STATE OF U.P. versus SUDHIR KUMAR SINGH AND ORS.

[2020] 13 S.C.R. 571

STATE OF U.P.

SUDHIR KUMAR SINGH AND ORS.

(Civil Appeal No. 3498 of 2020)

OCTOBER 16, 2020

[R. F. NARIMAN, NAVIN SINHA AND K. M. JOSEPH, JJ.]

Principles of Natural Justice – audi alteram partem – Breachof – U.P. State Warehousing Corporation issued e-tender inter aliafor unloading/loading of foodgrains/fertilizer bags from/into railwaywagons, trucks etc.; transporting from Railway Station toCorporation godowns or vice versa – Tender cancelled – e-tenderagain published in the same terms, for Vindhyachal (Mirzapur)region, it was regarding appointment of Handling and TransportContractor for food grain in FCI for four depots/centres of UttarPradesh for two years – Cancelled again – Another tender reissuedfor the same region – Respondent No.1 declared as successfulbidder for the Bhawanipur-I centre – Agreement entered intobetween the Corporation and Respondent No.1 for execution ofthe work under the tender – Complaints of financial irregularitiesin the issuance of the e-tender – Tender cancelled – Respondentno.1 filed Writ Petition – Allowed – On appeal, held: Prayer in theWrit Petition confined itself to the cancellation of the tender –However, impugned judgment went ahead and not only set asidesuch cancellation vide letter dtd. 26.07.19, but also set aside theManaging Director’s report dtd. 14.06.19, and the SpecialSecretary’s order of 16.07.19, which required taking disciplinaryaction and recovery of financial loss from those responsible – Setaside to that extent – Further, entire proceedings leading tocancellation of the tender, together with the cancellation itself, weredone on an ex parte appraisal of the facts behind respondent no.1’sback – Natural justice is flexible tool in the hands of the judiciaryto reach out in fit cases to remedy injustice – In the present case,respondent no.1 was completely in the dark so far as the cancellationof the tender is concerned, the audi alteram partem rule having beenbreached in its entirety – Impugned judgment upheld on this ground– Tenders – Maxims – Constitution of India – Arst.226, 14.

DEF

[2020] 13 S.C.R.

AConstitution of India – Art.226 – Writ petition – Maintainabilityof, for enforcing contractual obligation of the State/itsinstrumentality – Discussed.

Disposing of the appeals, the Court

HELD: 1.1 Despite the fact that the prayer in the WritBPetition filed by Respondent No.1 was set out in the verybeginning of the impugned judgment, confining itself to thecancellation of the second tender, the impugned judgment wentahead and not only set aside such cancellation vide the letter dated26.07.2019, but also went ahead and set aside the ManagingCDirector’s report dated 14.06.2019, and the Special Secretary’sorder of 16.07.2019, which required the taking of disciplinaryaction and recovery of financial loss from those who areresponsible. It was fairly conceded that no relief was asked quathe delinquent officers. This being the case, the impugnedjudgment is set aside insofar as it has quashed the ManagingDDirector’s report dated 14.06.2019, and the order of the SpecialSecretary dated 16.07.2019. Any consequential action that is tobe taken pursuant to these orders must follow in accordance withlaw. Every case in which citizen/person knocks at the doors ofthe writ court for breach of his or its fundamental rights is matterEwhich contains “public law element”, as opposed to case whichis concerned only with breach of contract and damages flowingtherefrom. Whenever plea of breach of natural justice is madeagainst the State, the said plea, if found sustainable, sounds inconstitutional law as arbitrary State action, which attracts theprovisions of Article 14 of the Constitution of India. The presentFcase is, therefore, case which involves “public law element”in that the petitioner (Respondent No.1) who knocked at thedoors of the writ court alleged breach of the audi alteram partemrule, as the entire proceedings leading to cancellation of thetender, together with the cancellation itself, were done on an exGparte appraisal of the facts behind his back. [Paras 18, 23][589-F-H; 590-A-B; 598-E-G]

Nawabkhan Abbaskhan v. State of Gujarat (1974) 2SCC 121 : [1974] 3 SCR 427 – relied on.

