STATE OF U.P. versus SUDHIR KUMAR SINGH AND ORS.
[2020] 13 S.C.R. 571, Supreme Court of India, 2020
Outcome: Disposed off
Segment: Ratio
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   [2020] 13 S.C.R. 571
STATE OF U.P.
v.
SUDHIR KUMAR SINGH AND ORS.
(Civil Appeal No. 3498 of 2020)
 OCTOBER 16, 2020
[R. F. NARIMAN, NAVIN SINHA AND K. M. JOSEPH, JJ.]
Principles of Natural Justice – audi alteram partem – Breach
of – U.P. State Warehousing Corporation issued e-tender inter alia
for unloading/loading of foodgrains/fertilizer bags from/into railway
wagons, trucks etc.; transporting from Railway Station to
Corporation godowns or vice versa – Tender cancelled – e-tender
again published in the same terms, for Vindhyachal (Mirzapur)
region, it was regarding appointment of Handling and Transport
Contractor for food grain in FCI for four depots/centres of Uttar
Pradesh for two years – Cancelled again – Another tender reissued
for the same region – Respondent No.1 declared as successful
bidder for the Bhawanipur-I centre – Agreement entered into
between the Corporation and Respondent No.1 for execution of
the work under the tender – Complaints of financial irregularities
in the issuance of the e-tender – Tender cancelled – Respondent
no.1 filed Writ Petition – Allowed – On appeal, held: Prayer in the
Writ Petition confined itself to the cancellation of the tender –
However, impugned judgment went ahead and not only set aside
such cancellation vide letter dtd. 26.07.19, but also set aside the
Managing Director’s report dtd. 14.06.19, and the Special
Secretary’s order of 16.07.19, which required taking disciplinary
action and recovery of financial
loss from those responsible – Set
aside to that extent – Further, entire proceedings leading to
cancellation of the tender, together with the cancellation itself, were
done on an ex parte appraisal of the facts behind respondent no.1’s
back – Natural justice is a flexible tool in the hands of the judiciary
to reach out in fit cases to remedy injustice – In the present case,
respondent no.1 was completely in the dark so far as the cancellation
of the tender is concerned, the audi alteram partem rule having been
breached in its entirety – Impugned judgment upheld on this ground
– Tenders – Maxims – Constitution of India – Arst.226, 14.
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Constitution of India – Art.226 – Writ petition – Maintainability
of, for enforcing contractual obligation of the State/its
instrumentality – Discussed.
Disposing of the appeals, the Court
HELD: 1.1 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
Director’s report dated 14.06.2019, and the Special Secretary’s
order of 16.07.2019, which required the taking of disciplinary
action and recovery of financial loss from those who are
responsible. It was fairly conceded that no relief was asked qua
the delinquent officers. This being the case, the impugned
judgment is set aside insofar as it has quashed the Managing
Director’s report dated 14.06.2019, and the order of the Special
Secretary dated 16.07.2019. Any consequential action that is to
be taken pursuant to these orders must follow in accordance with
law. 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. The present
case is, therefore, a case which involves a “public law element”
in that the petitioner (Respondent No.1) 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
parte appraisal of the facts behind his back. [Paras 18, 23][589-F-
H; 590-A-B; 598-E-G]
Nawabkhan Abbaskhan v. State of Gujarat (1974) 2
SCC 121 :  [1974] 3 SCR 427 – relied on.
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1.2 In some of the early judgments of this Court, the non-
observance of natural justice was said to be prejudice in itself to
the person affected, and proof of prejudice, independent of proof
of denial of natural justice, was held to be unnecessary. The only
exception to this rule is where, on “admitted or indisputable”
facts only one conclusion is possible, and under the law only one
penalty is permissible. In such cases, a Court may not issue its
writ to compel the observance of natural justice, not because it is
not necessary to observe natural justice, but because Courts do
not issue writs which are “futile”. Equally, the prejudice that is
caused, apart from natural justice itself being denied, cannot be
said to be present in a case in which there are admitted facts.
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 parte appraisal of the facts. [Paras 28,
29 and 33][600-C-D; 601-B; 605-E-F]
S.L. Kapoor v. Jagmohan and Ors. (1980) 4 SCC 379 :
[1981] 1 SCR 746; P.D. Agrawal v. State Bank of India
and Ors. (2006) 8 SCC 776 :  [2006[ 1 Suppl. SCR 454;
K.L. Tripathi v. State Bank of India and Ors. (1984) 1
SCC 43 : [1984] 1 SCR  184; State of U.P. v. Neeraj
Awasthi and Ors.(2006) 1 SCC 667 : [2005] 5 Suppl.
SCR 906; Managing Director, ECIL and Ors. v. B.
Karnakumar and Ors. (1993) 4 SCC 727: 1993 ( 2 )
Suppl. SCR 576; Haryana Financial Corporation
and
Anr. v. Kailash Chandra Ahuja (2008) 9 SCC 31 :
[ 2008] 10 SCR 222 – relied on.
1.3 Under the broad rubric of the Court not passing futile
orders as the case is based on “admitted” facts, being admitted
by reason of estoppel, acquiescence, non-challenge or non-denial,
the following judgments of this Court are all illustrations of a
breach of the audi alteram partem rule being established on the
facts of the case, but with no prejudice caused to the person
alleging breach of natural justice, as the case was one on admitted
facts. [Para 38][618-B-C]
STATE OF U.P. v. SUDHIR KUMAR SINGH AND ORS.
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SUPREME COURT REPORTS
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Punjab and Sind Bank and Ors. v. Sakattar
Singh (2001) 1 SCC 214:  2000 ( 3 )  Suppl.  JT 
450; Karnataka SRTC and Anr. v. S.G. Kotturappa and
Anr. (2005) 3 SCC 409 : [ 2005] 2 SCR 520; Viveka
Nand Sethi v. Chairman, J&K Bank Ltd. and Ors. (2005)
5 SCC 337 : [2005] 3   SCR 1095; Mohd. Sartaj and
Anr. v. State of U.P. and Ors. (2006) 2 SCC 315: [ 2006]
1 SCR 377; Punjab National Bank and Ors. v. Manjeet
Singh and Anr. (2006) 8 SCC 647 : 2006 (6 )  Suppl.
 SCR 825; Ashok Kumar Sonkar v. Union of India and
Ors. (2007) 4 SCC 54 : [2007] 3  SCR 95; State of
Manipur and Ors. v. Y. Token Singh and Ors. (2007) 5
SCC 65: [2007] 2 SCR 965; Secretary, A.P. Social
Welfare Residential Educational Institutions v. Pindiga
Sridhar and Ors. (2007) 13 SCC 352 :  [2007] 4
SCR 145; Peethani Suryanarayana and Anr. v. Repaka
Venkata Ramana Kishore and Ors. (2009) 11 SCC 308
: [2009] 2 SCR 48; Municipal Committee, Hoshiapur
v. Punjab State Electricity Board and Ors. (2010) 13
SCC 216  : [2010] 13 SCR 658; Union of India and
Anr. v. Raghuwar Pal Singh (2018) 15 SCC 463 : [2018]
4 SCR 1012 – referred to.
1.4 (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,
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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 of fact, or be based upon a definite inference of
likelihood of prejudice flowing from the non-observance of natural
justice. [Para 39][618-H; 619-A-E]
1.5 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.
