The decision to enter into a contractual relationship is inherent in every person capable of entering into a contract. Where a person has the right to make a contract, it also has a concomitant right not to make a contract.
The Indian government’s right to contract flows from article 298 of the constitution. Hence, the analogous right not to contract also rests with the government, which can choose either to annul the contract or to adopt debarment or suspension as a tool for ensuring compliance of erring contractors who fail to perform contractual actions for the Government.
However, these decisions taken on behalf of the government have to be mandatorily balanced with the Wednesbury principle of reasonableness and natural justice. A reasoning or decision is Wednesbury unreasonable (or irrational) if no reasonable person acting reasonably could have made it. The traditional view that the executive is not answerable in the matter of the exercise of prerogative power over erring contractors has long been discarded.
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Ravi Singhania is the managing partner and Madhu Sweta is a partner at Singhania & Partners
Singhania & Partners Solicitors and Advocates
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