Case: STATE OF U.P Vs. SUDHIR KUMAR SINGH AND OTHERS

R.F. Nariman, J. 1. Leave granted. 2. An e-tender notice was issued on 06.01.2018 by the U.P. State Warehousing Corporation (Corporation) for unloading/loading of foodgrains/fertilizer bags from/into railway wagons, trucks etc., stacking the foodgrains/fertilizers in bags, bagging, weighment, standardisation, cleaning of foodgrains/fertilizers etc. and transporting of foodgrains/fertilizers etc. from Railway Station to Corporation godowns or viceversa or transporting them from any place to any other place for the Vindhyachal (Mirzapur) Region. Ten days later i.e. on 16.01.2018, the said tender was cancelled by the Corporation due to administrative reasons. On 01.04.2018, an e-tender was again published in the same terms, and so far as the region Vindhyachal (Mirzapur) is concerned, it was for the appointment of Handling and Transport Contractor for food grain in FCI and alleged material etc. of the following depots/centres of Uttar Pradesh for a period of two years: TABLE 3. Technical bids for these four centres were opened on 17.04.2018. Price bids of technically qualified bidders were then opened on 23.04.2018. The price bids that were received, so far as these four centres were concerned, were as follows: PEG Bhawanipur-I Centre TABLE PEG Bhawanipur-II Centre TABLE Mirzapur Centre TABLE Tendu (Sonbhadra) Centre (Where ASOR means Above Schedule of Rates) 4. On 04.05.2018, the then Managing Director of the Corporation cancelled the aforesaid tender apparently on the ground that it was impractical to go ahead with such tender. As a result, on 01.06.2018, for the same region, the aforesaid tender was reissued for the same workable capacity and estimated annual value of the contract. It may be added that each of these tenders were for a period of two years. 5. Sudhir Kumar Singh, Respondent No.1 in the appeals arising out of SLP (C) No. 5136 of 2020 and SLP (C) No. 7351 of 2020, was declared as the successful bidder for the Bhawanipur-I centre, at the rate of 341% ASOR, the other successful tenderers for Mirzapur, Bhawanipur-II and Tendu (Sonbhadra) being at 314%, 338% and 290% ASOR respectively. On 13.07.2018, an agreement was entered into between the Corporation and Respondent No.1 for execution of the work under the tender, which began on and from that day, and continued for a period of over one year. 6. Meanwhile, on 27.05.2019, two complaints were made by one Shri Pramod Kumar Singh of the Purvanchal Trucker Owners Association to the Principal Secretary of the State of U.P. regarding financial irregularities that occurred in the issuance of the e-tender notice dated 01.06.2018. These complaints were then forwarded by the Principal Secretary of the State of U.P. to the Managing Director of the Corporation by a letter dated 30.05.2019. The said letter, insofar as Respondent No.1 is concerned, read as follows: Shri Pramod Kumar Singh should analyse two enclosed complaints dated 27.05.2019 of Truck Owners Association wherein loss of Crores to Corporation is shown due to serious financial irregularities caused in handling and transport contracts in Vindhyanchal Division. xxx xxx xxx Tendering was done in Vindhyanchal Division on 16.04.2018, wherein low rate of tenders were received. Issued tenders are cancelled on 05.05.2018 without telling any reason and tender of centres cancelled on 16.06.2018 were re-tendered wherein rates are too high in new tenders than older one and by allotting work on higher rates work is being done. Kindly assure providing report within five days in respect of aforesaid and in respect of all points mentioned in enclosed letters. 7. As a result of this letter, the Managing Director of the Corporation held an ex parte enquiry into the matter, and insofar as Respondent No.1 was concerned, the Managing Director went into the cancellation of the previous tender dated 01.04.2018, and into the comparative details of rates received for these four centres earlier, as compared to the rates of the same tendered quantity of the tender dated 01.06.2018, and found the latter rates to be extremely high. In his report dated 14.06.2019, he therefore ultimately concluded: It is mentionable that cancellation of e-tendering process done earlier through Advertisement No.1.1001.23318 dated 01.04.2018 on the ground that received minimum rates are impractical is not acceptable in any circumstance. In this respect, for getting e-tendering process done the committee constituted at Division Level considered PEG TENDU(Sonbhadra)Centre only as impractical whereas the Head Office accepted it as it is in respect of all centres. As far as question of hiding of fact regarding forfeiture of security deposit by Uday Construction or application filed for producing the same are concerned, then in this respect it is to be known that Uday Construction applied only for PEGTendu through Advertisement No.1.1001.23318 dated 01.04.2018. Therefore, on this ground rejection of bids received for other centres was prima facie not justified. 8. Meanwhile, the Commissioner, Vindhyachal Mandal Mirzapur, also conducted an ex parte investigation and found in his report dated 29.06.2019 as follows: 1. State regional manager Sh. Madhukar Gupta has mentioned in his letter no. R.BH.N/dated 26-05-2018 forwarded to State General Manager (finance) Uttar Pradesh State Warehousing Corporation that committee of e-tendering has been formed only for the purpose of formalities. It is cleared from examining the paragraph that formality has been done in the tender. On 12-07-2018 the state manager gave the recommendation of acceptance and on 13-07-2018 Uttar Pradesh State Warehousing Corporation gave acceptance. On 13-07-2018 Sh. Madhukar Gupta State Regional Manager, Uttar Pradesh State Warehousing Corporation Vindhyachal gave appointment order to the concerned contractors. Hereby uncommon vigilance has been shown in entire procedure. 2. Regional Manager, Uttar Pradesh State Warehousing Corporation Sh. Anuj Shukla, computer consultant was got involved by Sh. Madhukar Gupta which is not appropriate. It is objectionable in keeping contract work in bid is objection. 