“Show-Cause Issued Without Application Of Mind”: Calcutta High Court Quashes Termination Of LPG Transport Contract
The Calcutta High Court on March 30, 2026, set aside a show-cause notice and a subsequent termination order issued against M/s Sewak Enterprises, holding that the authorities acted arbitrarily and in complete disregard of documents already submitted by the petitioner.
Justice Krishna Rao observed that the impugned actions were issued “without any application of mind,” as the records clearly demonstrated that the vehicle's ownership transfer and the PESO licence transfer had been completed within the four-month deadline stipulated in the tender conditions, and the relevant documents had been emailed to the authorities well before the issuance of the show-cause notice.
The dispute arose after the authorities issued a notice dated February 26, 2026, suspending the transporter's vehicle and calling for a reply within seven days as to why punitive measures, including forfeiture of earnest money and caution money and termination of contract, should not be imposed for failure to submit the registration certificate (RC) and the PESO licence within four months of the Letter of Intent.
During the pendency of the writ petition, the authorities proceeded to terminate the contract on March 20, 2026, which the petitioner challenged through supplementary affidavits. These affidavits showed that the vehicle's ownership had been transferred on February 9, 2026, the very last day of the four-month period, and that this was communicated by email on February 10, 2026 along with the RC. The PESO licence was transferred on February 11, 2026 and emailed to the authorities the same day.
The Court noted that the show-cause notice did not allege delayed submission of documents; instead, it incorrectly stated that the petitioner had failed to submit them at all, a position contradicted by the emails and attachments placed on record.
During the hearing, the petitioner argued that the authorities acted in complete disregard of the timely submission of documents and proceeded mechanically to issue the show-cause notice and termination order. The respondents, on the other hand, raised a preliminary objection that the writ petition was not maintainable in view of the arbitration clause in the contract.
Relying on the Supreme Court decisions in Unitech Ltd. v. Telangana State Industrial Infrastructure Corporation (2021) 16 SCC 35 and MP Power Management Co. Ltd. v. Sky Power Southeast Solar India Pvt. Ltd. (2023) 2 SCC 703, the Court rejected this objection. It held that the existence of an arbitration clause does not bar writ jurisdiction where State action is arbitrary, irrational, or actuated by mala fides, and that the State cannot escape its constitutional obligation to act fairly merely because the dispute arises out of a contract.
Justice Rao held that the authorities had proceeded on an incorrect factual basis, failed to consider the emails dated February 10 and 11, 2026, and issued the show-cause notice alleging non-submission of documents when the petitioner had, in fact, submitted the RC and PESO licence within the prescribed timeline. The Court concluded that the foundational show-cause notice was unsustainable, and therefore, the termination order based on it was equally vitiated. Accordingly, both the show-cause notice dated February 26, 2026 and the termination order dated March 20, 2026 were quashed.
Case: M/s. Sewak Enterprise Vs. The Union of India & Ors.
Case No: WPA 6745 of 2026