1.2 In some of the early judgments of this Court, the non-observance of natural justice was said to be prejudice in itself tothe person affected, and proof of prejudice, independent of proofof denial of natural justice, was held to be unnecessary. The onlyexception to this rule is where, on “admitted or indisputable”facts only one conclusion is possible, and under the law only onepenalty is permissible. In such cases, Court may not issue itswrit to compel the observance of natural justice, not because it isnot necessary to observe natural justice, but because Courts donot issue writs which are “futile”. Equally, the prejudice that iscaused, apart from natural justice itself being denied, cannot besaid to be present in case in which there are admitted facts.What is important to note is that it is the Court or Tribunal whichmust determine whether or not prejudice has been caused, andnot the authority on an ex parte appraisal of the facts. [Paras 28,29 and 33][600-C-D; 601-B; 605-E-F]

S.L. Kapoor v. Jagmohan and Ors. (1980) 4 SCC 379 :[1981] 1 SCR 746; P.D. Agrawal v. State Bank of Indiaand Ors. (2006) 8 SCC 776 : [2006[ 1 Suppl. SCR 454;K.L. Tripathi v. State Bank of India and Ors. (1984) 1SCC 43 : [1984] 1 SCR 184; State of U.P. v. NeerajAwasthi and Ors.(2006) 1 SCC 667 : [2005] 5 Suppl.SCR 906; Managing Director, ECIL and Ors. v. B.Karnakumar and Ors. (1993) 4 SCC 727: 1993 ( 2 )Suppl. SCR 576; Haryana Financial Corporation andAnr. v. Kailash Chandra Ahuja (2008) 9 SCC 31 :[ 2008] 10 SCR 222 – relied on.1.3 Under the broad rubric of the Court not passing futileorders as the case is based on “admitted” facts, being admittedby reason of estoppel, acquiescence, non-challenge or non-denial,the following judgments of this Court are all illustrations of abreach of the audi alteram partem rule being established on thefacts of the case, but with no prejudice caused to the personalleging breach of natural justice, as the case was one on admittedfacts. [Para 38][618-B-C]

APunjab and Sind Bank and Ors. v. SakattarSingh (2001) 1 SCC 214: 2000 ( 3 ) Suppl. JT 450; Karnataka SRTC and Anr. v. S.G. Kotturappa andAnr. (2005) 3 SCC 409 : [ 2005] 2 SCR 520; VivekaNand Sethi v. Chairman, J&K Bank Ltd. and Ors. (2005)5 SCC 337 : [2005] 3 SCR 1095; Mohd. Sartaj andBAnr. v. State of U.P. and Ors. (2006) 2 SCC 315: [ 2006]1 SCR 377; Punjab National Bank and Ors. v. ManjeetSingh and Anr. (2006) 8 SCC 647 : 2006 (6 ) Suppl. SCR 825; Ashok Kumar Sonkar v. Union of India andOrs. (2007) 4 SCC 54 : [2007] 3 SCR 95; State ofCManipur and Ors. v. Y. Token Singh and Ors. (2007) 5SCC 65: [2007] 2 SCR 965; Secretary, A.P. SocialWelfare Residential Educational Institutions v. PindigaSridhar and Ors. (2007) 13 SCC 352 : [2007] 4SCR 145; Peethani Suryanarayana and Anr. v. RepakaVenkata Ramana Kishore and Ors. (2009) 11 SCC 308D: [2009] 2 SCR 48; Municipal Committee, Hoshiapurv. Punjab State Electricity Board and Ors. (2010) 13SCC 216 : [2010] 13 SCR 658; Union of India andAnr. v. Raghuwar Pal Singh (2018) 15 SCC 463 : [2018]4 SCR 1012 – referred to.

1.4 (1) Natural justice is flexible tool in the hands of thejudiciary to reach out in fit cases to remedy injustice. The breachof the audi alteram partem rule cannot by itself, without more,lead to the conclusion that prejudice is thereby caused.

(2) Where procedural and/or substantive provisions of lawFembody the principles of natural justice, their infraction per sedoes not lead to invalidity of the orders passed. Here again,prejudice must be caused to the litigant, except in the case of amandatory provision of law which is conceived not only inindividual interest, but also in public interest.

(3) No prejudice is caused to the person complaining of thebreach of natural justice where such person does not dispute thecase against him or it. This can happen by reason of estoppel,

acquiescence, waiver and by way of non-challenge or non-denialor admission of facts, in cases in which the Court finds on factsthat no real prejudice can therefore be said to have been causedto the person complaining of the breach of natural justice.

(4) In cases where facts can be stated to be admitted orindisputable, and only one conclusion is possible, the Court doesnot pass futile orders of setting aside or remand when there is, infact, no prejudice caused. This conclusion must be drawn by theCourt on an appraisal of the facts of case, and not by the authoritywho denies natural justice to person.

