Judicial Review vis-à-vis Government Contracts/Tenders

Award of Tenders by the Government involves a tedious process undertaken by the Government in strict adherence with the terms/guidelines stipulated in the tender documents which the tenderers are required to strictly follow with no deviations in order to emerge as the successful bidder. More often than not, the unsuccessful bidders who get blacklisted by the Government or whose bids get rejected, resort to invoking the Writ Jurisdiction of the High Court and challenge the process undertaken by the Government to choose the successful bidder. This article is confined to the extent of judicial review that the High Court can exercise while adjudicating the decision-making process of the Public Authority in selecting the successful bidder. At the outset, it is pertinent to note that the Supreme Court in at least two of its recent judgments has flagged the growing concern that almost no tender goes unchallenged, how much ever big or small¹, which, in turn, affects the commercial activities of the public sectors and makes awarding of contracts by the Government a cumbersome exercise, with long drawn out litigation at the threshold.

Power of High Court to exercise Writ Jurisdiction in contractual matters

Before advancing, the fundamental question that needs to be addressed first is whether the High Court can exercise its extraordinary power of Writ Jurisdiction to intervene in purely contractual matters between State and private citizen. The State enters into a sphere governed by private law when it enters into a contract with a private tender company . In such facts and circumstances , if the private party complains of a breach of contract committed by the State, can the private party to the contract invoke the Writ Jurisdiction of High Court to set aside an arbitrary action of state or the remedy lies before the Civil Court by way of a suit for specific performance, injunction or damages as the case may be.

In Radhakrishna Agarwal and Ors. vs State of Bihar² the Supreme Court emphatically held that a dispute which is purely contractual in nature, between the State and private citizen and rights and liabilities of the parties are governed by the terms of the contract, then no writ can be issued under Article 226 of the constitution and the appropriate remedy is before the Civil Court. The Court observed that when State enters into the contractual field, it is no longer governed by the constitutional provisions but by the terms of the contract which determines the rights and obligations of the parties inter se. Therefore, in contractual sphere between the State and Private citizen, issue of violation of Article 14 cannot be invoked, being public law remedy.

The Supreme Court in Radhakrishna (supra) adopted a complete hands-off approach in contractual matters. However, the law went through a radical change after Radhakrishana (supra). In Kumari Shrilekha Vidyarthi and Ors. vs State of UP and Ors.³ the Supreme Court inter alia held that even in contractual sphere, the State is required to stand the test of Article 14 and cannot act in an arbitrary manner-

“28. Even assuming that it is necessary to import the concept of presence of some public element in a State action to attract Article 14 and permit judicial review, we have no hesitation in saying that the ultimate impact of all actions of the State or a public body being undoubtedly on public interest, the requisite public element for this purpose is present also in contractual matters. We, therefore, find it difficult and unrealistic to exclude the State actions in contractual matters, after the contract has been made, from the purview of judicial review to test its validity on the anvil of Article 14.”

The aforesaid judgment was quoted with approval by Supreme Court in ABL International Ltd. vs Export Credit Guarantee Corporation of India Ltd.⁴ wherein the Supreme Court cemented the aforesaid position of law laid down in Shrilekaha (supra) and arrived at a categoric finding that a State or its instrumentality are subject to the application of Article 14 even in contractual sphere and a writ petition against a State arising out of a contractual obligation would be maintainable in an appropriate case. Thereafter, the law laid down in Radhakrishna (supra) was overruled by the Supreme Court in M.P. Power Management Co. Ltd. Jabalpur vs Sky Power Southeast Solar India Pvt. Ltd. & Ors.⁵. The ratio of Shrilekha (supra) and ABC International Ltd. (supra) and M.P. Power (surpa) was quoted with approval by a three judge bench of the Supreme Court in Subodh Kumar Singh Rathour vs The Chief Executive Officer and Ors.⁶ wherein the Court affirmed the position of law laid down in the aforesaid judgments.

