Government may terminate contractual rights and re-tender after substantial asset alteration in public interest.

The respondents awarded the petitioner a five-year contract, commencing 26 July 2025 and ending 25 July 2030, for commercial advertising through factory-fitted LED screens in Train Nos. 26403/26404, the Vande Bharat Express operating between Sri Mata Vaishno Devi Katra and Srinagar.

The petitioner deposited ₹3,90,000 as security and made payments towards the licence fee.

Subsequently, the train composition was increased from 8 to 20 coaches, with 78 screens, and its route was altered from SVDK–Srinagar to Jammu Tawi–Srinagar.

After the petitioner sought permission to operate advertisements on the additional coaches, the respondents terminated the contract on 26 May 2026, citing “administrative reasons”.

A fresh tender was issued on 18 June 2026.

During the writ proceedings, the Court directed the respondents to decide the petitioner’s representation by a speaking order; the representation was rejected on 16 July 2026.

The petitioner challenged the termination under Article 226 and sought a direction for a reasoned order.

Whether the respondents’ premature termination of the petitioner’s advertising contract, followed by issuance of a fresh tender, was arbitrary, unlawful or liable to be quashed under Article 226 of the Constitution.

Whether Clause 22 of the contract required the respondents to offer the additional coaches to the petitioner without any increase in licence fee, instead of terminating the existing contract and inviting a fresh tender.

Whether the petitioner was entitled to relief for the alleged loss caused by the premature termination.

The Court applied Article 226 principles governing judicial review of government contracts, under which judicial interference is limited to cases of arbitrariness, irrationality, mala fides, bias or decisions taken contrary to law; a bona fide decision taken in public interest is not to be invalidated merely because another view is possible.

Relying on Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517, and Silppi Constructions & Contractors v. Union of India, (2020) 16 SCC 489, the Court held that contractual and commercial decisions warrant restraint in judicial review.

The Court also applied Clause 17.2 of the Special Conditions of Contract under Freight Marketing Circular No. 11 of 2022, which authorised termination without financial repercussions after notice, including where operational exigencies, a change in site, subsequent developments or other reasons rendered the asset unavailable or materially altered.

Clause 22, providing that additional coaches would be offered without an increase in licence fee, was construed as applying to a limited increase in coaches and not to a substantial alteration of the commercial asset.

The Court distinguished Subodh Kumar Singh Rathour v. Chief Executive Officer, (2024) 15 SCC 461, because that case concerned cancellation outside the terms of the subsisting contract.

The Court found that the increase from 8 to 20 coaches and the change in route constituted a fundamental alteration of the commercial asset, resulting in a 150% variation in the commercial value of the advertising rights.

In these circumstances, Clause 22 could not be invoked to compel the respondents to continue the original contract on the same licence fee.

The respondents’ speaking order explained that termination and fresh tendering were intended to protect railway revenue, realise the enhanced commercial potential of the asset, and preserve transparency and competitiveness in public procurement.

Since the termination was expressly traceable to Clause 17.2 and was supported by bona fide public-interest considerations, the Court found no mala fides, arbitrariness or irrationality warranting interference under Article 226.

The petitioner’s claim for losses was treated as a contractual damages claim, unsuitable for adjudication in the writ petition.

The Court upheld the respondents’ termination of the contract and their decision to invite a fresh tender, holding that the action was authorised by Clause 17.2, taken in public interest, and not amenable to interference under Article 226.

The respondents were directed to forthwith return the petitioner’s security deposit and any excess licence fee paid.

The petitioner was left free to pursue appropriate legal remedies for recovery of damages arising from the premature termination, and the Court clarified that its observations would not prejudice such proceedings.

The pending application was disposed of and the scheduled date of 8 September 2026 was cancelled.