Court would like to reiterate certain well-established tenets of law pertaining to Government contracts. When we speak of Government contracts, constitutional factors are also in play. Governmental bodies being public authorities are expected to uphold fairness, equality and rule of law even while dealing with contractual matters. It is a settled principle that right to equality under Article 14 abhors arbitrariness. Public authorities have to ensure that no bias, favouritism or arbitrariness are shown during the bidding process. A transparent bidding process is much favoured by this Court to ensure that constitutional requirements are satisfied.
73. Fairness and the good faith standard ingrained in the contracts entered into by public authorities mandates such public authorities to conduct themselves in a non-arbitrary manner during the performance of their contractual obligations.
74. The constitutional guarantee against arbitrariness as provided under Article 14, demands the State to act in a fair and reasonable manner unless public interest demands otherwise. However, the degree of compromise of any private legitimate interest must correspond proportionately to the public interest, so claimed.
75. At this juncture, it is pertinent to remember that, by merely using grounds of public interest or loss to the treasury, the successor public authority cannot undo the work undertaken by the previous authority. Such a claim must be proven using material facts, evidence and figures. If it were otherwise, then there will remain no sanctity in the words and undertaking of the Government. Businessmen will be hesitant to enter Government contract or make any investment in furtherance of the same. Such a practice is counter-productive to the economy and the business environment in general."
4.4. It was also submitted that the Special Condition at No. 2 of the Special Terms & Condition of the e-auction for price enhancement provides that, "The price of lignite shall be enhanced by 5% on the basic received price in e-auction of each successful bidder after the end of 1st year from the date of close of e-auction."; the respondents, while ignoring and surpassing the said condition, increased the price, which is not sustainable in the eye of law.
4.5. It was further submitted that despite there being a specific provision for the termination of the contract in question in the form of Clause 14.33 of the e-auction document, dealing with Termination/Breach of Contract, the respondents took shelter under the general provisions of the terms and conditions i.e. Clause 14.10 of the General Terms and Conditions of the e-auction document. Apart therefrom, it was also submitted that Clause 14.11 of the General Terms & Conditions would not be applicable, once the tender process has been concluded and the parties entered into the contract.
Relevant portions of the said Clauses 14.10, 14.11 and 14.33 of the e-auction document are reproduced hereunder-:
"(14) General Terms & Conditions:
14.10. RSMML/MSTC Limited reserves the right to cancel the sale of ROM Lignite under this e-auction from any source/ location in part or whole at any stage at its sole discretion without assigning any reason thereof and no party shall have any right whatsoever to raise any claim in that regard on that count.
14.11. RSMML/MSTC reserves their rights to amend/modify/reject the auction deal in full/part and reserves the right to further modify/amend and revise the terms and conditions contained herein in full or in part at any point of time and no party shall have any right, whatsoever to raise any claim in that regard on that count.
14.33. TERMINATION/BREACH OF CONTRACT: In the event of bidders failure to fulfill any of the contractual obligations including non-lifting the contracted materials under this agreement, MSTC/RSMML's decision in regard to bidders failure being final and binding on the bidder. MSTC/RSMML shall have the full liberty to do any or all of the following :- Cancel the contract with immediate effect for the materials under the contract not taken delivery by the bidder as on that date, in which case the Pre-Bid EMD/Security Deposit and EMD along with the balance payment (if paid, any), will stand forfeited.
AND/OR
Retain and/or adjust, recover from bidders any amount lying with MSTC/Owner to the bidders credit either under this contract or any other which may at any time become payable/ refundable to the bidder either under this contract or any other contract, the amount of losses or damages or claim that might be incurred by MSTC/Owner in selling the materials under contract not taken delivery by the bidder at bidders risk and costs. Even after such recovery/adjustment by MSTC/Owner from bidder any amount as mentioned above lying with MSTC/ Owner, if any further amount is still found payable/refundable by the bidder, the bidder shall pay the same to MSTC on demand without any objection or demur."
4.6. It was also submitted that it is a settled position of law that when a Special provision or Rule exists, then the General provision takes a back seat, and the Special provision shall always prevail over the General provision.
4.6.1. In support of the submission, reliance was placed upon the judgments rendered by the Hon'ble Apex Court in cases of State of Gujarat & Anr. Etc Vs. Patel Ranjibhai Dhanbhai & Ors. 1979 AIR 1098; Union of India & Anr. Vs. India Fisheries (P) Ltd. 1966 AIR 35; and Sri Jagannath Temple Managing Committee Vs. Siddha Math & Ors.AIR 2016 SC 564 [LQ/SC/2015/1683] .
4.7. It was further submitted that Clause no. 14.36 of the e-auction document deals with Arbitration; relevant portion whereof is also reproduced as hereunder:-
"(14) General Terms & Conditions:
14.36. ARBITRATION: In the event of any dispute and/or difference arising between the Bidder/Purchaser/Buyer and/or their Agent as to the construction, interpretation and/or execution of the contract and/or the respective rights and liabilities of the parties, such disputes and/or differences shall be referred to the Arbitration. The Arbitrator shall be appointed by the Managing Director of RSMML."
4.7.1. On behalf of the petitioners, it was also submitted that the aforesaid arbitration clause does not apply in the present case, because it applies only between the bidder and its agent, and not between the RSMML and the bidder, and thus, the appointing authority for arbitration is the Managing Director of the respondent-RSMML; hence, the petitioners are not bound by the said clause, on count of inapplicability of the clause in the present case.
