Contractual extension clauses subject to "competent authority decision" vest discretionary power, precluding any claim to automatic renewal.

The Petitioners are authorized parking contractors for the Municipal Corporation of Delhi (MCD), having been allotted sites under a 2022 Tender (NIT No. 907).

The tender terms specified a tenure of three years, "further extendable for another two years subject to satisfactory performance and as decided by the Competent Authority".

As the initial three-year terms neared expiry, the Petitioners sought two-year extensions, asserting satisfactory performance and no outstanding dues.

However, the MCD issued a fresh Tender (NIT No. 1419) on 15.01.2026, including the Petitioners' sites, effectively bypassing the extension requests.

The Petitioners challenged the new tender, alleging the extension was a contractual right once satisfactory performance was met.

1. Whether the contractual provision for a two-year extension (3+2 years) constitutes a vested right of the contractor upon "satisfactory performance," or if it remains within the absolute discretion of the Municipal Corporation.

2. Whether the MCD’s decision to re-tender the sites to maximize revenue, despite the Petitioners' satisfactory performance, is arbitrary or violative of Article 14 of the Constitution.

The court primarily applied the principle of discretionary executive power in public contracts as interpreted in *Himalayan Flora and Aromas Pvt. Ltd. v. MCD (LPA 351/2025)*, which established that extension clauses using the phrase "as decided by the Commissioner/Authority" grant wide discretion beyond mere performance metrics.

It also referenced Section 200 of the Delhi Municipal Corporation Act, 1957, implying a fiduciary duty to manage public resources for maximum profitability.

It distinguished *S.K. Associates v. MCD*, where the absence of "Authority's discretion" in the clause made extensions mandatory.

and referenced *Union of India v. Dinesh Engineering Corp.* regarding the limits of administrative arbitrariness.

The Court analyzed Clause 10 of the NIT, focusing on the conjunctive word "and" between "satisfactory performance" and "as decided by the Competent Authority".

It reasoned that these are independent conditions; satisfactory performance alone does not trigger an automatic extension if the Authority decides otherwise.

Following the precedent in *Himalayan Flora*, the Court held that the MCD has the "prerogative" and "fiduciary responsibility" to seek "price discovery" through fresh tendering to maximize revenue, especially given its financial stress.

The Court rejected the "legitimate expectation" and "deemed extension" arguments, noting that any investment by contractors was made with the knowledge that extensions were conditional, not absolute.

Since the initial three-year term had expired by efflux of time, the new tender did not constitute a "constructive termination".

It answered that the MCD’s decision to re-tender for better revenue alignment is a valid exercise of administrative discretion and is not arbitrary.

The Court affirmed that once the Competent Authority decides against extension based on financial prudence, the "satisfactory performance" of the contractor becomes irrelevant to the renewal of the license.

All interim applications were dismissed.