Court quashes illegal contract termination, emphasizes natural justice principles

The court held that it had territorial jurisdiction based on the cause of action partly arising within its jurisdiction. It found the termination of the contract and issuance of a global tender notice to be illegal and procedurally improper, as the respondents acted arbitrarily without following principles of natural justice. The court emphasized that legitimate expectation does not create enforceable rights in contractual matters. The court quashed the impugned orders and directed the respondents to reconsider the matter after providing the petitioner with a hearing, without awarding costs.

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Issues Involved:

1. Territorial jurisdiction of the court.
2. Legality, rationality, and procedural propriety of the order terminating the alleged contract and issuing a global tender notice.
3. Legitimate expectation of the petitioner to be awarded the contract.

Issue-Wise Detailed Analysis:

1. Territorial Jurisdiction:

The court considered whether it had territorial jurisdiction to entertain the writ application. The relevant clause under Article 226(2) of the Constitution of India was examined, stating that the High Court can issue directions if the cause of action, wholly or in part, arises within its jurisdiction. The court noted that the contract was concluded at Delhi, but the communication of revocation to the petitioner's Calcutta address constituted part of the cause of action. It was determined that the petitioner's receipt of the revocation notice and the resultant pecuniary losses at Calcutta gave the court territorial jurisdiction. The court emphasized that the jurisdictional clause in the general conditions of the contract, which conferred jurisdiction to Bombay courts, could not override the constitutional provision under Article 226(2).

2. Legality, Rationality, and Procedural Propriety:

The court examined whether the order terminating the contract and issuing the global tender notice was illegal, irrational, or procedurally improper. It was established that a concluded contract existed between the parties, as evidenced by the fax of acceptance and subsequent correspondences. The court found that the respondents acted arbitrarily by terminating the contract without complying with the principles of natural justice. The court referred to various precedents, emphasizing that public bodies must act fairly and reasonably, and their actions are subject to judicial review if they exhibit arbitrariness or procedural impropriety. The court concluded that the respondents' failure to provide an opportunity for the petitioner to be heard before terminating the contract violated the principles of natural justice.

3. Legitimate Expectation:

The court considered whether the petitioner had a legitimate expectation to be awarded the contract. It was noted that the doctrine of legitimate expectation is rooted in fairness and requires reliance on representations and resulting detriment to the claimant. However, the court highlighted that legitimate expectation does not confer a right but checks arbitrariness on the part of the state. The court referred to various decisions, including those of the Supreme Court, which held that no enforceable right is created by legitimate expectation. The court concluded that in the contractual field, once a contract is concluded, any expectation comes to an end, and the parties are bound by the terms of the contract. The court emphasized that legitimate expectation does not apply to the enforcement of contractual conditions.

Conclusion:

The court allowed the writ application to the extent that the impugned orders dated 8-10-1995 and 10-10-1995 were quashed. A writ of mandamus was issued accordingly, directing the respondents to pass an appropriate order after giving an opportunity of being heard to the petitioner. The court did not award any costs in the facts and circumstances of the case.

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