Distinction between a matter which is at threshold of a contract and a breach of contract

In Noble Resources Ltd. vs State of Orissa⁷ the Supreme Court drew out a distinction between a matter which is at the threshold and at the stage of breach. The Court observed that the court’s scrutiny would be more intrusive and expansive while at the stage of threshold of a contract as opposed to the stage when a contract is entered into between the parties, wherein the court’s scrutiny would be discretionary except where the action is found to be arbitrary or unreasonable. Therefore, at the stage of choosing the right tender after inviting bids, the Court’s jurisdiction would be Writ large for the purpose of scrutinising the acts of the government entity. However, after awarding the contract to the tenderer and in the event of a breach of a contractual term, the court’s jurisdiction would be discretionary except when a case of violation of Article 14 is made out against the State’s action.

Government must act fairly

In Erusian Equipment & Chemicals Ltd. vs State of W.B.⁸, the Supreme Court observed that when the Government is trading with the public, “the democratic form of Government demands equality and absence of arbitrariness and discrimination in such transactions”. The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into contract with anyone, but if it does so, it must do so fairly without discrimination and without unfair procedure. The actions of the Government while selecting the successful bidder must confirm to the spirit of Article 14 of the Constitution of India which accords everyone equality before law devoid of any discrimination and arbitrariness. At the same time, it is not obligatory upon the Government to select a particular bidder merely because it has complied with all the tender documents and specifications. The Government has the right to choose to enter into contract with anyone it deems fit. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power⁹. Government is the protector of financial resources of the state and it has every right to cancel and call for fresh tender if it is in the nature of protecting the financial resources of the State¹⁰. Right to make a contract includes right not to make a contract¹¹. It is a settled law that the highest bidder has no vested right to have the auction concluded in his favour. The Government or its authority can validly retain power to accept or reject the highest bid in the interest of public revenue¹².

Scope of Judicial Review

In tata Cellular vs union of India¹³, the Supreme Court observed that it is not for the court to determine whether a particular policy decision taken in the fulfilment of that policy is fair. The court is only concerned with the manner in which those decisions have been taken. The court laid down the following grounds, upon which an administrative action of the Government can be called for scrutiny under judicial review-

Illegality- This means that the decision maker must understand correctly the law that regulates his decision-making power and must give effect to it.
Irrationality, namely, Wednesbury unreasonableness.
Procedural impropriety.

The Principle of Wednesday unreasonableness stems from an English case law viz. Associated Provincial Picture Houses Ltd. v Wednesbury Corporation¹⁴ wherein the court set out the standard of unreasonableness in the decision of the public body which would make it liable to be quashed on judicial review. Briefly stated, the Wednesbury Principle postulates that a decision of public authority will be liable to be quashed or otherwise dealt with by an appropriate order in judicial review proceedings where the court concludes that the decision is such that no authority properly directing itself on the relevant law and acting reasonably could have reached it. The aforesaid principle is often invoked by the Indian Courts when a decision of a public authority is called into question.

After a detailed discussion, the Supreme Court, in Tata Cellular (supra) culled out the following principles regarding scope of judicial review vis-à-vis award of tenders, viz.-

The modern Trend points to judicial restraint in administrative action.
The court does not sit as court of appeal but merely reviews the manner in which the decision was made.
The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible.
The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award of contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts.
The Government must have freedom of contract. In other words, a fair play in ther joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wedenesbury principle of reasonableness but must be free from arbitrariness not affected by bias or actuated by mala fides.
Quashing decisions may impose heavy administrative burden on the administration and lead to increased unbudgeted expenditure.

The courts, as a matter of principle, abstain from interfering with the decision-making process of Government, as the same would amount to entering the realm of the executive. In Kasturi Lal Lakshmi Reddy vs State Of Jammu And Kashmir & Another¹⁵, the Supreme Court observed that there is always a presumption that the government action is reasonable and in public interest and it is for the party challenging its validity to prove otherwise. This burden is a heavy one and it has to be discharged to the satisfaction of the court by proper and adequate material. The Court cannot lightly assume that the decision taken by the government is unreasonable. In Union of India & Ors. vs Hindustan Development Corporation and Ors.¹⁶, the Supreme Court observed that the court cannot strike down a policy decision taken by the State Government merely because it feels that another policy decision would have been fairer. The court can interfere only if the policy decision is patently arbitrary, discriminatory or mala fide. As held by the Supreme Court in Tata Cellular (supra) in categoric terms, that the court is not concerned with whether the policy decision is fair.

