The State and its instrumentalities do not have the absolute right to cancel a contract without following the principles of natural justice and providing reasonable grounds for such cancellation.

1. THESE appeals have been filed for setting aside judgments of a learned Judge allowing two writ applications filed on behalf of the two petitioners (hereinafter referred to as "the petitioners".

2. THE writ applications had been filed making a grievance that the Marine Engineer, Marine Organisation, Farakka Barrage project, after having accepted the highest tenders offered by the petitioners for the sale of the two Floating Derrick cranes, cancelled the said acceptance without assigning any reason. An advertisement was published by the Marine Engineer in different newspapers on 24.9.88 inviting tenders from the Seraf Dealer/re roller/contract ors for the sale of the marine crafts which included two Floating Derrick Cranes lying on the up-stream Marine site office, Farakka. Pursuant to the said advertisement the two petitioners, viz., Shri shiddeswar Haider and Paramananda Chowdhury submitted their tenders in respect of the two Derrick Cranes, It is an admitted position that the tenders submitted on behalf of the petitioners were the highest. In due, course they ware forwarded to the Superintending Engineer' by the Marine Engineer for approval. The Superintending Engineer Circle No. V, Farakka Barrage Project, Government of India, Ministry of Water resources, by a communication dated 20. 9. 88 accorded the approval as follows :

"to the Marine Engineer, marine Organisation, farakka Barrage Project.

Sub : Auction sale of Marine Crafts

Ref : Your letter No. ME/ DB- Auction/ 1744 (We) dated 19. 9. 88.

Approval is hereby accorded for acceptance to the highest bid amounting to Rs. 2,45,000/- (Rupees two lakhs and forty five thousand) only against the item NO. 2 only i. e. 30/10 Ton Derrick Crane to the following Agencies on the terms and conditions as stipulated in the N. I. T. and Tender documents.

1) Sri Siddeshwar alder. Rs. 1,22,500/- for Rajhansi- I new Farakka.

2) Sri Paramananda Chowdhury, Rs. 1,22,500/- for Rajhansi-II.

3. THE Marine Engineer by letters dated 30-9-88 addressed to the petitioners accepted their highest bid, saying that the highest bid was being accepted by him on behalf of the president of India on the terms and conditions stipulated in the notice inviting tenders and the related tender documents. After having accepted the highest bid of the petitioners, the Marine Engineer cancelled the acceptance letters on 17. 10. 1988 without assigning any reason.

4. IN the affidavits- in- opposition filed on behalf of the Marine Engineer, General Manager and other officers of the Farakka Barrage Project, it was stated that the two Floating Derrick Cranes had been declared surplus by the Tenth Disposal Committee in the year 1983. Thereafter a decision was taken to invite tenders for sale thereof. It was also stated that the reserve price for those two Cranes was fixed it 10% of the book value consideration, which consideration had been accepted by the then General Manager, Farakka Barrage project by his communication dated 18-7-88. It has been admitted by the respondents that the two petitioners had made the highest offer of Rs. 1,22,500/- each for the two Cranes and the then Marine Engineer had recommended for acceptance of their highest bid which was accepted by the Superintending engineer on 20-9-88. The acceptance of the tenders submitted by the petitioners ware communicated by the Marine Engineer by letters dated 30-9-88. It has been stated that on 6-10-88 the two petitioners ware asked not to deposit the amount in question and ultimately both the acceptance letters ware cancelled by the then Marine Engineer on 17-10-88 as per instructions of the present General Manager, Farakka Barrage Project. It may be mentioned that neither in the communications nor in the affidavits-in-reply any specific reason was mentioned for cancellation of the acceptance of the tenders submitted on behalf of the two petitioners in respect of the two Cranes.

5. A learned Judge of this Court after referring to the pleadings of the parti