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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

NAGPUR BENCH, NAGPUR

WRIT PETITION NO.7060 OF 2022

B. S. Ispat Limited, A company incorporated

under the Companies Act, 1956 having its

registered office and principal place of

business at Khasra No.97, 101, 190,

Village-Salori Yensa, Post-Chinora,

Tq. Warora, Dist. Chandrapur through its

authorized person Mr. Sagar S/o Ramchandra

Kasangottuwar, aged about 40 years,

Vice President (Finance & Accounts),

R/o Plot No. 125, Flat No. 301,

Telecom Nagar, Nagpur. .......PETITIONER

...V E R S U S...

1.The Union of India, through its Secretary,

Ministry of Coal, Government of India,

New Delhi.

2.The Nominated Authority,

Office of Ministry of Coal,

Government of India,

New Delhi. .......RESPONDENTS

-------------------------------------------------------------------------------------------

Mr. M. G. Bhangde, Senior Counsel with Mr. R. M. Bhangde,

Counsel for Petitioner.

Mr. Nandesh Deshpande, Deputy Solicitor General of India

for Respondents 1 & 2.

-------------------------------------------------------------------------------------------

CORAM:ROHIT B. DEO AND Y. G. KHOBRAGADE, JJ.

DATE: 10

th

FEBRUARY, 2023.

ORAL JUDGMENT: (PER ROHIT B. DEO, J.)

The petitioner is a public limited company ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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incorporated under the provisions of the Companies Act, 1956.

2. The petitioner emerged as the successful bidder in the

tender process under the provisions of the Coal Mines (Special

Provisions) Act, 2015 and the Coal Mines (Special Provisions)

Rules, 2014. Coal Mine Development and Production Agreement

(CMDPA) dated 17.08.2022 was executed between the petitioner

and respondent 2 – the nominated authority. The challenge in the

petition is to the termination of the CMDPA vide letter dated

02.11.2022 issued by respondent 2.

3. Facts lie in narrow compass and are broadly

undisputed.

4. In accordance with the terms and conditions of the

CMDPA the petitioner furnished bank guarantee (BG) dated

13.12.2021 issued by Axis Bank Ltd., Nagpur in the sum of

Rs.4,32,48,666.00 (Four Crores Thirty Two Lakhs Forty Eight

Thousand Six Hundred Sixty Six only) valid from 13.12.2021 to

14.07.2022, which BG was subsequently amended on 14.06.2022

and 07.09.2022 as to extend the validity from 14.07.2022 to

14.09.2022 and 14.09.2022 to 14.12.2022 respectively. ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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5. In terms of the CMDPA the petitioner paid an amount

of Rs.5,41,93,508.56 (Five Crores Forty One Lakhs Ninety Three

Thousand Five Hundred Eight and Fifty Six Paise only) in the

designated bank account on 21.09.2022, and an amount of

Rs.5,40,60,832.50 (Five Crores Forty Lakhs Sixty Thousand Eight

Hundred Thirty Two and Fifty Paise only)as the first installment of

the upfront charges, on even date.

6. The petitioner was required to submit BG in the sum

of Rs.49,10,12,653.41 (Forty Nine Crores Ten Lakhs Twelve

Thousand Six Hundred Fifty Three and Forty One Paise only) as

performance security within 40 days from the date of execution of

the CMDPA. The petitioner requested extension of one month for

submission of the performance BG, vide letter dated 25.09.2022,

which extension was granted by the respondent 1 vide letter dated

12.10.2022.

7. Due to certain constraints, inter alia festival holidays,

the petitioner found it difficult to submit the performance BG on

or before the extended period which was to end on 25.10.2022,

and the petitioner addressed letter dated 19.10.2022, seeking

further extension of time of 30 days to submit the performance ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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BG, which letter went unheeded.

8. The petitioner contends that out of the blue an e-mail

was received at 10:44 a.m. on 03.11.2022 along with which

attached was the termination letter dated 02.11.2022.

The petitioner was informed that as a consequence of the

termination of the CMDPA, the first installment of upfront amount

and fixed cost deposited by the petitioner and the BG in the sum

of Rs.4,32,48,666.00 (Five Crores Thirty Two Lakhs Forty Eight

Thousand Six Hundred Sixty Six only) stood forfeited.

9. The petitioner addressed representation dated

04.11.2022 inter alia pointing out that the respondent 2

nominated authority did not issue the 15 day notice as mandated

by clause 26.3.2 of the CMDPA and that the request for extension

of time was not addressed, either way.

10. The representation did not evoke any response.

11. In response to the notice issued, affidavit in response

dated 24.11.2022 is filed on behalf of the respondents. ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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12. Respondents do not refute the assertion that the

petitioner did apply for further extension of 30 days to submit the

performance BG, which request was not decided either way.

