M/S. Choudhury Medical Store, Bbsr Vs Union of India

1 . Instant writ petition is filed by the petitioner for quashment of the eviction orders dated 21^st September, 2023 and 1^st November, 2023 passed by opposite party No. 4 under Annexures-8 & 10 respectively with a direction to opposite party No. 2 to allow him to run 24X7 medicine shop inside the campus of AIIMS after renewal of the contract dated 1^st November, 2021 on the grounds stated.

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2 . The petitioner is a registered proprietorship firm involved in selling of medicines and other products from a store at AIIMS, Bhubaneswar, which was allowed for a period of two years. According to the petitioner, opposite party No.3 invited tender on 28^th October, 2020 for opening and running of 24X7 pharmacy/chemist shop within the campus of AIIMS and pursuant to the said tender call notice, the petitioner participated in the

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bidding process and finally, the Technical Evaluation Committee found it to be qualified, a decision stood was approved by the competent authority. It is further pleaded that opposite party No.2 thereafter issued a notice on 8^th February, 2021 for opening of the financial bid with the date and time fixed and the process included scrutiny of all the documents upon submission of the documents in pursuance of the request received by letter dated 11^th January 2021, whereafter, the petitioner was declared as L-1 bidder. It is stated that against the bid of the petitioner, the other bidders approached this Court in W.P.(C) No. 9899 of 2021 and the same was disposed of on 31^st March, 2021 and then, RVWPET No.89 of 2021 was filed, which was dismissed on 5^th July, 2021. It is pleaded that after validity of the tender process was upheld in favour of the petitioner, opposite party No. 3 issued the work order dated 3^rd May, 2021 in its favour with an agreement executed on 1^st November, 2020. It is claimed that the petitioner availed a loan from the Bank sanctioned in the year 2022 in connection with the shop but in the meanwhile, received a termination notice dated 2^nd December, 2022 (Annexure-3) with an intimation that such termination of contract is with immediate effect carrying a direction to vacate the premises and being aggrieved, W.P.(C) No. 34167 of 2022 was filed, which was disposed of by order dated 15^th December, 2022 (Annexure-4). It is alleged that without complying the directions issued by this Court under Annexure-4, opposite party No.4 passed the order dated 21^st March, 2023 (Annexure-5) thereby terminating the contract of the petitioner to run the shop inside AIIMS campus

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and was communicated via e-mail on 24^th March, 2023 to vacate the hospital premises within five days from the date of receipt of such intimation. It is further alleged that the orders of termination of contract and vacation of the premises by the decision of opposite party No.4 is without following due process of law, inasmuch as, the petitioner was not provided any opportunity of hearing and furthermore, there has been non-compliance of the Court‟s order dated 15^th December, 2022. According to the petitioner, being aggrieved of the issuance of the termination order dated 21^st March, 2023 followed by a notice to vacate the premises of the hospital, W.P.(C) No. 9406 of 2023 was filed and thereafter, CONTC No. 2013 of 2023, later to which, opposite party No.4 withdrew the show cause issued to them so also termination and eviction orders and tendered unconditional apology, whereafter, the contempt proceeding was dropped by an order under Annexure-7 series and when the shop was once again made operational, letter of closure of contract and eviction dated 21^st September, 2023 (Annexure-8) was received without assigning any reason for renewal of the same and on receipt of such letter, representation was submitted with a plea that previous vendor was granted several extensions and was allowed to run the shop for almost six years and hence, in view of such renewal clause, there has been a legitimate expectation for grant of renewal but the same has been denied by opposite party No.4 with a direction to vacate and handover the premises by letter dated 1^st November, 2023 (Annexure-10). Such eviction notice and non-renewal of the contract by the opposite parties with the

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petitioner, as pleaded further, is illegal and arbitrary, hence, therefore, the same is liable to be interfered with.

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3 . On contrary, the opposite parties justify eviction and termination of contract by orders vide Annexures-8 & 10 with a plea that discretion lies with the Authority concerned and in the facts and circumstances of the case, such renewal of contract was not possible and therefore, it was declined. The contention is that Annexures-8 & 10 cannot be termed as notice and action for eviction and as far as Annexure-8 is concerned, the same is merely an intimation to the petitioner to vacate the premises on completion of contractual period executed on 1^st November, 2023. It is further pleaded that Annexure-10 is a reply to the notice of renewal of contract where the authority expressed its view not to extend or renew the same, so therefore, the action is not in relation to eviction. In a reply to the petitioner‟s plea that the action is unjustified, it is also pleaded by the opposite parties that Annexures- 8 & 10 does not disclose action for eviction in terms of the OPP (Eviction of Unauthorized Occupants) Act. It is again pleaded that the petitioner since did not vacate the premises after expiry of the contract period, only thereafter, action was initiated under the aforesaid Act, during which, opportunity to file a show case was provided and hence, the contention that the proceeding is not tenable is liable to be rejected as any such occupation of the premises inside the campus of AIIMS, Bhubaneswar on expiry of the contract has become unauthorized. Referring to Annexure-B/2 series, it is claimed that a criminal action against the petitioner is pending in 2 C.C.Case No. 317 of W.P. (C) No.35991 of 2023 Page 4 of 34

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2007 in the file of learned SDJM, Sambalpur and since there has been allegations received towards distribution of wrong medicines etc. with reference to the complaints under Annexure-C/2 & D/2 and the fact that issuance of work order is based on documents with false annual turnover shown and submitted at the time of bid in respect of which a complaint dated 16^th November, 2022 (Annexure-E/2) was received and with other events for selling expiry goods and medicines on a complaint (Annexure F/2), wherein, the petitioner was directed to file a show cause, such a decision was taken not to continue with the contract but to terminate it in order to avoid future litigation, hence, such notice was issued to vacate the premises with the expiry of the contract period and when it was not vacated, the same was followed by an action under the OPP (Eviction of Unauthorized Occupants) Act.