4.7.2. It was also submitted that the arbitration clause did not bar the petitioners from invoking the jurisdiction of this Hon'ble Court, as unilateral exercise has been undertaken by the respondents, and in the present case, there is a breach of contractual obligation on part of the respondents.
4.8. It was also submitted that the e-auction of the Mine in question was of independent nature, and not influenced by the other two mines' (Giral and Soneri Mines) e-auction as well as international market price of crude oil. The prices in relation to those two mines in the year 2020 were far less in the year of 2020, but the respondents are trying to justify the June month's e-auction rates of Giral and Soneri Mines with regard to termination of the contract in question. The Giral and Soneri Mines have two kinds of prices i.e. "Lean Season Price and Peak Season Price, and therefore, on that count also, the impugned action of the respondents is not sustainable in the eye of law.
4.9. It was further submitted that the respondent is a party to the contract and it cannot take action as a State in its Legislative or Executive capacity. It was thus contended that the respondent-RSMML stands on the same pedestal as that of a private party to the contract, and that, the contract in question already stood concluded.
4.10. Lastly, reliance has been placed on the judgment rendered by a Division Bench of the Hon'ble Delhi High Court in the case of M/s Jai Singh & Co. Vs. National Highways Authority of India (WP (c) 14848/2022 & CM Appls. 45667/2022, along with other matters decided on 13.01.2023); relevant portion whereof is reproduced as hereunder:
"15. Termination of a contract deprives a person of very valuable rights. It cannot be said that there was no investment on the part of the Petitioners herein before they entered into the contract with NHAI. A performance guarantee of Rs. 2,08,00,000/-was given by the Petitioner in W.P.(C) 14848/2022. The Petitioner in W.P.(C) 14884/2022 had also given a performance security of Rs. 2,21,12,000/-. Apart from the bank guarantee, the Petitioners had to also arrange for the manpower to man the toll plaza in question. The fact that the Petitioner in W.P.(C) 14848/2022 himself has offered a sum of Rs. 44.24 crores which is equal to Rs. 12,12,055/-per day as opposed to Rs. 6,83,836/-cannot be the sole reason to justify premature termination of contract. State cannot be driven purely on profit motive.
16. The Apex Court in Vice Chairman & Managing Director, City and Industrial Development Corporated of Maharashtra Ltd. v. Shishir Realty P. Ltd., , has observed as under:
"58. When a contract is being evaluated, the mere possibility of more money in the public coffers, does not in itself serve public interest. A blanket claim by the State claiming loss of public money cannot be used to forgo contractual obligations, especially when it is not based on any evidence or examination. The larger public interest of upholding contracts and the fairness of public authorities is also in play. Courts need to have a broader understanding of public interest, while reviewing such contracts."
(emphasis supplied)
17. The Apex Court in M.P. Power Management Company Limited (supra) after relying upon the judgments of the Apex Court in Vice Chairman & Managing Director, City and Industrial Development Corporated of Maharashtra Ltd (supra); Michigan Rubber (India) Limited v. State of Karnataka, : (2012) 8 SCC 216 [LQ/SC/2012/666] & Raunaq International Ltd. v. I.V.R. Construction Ltd., (1999) 1 SCC 492 [LQ/SC/1998/1168] ; has held as under:
"95. Therefore, on a conspectus of the case law, we find that the concept of overwhelming public interest has essentially evolved in the context of cases relating to the award of contract by the State. It becomes an important consideration in the question as to whether then the State with whatever free play it has in its joints decides to award a contract, to hold up the matter or to interfere with the same should be accompanied by a careful consideration of the harm to public interest. We do not go on to say that consideration of public interest should not at all enter the mind of the court when it deals with a case involving repudiation of a claim under a contract or for that matter in the termination of the contract. However, there is a qualitative difference in the latter categories of cases. Once the State enters into the contract, rights are created. If the case is brought to the constitutional court and it is invited to interfere with State action on the score that its action is palpably arbitrary, if the action is so found then an appeal to public interest must be viewed depending on the facts of each case. If the aspect of public interest flows entirely on the basis that the rates embodied in the contract which is arbitrarily terminated has with the passage of time become less appealing to the State or that because of the free play of market forces or other developments, there is a fall in the rate of price of the services or goods then this cannot become determinative of the question as to whether court should decline jurisdiction. In this case, it is noteworthy that the rates were in fact settled on the basis of international competitive bidding and in which as many as 182 bidders participated and the rate offered by the first respondent was undoubtedly the lowest. The fact that power has become cheaper in the market subsequently by itself should not result in non-suiting of the complaint of the first respondent, if it is found that a case of clear arbitrariness has been established by the first respondent.
96. In other words, public interest cannot also be conflated with an evaluation of the monetary gain or loss alone." (emphasis supplied)
18. The upshot of the said discussion would show that mere possibility of more money in a public contract itself cannot be the sole criteria for terminating contracts and more particularly, the contracts which are for a fixed duration. It is to be considered that a sharp decline in traffic would not have enabled the contractors from terminating the contract. Clause 9 of the Contract provides that the Contractor has submitted its bid only after taking into consideration any access or diversion(s) or any diversion of traffic due to deterioration in road conditions or closure of road for maintenance work, whether existing or likely to come in the future which any road user may opt, inter-alia, to avoid payment of the user Fee by bypassing the toll plaza and the Contractor shall not make any claim for any decrease in traffic on the ground of diversion of the traffic, even if such diversion did not exist at the time of submission of the bid by the Contractor. Therefore, the Contractors were not allowed to claim any decrease in profits on the ground of any diversion even if such a diversion did not exist at the time of submission of the bid. Applying this analogy, if the Contractors cannot claim any damage for decrease in traffic, then NHAI also cannot terminate the contract because of increase of traffic on the toll plaza due to commencement of operation of Trans-Haryana project on NH-152D which was under construction at the time of submission of bid by the Petitioners herein, which the NHAI also knew would be operational during the subsistence of contract."
