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2025 Supreme(Del) 97
IN THE HIGH COURT OF DELHI AT NEW DELHI
MINI PUSHKARNA, J.
Sankalp Recreation Pvt. Ltd. - Petitioner
versus
Indian Railway Catering And Tourism Corporation Ltd. - Respondent
W.P. (C) 3975 of 2025, CM APPL. 18485 of 2025 & CM APPL. 18486 of 2025
Decided on : 28-03-2025
For the Appellant :Mr. Chetan Lokur with Mr. Nitish Chaudhary, Mr. Vaibhav Kaul, Advocates
For the Respondent:Mr. Saurav Agrawal, Mr. Anshuman Chowdhury, Ms. Prachi Dubey, Advocates
The court ruled that termination of a contract without a remedial notice is arbitrary and violates contractual obligations, emphasizing the need for adherence to policy and due process.
Headnote:(A) Contract Law - Termination of Contract - The petitioner sought to quash the termination letter dated 14th February, 2025, and the rejection of their appeal on 12th March, 2025, regarding catering services on trains. The petitioner was awarded the tender on 18th July, 2024, requiring establishment of base kitchens. (Paras 3-4)
(B) Contractual Obligations - The petitioner argued that no remedial notice was issued before termination, violating Clause 8.2 of the contract. The court noted that the respondent's actions were arbitrary and capricious, failing to follow their own policy. (Paras 13-14)
(C) Prima Facie Case - The court found that the petitioner established a prima facie case in their favor, with the balance of convenience lying against the respondent. (Paras 19-20)
Facts of the case:
The petitioner was awarded a tender for catering services, required to establish kitchens, but faced termination without proper notice.
Findings of Court:
The court stayed the termination letter and order, directing inspection of the kitchens.
Issues: Whether the termination was valid without a remedial notice and if the respondent followed their own policy.
Ratio Decidendi: The court emphasized the necessity of following contractual obligations and the arbitrary nature of the termination.
Result: The impugned letter and order are stayed.
ORDER :
CM APPL. 18485/2025 (For Exemption)
1. Exemption allowed, subject to all just exceptions.
2. Application is disposed of.
W.P. (C) 3975/2025 & CM APPL. 18486/2025
3. The present petition has been filed seeking quashing and setting-aside of Termination Letter dated 14th February, 2025, and order dated 12th March, 2025, whereby, representation/appeal of the petitioner was rejected, in re: providing catering services onboard trains in Cluster No. SR/CLT/B-26.
4. It is submitted that respondent awarded the above tender to the petitioner vide Letter of Award dated 18th July, 2024, whereby, the petitioner was allowed to provide catering service on 5 trains and in respect of which, it was required to establish 13 base kitchens in total, with only 7 kitchens to be deliverable in the year 2024, and the balance deliverable in the year 2026.
5. Learned counsel appearing for the petitioner has drawn the attention of this Court to the E-tender, on the basis of which, the Letter of Award was issued in favour of the petitioner. The scope of work for kitchen design, as given in the E-tender is reproduced as under:
“xxx xxx xxx
xxx xxx xxx”
6. It is submitted that as per the Letter of Award, it was stated that the Letter of Award consists of two parts, i.e., part (A), which included commissioning of base kitchens at all prenotified locations of the cluster and part (B) stipulated commencement of services in the notified trains of the cluster. Initially, the contract contemplated establishment of base kitchens within a period of three months from acceptance of Letter of Award extendable by one month. For the said cluster, the base kitchens would have to be commissioned by 5th November, 2024, further extendable up to 5th December, 2024.
7. It is submitted that the petitioner commenced the process of identifying the location of the base kitchen in August, 2024, and requested for inspection. Further, through subsequent letter 10th October, 2024, the petitioner requested the respondent to make a change in the pre-determined location. Unfortunately, the above request was not allowed.
8. It is further submitted that since the respondent had issued several licenses, and in all, 900 kitchens were to be established, the respondent itself found it to be a “Herculean task” to approve so many kitchens in one go. Therefore, the respondent came out with a policy decision vide letter dated 05th August, 2024, wherein, it was stated that the competent authority has decided that such base kitchens which are ready as per expected standards, to the satisfaction of the respondent, the respondent would be commissioning the trains by issuance of Letter of Commencement (“LOC”). The said letter dated 05th August, 2024, is reproduced as under:
9. Further, the respondent issued a Show Cause Notice dated 17th December, 2024, and subsequently, terminated the Letter of Award dated 18th July, 2024. The petitioner preferred representation/appeal against the termination, however, the same was also rejected vide order dated 12th March, 2025.
10. Learned counsel for the petitioner submits that the petitioner had invested a large amount of money for setting up the kitchen.
11. Attention of this Court has been drawn to Clause 7 and 8 of the contract document, Clause 7 of the said contract document, is reproduced as under:
12. This Court notes that with regard to consequence of default, Clause 8 of the contract stipulates as under:
13. Referring to the aforesaid clauses, learned counsel for the petitioner submits that no remedial notice for the purposes of remedying the breach was given to the petitioner in terms of Clause 8.2. He submits that Show Cause Notice dated 17th December, 2024, was issued straightaway for cancellation, without calling upon the petitioner to remedy the breach, as envisaged in the contract between the parties.
14. Thus, it is submitted that the letter of termination dated 13th February, 2025, as issued by the respondent is bad in law and arbitrary. It is further submi
