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Court cannot interfere in the decision of extension of contact, if no arbitrariness is established: High Court of New Delhi

The respondents cannot act arbitrarily or whimsically, while taking a decision whether, or not, to grant an extension of the contractual term. But, if there are good and germane reasons for not granting an extension of time, or limiting its extension for a period of less than one year at a time, it would not be correct for the Court to interfere in judgment. This was held in SUSHIL KUMAR SINGH v. NORTH DELHI MUNICIPAL CORPORATION[W.P.(C)4547/2021] in the High Court of New Delhi by division bench consisting of JUSTICE VIPIN SANGHI and MS. JUSTICE REKHA PALLI.

Facts are that the Petitioner was awarded the contract for the parking site for a period of two years, the period expired. In terms of Clause 3 of the License Conditions, the petitioner applied for renewal of the Licence. The petitioner has preferred the petition to restrain the respondents from proceeding to call for bids in respect of the parking site.

Counsel for the Petitioner contended after the filing of this Writ Petition, the petitioner has received a communication extending the license period till the new H-1 Bidder takes over the parking site. There is a legitimate expectation of it being granted the extension for two years as there has been no default on the part of the petitioner in the performance of the contract.

Counsel for the respondents submits that the petitioner is essentially seeking specific performance of the agreement which is not permissible in view of the fact that the contract itself is determinable. A conscious decision was taken to grant an extension to the petitioner till only the new H-1 Bidder is finalized in the interest of public revenue.

The court relied on the judgement of Delhi High court division bench in, Binay Kumar Mishra v. The Director (R.P.Cell), Delhi Urban Shelter Improvement Board and Ors., wherein the following observations were made, “13. ….In fact the respondents would be violating the public policy, if rather than fetching the maximum price which the subject parking site is capable of fetching, extend the term of the contract with the plaintiff therefore, without the plaintiff having any right under the said contract to extension as sought. Though the petitioner in the petition sought to give a color of discrimination to the action of the respondents, of issuing fresh NIT for the subject parking site while granting renewals with respect to other similarly situated parking sites but the petitioner has utterly failed to make out the said case. Even otherwise we are of the view that merely because the respondents may grant extension with respect to one parking site qua which the assessment of the respondents is that it is incapable of fetching more, would not be a ground for compelling the respondents to grant extension with respect to another parking site also, which indeed in the assessment of the respondents also is capable of fetching a much higher license fee. Court interference in price fixation is only on a case of mala fide and arbitrariness being established and which has not been done in the present case.”

Considering the facts of the case and keeping in mind the settled proposition of law on the subject. The Court held that Clause 3 of the terms and conditions shows that the term of the license was two years which had ended. right of the licensee to seek extension is pre-conditioned by satisfactory completion, without which the contractor cannot plead for further extension of the contract. The respondents have brought out the rationale for extending the petitioner’s contract only till the award of the fresh contract to H-1 Bidder. Thus the court dismissed the petition having found no merits.

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