13. Responding to the contention of the petitioner that

the 15 days notice envisaged under clause 26.3.2 of the CMDPA

was not given, respondents assert that the termination letter dated

02.11.2022 is made effective from the 15

th

business day, which is

sufficient compliance of the said condition. The respondents assert

that since the petitioner was extended the indulgence of extension

of 30 days, the petitioner was not justified in requesting for a

second extension of 30 days to submit the performance BG.

14. Respondents heavily rely on the decision of the

Division Bench of the High Court of Delhi in Writ Petition

7057/2022 and contend that in similar fact situation the challenge

to the termination of the CMDPA is rejected by the High Court,

and the Special Leave Petition (SLP) preferred challenging the

decision of the High Court is rejected in limine.

15. The petitioner has filed an affidavit in rejoinder dated

08.12.2022. Dealing with the averments in affidavit in response in ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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paragraph 18, petitioners contend that the construction of clause

26.3.2 and clause 26.3.3 is patently erroneous. The thrust of the

affidavit in rejoinder is that the words “may elect” clearly indicates

that termination is not the only option available, and that the

authority is obligated to exercise the discretion to elect one of the

two options, which is termination or allowing the extension of

time to comply with the condition, judiciously.

16. The petitioner asserts that there cannot be forfeiture

of the payment made till the 15

th

business days written notice to

terminate the CMDPA is served as envisaged. The petitioner

emphasizes that clause 28.11 of the CMDPA mandates that the

notice of termination shall be delivered by registered post or fax,

and that the petitioner did not receive the notice either by

registered post or fax.

17. The petitioner asserts that even in contractual

matters, the State is obligated to act fairly and that the

termination of the CMDPA whilst the request for extension was

pending and undecided is manifestly arbitrary.

18. In the affidavit in rejoinder the petitioner ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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distinguishes the decision of the High Court of Delhi thus:

i.The petitioner in the case before the Hon’ble

Delhi High Court had not paid the upfront

amount of Rs.2,25,54,400/-.

ii.The petitioner in the case before the Hon’ble

Delhi High Court had not paid the fixed

amount of Rs.2,59,04,776/-.

iia)In the instant case, the petitioner has paid

Upfront Charges of Rs.5,40,60,832.50/- as

well as Fixed Charges of

Rs.5,41,93,508.56/-, both on 21.09.2022

before the due date i.e. 26.09.2022.

iii.In the case before the Hon’ble Delhi High

Court, the time to furnish the Bank

Guarantee towards Performance Security

had expired on 02.12.2021 and the

Termination Letter was issued after five

months (approximately) on 21.4.2022.

In the meantime, the extension of time by

period of two months i.e., upto 01.02.2021

which was applied for was already over. …..

iiia) In the instant case, the time to furnish Bank

Guarantee expired on 25.10.2022 and the

Letter of Termination is issued within a

week on 02.11.2022. Thus, the respondent

no. 2 has practiced discrimination in as

much as the second application of the

petitioner before the Hon’ble Delhi High

Court for grant of extension of time to

furnish Bank Guarantee by two months

stood granted whereas the application of

the petitioner for the same purpose seeking

one month extension was not even

considered and now plea of its implied

rejection is raised.

iv.In the case before the Hon’ble Delhi High ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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Court, Bank Guarantee as Performance

Security was not furnished by the petitioner

even till the matter was heard therein.

However, in the present case, the petitioner

has already furnished Bank Guarantee in

the sum of Rs.49,10,12,654.00/- on

14.11.2022 before the expiry of the 15-

business days written notice.

v.…..

vi.Only one ground was raised before the

Hon’ble Delhi High Court, that it was

necessary to give Show Cause Notice before

the Termination of the CMDPA.

However, the said point is not urged in the

present case. The instant case is based upon

total lack of fairness and reasonableness on

the part of the respondents in issuing the

impugned letter of termination during

pendency of the application of the petitioner

for extension of time.

19. We have heard the learned Senior Counsel Mr. M. G.

Bhangde for the petitioner and the learned Deputy Solicitor

General Mr. Nandesh Deshpande for the respondents.

20. Before we consider the submissions canvassed, we

find it apposite to extract the order dated 14.11.2022, pursuant to

which the petitioner furnished the performance security BG vide

letter dated 14.11.2022.

“Heard Mr. M.G. Bhangde, learned Senior

Advocate. Perused the termination letter. ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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Noted the requirements of clause 26.3.2 of the

agreement in question requiring any of the

parties to give 15 days notice before terminating

the agreement. We have also considered the

submission that the request made on 19.10.2022

seeking extension of time to submit performance

security is still pending with the respondents.

2. Considering the above noted circumstances

of the case, which require consideration by this

Court, we issue notice for final disposal at

admission stage to the respondents and by way

of interim directions, permit the petitioner to

submit the performance security / bank

guarantee to respondent No.2, subject to the

final result of this petition.