5. On the other hand, Mr. Sandeep Shah, learned Senior Counsel & Additional Advocate General assisted by Ms. Akshiti Singhvi & Mr. Nishant Bapna; Mr. Indu Shekhar Pareek appearing on behalf of the respondents, while opposing the aforesaid submissions made on behalf of the petitioners, raised a preliminary objection that against the impugned action on part of the respondents, the petitioners are having a remedy of invocation of the Arbitration Clause; apart therefrom, the remedy of filing a civil suit for claiming damages before the competent court is also available to the present petitioners, but without exhausting any of such remedies, the petitioners have directly approached this Hon'ble Court by preferring the present petitions; thus, on that count alone, the present petitions deserve dismissal.
5.1. It was thereafter submitted that the impugned order passed by the respondents under Clause 14.10 of the Special Terms and Conditions of the e-auction document, and increased the price of Lignite, in exercise of the powers, under Clause 14.11 of the said Special Terms and Conditions. It was further submitted that the purchase order clearly reveals the terms and conditions, and therefore, the petitioners were very well aware of the terms and conditions, and voluntarily entered into the contract, and thus, was bound by the said terms and conditions.
5.2. It was further submitted that the e-auction in question was was concluded at a booking price of Rs. 2100/-per MT for one successful bidder and Rs. 2110/-per MT for six other successful bidders; the respondents have also held e-auction in regard to its Sonari Mines, Barmer and Giral Mines, Barmer, where the booking price received was ranging from Rs. 4520/-PMT to 5,000/-PMT and Rs. 4730/-PMT to Rs. 4750 PMT, respectively. Therefore, it was submitted that the price increase in question, as done by the respondents in relation to the Mining in question, is justified on the ground that the same was done so as to fetch more public revenue, which in turn would cater to the public interest.
5.3. It was also submitted that the impugned order of cancellation of the contract in question was passed by the respondents to ensure that a public resource is not being sold at very low price, so as to prevent a huge loss to the State Exchequer. It was further submitted that in cases where public interest and public resources are involved, then the decision cannot be taken while giving primacy to monetary benefits of a few individuals.
5.3.1. In support of such submissions, reliance was placed upon the judgments rendered by the Hon'ble Apex Court in cases of Jespar I. Slong Vs. State of Meghalaya & Ors. (2004) 11 SCC 485 [LQ/SC/2004/710] .; Association of Unified Tele Services Providers & Ors Vs Union of India (Civil Appeal No. 4591 of 2014, decided on 17.04.2014); also upon the judgment rendered by a Division Bench of the Hon'ble High Court of Delhi in case of Union of India & Anr. Vs Vedanta Ltd Ors. (LPA 346/2018 & CMs. No. 25515/2018, decided on 26.03.2021); and the judgment rendered by a Coordinate of this Hon'ble Court in the case of JSW Cement Limited Vs State of Rajasthan (S.B. Civil Writ Petition No. 12873/2017, decided on 29.05.2018)
Relevant Portion of the judgment rendered in Jespar I. Slong (Supra) is reproduced as hereunder :
"21. The respondent State owns a weighbridge at Morkjniange. The income from this weighbridge is received from the fees charged for weighment of trucks which pass through the route on which this weighbridge is situated. We are told that these trucks mostly carry coal from Jaintia Hills to Guwahati. As per the notification, the person operating the weighbridge can only charge a sum of Rs. 30 for a loaded truck and Rs. 10 for an unloaded truck. Therefore, the fee to be collected from the transporters for weighment of their vehicles is fixed and it does not vary with the amount of bid offered by the contractor. This is not a contract of supply where a contractor by manipulating the price may cause loss to the public at large. This is not a contract which would have any effect on the price of coal, since weighment charges are fixed by the Government and the contractor has no right to increase the same. Payment of the bid amount is purely a matter between the contractor and the State. As a matter of fact, obtaining higher revenue by accepting the eligible highest bid would only be in public interest because the State stands to gain more revenue. The offering of the bid after knowing the commercial value of the contract is a matter left to the business acumen or prudence of the tenderer. No third party's interest is involved in such contract. Therefore, in our opinion, application of the principle of predatory pricing is wholly alien to this type of contract. Mere offer of a fancy or high bid by itself does not make the bid a predatory bid in this type of contract. If the State decides to give its largesse to the public it has an obligation to see that it fetches the best possible value for the same, provided otherwise it does not in any manner affect the rights of other citizens. No bidder has any right in law to demand the State to give away its largesse for an amount which he considers to be reasonable even when there are bidders willing to pay more for it. The principle of monopoly also does not come into play in these types of contracts."