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4 . Heard Ms. Rath, learned Senior Advocate and Mr. Mohanty, learned counsel for AIIMS.

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5 . On the following grounds the eviction notice and closure of contract is challenged which are as follows: (i) the decision is without providing an opportunity to show cause vis-à-vis renewal of contract thereby violation of principles of natural justice;(ii) opposite parties have not provided any reason as to why the contract is not to be renewed even though there is a clause for renewal; (iii) the Authority concerned did not follow due process while exercising the discretion vested, an exercise which has not been carried out considering the clause for renewal of contract;

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(iv) the entire process not to renew the contract followed by termination orders and the malafide conduct of the opposite parties clearly reflect the vindictive attitude towards the petitioner ignoring the fact that the previous administration of AIIMS granted extension to the earlier vendor for about six years but in the present case, it has been given a go by;(v) the State cannot act whimsically and arbitrarily even in contractual matters and the Authority being an instrumentality of State cannot resort to such actions, which are liable to judicial review; (vi) the premise upon which the termination of contract and eviction notice stands is on account of the performance of the petitioner not being satisfactory but without conceding the same, any such opinion by the Authority is without carrying out a proper exercise and hence, the same lacked due diligence and against the spirit of the contract with a renewal clause therein; (vii) the performance of the petitioner has all been along satisfactory and any such stigmatic orders without offering an opportunity of hearing to the petitioner is illegal and unjustified and also in violation of the principles of audi alteram partem; (viii) the opposite parties being authorities under law and parties to the execution of contract is to honour public trust and hence, bound to act with prudence but in the case at hand, though the petitioner was allowed to run the business inside the campus of AIIMS, but suddenly without any opportunity to explain as to why the contract could not be renewed, decided to terminate the same with an eviction followed by a proceeding under the OPP (Eviction of Unauthorized Occupants) Act; (ix) since the petitioner fulfills all

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the criteria and was granted the tender to run the medicine shop based on a contract with huge investment made, renewal of it was legitimately expected and hence, the action of the opposite parties is in contravention of Articles 19(1)(g) and 21 of the Constitution of India; (x) the State in case acts arbitrarily even in the realm of contract, such action can be a subject of challenge and could be interfered with in exercise of writ jurisdiction under Article 226 of the Constitution of India;(xi) the opposite parties are instrumentalities of the State within the meaning of Article 12 of the Constitution of India and therefore, are bound to act in a fair and transparent manner but then, the petitioner was never called upon to explain about the non-renewal of the contract thereby failing in duty cast upon them;(xii) judicial review of administrative decision is permissible in law on certain grounds where there is clear violation of principles of natural justice and the authority concerned acted arbitrarily when the settled position of law is that any such discretion with respect to tenders is not unfettered; (xiii) abrupt closure of the medical shop is an arbitrary action of the opposite parties and till date, there has been no alternative arrangement for a 24X7 medical shop within the campus of AIIMS and hence, the public would be affected in case of immediate closure and in so far as the petitioner is concerned, it is selling medicines at discount in respect of generic products, therefore, without any such arrangement, the patients visiting the hospital may have to purchase medicines at a much higher price from the shops situate outside AIIMS; (xiv) the contract between the petitioner and opposite parties did contain a renewal clause

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for further two years of one year each at the discretion of the Director, AIIMS, Bhubaneswar subject to satisfactory performance and enhanced payment of compensation but while not renewing the contract, in utter violation of the principles of natural justice, the opposite parties have acted in a most arbitrary and unlawful manner and declined renewal followed by termination of the contract on its expiry.

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6 . Ms. Rath, learned Senior Advocate while advancing argument cited number of authorities which are to be discussed hereafter. It is submitted by Ms. Rath that the writ petition is maintainable in contractual matters and Article 14 is also applicable to the obligations arising therefrom where State instrumentalities are parties to it and such remedy provides effective prevention of miscarriage of justice and in support of such contention, the decision of the Apex Court in ABL International Ltd. and another Vrs. Export Credit Guarantee Corporation of India Ltd. & other s 2004(3) SCC553 and authority reported in 2023(2) SCC 703 are relied on. Further by referring to a citation in the case of Reliance Airport Developers (p) Ltd. Vrs. Airport Authority of India and others 2006(10) SCC 1 , Ms. Rath, learned Senior Advocate would submit that renewal of contract is at the discretion of the Director of AIIMS and of course such renewal cannot be claimed as a matter of right but discretion to be exercised by the authority cannot be whimsical and not by considering all the relevant facts since the settled law discussed therein implies discretion according to rules of reason and justice, for absence of reason not to waive renew of the contract. Ms. Rath also cited the following decisions, W.P. (C) No.35991 of 2023 Page 8 of 34

