Contractual extension clauses subject to "competent authority's decision" grant discretionary power, not an absolute right.

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

The tender 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 term neared completion, the Petitioners sought extensions, asserting satisfactory performance and no outstanding dues.

However, the MCD issued a fresh Tender on 15.01.2026 (NIT No. 1419) inviting bids for the same sites.

The Petitioners challenged the new tender, arguing they had a contractual right to a two-year extension.

During proceedings, MCD issued an order dated 11.02.2026 formally declining the extensions to maximize revenue through fresh price discovery.

1. Whether the extension of the contract for an additional two years was a vested contractual right or subject to the absolute discretion of the MCD.

2. Whether the MCD’s decision to re-tender the sites to achieve market-aligned rates was arbitrary or violative of Article 14 of the Constitution.

The Court applied the principle of contractual interpretation concerning discretionary clauses, specifically focusing on the conjunctive use of "and" in administrative stipulations.

It relied on the precedent in Himalayan Flora and Aromas Pvt. Ltd. v. MCD (LPA 351/2025), which established that "satisfactory performance" and "decision of the Competent Authority" are independent conditions, granting the Authority wide discretion to consider financial prudence and public interest.

The Court also referenced Union of India v. Dinesh Engineering Corpn. regarding the limits of administrative discretion.

and Section 200 of the Delhi Municipal Corporation Act, 1957, regarding the fiduciary duty of the MCD to maximize revenue from public resources.

The Court rejected the Petitioners' argument that "satisfactory performance" automatically triggered an extension.

Analyzing Clause 10 of the NIT, the Court held that the word "and" between "satisfactory performance" and "as decided by the Competent Authority" must be read disjunctively.

This created a "twin condition" where performance is merely a threshold, and the final decision rests on the Authority’s discretion.

Following the ratio in Himalayan Flora, the Court found that the MCD is entitled to consider "other relevant aspects," such as financial viability and revenue optimization.

The MCD’s justification—that the market demand for parking had increased and fresh "price discovery" was needed to alleviate financial stress—was deemed a valid exercise of fiduciary responsibility.

The Court distinguished S.K. Associates v. MCD, noting that the clause in the present case specifically reserved discretion to the Competent Authority, unlike the clause in S.K. Associates.

Furthermore, the plea of "deemed extension" was dismissed because the initial contract had expired by efflux of time, and the MCD had the right to invite fresh bids rather than renew an undervalued contract.

The MCD’s decision to re-tender the sites for revenue optimization is neither arbitrary nor unreasonable.

The Court dismissed the writ petitions and all pending applications, affirming that the MCD, as a custodian of public resources, is duty-bound to prioritize actions that maximize public benefit through competitive bidding.