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IN THE HIGH COURT OF ORISSA
R.K. Pattanaik, J.
M/s. Choudhury Medical Store - Appellant
Versus
Union of India & Ors. - Respondents
W.P. (C) No.35991 of 2023
Decided On : 19-06-2024
CONTRACT - Eviction and Renewal of Contract - Articles 14, 19(1)(g), 21 of the Constitution of India; OPP (Eviction of Unauthorized Occupants) Act - The court emphasized the necessity of adhering to principles of natural justice in contractual matters, particularly the requirement for authorities to provide reasons for non-renewal of contracts. It highlighted that discretion exercised by state instrumentalities must be guided by fairness and justice, and that arbitrary actions can be challenged under Article 14. The court found that the authority failed to provide adequate reasoning for the non-renewal of the contract, leading to a quashing of the eviction orders and a directive for reconsideration of the renewal plea.
Fact of the Case:
The petitioner, a registered proprietorship firm, was awarded a contract to run a 24X7 medicine shop at AIIMS, Bhubaneswar, which included a renewal clause. After a series of legal challenges and complaints against the petitioner, the authority issued eviction notices without providing reasons for the non-renewal of the contract, prompting the petitioner to file a writ petition for quashing these orders.
Finding of the Court:
The court found that the authority did not exercise its discretion properly regarding the renewal of the contract and failed to provide reasons for its decision. It emphasized the need for fairness and adherence to principles of natural justice, concluding that the eviction orders were arbitrary and lacked justification.
Issues: Whether the writ petition is maintainable in contractual matters involving state instrumentalities; whether the authority was required to provide reasons for the non-renewal of the contract; whether the actions of the authority were arbitrary and violated principles of natural justice.
Ratio Decidendi: The court held that in matters involving state instrumentalities, the exercise of discretion must be fair and just, and any decision affecting a party's rights must be accompanied by reasons. The absence of reasons for non-renewal constituted a violation of the principles of natural justice and warranted judicial intervention.
Final Decision: The court quashed the eviction orders dated 21st September, 2023, and 1st November, 2023, and directed the authority to reconsider the renewal of the contract, maintaining the status quo until a final decision is made.
To strengthen the case for M/s. Choudhury Medical Store and increase the likelihood of winning, the following legal strategies should be pursued:
Demonstrate Arbitrariness and Lack of Reasons: Argue that the authority's decision not to renew the contract was made without providing any reasons, violating the principles of natural justice and the requirement for a fair and transparent decision-making process (!) (!) .
Establish the Existence of a Contract with a Renewal Clause: Emphasize that the contract explicitly contained a renewal clause subject to satisfactory performance, which creates a legitimate expectation of renewal that the authority was obliged to consider fairly (!) (!) .
Prove Satisfactory Performance: Present evidence showing consistent satisfactory performance and compliance with contractual obligations, thereby challenging any claims of unsatisfactory conduct or misconduct used as grounds for non-renewal (!) (!) .
Argue for Fair Exercise of Discretion: Highlight that the authority's discretion to refuse renewal must be exercised judiciously, based on relevant facts and reasons, and not arbitrarily or capriciously. Demonstrate that the authority failed to exercise or disclose proper reasons for its decision (!) (!) (!) .
Assert the Violation of Principles of Natural Justice: Assert that the petitioner was not given an adequate opportunity to respond or be heard before the decision not to renew was taken, which is a fundamental requirement of fairness and natural justice (!) (!) .
Emphasize the Contractual and Constitutional Rights: Stress that the non-renewal and eviction actions contravene constitutional rights such as Articles 19(1)(g) and 21, which protect the right to carry on a lawful trade and livelihood, especially when the petitioner has a legitimate expectation based on the contractual terms (!) (!) .
Highlight the Public Interest and State Instrumentality: Argue that the authority, being an instrumentality of the State, has a duty to act fairly and transparently, and its actions should be subject to judicial review to prevent abuse of power or arbitrariness (!) (!) .
Seek Relief for Reconsideration: Request the court to direct the authority to reconsider the renewal application in a fair manner, considering all relevant facts, including the petitioner’s performance and the contractual rights, with a clear statement of reasons for any decision made (!) .
