Chattisgarh High Court
M/S. Menakshi Con vs South Eastern Coalfields Limited (S E C … on 15 July, 2026
Author: Ramesh Sinha
Bench: Ramesh Sinha
1
CGHC010265042026 2026:CGHC:29855-DB
NAFR
HIGH COURT OF CHHATTISGARH AT BILASPUR
WPC No. 3673 of 2026
M/s. Menakshi Con a Firm Duly Registered Under Applicable Law,
Through its Managing Partner and Authorized Signatory Shri Anil Kumar
Bandhi, S/o Shri Bandi Pullaiah Aged About 52 Years Having Its
Registered Office At Dwarakamai 2nd Floor, H.No. 8-2- 269-S/ 8 Sagar
Society Street No. 1 Road No. 2 Banjara Hills, Hyderabad - 500034
Telangana.
... Petitioner
versus
1 - South Eastern Coalfields Limited (SECL) Through Its Chairman
Managing Director, Having Its Registered Office At S E C L Bhawan,
Seepat Road, Bilaspur- 495006 Chhattisgarh
2 - The General Manager (Operations), South Eastern Coalfields
Limited, Kusmunda Area P.O. Kusmunda Colliery District- Korba
Chhattisgarh- 495454
3 - The General Manager (Contract Management Cell), South Eastern
Coalfields Limited, S E C L, Bhawan, Seepat Road Bilaspur- 495006
Chhattisgarh
4 - Coal India Limited (CIL) Through Its Chairman Cum Managing
Director, Having Its Registered Office At Coal Bhawan, Premises No.
04- M R Plot No. A F - III Action Area - 1 A, New Town, Rajarhat Kolkata
- 700156 West Bengal Acting
ROHIT
5 - Union of India Through The Secretary, Ministry of Coal, Shastri
KUMAR
CHANDRA
Digitally signed
Bhawan, New Delhi - 110001
by ROHIT
KUMAR
CHANDRA
2
6 - HDFC Bank Ltd, Through its Branch Manager, Having Office at WBO
Group 1st Floor 18/3 IT Pari, Gayatri Nagar, Mouza Parsodi Nagpur -
440022
... Respondents
_________________________________________________________
For Petitioner : Mr. Prafull N. Bharat, Senior Advocate
assisted by Mr. Kaustubh Singh Thakur,
Advocate
For Respondents/SECL : Mr. Manoj Paranjpe, Senior Advocate
assisted by Mr. Anumeh Shrivastava,
Advocate
For Respondent/UOI : Ms. Annapura Tiwari, Central Government
Counsel
Hon’ble Shri Ramesh Sinha, Chief Justice
Hon’ble Shri Ravindra Kumar Agrawal, Judge
Order on Board
Per Ramesh Sinha, Chief Justice
15.07.2026
1. Heard Mr. Prafull N. Bharat, learned Senior Advocate assisted by
Mr. Kaustubh Singh Thakur, learned counsel for the petitioner.
Also heard Mr. Manoj Paranjpe, learned Senior Advocate assisted
by Mr. Anumeh Shrivastava, learned counsel appearing for the
respondents/SECL as well as Ms. Annapurna Tiwari, learned
Central Government Counsel, appearing for respondent/ UOI.
2. The present writ petition has been filed by the petitioner under
Article 226 of the Constitution of India seeking following reliefs :
“(i) That, this Hon’ble Court may graciously be
pleased to allow the present writ petition preferred by
the petitioner and issue an appropriate Writ, Order or
Direction, more particularly a Writ of Certiorari,
quashing and setting aside the Impugned Order dated
329.06.2026 bearing Ref. No. SECL/KA/GM(O)/26-
bearing 27/67 (Annexure P/1);
(ii) That, this Hon’ble Court may graciously be
pleased to issue an appropriate Writ, Order or
Direction, more particularly a Writ of Mandamus,
directing Respondent No. 1 to discharge and release
the Performance Bank Guarantee No.
102GT02260700006 dated 11.03.2026, issued by
HDFC Bank Ltd. (Respondent No.2), without invoking
or encashing the same, and to return the original
Bank Guarantee to the Petitioner;
(iii) That, this Hon’ble Court may graciously be
pleased to issue an appropriate Writ, Order or
Direction directing Respondent No. 1 reconsider to
Petitioner’s the dated 08.05.2026, 13.05.2026 and
other representations connected representations,
including the Petitioner’s invocation of the
Government of India, Ministry of Finance, Department
of Expenditure No. 1/3/2026-Memorandum Office
PPD dated 29.04.2026, in accordance with law and
after affording the Petitioner an adequate opportunity
of hearing;
(iv) That, this Hon’ble Court may graciously be
pleased to issue an appropriate Writ, Order or
Direction directing Respondent Nos. 1 and 4 not to
initiate or proceed with any banning/debarment
proceedings against the Petitioner in connection with
the subject contract except strictly in accordance with
the applicable Coal India Limited Guidelines on
Debarment of Firms from Bidding and after complying
with the principles of natural justice, including
issuance of a show cause notice and grant of a
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reasonable opportunity of personal hearing;
(v) Pass such other or further order(s) as this
Hon’ble Court may deem fit, proper and expedient in
the facts and circumstances of the present case,
including the award of costs.”