3. Condition was kept on to participate only to the registered contractors which is objectionable. Due to, only participation of registered contractor, no contest took place amongst the contractors. Because of which rate was obtained at manifold high rate. Whereby damaged was caused to department. 4. Regional Manager in his letter no. R.B.N/284/dated 12-07-2018 which is addressed to Managing Director Uttar Pradesh State Warehousing Corporation Lucknow. For determined rate to 314 percent, 341 percent, 338 percent, and 290 percent at high rate conformation of recommendation of appointment of regular contractors have been given for work of Indian Fertilizer Corporation Handling and Transport. It is mentioned that despite the high rate from determined rate regional manager neither any market survey was conducted regarding high rate nor he mentioned in his letter and he recommended the acceptance irresponsibly. Hence Sh. Madhukar Gupta State Regional Manager has not followed his duty and responsibility and he is responsible for high rate and acceptance without any reason. 5. Even corporation Headquarter did not deem fit to take any action regarding high rate from determined rate. What was examined by Headquarter it is not cleared. 6. In this regard categorically it is not possible to determine the financial loss since neither in this case, opportunity to contest has been given and nor market survey has been conducted. On the basis of that formality rate can be determined. Damage has been surely caused. But it cannot be explained. Record is sent for perusal and necessary action. 9. Given these two reports, the Special Secretary, Government of U.P. wrote a letter dated 16.07.2019 to the Managing Director, in which the Managing Directors report dated 14.06.2019 was referred to, and concluded: In this, the role of Officer of Regional Level (Vindhyachal Division) and accepting Officer and erstwhile Managing Director and officers concerned with Headquarter, also appears to be doubtful. So, I have been instructed to say that you by doing enquiry of matter at your own level, the financial loss caused to the Government and after evaluating the same, shall take action to recover the said amount from concerned Contractor and concerned Officers. The Officers/Employees against whom any previous departmental proceeding is pending, in respect of them by including these charges as additional Charge Sheet action shall be taken and against officers/employees found guilty in the matter against whom no proceedings are pending, proceeding shall be done by marking them. The tenders of abovementioned firms which are granted contrary to rules, by cancelling them the appointment of contractors be done through e-tendering again for handling and transport work of concerned Warehouses. Said proceedings be done as soon as possible and the action taken shall be informed to the Government. 10. Pursuant to this letter, the aforesaid tenders were then cancelled on 26.07.2019, and disciplinary proceedings were taken against certain employees of the Corporation. These proceedings led to a report dated 18.10.2019, in which the difference between the earlier rates and the present rates were gone into, and it was found that an excess of INR 4,40,05,369 had been paid relative to what was sanctioned previously -this amount being the financial loss suffered by the Corporation. 11. Meanwhile, Respondent No.1 filed Writ Petition no. 25389 of 2019 in July 2019 before the High Court of Judicature at Allahabad, in which he challenged the illegal and arbitrary termination of the contract with the Corporation after successful completion of over one year of a two-year term, and prayed for the setting aside of the Corporations cancellation order dated 26.07.2019 of the tender dated 01.06.2018. 12. By the judgment dated 11.12.2019 in this Writ Petition, which is impugned in the appeals arising out of SLP (C) No. 5136 of 2020 and SLP (C) No. 7351 of 2020, the High Court, after setting out the prayer in the Writ Petition, set out four questions that arose before it as follows: (a) Whether the two enquiry reports are procedurally defective inasmuch as the findings returned thereunder are based upon no material and hence perverse; (b) Whether the respondent Managing Director was justified in cancelling the written agreement with the petitioner after a lapse of a year, without putting him to notice; (c) Whether being an autonomous body, Corporation could not have been directed to take action in particular manner and Managing Director was not justified in cancelling the agreement under an executive fiat of Special Secretary; and; (d) Whether the order passed by Managing Director is vitiated for bias as he himself had been Inquiry Officer and without inviting the petitioner to explain in his defence he himself conducted the inquiry and then on the basis of report prepared by him, he proceeded to cancel the agreement. 13. The High Court concluded that since the entire proceedings were conducted behind the back of Respondent No.1, and considering that the tender notice dated 01.06.2018 had never been challenged by anybody in a court of law, an ex parte appraisal of the complaints received was done in a hurry by the Managing Director of the Corporation and the learned Commissioner, and was liable to be set aside on several grounds, the single most important one - insofar as Respondent No.1 is concerned - being the breach of natural justice. The High Court, therefore, held: If the officials had cancelled the earlier tender notice in their wisdom and the cancellation of those tender notice was never questioned, merely because those earlier tender notices were cancelled/ withdrawn, a necessary presumption cannot be raised that the third notice inviting tender was for some extraneous considerations. It is true that the prices this time were taken to be very high as against the earlier ones in the process of tender in which the prices were quoted very low but that does not itself become the ground to cancel the entire tender process which had not only been finalized but even the agreement