A constitution bench of the Supreme Court in Shri Sitaram Sugar Company Limited vs Union of India¹⁷ while hearing a challenge to notifications issued by the Central Government, having a bearing on the sugar industry, inter alia observed that What is best for the sugar industry and in what manner the policy should be formulated and implemented is entirely in the province of Central Government. Such matters do not ordinarily attract the power of judicial review. In Afcons Infrastructure Ltd. vs Nagpur Metro Rail Corporation¹⁸, the Supreme Court reiterated that the decision making process while accepting or rejecting the bid should not be interfered with. Interference is only permissible if the decision is arbitrary. The court further emphasised that the author of the document is the best person to understand and appreciate its requirements. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional Courts but that by itself is not a reason for interfering with the interpretation given. Even when some defect is found in the decision making process, the court must exercise its discretionary powers under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The Court should always keep larger public interest in mind in order to decide whether its intervention is called for or not¹⁹. Allowing bidder to rectify mistakes in its financial bid after finalisation of financial bid, would be highly improper as it would have the effect of unsettling the entire tender process²⁰.

In Jagdish Mandal vs State of Orissa and Ors.²¹, the Supreme Court laid down two tests to determine the extent of judicial interference in tender matters viz.

“22. (i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; or Whether the process adopted or decision made is so arbitrary and irrational that the court can say:“the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached;”

(ii) Whether public interest is affected.

If the answers are in the negative, there should be no interference under Article 226. Cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action.”

In Banshidhar Construction Pvt Ltd. vs Bharat Coking Coal Ltd. & Ors²² the Respondent/Government Authority rejected the technical bid of the Appellant and accepted the bid of another bidder despite the said bidder not complying with the mandatory requirement of submitting the important documents. This was challenged by the Appellant before the High Court by way of Writ which was dismissed by the High Court by upholding the decision of the Government Authority to reject the bid of the Appellant. The Appellant assailed the aforesaid order in Supreme Court by way of SLP. The Supreme Court found the decision making process of the Respondent/Government Authority arbitrary and in violation of Article 14. The Respondent/Government Authority argued that the project in question being infrastructure project and also one of the mega projects, therefore the Supreme Court must not interfere especially when the Agreement has been executed between the Respondent and the successful bidder. However, the Supreme Court refused to entertain the aforesaid argument and held the same to be of no relevance when the Court has arrived at a finding that the decision of the Respondent/Government Authority was grossly, illegal, discriminatory and violative of Article 14 of the Constitution. The aforesaid decision of the Supreme Court reflects that the Constitutional Court would not hesitate to interfere if decision making process of the a public authority is found to be arbitrary, even if the challenge has come at a belated stage, at a time when the successful bidder has started working on the project.

When the Author of the tender document has taken a conscious decision that the Bid submitted by the Bidder can be said to be non-responsive and suffering from material deviation, it is not for the High Court to consider/opine whether the Bid submitted by Bidder is substantially responsive technical bid or not unless the decision is found to be perverse and/or from mala fides or favouritism. Whether the bid submitted by the Bidder is suffers from material deviation and/or any substantial deviation should be left to the author of the Bid document and normally, the High Courts, in exercise of the powers under Article 226 of the Constitution of India, should not interfere with the same²³.

How to determine whether an action taken by a Government Authority is arbitrary or not?