Prejudice has indeed been caused to respondent no.1, 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, he will be debarred from bidding for any of the
Corporation’s 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. The 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. The
impugned judgment of the High Court is therefore, upheld on
STATE OF U.P. v. SUDHIR KUMAR SINGH AND ORS.
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the ground that natural justice has indeed been breached in the
facts of the present case, not being a case of admitted facts leading
to the grant of a futile writ, and that prejudice has indeed been
caused to Respondent No.1. In view of this finding, there is no
need to examine the other contentions raised by the parties.
[Paras 40, 41][619-F-H; 620-A-C]
1.6 The submission that as respondent no.1 is working for
the Corporation in another subsequent tender, he is not going to
claim damages for the lost period post cancellation of the tender
is reiterated. This being the case, and other things being equal,
the earnest money deposit and security deposit made by him is
ordered to be returned by the Corporation within a period of
eight weeks from today. He may also request the Corporation to
pay any amount that remained unpaid for work actually done, which
the Corporation will, after a hearing, either allow or reject for
reasons to be stated. The appeals arising out of SLP (C) 5136 of
2020 and SLP (C) 7351 of 2020 are thus partially allowed, and the
impugned judgment of the High Court of Judicature at Allahabad
dated 11.12.2019 is set aside only to the extent indicated. [Paras
42, 43][620-C-E]
1.7 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 this Court 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 Corporation’s 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 Singh’s 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. As a result, the judgment in the two connected
appeals, and all consequential reliefs granted, will apply on all
fours to this appeal also. [Para 44][620-F-G]
ABL International Ltd. and Anr. v. Export Credit
Guarantee Corporation of India Ltd. and Ors. [2004]
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3 SCC 553; Food Corp. of India and Anr. v. SEIL Ltd.
and Ors.(2008) 3 SCC 440 :  [2008]  1 SCR 663;
Central Bank of India v. Devi Ispat Ltd. and Ors. (2010)
11 SCC 186 : [2010]  9 SCR 417; Surya Constructions
v. State of U.P. and Ors. (2019) 16 SCC 794; Verigamto
Naveen v. Govt. of A.P. and Ors. (2001) 8 SCC 344 :
2001 ( 3 ) Suppl. SCR  112; Rishi Kiran Logistics v.
Board of Trustees of Kandla Port and Ors. (2015) 13
SCC 233 : [2014] 5 SCR 411; Joshi Technologies
International Inc. v. Union of India and Ors. (2015) 7
SCC 728 : [2015]  6 SCR 1042; Dharampal Satyapal
Ltd. v. Dy. Comm. Of Central Excise, Gauhati and Ors.
(2015) 8 SCC 519 : [2015] 6 SCR 437; State Bank of
Patiala and Ors. v. S.K. Sharma (1996) 3 SCC 364  :
1996 ( 3 ) SCR 972; M.C. Mehta v. Union of India and
Ors. (1999) 6 SCC 237 :  [1999] 3 SCR 1173; Aligarh
Muslim University and Ors. v. Mansoor Ali Khan (2000)
7 SCC 529;  2000 ( 2 ) Suppl.  SCR  684; Union of
India and Ors. v. Alok Kumar (2010) 5 SCC 349 :
[2010] 5   SCR 35 – relied on.
Raunaq International Ltd. v. I.V.R. Construction Ltd.
and Ors. (1999) 1 SCC 492: [1998] 3 Suppl. SCR  421;
Jagdish Mandal v. State of Orissa and Ors. (2007) 14
SCC 517; Michigan Rubber (India) Ltd. v.State of
Karnataka and Ors. (2012) 8 SCC 216 :[ 2012] 8
SCR 128; Tata Cellular v. Union of India (1994) 6 SCC
651 :  [1994]  2  Suppl.  SCR  122; Rajasthan State
Housing Board and Anr. v. G.S. Investments and Anr.
(2007) 1 SCC 477 : [2006] 7 Suppl. SCR 868 –
distinguished.
Noble Resources v. State of Orissa and Anr. (2006) 10
SCC 236 : [ 2006] 6 Suppl. SCR 53; Radhakrishna
Agarwal and Ors. v. State of Bihar and Ors. (1977) 3
SCC 457 : [1977]   3  SCR  249 – referred to.
On Justice- Book by J.R. Lucas (Page 86) – referred
to.
STATE OF U.P. v. SUDHIR KUMAR SINGH AND ORS.

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Case Law Reference
[2006] 6  Suppl. SCR 53
referred to
Para 20
[2008] 1 SCR 663
relied on
Para 20
[2010] 9 SCR 417
relied on
Para 20
[1977] 3 SCR 249
referred to
Para 21
[2001] 3 Suppl. SCR  112
relied on
Para 21
[2014] 5 SCR 411
relied on
Para 22
[2015] 6 SCR 1042 
relied on
Para 22
[1974] 3 SCR  427
relied on
Para 23
[1998] 3 Suppl. SCR 421
distinguished
Para 24
[2012] 8 SCR 128
distinguished
Para 25
[1994] 2 Suppl. SCR  122
distinguished
Para 25
[2006] 7 Suppl. SCR 868
distinguished
Para 25
[1981] 1 SCR 746
referred to
Para 28
[2006] 1 Suppl.  SCR 454
referred to
Para 28
[1984] 1 SCR  184
referred to
Para 29
[2005] 5 Suppl. SCR 906
referred to
Para 30
1993 ( 2 ) Suppl. SCR  576 
referred to
Para 31
[2008 ]10 SCR 222
referred to
Para 32
[2015] 6 SCR 437
referred to
Para 33
1996 ( 3 ) SCR  972
referred to
Para 34
[1999] 3 SCR 1173 
referred to
Para 35
[2000] 2 Suppl. SCR 684 
referred to
Para 36
[2010] 5 SCR 35
referred to
Para 37
[2005] 2 SCR 520 
referred to
Para 38
[2005] 3 SCR 1095
referred to
Para 38
[2006] 1 SCR 377
referred to
Para 38
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[2006] 6 Suppl. SCR 825
referred to
Para 38
[2007] 3 SCR 95
referred to
Para 38
[2007] 2 SCR 965
referred to
Para 38
[2007] 4 SCR 145 
referred to
Para 38
[2009] 2 SCR 48
referred to
Para 38
[2010] 13 SCR 658
referred to
Para 38
[2018]  4  SCR 1012 
referred to
Para 38
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3498
of 2020.
From the Judgment and Order dated 11.12.2019 of the High Court
of Judicature at Allahabad in Writ C. No. 25389 of 2019.
With
Civil Appeal Nos. 3499 and 3500 of 2020.