had been entered into and the party under the contract was carrying out the work making huge investment of money. Had it been a case also of the kind where the party to the contract had violated the terms and conditions of the contract, it could have been said that the tender was liable to be cancelled for violation of terms and conditions of the tender agreement. But in the instant case no such finding has come to be returned. The reasons for which the tender proceedings that had already been concluded with the execution of the agreement, has been cancelled without assigning any reason of wrong practice adopted by the petitioner in obtaining the agreement. Thus the petitioner cannot be said to be at fault in the matter and, therefore, in our considered opinion if the petitioner was already working under the agreement and no charge was there that he violated the terms and conditions of the agreement, the respondents were not justified in cancelling the agreement ex parte. xxx xxx xxx There is no finding returned that at the stage of submission of the application against the notice inviting tender, the petitioner was not eligible or that at the time of the opening of the technical bid and financial bid the petitioner got wrongfully qualified and that the financial bid of the petitioner was wrongly approved and that the agreement entered between the petitioner and the Corporation was void being against the law. If in all the above three stages the petitioner cannot be held to be guilty in any manner for manipulating the things and obtaining the tender by hatching any conspiracy in connivance with the officials of the Corporation, cancellation of the agreement suddenly by the Managing Director holding that the entire Notice Inviting Tender was bad, certainly required a notice and opportunity of hearing to be afforded to the petitioner prior to passing of such an order. It is a settled principle of law that in administrative exercise of power, the authority exercising power has to not only render due application of mind but also to follow the procedure which would not render the entire action arbitrary. It is settled legal principle that whatever is arbitrary, is hit by Article 14 of the Constitution of India and in the present case we find that only the procedure that was followed by the respondents in taking impugned action was not only quite ex parte but also under the executive fiats of the Special Secretary of the Government which was quite uncalled for. 14. Having so held, the High Court then concluded: Order impugned is basically based on the enquiry report prepared by the Managing Director himself and that the enquiry was conducted in the ex parte manner and the Managing Director failed to offer any opportunity of hearing to the petitioner before passing the order impugned which has the effect of terminating the agreement for no justifiable reason to hold that the petitioner was at fault at any point of time. Element of bias therefore, under the circumstances at the end of Managing Director, cannot be ruled out. The order impugned, therefore, terminating the agreement dated 26.7.2019 cannot be sustained in law. Thus, for the forgoing discussions writ petition succeeds and is allowed. The order dated 26.7.2019 (Annexure-13) to the writ petition and the enquiry report dated 14.6.2019 submitted by the Managing Director as well as the order passed by the Special Secretary dated 16.7.2019 are also hereby quashed. The consequential action if taken pursuant to the impugned order is also quashed. The consequences to follow, however, there will be no order as to costs. 15. Dr. Abhishek Manu Singhvi, learned Senior Advocate appearing on behalf of the Corporation, first adverted to the prayer in the Writ Petition filed by Respondent No.1, and argued that the High Court had gone way beyond what was asked for. According to him, the Writ Petition only prayed for a quashing of the cancellation order dated 26.07.2019 of the second tender. The High Court went way beyond, and not only quashed the aforesaid cancellation, but also quashed the enquiry report of the Managing Director dated 14.06.2019, as well as the order passed by the Special Secretary dated 16.07.2019, and the consequential action taken, namely, the departmental proceedings against the delinquent officers, which was never the subject matter of challenge in the Writ Petition. He went on to argue, based upon the comparison between the rates that were received in the earlier tender dated 01.04.2018 that was cancelled, and the rates in the 01.06.2018 tender, that the disparity was so great as to make it clear that the contracts for these four centres ought not to have been entered into at these rates at all. He argued that the High Court ought to have appreciated the huge financial loss that was caused as a result of awarding the contract at these rates, and ought not to have interfered with the cancellation of the tender, as it could not be characterised as arbitrary, given the huge increase in rates in such a short period for the same works. Further, he argued that the case law on natural justice showed that it was not an inflexible straitjacket, but had to be used wisely and well, and cited a number of judgments of this Court for the proposition that even though natural justice may be breached in the facts of a given case, if otherwise such breach does not result in prejudice, it would be a mere exercise in futility to set aside the order and remand it to the authorities to pass an order after hearing the affected party. He also argued that as of today, the two year term of the contract is over, and this very contractor, i.e. Respondent No.1, is doing the same work awarded at Mirzapur on 21.03.2020 at rates (139% ASOR) which are much lower than the rates tendered for previously, as is the successful tenderer Tilotama Devi on and from 31.09.2019 so far as Bhawanipur-II is concerned, which was awarded at 221% ASOR. Dr. Singhvi also argued that the writ court ought not to have interfered in contractual matters, and ought to have left Respondent No.1 to approach a civil court to file a suit for appropriate reliefs. 