3.Mr. Sahil Mate, Advocate h/f Mr. Nandesh

Deshpande, learned Deputy Solicitor General of

India waives notice for respondent Nos.1 and 2.

4.Stand over to 28.11.2022.”

21. Mr. M. G. Bhangde would submit that the CMDPA is

executed in accordance with Rule 13 (5) of the Coal Mines

(Special Provisions) Rules, 2014 (Rules) and partakes the

character of statutory contract. Mr. M. G. Bhangde would further

submit, that even it is assumed arguendo, that CMDPA is not

statutory contract, the State is obligated to act fairly even in

matters of commercial contracts. Mr. M. G. Bhangde would submit

that the termination of the CMDPA is manifestly arbitrary in as

much as (i) the authority issued the termination letter while the ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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request for extension of time to furnish the performance BG was

pending (ii) the authority clearly misconstrued the terms and

conditions of the CMDPA and failed to appreciate that implicit in

the contractual scheme was that the termination was not the only

option available (iii) the termination of the CMDPA falls foul of

the contractually prescribed safeguards. (iv) in any event, the

forfeiture of the fixed amount of Rs.5,41,93,508.00 (Five Crores

Forty One Lakhs Ninety Three Thousand Five Hundred Eight

only), the first installment of the upfront charges of

Rs.5,40,60,832.00 (Five Crores Forty Lakhs Sixty Thousand Eight

Hundred Thirty Two only) and the bank security in the form of BG

in the sum of Rs.4,32,48,666.00 (Four Crores Thirty Two Lakhs

Forty Eight Thousand Six Hundred Sixty Six only) is arbitrary and

otherwise illegal in as much as the respondents did not suffer any

loss or damages nor did the petitioner withdraw its bid or

committed default during the period of the bid validity as

specified in the tender document.

22. Mr. M. G. Bhangde would invite our attention to

certain decisions to buttress the submission that even in

contractual matters the State is obligated to act fairly, and any

other view may be destructive to the maintenance of the rule of ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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law. We shall consider the decisions on which reliance is placed by

Mr. M. G. Bhangde, at a later stage in the judgment and to the

extent necessary.

23. Mr. Nandesh Deshpande would rely on the decisions

in (i) Industrial Promotion and Investment Corporation of Orissa

Limited v. New India Assurance Company Limited and another

(2016) 15 SCC 315, (ii) United India Insurance Company Limited

v. Orient Treasures Private Limited (2016) 3 SCC 49, (iii) Joshi

Technologies International Inc. v. Union of India and others

(2015) 7 SCC 728 (iv) Export Credit Guarantee Corporation of

India Limited v. Garg Sons International (2014) 1 SCC 686 and

(v) Food Corporation of India & Ors. V. Abhijit Paul in Civil Appeal

8572-8573/2022 arising out of SLP (C) 16009-16010/2019 to

buttress the submission that in as much as the petitioner did not

submit the performance BG within the extended time, the

termination of the CMDPA which is in consonance with the

contract is not vulnerable or susceptible to judicial review.

Mr. Nandesh Deshpande would submit that in writ jurisdiction the

constitutional court must be slow to interfere with the decisions in

the realm of contract in the absence of demonstrable arbitrariness.

Mr. Nandesh Deshpande would submit that the respondents were ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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under no obligation or duty to grant further extension of 30 days

to submit the performance BG, and that a decision which is taken

in consonance with the contractual terms is ordinarily immune

from judicial review.

24. Mr. M. G. Bhangde would rely on the decision in India

Thermal Power Ltd. v. State of M.P. and others (2000) 3 SCC 379

in support of the submission that since the CMDPA is executed in

pursuance of statutory provisions, the CMDPA is a statutory

contract. Kisan Sahkari Chini Mills Limited and others v. Vardan

Linkers and others (2008) 12 SCC 500 is pressed in service to

emphasize that the statutory contract and the termination thereof

involves a public law element, and that judicial review of the

administrative action is not only permissible, is expected.

25. Hindustan Petroleum Corporation Limited and others

v. Super Highway Services and another (2010) 3 SCC 321 is cited

in support of the submission that the cancellation of the CMDPA,

without hearing the petitioner, and without serving the notice in

terms of the CMDPA, is arbitrary, illegal and in violation of the

principles of natural justice. Surya Constructions v. State of Uttar

Pradesh and others (2019) 16 SCC 794, is cited to emphasize that ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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where the State acts arbitrarily, even in the realm of contract the

constitutional court can interfere under Article 226 of the

Constitution of India. Mr. M. G. Bhangde has heavily relied on the

articulation of the Hon’ble Supreme Court in Indsil Hydro Power

and Manganese Limited v. State of Kerala and others (2020) 16

SCC 276 and in particular on certain observations which we are

extracting below:

“33. While assessing the merits of the rival

contentions, this Court must be cognizant of the

fact that the invocation of the power of judicial

review under Article 226 of the Constitution of

India was in the context of a contract which was

entered into between the appellant and KSEB in

pursuance of a policy initiative of the

Government of Kerala. Evidently, in announcing

the policy initiative on 7-12-1990, the State

Government intended to encourage the setting

up of hydel power projects by private agencies

and hence, a slew of concessions came to be

provided. The agreement that was entered into

between the appellant and KSEB is undoubtedly

a matter in the contractual arena. It is now a

settled principle of law that the exercise of writ

jurisdiction under Article 226 is not excluded in

matters pertaining to contract. The States and its

agencies are duty bound to act in a manner

which is fair and transparent. The State and its

instrumentalities cannot act arbitrarily in

dealings with private parties. This must

particularly be the governing principle where the

State as a measure of encouraging

industrialisation invites the participation of

private industries to respond to the policy

initiative of the State. ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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43. The order of the State Government

dated 7-2-2001 shows that there was no

deliberate act or default on the part of KSEB.

Indeed, it has not been seriously disputed that at

the material time, there were agitations on the

part of the farmers and certain other

circumstances which caused delay in the

construction of the transmission lines.

However as significant as these reasons are, it

should not lead to a situation where a private

investor who has acted upon the policy of the

State Government being left in the lurch as a

result of supervening circumstances which have

resulted in the power not being evacuated into

the grid due to the non-commissioning of the

transmission lines at the material time by KSEB.

It is imperative that contractual obligations

entered into by the State have legal sanctity.

A legal regime where the sanctity of contracts is

respected and commercial contracts are enforced

is essential to the maintenance of the rule of law.

Trade and commerce can be freely conducted in

a stable legal order which provides remedies for

enforcement.

26. Relying on the decision of Popatrao Vyankatrao Patil

v. State of Maharashtra and others (2020) 19 SCC 241, Mr. M. G.

Bhangde would submit that the respondents are expected to act as

model litigant. The State must not be heard arguing that the play

in the joints in the realm of contractual matters can be stretched

or understood as licence to act arbitrarily.

27. M/s. Satav Infrastructure Pvt. Ltd. v. Union of India &

Ors. 2008 SCC OnLine Pat 48 is cited in support of the submission ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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that in contractual matters, while the State is bound by

contractual obligations like an individual, there is an additional

responsibility to frame its actions in conformity with the

philosophy enshrined in Article 14 of the Constitution of India.

27. Relying on the decision in Kailash Nath Associates v.

Delhi Development Authority and another (2015) 4 SCC 136,

Mr. M. G. Bhangde emphasizes on the enunciation that the

provisions of section 74 of the Contract Act, 1872 cannot be

invoked in the absence of contractual pre-estimate of the loss or

damage in case of breach of contract.

28. Rambeer Shokeen v. State (NCT of Delhi) (2018) 4

SCC 405 is cited to buttress the submission that since the

application seeking extension of time to furnish the performance

BG was not decided, recourse to the power to terminate the

CMDPA was not available.

29. Hirday Narain v. Income-Tax Offier, Bareilly 1970 (2)

SCC 355 is cited in support of the submission that the fact that

there is a power vested to consider extension of time to furnish the

performance BG, creates a corresponding right to expect that the ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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application seeking extension shall be considered and decided

either way, prior to the decision on termination of the contract.

The said decision is relied also in support of the submission that

the termination was not the only option available, and the

enabling power to resort to termination did not obviate the need

and obligation to act fairly in exercise of the enabling power. J. N.

Chemical (Pvt.) Ltd. v. Cegat 1989 SCC OnLine Cal 488 refers to

and relies on Hirday Narain’s case supra.

30. We may now consider the decisions cited by Nandesh

Deshpande.

Industrial Promotion and Investment Corporation of

Orissa Limited v. New India Assurance Company Limited and

another (2016) 15 SCC 315 is cited in support of the submission

that the Doctrine of contra proferentem, which is that the

ambiguity in the contract must be resolved against the party

drafting the contract, does not come into the play unless the

ambiguity is demonstrated. The decision is cited presumably since

in the pleadings there is a reference to the said doctrine, although

that aspect has not been touched in the arguments canvassed.

31. United India Insurance Co. Ltd. v. Orient Treasures ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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Private Limited (2016) 3 SCC 49 also considers the doctrine of

contra proferentem.

