Simplified Explanation of the Judgment
This case revolves around a dispute between a construction company (petitioner) and the Building Construction Department, Government of Bihar. The matter relates to the construction of an MLA Housing Complex (Vidhayak Awasan) at Beerchand Patel Path, Patna.
The petitioner had entered into an agreement with the department in June 2017, with a two-year deadline for completing the project (by May 2019). However, the work was delayed due to multiple factors:
- Encroachments on nearly 80% of the site.
- Trees within the construction site that needed clearance.
- Lack of site demarcation and incomplete drawings.
- Presence of underground high-tension electric cables and water pipelines.
- External factors like demonetisation, sand supply restrictions, GST rollout, and later, the COVID-19 pandemic.
By July 2020, the department terminated the contract through an office order, citing poor progress (only around 23% of work was complete). The petitioner challenged this termination in the Patna High Court, seeking more time to finish the project.
Petitioner’s Arguments:
- Clause 14 of the contract required a written show cause notice before termination. No proper notice was issued.
- Termination during COVID-19 lockdown violated principles of natural justice and fairness.
- Large portions of delay were due to government lapses (site clearance, drawings, payments).
- Courts can allow contractors to complete projects instead of re-tendering, which would cause additional costs to the public exchequer.
State’s Arguments:
- The petitioner failed to complete work despite multiple opportunities.
- A show cause notice was issued in June 2020.
- Only 23% of the work was done in three years, showing inefficiency.
Court’s Findings:
Justice Mohit Kumar Shah of the Patna High Court quashed the termination order on two main grounds:
- Violation of Clause 14 and Natural Justice: The show cause notice issued was inadequate. It did not clearly spell out the proposed penalty or termination, depriving the petitioner of a fair opportunity to respond.
- Lack of Independent Application of Mind: The termination order was passed by the Executive Engineer but was based solely on directions from higher authorities (Chief Engineer and Superintending Engineer), without independent judgment.
The Court cited several precedents, including:
- Whirlpool Corporation v. Registrar of Trademarks (1998) – writ petitions are maintainable even if alternate remedies exist, especially where natural justice is violated.
- Popcorn Entertainment v. CIDCO (2007) – termination without proper notice is invalid.
- Gorkha Security Services v. Govt. of NCT of Delhi (2014) – show cause notices must specify both grounds and potential penalties.
Final Decision:
- The termination order dated 02.07.2020 was declared void.
- The petitioner was given liberty to approach the authorities with a representation to seek 12 more months to complete the project.
- Authorities were directed to decide the representation within four weeks, keeping in mind COVID-19 disruptions and the principle of avoiding wastage of public money.
Significance or Implication of the Judgment
- Natural Justice Reinforced: Government agencies must issue proper show cause notices before cancelling contracts.
- COVID-19 Consideration: Courts acknowledged the pandemic as a valid ground for delay in government projects.
- Public Finance Protection: Re-tendering often raises costs due to higher rates. Allowing the original contractor to continue can prevent wastage of public money.
- Judicial Oversight in Contracts: Even in government contracts with arbitration clauses, High Courts can intervene under Article 226 if natural justice is violated.
Legal Issue(s) Decided and the Court’s Decision
- Was the termination of the contract valid under Clause 14?
❌ No, because no proper show cause notice was issued. - Did the termination violate principles of natural justice?
✅ Yes, since the contractor was not given a meaningful chance to respond. - Can the contractor seek more time due to COVID-19 delays?
✅ Yes, the Court allowed representation for an extension, to be decided by the government.
Judgments Referred by Parties
- Kems Services Pvt. Ltd. v. SBPDCL (CWJC No. 10091 of 2017)
- B.K. Enterprises v. State of Bihar (2008) 1 PLJR 473
- Union of India v. Tantia Construction Pvt. Ltd. (2011) 5 SCC 697
- Whirlpool Corporation v. Registrar of Trademarks (1998) 8 SCC 1
- Popcorn Entertainment v. CIDCO (2007) 9 SCC 593
Judgments Relied Upon or Cited by Court
- Gorkha Security Services v. Govt. of NCT of Delhi (2014) 9 SCC 105
- Commissioner of Police v. Gordhandas Bhanji (AIR 1952 SC 16)
- Dirghayu Mahavir Diagnostic v. State of Bihar (LPA No. 1288 of 2013)
Case Title
Kashish Developers Limited v. State of Bihar & Ors.
Case Number
Civil Writ Jurisdiction Case No. 7234 of 2020
Citation(s)
2021(2) PLJR 20
Coram and Names of Judges
- Hon’ble Mr. Justice Mohit Kumar Shah
(Oral Judgment dated 28.01.2021)
Names of Advocates and who they appeared for
- For the Petitioner: Mr. P.K. Shahi, Sr. Adv.; Mr. Ranjeet Kumar; Mr. Yogesh Kumar
- For the State: Mr. Uday Shankar Sharan Singh, GP-19; Mr. R.K. Chandram, AC to GP-19
Link to Judgment
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