16. Shri Tushar Mehta, learned Solicitor General appearing on behalf of the State of U.P., argued that he had a limited role, and confined his arguments to the setting aside of the letter dated 16.07.2019 of the Special Secretary to take departmental action. He argued that this letter could not have been set aside by the High Court, as no such prayer or argument was made before it by the writ petitioner. 17. Shri Rakesh Dwivedi, learned Senior Advocate appearing on behalf of Respondent No.1, argued that the High Court judgment ought not to be interfered with, inasmuch as his client had pumped in a lot of money, and had worked the contract for a period of over one year successfully and without any complaint whatsoever from the Corporation. He reiterated the fact that nobody had challenged the award of the tender to his client, and that the cancellation of the tender was done behind his clients back. Had the authorities bothered to give his client a hearing, his client could have pointed out that in other nearby divisions, tenders were awarded at roughly the same rates, all of which contracts had been worked out, and none of which have been cancelled. Thus, he argued that his client suffered serious prejudice, in that he was able to work his contract for only one out of the two years that was awarded to him. He further argued that had a hearing been given, his client would also have demonstrated that the rates that were awarded could not be characterised as unreasonable, given the magnitude of the contract in his favour. He also argued that the award of tender at a lower rate at Mirzapur, which is currently being processed through his client, is not comparable with the tender that was awarded to his client for Bhawanipur I, because, inter alia, there was a huge difference between the volume of work awarded in the two contracts. He argued that it is idle to say that no prejudice has been caused, inasmuch as he has not been able to work the contract for one year, the contract period now being over, and that if the contract with his client is set aside, his client is debarred from bidding for a period of three years for any other contract with the Corporation. He further argued, in support of the impugned High Court judgment, that the action of termination by the Corporation waswithout an independent application of mind, and was purely at the instruction of the Special Secretary of the Government of U.P. dated 16.07.2019. He also fairly argued that his statement may be recorded that his client is not going to claim damages for the period of the agreement post cancellation, and that in fairness, the earnest money deposit and security deposit made by his client ought to be returned by the Corporation. 18. Having heard learned counsel for all the parties, one thing becomes clear. Despite the fact that the prayer in the Writ Petition filed by Respondent No.1 was set out in the very beginning of the impugned judgment, confining itself to the cancellation of the second tender, the impugned judgment went ahead and not only set aside such cancellation vide the letter dated 26.07.2019, but also went ahead and set aside the Managing Directors report dated 14.06.2019, and the Special Secretarys order of 16.07.2019, which required the taking of disciplinary action and recovery of financial loss from those who are responsible. Shri Rakesh Dwivedi also fairly conceded that his client had not asked for any relief qua the delinquent officers.

Decision:
1[ds]18. Having heard learned counsel for all the parties, one thing becomes clear. Despite the fact that the prayer in the Writ Petition filed by Respondent No.1 was set out in the very beginning of the impugned judgment, confining itself to the cancellation of the second tender, the impugned judgment went ahead and not only set aside such cancellation vide the letter dated 26.07.2019, but also went ahead and set aside the Managing Directors report dated 14.06.2019, and the Special Secretarys order of 16.07.2019, which required the taking of disciplinary action and recovery of financial loss from those who are responsible.19. Dr. Singhvis preliminary objection as to Respondent No.1 having to approach a civil court, and not a writ court, for actions that pertain to breach of contract, need not detain us. In ABL International Ltd. and Anr. vs. Export Credit Guarantee Corporation of India Ltd. and Ors. (2004) 3 SCC 553, this Court held that it was no longer res integra that a writ petition under Article 226 of the Constitution is maintainable at the instance of an aggrieved party to enforce a contractual obligation of the State or its instrumentality when the State acts in an arbitrary manner, as follows:8. As could be seen from the arguments addressed in this appeal and as also from the divergent views of the two courts below, one of the questions that falls for our consideration is whether a writ petition under Article 226 of the Constitution of India is maintainable to enforce a contractual obligation of the State or its instrumentality, by an aggrieved party.9. In our opinion this question is no more res integra and is settled by a large number of judicial pronouncements of this Court. In K.N. Guruswamy vs. State of Mysore [(1955) 1 SCR 305] this Court held:20. The next question is whether the appellant can complain of this by way of a writ. In our opinion, he could have done so in an ordinary case. The appellant is interested in these contracts and has a right under the laws of the State to receive the same treatment and be given the same chance as anybody else. ...We would therefore in the ordinary course have given the appellant the writ he seeks. But, owing to the time which this matter has taken to reach us (a consequence for which the appellant is in no way to blame, for he has done all he could to have an early hearing), there is barely a fortnight of the contract left to go...A writ would therefore be ineffective and as it is not our practice to issue meaningless writs we must dismiss this appeal and leave the appellant content with an enunciation of the law.10. It is clear from the above observations