SC quashes decision of Bengal authorities to cancel contract, terms it classic case of arbitrariness

New Delhi: The Supreme Court on Tuesday quashed a decision of the West Bengal authorities to cancel award of a contract for maintaining two underpasses in Kolkata to a private party without assigning any reason, saying it was a "classic textbook case of arbitrariness". A bench comprising Chief Justice D Y Chandrachud and justices JB Pardiwala and Manoj Misra also set aside the judgement of the Calcutta High Court which upheld the cancellation of the contract.

"We are of the considered opinion that this is the classic textbook case of arbitrariness," Justice Pardiwala said while pronouncing the verdict.

The bench referred to the fact that the decision to cancel the contract was taken purportedly at the behest of a minister.


The top court had reserved the judgement on May 8.

While reserving the verdict, the bench had said the contracts awarding work to private parties should not be cancelled without assigning reasons.

Private parties, who make investments after bagging a contract, have reasonable expectations of getting a return, it had said.

Referring to the facts of the case, the CJI had said no reason was given for cancellation of the contract.

A division bench of the high court had on May 25, 2023 upheld the verdict of a single judge bench which had approved cancellation of the contract awarded to a firm headed by Subodh Kumar Singh Rathour.

The firm had secured a contract for maintaining two underpasses on the Eastern Metropolitan Bypass in Kolkata for 10 years. As part of the contract, the firm was allowed to place advertisements both inside and above the underpasses for which he was required to undertake some construction work.

However, the contract was terminated by the KMDA (Kolkata Metropolitan Development Authority) on February 7, 2023.

The KMDA had made it clear that it would refund the licence fee deposited by Rathour and the cost incurred by him on construction activity and maintenance etc.

Senior advocate Rakesh Dwivedi, appearing for the KMDA, had told the Supreme Court that a fresh contract has now been awarded to another party and Rathour can be compensated.

Senior advocate Shyam Divan, who represented Rathour, had said though he did not want disruption of maintenance activities at the underpasses, the impugned communication by which the contract was cancelled, has to be set aside.