Tushar Mehta, SG, Dr. Abhishek Manu Singhvi, Ms. Meenakshi
Arora, Rakesh Dwivedi, Sidharth Dave, Sr. Advs., Mrs. Rachna Gupta,
Amit Bhandari, Ms. Sakshi Kakkar, Shakti Singh, Ms. Preetika Dwivedi,
Mr. Imran Syed, Advs. for the appearing parties.
The Judgment of the Court was delivered by
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 vice
versa 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:
STATE OF U.P. v. SUDHIR KUMAR SINGH AND ORS.

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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
PEG Bhawanipur-II Centre
Mirzapur Centre
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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 Owner’s
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.
STATE OF U.P. v. SUDHIR KUMAR SINGH AND ORS.
[R.F. NARIMAN, J.]
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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 PEG Tendu 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
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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
STATE OF U.P. v. SUDHIR KUMAR SINGH AND ORS.
[R.F. NARIMAN, J.]
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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 Director’s 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.
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11. Mean while, 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 Corporation’s
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
STATE OF U.P. v. SUDHIR KUMAR SINGH AND ORS.
[R.F. NARIMAN, J.]
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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
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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
STATE OF U.P. v. SUDHIR KUMAR SINGH AND ORS.
[R.F. NARIMAN, J.]
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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
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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 client’s 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 was without
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 Director’s report dated 14.06.2019, and the Special Secretary’s
order of 16.07.2019, which required the taking of disciplinary action and
recovery of financial loss from those who are responsible. Shri Rakesh
STATE OF U.P. v. SUDHIR KUMAR SINGH AND ORS.
[R.F. NARIMAN, J.]
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Dwivedi also fairly conceded that his client had not asked for any relief
qua the delinquent officers. This being the case, we set aside the impugned
judgment insofar as it has quashed the Managing Director’s report dated
14.06.2019, and the order of the Special Secretary dated 16.07.2019.
Any consequential action that is to be taken pursuant to these orders
must follow in accordance with law.
19. Dr. Singhvi’s 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. v. 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 v. 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
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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 v. State of Mysore was followed subsequently by
this Court in the case of D.F.O. v. 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. v. Lotus
Hotels (P) Ltd. [(1983) 3 SCC 379] this
Court following an earlier
judgment in Ramana Dayaram Shetty v. 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
STATE OF U.P. v. SUDHIR KUMAR SINGH AND ORS.
[R.F. NARIMAN, J.]
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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 v. 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 court’s 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
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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. v. 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 v. State of Orissa and Anr. (2006) 10 SCC 236 (at
paragraph 15); Food Corp. of India and Anr. v. SEIL Ltd. and Ors.
(2008) 3 SCC 440 (at paragraph 16); Central Bank of India v. Devi
STATE OF U.P. v. SUDHIR KUMAR SINGH AND ORS.
[R.F. NARIMAN, J.]
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Ispat Ltd. and Ors. (2010) 11 SCC 186 (at paragraph 28); and Surya
Constructions v. 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.
v. State of Bihar and Ors. (1977) 3 SCC 457 was a judgment in which
a writ petition against the State Government’s 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 v. 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 v. A.P.
Mining Corpn. Ltd. [(1988) 2 An LT 722] and the
decisions of
this Court in Har Shankar v. Dy. Excise & Taxation
Commr. [(1975) 1 SCC 737], Radhakrishna Agarwal v. State
of Bihar [(1977) 3 SCC 457], Ramlal & Sons v. State of
Rajasthan [(1976) 1 SCC 112], Shiv Shankar Dal Mills v. State
of Haryana [(1980) 2 SCC 437], Ramana Dayaram
Shetty v. International Airport Authority of India [(1979) 3 SCC
489] and Basheshar Nath v. CIT [AIR 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
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agencies. We may advert to three decisions of this Court
in Dwarkadas Marfatia & Sons v. Board of Trustees of the
Port of Bombay [(1989) 3 SCC 293], Mahabir Auto
Stores v. Indian Oil Corpn. [(1990) 3 SCC 752] and Shrilekha
Vidyarthi (Kumari) v. 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.”
(emphasis supplied)
22. In Rishi Kiran Logistics v. Board of Trustees of Kandla
Port and Ors. (2015) 13 SCC 233, this Court held that a writ petition
under Article 226, being a public law remedy, a “public law element”
should be present on facts before
Article 226 can be invoked – see
paragraphs 37 and 38. The law on this subject has been laid down
exhaustively in Joshi Technologies International Inc. v. Union of
India and Ors. (2015) 7 SCC 728, this Court stating:
“69. The position thus summarised in the aforesaid principles has
to be understood in the context of discussion that preceded which
we have pointed out above. As per this, no doubt, there is no
absolute bar to the maintainability of the writ petition even in
contractual matters or where there are disputed questions of fact
or even when monetary claim is raised. At the same time,
discretion lies with the High Court which under certain
circumstances, it can refuse to exercise. It also follows that under
the following circumstances, “normally”, the Court would not
exercise such a discretion:
STATE OF U.P. v. SUDHIR KUMAR SINGH AND ORS.
[R.F. NARIMAN, J.]
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69.1. The Court may not examine the issue unless the action has
some public law character attached to it.
69.2. Whenever a particular mode of settlement of dispute is
provided in the contract, the High Court would refuse to exercise
its discretion under Article 226 of the Constitution and relegate
the party to the said mode of settlement, particularly when
settlement of disputes is to be resorted to through the means of
arbitration.
69.3. If there are very serious disputed questions of fact which
are of complex nature and require oral evidence for their
determination.
69.4. Money claims per se particularly arising out of contractual
obligations are normally not to be entertained except in exceptional
circumstances.
70. Further, the legal position which emerges from various
judgments of this Court dealing with different situations/aspects
relating to contracts entered into by the State/public authority with
private parties, can be summarised as under:
70.1. At the stage of entering into a contract, the State acts purely
in its executive capacity and is bound by the obligations of fairness.
70.2. State in its executive capacity, even in the contractual field,
is under obligation to act fairly and cannot practise some
discriminations.
70.3. Even in cases where question is of choice or consideration
of competing claims before entering into the field of contract,
facts have to be investigated and found before the question
of a
violation of Article 14 of the Constitution could arise. If those
facts are disputed and require assessment of evidence the
correctness of which can only be tested satisfactorily by taking
detailed evidence, involving examination and cross-examination
of witnesses, the case could not be conveniently or satisfactorily
decided in proceedings under Article 226 of the Constitution. In
such cases the Court can direct the aggrieved party to resort to
alternate remedy of civil suit, etc.
70.4. Writ jurisdiction of the High Court under Article 226 of the
Constitution was not intended to facilitate avoidance of obligation
voluntarily incurred.
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70.5. Writ petition was not maintainable to avoid contractual
obligation. Occurrence of commercial difficulty, inconvenience
or hardship in performance of the conditions agreed to in the
contract can provide no justification in not complying with the
terms of contract which the parties had accepted with open eyes.
It cannot ever be that a licensee can work out the licence if he
finds it profitable to do so: and he can challenge the conditions
under which he agreed to take the licence, if he finds it
commercially inexpedient to conduct his business.
