The Aryavarth Express
Agency (New Delhi): Contracts awarded to private parties should not be canceled without giving reasons, the Supreme Court ruled on Wednesday, as it reserved judgment on an appeal against a Calcutta High Court order. A bench comprising Chief Justice D Y Chandrachud and Justices JB Pardiwala and Manoj Misra highlighted that private parties, who invest after securing a contract, have a reasonable expectation of returns.
Chief Justice Chandrachud questioned, “How can a contract be terminated without assigning any reason? A private person invests in pursuance of an award of contract.” Referring to the case specifics, he noted that no reason was provided for the contract’s cancellation.
A division bench of the Calcutta High Court had, on May 25, 2023, upheld a single judge bench’s verdict approving the cancellation of a contract awarded to Subodh Kumar Singh Rathour’s firm. The firm had secured a contract to maintain two underpasses on the Eastern Metropolitan Bypass in Kolkata for 10 years, allowing them to place advertisements inside and above the underpasses, which required some construction work.
However, the Kolkata Metropolitan Development Authority (KMDA) terminated the contract on February 7, 2023. The KMDA stated it would refund the license fee deposited by Rathour and the costs he incurred for construction, maintenance, etc.
Senior advocate Rakesh Dwivedi, representing the KMDA, informed the Supreme Court that a new contract had been awarded to another party and that Rathour could be compensated. On the other hand, senior advocate Shyam Divan, representing Rathour, argued that while he did not want to disrupt maintenance activities at the underpasses, the communication canceling the contract needed to be set aside.
“We will close it for judgment,” stated Chief Justice Chandrachud.