3. The present writ petition has been filed by the petitioner
challenging the legality and validity of the order dated 29.06.2026
passed by respondent No.2, whereby the Letter of Acceptance
(LOA) issued in favour of the petitioner has been cancelled, the
Performance Security Deposit (PSD) amounting to Rs.49,19,184/-
furnished by the petitioner through Bank Guarantee has been
forfeited, the petitioner has been disqualified from participating in
the Special Purpose Limited Tender (SPLT) process and liberty
has been reserved to initiate further proceedings for
banning/debarment of the petitioner.
4. The dispute arises out of a tender floated by respondent No.1
through the Government e-Marketplace (GeM) vide NIT No.
26/GeM/203 dated 15.12.2025 bearing GeM Bid No.
GEM/2025/B/7003365 for the work of “Hiring of HEMM for
excavating Re-handling OB (not requiring drilling), loading into
Tippers, Transportation and unloading the excavated material and
silt, dumping, dozing, scraping/removal of Re-handling OB,
preparation/maintenance of haul road, water sprinkling and
spreading of material” at Kusmunda Open Cast Project,
Kusmunda Area, Chhattisgarh. The tender was for a period of 60
days involving excavation of 17,82,058 cubic metres of material at
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a quantity per day of 29,701 cubic metres. The estimated cost of
the work was Rs.13,65,63,612.29/- inclusive of GST. The tender
documents specifically incorporated a Price Variation Clause
(PVC), wherein the base diesel price was fixed at Rs.93.06 per
litre as on 22.12.2025 at the nearest IOC/BP PSU retail outlet,
and the said base price was a significant component for
determination of the bid price and future adjustment of contract
rates.
5. The petitioner participated in the said tender process and
submitted its bid at 85.01% of the estimated cost, i.e., 14.99%
below the estimated value. Upon evaluation of the bids, the
petitioner was declared as the successful bidder and respondent
No.1 issued Letter of Acceptance bearing No.
SECL/BSP/CMC/LOA/KSM_OBRH/GeM-203/2025-26/586 dated
05.02.2026 in favour of the petitioner. Pursuant thereto, GeM
Contract No. GEMC-511687716017645 was generated on
05.02.2026. The total contract value was Rs.1,16,09,272.81/-
inclusive of GST, and the service period was reflected as
commencing from 15.02.2026 and ending on 14.04.2026. As per
the terms of the contract, the petitioner was required to furnish
Performance Security Deposit of Rs.49,19,184/-. After issuance of
the LOA, respondent No.2 issued various reminders dated
10.02.2026, 15.02.2026, 20.02.2026 and 24.02.2026 for
submission of the PSD. Since the petitioner faced processing
delays at HDFC Bank, Nagpur, it submitted a request dated
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24.02.2026 seeking extension of time for furnishing the PSD. The
said request was considered and accepted by respondent No.2
vide communication dated 03.03.2026, whereby the time for
submission of PSD was extended till 11.03.2026. In compliance
with the said extension, the petitioner furnished the Performance
Security Deposit through Bank Guarantee No.
102GT02260700006 dated 11.03.2026 issued by HDFC Bank
Ltd., Nagpur, for an amount of Rs.49,19,184/-, valid up to
03.03.2027. Thereafter, the work site was handed over to the
petitioner vide communication dated 17.03.2026 and the formal
Work Order was issued on 20.03.2026.
6. According to the petitioner, after issuance of the work order, it
undertook necessary steps for mobilization of manpower and
machinery for execution of the contract. However,
commencement of the work was affected due to circumstances
beyond the control of the petitioner, particularly the disruption
caused in the global supply chain due to the ongoing West Asia
conflict, which adversely affected transportation and availability of
Heavy Earth Moving Machinery, spare parts and related
equipment. The petitioner further contends that another serious
impediment was the unprecedented increase in diesel prices. It is
stated that the entire bid was prepared on the basis of the
contractual base diesel price of Rs.93.06 per litre mentioned in
the NIT. However, subsequently, the diesel price increased
substantially to approximately Rs.140 per litre, resulting in an
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increase of more than 50% from the base price. It is further
pleaded that restrictions imposed on diesel allocation, limiting
supply to approximately 300 litres per day against the project’s
requirement of around 12,000 to 15,000 litres per day, created
severe operational difficulties. The petitioner accordingly
requested the respondents to clarify the applicable diesel rate and
sought implementation of the Price Variation Clause incorporated
in the contract.
