Kinsfolk Infra Engineering vs. State Of Gujarat

Facts

The writ applicants, Kinsfolk Infra Engineering and its partner, were granted a contract by the Tourism Corporation of Gujarat Limited (TCGL) to manage and operate the 'Visamo' shelter at Saputara. The agreement, executed on April 8, 2015, was for five years with a potential extension. The applicants undertook renovation at their cost. A work order was issued on April 24, 2015. The applicants faced delays in obtaining necessary licenses, including a hotel license, which they applied for on May 14, 2015. The TCGL issued an order on August 19, 2020, terminating the agreement and taking possession of the premises. The applicants challenged this order, seeking to quash it, permit them to continue operations, and adjust the contract period based on license grant dates, citing delays and the COVID-19 pandemic.

Held

The Court held that the writ applicants had a legitimate expectation to be treated fairly regarding the contract extension, as per Clause 4.7 of the tender. The Court found the Corporation's actions to be unfair, unreasonable, and contrary to the materials on record, including the applicant's significant investment in upgrading the 'Visamo'. The Court relied on Supreme Court judgments recognizing the doctrine of legitimate expectation and the maintainability of writ petitions in contractual matters involving state instrumentalities when actions are unfair or arbitrary. The impugned order dated August 19, 2020, passed by the Managing Director of TCGL, was quashed and set aside. The Court directed the Corporation to pass an order permitting the writ applicants to run and manage the 'Visamo' for a further period of two years from the date an appropriate order is passed and operations commence. The writ applicants were directed to abide by all other terms and conditions of the contract. The Corporation was ordered to comply within two weeks of receiving the writ.

Key Issues

1. Whether the writ applicants are entitled to a writ of mandamus to quash the order dated August 19, 2020, and be permitted to continue operating the 'Visamo' shelter as per the agreement terms? The petitioners argued that the termination was arbitrary and violated principles of natural justice, given their investment and the doctrine of legitimate expectation. They contended that the Corporation's actions were unfair and contrary to contractual clauses, citing precedents like Kishan Freight Forwarders vs. Union of India and Harbanslal Sahnia vs. Indian Oil Corporation. The respondents' arguments are not explicitly recorded in the provided text, but their actions suggest a stance against granting the extension or continuing the contract. 2. Whether the commencement date of the agreement should be considered from April 29, 2017, instead of April 24, 2015, for calculating the contract period and potential extension? The petitioners argued that permission to commence operations was granted on April 29, 2017, and this date should be the basis for the five-year term, thereby affecting renewal prospects. The respondents' position on this specific point is not detailed.