Krishna Enterprises Through Its Partners Jignesh Kantilal Kenia vs. The Union Of INDIA Through Secretary Of Power Department And Others

Held

The Court held that the Petitioners had not established sufficient arbitrariness, mala fides, or perversity in the decision-making process to warrant interference under Article 226 of the Constitution. The Court noted that the Respondent authorities had constituted an inquiry committee, obtained a report identifying irregularities, accepted its recommendations for cancellation, and then issued a fresh auction notice. The Court found no material to suggest the report was fabricated or that the decision to cancel was a mere pretext unsupported by the record. While acknowledging the Petitioners' grievance of being the highest bidders and having deposited security, the Court distinguished grievance from illegality. Consequently, the challenge to the email dated January 31, 2026, cancelling the e-auction failed. As a sequitur, the challenge to the fresh e-auction notice also failed, as no enforceable right had crystallized in favour of the Petitioners under the cancelled auction. The Court clarified that it had not pronounced upon the merits of the fresh tender conditions or individual bidder entitlements, nor on private disputes with Respondent No. 5. The dismissal was based on the ground that the cancellation of the earlier tender process could not be characterized as unconstitutional, arbitrary, or vitiated by mala fides. The Court directed the Respondent authorities to ensure refund or adjustment of amounts deposited by the Petitioners in accordance with law within a reasonable period.

Facts

Two partnership firms, Sai Infrastructure and Krishna Enterprises, filed writ petitions challenging the cancellation of an e-auction for the disposal of Pond Ash from the Bhusawal Thermal Power Station. The Petitioners were declared the highest bidders in the e-auction held on January 14, 2026, and had deposited the required security amounts. However, on January 31, 2026, the Maharashtra State Power Generation Company Limited (Respondent Nos. 3 & 4) cancelled the e-auction without providing reasons. Subsequently, a fresh e-auction notice was issued on February 5, 2026, with allegedly tailored qualifying requirements. The Petitioners contended that the cancellation was arbitrary and designed to benefit Respondent No. 5, which had previously enjoyed an ad hoc arrangement for lifting Pond Ash at a lower rate. The Respondent authorities claimed the cancellation was based on an inquiry committee report identifying irregularities.

Key Issues

1. Whether the cancellation of the e-auction held on January 14, 2026, by Respondent Nos. 3 and 4 was arbitrary, mala fide, or vitiated by perversity, thereby violating Article 226 of the Constitution of India? 2. Whether the issuance of a fresh e-auction notice on February 5, 2026, was vitiated due to the alleged illegality of the prior cancellation? Petitioner's arguments: The Petitioners argued that the cancellation of the e-auction was arbitrary and lacked valid reasons, pointing to the restoration of the earlier ad hoc arrangement with Respondent No. 5 prior to the formal cancellation. They contended that the fresh auction notice had discriminatory qualifying requirements designed to favour specific bidders. They relied on the principle that tender processes must be lawful in their route, not just their result, and cited precedents emphasizing transparency and fairness. Revenue/State's arguments: The Respondent authorities argued that the cancellation was based on an inquiry committee report that identified multiple irregularities in the e-auction process. They asserted that constitutional courts should not interfere in commercial tender matters unless gross arbitrariness or mala fides are established, citing Supreme Court judgments that advocate for restraint and deference to the tendering authority's discretion. They maintained that no enforceable right had accrued to the Petitioners upon being declared the highest bidder.