7. Respondent No.2 thereafter issued a notice dated 07.04.2026
under Clause 6.1 of the General Terms and Conditions, requiring
the petitioner to commence the work within 15 days, failing which
action for forfeiture of Performance Security Deposit and
debarment would be initiated. The petitioner submitted a detailed
reply dated 18.04.2026 explaining the circumstances causing
delay and assured that the machinery was in transit and the work
would commence shortly. The petitioner also submitted
representations dated 21.04.2026 and subsequent dates
highlighting the diesel crisis and requesting assistance from the
respondents for supply of diesel on a recoverable basis.
8. The petitioner further relies upon the Office Memorandum dated
29.04.2026 issued by the Ministry of Finance, Department of
Expenditure, Government of India, whereby the West Asia conflict
was recognized as a Force Majeure event and directions were
issued to grant extension of contractual completion period without
levy of penalty in eligible cases. The petitioner invoked the said
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Force Majeure provisions by submitting representation dated
08.05.2026 seeking extension of time. The petitioner also
submitted documents demonstrating mobilization of resources,
including details of vehicles and machinery, request for medical
examination of workmen, list of deployed personnel and a detailed
mobilization schedule.
9. According to the petitioner, despite the aforesaid communications
and documentary evidence demonstrating its bona fide intention
to execute the work, respondent No.2 proceeded to pass the
impugned order dated 29.06.2026 without considering the
petitioner’s subsequent representations, without granting any
further opportunity of hearing and without considering the
applicability of the Force Majeure Office Memorandum. By the
said order, the LOA was cancelled, PSD was forfeited and further
adverse action was proposed against the petitioner. Hence, the
present petition has been filed challenging the said action as
arbitrary, unreasonable, contrary to the contractual terms, violative
of principles of natural justice and unsustainable in law.
10. Mr. Prafull N. Bharat, learned Senior Advocate appearing for the
petitioner submits that the impugned order dated 29.06.2026
passed by respondent No.2 is arbitrary, illegal and contrary to the
terms and conditions of the contract as well as the material
available on record. It is contended that the respondents have
proceeded against the petitioner mechanically without
appreciating the genuine difficulties faced by the petitioner and
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without considering the fact that the delay in commencement of
work occurred due to extraordinary circumstances beyond the
petitioner’s control. Learned Senior Advocate submits that the
petitioner was a successful bidder after participating in a
transparent tender process and had quoted its rates strictly on the
basis of the tender conditions, particularly the base diesel price of
Rs.93.06 per litre and the Price Variation Clause incorporated in
the LOA. It is argued that the respondents themselves recognized
the importance of diesel price fluctuation by incorporating the PVC
in the contract, and therefore, the petitioner was entitled to seek
appropriate adjustment in view of the unprecedented escalation in
diesel prices. The failure of the respondents to clarify the
applicable diesel rate despite repeated requests has rendered the
execution of the contract financially impossible and commercially
unviable.
11. Mr. Bharat further submits that the petitioner never committed any
deliberate breach or abandoned the contract. On the contrary, the
petitioner continuously acted in furtherance of the contract by
furnishing the Performance Security Deposit within the extended
period granted by the respondents, arranging machinery,
mobilizing manpower, submitting details of vehicles and
equipment, and taking steps for mandatory medical examination
of workmen. It is contended that the findings recorded by
respondent No.2 that the petitioner failed to take any tangible
steps towards commencement of work are contrary to the
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admitted documents available on record. It is further argued that
the respondents failed to appreciate the impact of the West Asia
conflict, which was subsequently recognized by the Government
of India, Ministry of Finance, as a Force Majeure event vide Office
Memorandum dated 29.04.2026. Learned counsel submits that
the petitioner fulfilled the conditions prescribed in the said
memorandum as it was not in default on 27.02.2026 and was, in
fact, granted extension for submission of PSD by the
respondents. Therefore, the petitioner was entitled to
consideration of extension of time without imposition of penalty or
forfeiture.