By systematically establishing that the authority acted arbitrarily, failed to provide reasons, and did not adhere to principles of natural justice and fairness, the petitioner can significantly improve their chances of success in the case.
JUDGMENT
R.K. Pattanaik, J.
Instant writ petition is filed by the petitioner for quashment of the eviction orders dated 21st September, 2023 and 1st November, 2023 passed by opposite party No. 4 under Annexures-8 & 10 respectively with a direction to opposite party No. 2 to allow him to run 24X7 medicine shop inside the campus of AIIMS after renewal of the contract dated 1st November, 2021 on the grounds stated.
2. The petitioner is a registered proprietorship firm involved in selling of medicines and other products from a store at AIIMS, Bhubaneswar, which was allowed for a period of two years. According to the petitioner, opposite party No.3 invited tender on 28th October, 2020 for opening and running of 24X7 pharmacy/chemist shop within the campus of AIIMS and pursuant to the said tender call notice, the petitioner participated in the bidding process and finally, the Technical Evaluation Committee found it to be qualified, a decision stood was approved by the competent authority. It is further pleaded that opposite party No.2 thereafter issued a notice on 8th February, 2021 for opening of the financial bid with the date and time fixed and the process included scrutiny of all the documents upon submission of the documents in pursuance of the request received by letter dated 11th January 2021, whereafter, the petitioner was declared as L-1 bidder. It is stated that against the bid of the petitioner, the other bidders approached this Court in W.P.(C) No. 9899 of 2021 and the same was disposed of on 31st March, 2021 and then, RVWPET No.89 of 2021 was filed, which was dismissed on 5th July, 2021. It is pleaded that after validity of the tender process was upheld in favour of the petitioner, opposite party No. 3 issued the work order dated 3rd May, 2021 in its favour with an agreement executed on 1st November, 2020. It is claimed that the petitioner availed a loan from the Bank sanctioned in the year 2022 in connection with the shop but in the meanwhile, received a termination notice dated 2nd December, 2022 (Annexure-3) with an intimation that such termination of contract is with immediate effect carrying a direction to vacate the premises and being aggrieved, W.P.(C) No. 34167 of 2022 was filed, which was disposed of by order dated 15th December, 2022 (Annexure-4). It is alleged that without complying the directions issued by this Court under Annexure-4, opposite party No.4 passed the order dated 21st March, 2023 (Annexure-5) thereby terminating the contract of the petitioner to run the shop inside AIIMS campus and was communicated via e-mail on 24th March, 2023 to vacate the hospital premises within five days from the date of receipt of such intimation. It is further alleged that the orders of termination of contract and vacation of the premises by the decision of opposite party No.4 is without following due process of law, inasmuch as, the petitioner was not provided any opportunity of hearing and furthermore, there has been non-compliance of the Court's order dated 15th December, 2022. According to the petitioner, being aggrieved of the issuance of the termination order dated 21st March, 2023 followed by a notice to vacate the premises of the hospital, W.P.(C) No. 9406 of 2023 was filed and thereafter, CONTC No. 2013 of 2023, later to which, opposite party No.4 withdrew the show cause issued to them so also termination and eviction orders and tendered unconditional apology, whereafter, the contempt proceeding was dropped by an order under Annexure-7 series and when the shop was once again made operational, letter of closure of contract and eviction dated 21st September, 2023 (Annexure-8) was received without assigning any reason for renewal of the same and on receipt of such letter, representation was submitted with a plea that previous vendor was granted several extensions and was allowed to run the shop for almost six years and hence, in view of such renewal clause, there has been a legitimate expectation for grant of renewal
The court established that state authorities must provide clear reasons for decisions affecting contractual rights, and that arbitrary actions can be challenged under the principles of natural justic....
A terminated contract cannot be revived by administrative order, and the principles of transparency and fairness must be upheld in public procurement processes.
Public authorities must act fairly and cannot arbitrarily terminate contracts without justification, reinforcing the legitimacy of expectations within public-private partnerships.
A terminated contract cannot be revived by administrative order, and any such action must adhere to principles of transparency and fairness as mandated by public procurement laws.
The State must act fairly and cannot terminate contracts arbitrarily without providing reasons, even in contractual matters.
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