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such as, Mohindra Singh Gill & Another Vrs. The Chief Election Commissioner, New Delhi and Others 1978 (1) SCC 405 ; Ramchandra Muralilal Bhattad and Others Vrs. State of Maharashtra and Others 2007(2) SCC 588 ; Dharampal Satyapal Limited Vrs. Deputy Commissioner of Central Excise, Gauhati and Others 2015 (8) SCC 519 ; Kranti Associates Pvt. Ltd. Vrs. Masood Ahemed Khan and Others 2010 (9) SCC 496 and on the point of action to be arbitrary and hence, is violative of Article 14 of the Constitution of India: Menaka Gandhi Vrs. Union of India 1978(1) SCC 248 . In support of legitimate expectation, Ms. Rath referring to the decision in 2021(II) OLR 568 contends that such expectation was with the petitioner in view of the renewal clause of the contract and for the fact that its performance to be satisfactory and that similar contract having been renewed on earlier occasions. In other words, it is submitted that the petitioner had all the reasons to expect renewal of the contract and hence, had the legitimate expectation. Ms. Rath contends that the stand taken by the opposite parties in no way sustainable in law by the very conduct of the authority concerned and further cited a decision of the Apex Court reported in 2007 (1) SCC 33 : MANU/OR/0457/2007 . It is contended that the reason not to renew the contract cannot be supplemented with affidavits filed in Court by the opposite parties and in that regard, Ms. Rath referred to a decision reported in 1978(1) SCC 405 and hence, all such grounds raised at present cannot be entertained, so to say, the reply affidavit is only an attempt to justify the impugned decision. Lastly, Ms. Rath, learned Senior Advocate would submit that even

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existence of arbitration clause in view of the decision of the Supreme Court in 2021 (6) SCC 15 does not debar a matter to be entertained with a writ petition filed seeking enforcement of fundamental right and where there is infringement of natural justice and in the case of the petitioner, violation of principle of natural justice and rights guaranteed under Article 14 of the Constitution of India has taken place.

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7 . In reply to the counter, the petitioner filed the rejoinder affidavit and in addition to the grounds pleaded, it is stated that the relief sought for is to be entertained notwithstanding any such alternative forum to challenge the action against eviction. It is reiterated that the opposite parties clearly misutilised the discretionary power and acted in an arbitrary manner to terminate the contract notwithstanding a clause in agreement itself that the arrangement is to continue till such time a new arrangement with a 24X7 shop coming up inside the campus of AIIMS. The opposite parties have denied the allegations filing the affidavit to the rejoinder and pleaded that the action is on account of the illegalities committed by the petitioner and for having received complaints against it and for the fact that fraud was perpetuated at the time of bidding which was revealed later on. In response to the reply affidavit of the opposite parties, the petitioner also filed a rejoinder and referring to the decision of the Apex Court in Mohindra Singh Gill & Another Vrs. The Chief Election Commissioner, New Delhi and Others 1978 (1) SCC 405 pleaded that with the counter on record and reasons assigned, it cannot substitute the eviction orders as the same is impermissible in view W.P. (C) No.35991 of 2023 Page 10 of 34

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of the law laid down therein. In reply to the contention of the opposite parties, in the rejoinder affidavit, it is stated that there has been satisfactory performance of the petitioner as no such allegations were ever proved and hence, non-renewal of the agreement on any such ground is a false plea altogether by claiming further that the validity of the tender has been upheld in W.P.(C) Nos.5072,8917,9899 & 20198 of 2021; RVWPET No. 89 of 2021; and finally, SLP(C) No. 11564-11565 of 2021, hence, even the allegation of fraud against the petitioner is a falsehood. It is rather alleged that the opposite parties are hell bent to not renew the contract with an oblique motive and accordingly, did so and further initiated action under the OPP (Eviction of Unauthorized Occupants) Act to evict the petitioner and the reason for such action, lies somewhere else. As a matter of fact one of the bidders, namely, M/s., A.K. Dey and Night Medical Store challenged the tender floated by AIIMS for opening and running 24X7 pharmacy with Chemist store within its campus awarding the contract in favour of the petitioner by filing W.P.(C) No. 9899 of 2021 and it was disposed of and dismissed by an order dated 31^st March, 2021 and citing it and other grounds, the contention of the petitioner is that there has been no fraud or any misrepresentation proved during the bidding process and therefore, the opposite parties cannot be permitted to take any such plea.

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8 . The first and foremost question is, whether, the writ petition is maintainable and if at all, the Court should interfere in the contractual matters. In support of maintainability, Ms. Rath, learned Senior Advocate has referred to the case in ABL W.P. (C) No.35991 of 2023 Page 11 of 34

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International Ltd. (supra). For better understanding, it is apposite to extract of the relevant paragraphs of the said decision and the same is reproduced below :

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“23 . xxx once State or an instrumentality of State is a party to the contract, it has an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14 of the Constitution of India. Therefore, if by the impugned repudiation of the claim of the appellants, the first respondent as an instrumentality of the State has acted in contravention of the above said requirement of Article 14, then we have no hesitation that a writ court can issue suitable directions to set right the arbitrary actions of the first respondent. In this context, we may note that though the first respondent is a company registered under the Companies Act, it is wholly owned by the Government of India. The total subscribed share capital of this company is 2,50,000 shares out of which 2,49,998 shares are held by the President of India while one each share is held by the Joint Secretary, Ministry of Commerce and Industry and Officer on Special Duty, Ministry of Commerce and Industry respectively. The objects enumerated in the Memorandum of Association of the first respondent at Para 10 states:

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"To undertake such functions as may be entrusted to it by Government from time to time, including grant of credits and guarantees in foreign currency for the purpose of facilitating the import of raw materials and semi-finished goods for manufacture or processing goods for export."