Relevant Portion of the judgment rendered in Association of Unified Tele Services Providers (Supra) is reproduced as hereunder :
"4. We have indicated, the worth of spectrum to impress upon the fact that the State actions and actions of its agencies/instrumentalities/licensees must be for the public good to achieve the object for which it exits, the object being to serve public good by resorting to fair and reasonable methods. State is also bound to protect the resources for the enjoyment of general public rather than permit their use for purely commercial purposes. Public trust doctrine, it is well established, puts an implicit embargo on the right of the State to transfer public properties to private party if such transfer affects public interest. Further it mandates affirmative State action for effective management of natural resources and empowers the citizens to question ineffective management."
Relevant portion of the judgment rendered in Union of India & Anr. Vs Vedanta Ltd. & Ors. (Supra) is reproduced as hereunder-:
"67. We find merit in the contention of the appellants that the Government may enter into various contracts, some may have public element and some may be purely in the realm of private contracts, but, while entering into a contract with respect to natural resources, the Constitutional imperative and the public interest will outweigh the contractual stipulations. The Policy dated 7th April, 2017 provides that it applies to "all existing PSCs" and also provides a mechanism for their extension. The direction in the impugned judgment is, therefore, contrary to the policy, which is unchallenged. Likewise, there is also merit in the contention that the petitioners do not have an unfettered right to demand extension of the PSC on unilateral terms which suit their interest, overlooking the interest of the State, which is a Trustee of the natural resources under a Constitutional mandate.
.....
71. The learned Solicitor General had also contended that indirectly and subtly the prayers of the petitioners in the writ petition were based upon principles of promissory estoppel and legitimate expectation, and were misconceived as The effect of a policy decision taken by the State is to be considered having regard to the provisions contained in Article 47 of the Constitution of India as also its power of regulation and control in respect of the trade in terms of the provisions of the Excise Act." (emphasis supplied) in Government contracts, wherein overwhelming public interest is involved, concerning the utilization of natural resources held in public trust, the said doctrines, viz, promissory estoppels and legitimate expectations cannot be invoked. We are in complete agreement with the contentions raised by the learned Solicitor General, especially when the decision of Union of India for the extension of the period of PSC on the condition of 10% higher Government share in Profit Petroleum is by way of Policy Decision, uniformly applicable to all PSCs in the Country and has its genesis in public interest and Constitutional mandate."
Relevant Portion of the judgment rendered in JSW Cement Limited (Supra) is reproduced as hereunder-:
".....The inaction of the respondent No. 8 to act on time has ultimately affected the revenue of the exchequer and public interest has been sacrificed at the cost of gain to an individual. The likely loss which is not disputed is around 1900-2000 crores. This Court is surprised with the stand of the State supporting to uphold the bid which is as low as 41.6 as compared to the highest bid of the adjoining blocks going upto approximately 67.94 and that too few months prior to the present auction. Thus, the declaration of respondent No. 7 to be preferred bidder is at the cost of heavy loss of revenue to the State exchequer and against the public interest. In the circumstances, this Court cannot shut its eyes and ignore the public interest which stands to suffer in case the State is not stopped from finalising the contract with respondent No. 7. The Mineral (Auction) Rules, 2015 duly permit cancellation and recall specially when no vested right is created till as such time the bid is finalised and approved. In any case, individual interest cannot be watched in face of such a huge loss to public exchequer. Hence, keeping the public interest involved as upper most in the present case, the order dated 29.09.2017 of declaration is set aside........."
5.4. It was also submitted that the E-auction Clause 14.36 contained an arbitration clause, which was governing the contract between the parties, and one of the successful bidder M/s. Shubham Minchem Pvt. Ltd. has by itself served a notice upon the respondents for invoking the arbitration clause against the order dated 24.03.2022; therefore, this Hon'ble Court may not exercise its writ jurisdiction in the present case, where the arbitration clause already existed.
5.4.1. In support of such submissions, reliance was placed upon the judgments rendered by the Hon'ble Apex Court in cases of M/s. Titagarh Paper Mills Ltd. Vs Orissa State Electricity Board & Anr. (1975) 2 SCC 436 [LQ/SC/1975/234] and Empire Jute Mill Company Ltd. Ors. Vs Jute Corporation of India Ltd (2007) 14 SCC 680 [LQ/SC/2007/1285] .