A Government Authority must act fairly while dealing with the public and if there is any element of arbitrariness, the same is amenable to a challenge under the Writ Jurisdiction of the High Court. However, arbitrariness has to be determined from facts and circumstances of a particular case and no straight jacket formula can be applied. In Subodh Kumar (supra) the Supreme Court explained how to ascertain whether an act is arbitrary or not as follows-

“69. To ascertain whether an act is arbitrary or not, the court must carefully attend to the facts and the circumstances of the case. It should find out whether the impugned decision is based on any principle. If not, it may unerringly point to arbitrariness. If the act betrays caprice or the mere exhibition of the whim of the authority it would sufficiently bear the insignia of arbitrariness. In this regard supporting an order with a rationale which in the circumstances is found to be reasonable will go a long way to repel a challenge to State action. No doubt the reasons need not in every case be part of the order as such. If there is absence of good faith and the action is actuated with an oblique motive, it could be characterised as being arbitrary. A total non-application of mind without due regard to the rights of the parties and public interest may be a clear indicator of arbitrary action.

70. One another way, to assess whether an action complained of could be termed as arbitrary is by way of scrutinizing the reasons that have been assigned to such an action. It involves overseeing whether the reasons which have been cited if at all genuinely formed part of the decision-making process or whether they are merely a ruse. All decisions that are taken must earnestly be in lieu of the reasons and considerations that have been assigned to it. The Court must be mindful of the fact that it is not supposed to delve into every minute details of the reasoning assigned, it need not to go into a detailed exercise of assessing the pros and cons of the reasons itself, but should only see whether the reasons were earnest, genuine and had a rationale with the ultimate decision. What is under scrutiny in judicial review of an action is the decision-making process and whether there is any element of arbitrariness or mala fide.

71. Thus, the question to be answered in such situations is whether the decision was based on valid considerations. This is undertaken to ensure that the reasons assigned were the true motivations behind the action and it involves checking for the presence of any ulterior motives or irrelevant considerations that might have influenced the decision. The approach of the court must be to respect the expertise and discretion of administrative authorities while still protecting against arbitrary and capricious actions.” (emphasis supplied)

Bidder cannot be punished for not complying with non-essential terms of Tender

In Poddar Steel Corporation vs Ganesh Engineering Works & Ors.²⁴, the Supreme Court observed that a public authority is not bound to meticulously implement the tender terms and conditions. The court culled out the following two requirements in a ternder notice viz. –

Those which lay down the essential conditions of eligibility, and
The others which are merely ancillary or subsidiary with the main object to be achieved by the condition.

The Court observed that in the first case, the authority issuing the tender may be required to enforce the said conditions rigidly. However, in other cases, it must be open to the authority to deviate from and not insist upon strict literal compliance of the condition in appropriate cases. In Tata Cellular (supra) the Supreme Court referred to the above decision and in the facts and circumstances of the case before it, the court observed that the mistake committed by the bidder is in relation to a non-essential matter, otherwise, the bidder has shown every intention to comply with the terms of the bid.

In N.G. Projects Ltd. vs Vinod Kumar Jain & Ors.²⁵, the Supreme Court held that whether a term of the contract is essential or not is to be viewed from the perspective of the employer and by the employer. Whether a term of NIT is essential or not is a decision taken by the employer which should be respected, however if the employer has exercised the inherent authority to deviate from the essential term, such deviation has to be made applicable to al the bidders and potential bidders²⁶.

Blacklisting

The Government, apart from having the liberty to accept and reject the bid, as it may deem fit, also exercises powers to Blacklist a bidder from taking part in future tenders floated by the Government. The reasons for blacklisting may vary from case-to-case basis viz. bidder committing forgery, breach of contract causing losses to the Government, etc. Therefore, the Government, to protect its own interests, debars or blacklists a particular Bidder/Contractor. In Erusian Equipment & Chemicals Ltd. vs State of W.B.²⁷, the Supreme Court explained ‘blacklisting’ as follows-

“Blacklisting has the effect of preventing a person from privilege and advantage of entering into lawful relationship with the Government for purposes of gains.”

Like any other decision of the Government, while dealing with public, is required to pass the test of Article 14 of the Constitution, the action of blacklisting also is subjected to the test of Article 14.