70.6. Ordinarily, where a breach of contract is complained of,
the party complaining of such breach may sue for specific
performance of the contract, if contract is capable of being
specifically performed. Otherwise, the party may sue for damages.
70.7. Writ can be issued where there is executive action
unsupported by law or even in respect of a corporation there is
denial of equality before law or equal protection of law or if it can
be shown that action of the public authorities was without giving
any hearing and violation of principles of natural justice after holding
that action could not have been taken without observing principles
of natural justice.
70.8. If the contract between private party and the State/
instrumentality and/or agency of the State is under the realm of a
private law and there is no element of public law, the normal course
for the aggrieved party, is to invoke the remedies provided
under
ordinary civil law rather than approaching the High Court under
Article 226 of the Constitution of India and invoking its
extraordinary jurisdiction.
70.9. The distinction between public law and private law element
in the contract with the State is getting blurred. However, it has
not been totally obliterated and where the matter falls purely in
private field of contract, this Court has maintained the position
that writ petition is not maintainable. The dichotomy between public
law and private law rights and remedies would depend on the
factual matrix of each case and the distinction between the public
law remedies and private law field, cannot be demarcated with
precision. In fact, each case has to be examined, on its facts
whether the contractual relations between the parties bear insignia
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of public element. Once on the facts of a particular case it is
found that nature of the activity or controversy involves public
law element, then the matter can be examined by the High Court
in writ petitions under Article 226 of the Constitution of India to
see whether action of the State and/or instrumentality or agency
of the State is fair, just and equitable or that relevant factors are
taken into consideration and irrelevant factors have not gone into
the decision-making process or that the decision is not arbitrary.
70.10. Mere reasonable or legitimate expectation of a citizen, in
such a situation, may not by itself be a distinct enforceable right,
but failure to consider and give due weight to it may render the
decision arbitrary, and this is how the requirements of due
consideration of a legitimate expectation forms part of the principle
of non-arbitrariness.
70.11. The scope of judicial review in respect of disputes falling
within the domain of contractual obligations may be more limited
and in doubtful cases the parties may be relegated to adjudication
of their rights by resort to remedies provided for adjudication of
purely contractual disputes.”
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
v. 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 breachofthe audi alteram partem rule, as the entire
proceedings leading to cancellation of the tender, together with the
cancellation itself, were done on an ex parte 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
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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. v.
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
v. State of Orissa and Ors. (2007) 14 SCC 517 at paragraph 22.
25. Likewise, this Court’s judgment in Michigan Rubber (India)
Ltd. v. State of Karnataka and Ors. (2012) 8 SCC 216 again deals
with a writ court not interfering in the award of a tender, having regard
to the public interest, which is paramount – see paragraphs 23 and 24.
To the same effect are the judgments of this Court in Tata Cellular v.
Union of India (1994) 6 SCC 651 (at paragraphs 70 and 71), and
Rajasthan State Housing Board and Anr. v. G.S. Investments and
Anr. (2007) 1 SCC 477 (at paragraph 10).
26. Both the learned Senior Advocates locked horns on the audi
alteram partem part of natural justice. Dr. Singhvi argued that it is not
an inflexible tool in the hands of the Court, but must yield
when no prejudice
is caused, and where it would be an idle formality to set aside an order,
as all the facts on record are admitted facts, to which nothing can be
added or subtracted by Respondent No.1. Shri Dwivedi, on the other
hand, argued that this is a case of a complete lack of natural justice, all
orders having been passed behind the back of his client, as a result of
which his client has been severely prejudiced.
27. Natural justice is at least as old as the first man created on
earth – the biblical ‘Adam’. J.R. Lucas in his book ‘On Justice’ states
(at page 86):
“Hence, when we are judging deeds, and may find that a man did
wrong, there is a requirement of logic that we should allow the
putative agent to correct misinterpretations or disavow the intention
imputed to him or otherwise disown the action. God needed to
ask Adam ‘Hast thou eaten of the tree whereof I commanded
thee that thou shouldest not eat?’ Because it was essential that
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Adam should not be blamed or punished unless he had done exactly
that deed. If the serpent had planted the evidence, or if he had
beguiled Adam into eating it under the misapprehension that it
came from another, non-forbidden tree, then Adam had not sinned
and should not have been expelled from Eden. Only if the accused
admits the charge, or, faced with the accusation, cannot explain
his behaviour convincingly in any other way, are we logically entitled
to conclude that he did indeed do it.”
28. In some of the early judgments of this Court, the non-
observance of natural justice was said to be prejudice in itself to the
person affected, and proof of prejudice, independent of proof of denial
of natural justice, was held to be unnecessary. The only exception to this
rule is where, on “admitted or indisputable” facts only one conclusion is
possible, and under the law only one penalty is permissible. In such cases,
a Court may not issue its writ to compel the observance of natural justice,
not because it is not necessary to observe natural justice, but because
Courts do not issue writs which are “futile” – see S.L. Kapoor v.
Jagmohan and Ors. (1980) 4 SCC 379 at paragraph 24. In P.D.
Agrawal v. State Bank of India and Ors. (2006) 8 SCC 776, however,
the Court observed that this statement of the law has undergone a “sea
change”, as follows:
“39. Decision of this Court in S.L. Kapoor v. Jagmohan [(1980)
4 SCC 379]
whereupon Mr Rao placed strong reliance to contend
that non-observance of principle of natural justice itself causes
prejudice or the same should not be read “as it causes difficulty of
prejudice”, cannot be said to be applicable in the instant case.
The principles of natural justice, as noticed hereinbefore, have
undergone a sea change. In view of the decisions of this Court
in State Bank of Patiala v. S.K. Sharma [(1996) 3 SCC 364]
and Rajendra Singh v. State of M.P. [(1996) 5 SCC 460] the
principle of law is that some real prejudice must have been caused
to the complainant. The Court has shifted from its earlier concept
that even a small violation shall result in the order being rendered
a nullity. To the principle/doctrine of audi alteram partem, a clear
distinction has been laid down between the cases where there
was no hearing at all and the cases where there was mere technical
infringement of the principle. The Court applies the principles of
natural justice having regard to the fact situation obtaining in each
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case. It is not applied in a vacuum without reference to the relevant
facts and circumstances of the case. It is no unruly horse. It cannot
be put in a straitjacket formula.”