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Para 11 of the said object reads thus:

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"To act as agent of the Government, or with the sanction of the Government on its own account, to give the guarantees, undertake such responsibilities

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and discharge such functions as are considered by the Government as necessary in national interest."

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“24. It is clear from the above two objects of the company that apart from the fact that the company is wholly a Government owned company, it discharges the functions of the Government and acts as an agent of the Government even when it gives guarantees and it has a responsibility to discharge such functions in the national interest. In this background, it will be futile to contend that the actions of the first respondent impugned in the writ petition do not have a touch of public function or discharge of a public duty. Therefore, this argument of the first respondent must also fail.”

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In M.P. Power Management Company limited vs. SKY Power South East Solar India Pvt. Ltd. & Others 2023(2) SCC 703 while referring to the decision in ABL International Ltd. (supra), the Supreme Court observed as hereunder:

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“67. ABL marks a milestone, as it were, in the matter of the superior court interfering in contractual matters where the State is a player even after the contract is entered into. A petition was filed under Article 226 wherein the respondent which was incorporated under the Companies Act repudiated an insurance claim made by the appellant writ petitioner. This Court undertook an elaborate discussion of the earlier case law. We find that this Court dealt with several obstacles which were sought to be posed by the respondent. They included disputed questions of facts being involved, availability of alternate remedy, and the case involving entertaining a money claim. This Court went on to hold as follows:

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“27. From the above discussion of ours, the following legal principles emerge as to the maintainability of a writ petition:

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(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable.

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(b) Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.

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(c) A writ petition involving a consequential relief of monetary claim is also maintainable.

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“82.5. After the contract is entered into, there can be a variety of circumstances, which may provide a cause of action to a party to the contract with the State, to seek relief by filing a writ petition.

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82.10. The reach of Article 14 enables a writ court to deal with arbitrary State action even after a contract is entered into by the State. A wide variety of circumstances can generate causes of action for invoking Article 14. The Court‟s approach in dealing with the same would be guided by, undoubtedly, the overwhelming need to obviate arbitrary State action, in cases where the writ remedy provides an effective and fair means of preventing miscarriage of justice arising from palpably unreasonable action by the State.”

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It has thus been held by the Supreme Court in the aforesaid case that a civil action before the appropriate forum is undoubtedly maintainable but having regard to the fact that the State is involved and it has duty to act fairly and to eschew arbitrariness in all its actions, resort to the Constitutional remedy on the cause of action that the same is arbitrary is permissible.

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Taking into account the decisions (supra) and the fact that the petitioner is a party to the contract which has been entered into by AIIMS, an instrumentality within the definition of Article 12 of the Constitution of India, notwithstanding any such alternate remedy by way of a civil action, the Court is of the humble view that despite expiry of contractual period since arbitrariness is alleged against the opposite parties in flagrant violation of Articles 12 & 14, the subject matter in dispute is entertainable. It is restated that the writ petition is maintainable in contractual matters which is based on a cause of action attributing arbitrariness and miscarriage of justice when an instrumentality of the State is involved and when such violation is alleged for contravention of Article 14 of the Constitution of India. In the case at hand, as earlier stated, the petitioner has been allowed to run a 24X7 medicine shop inside the campus of AIIMS with a contract duly entered into, though the same having expired in the meantime without its renewal despite a provision for the same in the agreement and since the opposite parties are alleged of not allowing the contract to renew in absence of any such non-satisfactory performance, an action alleged to be filled with arbitrariness, all such aspects being the subject matter in dispute, according to the Court, the cause of action as well as the remedy so sought for in the writ petition is maintainable.

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When there is a renew clause in the contract, the further question is, whether, the opposite parties are bound to allow such renewal? Whether the Director, AIIMS is obliged to renew the agreement in view of a clause in the contract in the peculiar facts and circumstances of the case? There is no denial to the fact that the W.P. (C) No.35991 of 2023 Page 15 of 34

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contract allows renewal for a further period stipulated therein subject to discretion and satisfactory performance by the petitioner. In so far as the action initiated with a notice and intimation regarding termination of the contract and to vacate the campus premises, in view of the contention of the petitioner that there has been no reason assigned and as such the discretion has not been exercised in the manner expected from a statutory Authority, it is to be ascertained, whether, the opposite parties and in particular, the concerned Authority did exercise the discretionary power according to law.

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In Reliance Airport Developers (p) Ltd. (supra), the Apex Court while dealing with the matter involving decision making process and the discretion to be exercised by the authority empowered to take any such decision stressed upon and outlined the parameters which are to be followed. As to what means „discretion‟ and when it is to apply to a Court of justice stands described therein and the extract of the same is reproduced herein below:

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“ 26. While exercising the discretion, certain parameters are to be followed:

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„Discretion‟, said Lord Mansfield in R.v. Wilkes, „when applied to a court of justice, means sound discretion guided by law. It must be governed by rule, not by humour; it must not be arbitrary, vague, and fanciful, but legal and regular‟.” (See Craies on Statute Law, 6^th Edn. p.273 and Ramji Dayawala & Sons(P)Ltd. v. Invest Import, SCC P-96, Para-20)

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Discretion undoubtedly means judicial discretion and not whim, caprice or fancy of a judge. (See Dhurandhar Prasad Singh v. Jai Prakash University.)

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Lord Halsbury in Susannah Sharpe v. Wakefield considered the word “discretion” with reference to its exercise and held:

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“Discretion means when it is said that something is to be done within the discretion of the authorities that something is to be done according to the rules of reason and justice, not according to private opinion; Rooke‟s case according to law, and not humour. It is to be not arbitrary, vague, and fanciful, but legal and regular, and it must be exercised within the limit to which an honest man competent to the discharge of his office, ought to confine himself.”

