The State Of Uttar Pradesh vs Sudhir Kumar Singh on 16 October, 2020


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Supreme Court of India

The State Of Uttar Pradesh vs Sudhir Kumar Singh on 16 October, 2020

Author: Rohinton Fali Nariman

Bench: Rohinton Fali Nariman, Navin Sinha, K.M. Joseph

                                                                                    REPORTABLE

                                            IN THE SUPREME COURT OF INDIA

                                             CIVIL APPELLATE JURISDICTION

                                          CIVIL APPEAL NO. 3498 OF 2020
                                     (ARISING OUT OF SLP (C) NO. 5136 OF 2020)


                         STATE OF U.P.                                            …APPELLANT


                                     VERSUS

                         SUDHIR KUMAR SINGH AND ORS.                              …RESPONDENTS

                                                      WITH
                                          CIVIL APPEAL NO. 3499 OF 2020
                                     (ARISING OUT OF SLP (C) NO. 7351 OF 2020)

                                                      AND
                                          CIVIL APPEAL NO. 3500 OF 2020
                                     (ARISING OUT OF SLP (C) NO. 7364 OF 2020)

                                                          JUDGMENT

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:

  Sl.   Name           of Workable   Estimated      Earnest      Security

  No.   Depot/Centre     capacity    annual    value money @20% deposit      (in

                         (in M.T.)   of contract    security     rupees)

                                                    amount

                                                    through

                                                    RTGS/NEFT
  1.    Mirzapur         8430        50000000.00    1000000.00   5000000.00
  2.    Bhawanipur       30000       60000000.00    1200000.00   6000000.00

        PEG-1
  3.    Bhawanipur       10000       10000000.00    200000.00    1000000.00

        PEG-II
  4.    Tendu            61400       9000000.00     180000.00    900000.00

        (Sonbhadra)

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:

                                                                                   2
                            “PEG Bhawanipur-I Centre

   Serial No.   Bidder                                 Rate
   1.           Maa Bhawani Transport                  222% ASOR
   2.           Iqbal Ahmad Ansari                     154% ASOR
   3.           Suresh Singh                           174% ASOR

                             PEG Bhawanipur-II Centre
   Serial No.   Bidder                                 Rate
   1.           Maa Bhawani Transport                  198% ASOR
   2.           Iqbal Ahmad Ansari                     153% ASOR
   3.           Suresh Singh                           174% ASOR

                                  Mirzapur Centre
   Serial No.   Bidder                                 Rate
   1.           Maa Bhawani Transport                  219% ASOR
   2.           Iqbal Ahmad Ansari                     139% ASOR
   3.           Suresh Singh                           134% ASOR
   4.           Shaquil Ahmad                          248% ASOR


                             Tendu (Sonbhadra) Centre

   Serial No.   Bidder                                 Rate
   1.           Maa Bhawani Transport                  180% ASOR
   2.           Dharam Raj Singh                       300% ASOR
   3.           Sonbhadra Transport                    Not specified in words

                                                    and numbers
   4.           Manisha Engineering                 225% ASOR
   5.           Arjun Singh                         25% ASOR

(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.

3

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.

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
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:

“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.”

5

8. Meanwhile, the Commissioner, Vindhyachal Mandal Mirzapur, also

conducted an ex parte investigation and found in his report dated

29.06.2019 as follows:

“1. State regional manager Sh. Madhukar Gupta has
mentioned in his letter no. R.BH.N/dated 26-05-2018
forwarded to State General Manager (finance) Uttar
Pradesh State Warehousing Corporation that committee
of e-tendering has been formed only for the purpose of
formalities. It is cleared from examining the paragraph
that formality has been done in the tender. On 12-07-
2018 the state manager gave the recommendation of
acceptance and on 13-07-2018 Uttar Pradesh State
Warehousing Corporation gave acceptance. On 13-07-
2018 Sh. Madhukar Gupta State Regional Manager,
Uttar Pradesh State Warehousing Corporation
Vindhyachal gave appointment order to the concerned
contractors. Hereby uncommon vigilance has been
shown in entire procedure.

2. Regional Manager, Uttar Pradesh State Warehousing
Corporation Sh. Anuj Shukla, computer consultant was
got involved by Sh. Madhukar Gupta which is not
appropriate. It is objectionable in keeping contract work
in bid is objection.

3. Condition was kept on to participate only to the
registered contractors which is objectionable. Due to,
only participation of registered contractor, no contest
took place amongst the contractors. Because of which
rate was obtained at manifold high rate. Whereby
damaged was caused to department.

4. Regional Manager in his letter no. R.B.N/284/dated
12-07-2018 which is addressed to Managing Director
Uttar Pradesh State Warehousing Corporation Lucknow.

For determined rate to 314 percent, 341 percent, 338
percent, and 290 percent at high rate conformation of
recommendation of appointment of regular contractors
have been given for work of Indian Fertilizer Corporation
Handling and Transport. It is mentioned that despite the
high rate from determined rate regional manager neither
any market survey was conducted regarding high rate
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:

“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

7
contractors be done through e-tendering again for
handling and transport work of concerned Warehouses.
Said proceedings be done as soon as possible and the
action taken shall be informed to the Government.”

10. Pursuant to this letter, the aforesaid tenders were then cancelled on

26.07.2019, and disciplinary proceedings were taken against certain

employees of the Corporation. These proceedings led to a report dated

18.10.2019, in which the difference between the earlier rates and the

present rates were gone into, and it was found that an excess of INR

4,40,05,369 had been paid relative to what was sanctioned previously –

this amount being the financial loss suffered by the Corporation.