Power of Public Authority to Blacklist is inherent

In Kulja Industries Ltd. vs Chief General Manager, Western Telecom BSNL & Ors.²⁸, the Government blacklisted the entity for allotment of future contracts on the account of committing fraud. The entity opposed it on the ground that its case does not fall in various instances as enumerated in the bid document, upon which the Government is entitled to blacklist. The Supreme Court held that the power to blacklist a contractor is inherent in the party allotting the contract. There is no need for any such power being specifically conferred by statute or reserved by contractor. However, the court reiterated the caveat, that such power should pass the test of Article 14 and must be devoid of malafide or arbitrariness. A similar view was taken in Patel Engineering vs Union of India²⁹. In M/s Sabharwal Medicos Pvt. Ltd vs UOI³⁰, the Government blacklisted two companies based upon the chargesheet filed by CBI against the two companies pertaining to fraudulent activities. The Delhi High Court held that the decision of the Government cannot be said to be arbitrary, illegal or perverse.

Primarily it is for the authority competent to order blacklisting/debarring to decide, whether the facts and circumstances of the case justify blacklisting/debarring or not. The Court cannot substitute its own views for the view of the competent authority in this regard and cannot interfere with the decision taken by it, unless it shown that that the decision is taken by an authority which was not competent in this regard and was taken without following the principles of natural justice³¹. The fact that blacklisting might have adverse effect on the Tenderers business prospects/commercial interest will not be a ground to not ban the tenderer as power of judicial review will not be invoked to protect private interest at the cost of public interest³².

Duration of Blacklisting

In State of Odisha and Ors vs Panda Infra projects Ltd.³³, the Government had formulated guidelines for duration of blacklisting which inter alia provided that blacklisting period per offence shall be limited to 3 years subject to an overall maximum cumulative period of 10 years for multiple offences. The Supreme Court however, disapproved of the aforesaid guidelines and observed as follows-

“Duration of blacklisting cannot be solely per offence. Seriousness of the lapse and the incident and/or gravity of the commission on the part of the contractor which led to the incident should be relevant considerations.”

Therefore, the gravity of offence committed by the contractor should be a guiding factor in determination of period of blacklisting.

Show cause notice precedes action of blacklisting

The Supreme Court, in a catena of judgments has held that a show cause notice must precede an action of blacklisting. The Government must comply with the principles of natural justice before completely debarring an entity from taking part in future tenders of the Government. In Gorkha Security Services vs Govt.³⁴, the Supreme Court observed that blacklisting amounts to “civil death” of a person who is foisted with the order of blacklisting. Therefore, it is imperative, that an opportunity must be afforded to an entity, to show cause, as to why it should not be blacklisted. In Raghunath v. State of Bihar³⁵, the Supreme Court observed that even if the rules do not provide for issuing a show cause notice, a show cause notice must be issued as it is an elementary principle of natural justice that parties affected by any order should have the right of being heard and making representations against the order. A show cause notice should be unambiguous, clearly disclosing the intention of the public authority to blacklist the entity if it fails to show any cause. In UMC Technologies Pvt. Ltd. vs Food Corporation of India³⁶, the Supreme Court held that the show cause notice issued by the authority was completely silent upon blacklisting and therefore, action of blacklisting in pursuance of the said show cause notice was bad in law.

Can Government Blacklist a Company without issuing showcause notice?

Issuance of a showcause notice before blacklisting a company is predicated upon the principles of natural justice. Everyone needs to be afforded an opportunity to present their case before an adverse action is taken against them. However, in some cases, courts have observed that principles of natural justice are very flexible principles, and they cannot be applied in a straight jacket formula. There may be cases when blacklisting of a company was completely warranted in law and even otherwise, given the facts and circumstances, so much so that even if show cause notice is issued and a fair hearing is accorded to the party, it would not make any difference and result in a blacklisting order nevertheless. In that eventuality, can a party against which the blacklisting order has been issued, seek quashing of the same merely on the technicality that show cause notice was not issued? If the court remits the matter back to the authority solely on this ground, then it would result in a empty formality resulting in blacklisting of the company again.