(emphasis supplied)
29. Equally, the prejudice that is caused, apart from natural justice
itself being denied, cannot be said to be present in a case in which there
are admitted facts. Thus, in K.L. Tripathi v. State Bank of India and
Ors. (1984) 1 SCC 43, the Court held:
“29. We are of the opinion that Mr Garg is right that the rules of
natural justice as we have set out hereinbefore implied an
opportunity to the delinquent officer to give evidence in respect of
the charges or to deny the charges against him. Secondly, he
submitted that even if the rules had no statutory force and even if
the party had bound himself by the contract, as he had accepted
the Staff Rule, there cannot be any contract with a Statutory
Corporation which is violative of the principles of natural justice
in matters of domestic enquiry involving termination of service of
an employee. We are in agreement with the basic submission of
Mr Garg in this respect, but we find that the relevant rules which
we have set out hereinbefore have been complied with even if
the rules are read that requirements of natural justice were implied
in the said rules or even if such basic principles of natural justice
were implied, there has been no violation of the principles of natural
justice in respect of the order passed in this
case. In respect of an
order involving adverse or penal consequences against an officer
or an employee of Statutory Corporations like the State Bank of
India, there must be an investigation into the charges consistent
with the requirements of the situation in accordance with the
principles of natural justice as far as these were applicable to a
particular situation. So whether a particular principle of natural
justice has been violated or not has to be judged in the background
of the nature of charges, the nature of the investigation conducted
in the background of any statutory or relevant rules governing
such enquiries. Here the infraction of the natural justice complained
of was that he was not given an opportunity to rebut the materials
gathered in his absence. As has been observed in On Justice by
J.R. Lucas, the principles of natural justice basically, if we may
say so, emanate from the actual phrase “audi alteram
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partem” which was first formulated by St. Augustine (De Duabus
Animabus, XIV, 22 J.P. Migne, PL. 42, 110).
xxx xxx xxx
32. The basic concept is fair play in action administrative, judicial
or quasi-judicial. The concept of fair play in action must depend
upon the particular lis, if there be any, between the parties. If the
credibility of a person who has testified or given some information
is in doubt, or if the version or the statement of the person who
has testified, is, in dispute, right of cross-examination must inevitably
form part of fair play in action but where there is no lis regarding
the facts but certain explanation of the circumstances there is no
requirement of cross-examination to be fulfilled to justify fair play
in action. When on the question of facts there was no dispute, no
real prejudice has been caused to a party aggrieved by an order,
by absence of any formal opportunity of cross-examination per
se does not invalidate or vitiate the decision arrived at fairly. This
is more so when the party against whom an order has been passed
does not dispute the facts and does not demand to test the veracity
of the version or the credibility of the statement.
33. The party who does not want to controvert the veracity of
the evidence from record or testimony gathered behind his back
cannot expect to succeed in any subsequent demand that there
was no opportunity of cross-examination specially when it was
not
asked for and there was no dispute about the veracity of the
statements. Where there is no dispute as to the facts, or the weight
to be attached on disputed facts but only an explanation of the
acts, absence of opportunity to cross-examination does not create
any prejudice in such cases.”
(emphasis supplied)
30. Likewise, in State of U.P. v. Neeraj Awasthi and Ors. (2006)
1 SCC 667, this Court held that where, on undisputed facts, a retrenchment
would be valid in law, the principles of natural justice would not be
attracted, unless there is some stigma or punitive measure which would
be attached, which would then cause prejudice, as follows:
“47. If the employees are workmen within the purview of the
U.P. Industrial Disputes Act, they are protected thereunder. Rules
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42 and 43 of the U.P. Industrial Disputes Rules provide that before
effecting any retrenchment in terms of the provisions of Section
6-N of the U.P. Industrial Disputes Act, the employees concerned
would be entitled to a notice of one month or in lieu thereof pay
for one month and 15 days’ wages for each completed year of
service by way of compensation. If such a retrenchment is
effected under the Industrial Disputes Act, the question of
complying with the principles of natural justice would not arise.
The principle of natural justice would be attracted only when the
services of some persons are terminated by way of a punitive
measure or thereby a stigma is attached.
48. In Viveka Nand Sethi v. Chairman, J&K Bank Ltd. [(2005)
5 SCC 337] it was held: (SCC p. 345, para 22)
“22. The principle of natural justice, it is trite, is no unruly
horse. When facts are admitted, an enquiry would be an empty
formality. Even the principle of estoppel will apply.
[See Gurjeewan Garewal (Dr.) v. Dr. Sumitra Dash [(2004)
5 SCC 263].] The principles of natural justice are required
to be complied with having regard to the fact situation
obtaining therein. It cannot be put in a straitjacket formula.
It cannot be applied in a vacuum without reference to the
relevant facts and circumstances of the case.”
49. The High Court, therefore, must be held to have erred in law
in holding that the principles of natural justice were required to be
complied with.”
31. In the five-Judge
Bench decision in Managing Director,
ECIL and Ors. v. B. Karnakumar and Ors. (1993) 4 SCC 727, this
Court, after discussing the constitutional requirement of a report being
furnished under Article 311(2), held thus:
“30. Hence the incidental questions raised above may be answered
as follows:
xxx xxx xxx
[v] The next question to be answered is what is the effect on the
order of punishment when the report of the enquiry officer is not
furnished to the employee and what relief should be granted to
him in such cases. The answer to this question has to be relative
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to the punishment awarded. When the employee is dismissed or
removed from service and the inquiry is set aside because the
report is not furnished to him, in some cases the non-furnishing of
the report may have prejudiced him gravely while in other cases it
may have made no difference to the ultimate punishment awarded
to him. Hence to direct reinstatement of the employee with back-
wages in all cases is to reduce the rules of justice to a mechanical
ritual. The theory of reasonable opportunity and the principles of
natural justice have been evolved to uphold the rule of law and to
assist the individual to vindicate his just rights. They are not
incantations to be invoked nor rites to be performed on all and
sundry occasions. Whether in fact, prejudice has been caused to
the employee or not on account of the denial to him of the report,
has to be considered on the facts and circumstances of each case.
Where, therefore, even after the furnishing of the report, no
different consequence would have followed, it would be a
perversion of justice to permit the employee to resume duty and
to get all the consequential benefits. It amounts to rewarding the
dishonest and the guilty and thus to stretching the concept of justice
to illogical and exasperating limits. It amounts to an “unnatural
expansion of natural justice” which in itself is antithetical to justice.
31. Hence, in all cases where the enquiry officer’s 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 give
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
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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.”
(emphasis supplied)
32. B. Karunakar (supra) was followed by this Court in Haryana
Financial Corporation and Anr. v. Kailash Chandra Ahuja (2008) 9
SCC 31, as follows:
“21. From the ratio laid down in B. Karunakar [(1993) 4 SCC
727] it is explicitly clear that the doctrine of natural justice requires
supply of a copy of the inquiry officer’s report to the delinquent if
such inquiry officer is other than the disciplinary authority. It is
also clear that non-supply of report of the inquiry officer is in the
breach of natural justice. But it is equally clear that failure to
supply a report of the inquiry officer to the delinquent employee
would not ipso facto result in the proceedings being declared null
and void and the order of punishment non est and ineffective. It
is for the delinquent employee to plead and prove that non-supply
of such report had caused prejudice and resulted in miscarriage
of justice. If he is unable to satisfy the court on that point, the
order of punishment cannot automatically be set aside.”
(emphasis in original)
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 parte appraisal of the facts. This has been
well-explained in a later judgment, namely Dharampal Satyapal Ltd.
v. 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
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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 v. 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.”