Relevant portion of the judgment rendered in Titagarh Paper Mills Ltd. (Supra) is reproduced as hereunder:-
"9. But that does not put an end to the controversy between the parties. It is true that in the press note the Board relied only on Sections 49 and 59 and the Sixth Schedule of the Supply Act as the source of the power under which it claimed to levy the coal surcharge and these provisions have been found not to contain the power sought in them. But, if there is one principle more well settled than any other, it is that, when an authority takes action which is within its competence, it cannot be held to be invalid, merely because it purports to be made under a wrong provision, if it can be shown to be within its power under any other provision. A mere wrong description of the source of power - a mere wrong label - cannot invalidate the action of an authority, if it is otherwise within its power. The Board claimed that, in any event, even if Sections 49 and 59 and the Sixth Schedule to the Supply Act could not be construed as authorising the Board to enhance unilaterally the rates for supply of electricity, the Board had the power under clause (13) of the agreement to levy the coal surcharge on the appellant and the decision to levy the coal surcharge could be justified by reference to this power. Now, if this claim of the Board were well founded, it would afford a complete answer to the challenge made on behalf of the appellant. But the appellant raised various contentions in answer to this plea based on clause (13) of the agreement. We may have referred to some of these contentions in an earlier part of the judgment. It is here that the case of the appellant founders on the rock of the preliminary objection. Clause (23) of the agreement provides that any dispute or difference relating to a question, thing or matter arising under the agreement shall be referred to the arbitration of a single arbitrator. Questions such as: whether the Board had power under clause (13) of the agreement to levy any coal surcharge at all when no such power was conferred on it by the Act, whether the action of the Board in levying the coal surcharge on the appellant under clause (13) of the agreement was arbitrary and unreasonable or whether it was based on extraneous and irrelevant considerations and whether, on the facts and circumstances of the case, the Board was justified under clause (13) of the agreement to levy the coal surcharge on the appellant, are plainly questions arising under the agreement and they are covered by the arbitration provision contained in clause (23) of the agreement. All the contentions raised by the appellant against the claim to justify the levy of the coal surcharge by reference to clause (13) of the agreement would, therefore, seem to be covered by the arbitration agreement and there is no reason why the appellant should not pursue the remedy of arbitration which it has solemnly accepted under clause (23) of the agreement and instead invoke the extraordinary jurisdiction of the High Court under Article 226 of the Constitution to determine questions which really form the subject-matter of the arbitration agreement. We are, therefore, of the view that the High Court was right in exercising its discretion against entertaining the writ petition on merits, insofar as it was directed against the validity of the levy of the coal surcharge under clause (13) of the agreement. The merits of the contentions raised by the appellant would have to be decided by arbitration as provided in clause 23 of the agreement".
Relevant portion of the Empire Jute Mill Company Ltd. (Supra) reproduced hereunder-:
"18. The power of judicial review vested in the superior courts undoubtedly has wide amplitude but the same should not be exercised when there exists an arbitration clause. The Division Bench of the High Court took recourse to the arbitration agreement in regard to one part of the dispute but proceeded to determine the other part itself. It could have refused to exercise its jurisdiction leaving the parties to avail their own remedies under the agreement but if it was of the opinion that the dispute between the parties being covered by the arbitration clause should be referred to arbitration, it should not have proceeded to determine a part of the dispute itself."
5.5. It was further submitted that the present case is purely a contractual matter, involving amongst others the State and its instrumentality, who are bound to act reasonably, fairly and in public interest, and that, looking into the factual matrix of the present case, the scope of judicial review is very narrow and limited; therefore, the Hon'ble High Court may not exercise such power, unless a grave error and/or violation of the principles of natural justice, on the part of the respondents, is pointed out.
5.5.1. It was also submitted that the contract in question is a commercial transaction and was done looking into the public interest; thus, on that count also, the Hon'ble Court may not exercise the power of judicial view in the present case, more particularly, looking into the fact that certain private individual is going to be benefited thereby by selling the Lignite at much higher prices, at the cost of larger public interest, in relation to the contractual dispute
5.5.2. In support of such submissions, reliance was placed upon the following judgments rendered by the Hon'ble Apex Court :
"(a) Tata Cellular Vs. Union of India, (1994) 6 SCC 651 [LQ/SC/1994/685] ;
(b) Jagdish Mandal Vs. State of Orissa & Ors., (2007) 14 SCC 517 (c) Silppi Construction Contractors Vs. Union of India & Anr., (2020) 16 SCC 489 [LQ/SC/2019/934] ;
(d) Afcons Infrastructure Ltd. Vs. Nagpur Metro Rail Corporation Ltd. & Anr. (2016) 16 SCC 818 [LQ/SC/2016/1201] ;
(e) State of Punjab Vs. Mehar Din, (2022) 5 SCC 648 [LQ/SC/2022/279 ;] ;
(f) Master Marine Service (P) Ltd. Vs. Metcalfe & Hodgkinson (P) Ltd. & Anr., (2005) 6 SCC 138 [LQ/SC/2005/514] ;
(g) State of Kerala & Ors. Vs M.K. Jose (2015) 9 SCC 433 [LQ/SC/2015/1028] ;"
5.6. It was also submitted that the price of imported coal was on an increasing trend (from USD 158 PMT in January, 2022 to USD 275 in May, 2022, and has increased further. It was further submitted that the Mine in question was being sold at a very low price as compared to the market price of other similar lignite mines, through e-auction process. Therefore, as per the respondents, for the purpose of fetching more public revenue, looking into the public interest, it was necessary for the respondents to firstly increase the price, prior to passing of the impugned order regarding cancellation of contract in question.
5.7. It was also submitted that the order regarding price increase has been accepted by few other successful bidders and the present petitioners also gave their consent for the said hike with regard to the Giral Mines of the respondents. It was also submitted that looking into the Covid-19 pandemic, in September, 2020, the respondents had reduced the price of Lignite from Matasukh Mines by 15%, which was accepted by the successful bidders, including the present petitioners; therefore, the petitioners cannot be allowed to blow hot and cold at the same time.
6. Heard learned counsel for the parties as well as perused the record of the case alongwith judgments cited at the Bar.
7. This Court observes that the respondents had issued a notice for sale of ROM Lignite through e-auction produced from Matasukh Mines, while prescribing, amongst others, certain Special Terms and Conditions. Thereafter, the e-auction proceeding was initiated and upon being declared successful therein, the petitioner was awarded the contract and started lifting lignite w.e.f. 15.01.2022; the detailed purchased order dated 17.01.2022 was placed by the respondents. The respondents vide the impugned order dated 24.03.2022 increased the price of Rs. 500/-PMT and the said price shall be made effective on the physical dispatches from 25.03.2022 onwards. Thereafter, the respondent vide the impugned order 22.08.2022, cancelled the whole e-auction.