12. Mr. Bharat contended that the action of forfeiting the Performance
Security Deposit is wholly disproportionate and contrary to Clause
6.1 of the contract, which permits forfeiture only when the
contractor commits default without reasonable cause or valid
reason. It is argued that in the present case, the petitioner had
demonstrated sufficient and valid reasons for delay, which were
neither considered nor dealt with by the respondents. It is further
contended that the impugned order has been passed in violation
of principles of natural justice. Learned counsel submits that after
submission of detailed representations dated 08.05.2026,
13.05.2026, 19.05.2026 and 26.05.2026 along with supporting
documents, the respondents were required to consider the same
and provide an effective opportunity of hearing before taking the
extreme step of cancellation of LOA and forfeiture of PSD.
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However, without considering the relevant material and without
granting any opportunity of personal hearing, the impugned order
has been passed. Learned counsel lastly submits that the
impugned action is also arbitrary as the respondents have ignored
their own conduct in granting extension for submission of PSD
and thereafter abruptly resorted to cancellation and forfeiture. It is
therefore prayed that the impugned order dated 29.06.2026 be
quashed and the respondents be directed to restore the contract,
release the Performance Security Deposit and grant appropriate
extension of time in terms of the Government of India Force
Majeure guidelines and the contractual provisions.
13. Per contra, Mr. Manoj Paranjpe, learned Senior Advocate,
appearing for the respondents/SECL submits that the present
petition is devoid of merit and deserves to be dismissed, as the
action taken by the respondents is strictly in accordance with the
terms and conditions of the tender document and the contractual
provisions governing the parties. It is submitted that the petitioner
was declared the successful bidder pursuant to the tender
process for the work of re-handling of OB and allied activities at
Kusmunda OC Project, and thereafter Letter of Acceptance was
issued in favour of the petitioner on 05.02.2026. The petitioner
was required to furnish the Performance Security Deposit and
commence execution of the awarded work within the stipulated
period. Learned counsel would submit that the contention of the
petitioner that the site was not handed over and, therefore, the
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contractual period for commencement of work had not
commenced is wholly misconceived and contrary to the record. It
is submitted that the work site was duly handed over to the
petitioner vide communication dated 17.03.2026 and thereafter
the Work Order was issued on 20.03.2026. As per the contractual
conditions, particularly the clause relating to the scheduled period
of completion, the period for execution of work commenced after
expiry of the prescribed period from the date of issuance of the
Letter of Acceptance or handing over of the site, whichever was
later. Therefore, there was no ambiguity regarding
commencement of contractual obligations upon the petitioner.
Learned counsel further submits that despite handing over of the
site and issuance of the Work Order, the petitioner failed to
mobilize the required manpower, machinery and resources for
commencement of the work. It is submitted that the petitioner was
specifically directed by the General Manager (Mining), Kusmunda
Project, vide communication dated 02.04.2026, to immediately
mobilize adequate resources and commence the work. However,
despite such instructions, the petitioner failed to commence the
execution of the work within the stipulated period, resulting in
issuance of a statutory notice dated 07.04.2026 under Clause 6.1
of the General Terms and Conditions of the contract. It is
submitted that in response to the said notice, the petitioner, vide
its communication dated 18.04.2026, assured the respondents
that the work would be commenced shortly. Similar assurances
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were also given during telephonic communications. However,
instead of commencing the work, the petitioner subsequently
raised issues relating to the West Asia conflict, escalation of
diesel prices and alleged shortage of diesel supply. Learned
counsel submits that the said grounds are merely an afterthought
and cannot justify the failure of the petitioner to commence the
work, particularly when the respondents had already assured
supply of diesel for execution of the project and had repeatedly
granted sufficient opportunities to the petitioner to mobilize and
commence the work.
14. Mr. Paranjpe would further submit that the petitioner, despite
repeated directions and opportunities, failed to take any effective
steps towards commencement of work even during the extended
period granted under the notice dated 07.04.2026. It is submitted
that the petitioner itself, vide communication dated 23.04.2026,
expressed its inability to commence the work, thereby clearly
demonstrating its failure to comply with the contractual
obligations. Therefore, the respondents were fully justified in
invoking Clause 6.1 of the contract and taking consequential
action, including cancellation of the Letter of Acceptance and
forfeiture of the Performance Security Deposit. Learned counsel
further submits that the allegations of violation of principles of
natural justice are wholly untenable. The petitioner was repeatedly
communicated regarding its failure to commence the work, was
issued a notice under Clause 6.1 of the contract, and was granted
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adequate opportunity to explain its position. The petitioner
submitted its replies and representations, which were duly
considered. After considering the entire material available on
record and the repeated defaults committed by the petitioner, the
competent authority took the decision in accordance with the
contractual provisions. Therefore, no interference under Article
226 of the Constitution of India is warranted.
