Bombay HC Slams BEST For Arbitrary And Illegal Order Terminating Contract For 40 E-Buses; Says Extraneous Reasons Might Be At Play [Read Judgment]

The Bombay High Court on Tuesday quashed a notice issued by the Brihanmumbai Electric Supply & Transport Undertaking (BEST) terminating a contract with a private company for 40 electric buses.

The bench comprising Acting Chief Justice Naresh H. Patil and Justice GS Kulkarni also rapped the civic transport and electricity provider, opining that it “not only acted high handedly and arbitrarily in taking the impugned decision, but also attempted to abuse the process of law least expected from a public body”.

The court was hearing a petition filed by Olectra Greentec, a Hyderabad-based firm, challenging a notice issued on August 30 by BEST, terminating the former’s contract to supply the electric buses. Olectra had, in February, been awarded a contract to supply 20 air-conditioned and 20 non-air-conditioned electric buses, and by June, it had manufactured 24 electric buses, in view of the stipulation that 25% of the buses had to be delivered in three months.

The award was, however, terminated in August, with BEST claiming that the work order was in the nature of a letter of intent and merely an expression of intention to enter into a contract.

The court, however, rejected this argument, explaining, “The record indicates and that there cannot be a semblance of doubt that the petitioner responded to the tender. The petitioner’s tender/bid was accepted by issuance of, not only a letter of acceptance, but a formal contract work order. Above all there is a candid acceptance of the award of the contract to the petitioner, in the BEST’s letter dated 28 May 2018 addressed to the DHI, as referred by us above. If this be the case, then for the BEST to say that there is no contract between the parties, goes against the fundamental tenets of law on contracts and the basic principles of commercial jurisprudence.”

BEST had also claimed to have terminated the contract on the basis that the Centre had imposed a condition of joint ownership of the vehicles. This, it had said, changed the nature of the tender, requiring termination of the contract. The court refused to accept this contention as well, observing,

“We find this reason astonishing and certainly not appealing to our judicial conscience. Perusal of the record do not inspire any confidence for the BEST to take such a stand. We feel that there may be some extraneous reasons which have compelled the BEST to deviate itself from its normal and lawful course expected of the statutory authority.”

The communication terminating the contract was therefore ruled to be “ex facie arbitrary and illegal” and unconstitutional, with the court observing, “…applying the test of the manner, the method and the motive of a decision expected from a statutory body and when tested on the touchstone of Article 14, we have no manner of doubt there is a breach of the statutory obligation as conferred on the BEST to act in a fair, transparent and reasonable manner and in public interest, in taking the impugned decision, to terminate the petitioner’s contract and/or withdraw the work order.”