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“35. In the instance case, though the High Court seems to have noted that EGOM has absolute discretion, it has really not held that the discretion was unfettered. In fact, it has on facts found that the discretion was properly exercised to make some variations in the terms of RFP.”

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13 . Ms. Rath, learned Senior Advocate for the petitioner submits that in the instant case, the discretion has not been exercised properly and contended that any such discretion which lies with the Authority is not boundless. In response to the above, Mr. Mohanty, learned counsel for AIIMS submits that the reason is clearly assigned in the counter affidavit and additional affidavit filed and the circumstances leading to non-renewal of the contract on expiry of the same. If a show cause is invited, it is expected that the authority shall consider reply and exercise discretion judiciously with respect to the renewal of contract. Considering the settled legal position, there is no gainsay that if final decision of the AIIMS authority dehors any reason against renewal, when such a provision is in place subject to satisfactory performance of the petitioner with a claim of having an unblemished record, the opposite parties are W.P. (C) No.35991 of 2023 Page 17 of 34

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under obligation to consider any such reply and response of the petitioner before taking a decision exercising discretion according to rules of reason and justice. An Authority cannot lightly brush aside the renewal clause in the contract when the petitioner having been allowed to run a 24X7 medicine shop inside the campus of AIIMS and is always expected to respond for renewal in a manner which is not fanciful but based on sound principles being a party thereto and an instrumentality of the State.

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Since the discretion to be exercised by the Authority in such matters is not unfettered or immune from judicial review, action of the opposite parties is to be tested on the touchstone of the principles highlighted upon and discussed herein before. In absence of reasons in the decision dated 1^st November, 2023, Ms. Rath, learned Senior Advocate cited Mohindra Singh (supra) by contending that the same cannot be supplemented by filing a reply affidavit. In the aforesaid decision, the Apex Court concluded that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of an affidavit. It is observed therein that if such a course is adopted, an order otherwise bad from the inception, may by the time, it reaches the Court could stand validated with additional grounds advanced.

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In fact, absence of reasons at times makes an order susceptible to challenge, hence, therefore, it is the duty of the authority dealing with the matter, whether, administrative or quasi-judicial, to offer such reasons justifying the decision. In this context, the

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authority of the Apex Court in Dharampal Satyapal Limited (supra) is referred to from the side of the petitioner. In the said decision, the Apex Court discussed the concept and doctrine of natural justice in common law. It is again profitable to quote the relevant excerpt of the decision, which is hereunder;

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“ 21. In Common Law, the concept and doctrine of natural justice, particularly which is made applicable in the decision-making by judicial and quasi-judicial bodies, has assumed a different connotation. It is developed with this fundamental in mind that those whose duty is to decide, must act judicially. They must deal with the question referred both without bias and they must give (sic an opportunity) to each of the parties to adequately present the case made. It is perceived that the practice of aforesaid attributes in mind only would lead to doing justice. Since these attributes are treated as natural or fundamental, it is known as “natural justice”. The principles of natural justice developed over a period of time and which is still in vogue and valid even today are: (i) rule against bias i.e. nemo debet esse judex in propria sua causa; and (ii) opportunity of being heard to the party concerned i.e. audi alteram partem. These are known as principles of natural justice. To these principles a third principle is added, which is of recent origin. It is the duty to give reasons in support of decision, namely, passing of a “reasoned order”.

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It has been held in the above decision that there should not be any bias and furthermore, opportunity of hearing should be provided to the parties in judicial and quasi-judicial matters, which are the basic principles of natural justice. In other words, it is held that the Authority has a duty to pass a reasoned order in support of its decision having heard the parties involved. A similar view W.P. (C) No.35991 of 2023 Page 19 of 34

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has been expressed by the Apex Court in Ramchandra Murarilal Bhattad (supra). The said decision is based on an administrative action which was subjected to judicial scrutiny. While referring to a decision in Star Enterprises Vrs. City and Industrial Development Corporation of Maharashtra Limited (1990) 3 SCC 280 , it is held thus:

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“52.10. In recent times, judicial review of administrative action has become expansive and is becoming wider day by day. The traditional limitations have been vanishing and the sphere of judicial scrutiny is being expanded. State activity too is becoming fast pervasive. As the State has descended into the commercial field and giant public sector undertakings have grown up, the stake of the public exchequer is also large justifying larger social audit, judicial control and review by opening of the public gaze; these necessitate recording of reasons for executive actions including cases of rejection of highest offers. That very often involves large stakes and availability of reasons for actions on the record assures credibility to the action; disciplines public conduct and improves the culture of accountability. Looking for reasons in support of such action provides an opportunity for an objective review in appropriate cases both by the administrative superior and by the judicial process.”

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16 . In Kranti Associates Private Limited (supra), the Apex Court summed up the basic principles to be followed while exercising judicial, quasi-judicial and even administrative powers by the authority concerned and they are in the following words:

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“47. Summarizing the above discussion, this Court holds:

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(a) In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially.

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(b) A quasi-judicial authority must record reasons in support of its conclusions.

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(c) Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well.

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(d) Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power.

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(e) Reasons reassure that discretion has been exercised by the decision-maker on relevant grounds and by disregarding extraneous considerations.

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(f) Reasons have virtually become as indispensable a component of a decision-making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies.