15. Mr. Paranjpe further submits that the present petition involves
adjudication of disputed contractual issues arising out of the
agreement between the parties, and the petitioner has an
efficacious alternative remedy available under the terms of the
contract. It is submitted that the petitioner has deliberately not
placed on record the copy of agreement executed between the
parties, which contains Clause 13.3 providing for settlement of
disputes between the contractor and SECL through the agreed
contractual mechanism. The petitioner, having entered into a
contractual arrangement with open eyes, cannot bypass the
agreed dispute resolution mechanism and directly invoke the
extraordinary writ jurisdiction of this Hon’ble Court. It is submitted
that the dispute raised by the petitioner essentially pertains to
interpretation of contractual clauses, alleged delay in
commencement of work, applicability of force majeure provisions,
and justification for forfeiture of Performance Security Deposit.
Such matters require examination of contractual obligations and
evidence, which cannot ordinarily be undertaken in writ
15
proceedings. The petitioner is required to avail the remedy
provided under the contract itself.
16. Mr. Paranjpe lastly submits that the respondents, being a public
sector undertaking, are required to ensure timely completion of
public projects and cannot permit a contractor to indefinitely delay
execution of the awarded work after acceptance of the contract.
The petitioner failed to honour its contractual commitments
despite repeated opportunities and notices. The impugned action
has been taken strictly in accordance with the terms of the
contract and does not suffer from any arbitrariness, illegality or
violation of any statutory provision. Accordingly, it is prayed that
the present writ petition being devoid of merit and involving
disputed contractual questions deserves to be dismissed.
17. We have heard learned counsel appearing for the parties and
perused the material available on record.
18. The present petition has been filed challenging the action of
respondent No.2 whereby the Letter of Acceptance issued in
favour of the petitioner has been cancelled, the Performance
Security Deposit furnished by the petitioner has been forfeited and
consequential action has been proposed against the petitioner on
account of failure to commence the work awarded under the
contract. The principal grievance of the petitioner is that the delay
in commencement of work was occasioned due to circumstances
beyond its control, particularly the disruption caused due to the
16
West Asia conflict, escalation in diesel prices and alleged non-
clarification regarding application of the Price Variation Clause.
The respondents, on the other hand, have justified the impugned
action on the ground that despite handing over of the site,
issuance of the Work Order, repeated instructions and issuance of
notice under Clause 6.1 of the contract, the petitioner failed to
commence the work and thereby committed breach of contractual
obligations.
19. From the documents placed on record, it is not in dispute that the
petitioner participated in the tender process, was declared the
successful bidder and accepted the terms and conditions of the
tender document by submitting its bid. The Letter of Acceptance
was issued on 05.02.2026 and thereafter the petitioner furnished
the Performance Security Deposit on 11.03.2026 after seeking
and obtaining extension of time from the respondents. It is also
not disputed that the work site was handed over to the petitioner
on 17.03.2026 and the Work Order was issued on 20.03.2026.
Therefore, the contention raised by the petitioner that the
contractual period had not commenced on account of non-
handing over of the site cannot be accepted.
20. The record further demonstrates that after handing over of the site
and issuance of the Work Order, the petitioner was directed by the
competent authority vide communication dated 02.04.2026 to
mobilize the requisite resources and commence the work. Since
the petitioner failed to commence the work, notice dated
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07.04.2026 was issued under Clause 6.1 of the General Terms
and Conditions granting fifteen days’ time to commence the work,
failing which action including forfeiture of Performance Security
Deposit was proposed. The petitioner submitted its reply dated
18.04.2026 assuring commencement of work; however, instead of
commencing the work, it subsequently expressed inability on
account of diesel price escalation and other difficulties.
21. The contention of the petitioner that the escalation of diesel prices
and supply constraints rendered the contract impossible to
perform cannot be accepted in the facts of the present case. The
petitioner was aware of the terms and conditions of the tender,
including the Price Variation Clause, at the time of submitting its
bid. Having voluntarily participated in the tender process and
accepted the contractual conditions, the petitioner cannot
subsequently seek to rewrite the terms of the contract on account
of commercial difficulties.
22. Before adverting to the rival contentions, it would be appropriate
to refer to the settled principles governing judicial review in matters
relating to public tenders and contractual decisions of the State.
23. In Michigan Rubber (India) Ltd. (supra), the Hon’ble Supreme
Court has categorically held that the terms and conditions of a
tender fall within the domain of the tendering authority and that the
Court should exercise great restraint in interfering with such
conditions unless they are found to be arbitrary, discriminatory or
actuated by mala fides.
