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 Signature Not Verified Digitally signed by R Natarajan Date: 2020.10.16 the foodgrains/fertilizers in bags, bagging, weighment, standardisation, 15:17:08 IST Reason: cleaning of foodgrains/fertilizers etc. and transporting of 1 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:

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:

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:

Issued tenders are cancelled on 05.05.2018 without 4 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:

8. Meanwhile, the Commissioner, Vindhyachal Mandal Mirzapur, also conducted an ex parte investigation and found in his report dated 29.06.2019 as follows:

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 6 nor he mentioned in his letter and he recommended the acceptance irresponsibly. Hence Sh. Madhukar Gupta State Regional Manager has not followed his duty and responsibility and he is responsible for high rate and acceptance without any reason.

5. Even corporation Headquarter did not deem fit to take any action regarding high rate from determined rate. What was examined by Headquarter it is not cleared.

6. In this regard categorically it is not possible to determine the financial loss since neither in this case, opportunity to contest has been given and nor market survey has been conducted. On the basis of that formality rate can be determined. Damage has been surely caused. But it cannot be explained. Record is sent for perusal and necessary action.”

9. Given these two reports, the Special Secretary, Government of U.P. wrote a letter dated 16.07.2019 to the Managing Director, in which the Managing Director’s report dated 14.06.2019 was referred to, and concluded:

10. Pursuant to this letter, the aforesaid tenders were then cancelled on 26.07.2019, and disciplinary proceedings were taken against certain employees of the Corporation. These proceedings led to a report dated 18.10.2019, in which the difference between the earlier rates and the present rates were gone into, and it was found that an excess of INR 4,40,05,369 had been paid relative to what was sanctioned previously – this amount being the financial loss suffered by the Corporation.

11. Meanwhile, Respondent No.1 filed Writ Petition no. 25389 of 2019 in July 2019 before the High Court of Judicature at Allahabad, in which he challenged the “illegal and arbitrary” termination of the contract with the Corporation after successful completion of over one year of a two-year term, and prayed for the setting aside of the 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:

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:

14. Having so held, the High Court then concluded:

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 11 beyond what was asked for. According to him, the Writ Petition only prayed for a quashing of the cancellation order dated 26.07.2019 of the second tender. The High Court went way beyond, and not only quashed the aforesaid cancellation, but also quashed the enquiry report of the Managing Director dated 14.06.2019, as well as the order passed by the Special Secretary dated 16.07.2019, and the consequential action taken, namely, the departmental proceedings against the delinquent officers, which was never the subject matter of challenge in the Writ Petition. He went on to argue, based upon the comparison between the rates that were received in the earlier tender dated 01.04.2018 that was cancelled, and the rates in the 01.06.2018 tender, that the disparity was so great as to make it clear that the contracts for these four centres ought not to have been entered into at these rates at all. He argued that the High Court ought to have appreciated the huge financial loss that was caused as a result of awarding the contract at these rates, and ought not to have interfered with the cancellation of the tender, as it could not be characterised as arbitrary, given the huge increase in rates in such a short period for the same works. Further, he argued that the case law on natural justice showed that it was not an inflexible straitjacket, but had to be used wisely and well, and cited a number of judgments of this Court for the proposition that even though natural justice may be breached in the facts of a given case, if otherwise such breach does not result in 12 prejudice, it would be a mere exercise in futility to set aside the order and remand it to the authorities to pass an order after hearing the affected party. He also argued that as of today, the two year term of the contract is over, and this very contractor, i.e. Respondent No.1, is doing the same work awarded at Mirzapur on 21.03.2020 at rates (139% ASOR) which are much lower than the rates tendered for previously, as is the successful tenderer Tilotama Devi on and from 31.09.2019 so far as Bhawanipur-II is concerned, which was awarded at 221% ASOR. Dr. Singhvi also argued that the writ court ought not to have interfered in contractual matters, and ought to have left Respondent No.1 to approach a civil court to file a suit for appropriate reliefs.

16. Shri Tushar Mehta, learned Solicitor General appearing on behalf of the State of U.P., argued that he had a limited role, and confined his arguments to the setting aside of the letter dated 16.07.2019 of the Special Secretary to take departmental action. He argued that this letter could not have been set aside by the High Court, as no such prayer or argument was made before it by the writ petitioner.

17. Shri Rakesh Dwivedi, learned Senior Advocate appearing on behalf of Respondent No.1, argued that the High Court judgment ought not to be interfered with, inasmuch as his client had pumped in a lot of money, and had worked the contract for a period of over one year successfully and without any complaint whatsoever from the Corporation. He reiterated 13 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 14 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 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:

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 18 use of the words “court may not ordinarily examine it unless the action has some public law character attached to it” itself indicates that in a given case, on the existence of the required factual matrix a remedy under Article 226 of the Constitution will be available. The learned counsel then relied on another judgment of this Court in the case of State of U.P. v. Bridge & Roof Co. (India) Ltd. [(1996) 6 SCC 22] wherein this Court held:

(2008) 3 SCC 440 (at paragraph 16); Central Bank of India v. Devi 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:

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:

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 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 24 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 breach of the audi alteram partem rule, as the entire proceedings leading 25 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 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 26 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):

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:

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:

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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 30 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:

[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 31 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:

If after hearing the parties, the Court/Tribunal comes to the conclusion that the non-supply of the report would have made no difference to the ultimate findings and the punishment given, the Court/Tribunal should not interfere with the order of punishment. The Court/Tribunal should not mechanically set aside the order of punishment on the ground that the report was not furnished as is regrettably being done at present. The courts should avoid resorting to short cuts. Since it is the Courts/Tribunals which will apply their judicial mind to the question and give their reasons for setting aside or not setting aside the order of punishment, (and not any internal appellate or revisional authority), there would be neither a breach of the principles of natural justice nor a denial of the reasonable opportunity. It is only if the Court/Tribunal finds that the furnishing of the report would have made a difference to the result in the case that it should set aside the order of punishment.” (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:

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:

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.” Relying on these comments, Brandon L.J. opined in Cinnamond v. British Airports Authority [(1980) 1 WLR 582] that: (WLR p. 593) 35 “… 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.

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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 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:

If after hearing the parties, the court/tribunal comes to the conclusion that the non-supply of the report would have made no difference to the ultimate findings and the punishment given, the court/tribunal should not interfere with the order of punishment. The court/tribunal should not mechanically set aside the order of punishment on the ground that the report was not furnished as is regrettably being done at present. The courts should avoid resorting to short cuts. Since it is the courts/tribunals which will apply their judicial mind to the question and give their reasons for setting aside or not setting aside the order of punishment, (and not any internal appellate or revisional authority), there would be neither a breach of the principles of natural justice nor a denial of the reasonable opportunity. It is only if the court/tribunal finds that the furnishing of the report would have made a difference to the result in the case that it should set aside the order of punishment.”

45. Keeping in view the aforesaid principles in mind, even when we find that there is an infraction of principles of natural justice, we have to address a further question as to whether any purpose would be served in remitting the case to the authority to make fresh demand of amount recoverable, only after issuing notice to show cause to the appellant. In the facts of the present case, we find that such an exercise would be totally futile having regard to the law laid down by this Court in R.C. Tobacco [(2005) 7 SCC 725] .” (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 38 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:

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 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 40 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 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 41 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:

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 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 43 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.

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:

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:

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 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:

( 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:

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 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 51 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 52 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.

………………………………..J. (R.F. Nariman) ………………………………..J. (Navin Sinha) ………………………………..J. (K.M. Joseph) New Delhi;

16th October 2020.