32. Joshi Technologies International Inc v. Union of India

and others (2015) 7 SCC 728 is cited to emphasize that if the

dispute is in the realm of pure contract, in contra distinction with

statutory contract, the High Court ought not to interfere in writ

jurisdiction. It would be necessary to briefly notice the factual

matrix in which the said decision is rendered. Joshi Technologies

International Inc. (petitioner) had entered into two contracts

dated 20.02.1995 with the Union of India relating to exploration

of certain oil fields on production sharing basis for Dholka and

Wavel Oil fields. In the income tax returns, the petitioner claimed

benefit of section 42 of the Income Tax Act, 1961 (Act) which is a

special provision for deductions in the case of business for

prospecting etc. for mineral oil. The allowances envisaged in

section 42 of the Act are however, required to be specifically

mentioned in the agreement. Initially, the benefit of deduction was

extended to the petitioner, and while making the assessment for

the year 2005-06 the deductions were not allowed on the premise

that the agreements did not contend such provision.

Aggrieved, the petitioner approached the High Court of Delhi ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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seeking a writ of declaration that the petitioner is entitled to the

benefit of the deductions which writ petition the High Court

dismissed holding that in the absence of stipulation in the

agreement, the petitioner is not entitled to deductions under

section 42 of the Act. The decision of the High Court is upheld by

the Hon’ble Supreme Court inter alia holding that the contract can

be amended only if the parties to the contract agree to do so, and

not otherwise. The Hon’ble Supreme Court while observing that

on the facts of the case, the matter was in the realm of pure

contract, and that there was no statutory contract in existence,

held that no mandamus could have been issued to direct the State

to incorporate a clause in the contract, in the face of the specific

provisions of the contract, of which the petitioner is presumed to

have knowledge.

33. Export Credit Guarantee Corporation of India Limited

v. Garg Sons International (2014) 1 SCC 686 is again a decision

which enunciates that the courts are not permitted to substitute

the terms of contract under the garb of liberal construction, and

that the doctrine of contra proferentem would not apply to

commercial contracts which are bilateral and mutually agreed

upon. ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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34. Food Corporation of India and others v. Abhijit Paul in

Civil Appeal 8572-8573/2022 Arising Out of SLP (C) 16009-

16010/2019 is cited in support of the argument that every

contract must be considered with reference to its object and the

terms must be construed contextually and in entirety in order to

decipher the intention of the parties.

35. We have given anxious consideration to the

submissions canvassed by Mr. M. G. Bhangde and Mr. Nandesh

Deshpande, and having done so, we are inclined to hold, for

reasons spelt out hereinafter, that the petition deserves to be

allowed.

36. It is irrefutable that the CMDPA is executed as

mandated by Rule 13 (5) of the rules, as is the recital in the

CMDPA. Sub-rule 4 of Rule 13 provides that in accordance with

the provisions of the Act the successful bidder or allottee shall be

required to provide a performance bank guarantee for such

amount as may be specified by the Central Government or the

nominated authority, and such performance bank guarantee shall

be linked with the milestones for the development of the coal

mine till it reaches its peak rated capacity as specified in the ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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approved mine plan. Sub-rule (5) mandates that the successful

allottee shall enter into an agreement with the nominated

authority wherein the terms and conditions of the allocation shall

be specified. The statutory regime obligates the successful bidder

to enter into an agreement and provides that the successful bidder

shall furnish performance BG. There is no gain saying, that if a

contract is entered into in exercise of an enabling power conferred

by statute, every condition of the contract does not necessarily

assume a statutory flavor. While conditions which are statutorily

envisaged are clothed with the character of statutory conditions,

the parties may as well agree on certain conditions which are not

referable to the statutory regime, and such conditions may be

considered as purely contractual conditions. In the present case,

we have noted that it is statutorily mandated that the successful

bidder shall enter into an agreement with the Central Government

or the appointed authority, and the successful bidder shall furnish

performance BG the nature of which is statutorily spelt out.

We are inclined to hold, that at least to the extent of the

conditions governing the performance BG, the CMDPA assumes

the character of statutory contract with an element of public law

involved. ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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37. Arguendo, even if we assume that the CMDPA has no

statutory flavor, and that the termination of the CMDPA is a matter

in the realm of pure commercial contract, the State is nonetheless

obligated to act fairly and reasonably. We are not suggesting, even

for a moment, that the scope and ambit of writ jurisdiction, while

entertaining a matter within the realm of pure commercial

contract, shall be of the same width and amplitude as in

entertaining a matter pertaining to a statutory contract.

The width, and the contours of the writ jurisdiction is undoubtedly

restricted if there is no element of public law involved.

Nonetheless, if the action of the State is manifestly arbitrary as

would militate against the constitutional philosophy enshrined in

Article 14 of the Constitution, interference in the writ jurisdiction

is not only permissible, is imperative.

38. The seminal issue, however, is whether the

termination of the CMDPA is arbitrary. The answer must clearly be

in the affirmative. We are inclined to hold, for reasons articulated

infra, that the termination and forfeiture of Rs.5,41,93,508.56

(Five Crores Forty One Lakhs Ninety Three Thousand Five

Hundred Eight and Fifty Six paise only) and Rs.5,40,60,832.50

(Five Crores Forty Lakhs Sixty Thousand Eight Hundred Thirty ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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Two and Fifty paise only) and Rs.4,32,48,666.00 (Four Crores

Thirty Two Lakhs Forty Eight Thousand Six Hundred Sixty Six

only) bank guarantee is not fair and unreasonable and what is

unfair and unreasonable is ordinarily arbitrary.