of this Court in the said case, though a writ was not issued on the facts of that case, this Court has held that on a given set of facts if a State acts in an arbitrary manner even in a matter of contract, an aggrieved party can approach the court by way of writ under Article 226 of the Constitution and the court depending on facts of the said case is empowered to grant the relief. This judgment in K.N. Guruswamy vs. State of Mysore was followed subsequently by this Court in the case of D.F.O. vs. Ram Sanehi Singh [(1971) 3 SCC 864] wherein this Court held:By that order he has deprived the respondent of a valuable right. We are unable to hold that merely because the source of the right which the respondent claims was initially in a contract, for obtaining relief against any arbitrary and unlawful action on the part of a public authority he must resort to a suit and not to a petition by way of a writ. In view of the judgment of this Court in K.N. Guruswamy case there can be no doubt that the petition was maintainable, even if the right to relief arose out of an alleged breach of contract, where the action challenged was of a public authority invested with statutory power.11. In the case of Gujarat State Financial Corpn. vs. Lotus Hotels (P) Ltd. [(1983) 3 SCC 379] this Court following an earlier judgment in Ramana Dayaram Shetty vs. International Airport Authority of India [(1979) 3 SCC 489] held:The instrumentality of the State which would be other authority under Article 12 cannot commit breach of a solemn undertaking to the prejudice of the other party which acted on that undertaking or promise and put itself in a disadvantageous position. The appellant Corporation, created under the State Financial Corporations Act, falls within the expression of other authority in Article 12 and if it backs out from such a promise, it cannot be said that the only remedy for the aggrieved party would be suing for damages for breach and that it could not compel the Corporation for specific performance of the contract under Article 226.12. The learned counsel appearing for the first respondent, however, submitted that this Court has taken a different view in the case of LIC of India vs. Escorts Ltd. [(1986) 1 SCC 264] wherein this Court held: (SCC p. 344, para 102)If the action of the State is related to contractual obligations or obligations arising out of the tort, the court may not ordinarily examine it unless the action has some public law character attached to it. Broadly speaking, the court will examine actions of State if they pertain to the public law domain and refrain from examining them if they pertain to the private law field. The difficulty will lie in demarcating the frontier between the public law domain and the private law field. It is impossible to draw the line with precision and we do not want to attempt it. The question must be decided in each case with reference to the particular action, the activity in which the State or the instrumentality of the State is engaged when performing the action, the public law or private law character of the action and a host of other relevant circumstances. When the State or an instrumentality of the State ventures into the corporate world and purchases the shares of a company, it assumes to itself the ordinary role of a shareholder, and dons the robes of a shareholder, with all the rights available to such a shareholder. There is no reason why the State as a shareholder should be expected to state its reasons when it seeks to change the management, by a resolution of the company, like any other shareholder.13. We do not think this Court in the above case has, in any manner, departed from the view expressed in the earlier judgments in the case cited hereinabove. This Court in the case of LIC of India proceeded on the facts of that case and held that a relief by way of a writ petition may not ordinarily be an appropriate remedy. This judgment does not lay down that as a rule in matters of contract the courts jurisdiction under Article 226 of the Constitution is ousted. On the contrary, the use of the words court may not ordinarily examine it unless the action has some public law character attached to it itself indicates that in a given case, on the existence of the required factual matrix a remedy under Article 226 of the Constitution will be available. The learned counsel then relied on another judgment of this Court in the case of State of U.P. vs. Bridge & Roof Co. (India) Ltd. [(1996) 6 SCC 22] wherein this Court held:Further, the contract in question contains a clause providing inter alia for settlement of disputes by reference to arbitration. The arbitrators can decide both questions of fact as well as questions of law. When the contract itself provides for a mode of settlement of disputes arising from the contract, there is no reason why the parties should not follow and adopt that remedy and invoke the extraordinary jurisdiction of the High Court under Article 226. The existence of an effective alternative remedy - in this case, provided in the contract itself- is a good ground for the court to decline to exercise its extraordinary jurisdiction under Article 226.14. This judgment again, in our opinion, does not help the first respondent in the argument advanced on its behalf that in contractual matters remedy under Article 226 of the Constitution does not lie. It is seen from the above extract that in that case because of an arbitration clause in the contract, the Court refused to invoke the remedy under Article 226 of the Constitution. We have specifically inquired from the parties to the present appeal before us and we have been told that there is no such arbitration clause in the contract in question. It is well known that if the parties to a dispute had agreed to settle their dispute by arbitration and if there is an agreement in that regard, the courts will not permit recourse to any other remedy without invoking the remedy by way of arbitration, unless of course both the parties to the dispute agree on another mode of dispute resolution. Since that is not the case in the instant appeal, the