(5) The “prejudice” exception must be more than mereapprehension or even reasonable suspicion of litigant. It shouldexist as matter of fact, or be based upon definite inference oflikelihood of prejudice flowing from the non-observance of naturaljustice. [Para 39][618-H; 619-A-E]

1.5 Judged by the touchstone of these tests, it is clear thatRespondent No.1 has been completely in the dark so far as thecancellation of the award of tender in his favour is concerned, theaudi alteram partem rule having been breached in its entirety.Prejudice has indeed been caused to respondent no.1, not onlyfrom the fact that one year of the contract period has been takenaway, but also that, if the impugned High Court judgment is to beset aside today, he will be debarred from bidding for any of theCorporation’s tenders for period of three years. Undoubtedly,prima facie, the rates at which contracts have been awardedpursuant to the tender dated 01.06.2018 are way above the ratesthat were awarded of the same division, and for exactly the sameamount of work awarded vide the earlier tender advertisementdated 01.04.2018. The argument that in the neighbouring regionsthe rates tendered were also high, and nothing has yet been doneto nullify these tenders and the financial loss caused, does carrysome weight. That huge financial loss to the Corporation hasalso taken place is something for the Corporation to probe, andtake remedial action against the persons responsible. Theimpugned judgment of the High Court is therefore, upheld on

Athe ground that natural justice has indeed been breached in thefacts of the present case, not being case of admitted facts leadingto the grant of futile writ, and that prejudice has indeed beencaused to Respondent No.1. In view of this finding, there is noneed to examine the other contentions raised by the parties.[Paras 40, 41][619-F-H; 620-A-C]

1.6 The submission that as respondent no.1 is working forthe Corporation in another subsequent tender, he is not going toclaim damages for the lost period post cancellation of the tenderis reiterated. This being the case, and other things being equal,the earnest money deposit and security deposit made by him isCordered to be returned by the Corporation within period ofeight weeks from today. He may also request the Corporation topay any amount that remained unpaid for work actually done, whichthe Corporation will, after hearing, either allow or reject forreasons to be stated. The appeals arising out of SLP (C) 5136 ofD2020 and SLP (C) 7351 of 2020 are thus partially allowed, and theimpugned judgment of the High Court of Judicature at Allahabaddated 11.12.2019 is set aside only to the extent indicated. [Paras42, 43][620-C-E]

1.7 Insofar as the appeal arising out of SLP (C) No. 7364 ofE2020 is concerned, the facts therein are distinct from the othertwo connected appeals before this Court only to the extent thatRespondent No.1 therein, M/s Dharam Raj Singh, was thesuccessful bidder for the Tendu (Sonbhadra) region, which awardof tender was also cancelled by the Corporation’s order dated26.07.2019. The judgment impugned in this appeal, datedF07.01.2020 of the High Court of Judicature of Allahabad (LucknowBench), allowed M/s Dharam Raj Singh’s writ petition challengingthe cancellation order, stating that it was to be governed by thejudgment of the High Court of Judicature at Allahabad dated11.12.2019. As result, the judgment in the two connectedGappeals, and all consequential reliefs granted, will apply on allfours to this appeal also. [Para 44][620-F-G]

ABL International Ltd. and Anr. v. Export CreditGuarantee Corporation of India Ltd. and Ors. [2004]

3 SCC 553; Food Corp. of India and Anr. v. SEIL Ltd.and Ors.(2008) 3 SCC 440 : [2008] 1 SCR 663;Central Bank of India v. Devi Ispat Ltd. and Ors. (2010)11 SCC 186 : [2010] 9 SCR 417; Surya Constructionsv. State of U.P. and Ors. (2019) 16 SCC 794; VerigamtoNaveen v. Govt. of A.P. and Ors. (2001) 8 SCC 344 :2001 ( 3 ) Suppl. SCR 112; Rishi Kiran Logistics v.Board of Trustees of Kandla Port and Ors. (2015) 13SCC 233 : [2014] 5 SCR 411; Joshi TechnologiesInternational Inc. v. Union of India and Ors. (2015) 7SCC 728 : [2015] 6 SCR 1042; Dharampal SatyapalLtd. v. Dy. Comm. Of Central Excise, Gauhati and Ors.(2015) 8 SCC 519 : [2015] 6 SCR 437; State Bank ofPatiala and Ors. v. S.K. Sharma (1996) 3 SCC 364 :1996 ( 3 ) SCR 972; M.C. Mehta v. Union of India andOrs. (1999) 6 SCC 237 : [1999] 3 SCR 1173; AligarhMuslim University and Ors. v. Mansoor Ali Khan (2000)7 SCC 529; 2000 ( 2 ) Suppl. SCR 684; Union ofIndia and Ors. v. Alok Kumar (2010) 5 SCC 349 :[2010] 5 SCR 35 – relied on.