39. The petitioner did deposit the amount of

Rs.5,41,93,508.56 (Five Crores Forty One Lakhs Ninety Three

Thousand Five Hundred Eight and Fifty Six Paise only) as fixed

charges and further amount of Rs.5,40,60,832.50 (Five Crores

Forty Lakhs Sixty Thousand Eight Hundred Thirty Two and Fifty

Paise only) as the first installment of the upfront charges.

The petitioner further furnished the performance BG in the sum of

Rs.4,32,48,666.00 (Four Crores Thirty Two Lakhs Forty Eight

Thousand Six Hundred Sixty Six only). The petitioner did seek

extension of 30 days to furnish the performance BG, which

extension was granted and the petitioner was expected to furnish

the performance BG on or before 25.10.2022. Before the expiry of

the extended period, the petitioner sought further extension of 30

days which application was not decided and the CMDPA was

terminated vide order dated 02.11.2022.

40. It is not necessary to delve deeper in the submission ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

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of Mr. M. G. Bhangde that the order of termination of CMDPA is

illegal in as much as the petitioner was not served the notice of

termination by the mode specified and that the 15

th

business days

notice was not given. In our considered view, the order of

termination of CMDPA is arbitrary on two counts. The first is that

in the absence of any statutory impediment in considering the

application for extension of 30 days to furnish the performance

BG, albeit one extension was already granted to the petitioner, the

least which was expected of the authority was to take a decision

on the pending application, one-way or the other, and put the

petitioner on notice that no further extension shall be granted and

that the performance BG must be furnished immediately.

The other aspect is that the drastic power of termination of

CMDPA is clearly not the only option available and the authority is

not precluded from condoning the delay and accepting the

performance BG, in a given situation. We find considerable

substance in the submission canvassed by Mr. M. G. Bhangde, that

the termination of the CMDPA while keeping the application

seeking extension to furnish performance BG pending, is an

arbitrary exercise of the enabling power of termination,

particularly since the petitioner was not put on notice much less

heard, prior to the issuance of the termination letter. Having so ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

24 wp7060.22.J.odt

observed, we may clarify that we are not inclined to make any

positive observation on the entitlement of the petitioner to hearing

prior to the decision of termination. What we are emphasizing in

the factual matrix, is that the petitioner was entitled to nurture a

legitimate expectation that the application seeking extension of

time shall be considered, either way. While the petitioner has no

right to claim an extension, the petitioner can certainly assert the

right that the application be considered on its merits, either way.

41. The enabling power of termination of the CMDPA is

drastic, and as is apparent from the consequences of the

termination of the CMDPA, visits the party to the contract with

serious consequences. It is all the more necessary, given the

consequences inter alia forfeiture of the substantial amount

deposited and the invocation of the bank guarantee in the sum of

Rs.4,32,48,666.00 (Four Crores Thirty Two Lakhs Forty Eight

Thousand Six Hundred Sixty Six only), that the authority is

expected to consider and decide the application seeking extension

of time prior to the issuance of the termination letter.

42. We may draw some support from the decision of the

Division Bench of this Court in Babasaheb s/o Apparao Akat and ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

25 wp7060.22.J.odt

others v. State of Maharashtra and others 2010(4) Mh.L.J. 360,

albeit the said decision was rendered on the anvil of the provisions

of the Maharashtra Agricultural Produce Marketing (Development

and Regulation) Act, 1963 (APMC Act).

43. We may notice certain provisions of the APMC Act

which were considered in the said decision. Sub-section(3) and

(3A) of section 14 of the APMC Act read thus:

(3)Except as otherwise provided in this Act, the

members of a Market Committee (not being

a Committee constituted for the first time)

shall hold office for a period of [five years],

and the members of a Committee

constituted for the first time shall hold

office for a period of two years:

[Provided that, the Market Committee

constituted for the first time, may be

replaced by the Government and the new

Committee so replaced shall hold office for

the remainder of the period:]

[[Provided further that], where the general

election of members of a Committee could

not be held for reasons beyond the control

of the Committee before expire of the term

of office of its members as aforesaid, the

State Government may, by order in the

Official Gazette, extend from time to time,

the term of office of any such Committee, so

however, that the period for which the term

of office is so extended shall not exceed the

period of one year in the aggregate.] ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

26 wp7060.22.J.odt

[(3A) Where due to scarcity, draught, flood, fire

or any other natural calamity or rainy

season or any election programme of the

State legislature or the Parliament or a local

authority, coinciding with the election

programme of any Market Committee or

such other special reason, in the opinion of

the State Government, it is not in the public

interest to hold elections to any Market

Committee, the State Government may,

notwithstanding anything contained in this

Act or in any rules, or bye-law made

thereunder, or any other law for the time

being in force, for the reasons to be

recorded in writing, by general or special

order, postpone the election of any Market

Committee for a period not exceeding six

months at a time which period may further

be extended, so, however, that the total

period shall not exceed one year in the

aggregate.]