observations of this Court in the said case of Bridge & Roof Co. [(1996) 6 SCC 22] are of no assistance to the first respondent in its contention that in contractual matters, writ petition is not maintainable.20. This principle has been consistently upheld by this Court in Noble Resources vs. State of Orissa and Anr. (2006) 10 SCC 236 ( at paragraph 15); Food Corp. of India and Anr. vs. SEIL Ltd. and Ors. (2008) 3 SCC 440 ( at paragraph 16); Central Bank of India vs. Devi Ispat Ltd. and Ors. (2010) 11 SCC 186 ( at paragraph 28); and Surya Constructions vs. State of U.P. and Ors. (2019) 16 SCC 794 ( at paragraph 3).21. The judgments cited by Dr. Singhvi do not in any manner detract from the aforesaid principle. Radhakrishna Agarwal and Ors. vs. State of Bihar and Ors. (1977) 3 SCC 457  was a judgment in which a writ petition against the State Governments revision of the rates of royalty payable to it under a lease, and the cancellation of the said lease, was held to be governed by contract between the parties, no unreasonableness being made out by way of State action so as to attract the provisions of Article 14 of the Constitution of India. The broad proposition that all such questions are to be settled by civil courts, and not by writ petitions, has been expressly dissented from, as much water has flown since this judgment, which was delivered during the emergency when the fundamental rights of persons were suspended. Thus, in Verigamto Naveen vs. Govt. of A.P. and Ors. (2001) 8 SCC 344 , this Court stated:21. On the question that the relief as sought for and granted by the High Court arises purely in the contractual field and, therefore, the High Court ought not to have exercised its power under Article 226 of the Constitution placed very heavy reliance on the decision of the Andhra Pradesh High Court in Y.S. Raja Reddy vs. A.R Mining Corpn. Ltd. [(1988) 2 An LT 722] and the decisions of this Court in Har Shankar vs. Dy. Excise & Taxation Commr. [(1975) 1 SCC 737] , Radhakrishna Agarwal vs. State of Bihar [(1977) 3 SCC 457] , Ramlal & Sons vs. State of Rajasthan [(1976) 1 SCC 112] , Shiv Shankar Dal Mills vs. State of Haryana [(1980) 2 SCC 437] , Ramana Dayaram Shetty vs. International Airport Authority of India [(1979) 3 SCC 489] and Basheshar Nath vs. CIT [AI R 1959 SC 149] . Though there is one set of cases rendered by this Court of the type arising in Radhakrishna Agarwal case [(1977) 3 SCC 457] much water has flown in the stream of judicial review in contractual field. In cases where the decision-making authority exceeded its statutory power or committed breach of rules or principles of natural justice in exercise of such power or its decision is perverse or passed an irrational order, this Court has interceded even after the contract was entered into between the parties and the Government and its agencies. We may advert to three decisions of this Court in Dwarkadas Marfatia & Sons vs. Board of Trustees of the Port of Bombay [(1989) 3 SCC 293] , Mahabir Auto Stores vs. Indian Oil Corpn. [(1990) 3 SCC 752] and Shrilekha Vidyarthi (Kumari) vs. State of U.P. [(1991) 1 SCC 212] . Where the breach of contract involves breach of statutory obligation when the order complained of was made in exercise of statutory power by a statutory authority, though cause of action arises out of or pertains to contract, brings it within the sphere of public law because the power exercised is apart from contract. The freedom of the Government to enter into business with anybody it likes is subject to the condition of reasonableness and fair play as well as public interest. After entering into a contract, in cancelling the contract which is subject to terms of the statutory provisions, as in the present case, it cannot be said that the matter falls purely in a contractual field. Therefore, we do not think it would be appropriate to suggest that the case on hand is a matter arising purely out of a contract and, therefore, interference under Article 226 of the Constitution is not called for. This contention also stands rejected.23. It may be added that every case in which a citizen/person knocks at the doors of the writ court for breach of his or its fundamental rights is a matter which contains a public law element, as opposed to a case which is concerned only with breach of contract and damages flowing therefrom. Whenever a plea of breach of natural justice is made against the State, the said plea, if found sustainable, sounds in constitutional law as arbitrary State action, which attracts the provisions of Article 14 of the Constitution of India - see Nawabkhan Abbaskhan vs. State of Gujarat (1974) 2 SCC 121  at paragraph 7. The present case is, therefore, a case which involves a public law element in that the petitioner (Respondent No.1 before us) who knocked at the doors of the writ court alleged breach of the audi alteram partem rule, as the entire proceedings leading to cancellation of the tender, together with the cancellation itself, were done on an ex pane appraisal of the facts behind his back.24. The other judgments cited by Dr. Singhvi in his Written Submissions are distinguishable on facts, as all of them deal with either Public-Interest Litigations or tender applicants who have been turned down, who approach the writ court under Article 226 and ask for stay orders against a proposed project, which may then be considerably delayed and escalate cost, this being contrary to public interest. It is in these situations that observations have been made that before entertaining such writ petitions and passing interim orders, the writ court must be very careful to weigh conflicting public interests, and should intervene only when there is an overwhelming public interest in entertaining the writ petition. This is what was held in Raunaq International Ltd. vs. I.V.R. Construction Ltd. and Ors. (1999) 1 SCC 492  at paragraphs 11 to 13, 24 and 25. To similar effect is the judgment in Jagdish Mandal vs. State of Orissa and Ors. (2007) 14 SCC 517  at paragraph 22.33. What is important to note is that it is the Court or Tribunal which must determine whether or not prejudice