“Specious Reason, Smacks of Arbitrariness”: J&K High Court Quashes Cancellation of Borehole Contract, Directs State to Honour Allotment
Sanchayita Lahkar
The High Court of Jammu & Kashmir and Ladakh quashed the cancellation of a drilling and hand pump installation contract awarded to a private firm, citing arbitrary action and violation of principles of natural justice by the State authorities. A Single Bench of Justice Sanjay Dhar directed the respondents to allow the petitioner to execute the work under the original allotment orders, observing that the cancellation was based on a “specious” ground and was unsustainable in law.
The petitioner, a proprietor of a firm, challenged the cancellation of allotment orders issued in his favour for drilling and installation works in District Poonch under the District Capex Budget. The petitioner was declared the successful bidder following his participation in e-NIT Nos. GWD/84 of 2024-25 and GWD/89 of 2024-25 dated 12.10.2024, resulting in allotment orders issued on 18.11.2024. These orders covered “Deep Drilling of 125 MM dia Bore holes by using ODEX method including, providing, installation, testing commissioning of Mark-II Hand Pumps and construction of platforms at 23 & 13 number locations in District Poonch on turnkey basis (EPC) under District Capex Budget.”
However, the allotment orders were cancelled by respondent No. 4 through communication No. GWD/4878-81 dated 26.11.2024, citing lack of financial resources. The petitioner alleged that the cancellation was mala fide and politically motivated, asserting that the Minister in charge had influenced the decision due to political rivalry, as the petitioner’s father had recently contested Assembly Elections against the said Minister.
It was further submitted that the petitioner had commenced execution of the works following the issuance of allotment orders and that the cancellation had caused significant financial loss. The petitioner argued that the impugned cancellation lacked a valid legal basis, as administrative approvals and necessary funds were already in place.
The respondents, through their reply, stated that the works were cancelled following deliberations by the contract committee, which identified non-availability of funds under the PRI grants for District Poonch as the reason. The committee had also noted the petitioner’s alleged failure to execute the agreement within seven days, as required under Clause (22) of the e-NIT terms and conditions. The respondents claimed that non-execution of the agreement and fund shortages justified the decision to cancel the allotment.
The petitioner countered this claim by submitting copies of administrative approvals, including Order No. 105 DDCP of 2024 dated 26.07.2024 and Order No. 197 DDCP of 2024 dated 14.08.2024, which showed that funds were approved under the Capex Budget (SSY) 2024-25 for the execution of the works allocated to the petitioner.
Additionally, the petitioner provided an affidavit referencing information obtained via an RTI reply, which confirmed that funds were released to the Executive Engineer (M) Ground Water Division Jammu through BEAMS under the PRI Grants of District Capex Budget 2024-25. The respondents admitted that funds were released on 01.01.2025 but argued that this occurred after the cancellation orders had been issued.
The court, after examining the records and submissions, observed that the cancellation letter referred solely to lack of funds as the reason, with no mention of the petitioner’s alleged failure to execute the agreement. The court stated that “it is not open to the respondents to introduce new grounds through their reply affidavit,” referring to the Supreme Court’s judgment in Mohinder Singh Gill v. Chief Election Commissioner & Ors., 1978(1) SCC 405, which held that “where an authority makes an order based on certain grounds its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons.”
The court recorded that “the contention of the respondents in this regard cannot be accepted,” and noted that no documentation was presented to demonstrate that the petitioner was ever asked to execute the agreement
.
Justice Dhar recorded that “once administrative approval was accorded for execution of the works, it has to be inferred that funds were available with the respondents and it was only a matter of time till the same were uploaded on BEAMS.” The court found that the respondents’ explanation regarding the non-availability of funds was unsatisfactory, terming the reason “specious.”
The court further recorded that the cancellation violated principles of fairness and natural justice, observing that “once the respondents accepted the bid of the petitioner and issued allotment orders in his favour, a complete and binding contract came into being between the parties giving rise to rights and liabilities amongst the parties inter se.” The court stated that the respondents were obliged to issue notice to the petitioner before taking any action prejudicial to his interests under the contract.
Justice Dhar referred to the Supreme Court decision in R.D. Shetty v. International Airport Authority, 1979 (3) SCC 489, observing that “actions of the State authorities even in matters relating to contract have to meet the tests of fairness and reasonableness.”
The court concluded that the respondents' action “smacks of arbitrariness” and failed to adhere to principles of natural justice, rendering the cancellation legally unsustainable.
Accordingly, the court allowed the writ petition and quashed the cancellation letter dated 26.11.2024, directing the respondents to permit the petitioner to execute the works as per the terms of the original allotment orders.
The court further directed that “the respondents are directed to permit the petitioner to execute the work in accordance with the terms and conditions of the contract/allotment orders.”
Advocates Representing the Parties
For Petitioner: F.A. Natnoo, Advocate
For Respondents: Monika Kohli, Senior Additional Advocate General
Case Title: M/s Mohd Asif through its Proprietor Mohd. Asif v. Union Territory of Jammu and Kashmir and Others
Neutral Citation: 2025: JKHCL:201
Case Number: Writ Petition (Civil) No. 2876/2024
Bench: Justice Sanjay Dhar
[Read/Download order]
