Taxpayers Can't Be Made To Bear Losses Caused By Illegal Project Cancellations; Erring Officials Must Pay Damages Personally: Bombay High Court

The Bombay High Court recently while issuing notice to the Maharashtra Government and also the Brihanmumbai Municipal Corporation (BMC) in a plea challenging the 'sudden' stoppage of a multi-storey parking project near the city's famous Mumba Devi Temple, observed that time has come for making government servants pay damages to the construction companies from their own salaries and not from the State Exchequer.A division bench of Acting Chief Justice Ravindra Ghuge and Justice Gautam Ankhad were irked to note that the construction work of the said project, which was carried out halfway by the company - SMS Limited, was abruptly stopped by the authorities and that a new tender was going to be floated for proceeding with the same project along with some other additional infrastructure improvement projects. The judges pointed out that due to such abrupt stoppage of the work, the State Exchequer faces tremendous loss as usually the company affected, resorts to litigation and seeks damages or compensation from the State. "In such matters, we find that authorities like a Corporation or State instrumentalities or sometimes even the State, cancel a project midway through, or there is a stop-work notice, etc. This causes tremendous loss to the State Exchequer in view of the part progress of the project. The added loss is that the affected party moves, either for arbitration or for damages, before the appropriate forum. If such damages are awarded on account of the illegal acts of cancellation of projects or termination of projects abruptly/ midway, such compensation or damages are paid from the taxpayers' money. We find that, in such situations where certain officers are responsible for such decisions of illegal cancellation of projects midway through and that results in the payment of damages, the time has come to hold such officers personally liable to pay such damages from their salary accounts because the taxpayers are not at fault when such illegal decisions are taken by authorities who are in seat of power," the bench said. The bench passed the order on a plea filed SMS Limited company through advocate Karl Tamboly, pointing out that the firm was awarded the task of constructing the multi-storey underground parking facility near Mumba Devi Temple, which would roughly cost around 1.22 billions, in December 2022. However, in July 2024, the company was asked to stop the construction work, abruptly.Further, the company was informed that the BMC, which had floated tenders for the said project, first thought of changing it to 'beautification' of the Mumba Devi Temple corridors but eventually, it was decided that fresh tenders would be floated for continuing the said project of underground parking along with other beautification works in the vicinity. However, during the hearing on July 17, the BMC counsel informed the judges that the civic body was not inclined to stop the project which had already been undertaken by the Petitioner as the construction had been carried out up to the plinth level. "The Municipal Corporation has also requested the State Government to accord permission for proceeding with the project from the stage at which it was paused and that the project be completed. The State is yet to take a decision. The communications dated July 12, 2024, October 24, 2024 and March 21,.2025, would indicate that the Municipal Corporation was inclined to proceed with the project. A meeting was held between the Petitioner and the Municipal Corporation on April 24, 2026, and it was resolved to once again request the State to permit the completion of the project which had been awarded to the Petitioner," the judges noted.The bench therefore, issued notice to the State government and other respondents to the petition. A further liberty is granted to the petitioner company to amend its plea to challenge the proposed new tender which is likely to be floated by the BMC. The authorities have been directed to file detailed replies to the petition before August 7, when the matter would be next heard. Appearance:Advocates Karl Tamboly, Zahan Setalvad and Atharva Salvi appeared for the Petitioner.Advocates Madhavi Nalluri and Oorja Dhond represented the BMC.Assistant Government Pleader Rita Joshi represented the State.Case Title: M/s SMS Limited vs Municipal Corporation of Greater Mumbai (Writ Petition 3155 of 2026)Click Here To Read/Download Order

Taxpayers Can't Be Made To Bear Losses Caused By Illegal Project Cancellations; Erring Officials Must Pay Damages Personally: Bombay High Court

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Taxpayers Can't Be Made To Bear Losses Caused By Illegal Project Cancellations; Erring Officials Must Pay Damages Personally: Bombay High Court

Narsi Benwal

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Narsi Benwal

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