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(g) Reasons facilitate the process of judicial review by superior courts.

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(h) The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the lifeblood of judicial decision-making justifying the principle that reason is the soul of justice.

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(i) Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered.

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This is important for sustaining the litigants' faith in the justice delivery system.

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(j) Insistence on reason is a requirement for both judicial accountability and transparency.

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(k) If a judge or a quasi-judicial authority is not candid enough about his/her decision-making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism. (l) Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or “rubberstamp reasons” is not to be equated with a valid decision-making process.

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(m) It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision-making not only makes the judges and decision-makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor [(1987) 100 Harvard Law Review 731-37].)

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(n) Since the requirement to record reasons emanates from the broad doctrine of fairness in decision-making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See Ruiz Torija v. Spain [(1994) 19 EHRR 553] EHRR, at 562 para 29 and Anya v. University of Oxford [2001 EWCA Civ 405 (CA)], wherein the Court referred to Article 6 of the European Convention of Human Rights which requires,

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“adequate and intelligent reasons must be given for judicial decisions”.

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(o) In all common law jurisdictions judgments play a vital role in setting up precedents for the future.

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Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of “due process ”.

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It is well known that any decision which is not in consonance with the principles of natural justice could be termed as arbitrary and in violation of Article 14 of the Constitution of India as has been the view of the Apex Court in Mrs. Menaka Gandhi case.

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17 . On a bare reading of the order dated 24^th September, 2023 under Annexure-8, it would reveal that the Authority declined to renew the contract with the petitioner, however, the same is not supported by any reason. The circumstances under which the contract is not renewed should at least be made known to the petitioner. When it is a contract with a renewal clause subject to discretion of the Authority and performance of the petitioner, it is but quite natural to expect to have it renewed for such further period. The Authority concerned, if has taken a decision for whatever reasons against renewal, must made it clear and conspicuous, while taking a final decision stating the reasons therefor. In the present case, the petitioner alleges that no hearing with a response was held and the impugned decision either for or against renewal of contract is not accompanied with any justifiable reasons. In view of the decisions discussed before with reference to the ratio laid down in Star Enterprises referred to in Ramchandra Murarilal Bhattad (supra) to the effect that executive actions necessitate recording of reasons in order to assure credibility to such action as looking for reasons in support of action provides an

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opportunity and objective review in appropriate cases both in the administrative and judicial side. In the said decision, the cancellation of bid pursuant to change in policy decision though was held valid and the appeal was dismissed but the Apex Court discussed the expansive role of the Courts in exercising power of judicial review with a rider that each case shall have to be examined on its own facts.

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18 . In the case of the petitioner, the contract was in place between the petitioner and AIIMS, Bhubaneswar, Odisha executed on 1^st November, 2021, which contained the terms and conditions with a renewal clause for a further two terms of one year each at the discretion of the Director, AIIMS, Bhubaneswar, Odisha subject to the satisfactory performance and enhanced payment of compensation. The unsuccessful bidder, as earlier stated, challenged the final tender but was unsuccessful. In fact, the said matter in W.P.(C) No.9899 of 2021 challenging the award of tender in favour of the petitioner was on the premise, whether, the bidder had a valid drug license and if AIIMS acted in favour of such L-1 bidder by extending deadline. While disposing of the matter, this Court finally reached at a conclusion that there was no illegality committed by the AIIMS Authority in awarding the contract in favour of the petitioner. As against the said decision, a review was filed but the same also ended in dismissal by order dated 5^th July, 2021 in RVWPET No. 89 of 2021. Though the review was dismissed on 5^th July, 2021 but the work order had already been issued on 3^rd May, 2021 in favour of the petitioner subject to conditions stipulated therein. The SLP which was filed W.P. (C) No.35991 of 2023 Page 24 of 34

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by M/s A.K. Day and Night Medical Store was dismissed by the Apex Court on 6^th August, 2021. Pursuant to the work order, an agreement was entered into between the petitioner and the Director, AIIMS, Bhubaneswar on 1^st November, 2021. The contractual period was from the date of execution of agreement till 31^st October, 2023 with a clause for its renewal subject to satisfactory performance. As a matter of fact, Clause-12 of the contract authorizes AIIMS to terminate the contract and if the performance of the petitioner is found to be not satisfactory. It does mean that during the continuation of contract, it may be terminated, in case, discretion is so exercised and the performance of the petitioner is found to be unsatisfactory. Such is the condition even for renewal of the contract. Furthermore, as per Clause-45, even after expiry of the contract, the petitioner is to run the shop till a new party is engaged. The contention of the petitioner is that its performance is satisfactory all through and hence, it was natural to expect renewal of the contract. But then, the petitioner was issued with a show cause notice from AIIMS on 4^th November, 2022 with respect to complaint received in the distribution of medicines, on discount benefits and overcharging the patients. It is claimed by the petitioner that M/s A.K. Day and Night Medical through its representative challenged the tender on the ground that the petitioner suppressed certain seizures made at Sambalpur and thereafter, another show cause was invited on 16^th November, 2022. Sometime thereafter, on 2^nd December, 2022, the petitioner received termination notice with immediate effect, however, according to the claim, it was not for any unsatisfactory

