Contracts to cease to have effect unless ratified by State Governemnt or Corporation or new Government company.

Every contract entered into by the proprietors in relation to their undertaking, which has vested in the State Government under section 3, for any service, sale or supply, and in force immediately before the appointed day, shall on and from the expiry of one hundred and eighty days from the appointed day, cease to have effect unless such contract is, before the expiry of that period, ratified, in writing by the State Government, or the Corporation, or new Government company, in which such undertaking has been vested under this Act, and in ratifying such contract, the State Government, or the Corporation or the new Government company, as the case may be, may make such alteration or modification therein as it may think fit: Provided that, the State Government, or the Corporation, or the new Government company shall not omit to ratify a contract and shall not make any alteration or modification in a contract,— (a) unless it is satisfied that such contract is unduly onerous, or has been entered into in bad faith, or is detrimental to the interest of the State Government, or the Corporation or the new Government company ; and (b) except after giving the parties to the contract a reasonable opportunity of being heard and except after recording in writing its reasons for refusal to ratify the contract or for making any alteration or modification therein.