Introduction:

In a significant ruling reinforcing the principles of fairness and reasonableness in government dealings, particularly in contractual matters, the Jammu and Kashmir and Ladakh High Court has held that the validity of an administrative order must be judged solely by the reasons cited at the time of issuance and cannot be later bolstered by additional grounds introduced through affidavits or other means. The judgment, delivered by Justice Sanjay Dhar, came in the case of M/s Mohd Asif Vs UT of J&K [2025 LiveLaw (JKL) 108], wherein the Court quashed the cancellation of a contract awarded to M/s Mohd Asif for deep drilling and installation of hand pumps in Poonch district. The petitioner had successfully bid for the execution of the project at 23 locations, and allotment orders were issued on November 18, 2024. However, just days later, on November 26, 2024, the Executive Engineer of the Jal Shakti Department (Mechanical) abruptly cancelled the contract, citing a lack of funds. Aggrieved by this sudden cancellation, the petitioner approached the High Court, alleging mala fide intentions behind the decision. He contended that the cancellation was orchestrated by a Minister due to political rivalry with his father and further argued that the cited reason of fund unavailability was factually incorrect. Justice Dhar, after meticulously examining the legal and factual matrix, ruled that the respondents acted arbitrarily by cancelling the allotment without notice or opportunity of hearing and directed that the petitioner be permitted to execute the work as per the contract terms.

Arguments of Both Sides:

The petitioner, M/s Mohd Asif, argued that he had lawfully secured the contract through the tender process and had already commenced work when the allotment was arbitrarily cancelled. He asserted that the reason cited for cancellation—non-availability of funds—was a facade, as funds had been sanctioned for the project. To substantiate his claim, he furnished administrative approvals and RTI responses proving that the project had received financial clearance. Additionally, he contended that the decision was politically motivated, influenced by a Minister who sought to undermine his business interests due to animosity with his father. The petitioner also pointed out that the cancellation caused him financial hardship since he had already invested resources in mobilizing equipment and personnel for the project. He further argued that the cancellation order did not mention any failure on his part to execute the agreement within the stipulated seven days, and therefore, the respondents could not introduce this new ground in their reply affidavit. Relying on the Supreme Court’s decision in Mohinder Singh Gill vs. The Chief Election Commissioner (1978), he contended that an order’s validity must be judged on the reasons given at the time of its issuance and not by subsequently introduced justifications.

On the other hand, the respondents, including the Executive Engineer of the Jal Shakti Department, defended the cancellation by maintaining that funds were not available at the time of issuance of the allotment order, making the award of the contract unsustainable. They also attempted to introduce an additional ground in their reply affidavit, arguing that the petitioner had failed to execute the agreement within seven days of receiving the allotment order. They contended that this failure provided a separate justification for the cancellation. Moreover, they argued that the petitioner’s allegations of political influence were baseless and unsubstantiated. They maintained that the funds were only released on BEAMS (Budget Estimation, Allocation & Monitoring System) on January 1, 2025, which postdated the cancellation order, and therefore, the department acted within its rights to annul the contract.

Court’s Judgment:

After carefully examining the legal and factual aspects, Justice Sanjay Dhar rejected the respondents’ arguments and ruled in favor of the petitioner. The Court emphasized that the primary reason cited for the cancellation—non-availability of funds—was factually incorrect, as the petitioner had produced sufficient documentary evidence proving that financial sanction for the project had been granted. The Court noted that administrative approval for government projects is granted only when funds are available, meaning that the funds’ release on BEAMS at a later date did not negate their prior availability. Addressing the respondents’ attempt to introduce a new justification—petitioner’s failure to execute the agreement within seven days—the Court found this to be impermissible. It relied on the Supreme Court’s decision in Mohinder Singh Gill, which laid down the principle that an order must be justified by the reasons cited at the time of its issuance and cannot be subsequently supplemented with new grounds in affidavits. The Court also invoked the Supreme Court’s ruling in R.D. Shetty vs. International Airport Authority (1979), which held that even in contractual matters, state authorities must adhere to the principles of fairness and reasonableness. Given that the petitioner’s contract had been validly awarded through a transparent tender process, and he had already begun work, the Court found the respondents’ actions arbitrary and in violation of principles of natural justice. The Court observed that once the government had accepted the petitioner’s bid and issued the allotment orders, a binding contractual obligation had arisen. It further held that cancellation without prior notice or an opportunity for the petitioner to be heard was legally untenable. Consequently, the Court allowed the writ petition and quashed the cancellation order. The respondents were directed to permit the petitioner to execute the work in accordance with the original terms of the contract.