has been caused, and not the authority on an ex pane appraisal of the facts. This has been well-explained in a later judgment, namely Dharampal Satyapal Ltd. vs. Dy. Comm. Of Central Excise, Gauhati and Ors. (2015) 8 SCC 519 , in which, after setting out a number of judgments, this Court concluded:38. But that is not the end of the matter. While the law on the principle of audi alteram partem has progressed in the manner mentioned above, at the same time, the courts have also repeatedly remarked that the principles of natural justice are very flexible principles. They cannot be applied in any straitjacket formula. It all depends upon the kind of functions performed and to the extent to which a person is likely to be affected. For this reason, certain exceptions to the aforesaid principles have been invoked under certain circumstances. For example, the courts have held that it would be sufficient to allow a person to make a representation and oral hearing may not be necessary in all cases, though in some matters, depending upon the nature of the case, not only full-fledged oral hearing but even cross-examination of witnesses is treated as a necessary concomitant of the principles of natural justice. Likewise, in service matters relating to major punishment by way of disciplinary action, the requirement is very strict and full-fledged opportunity is envisaged under the statutory rules as well. On the other hand, in those cases where there is an admission of charge, even when no such formal inquiry is held, the punishment based on such admission is upheld. It is for this reason, in certain circumstances, even post-decisional hearing is held to be permissible. Further, the courts have held that under certain circumstances principles of natural justice may even be excluded by reason of diverse factors like time, place, the apprehended danger and so on.39. We are not concerned with these aspects in the present case as the issue relates to giving of notice before taking action. While emphasising that the principles of natural justice cannot be applied in straitjacket formula, the aforesaid instances are given. We have highlighted the jurisprudential basis of adhering to the principles of natural justice which are grounded on the doctrine of procedural fairness, accuracy of outcome leading to general social goals, etc. Nevertheless, there may be situations wherein for some reason-perhaps because the evidence against the individual is thought to be utterly compelling-it is felt that a fair hearing would make no difference-meaning that a hearing would not change the ultimate conclusion reached by the decision-maker-then no legal duty to supply a hearing arises. Such an approach was endorsed by Lord Wilberforce in Malloch vs. Aberdeen Corpn. [(1971) 1 WLR 1578], who said that: (WLR p. 1595)... A breach of procedure ... cannot give [rise to] a remedy in the courts, unless behind it there is something of substance which has been lost by the failure. The court does not act in vain.Relying on these comments, Brandon L.J. opined in Cinnamond vs. British Airports Authority [(1980) 1 WLR 582] that: (WLR p. 593)... no one can complain of not being given an opportunity to make representations if such an opportunity would have availed him nothing.In such situations, fair procedures appear to serve no purpose since the right result can be secured without according such treatment to the individual.40. In this behalf, we need to notice one other exception which has been carved out to the aforesaid principle by the courts. Even if it is found by the court that there is a violation of principles of natural justice, the courts have held that it may not be necessary to strike down the action and refer the matter back to the authorities to take fresh decision after complying with the procedural requirement in those cases where non-grant of hearing has not caused any prejudice to the person against whom the action is taken. Therefore, every violation of a facet of natural justice may not lead to the conclusion that the order passed is always null and void. The validity of the order has to be decided on the touchstone of prejudice. The ultimate test is always the same viz. the test of prejudice or the test of fair hearing.xxx xxx xxx42. So far so good. However, an important question posed by Mr Sorabjee is as to whether it is open to the authority, which has to take a decision, to dispense with the requirement of the principles of natural justice on the ground that affording such an opportunity will not make any difference? To put it otherwise, can the administrative authority dispense with the requirement of issuing notice by itself deciding that no prejudice will be caused to the person against whom the action is contemplated? Answer has to be in the negative. It is not permissible for the authority to jump over the compliance of the principles of natural justice on the ground that even if hearing had been provided it would have served no useful purpose. The opportunity of hearing will serve the purpose or not has to be considered at a later stage and such things cannot be presumed by the authority. This was so held by the English Court way back in the year 1943 in General Medical Council vs. Spackman [1943 AC 627]. This Court also spoke in the same language in Board of High School and Intermediate Education vs. Chitra Srivastava [(1970) 1 SCC 121] , as is apparent from the following words: (SCC p. 123, para 7)7. The learned counsel for the appellant, Mr C.B. Agarwala, contends that the facts are not in dispute and it is further clear that no useful purpose would have been served if the Board had served a show-cause notice on the petitioner. He says that in view of these circumstances it was not necessary for the Board to have issued a show-cause notice. We are unable to accept this contention. Whether a duty arises in a particular case to issue a show-cause notice before inflicting a penalty does not depend on the authoritys satisfaction that the person to be penalised has no defence but on the nature of the order proposed to be passed.43. In view of the aforesaid enunciation