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Relying on these comments, Brandon L.J. opined
in Cinnamond v. 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 xxx
42. 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
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the English Court way back in the year 1943 in General Medical
Council v. Spackman [1943 AC 627]. This Court also spoke in
the same language in Board of High School and Intermediate
Education v. 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 authority’s 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 officer’s 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
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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] .”
(emphasis supplied)
34. In State Bank of Patiala and Ors. v. S.K. Sharma (1996) 3
SCC 364, a Division Bench of this Court
distinguished between “adequate
opportunity” and “no opportunity at all”, and held that the “prejudice”
exception operates more especially in the latter case. This judgment
also speaks of procedural and substantive provisions of law which embody
the principles of natural justice which, when infracted, must lead to
prejudice being caused to the litigant in order to afford him relief, as
follows:
“32. Now, coming back to the illustration given by us in the
preceding para, would setting aside the punishment and the entire
enquiry on the ground of aforesaid violation of sub-clause (iii) be
in the interests of justice or would it be its negation? In our
respectful opinion, it would be the latter. Justice means justice
between both the parties. The interests of justice equally demand
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that the guilty should be punished and that technicalities and
irregularities which do not occasion failure of justice are not allowed
to defeat the ends of justice. Principles of natural justice are but
the means to achieve the ends of justice. They cannot be perverted
to achieve the very opposite end. That would be a counter-
productive exercise.
33. We may summarise the principles emerging from the above
discussion. (These are by no means intended to be exhaustive
and are evolved keeping in view the context of disciplinary enquiries
and orders of punishment imposed by an employer upon the
employee):
(1) An order passed imposing a punishment on an employee
consequent upon a disciplinary/departmental enquiry in violation
of the rules/regulations/statutory provisions governing such
enquiries should not be set aside automatically. The Court or the
Tribunal should enquire whether (a) the provision violated is of a
substantive nature or (b) whether it is procedural in character.
(2) A substantive provision has normally to be complied with as
explained hereinbefore and the theory of substantial compliance
or the test of prejudice would not be applicable in such a case.
(3) In the case of violation of a procedural provision, the position
is this: procedural provisions are generally meant for affording a
reasonable and adequate opportunity to the delinquent officer/
employee. They are, generally speaking, conceived in his
interest.
Violation of any and every procedural provision cannot be said to
automatically vitiate the enquiry held or order passed. Except cases
falling under — “no notice”, “no opportunity” and “no hearing”
categories, the complaint of violation of procedural provision should
be examined from the point of view of prejudice, viz., whether
such violation has prejudiced the delinquent officer/employee in
defending himself properly and effectively. If it is found that he
has been so prejudiced, appropriate orders have to be made to
repair and remedy the prejudice including setting aside the enquiry
and/or the order of punishment. If no prejudice is established to
have resulted therefrom, it is obvious, no interference is called
for. In this connection, it may be remembered that there may be
certain procedural provisions which are of a fundamental
character, whose violation is by itself proof of prejudice. The Court
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may not insist on proof of prejudice in such cases. As explained in
the body of the judgment, take a case where there is a provision
expressly providing that after the evidence of the employer/
government is over, the employee shall be given an opportunity to
lead defence in his evidence, and in a given case, the enquiry
officer does not give that opportunity in spite of the delinquent
officer/employee asking for it. The prejudice is self-evident. No
proof of prejudice as such need be called for in such a case. To
repeat, the test is one of prejudice, i.e., whether the person has
received a fair hearing considering all things. Now, this very aspect
can also be looked at from the point of view of directory and
mandatory provisions, if one is so inclined. The principle stated
under (4) hereinbelow is only another way of looking at the same
aspect as is dealt with herein and not a different or distinct principle.
(4) (a) In the case of a procedural provision which is not of a
mandatory character, the complaint of violation has to be examined
from the standpoint of substantial compliance. Be that as it may,
the order passed in violation of such a provision can be set aside
only where such violation has occasioned prejudice to the
delinquent employee.
(b) In the case of violation of a procedural provision, which is of
a mandatory character, it has to be ascertained whether the
provision is conceived in the interest of the person proceeded
against or in public
interest. If it is found to be the former, then it
must be seen whether the delinquent officer has waived the said
requirement, either expressly or by his conduct. If he is found to
have waived it, then the order of punishment cannot be set aside
on the ground of the said violation. If, on the other hand, it is found
that the delinquent officer/employee has not waived it or that the
provision could not be waived by him, then the Court or Tribunal
should make appropriate directions (include the setting aside of
the order of punishment), keeping in mind the approach adopted
by the Constitution Bench in B. Karunakar [(1993) 4 SCC 727].
The ultimate test is always the same, viz., test of prejudice or the
test of fair hearing, as it may be called.
(5) Where the enquiry is not governed by any rules/regulations/
statutory provisions and the only obligation is to observe the
principles of natural justice — or, for that matter, wherever such
STATE OF U.P. v. SUDHIR KUMAR SINGH AND ORS.
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principles are held to be implied by the very nature and impact of
the order/action — the Court or the Tribunal should make a
distinction between a total violation of natural justice (rule of audi
alteram partem) and violation of a facet of the said rule, as
explained in the body of the judgment. In other words, a distinction
must 
be 
made 
between 
“no 
opportunity” 
and
no adequate opportunity, i.e., between “no notice”/”no hearing”
and “no fair hearing”. (a) In the case of former, the order passed
would undoubtedly be invalid (one may call it ‘void’ or a nullity if
one chooses to). In such cases, normally, liberty will be reserved
for the Authority to take proceedings afresh according to law, i.e.,
in accordance with the said rule (audi alteram partem). (b) But in
the latter case, the effect of violation (of a facet of the rule of
audi alteram partem) has to be examined from the standpoint of
prejudice; in other words, what the Court or Tribunal has to see is
whether in the totality of the circumstances, the delinquent officer/
employee did or did not have a fair hearing and the orders to be
made shall depend upon the answer to the said query. [It is made
clear that this principle (No. 5) does not apply in the case of rule
against bias, the test in which behalf are laid down elsewhere.]
(6) While applying the rule of audi alteram partem (the primary
principle of natural justice) the Court/Tribunal/Authority must
always bear in mind the ultimate and overriding objective
underlying the said rule, viz., to ensure a fair hearing and to ensure
that there is no failure of justice. It is this objective which should
guide them in applying the rule to varying situations that arise
before them.
(7) There may be situations where the interests of State or public
interest may call for a curtailing of the rule of audi alteram partem.
In such situations, the Court may have to balance public/State
interest with the requirement of natural justice and arrive at an
appropriate decision.”