18
24. Similarly, in Jagdish Mandal (supra), the Supreme Court held
that judicial review in tender matters is limited and the Court
should not interfere unless the decision-making process is shown
to be arbitrary, irrational or intended to favour someone.
25. The Supreme Court in Meerut Development Authority (supra)
has further held that the State or its instrumentalities are entitled to
cancel a tender process and invite fresh bids in public interest and
such decisions should not ordinarily be interfered with unless they
are patently arbitrary.
26. Another important principle was laid down by the Supreme Court
in Municipal Corporation, Katra (supra), wherein it was held that
a party which does not participate in the tender process cannot
subsequently challenge the same.
27. The law with respect to interference in tender matters is limited to
certain extent as has been considered by the Hon’ble Supreme
Court in large number of cases including in the case of Tata
Motors Limited vs Brihan Mumbai Electric Supply &
Transport Undertaking (BEST) and others 1 wherein the Hon’ble
Supreme Court has considered the factum of interference in the
tender matters and has held as under:
“48. This Court being the guardian of fundamental
rights is duty-bound to interfere when there is
arbitrariness, irrationality, mala fides and bias.
However, this Court has cautioned time and again
that courts should exercise a lot of restraint while1 2023 SCC OnLine SC 671
19exercising their powers of judicial review in
contractual or commercial matters. This Court is
normally loathe to interfere in contractual matters
unless a clear-cut case of arbitrariness or mala
fides or bias or irrationality is made out. One must
remember that today many public sector
undertakings compete with the private industry.
The contracts entered into between private parties
are not subject to scrutiny under writ jurisdiction.
No doubt, the bodies which are State within the
meaning of Article 12 of the Constitution are bound
to act fairly and are amenable to the writ
jurisdiction of superior courts but this discretionary
power must be exercised with a great deal of
restraint and caution. The courts must realise their
limitations and the havoc which needless
interference in commercial matters can cause. In
contracts involving technical issues the courts
should be even more reluctant because most of us
in Judges’ robes do not have the necessary
expertise to adjudicate upon technical issues
beyond our domain. The courts should not use a
magnifying glass while scanning the tenders and
make every small mistake appear like a big
blunder. In fact, the courts must give “fair play in
the joints” to the government and ublic sector
undertakings in matters of contract. Courts must
also not interfere where such interference will
cause unnecessary loss to the public exchequer.”
28. Recently, the Hon’ble Supreme Court, in the matter of
Banshidhar Construction Pvt. Ltd. v. Bharat Coking Coal Ltd.
& Others, {Civil Appeal No. 11005 OF 2024, decided on
20
04.10.2024}, taking note of the decisions rendered in various
other celebrated judgments, observed as under:
“21. There cannot be any disagreement to the legal
proposition propounded in catena of decisions of this
Court relied upon by the learned counsels for the
Respondents to the effect that the Court does not sit as a
Court of Appeal in the matter of award of contracts and it
merely reviews the manner in which the decision was
made; and that the Government and its instrumentalities
must have a freedom of entering into the contracts.
However, it is equally well settled that the decision of the
government/ its instrumentalities must be free from
arbitrariness and must not be affected by any bias or
actuated by malafides. Government bodies being public
authorities are expected to uphold fairness, equality and
public interest even while dealing with contractual
matters. 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 and that the entire bidding process is
carried out in absolutely transparent manner.
29. 22. At this juncture, we may reiterate the well-
established tenets of law pertaining to the scope of
judicial intervention in Government Contracts.
23. In Sterling Computers Limited vs. M/s. M & N
Publications Limited and Others2, this Court while
dealing with the scope of judicial review of award of
contracts held: –
“18. While exercising the power of judicial review, in
respect of contracts entered into on behalf of the
State, the Court is concerned primarily as to whether
there has been any infirmity in the “decision making
process”. In this connection reference may be made
to the case of Chief Constable of the North Wales
Police v. Evans [(1982) 3 All ER 141] where it was
said that: (p. 144a)
“The purpose of judicial review is to ensure that
the individual receives fair treatment, and not to
ensure that the authority, after according fair
treatment, reaches on a matter which it is
2 (1993) 1 SCC 445
21authorised or enjoined by law to decide for itself
a conclusion which is correct in the eyes of the
court.”
By way of judicial review the court cannot examine
the details of the terms of the contract which have
been entered into by the public bodies or the State.
Courts have inherent limitations on the scope of any
such enquiry. But at the same time as was said by
the House of Lords in the aforesaid case, Chief
Constable of the North Wales Police v. Evans
[(1982) 3 All ER 141] the courts can certainly
examine whether “decision-making process” was
reasonable, rational, not arbitrary and violative of
Article 14 of the Constitution.”