8. This Court, firstly deals with the issue, as to whether in this petition pertaining to the contractual matter, the power of judicial review can be exercised by this Court under Article 226 of the Constitution of India, or not.
8.1 For the said purpose, this Court deems it appropriate to reproduce the relevant portion of the judgment rendered in the case of UNITECH Ltd. (Supra) and Mihan India Ltd. (Supra), as hereunder :
"33. A two judge Bench of this Court in ABL International Ltd. v. Export Credit Guarantee Corporation of India [ABL International] analyzed a long line of precedent of this Court to conclude that writs under Article 226 are maintainable for asserting contractual rights against the state, or its instrumentalities, as defined under Article 12 of the Indian Constitution. Speaking through Justice N Santosh Hegde, the Court held:
"27. ...the following legal principles emerge as to the maintainability of a writ petition:
(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable.
(b) Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.
(c) A writ petition involving a consequential relief of monetary claim is also maintainable."
This exposition has been followed by this Court, and has been adopted by three-Judge Bench decisions of this Court in State of UP v. Sudhir Kumar and Popatrao Vynkatrao Patil v. State of Maharashtra. The decision in ABL International, cautions that the plenary power under Article 226 must be used with circumspection when other remedies have been provided by the contract. But as a statement of principle, the jurisdiction under Article 226 is not excluded in contractual matters."
The relevant portion of the judgment rendered in the case of Mihan India Ltd. (Supra) is also reproduced as hereunder:
"49. In the facts of the present case and the findings so recorded hereinabove, it is clear that the authorities have acted arbitrarily in violation of Article 14 of the Constitution of India. In such a situation, the public law remedy has rightly been availed, invoking the jurisdiction of the High Court under Article 226 of the Constitution of India".
9. This Court further observes that the citizens of India always expect from the State to uphold the fairness and the rule of law as well as the Right to Equality enshrined under Article 14 of the Constitution of India.
9.1. The respondent-RSMML is an agency/body of the State, and thus, falls under the definition of the 'State' under Article 12 of the Constitution of India, and therefore, whenever the State passes an order in an arbitrary manner, as well as against the rule of law, the Hon'ble High Court has exclusive power of judicial review, to set at naught such action, in exercise of the power under Article 226 of the Constitution of India.
10. This Court also observes that in the present case, the respondent-RSMML firstly increased the price and then cancelled the whole e-auction, after the contract was finalized and the petitioner had already started the work. Therefore, the impugned action of the respondent-RSMML is against the rule of law and a clear violation of Article 14 of the Constitution of India; thus, such actions in contractual matters are always subject to the judicial review by the Hon'ble High Court under Article 226 of the Constitution of India.
11. This Court further observes that the position of the law is already settled as per the aforementioned precedent law that the Hon'ble High Court has exclusive power of judicial review, in the contractual matters, under Article 226 of the Constitution of India.
12. This Court also observes that the proceeding of the e-auction in question was initiated by the respondent-RSMML with some terms and conditions, while also reserving the right to cancel/modify the e-auction. This Court examined the issue that the action of the respondent-RSMML in cancelling the whole proceeding in question, on the sole ground of public revenue after the contract was finalized and work order has been issued as well as the work was also started by the petitioner.
12.1. This Court deems it appropriate to reproduce the relevant portion of the judgment rendered in the case of Mihan India Ltd. (Supra) as hereunder:-
"46. In view of the above, it is apparent that in government contracts, if granted by the government bodies, it is expected to uphold fairness, equality and rule of law while dealing with contractual matters. Right to equality under Article 14 of the Constitution of India abhors arbitrariness. The transparent bidding process is favoured by the Court to ensure that constitutional requirements are satisfied. It is said that the constitutional guarantee as provided under Article 14 of the Constitution of India demands the State to act in a fair and reasonable manner unless public interest demands otherwise. It is expedient that the degree of compromise of any private legitimate interest must correspond proportionately to the public interest. It is specified that using a ground of public interest or loss to the treasury cannot undo the work already undertaken by the authority."
Relevant portion of the judgment rendered in the case of UNITECH Limited & Ors. (Supra), is reproduced hereunder-:
"The State and its instrumentalities are duty bound to act fairly under Article 14 of the Constitution. They cannot, even in the domain of contract, claim an exemption from the public law duty to act fairly. The State and its instrumentalities do not shed either their character or their obligation to act fairly in their dealings with private parties in the realm of contract. Investors who respond to the representations held out by the State while investing in public projects are legitimately entitled to assert that the representations must be fulfilled and to enforce compliance with duties which have been contractually assumed".
In the case of The Vice-Chairman & Management Director, City and Industrial Development Corporation of Maharashtra (Supra), it was observed thus:
"58. When a contract is being evaluated, the mere possibility of more money in the public coffers, does not in itself serve public interest. A blanket claim by the State claiming loss of public money cannot be used to forgo contractual obligations, especially when it is not based on any evidence or examination. The larger public interest of upholding contracts and the fairness of public authorities is also in play. Courts need to have a broader understanding of public interest, while reviewing such contracts.
73. Fairness and the good faith standard ingrained in the contracts entered into by public authorities mandates such public authorities to conduct themselves in a non-arbitrary manner during the performance of their contractual obligations."