35. In M.C. Mehta v. Union of India and Ors. (1999) 6 SCC
237, the expression “admitted and indisputable facts” laid down in
Jagmohan (supra), as also the interesting divergence of legal opinion
on whether it is necessary to show “slight proof” or “real likelihood” of
prejudice, or the fact that it is an “open and shut case”, were all discussed
in great detail as follows:
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“16. Courts are not infrequently faced with a dilemma between
breach of the rules of natural justice and the Court’s discretion to
refuse relief even though the rules of natural justice have been
breached, on the ground that no real prejudice is caused to the
affected party.
xxx xxx xxx
22. Before we go into the final aspects of this contention, we
would like to state that cases relating to breach of natural justice
do also occur where all facts are not admitted or are not all beyond
dispute. In the context of those cases there is a considerable case-
law and literature as to whether relief can be refused even if the
court thinks that the case of the applicant is not one of “real
substance” or that there is no substantial possibility of his success
or that the result will not be different, even if natural justice is
followed. See Malloch v. Aberdeen Corpn. [(1971) 1 WLR 1578]
(per Lord Reid and Lord Wilberforce), Glynn v. Keele
University [(1971) 1 WLR 487], Cinnamond v. British Airports
Authority [(1980) 1 WLR 582] and other cases where such a
view has been held. The latest addition to this view is R. v. Ealing
Magistrates’ court, ex p Fannaran [(1996) 8 Admn LR 351,
358] (Admn LR at p. 358) (see de Smith, Suppl. p. 89) (1998)
where Straughton, L.J. held that there must be “demonstrable
beyond doubt” that the result would have been different. Lord
Woolf in Lloyd v. McMahon [(1987) 2 WLR 821, 862] (WLR at
p. 862) has also not disfavoured refusal of
discretion in certain
cases of breach of natural justice. The New Zealand Court
in McCarthy v. Grant [1959 NZLR 1014] however goes halfway
when it says that (as in the case of bias), it is sufficient for the
applicant to show that there is “real likelihood — not certainty —
of prejudice”. On the other hand, Garner Administrative
Law (8th Edn., 1996, pp. 271-72) says that slight proof that the
result would have been different is sufficient. On the other side of
the argument, we have apart from Ridge v. Baldwin [1964 AC
40], Megarry, J. in John v. Rees [(1969) 2 WLR 1294] stating
that there are always “open and shut cases” and no absolute rule
of proof of prejudice can be laid down. Merits are not for the
court but for the authority to consider. Ackner, J. has said that the
“useless formality theory” is a dangerous one and, however
STATE OF U.P. v. SUDHIR KUMAR SINGH AND ORS.
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inconvenient, natural justice must be followed. His Lordship
observed that “convenience and justice are often not on speaking
terms”. More recently Lord Bingham has deprecated the “useless
formality” theory in R. v. Chief Constable of the Thames Valley
Police Forces, ex p Cotton [1990 IRLR 344] by giving six
reasons. (See also his article “Should Public Law Remedies be
Discretionary?” 1991 PL, p. 64.) A detailed and emphatic criticism
of the “useless formality theory” has been made much earlier in
“Natural Justice, Substance or Shadow” by Prof. D.H. Clark of
Canada (see 1975 PL, pp. 27-63) contending that Malloch [(1971)
1 WLR 1578] and Glynn [(1971) 1 WLR 487] were wrongly
decided. Foulkes (Administrative Law, 8th Edn., 1996, p. 323),
Craig (Administrative Law, 3rd Edn., p. 596) and others say that
the court cannot prejudge what is to be decided by the decision-
making authority de Smith (5th Edn., 1994, paras 10.031 to 10.036)
says courts have not yet committed themselves to any one view
though discretion is always with the court. Wade (Administrative
Law, 5th Edn., 1994, pp. 526-30) says that while futile writs may
not be issued, a distinction has to be made according to the nature
of the decision. Thus, in relation to cases other than those relating
to admitted or indisputable facts, there is a considerable divergence
of opinion whether the applicant can be compelled to prove that
the outcome will be in his
favour or he has to prove a case of
substance or if he can prove a “real likelihood” of success or if he
is entitled to relief even if there is some remote chance of success.
We may, however, point out that even in cases where the facts
are not all admitted or beyond dispute, there is a considerable
unanimity that the courts can, in exercise of their “discretion”,
refuse certiorari, prohibition, mandamus or injunction even though
natural justice is not followed. We may also state that there is yet
another line of cases as in State Bank of Patiala v. S.K.
Sharma [(1996) 3 SCC 364], Rajendra Singh v. State of
M.P. [(1996) 5 SCC 460] that even in relation to statutory
provisions requiring notice, a distinction is to be made between
cases where the provision is intended for individual benefit and
where a provision is intended to protect public interest. In the
former case, it can be waived while in the case of the latter, it
cannot be waived.
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23. We do not propose to express any opinion on the correctness
or otherwise of the “useless formality” theory and leave the matter
for decision in an appropriate case, inasmuch as, in the case before
us, “admitted and indisputable” facts show that grant of a writ
will be in vain as pointed out by Chinnappa Reddy, J.”
36. In Aligarh Muslim University and Ors. v. Mansoor Ali
Khan (2000) 7 SCC 529,the aforesaid authorities were relied upon, and
the answer given was that there is no absolute rule, and prejudice must
be shown depending on the facts of each case, as follows:
“24. The principle that in addition to breach of natural justice,
prejudice must also be proved has been developed in several cases.
In K.L. Tripathi v. State Bank of India [(1984) 1 SCC 43]
Sabyasachi Mukharji, J. (as he then was) also laid down the
principle that not mere violation of natural justice but de facto
prejudice (other than non-issue of notice) had to be proved. It
was observed, quoting Wade’s Administrative Law (5th Edn., pp.
472-75), as follows: (SCC p. 58, para 31)
“[I]t is not possible to lay down rigid rules as to when the
principles of natural justice are to apply, nor as to their scope
and extent. … There must also have been some real prejudice to
the complainant; there is no such thing as a merely technical
infringement of natural justice. The requirements of natural
justice must depend on the facts and circumstances of the
case, the nature of the inquiry, the rules
under which the
tribunal is acting, the subject-matter to be dealt with, and so
forth.”
Since then, this Court has consistently applied the principle of
prejudice in several cases. The above ruling and various other
rulings taking the same view have been exhaustively referred to
in State Bank of Patiala v. S.K. Sharma [(1996) 3 SCC 364]. In
that case, the principle of “prejudice” has been further elaborated.
The same principle has been reiterated again in Rajendra
Singh v. State of M.P. [(1996) 5 SCC 460]
25. The “useless formality” theory, it must be noted, is an exception.
Apart from the class of cases of “admitted or indisputable facts
leading only to one conclusion” referred to above, there has been
considerable debate on the application of that theory in other cases.
STATE OF U.P. v. SUDHIR KUMAR SINGH AND ORS.
[R.F. NARIMAN, J.]
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The divergent views expressed in regard to this theory have been
elaborately considered by this Court in M.C. Mehta  referred to
above. This Court surveyed the views expressed in various
judgments in England by Lord Reid, Lord Wilberforce, Lord Woolf,
Lord Bingham, Megarry, J. and Straughton, L.J. etc. in various
cases and also views expressed by leading writers like Profs.