In Dharampal Satyapal Ltd vs CCE³⁷, the Government issued a notification granting tax benefits. However, after some time, by way of subsequent notification, the government withdrew the notification passed earlier and further ordered that any benefit obtained by an individual under the previous notification viz. tax exemptions, be refunded to the Government, which resulted in recovery proceedings against the Appellant. The Appellant opposed the action on the ground that a show cause notice ought to have been issued before initiation of recovery proceedings. After detailed discussion on the principles of natural justice, the court applied the useless formality theory, explicating that if the matter is remitted back to the authority for procedural compliance of issuing show cause notice, it would amount to an empty formality, resulting in the same outcome, viz order of refund, since the Government has withdrawn the notification and such action of withdrawal with retrospective effect has been upheld by the Court in separate proceedings.

Every violation of a facet of natural justice may not lead to the conclusion that the order passed is always null and void. The validity of the order has to be decided on the touchstone of “prejudice”.

The court however added a caveat that the authority cannot take upon itself to decide that granting of a fair hearing would be useless and proceed with blacklisting of the company directly. However, the court clarified that while the public authority is not equipped with such power, the court is very much empowered to consider whether any purpose would be served in remanding the case keeping in mind whether any prejudice is caused to the person against whom action is taken. Therefore, in the facts and circumstances of the above case, the court although stated that show cause notice ought to have been issued, however, in the facts and circumstances of the case, the court observed that issuance of show cause notice would be covered by “useless formality theory”. Issuance of show cause notice would be of no use if it amounts to completing a mere ritual of hearing without possibility of any change in the decision of the case on merits.

Therefore, the public authority is required to act in conformity with principles of natural justice. However, if the authority has taken a decision in violation of principles of natural justice, viz. blacklisting a company without issuing a show cause notice, the authority can always persuade the court to consider that issuance of show cause notice would have been an empty formality given the facts and circumstances of the case.

Determining Territorial Jurisdiction of the High Court for entertaining Writ Petition

Article 226 (1) of the Constitution of India confers power upon the High Court to issue Writs to any person, authority, including any government, that are situated “within its territory”. Therefore, a prima facie reading of the provision suggests that in order to invoke Article 226(1) of the Constitution, it is immaterial where the cause of action may have arisen, what is imperative is that the Respondent must be situated within the territorial limits of the High Court.

Article 226(2) on the other hand, confers additional power upon the High Court to entertain Writ Petition if cause of action wholly or in part, arises within its territory, notwithstanding that the seat of Government or Authority is not within its territory. Therefore, if cause of action has arisen within the jurisdiction of New Delhi, however, the concerned Government Authority against which action is sought, has its registered address in Mumbai, then Delhi High Court would have the jurisdiction to entertain the Writ Petition as per Article 226(2) of the Constitution.

It is now well settled that a Writ Petition is a Public Law remedy which may be filed by any person, however, the main Respondent in the Writ Petition should be either Government, Governmental Agencies, or State instrumentalities of a State within the meaning of Article 12³⁸. It is common knowledge that the Seat of Government of India is in New Delhi and the Government as such is located in Delhi³⁹. Mostly all the Public Sector Undertakings have their registered offices in New Delhi. Therefore, by a plain reading of Article 226(1) a party may invoke the Jurisdiction of Delhi High Court under Article 226(1) notwithstanding that the cause of action may have arisen entirely in a different State. If Article 226(1) is followed stricto sensu, then Delhi High Court would be inundated with Writ Petitions.

In Kusum Ingots and Alloys Ltd. vs Union of India⁴⁰ a three-judge bench of the Supreme Court was adjudicating the issue whether the Seat of the Parliament or the Legislature of a State would be a relevant factor for determining the territorial jurisdiction of a High Court to entertain a Writ Petition under Article 226 of the Constitution. In facts of this of this case, the Appellant was registered under the Companies Act having its head office at Mumbai. It obtained a loan from the Bhopal Branch of the State Bank of India. The Bank issued a notice for repayment of loan from Bhopal under the SARFAESI Act, 2002. The Appellant Company filed Writ Petition in the Delhi High Court challenging the vires of the Legislation which was dismissed by the Delhi High Court. In SLP to Supreme Court, the Appellant contended that since the Constitutionality of a Parliamentary Legislation was questioned, the High Court of Delhi had the requisite jurisdiction. The Supreme Court, however disagreed and clarified that a Writ Petition questioning a Parliamentary Act shall not be maintainable in the High Court of Delhi only because the Seat of the Union of India is in Delhi. The Court emphasized on “cause of action” and observed that in order to confer jurisdiction on a High Court to entertain Writ Petition, the entire or part of cause of action must have arisen within its jurisdiction.