In the case of M.P. Power Management Company Ltd & Ors. (Supra), it was observed as under:
"9. However, because the State or a public body or an agency of the State enters into such a contract, there could be, in a given case, an element of public law or public interest involved even in such a commercial transaction.
10. The elements of public interest are: (1) Public money would be expended for the purposes of the contract. (2) The goods or services which are being commissioned could be for a public purpose, such as, construction of roads, public buildings, power plants or other public utilities. (3) The public would be directly interested in the timely fulfilment of the contract so that the services become available to the public expeditiously. (4) The public would also be interested in the quality of the work undertaken or goods supplied by the tenderer.
The aforementioned present law was referred by the Division Bench of the Hon'ble High Court of Delhi in the case of M/s Jai Singh & Ors (Supra), relevant portion of which is reproduced hereunder-:
"17. The Apex Court in M.P. Power Management Company Limited (supra) after relying upon the judgments of the Apex Court in Vice Chairman & Managing Director, City and Industrial Development Corporated of Maharashtra Ltd (supra); Michigan Rubber (India) Limited v. State of Karnataka, (2012) 8 SCC 216 [LQ/SC/2012/666] & Raunaq International Ltd. v. I.V.R. Construction Ltd., (1999) 1 SCC 492 [LQ/SC/1998/1168] ; has held as under:
"95. Therefore, on a conspectus of the case law, we find that the concept of overwhelming public interest has essentially evolved in the context of cases relating to the award of contract by the State. It becomes an important consideration in the question as to whether then the State with whatever free play it has in its joints decides to award a contract, to hold up the matter or to interfere with the same should be accompanied by a careful consideration of the harm to public interest. We do not go on to say that consideration of public interest should not at all enter the mind of the court when it deals with a case involving repudiation of a claim under a contract or for that matter in the termination of the contract. However, there is a qualitative difference in the latter categories of cases. Once the State enters into the contract, rights are created. If the case is brought to the constitutional court and it is invited to interfere with State action on the score that its action is palpably arbitrary, if the action is so found then an appeal to public interest must be viewed depending on the facts of each case. If the aspect of public interest flows entirely on the basis that the rates embodied in the contract which is arbitrarily terminated has with the passage of time become less appealing to the State or that because of the free play of market forces or other developments, there is a fall in the rate of price of the services or goods then this cannot become determinative of the question as to whether court should decline jurisdiction. In this case, it is noteworthy that the rates were in fact settled on the basis of international competitive bidding and in which as many as 182 bidders participated and the rate offered by the first respondent was undoubtedly the lowest. The fact that power has become cheaper in the market subsequently by itself should not result in non-suiting of the complaint of the first respondent, if it is found that a case of clear arbitrariness has been established by the first respondent.
96. In other words, public interest cannot also be conflated with an evaluation of the monetary gain or loss alone." (emphasis supplied)
18. The upshot of the said discussion would show that mere possibility of more money in a public contract itself cannot be the sole criteria for terminating contracts and more particularly, the contracts which are for a fixed duration".
In the case of Aakash Exploration Services Ltd (Supra) relevant portion of the said judgment reproduced hereunder:-
"76. Our final conclusions, as regards the maintainability of this writ application, may be summarized thus:
[1] Where the contract entered into between the State and the person aggrieved is non-statutory and purely contractual, but such contract has been cancelled on a ground de hors any of the terms of the contract, and which is per se violative of Article 14 of the Constitution, the High Court in such case can exercise its jurisdiction under Article 226 and the writ petition under Article 226 by aggrieved person would be maintainable.
. . . . . . . . .
85. There is no doubt that the Corporation has the option or right to terminate the contract at any time before the expiry of the firm period of one year by giving thirty days prior notice in writing. However, this clause of termination by itself does not empower the Corporation to take an arbitrary decision or rather act an unfair and unreasonable manner. The principles of natural justice are embodied in Article 14 of the C/SCA/7814/2019 JUDGMENT Constitution of India. One of the facets of the principles of natural justice is fairness. We are not impressed by the submission of Mr. Mehta that the Corporation having realized its mistake in fixing a particular rate is justified at a later stage, to revise the rates in public interest. The Corporation is also not justified in submitting that the writ applicant was given an opportunity to revise the rates if at all he wanted to continue with the work and as he declined, the Corporation had no option, but to terminate the contract. At the cost of repetition, we state that after due deliberations, at all stages, and with eyes wide open, the Corporation entered into a contract with the writ applicant at a particular EDR. The contract was finalized. The writ applicant started the work of contract. He worked for almost four months without any complaint of any nature, and all of a sudden, the issue with regard to the EDR was raised by the Corporation. The Corporation, at any cost, wants the writ applicant to match his EDR with the EDR fixed in the contract issued by the Delhi Office. The writ applicant has explained as to why the rate of EDR, so far as the case on hand is concerned, is on a higher side compared to the contract of the Delhi office. In our opinion, once the contract stood concluded with all the terms and conditions being finalized, all of a sudden, the Corporation could not have raised the issue of EDR in the name of public interest. Mr. Dave, the learned counsel appearing for the writ applicant is right in submitting that the termination clause could have been invoked by the Corporation provided his client was at fault in any manner or was guilty of committing breach of any terms and conditions of the tender document. The termination clause in the contract does not give an unbridled power to the Corporation being a "State" within the meaning of Article 12 of the Constitution of India to terminate the contract on its own whims and caprice."
