Simplified Explanation of the Judgment
The Patna High Court examined a dispute between a private construction company and the Bihar government regarding the construction of Katihar Engineering College. The company (petitioner) had signed an agreement with the Building Construction Department. However, by office order dated 17 July 2020, the Executive Engineer abruptly terminated the contract (rescinded the agreement) without issuing any show-cause notice. The same order also fixed a date for final measurement of the work.
The company challenged this order in a writ petition, arguing that:
- The termination violated Clause 14 of the contract, which required that a prior show-cause notice be issued before rescinding the agreement.
- The decision ignored the COVID-19 pandemic lockdown (23 March to 5 June 2020), during which construction work had come to a standstill. Even after lockdown, normal work resumed slowly.
- The delay in execution was beyond the contractor’s control, and hence, cancelling the contract outright was arbitrary and unfair.
- They sought six additional months to complete the remaining work.
The petitioner relied on earlier judgments of the Patna High Court in CWJC No. 7130 of 2020 (decided on 07.08.2020) and in CWJC Nos. 7234/2020 and 7240/2020, where similar orders of contract rescission were quashed because no show-cause notice had been served.
The State defended the decision but could not dispute the fact that no prior notice had been issued.
The Court emphasized that both the principles of natural justice and the specific contractual clause (Clause 14) required that the contractor be given an opportunity to respond before termination. Since no such opportunity was provided, the rescission order was unsustainable in law.
Accordingly, the Court set aside the termination order dated 17 July 2020, but also gave liberty to the government to issue a fresh show-cause notice if it still wished to rescind the contract.
Thus, the writ petition was allowed, and the petitioner secured relief against arbitrary cancellation.
Significance or Implication of the Judgment
- For Contractors and Companies: The judgment reinforces the principle that government departments must follow contractual terms and natural justice before terminating contracts. Arbitrary termination without notice is invalid.
- For the Government: While the State has authority to enforce contracts and rescind them if breaches occur, it must ensure procedural fairness by issuing show-cause notices and allowing contractors to explain delays or lapses.
- For the Public: Since this case involved the construction of an engineering college, the decision helps safeguard public projects from unnecessary delays caused by legal disputes over arbitrary actions.
- For Legal Precedent: The ruling reaffirms that even in extraordinary times like the COVID-19 pandemic, authorities cannot bypass principles of natural justice.
Legal Issue(s) Decided and the Court’s Decision with reasoning
- Whether the State could rescind the construction contract without issuing a show-cause notice?
Decision: No. The Court held that both Clause 14 of the contract and principles of natural justice required a prior notice. The order was set aside. - Whether COVID-19 pandemic justified the contractor’s delay in work execution?
Observation: The Court noted the lockdown context but primarily focused on the lack of notice. Since termination was already invalid for procedural reasons, the delay issue was not the deciding factor. - What remedy did the Court grant?
Decision: The termination order dated 17 July 2020 was quashed. However, the State was given liberty to issue a fresh show-cause notice and proceed lawfully if necessary.
Judgments Referred by Parties (with citations)
- CWJC No. 7130 of 2020, Patna High Court, decided on 07.08.2020 — held contract rescission without notice violates Clause 14 and natural justice.
- CWJC Nos. 7234/2020 and 7240/2020, Patna High Court — similar rulings on invalid contract terminations without notice.
Judgments Relied Upon or Cited by Court (with citations)
- Whirlpool Corporation v. Registrar of Trade Marks (1998) 8 SCC 1 — on writ maintainability despite contractual disputes.
- Popcorn Entertainment & Anr. v. City Industrial Development Corporation (2007) 9 SCC 593 — on natural justice in contractual disputes.
Case Title
Kashish Developers Limited v. State of Bihar & Ors.
Case Number
Civil Writ Jurisdiction Case No. 7933 of 2020
Citation(s)
2021(2) PLJR 197
Coram and Names of Judges
Hon’ble Mr. Justice Vikash Jain
Names of Advocates and who they appeared for
- Mr. P.K. Shahi, Senior Advocate, with Mr. Ranjeet Kumar — for the petitioner
- Mr. Mahendra Pd. Verma, AC to SC-20 — for the State
Link to Judgment
MTUjNzkzMyMyMDIwIzEjTg==-S98TpV–ak1–xO–am1–8=
If you found this explanation helpful and wish to stay informed about how legal developments may affect your rights in Bihar, you may consider following Samvida Law Associates for more updates.
