Patna HC Sets Aside Work Order Cancellation Passed Without Hearing the Contract-Holder

The Patna High Court quashed an order cancelling a rural bridge construction contract, holding that the petitioner’s concluded agreement could not be annulled without affording it a hearing.

A Division Bench of the Patna High Court, comprising Acting Chief Justice Sudhir Singh and Justice Rajesh Kumar Verma, set aside an order by which the Additional Chief Secretary, Rural Works Department, Bihar, had cancelled a work order already issued to a contractor and directed a fresh tender — all without issuing any notice to the contractor. The judgment, delivered on 21 July 2026 in Shivmay Construction Equipments Private Limited v. The State of Bihar & Ors., holds that once a contract stands awarded and a formal agreement executed, an administrative authority cannot annul those rights behind the back of the contract-holder. The bench also held that Clause 33 of the Notice Inviting Tender, which reserves the right to cancel the bidding process, operates only prior to the award of the contract and cannot be invoked after a concluded agreement is in place.

The Tender, the Disqualification, and the Concluded Contract

The Rural Works Department, Government of Bihar, floated a tender under NIT No. RWD/MGSY/HQ/ET/06/24-25/Banka-2/04 dated 01.05.2025 for the construction and five years’ routine maintenance of a rural bridge under the Mukhyamantri Gramin Setu Yojana (MGSY). The petitioner, Shivmay Construction Equipments Private Limited, participated in the process for Package No. SETU/MGSY/24-25/Banka-2/04.

Both the petitioner and the fourth respondent, Choubatia Construction Private Limited, were declared technically qualified. The petitioner then raised a complaint questioning the Bank Credit Facilities Certificate submitted by Choubatia Construction. On verification with Canara Bank, the bank confirmed that the certificate contained a typographical error. The Technical Bid Evaluation Committee, in its meeting on 01.07.2025, declared the private respondent technically disqualified.

With Choubatia Construction out of contention, Shivmay Construction was declared the lowest responsive bidder (L-1) in the financial bid. A Letter of Acceptance and a Work Order, both dated 28.07.2025, were issued in its favour. On the same day, a formal agreement was executed between the petitioner and the Executive Engineer, Rural Works Division, Banka-2. The petitioner commenced execution of the work.

Subsequently, the Chief Engineer blacklisted Choubatia Construction under the Bihar Registration of Contractors Rules (Rural Works Department), 2007. Choubatia Construction appealed to the Additional Chief Secretary, Rural Works Department.

The Impugned Order: Blacklisting Reversed, Entire Tender Annulled

By order dated 12.09.2025, the Additional Chief Secretary, acting as appellate authority, set aside the blacklisting. The authority went further: it declared the entire tender process vitiated, directed cancellation of the Work Order issued in favour of Shivmay Construction, and ordered that a fresh tender be floated. No notice was issued to Shivmay Construction before this order was passed.

Aggrieved, Shivmay Construction filed Civil Writ Jurisdiction Case No.16389 of 2025 before the Patna High Court, seeking quashing of the order dated 12.09.2025, a direction to keep its implementation in abeyance, and a direction restraining the department from interfering with the subsisting contract.

The Competing Arguments

Mr. Ashish Kumar Jha, appearing for the petitioner, argued that the order of 12.09.2025 was passed without any opportunity of hearing to the petitioner, despite the fact that a Letter of Acceptance, a Work Order, and a concluded agreement were already in place. He submitted that cancellation of the Work Order and the direction for re-tendering, without notice, violated the principles of natural justice. He further submitted that the appellate authority had travelled beyond the scope of its jurisdiction: the appeal before it was against the blacklisting order, not against the award of the contract to the petitioner.

The State’s counsel defended the order on the ground that the appellate authority had found the entire tender process vitiated upon examination of records, and had acted in public interest to ensure fairness and transparency. However, State counsel fairly conceded before the bench that there was no material on record to show that any notice or opportunity of hearing had been afforded to the petitioner before the impugned order was passed.

The Court’s Reasoning on Natural Justice

The bench framed the issue precisely: whether an order cancelling a work order and directing re-tendering, passed without hearing the contract-holder after execution of the agreement and commencement of work, could be sustained in law.

The court answered in favour of the petitioner. It observed that by the date of the impugned order, Shivmay Construction had already acquired valuable civil and contractual rights through the Letter of Acceptance, the Work Order, and the formal agreement. The order of 12.09.2025 not only nullified the contract award but also directed re-tendering, directly affecting the petitioner’s rights and liabilities.

The bench relied on the Supreme Court’s decision in Canara Bank & Ors. v. Debasis Das & Ors., reported in (2003) 4 SCC 557, which explained the scope of the audi alteram partem rule. The court quoted the relevant passage:

“Even an administrative order which involves civil consequences must be consistent with the rules of natural justice.”

Applying this to the facts, the bench held that cancellation of the Work Order and the direction for re-tender visited the petitioner with serious civil consequences. The admitted failure to afford a hearing before passing such an order rendered the impugned order legally vulnerable.

Why Clause 33 of the NIT Did Not Save the Order

The State sought to justify the cancellation by relying on Clause 33 of the NIT, which reserves to the Engineer-in-Chief the right to accept or reject any bid and to cancel the bidding process at any time prior to the award of the contract without assigning reasons.

The bench rejected this argument by reading the plain language of the clause. Clause 33 expressly restricts the power to cancel to the stage “prior to the award of the contract.” In this case, the Letter of Acceptance had been issued, the Work Order had been issued, and a formal agreement had been executed — all on 28.07.2025. The stage contemplated under Clause 33 had, in the court’s words, “long crossed.” Once the contract stood awarded and had culminated in a concluded agreement, the authority could not invoke Clause 33 to cancel the tender process.

The bench also placed the matter within the constitutional framework. It observed that judicial review in contractual matters is primarily concerned with the decision-making process, and that fairness in State action remains the governing principle under Article 14. Where the decision-making process itself is vitiated by denial of hearing to an affected party, the resultant order cannot stand.

Outcome

The Division Bench set aside the order dated 12.09.2025 (Annexure P/6) to the extent it directed cancellation of the Work Order issued in favour of Shivmay Construction and issuance of a fresh tender. The matter was remitted to the competent authority to pass a fresh order in accordance with law, after affording due opportunity of hearing to the petitioner and all other affected parties.

The bench clarified that it had expressed no opinion on the merits of the underlying controversy, leaving all questions of fact and law open for independent consideration by the competent authority, except on the issue of violation of the principles of natural justice.

The interim order dated 14.10.2025 was vacated. All pending applications were disposed of. The writ petition stands finally disposed of.