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Judgment
SOUMEN SEN, C.J.
Heard Mr. Ajay Gopal, learned counsel for the appellant, Mr. Athul P., learned counsel for respondent No.5, Mr. B. Premod, learned Standing Counsel for the Kerala State Electricity Board and Mr. Biju Meenattoor, learned Senior Government Pleader.
The appellant is aggrieved by the judgment dated 11th September 2026 delivered by the learned Single Judge in W.P.(C) No. 2808 of 2026. The writ appellant is a registered scrap trading firm engaged in the purchase and disposal of metal and industrial scrap through government e-auctions. Admittedly, the writ appellant participated in an e-auction conducted by respondent No. 5 – MSTC for the sale of dismantled penstock/LPP pipes belonging to the KSEB Limited. The writ appellant was the successful bidder, and upon depositing the entire consideration amount, a delivery order was issued in its favour. Subsequent to the issuance of the delivery order, the said contract was cancelled.
Initially, by a cryptic communication dated 24th December 2025, the Chief Engineer intimated the writ appellant that, “due to administrative reasons, after due consideration, KSEBL has decided to cancel the sale of Lot No. VTL-1”. However, pursuant to a representation submitted by the writ appellant on 3rd January 2026, KSEBL, by communication dated 6th January 2026, furnished the reasons for cancellation, which are as follows:
“1.Rate realised in comparison with prevailing market trends: On post auction examination, it was observed that the rate realised in the subject auction was significantly lower when compared with the rates obtained in comparable sales of similar MS/Iron scrap conducted earlier by KSEBL as well as with prevailing market discovered rates, raising concerns regarding adequacy of realisation.
2.Operational and logistical constraints: It has been ascertained that the total quantity of dismantled Penstock/LPP Pipes is distributed over multiple locations within a radius of approximately 5 ks, with varying quantities at each location, rather than being stacked at a single site.
3.Difficulty in accurate measurement at site: The material consists of penstock pipes of varying lengths, diameters, and thicknesses, which are not practically measurable or vefifiable with reasonable accuracy at site in their present dismantled and scattered condition.
4.Issues relating to delivery, verification, and accountability: Due to the above distribution and measurement constraints, ensuring smooth delivery, joint verification, accountability of quantities, and avoidance of disputes would be operationally difficult.
5.Safeguarding the interest of KSEBL: Considering the combined factors of low realisation and operational difficulties, the competent authority decided to cancel the sale in the overall interest of KSEBL.”
In the affidavit filed before the learned Single Judge, Clause (1) of the impugned order dated 6th January 2026 was explained in paragraph No. 19. The explanation offered therein reads as follows:
“On subsequent examination, it was observed that the rate realized in the subject auction (Rs.20.7&g) was substantially lower when compared with the rate realized (Rs.39/kg) for the sale of dismantled penstock pipes available under Sengulam Power House during 2022-23. Hence it was assessed that the finalization of the above sale would result in a financial loss of approx. Rs.2.90 Crs. when compared with the previous sale (vide SRO No.459l22-23 dated 15.03.2023 issued to M/s. A.K Steels, Mampuzha (Lot No.SHP-l) of E-auction No.47 conducted on 13.02.2023. The true copy of the sale release order dated 15.03.2023 is produced helewith and marked as Exhibit R2 (l). Funher, it was ascerlained that the dismantled penstock pipes, valves etc. under Lot No.VTL 1 were distributed over multiple locations within a radius of about 5 kilometers, with varying quantities at each location, and that accurate measurement and verification at site were practically difficult due to variation in lengths, diameters and thicknesses. In view of the above and in order to safeguard the interest of KSEBL, it was decided to cancel the sale, invoking Clause 16 of the Special Terms and Conditions of MSTC E-Auction. Accordingly, the sale was cancelled vide proceedings No.SCM,XM,{E-Auction 39-8912025-2611121648412025 dated 24.12.2025 of the Chief Engineer (SCM), KSEBL. The true copy of the proceedings of the Chief Engineer dated 24.12.2025 is produced herewith and marked as Exhibit R2 (m).”
It is surprising that KSEBL could have proceeded to conduct an e-auction through MSTC for the sale of the penstock without ascertaining the aforesaid facts. It cannot be said that KSEBL was unaware of the implications that were likely to follow if the e-auction were given effect to and an intending purchaser performed its obligations by depositing the entire sale consideration. There is nothing on record to show that, before fixing the reserve price or accepting the offer of the writ appellant, any study was conducted to ascertain the realistic rate per kilogram for the sale of the dismantled penstock pipes.
We have been informed that another e-auction is scheduled to take place on 29th September 2026. Every auction involves public exchequer, and the conduct of KSEBL in deciding to recall the earlier tender reflects a lackadaisical approach to the matter, with no sense of any accountability. The Chairman of KSEBL is directed to constitute a high-level committee to examine the aspects which are now being relied upon as grounds for recalling the tender, but which were not considered when MSTC was directed to proceed with the sale. The investigation shall be completed within a period of six weeks from the date of communication of this order.
However, having regard to the explanation offered regarding the rates, which may result in financial loss if the sale is concluded in favour of the writ appellant, we do not intend to interfere with the said process. Liberty is granted to the writ appellant to participate in the tender scheduled to take place on 29th September 2026, or as and when fixed. It would be open to the writ appellant to pursue its civil remedies in respect of any loss or damage sustained on account of the recall of the said tender. The decision to recall the earlier tender shall always be subject to the review in appropriate legal proceedings, if initiated by the writ appellant before the competent forum. Any observations made by the learned Single Judge or by this Court shall not operate as res judicata, and the Civil Court or other appropriate forum shall decide the matter impartially and in accordance with law.
The Writ Appeal is accordingly disposed of.