13. This Court further observes that the Rajasthan State Legislature enacted the Rajasthan Transparency in Public Procurement Act, 2012 with an object to cover the entire auction processes in the said statute, and to ensure fairness and transparency in the auction processes. This Court also observes that the Preamble of the said statute clearly stated that "to regulate public procurement with the objectives of ensuring transparency, fair and equitable treatment of bidders, promoting competition, enhancing efficiency and economy and safeguarding integrity in the procurement process and for matters connected therewith or incidental thereto. Whereas, the State Government considers it necessary to ensure the highest standards of transparency, accountability and probity in the public procurement process and to enhance public confidence in public procurement." Thus, the State cannot act contrary to the said Statute.
14. This Court further observes that the respondent-RSMML issued the notice for the e-auction in question and finalised the same as per the terms and conditions in favour of the petitioner; all other formalities regarding the contract in question have been completed and the petitioner started the work in question. Thereafter, the respondent-RSMML increased the price, as mentioned above, and then in an arbitrary manner cancelled the contract.
14.1. This Court also observes that till the e-auction was not finalised and was under process, the respondent-RSMML had exclusive power to amend, change or cancel the e-auction as per the terms and conditions, but once the contract has been finalised and all the formalities were completed, and even the work had already started in pursuance of that contract, then the respondent-RSMML was not justified in law in cancelling the contract in question.
15. This Court further observes that the respondent-RSMML falls under definition of the State under Article 12 of the Constitution of India, and though it is the duty of the respondent-RSMML to protect the public revenue and increase the public revenue in public interest under the Constitution of India, but at the same time, once the contract was executed between the parties, then the respondent-RSMML ought not have cancelled the whole contract, while acting arbitrarily and against the rule of law.
16. This Court also observes that the public revenue is very significant for the State to provide better infrastructure to the public, but at the same time, the right of the petitioner (contracting party) cannot be infringed, and thus, the impugned action of the respondent-RSMML is not sustainable in the eye of law.
17. This Court further observes that the respondent-RSMML finalized the contract with its price, and at that time, the respondent-RSMML did not think about the public revenue and public interest; but after the contact was finalised and execution started, suddenly the respondent increased the price, and thereafter, in an arbitrary manner cancelled the whole contract; which clearly prejudiced the rights of the petitioner.
18. This Court further observes that the citizens of the country always expects from the State to act fairly and not in an arbitrary manner or against the Rule of law; on that count also, the impugned action of the respondent is not sustainable in the eye of law.
19. This Court is conscious about the issues of public revenue and public interest, but at the same time, the arbitrary action, even on the ground of public revenue and public interest, cannot be accepted; more particularly, when after finalization of the contract, the contracting party to whom the contract was awarded, and after the rights and obligations have come into existence, the same cannot be made to suffer, even on the grounds of ordinary public revenue variations and public interest. Therefore, the impugned action of the respondent-RSMML is not justified in law.
20. This Court also observes that in the precedent law of Vice-Chairman & Management Director, City and Industrial Development Corporation of Maharashtra (Supra), the Hon'ble Apex Court had clearly laid down the law that, "When a contract is being evaluated, the mere possibility of more money in the public coffers, does not in itself serve public interest. A blanket claim by the State claiming loss of public money cannot be used to forgo contractual obligations, especially when it is not based on any evidence or examination."; the said precedent law thereafter was also followed by various Hon'ble High Courts.
20.1. In the present case, the respondent-RSMML firstly increased the price and then passed the impugned cancellation order, after finalization of the contract and even when the work was started by the petitioner; such impugned action was taken without any viable explanation as to how the same shall fetch more public revenue and would serve the public interest.
21. This Court also observes that the State and its agencies/bodies are highly responsible for subserving public interest, and every citizen of the country expects that the State and its functionaries, agencies/bodies shall act fairly and in good faith, as mandated by the Constitution of India; therefore, on that count also, the impugned action of the respondent-RSMML, in the present case, cannot be sustained in the eye of law.
22. This Court further observes that though the provision for arbitration as mentioned in the contract in question is not in dispute, but in the present case, the whole contract was cancelled by the respondent-RSMML in arbitrary manner and against rule of law, which cannot be sustained, even when there is an arbitration clause contained in the agreement/contract.
23. This Court has kept into consideration the fact that the sole ground of terminating the e-auction is the rise in price of the mineral in question, which could have fetched more revenue for the respondents; but at the same time, the respondents have failed to point out any exceptional circumstance of variations in the price of the mineral. The reply and the impugned orders do not indicate any such remarkable reason, which could impact the strong and vital parameters of the public interest.
23.1. Merely because the price of the mineral in question escalates a bit, the same is only a loss of opportunity cost and is a part of the character of the market forces. The impugned orders and the record including reply do not show that there was any extraordinary parameter, which could significantly create an economic impact upon the decision-making of the respondents. The argument of the learned counsel for the respondents merely indicates ordinary market variations, which are a normal perspective in the contractual obligations.
23.2. A bare perusal of the impugned orders clearly shows that the same do not reflect any such exceptional circumstances; furthermore, the impugned orders are non-speaking orders and do not reflect due application of mind, more particularly, when juxtaposed to the vital aspects of public revenue or public interest.
24. Thus, in light of the aforesaid observations and in view of the aforementioned precedent laws, the present petitions are allowed, and accordingly, the impugned orders dated 24.03.2022 and 22.08.2022 are quashed and set aside. No order as to costs. All pending applications stand disposed of.