A Division Bench of Delhi High Court in the matter of Ex-Rect./GD Vinod Kumar vs Union of India⁴¹ held that clauses (1) and (2) of Article 226 have to be read and construed in conjunction with each other and in order to take the benefit of the enlarged jurisdiction of Article 226, it would be obligatory upon the Petitioner to show that any cause of action or part thereof had arisen within the territorial jurisdiction of the High Court.

In Easter Coalfields & Ors. vs Kalyan Banerjee⁴² the Respondent was an Employee in the Appellant Company, serving at Mugma, Jharkhand. His services were terminated by the General Manager/Disciplinary Authority, which was also situated in Mugma, Jharkhand. However, the Respondent filed Writ Petition before the Calcutta High Court, challenging its termination and contended that since the head office of the Appellant is situated in Calcutta therefore, Calcutta High Court would have jurisdiction. The Division Bench of the High Court, however disagreed and dismissed the Petition by observing that simply because a head office of the Company is within the territorial limits of the Calcutta High Court, that will not give jurisdiction to the Court unless cause of action arises within the territorial limits of the Calcutta High Court. However, in Review proceedings, the aforesaid judgment was set aside which was challenged in SLP before the Supreme Court. The Supreme Court noted that entire cause of action had arisen in Jharkhand and in view of the law laid down in Kusum Ingots (supra) only that Court will have jurisdiction within whose territorial limits the entire cause of action has arisen. The Supreme Court further reiterated that merely because the head office of the Appellant company was situated in the State of West Bengal, the same by itself will not confer any jurisdiction on Calcutta High Court, particularly when the head office had nothing to do with the order of punishment passed against the Respondent. A full Bench of the Delhi High Court in the matter of Sterling Agro Industries vs Union of India⁴³, held that while entertaining Writ Petition the doctrine of forum conveniens and the nature of cause of action are required to be scrutinised upon the factual matrix of each case.

In Shrishti Udaipur Hotels and Resorts Pvt. Ltd. vs Housing and Urban Development Corporation Limited⁴⁴, the Delhi High Court was adjudicating a Writ Petition filed by the Petitioner challenging the Loan Recall Notice issued by the Respondent. In the facts of this case, the loan agreement between the parties was executed in Jaipur; the land in question where the project was being developed by the Petitioner was situated in Udaipur; and the impugned loan recall notice was issued by the Jaipur regional branch of the Respondent. However, the Petitioner invoked the jurisdiction of Delhi High Court by inter alia contending that the Registered office of the Respondent/Corporation was in Delhi. However, the Delhi High Court held that that this cannot be a ground to canvass that the cause of action has arisen within the territorial jurisdiction of Delhi High Court. The Court further observed that a bald submission made to the effect that ordinarily a decision to recall a loan from a client is taken at the head office of the Respondent/Corporation would not be of much assistance to the Petitioner. Since the entire cause of action had arisen in Jaipur, the Court held that the Writ Petition was not maintainable before Delhi High Court. In Jayshreyesh Kaushik vs Union of India & Anr.⁴⁵, the Delhi High Court similarly observed that since no part of cause of action had arisen within its territorial limits, merely impleading the Union of India through the Secretary, Government of India, Department of Atomic Energy, which is located in Delhi, would not by itself vest the Court with territorial jurisdiction.

In Centre for Public Interest Litigation vs Union of India & Ors⁴⁶, a Division Bench of the Delhi High Court was adjudicating a Writ Petition filed by the Petitioner challenging the e-tender process for allotment of land which was situated in Gujrat. The Respondent opposed the Petition on the ground of territorial jurisdiction by contending that the E-tender process took place in Gujrat, the land for which tender has been issued is situated in Gujrat; the lease agreement was executed in Gujrat, and the decision-making authority is also situated in Gujrat, therefore no part of cause of action arose within the territorial limits of Delhi High Court. The Respondent also argued that merely because the Union of India has been arrayed as Respondent, that would not confer any right upon the Petitioner to file Petition before Delhi High Court. The Court acceded to the submissions made by the Respondents and noted that since no part of cause of action arose within the territorial limits of the Delhi High Court, therefore, Writ Petition was not maintainable.