Garner, Craig, de Smith, Wade, D.H. Clark etc. Some of them
have said that orders passed in violation must always be quashed
for otherwise the court will be prejudging the issue. Some others
have said that there is no such absolute rule and prejudice must
be shown. Yet, some others have applied via media rules. We do
not think it necessary in this case to go deeper into these issues.
In the ultimate analysis, it may depend on the facts of a particular
case.”
37. In Union of India and Ors. v. Alok Kumar (2010) 5 SCC
349, this Court, after eschewing a hyper-technical approach, held that
prejudice must not merely be the apprehension of a litigant, but should
be a definite inference of the likelihood of prejudice flowing from the
refusal to follow natural justice, as follows:
“83. Earlier, in some of the cases, this Court had taken the view
that breach of principles of natural justice was in itself a prejudice
and no other “de facto” prejudice needs to be proved. In regard
to statutory rules, the prominent view was that the violation of
mandatory
statutory rules would tantamount to prejudice but where
the rule is merely directory the element of de facto prejudice needs
to be pleaded and shown. With the development of law, rigidity in
these rules is somewhat relaxed. The instance of de facto prejudice
has been accepted as an essential feature where there is violation
of the non-mandatory rules or violation of natural justice as it is
understood in its common parlance. Taking an instance, in a
departmental enquiry where the department relies upon a large
number of documents majority of which are furnished and an
opportunity is granted to the delinquent officer to defend himself
except that some copies of formal documents had not been
furnished to the delinquent. In that event the onus is upon the
employee to show that non-furnishing of these formal documents
have resulted in de facto prejudice and he has been put to a
disadvantage as a result thereof.
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xxx xxx xxx
87. In ECIL v. B. Karunakar [(1993) 4 SCC 727] this Court
noticed the existing law and said that the theory of reasonable
opportunity and the principles of natural justice have been evolved
to uphold the rule of law and to assist the individual to vindicate
his just rights. They are neither incantations to be invoked nor
rites to be performed on all and sundry occasions. Whether, in
fact, prejudice has been caused to the employee or not on account
of denial of report to him, has to be considered on the facts and
circumstances of each case. The Court has clarified even the
stage to which the departmental proceedings ought to be reverted
in the event the order of punishment is set aside for these reasons.
88. It will be useful to refer to the judgment of this Court
in Haryana 
Financial 
Corpn. v. Kailash 
Chandra
Ahuja [(2008) 9 SCC 31] at pp. 38-39 where the Court held as
under: (SCC para 21)
“21. From the ratio laid down in B. Karunakar it is explicitly
clear that the doctrine of natural justice requires supply of a
copy of the enquiry officer’s report to the delinquent if such
enquiry officer is other than the disciplinary authority. It is
also clear that non-supply of report of the enquiry officer is
in breach of natural justice. But it is equally clear that failure
to supply a report of the enquiry officer to the delinquent
employee would not ipso facto result in the proceedings being
declared null and void and the order of punishment non
est
and ineffective. It is for the delinquent employee to plead
and prove that non-supply of such report had caused prejudice
and resulted in miscarriage of justice. If he is unable to satisfy
the court on that point, the order of punishment
cannot automatically be set aside.”
89. The well-established canons controlling the field of bias in
service jurisprudence can reasonably be extended to the element
of prejudice as well in such matters. Prejudice de facto should not
be based on a mere apprehension or even on a reasonable
suspicion. It is important that the element of prejudice should exist
as a matter of fact or there should be such definite inference of
likelihood of prejudice flowing from such default which relates to
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statutory violations. It will not be permissible to set aside the
departmental enquiries in any of these classes merely on the basis
of apprehended prejudice.”
38. Under the broad rubric of the Court not passing futile orders
as the case is based on “admitted” facts, being admitted by reason of
estoppel, acquiescence, non-challenge or non-denial, the following
judgments of this Court are all illustrations of a breach of the audi alteram
partem rule being established on the facts of the case, but with no
prejudice caused to the person alleging breach of natural justice, as the
case was one on admitted facts:
(i)
Punjab and Sind Bank and Ors. v. Sakattar Singh
(2001) 1 SCC 214 (see paragraphs 1, 4 and 5);
(ii)
Karnataka SRTC and Anr. v. S.G. Kotturappa and Anr.
(2005) 3 SCC 409 (see paragraph 24);
(iii)
Viveka Nand Sethi v. Chairman, J&K Bank Ltd. and
Ors. (2005) 5 SCC 337 (see paragraphs 21, 22 and 26);
(iv)
Mohd. Sartaj and Anr. v. State of U.P. and Ors. (2006)
2 SCC 315 (see paragraph 18);
(v)
Punjab National Bank and Ors. v.Manjeet Singh and
Anr. (2006) 8 SCC 647 (see paragraphs 17 and 19);
(vi)
Ashok Kumar Sonkar v. Union of India and Ors. (2007)
4 SCC 54 (see paragraphs 26 to 32);
(vii) State of Manipur and Ors. v. Y. Token Singh and Ors.
(2007) 5 SCC 65 (see paragraphs 21 and 22);
(viii) Secretary, A.P. Social Welfare Residential Educational
Institutions v. Pindiga Sridhar and Ors. (2007) 13 SCC
352 (see
paragraph 7)
(ix)
Peethani Suryanarayana and Anr. v. Repaka Venkata
Ramana Kishore and Ors. (2009) 11 SCC 308 (see
paragraph 18);
(x)
Municipal Committee, Hoshiapur v.Punjab State
Electricity Board and Ors. (2010) 13 SCC 216 (see
paragraphs 31 to 36, and paragraphs 44 and 45);
(xi)
Union of India and Anr. v. Raghuwar Pal Singh (2018)
15 SCC 463 (see paragraph 20).
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
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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 of fact, 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 Corporation’s 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 Dwivedi’s argument that in the neighbouring regions
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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.
41. We, therefore, uphold the impugned judgment of the High
Court on the ground that natural justice has indeed been breached in the
facts of the present case, not being a case of admitted facts leading to
the grant of a futile writ, and that prejudice has indeed been caused to
Respondent No.1. In view of this finding, there is no need to examine
the other contentions raised by the parties before us.
42. We reiterate the submission of Shri Dwivedi that as his client
is working for the Corporation in another subsequent tender, he is not
going to claim damages for the lost period post cancellation of the tender.
This being the case, and other things being equal, the earnest money
deposit and security deposit made by his client is ordered to be returned
by the Corporation within a period of eight weeks from today. Shri
Dwivedi’s client may also request the Corporation to pay any amount
that remained unpaid for work actually done, which the Corporation will,
after a hearing, either allow or reject for reasons to be stated.
43. The appeals arising out of SLP (C) 5136 of 2020 and SLP (C)
7351 of 2020 are thus
partially allowed, and the impugned judgment of
the High Court of Judicature at Allahabad dated 11.12.2019 is set aside
only to the extent indicated by us above.
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 Corporation’s
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 Singh’s 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. As a result,
our judgment in the two connected appeals, and all consequential reliefs
granted, will apply on all fours to this appeal also.
45. With these observations, these appeals are disposed of.
Divya Pandey
Appeals  disposed.