of law. Mr Sorabjee may also be right in his submission that it was not open for the authority to dispense with the requirement of principles of natural justice on the presumption that no prejudice is going to be caused to the appellant since the judgment in R.C. Tobacco [(2005) 7 SCC 725] had closed all the windows for the appellant.44. At the same time, it cannot be denied that as far as courts are concerned, they are empowered to consider as to whether any purpose would be served in remanding the case keeping in mind whether any prejudice is caused to the person against whom the action is taken. This was so clarified in ECIL itself in the following words: (SCC p. 758, para 31)31. Hence, in all cases where the enquiry officers report is not furnished to the delinquent employee in the disciplinary proceedings, the courts and tribunals should cause the copy of the report to be furnished to the aggrieved employee if he has not already secured it before coming to the court/tribunal and given the employee an opportunity to show how his or her case was prejudiced because of the non-supply of the report. If after hearing the parties, the court/tribunal comes to the conclusion that the non-supply of the report would have made no difference to the ultimate findings and the punishment given, the court/tribunal should not interfere with the order of punishment. The court/tribunal should not mechanically set aside the order of punishment on the ground that the report was not furnished as is regrettably being done at present. The courts should avoid resorting to short cuts. Since it is the courts/tribunals which will apply their judicial mind to the question and give their reasons for setting aside or not setting aside the order of punishment, (and not any internal appellate or revisional authority), there would be neither a breach of the principles of natural justice nor a denial of the reasonable opportunity. It is only if the court/tribunal finds that the furnishing of the report would have made a difference to the result in the case that it should set aside the order of punishment.45. Keeping in view the aforesaid principles in mind, even when we find that there is an infraction of principles of natural justice, we have to address a further question as to whether any purpose would be served in remitting the case to the authority to make fresh demand of amount recoverable, only after issuing notice to show cause to the appellant. In the facts of the present case, we find that such an exercise would be totally futile having regard to the law laid down by this Court in R.C. Tobacco [(2005) 7 SCC 725] .39. An analysis of the aforesaid judgments thus reveals:(1) Natural justice is a flexible tool in the hands of the judiciary to reach out in fit cases to remedy injustice. The breach of the audi alteram partem rule cannot by itself, without more, lead to the conclusion that prejudice is thereby caused.(2) Where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, except in the case of a mandatory provision of law which is conceived not only in individual interest, but also in public interest.(3) No prejudice is caused to the person complaining of the breach of natural justice where such person does not dispute the case against him or it. This can happen by reason of estoppel, acquiescence, waiver and by way of non-challenge or non-denial or admission of facts, in cases in which the Court finds on facts that no real prejudice can therefore be said to have been caused to the person complaining of the breach of natural justice.(4) In cases where facts can be stated to be admitted or indisputable, and only one conclusion is possible, the Court does not pass futile orders of setting aside or remand when there is, in fact, no prejudice caused. This conclusion must be drawn by the Court on an appraisal of the facts of a case, and not by the authority who denies natural justice to a person.(5) The prejudice exception must be more than a mere apprehension or even a reasonable suspicion of a litigant. It should exist as a matter offact, or be based upon a definite inference of likelihood of prejudice flowing from the non-observance of natural justice.40. Judged by the touchstone of these tests, it is clear that Respondent No.1 has been completely in the dark so far as the cancellation of the award of tender in his favour is concerned, the audi alteram partem rule having been breached in its entirety. As has been correctly argued by Shri Rakesh Dwivedi, prejudice has indeed been caused to his client, not only from the fact that one year of the contract period has been taken away, but also that, if the impugned High Court judgment is to be set aside today, his client will be debarred from bidding for any of the Corporations tenders for a period of three years. Undoubtedly, prima facie, the rates at which contracts have been awarded pursuant to the tender dated 01.06.2018 are way above the rates that were awarded of the same division, and for exactly the same amount of work awarded vide the earlier tender advertisement dated 01.04.2018. Shri Dwivedis argument that in the neighbouring regions the rates tendered were also high, and nothing has yet been done to nullify these tenders and the financial loss caused, does carry some weight. That a huge financial loss to the Corporation has also taken place is something for the Corporation to probe, and take remedial action against the persons responsible.44. Insofar as the appeal arising out of SLP (C) No. 7364 of 2020 is concerned, the facts therein are distinct from the other two connected appeals before us only to the extent that Respondent No.1 therein, M/s Dharam Raj Singh, was the successful bidder for the Tendu (Sonbhadra) region, which award of tender was also cancelled by the Corporations order dated 26.07.2019. The judgment impugned in this appeal, dated 07.01.2020 of the High Court of Judicature of Allahabad (Lucknow Bench), allowed M/s Dharam Raj Singhs writ petition challenging the cancellation order, stating that it was to be governed by the judgment of the High Court of Judicature at Allahabad dated 11.12.2019.