Section 15A which provides for appointment of

Administrator after expiry of the normal or extended term of

office of the elected committee reads thus:

[15A. Provision for appointment of

Administrator after normal or extended term of

office of members expires.

(1)Notwithstanding anything contained in

sub-section (3) of section 15 or any other

provisions of this Act, where the term of

office of two years, five years, or as the

case may be, the extended term of office, if

any, under the proviso to sub-section (3) of

section 14 [-------] of the members of any

Market Committee, has expired, the ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

27 wp7060.22.J.odt

Director or any officer not below the rank

of the District Deputy Registrar of

Co-operative Societies, authorised by him

shall, by order in writing, direct that —

(a)all members of the Committee shall,

as from the date specified in the

order, cease to hold and vacate their

offices as members or otherwise; and

(b)[the Administrator or the Board of

Administrators of not more than

seven members appointed by the

Director or such authorised officer

shall manage the affairs of the

Committee], during the period from

the date specified in the order upto

the day on which the first meeting of

the reconstituted Committee after the

election is held, where there is a

quorum (hereinafter in this section

referred to as “the said period”).

Such election shall be held within a

period of [Six months] from the date

the [Administrator or the Board of

Administrators] assumes office:

[Provided that, this period of [Six

months] may be extended from time

to time by the State Government, in

exceptional circumstances, to a period

not exceeding [one year] in the

aggregate, by notification in the

Official Gazette, for reasons, which

shall be stated in the notification.

[(1A)Notwithstanding anything contained in

clause (b) of sub-section (1), as it stood

before the commencement of the

Maharashtra Agricultural Produce

Marketing (Regulation) (Amendment and

Validation) Act, 1985, where the

Administrator has been to manage the ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

28 wp7060.22.J.odt

affairs of any Committee but election to

such Committee has not been held within a

period of one year as required under clause

(b) of sub-section (1), the period of holding

election to such Committee shall be

extended and shall be deemed always to

have been extended upto and inclusive of,

the 31

st

day of March 1986.]

(2)During the said period, all the powers and

duties of the Committee and its various

authorities under this Act and the rules and

bye-laws made thereunder or any other law

for the time being in force shall be

exercised and performed by [the

Administrator or the Board of

Administrators].

(3) The [Administrator or the Board of

Administrators] may delegate any of his

powers and duties to any officer for the

time being serving under him or under the

Committee.

(4)The [Administrator or the members of the

Board of Administrators] shall receive such

remuneration from the Market Fund as the

Director or authorised officer may, from

time to time, by general or special order,

determine.]]

In Babasaheb Akat, which decision is relied on relatively

recent decision in Bhausaheb Pandurang Jadav v. State of

Maharashtra, the Division Bench noticed that the proposal for

extension of the term of the elected managing committee was

pending, and instead of first considering the proposal seeking

extension, straightway the Administrator was appointed. ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

29 wp7060.22.J.odt

The Division Bench considered the issue thus:

7.In the present case, however, we have

noticed that respondent No. 7 submitted

proposal for extension of the term highlighting

the fact that the elections could not be held

before the expiry of the term for no fault of the

present Committee and for that reason, it was

just and proper to extend the term which can be

extended upto a period of one year as provided

by the second proviso under sub-section (3) of

section 14 of the Act. The appropriate authority

instead of first considering the said proposals,

after lapse of about five months from the

submission of the proposals proceeded to

straightway appoint Administrator to take over

the affairs of the respondent No. 7 Committee.

Section 14 of the Act is of some relevance for

considering the controversy at hand. We are

concerned with Section 14(3) which provides

that except as otherwise provided in the Act, the

members of the Market Committee shall hold

office for a period of five years as is applicable to

the present case. Second proviso under the said

sub-section, however, stipulates that where the

general election of members of a Committee

could not be held “for the reasons beyond the

control of the Committee” before expiry of the

term of office of its members, the State

Government may, by order in the official Gazette

extend the term of the office of any such

Committee which can be upto a period of one

year in the aggregate. This is obviously an

enabling provision. It bestows power in the

respondent No. 1 to extend the term of the

Committee in specified situation. That power is

coupled with duty to act in time and decide

justly and reasonably. If the State Government

were to consider the proposals submitted by the

petitioners, to respondent Nos.1 and 2, the

period of present Committee could be extended

maximum upto 10th July 2010. However, the ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

30 wp7060.22.J.odt

proposals were kept pending by the appropriate

authority for reasons best known to it.

