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IN THE HIGH COURT AT CALCUTTA
T.K. Basu, J.
Central Group & Ors.
vs.
Calcutta Metropolitan Development Authority & Ors.
CONSTITUTIONAL WRIT JURISDICTION Matter No. 675 of 1981
Decided On : June 8, 1982
The State's arbitrary action in canceling a letter of intent issued to a firm for a pilot study-cum-work project on Calcutta sewers was challenged. The Court held that the State cannot act arbitrarily, even when it is acting entirely in terms of a contract. The Court accepted the submission that an arbitrary act on behalf of the State even in the contractual field is liable to be struck down. The Court also held that the doctrine of promissory estoppel can be invoked against the State and that the plea of "executive necessity" is of no avail to the State when it has made a representation and a person acting on that representation puts himself in a disadvantageous position.
Fact of the Case:
The petitioner, a firm of consulting engineers, was issued a letter of intent by the Calcutta Metropolitan Development Authority (CMDA) for a pilot study-cum-work project on Calcutta sewers. The petitioner spent a large sum of money and employed a considerable number of technical personnel in reliance on the letter of intent. However, the CMDA later issued a notice canceling the letter of intent without assigning any reason.
Finding of the Court:
The Court held that the CMDA's action in canceling the letter of intent was arbitrary and illegal. The Court found that the CMDA had not provided any reason for the cancellation and that the petitioner had not been given an opportunity to be heard. The Court also found that the CMDA had not followed its own procedures for canceling a letter of intent.
Issues: 1. Whether the CMDA's action in canceling the letter of intent was arbitrary and illegal? 2. Whether the petitioner was entitled to rely on the doctrine of promissory estoppel?
Ratio Decidendi: 1. The Court held that the CMDA's action in canceling the letter of intent was arbitrary and illegal because: * The CMDA did not provide any reason for the cancellation. * The petitioner was not given an opportunity to be heard. * The CMDA did not follow its own procedures for canceling a letter of intent. 2. The Court held that the petitioner was entitled to rely on the doctrine of promissory estoppel because: * The CMDA made a clear and unequivocal promise to the petitioner that it would be awarded the contract. * The petitioner acted in reliance on the promise by spending a large sum of money and employing a considerable number of technical personnel. * It would be inequitable to allow the CMDA to go back on its promise.
Final Decision: The Court allowed the petition and quashed the CMDA's notice canceling the letter of intent. The Court also directed the CMDA to pay the petitioner the costs of the litigation.
The facts of the present application may be briefly noted.
1. The petitioner nos. 2 and 3 who are citizens of India are partners of the petitioner no. 1. The partnership business of the petitioner no. 1 was commenced with effect from the 1st December, 1979 although the Deed of Partnership by and between the petitioner nos. 2 and 3 in respect of the petitioner no. 1 was executed on the 17th March, 1980.
2. Prior to the formation of the petitioner no. 1 the petitioner no. 2 along with two others had formed a partnership firm under the name and style of "Central Engineering Syndicate" (hereinafter referred to as the CES). The firm CES had, inter alia, undertaken and, successfully executed the following projects. :-
(a) Teesta Bridge Project
(b) Bokaro Water Treatment Plant.
(c) Bokaro Central Plant.
(d) Garden Reach Water Treatment Plant.
According to the petition, the last mentioned work is still in progress and is about to be completed.
3. The petitioner no. 2 is the Managing Director of another sister concern of CES known as "Central Concrete and Allied Products Private Limited" (hereinafter referred to as the CCAP). The petitioner no. 2 was the Managing Director of the Company upto 30th September, 1980 and thereafter continues to be a Director. The Company CCAP has undertaken and completed the following projects :-
(1) Underground Reservoir at Auckland Square, Calcutta
(2) New Buckland Bridge Roads System.
The following projects have been partially completed by CCAP and works are still continuing :-
(1) Sealdah Fly Over Project.
(2) Sections 15(B), 15C, 16A Part II and 17B of the Metropolitan Railway project.
(3) A Fly over at Delhi.
4. On the 4th September, 1979 an advertisement was issued by the Calcutta Metropolitan Development Authority respondent no. 1 which was published under the caption "Enlistment of Contractors" in the Statesman, Calcutta Edition. The advertisement which is material for our purpose, may be set out hereinbelow:-
"The Calcutta Metropolitan Development Authority intends to take up large scale rehabilitation works of the sewrage and drainage system in the City of Calcutta. For the purpose of drawing up the total programe the CMDA will like to have a proto-type work-cum-study project for a selected area of Calcutta which will consist of cleansings the sewers, inspecting the conditions of the sewers and taking measures of rehabilitation of the same.
The CMDA intends to select a construction organisation who have large seale experience in execution of underground projects in the complex urban setup of Calcutta.
Those who are interested in participating in the above work-cum-study project are hereby requested to kindly furnish details of their experience in similar projects or at least in those projects where they have been involved in dealing with underground utilities.
The work may require inducting foreign expertise in the form of specialist sewerage renovation contractors and professionals, particularly experienced in such works. The name and particulars of foreign associates/collaborators, if any, may also be indicated, stating the details of their experience and nature of working arrangements with them.
The CMDA wants to utilise the current working season for launching this project and as such all particulars have to be delivered on or before 17th December, 1979 to Shri S.K. Sen Additional Director of Planning, 3A, Auckland Place (5th Floor), Calcutta 17.”
5. On the same day i.e. 4th December, 1979 Central Group under the signature of the petitioner No. 2 sent an offer to undertake the work; mentioned in the above advertisement. The offer which is Annexure “B” to the petition is important for our purpose and is set out below in full.
CENTRAL GROUP
Management Consultants : Project Engineers
Shantiniketan
3, Camac Street,
Calcutta – 1000017
INDIA Telephone 43-1554, 43-426
Telex: CENTIN 21 2331
Cable-CENTPILES CALCUTTA.
Date Dec. 4, 1979 Our Reference CG/SKB/SD/3167.
Your Reference:
To
Shri S.K. Sen
Additional Director of Plan
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