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performance. It is made to reveal from the record that a criminal proceeding in 2(C) C.C. Case No. 317 of 2007 to be pending in the Court of learned S.D.J.M., Sambalpur initiated against the petitioner. But the termination dated 2^nd December, 2022 was set aside by this Court in W.P.(C) No.34167 of 2022 with a conclusion that the contract and its termination cannot go hand in hand while inviting a show cause. Quite interestingly, the contract was again terminated on 21^st March, 2023 for the reasons, such as, discrepancy is turnover during tender process; pendency of the criminal proceeding in 2(C) C.C. Case No. 317 of 2007 and other irregularities. The said termination was also challenged by the petitioner in W.P.(C) No. 9406 of 2023 and during such pendency, CBI raided the premises of the petitioner on 12^th April, 2023 on the self-same allegation as claimed by the petitioner, for which, the Agency was impleaded as a party therein. Since, the second termination was found to be contemptuous, it was withdrawn and an affidavit was filed on 10^th May, 2023. Against the aforesaid backdrop, the intimation was received for closure of the contract on 21^st September, 2023 and it was without undertaking any exercise as to whether the same should be renewed or otherwise. The only reason cited was that apparently on account of expiry of the contract by 31^st October, 2023.

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19 . Admittedly, such letter to close the contract has no reference of any decision not to renew the contract. In fact, the petitioner submitted a representation but the same was rejected by AIIMS Authority on 1^st November, 2023, which is also under challenge. In the above circumstances, despite action of AIIMS to terminate W.P. (C) No.35991 of 2023 Page 26 of 34

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the contract which could not materialize and in the meantime, the contract expired on 31^st October, 2023.

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20 . Appreciating the contention of Mr. Mohanty, learned counsel for the AIIMS, it is to be held that no doubt the concerned Authority has discretion to consider renewal of contract but in the humble view of the Court, before such decision against it, an opportunity should have been provided to the petitioner. Furthermore, the decision dated 21^st September, 2023 does not reveal if there is any call taken by AIIMS for renewal of contract. Even though certain complaints were received, as according to the Court, it should have been confronted to the petitioner while closing the contract without renewal as it was much anticipated. On perusal of Annexure-8, it is made to understand that notice for closure of contract was issued due to its expiry on 31^st October, 2023 with a direction to the petitioner to remove all such articles from the premises in question and to hand it over by the end of the business hours on the expiry date. Hence, with such a response, it is obvious for anyone to carry an impression that AIIMS was not inclined and in favour of renewal of the contract. After receipt of the representation dated 30^th October, 2023, the decision of the AIIMS was intimated vide letter dated 1^st November, 2023. As per the said intimation, renewal of contract with effect from 1^st November, 2023 has not been acceded to by the competent Authority of AIIMS. Thus, it is clear and apparent from Annexure-10 that renewal of contract was outrightly refused. But, as stated before, no reason was assigned as to what prevailed upon the Authority of AIIMS to not consider renewal of contract. W.P. (C) No.35991 of 2023 Page 27 of 34

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It is quite natural for the petitioner to expect and to know the reasons against renewal of contract, which was not revealed by the AIIMS. The only intimation vide Annexure-10 is that the competent Authority of AIIMS declined to grant permission to renew the contract. Prima facie, the impugned decision is want of reasons. As stated, it was for the Authority of AIIMS to make its intention clear with reasons assigned while not being in favour of renewal of the contract. If no reasons were assigned allowing the contract to die down, in view of the decision of the Apex Court in Mohinder Singh Gill (supra), the correctness of such decision is to be judged by reasons and the same, cannot be justified later with the affidavits filed. In other words, the challenge to the action does not stand validated with the reasons assigned by filing the affidavits in Court, which is what has been held and observed by the Supreme Court in the decisions (supra). According to AIIMS, as made to reveal from the counter affidavit and additional affidavit, there is no need for any other medicine shops as it has already a pharmacy shop running inside the campus and also inclined to have a „Janaushadhi Kendra‟. Any such decision by AIIMS should have been brought to the notice to the petitioner. Of course, it is not a matter of right to get the contract renewed but rules of prudence and justice demanded a hearing and reply disclosing the clear reasons. If the complaints and allegations were received and any such false annual turnover was revealed at the time of submission of bid, it could possibly a ground to terminate the contract and as such, twice actions had been taken before expiry of the contractual period. The petitioner, in the considered view

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of the Court, should have been allowed an opportunity to respond when it is claimed that the performance has been satisfactory all along and all the allegations to be falsehood.

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21 . With the above discussion, the conclusion of the Court is precisely stated and summed up herein below:

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(i) In contractual matters, for its continuation with a renewal, reciprocity demands;

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(ii) Such renewal not being an extension is not automatic and hence, it needs consent of the parties and certainly cannot be forced;

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(iii) Nevertheless, renewal of contract being an agreement, the parties are to be abided by the terms and conditions of it;

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(iv) Intention to continue with the renewal of contract or otherwise must be made clear and conspicuous leaving no space for any distrust;

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(v) To consider any such renewal, the role of the Authority assumes significance as its responsibility to take a decision is to be fair and balanced;

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(vi) Authority is to exercise the discretion in an unbiased manner keeping in view the terms of the contract and applying the rules of reason and justice;

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(vii) If no provision is in place to renew the contract, obviously it shall have a natural death, unless the parties further agree to enter into a fresh one;

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(viii) But, if the contract has a renewal clause, the same needs consideration according to the terms contained therein mindful of the fact that it is no extension;

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(ix) In case of a restitution clause, it is not unusual for the party with whom the agreement is executed to render service, to expect renewal of contract, however, subject to the conditions agreed upon;

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(x) In matters of contract with renewal provision, the Authority does possess discretion but the same is not limitless or unfettered, as in such a situation, it could lead to arbitrary exercise of powers; (xi) While considering the renewal of contract, the Authority assigned with the role shall have to be alive to all the relevant facts by not being influenced by extraneous considerations detrimental to the interest of the other party involved as the latter may have all the rights and reasons expecting a decision in its favour;

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(xii) To claim that the fate of a contract and its renewal depends on the exclusive discretion of the Authority never ever unaffected by any other relevant considerations would be a fallacy, inasmuch as, such an exercise cannot or ought not to be based on anyone‟s whim and caprice but to be guided by fairness and justice.