Instead, the impugned orders came to be issued

to appoint the Administrator to take over the

affairs of respondent No. 7 Committee.

On conjoint and harmonious reading of Second

proviso under Section 14(3) and Section 15 of

the Act, the appropriate authority had at least

two different options to deal with the present

situation. For, it is not the case of the authority

or for that matter the intervenor that the present

members of the Committee were responsible for

not holding the election of the Committee before

the expiry of their term. On the other hand, the

material on record would go to show that

respondent No. 7 commenced the exercise of

conducting the election well in advance, as back

as on 6-1-2009. The fact that the election could

not be held due to intervening Parliamentary and

Assembly elections, is also not in dispute.

There is nothing on record or brought to our

notice by the official respondents or the

Intervenor, which would remotely suggest that

there was any allegation of mal-administration

or mis-feasance committed by the members of

the present Committee. In such a situation,

ordinarily, the appropriate authority ought to

favourably consider the proposal for extending

the term of the present Committee by invoking

the second proviso under Section 14(3) of the

Act. Assuming that the appropriate authority was

inclined to appoint the Administrator, it was

open to it to appoint the present members as the

Board of Administrators, instead of appointing

the respondent No. 6 as the sole Administrator.

In other words, more than one option was

available to the appropriate authority in the fact

situation of the present case. Obviously, none of

these options have been considered and the

appropriate authority straightway proceeded to

appoint the sole Administrator to look after the

affairs of the Committee. That cannot be

countenanced more particularly when no reason ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

31 wp7060.22.J.odt

is stated in the impugned order or for that

matter any contemporaneous record to justify

one of the particular mode amongst the available

modes.

44. The observation in Babasaheb Akat, while rendered

on the anvil of the statutory provisions of the APMC Act, are of

relevance to the extent the appointment of the Administrator

without first considering the application seeking extension of the

term of the elected committee, is held arbitrary and further, the

availability of more than one option is emphasized.

45. In the factual matrix, we are inclined to hold that the

silence and inaction of the authority as regards the application

seeking extension of time to furnish the performance BG, and

exercising the power of termination of the CMDPA without first

deciding on the application seeking extension, which was

undisputedly preferred prior to the expiry of the extended period,

is arbitrary and violative of the Article 14 of the Constitution of

India. We are further of the view, that even in the realm of pure

contractual matters, the action of the State must be enthused with

fairness and reasonableness and power of termination of contract

must not be exercised in a routine or mechanical manner.

It appears to us that the power to terminate the CMDPA, which ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

32 wp7060.22.J.odt

power is undoubtedly available, ought not to have been exercised

without exploring the alternate options inter alia of considering

the application seeking extension of time, and at any rate without

putting the petitioner on notice that the extension shall not be

considered and the performance BG must be furnished without

any further loss of time.

46. We have extracted the order dated 14.11.2022.

The petitioner has furnished the performance bank guarantee

pursuant to the said order immediately on 14.11.2022.

The termination letter dated 02.11.2022, even according to the

respondents, was to come into effect on 21.11.2022.

The performance BG is submitted, albeit in view of the order

dated 14.11.2022 which records that the submission shall be

subject to the final decision in the petition, prior to the coming

into effect of the termination. These facts are of some relevance.

While ordinarily, despite holding the termination of the CMDPA

arbitrary, we may have directed the respondents to take an

appropriate decision, in the factual matrix we are inclined to

quash the termination of the CMDPA and make the interim

arrangement absolute. ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

33 wp7060.22.J.odt

47. We have given due consideration to the facts in the

back-drop of which the High Court of Delhi rendered the decision

which is heavily relied on by the respondents. We are inclined to

agree with Mr. M. G. Bhangde that the facts in the said decision

are clearly distinguishable, for reasons spelt out by the petitioner

and which we have extracted in para 18 supra, which appeal to

us.

50. In any event, as is rightly submitted by Mr. M. G.

Bhangde the dismissal of the SLP by the Hon’ble Supreme Court is

not necessarily an imprimatur of the reasoning of the High Court

of Delhi.

51. In the light of the discussion supra, we quash and set

aside the termination letter dated 02.11.2022 and allow the

petition in terms of prayer clause (1) which read thus:

1)Quash and set aside termination letter dated

02.11.2022 issued by the Nominated Authority,

respondent 2 and direct the respondent to

reverse all actions taken pursuant thereof and

accept bank guarantee towards performance ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::

34 wp7060.22.J.odt

security to be furnished by the petitioner.

(Y. G. KHOBRAGADE, J.) (ROHIT B. DEO, J.)

NSN ::: Uploaded on - 22/02/2023 ::: Downloaded on - 30/08/2025 21:42:03 :::