11. Meanwhile, Respondent No.1 filed Writ Petition no. 25389 of 2019 in

July 2019 before the High Court of Judicature at Allahabad, in which he

challenged the “illegal and arbitrary” termination of the contract with the

Corporation after successful completion of over one year of a two-year

term, and prayed for the setting aside of the 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;

8

(b) Whether the respondent Managing Director was
justified in cancelling the written agreement with the
petitioner after a lapse of a year, without putting him to
notice;

(c) Whether being an autonomous body, Corporation
could not have been directed to take action in particular
manner and Managing Director was not justified in
cancelling the agreement under an executive fiat of
Special Secretary; and;

(d) Whether the order passed by Managing Director is
vitiated for bias as he himself had been Inquiry Officer
and without inviting the petitioner to explain in his
defence he himself conducted the inquiry and then on
the basis of report prepared by him, he proceeded to
cancel the agreement.”

13. The High Court concluded that since the entire proceedings were

conducted behind the back of Respondent No.1, and considering that

the tender notice dated 01.06.2018 had never been challenged by

anybody in a court of law, an ex parte appraisal of the complaints

received was done in a hurry by the Managing Director of the

Corporation and the learned Commissioner, and was liable to be set

aside on several grounds, the single most important one – insofar as

Respondent No.1 is concerned – being the breach of natural justice. The

High Court, therefore, held:

“If the officials had cancelled the earlier tender notice in
their wisdom and the cancellation of those tender notice
was never questioned, merely because those earlier
tender notices were cancelled/ withdrawn, a necessary
presumption cannot be raised that the third notice
inviting tender was for some extraneous considerations.

It is true that the prices this time were taken to be very

9
high as against the earlier ones in the process of tender
in which the prices were quoted very low but that does
not itself become the ground to cancel the entire tender
process which had not only been finalized but even the
agreement had been entered into and the party under
the contract was carrying out the work making huge
investment of money. Had it been a case also of the kind
where the party to the contract had violated the terms
and conditions of the contract, it could have been said
that the tender was liable to be cancelled for violation of
terms and conditions of the tender agreement. But in the
instant case no such finding has come to be returned.
The reasons for which the tender proceedings that had
already been concluded with the execution of the
agreement, has been cancelled without assigning any
reason of wrong practice adopted by the petitioner in
obtaining the agreement. Thus the petitioner cannot be
said to be at fault in the matter and, therefore, in our
considered opinion if the petitioner was already working
under the agreement and no charge was there that he
violated the terms and conditions of the agreement, the
respondents were not justified in cancelling the
agreement ex parte.

xxx xxx xxx

There is no finding returned that at the stage of
submission of the application against the notice inviting
tender, the petitioner was not eligible or that at the time
of the opening of the technical bid and financial bid the
petitioner got wrongfully qualified and that the financial
bid of the petitioner was wrongly approved and that the
agreement entered between the petitioner and the
Corporation was void being against the law. If in all the
above three stages the petitioner cannot be held to be
guilty in any manner for manipulating the things and
obtaining the tender by hatching any conspiracy in
connivance with the officials of the Corporation,
cancellation of the agreement suddenly by the Managing
Director holding that the entire Notice Inviting Tender
was bad, certainly required a notice and opportunity of
hearing to be afforded to the petitioner prior to passing of
such an order. It is a settled principle of law that in
administrative exercise of power, the authority exercising
10
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

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.

15

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 as it is not our practice to
16
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

17
aggrieved party would be suing for damages for breach
and that it could not compel the Corporation for specific
performance of the contract under Article 226.

12. The learned counsel appearing for the first
respondent, however, submitted that this Court has
taken a different view in the case of LIC of
India 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
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:
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.”

19

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

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:

20

“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 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,

21
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:
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.

22

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.
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

23
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 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):

“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 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.”

27

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

28
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 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

29
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 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

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:

“47. If the employees are workmen within the purview of
the U.P. Industrial Disputes Act, they are protected
thereunder. Rules 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

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:

“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 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,
32
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 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

“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 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-

34

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.”

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.

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.

36

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:
(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

37
aggrieved employee if he has not already secured it
before coming to the court/tribunal and given the
employee an opportunity to show how his or her case
was prejudiced because of the non-supply of the report.
If after hearing the parties, the court/tribunal comes to
the conclusion that the non-supply of the report would
have made no difference to the ultimate findings and the
punishment given, the court/tribunal should not interfere
with the order of punishment. The court/tribunal should
not mechanically set aside the order of punishment on
the ground that the report was not furnished as is
regrettably being done at present. The courts should
avoid resorting to short cuts. Since it is the
courts/tribunals which will apply their judicial mind to the
question and give their reasons for setting aside or not
setting aside the order of punishment, (and not any
internal appellate or revisional authority), there would be
neither a breach of the principles of natural justice nor a
denial of the reasonable opportunity. It is only if the
court/tribunal finds that the furnishing of the report would
have made a difference to the result in the case that it
should set aside the order of punishment.”

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

“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 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.

39

(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 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:

“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.

42

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 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.

44

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]

45

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. 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

46
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.

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

47
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 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);

48

(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 alteram

partem rule cannot by itself, without more, lead to the conclusion that

prejudice is thereby caused.

49

(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

50
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 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

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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

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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.

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