A concluded government contract cannot be cancelled without hearing the affected contractor.

The Rural Works Department, Government of Bihar, issued a tender for construction and five-year routine maintenance of a rural bridge under the Mukhyamantri Gramin Setu Yojana pursuant to NIT No. RWD/MGSY/HQ/ET/06/24-25/Banka-2/04 dated 1 May 2025.

The petitioner and respondent no. 4 were initially declared technically qualified.

Following the petitioner’s complaint regarding respondent no. 4’s Bank Credit Facilities Certificate, Canara Bank clarified that the discrepancy was a typographical error; nevertheless, the Technical Bid Evaluation Committee subsequently disqualified respondent no. 4.

The petitioner was thereafter declared the lowest responsive bidder, and a Letter of Acceptance, Work Order, and formal agreement were issued/executed in his favour on 28 July 2025. The petitioner also commenced execution of the work.

Respondent no. 4 was subsequently blacklisted by the Chief Engineer on 26 August 2025 and appealed against that order.

While allowing the appeal, the Additional Chief Secretary, by order dated 12 September 2025, held that the tender process was vitiated, cancelled the petitioner’s Work Order, and directed issuance of a fresh tender.

No notice or opportunity of hearing was given to the petitioner before the cancellation, despite the concluded contract and commencement of work.

Whether the cancellation of the petitioner’s Work Order and direction for re-tendering, after execution of the agreement and commencement of work, without affording the petitioner notice or an opportunity of hearing, violated the principles of natural justice?

Whether Clause 33 of the NIT authorised the respondents to cancel the tender process after issuance of the Letter of Acceptance, Work Order, and execution of the formal agreement?

Whether the impugned order dated 12 September 2025, insofar as it affected the petitioner’s accrued contractual rights, was legally sustainable?

The Court applied the audi alteram partem rule, holding that an administrative or quasi-judicial order producing adverse civil consequences must ordinarily be preceded by a meaningful opportunity of hearing.

Relying on Canara Bank v. Debasis Das, (2003) 4 SCC 557, the Court reiterated that natural justice principles may be implied from the statutory duty and apply even to administrative actions involving civil consequences.

The Court also applied Article 14’s requirement of fairness and non-arbitrariness in State action, particularly in contractual and tender matters.

Clause 33 of the NIT empowered the Engineer-in-Chief to cancel the bidding process and reject bids only “at any time prior to the award of the contract”; the provision therefore did not authorise cancellation after the contract had been awarded and formally executed.

The Court found that the petitioner was directly and substantially affected by the impugned order because the Letter of Acceptance, Work Order, and formal agreement had already created valuable contractual rights, and the petitioner had commenced performance.

The State was unable to demonstrate that any notice or hearing had been provided before those rights were nullified.

Applying the rule in Canara Bank, the Court held that cancellation of the Work Order and re-tendering involved serious adverse civil consequences and could not lawfully be ordered behind the petitioner’s back.

The Court further held that Clause 33 was temporally limited to the pre-award stage. Since the tender had culminated in a concluded contract on 28 July 2025, reliance on Clause 33 to cancel the process was impermissible.

The decision-making process was therefore vitiated both by denial of natural justice and by the authority’s failure to act within the scope of Clause 33.

The order dated 12 September 2025 was set aside to the extent that it cancelled the petitioner’s Work Order and directed a fresh tender.

The matter was remitted to the competent authority to pass a fresh order in accordance with law after affording an opportunity of hearing to the petitioner and all other affected parties; the Court expressly left all factual and legal merits open.

The writ petition was accordingly disposed of, the interim order dated 14 October 2025 was vacated, and pending applications, if any, were also disposed of.