The government had earlier granted sanction to KSEB to award the work to the Korean Electric Power Data Network Company Ltd owned by the Korean Republic.
Following objections raised by the Congress-led United Democratic Front (UDF), then Chief Minister V S Achutanandan intervened and cancelled the contract and ordered re-tender of the work.
Challenging this decision the company approached the Court.
Allowing the petition, Justice P N Ravindran questioned the government order and held that sanction of the state was not required for awarding the work.
The Court directed the Centre and Power Finance Corporation to extend the time for implementation of the project.
The project was awarded to the Korean firm on September 4, 2010, while it was cancelled on December 27 the same year.
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It was on the basis of a letter sent by Achuthanandan and then opposition leader Oommen Chandy that the contract was cancelled. No other reason was assigned for cancellation, the Court said.
The Court said in the absence of any right of the government to overrule the decision of KSEB to award the work to the petitioner, the stand taken by the government cannot be sustained.
KSEB has acted on the dictates of the government and the government had no authority to dictate on the matter, the Court held.