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22 . With so much of events having taken place before expiry of the contract period and thereafter, initiation of action treating the possession by the petitioner to be unauthorized, the concerned Authority was needed to take cognizance of the same besides such other criteria necessary while considering the plea for renewal of the contract without being bias in any manner and keeping in W.P. (C) No.35991 of 2023 Page 30 of 34

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view the catchword „justice should not only be done but should appeared to have been done‟ without any lip service extended. The Court finds that the Authority of AIIMS apparently based its decision against renewal and presumably on the grounds commencing from the time of the bidding process with receipt of other allegations not clearly known to have been substantiated. To determine the contract on any such plea or excuse as borne out of record is alleged by the petitioner to be not bonafide. The very conduct of a third party is suspected by claiming that all or most of the obstacles created against renewal of the contract is at its behest for the reason quite obvious. It is alleged that forces are behind the scene playing part to ensure the contract not to be renewed. Such apprehension does not appear to be entirely misplaced, if the facts on record are taken judicial notice of with parties having frequent tussle and rounds of litigations. The Court is not to cast any aspersion on the Authority dealing with the matter but very much concerned with the manner in which the entire episode has unfolded. Despite complaints received, unless it is substantiated or a strong reason to believe exists to find the petitioner to be on the wrong side, the Authority which is to consider the plea for renewal should not be unduly influenced by any such events having taken place as otherwise it would lead to miscarriage of justice thereby at times facilitating visible or invisible forces to succeed in defeating the contract which is again followed by spending precious time and resources, the fact which cannot and could not have been lost sight of by the AIIMS Authority. Of course, renewal of the contract depends on the terms and

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conditions but the aforesaid aspects are to be borne in mind while exercising discretion or else it would certainly result in gross injustice to the party at the receiving end, who rather deserves a fair treatment even when the Authority has reservations which should be made known particularly when there lies expectation for renewal considering the precedent. No doubt, any earlier instance of renewal is not to affect the exercise of discretion as it is based on the terms of the contract but it would not be incorrect to say that on account of a satisfactory performance, continuation of it with an expectation is quite natural. It may be said that favourable performance of the petitioner, which has been claimed, founded a reasonable expectation of renewal of contract notwithstanding other events with litigations and battles fought out. If all the allegations made now to be the grounds not to renew the contract and have led to the litigations without the allegations being substantiated, a case for renewal can be said to have been made out. It is no doubt not a case of any assurance to the petitioner before expiry of contract for its renewal and hence, to demand it with a plea of legitimate expectation but having regard to the satisfactory performance exclaimed with an unblemished track record without the allegations ever substantiated, the petitioner could be said to have a reasonable expectation in favour of its continuation with a fresh agreement entered into with AIIMS. To set the record straight, the view of the Court is that the petitioner deserved a fair treatment instead but it could not be properly responded to by the Authority may be for the mess around with the involvement of a third party and

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the litigations. A decision not to renew is needed to be taken without being biased or having any prejudices. This Court is of the humble view that the concerned Authority was required to judiciously balance the competing interests of both the sides but it has not exhibited so or in a way demonstrated by not taking notice of all the facts and aspects necessary to consider renewal of contract followed by a decision with a non-speaking order and intimation and that too, rejecting the representation within no time without the grievance of the petitioner being properly attended to. It is reiterated that the Authority has to observe fairness and follow rules of justice even in contract matters as the exercise of discretion and jurisdiction is never unfettered. Having said that, the irresistible conclusion of the Court is that the case of the petitioner for renewal of contract certainly deserves a fresh consideration instead of action alleging its possession to be unauthorized keeping in view all the relevant facts otherwise it would result in miscarriage of justice.

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23 . Hence, it is ordered.

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24 . In the result, the writ petition stands disposed of with a direction to opposite party No.2 to reconsider the plea for renewal of the contract vis-à-vis the petitioner as per the contract with respect to the medicine shop situate inside the campus of AIIMS with a summary hearing and decision concluding the said exercise within four weeks from today keeping in view the observations made herein above and the settled legal position. It is further directed that till such time, a final decision is taken

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within the stipulated period, status quo in respect of the subject matter shall be maintained. As a necessary corollary, the impugned orders dated 21^st September, 2023 and 1^st November, 2023 passed by opposite party No. 4 under Annexures-8 & 10 are hereby quashed.

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25 . In the circumstance, however, there is no order as to costs.

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(R.K. Pattanaik) Judge

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Kabita/Balaram/Rojina

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Signature Not Verified

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Digitally Signed Signed by: BALARAM BEHERADesignation: Personal Assistant W.P. (C) No.35991 of 2023 Page 34 of 34 Reason: Authentication Location: HIGH COURT OF ORISSA, C UTT ACK Date: 20-Jun-2024 11:05:32

M/S. Choudhury Medical Store, Bbsr v. Union of India

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M/S. Choudhury Medical Store, Bbsr v. Union of India

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