24. In Tata Cellular vs. Union of India 3, this Court had
laid down certain priniciples for the judicial review of
administrative action.
“94. The principles deducible from the above are:
(1) The modern trend points to judicial restraint in
administrative action.
(2) The court does not sit as a court of appeal but
merely reviews the manner in which the decision
was made.
(3) The court does not have the expertise to correct
the administrative decision. If a review of the
administrative decision is permitted it will be
substituting its own decision, without the necessary
expertise which itself may be fallible.
(4) The terms of the invitation to tender cannot be
open to judicial scrutiny because the invitation to
tender is in the realm of contract. Normally speaking,
the decision to accept the tender or award the
contract is reached by process of negotiations
through several tiers. More often than not, such
decisions are made qualitatively by experts.
(5) The Government must have freedom of contract.
In other words, a fair play in the joints is a necessary
concomitant for an administrative body functioning in
an administrative sphere or quasi-administrative
sphere. However, the decision must not only be
tested by the application of Wednesbury principle of
3 (1994) 6 SCC 651
22
reasonableness (including its other facts pointed out
above) but must be free from arbitrariness not
affected by bias or actuated by mala fides.
(6) Quashing decisions may impose heavy
administrative burden on the administration and lead
to increased and unbudgeted expenditure. Based on
these principles we will examine the facts of this
case since they commend to us as the correct
principles.”
25. It has also been held in ABL International Limited
and Another vs. Export Credit Guarantee Corporation
of India Limited and Others4, as under: –
“53. From the above, it is clear that when an
instrumentality of the State acts contrary to public
good and public interest, unfairly, unjustly and
unreasonably, in its contractual, constitutional or
statutory obligations, it really acts contrary to the
constitutional guarantee found in Article 14 of the
Constitution.”
26. In Jagdish Mandal vs. State of Orissa and Others 5,
this Court after discussing number of judgments laid
down two tests to determine the extent of judicial
interference in tender matters. They are: –
“22. (i) Whether the process adopted or decision
made by the authority is mala fide or intended to
favour someone; or Whether the process adopted or
decision made is so arbitrary and irrational that the
court can say: “the decision is such that no
responsible authority acting reasonably and in
accordance with relevant law could have reached;”
(ii) Whether public interest is affected. If the answers
are in the negative, there should be no interference
under Article 226. Cases involving blacklisting or
imposition of penal consequences on a
tenderer/contractor or distribution of State largesse
(allotment of sites/shops, grant of licences,
dealerships and franchises) stand on a different
footing as they may require a higher degree of
fairness in action.”
4 (2004) 3 SCC 553
5 (2007) 14 SCC 517
23
27. In Mihan India Ltd. vs. GMR Airports Ltd. and
Others6, while observing that the government contracts
granted by the government bodies must uphold fairness,
equality and rule of law while dealing with the contractual
matters, it was observed in Para 50 as under: –
“50. 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.”
28. It was sought to be submitted by the learned
Counsels for the Respondents relying upon the
observations made in Central Coalfields Limited and
Another vs. SLL-SML (Joint Venture Consortium) and
Others7, that whether a term of NIT is essential or not is
a decision taken by the employer which should be
respected. However, in the said judgment also it is
observed that if the employer has exercised the inherent
authority to deviate from the essential term, such
deviation has to be made applicable to all the bidders and
potential bidders. It was observed in Para 47 and 48 as
under:-
“47. The result of this discussion is that the issue of
the acceptance or rejection of a bid or a bidder
should be looked at not only from the point of view of
the unsuccessful party but alsofrom the point of view
of the employer. As held in Ramana Dayaram Shetty
[Ramana Dayaram Shetty v. International Airport
Authority of India, (1979) 3 SCC 489] the terms of
NIT cannot be ignored as being redundant or
superfluous. They must be given a meaning and the6 (2022) SCC OnLine SC 574
7 (2016) 8 SCC 622
24necessary significance. As pointed out in Tata
Cellular [Tata Cellular v. Union of India, (1994) 6
SCC 651] there must be judicial restraint in
interfering with administrative action. Ordinarily, the
soundness of the decision taken by the employer
ought not to be questioned but the decision-making
process can certainly be subject to judicial review.
The soundness of the decision may be questioned if
it is irrational or mala fide or intended to favour
someone or a decision “that no responsible authority
acting reasonably and in accordance with relevant
law could have reached” as held in Jagdish Mandal
[Jagdish Mandal v. State of Orissa, (2007) 14 SCC
517] followed in Michigan Rubber [Michigan Rubber
(India) Ltd. v. State of Karnataka, (2012) 8 SCC
216].
