Introduction:

In the case of M/s Bedi & Bedi Associates v. Chandigarh Administration and others, the Punjab & Haryana High Court addressed the unilateral cancellation of a bid contract by the Chandigarh Administration concerning a Nursing Home Site. citeturn0search0

M/s Bedi & Bedi Associates (the petitioner) challenged the Chandigarh Administration’s decision to cancel the execution of an agreement to sell a Nursing Home Site after the petitioner had deposited the entire sale consideration. The petitioner sought the quashing of the cancellation letter and requested the court to direct the respondents to execute the registered deed of conveyance in their favor.

Petitioner’s Arguments:

The petitioner’s senior counsel contended that:

• Lack of Authority for Cancellation: The Chandigarh Administration had no authority to unilaterally review or cancel the bid after its acceptance. Such a review or cancellation could only occur before the bid’s acceptance.
• Fulfillment of Obligations: The petitioner had discharged all obligations by depositing the entire sale consideration. Despite this, the respondents failed to execute the deed, indicating a breach of contractual obligations.
• Violation of Promissory Estoppel and Legitimate Expectation: The unilateral cancellation violated the doctrines of promissory estoppel and legitimate expectation, as the petitioner had relied on the administration’s promise and had a reasonable expectation of contract fulfillment.

Respondents’ Arguments:

The respondents, represented by senior counsel, argued that:

• Authority to Cancel: The administration retained the power to cancel the auction even after bid confirmation if deemed necessary.
• Public Interest Considerations: The cancellation was in the public interest, and such interests eclipse the doctrines of promissory estoppel and legitimate expectation.
• Procedural Adherence: The administration followed due procedure in canceling the bid and communicated the decision appropriately to the petitioner.

Court’s Observations and Judgment:

The bench, comprising Justice Sureshwar Thakur and Justice Vikas Suri, made several critical observations:

• Sanctity of Contracts under Article 299: The court emphasized that contracts entered into by the Union of India or its federal units, executed in the name of the President or Governors as per Article 299 of the Constitution, carry constitutional sanctity. Assurances made under such contracts must be met with utmost deference.
• Rule of Law and State Obligations: Allowing state authorities to renege on contractual promises undermines the rule of law, a fundamental pillar of the Constitution. The court stated, “If there is yet an endowment of permissibility to State or its agencies to renege from the apposite contractual promises… the basis of a welfare state, besides the basis of the rule of law… would become ineffective.”
• Application of Promissory Estoppel and Legitimate Expectation: The court held that the doctrines of promissory estoppel and legitimate expectation, rooted in equity, were applicable. The petitioner’s reliance on the administration’s promise was justified, and the unilateral cancellation breached these principles.
• Public Interest vs. Equitable Doctrines: While public interest and policy are paramount, the court found no compelling public interest justifying the cancellation post-bid confirmation. Thus, the equitable doctrines were not eclipsed in this scenario.

Conclusion:

The Punjab & Haryana High Court concluded that the Chandigarh Administration’s unilateral cancellation of the bid, after the petitioner fulfilled all obligations, was unjustified and violated constitutional principles. The court directed the respondents to execute the registered deed of conveyance in favor of the petitioner and issue the allotment letter, thereby allowing the plea.