In Dr. Rakesh Dwivedi vs Coal India Ltd.⁴⁷, the Petitioner argued that the Delhi High Court would have the territorial jurisdiction to entertain the Writ Petition on the following grounds-

One of the Offices of Coal India Ltd. was located in Delhi
Petitioner is posted and works for gain in Delhi
The communications with regard to his grievances were addressed to the official Respondents from Delhi.
The response to one of the representations was received by the Petitioner in Delhi.

The Delhi High Court, however, observed that none of the above factors would confer territorial jurisdiction upon the Court. The Court reiterated that even though the Corporate Office of the Respondent is located in Delhi but that by itself will not clothe Delhi High Court with jurisdiction to entertain the Petition. The Court further emphasized that the letter and spirit of Article 226(2) is that no High Court shall have territorial jurisdiction to entertain a Petition unless a cause of action arises in its territorial limits and the location of the office of the Authority or Department will not be enough to confer the jurisdiction. Since no part of cause of action arose within the territorial limits of Delhi High Court, the Court dismissed the Petition for lack of jurisdiction.

The aforesaid line of authorities suggest that the sole determining and decisive factor for invoking Writ Jurisdiction of the High Court, insofar the territorial limits are concerned, is “cause of action”. The Petitioner must demonstrate that the cause of action, wholly or in part, arose within the territorial limits of the High Court and the mere fact that the seat of the Government or the concerned department is located within the territorial limits of the High Court, will not confer jurisdiction upon the Court⁴⁸. Even though clauses (1) and (2) of Article 226 are separate, with clause (2) extending the territorial limits of the High Court to entertain Writ Petition, however, as observed by the Division Bench of Delhi High Court in Ex-Rect./GD Vinod Kumar (supra), both the clauses have to be read and construed in conjunction with each other. In Bharati Nidhi Ltd. vs Securities and Exchange Board of India & Ors.⁴⁹ 8586 the Delhi High Court held that even if a small part of cause of action is established and the same is found to be non-integral for non-material to the lis, the court may invoke the doctrine of forum non-conveniens and decline the exercise its writ jurisdiction. This was further affirmed by the Division Bench⁵⁰ In Mr. Gautam Mondal vs Union of India⁵¹2025 the division bench of Delhi High Court observed that passing of order in Delh is not enough to invoke its writ jurisdiction. In the aforesaid case, entire cause of action had arisen in West Bengal therefore, the Court declined to exercise Writ jurisdiction.

The question as to whether the Court has territorial jurisdiction to entertain a Writ Petition must be arrived at on the basis of averments made in the Petition, the truth or otherwise thereof being immaterial⁵¹Oil and Natural Gas Commission vs Utpal Kumar Basu and Ors. (1994) 4 SCC 711. All the necessary facts must form an “integral part” of cause of action. The fact which is neither material nor essential nor integral part of cause of action would not constitute a part of cause of action within the meaning of clause (2) of Article 226 of the Constitution⁵². The mere fact that the Writ Petitioner carries on business at Calcutta or that the reply to the correspondence made by it was received at Calcutta is not an integral part of the cause of action so as to confer Calcutta High Court with jurisdiction to entertain the Petition⁵³.

Conclusion

Article 14 of the Constitution of India forms the touchstone upon which the Courts can adjudicate the decision-making process of a public authority. The courts, as a matter of principle, abstain from interfering with the decision-making process of a public authority as it amounts to entering into the sphere of the executive. When the decision-making process is challenged, the party challenging has to discharge a heavy burden, as observed by Supreme Court in Kasturi Lal Lakshmi Reddy (supra), that the decision of the public authority was beset with arbitrariness.

By Daksh Pandit