48. Therefore, whether a term of NIT is essential or
not is a decision taken by the employer which should
be respected. Even if the term is essential, the
employer has the inherent authority to deviate from it
provided the deviation is made applicable to all
bidders and potential bidders as held in Ramana
Dayaram Shetty [Ramana Dayaram Shetty
v.International Airport Authority of India, (1979) 3
SCC 489] . However, if the term is held by the
employer to be ancillary or subsidiary, even
thatdecision should be respected. The lawfulness of
that decision can be questioned on very limited
grounds, as mentioned in the various decisions
discussed above, but the soundness of the decision
cannot be questioned, otherwise this Court would be
taking over the function of the tender issuing
authority, which it cannot.”
30. In the present case, the respondents have acted strictly in terms
of Clause 6.1 of the contract, which empowers the employer to
take action including forfeiture of Performance Security Deposit
where the contractor, without reasonable cause or valid reason,
fails to commence execution of work. The petitioner was issued
25
notice, was granted opportunity to explain its position and
submitted its replies and representations. Thus, the contention
regarding violation of principles of natural justice cannot be
accepted.
31. The reliance placed by the petitioner on the Force Majeure Office
Memorandum dated 29.04.2026 issued by the Ministry of Finance
also does not assist the petitioner at this stage. Even assuming
that the said memorandum was applicable, the benefit thereunder
was subject to fulfilment of the conditions prescribed therein. The
respondents have disputed the applicability of the said
memorandum on the ground that the petitioner had already
committed default in commencement of work. The determination
of whether the petitioner fulfilled the conditions of the Force
Majeure memorandum involves examination of contractual facts
and disputed questions, which cannot be adjudicated in exercise
of writ jurisdiction.
32. It is also relevant to note that the petitioner has not placed on
record the copy of agreement executed between the parties. The
respondents have specifically pointed out that Clause 13.3 of the
agreement provides for settlement of disputes between the
contractor and SECL through the agreed contractual mechanism.
The petitioner, having entered into the contract with full knowledge
of the terms and conditions, cannot be permitted to bypass the
agreed dispute resolution mechanism and invoke the
extraordinary jurisdiction of this Court for adjudication of disputed
26
contractual claims.
33. The Hon’ble Supreme Court in State of U.P. v. Bridge & Roof
Co. (India) Ltd., (1996) 6 SCC 22, has held that where disputes
arise out of contractual obligations and require interpretation of
contractual terms, the appropriate remedy is through the
mechanism provided under the contract and not by invoking writ
jurisdiction under Article 226 of the Constitution.
34. Further, in Joshi Technologies International Inc. v. Union of
India, (2015) 7 SCC 728, the Hon’ble Supreme Court reiterated
that although writ jurisdiction may be exercised in contractual
matters involving State authorities, such jurisdiction is
discretionary and should not ordinarily be exercised where the
dispute involves disputed questions of fact or enforcement of
contractual rights.
35. In the present case, the controversy essentially relates to whether
the petitioner had sufficient justification for non-commencement of
work, whether the Force Majeure clause was attracted, whether
the petitioner had mobilized sufficient resources and whether
forfeiture of Performance Security Deposit was justified under the
contract. These issues require appreciation of contractual
obligations and factual determination, which are beyond the scope
of judicial review under Article 226 of the Constitution.
36. The Court also finds that the petitioner cannot claim an absolute
right to continue with the contract merely on the ground that it had
27
furnished the Performance Security Deposit or had subsequently
taken certain steps towards mobilization. The respondents, being
a public sector undertaking, are equally obligated to ensure timely
execution of public projects and cannot be compelled to continue
with a contractor who has failed to commence the work within the
stipulated period despite repeated opportunities.
37. In view of the aforesaid discussion, this Court is of the considered
opinion that the action taken by the respondents does not suffer
from arbitrariness, irrationality, mala fide or violation of any
statutory provision. The impugned order has been passed in
exercise of contractual powers after granting sufficient opportunity
to the petitioner. No ground is made out warranting interference
under Article 226 of the Constitution of India.
38. Accordingly, the writ petition being devoid of merit is hereby
dismissed. However, dismissal of the present writ petition shall
not preclude the petitioner from availing any remedy available to it
under the dispute resolution mechanism contained in the
agreement or in accordance with law. There shall be no order as
to costs.
Sd/- Sd/-
(Ravindra Kumar Agrawal) (Ramesh Sinha)
Judge Chief Justice
Chandra