Raunaq International Ltd. v. I.V.R. Construction Ltd.and Ors. (1999) 1 SCC 492: [1998] 3 Suppl. SCR 421;Jagdish Mandal v. State of Orissa and Ors. (2007) 14SCC 517; Michigan Rubber (India) Ltd. v.State ofKarnataka and Ors. (2012) 8 SCC 216 :[ 2012] 8SCR 128; Tata Cellular v. Union of India (1994) 6 SCC651 : [1994] 2 Suppl. SCR 122; Rajasthan StateHousing Board and Anr. v. G.S. Investments and Anr.(2007) 1 SCC 477 : [2006] 7 Suppl. SCR 868 –distinguished.

Noble Resources v. State of Orissa and Anr. (2006) 10SCC 236 : [ 2006] 6 Suppl. SCR 53; RadhakrishnaAgarwal and Ors. v. State of Bihar and Ors. (1977) 3SCC 457 : [1977] 3 SCR 249 – referred to.

On Justice- Book by J.R. Lucas (Page 86) – referredto.

Case Law Reference

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3498of 2020.

From the Judgment and Order dated 11.12.2019 of the High Courtof Judicature at Allahabad in Writ C. No. 25389 of 2019.

With

Civil Appeal Nos. 3499 and 3500 of 2020.

Tushar Mehta, SG, Dr. Abhishek Manu Singhvi, Ms. MeenakshiArora, Rakesh Dwivedi, Sidharth Dave, Sr. Advs., Mrs. Rachna Gupta,Amit Bhandari, Ms. Sakshi Kakkar, Shakti Singh, Ms. Preetika Dwivedi,Mr. Imran Syed, Advs. for the appearing parties.

The Judgment of the Court was delivered by

R. F. NARIMAN, J.

1. Leave granted.

2. An e-tender notice was issued on 06.01.2018 by the U.P. StateWarehousing Corporation (“Corporation”) for unloading/loading offoodgrains/fertilizer bags from/into railway wagons, trucks etc., stackingthe foodgrains/fertilizers in bags, bagging, weighment, standardisation,cleaning of foodgrains/fertilizers etc. and transporting of foodgrains/fertilizers etc. from Railway Station to Corporation godowns or viceversa or transporting them from any place to any other place for theVindhyachal (Mirzapur) Region. Ten days later i.e. on 16.01.2018, thesaid tender was cancelled by the Corporation due to “administrativereasons”. On 01.04.2018, an e-tender was again published in the sameterms, and so far as the region Vindhyachal (Mirzapur) is concerned, itwas for the “appointment of Handling and Transport Contractor for foodgrain in FCI and alleged material etc.” of the following depots/centresof Uttar Pradesh for period of two years:

3. Technical bids for these four centres were opened on17.04.2018. Price bids of technically qualified bidders were then openedCon 23.04.2018. The price bids that were received, so far as these fourcentres were concerned, were as follows:

“PEG Bhawanipur-I CentreD

PEG Bhawanipur-II CentreEFMirzapur Centre

Tendu (Sonbhadra) Centre

(Where ASOR means Above Schedule of Rates)”

4. On 04.05.2018, the then Managing Director of the Corporationcancelled the aforesaid tender apparently on the ground that it was“impractical” to go ahead with such tender. As result, on 01.06.2018,for the same region, the aforesaid tender was reissued for the sameworkable capacity and estimated annual value of the contract. It may beadded that each of these tenders were for period of two years.

5. Sudhir Kumar Singh, Respondent No.1 in the appeals arisingout of SLP (C) No. 5136 of 2020 and SLP (C) No. 7351 of 2020, wasdeclared as the successful bidder for the Bhawanipur-I centre, at therate 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 intobetween the Corporation and Respondent No.1 for execution of thework under the tender, which began on and from that day, and continuedfor period of over one year.

6. Meanwhile, on 27.05.2019, two complaints were made by oneShri Pramod Kumar Singh of the Purvanchal Trucker Owner’sAssociation to the Principal Secretary of the State of U.P. regardingfinancial irregularities that occurred in the issuance of the e-tender noticedated 01.06.2018. These complaints were then forwarded by the PrincipalSecretary of the State of U.P. to the Managing Director of theCorporation by letter dated 30.05.2019. The said letter, insofar asRespondent No.1 is concerned, read as follows:

“Shri Pramod Kumar Singh should analyse two enclosedcomplaints dated 27.05.2019 of Truck Owners Association whereinloss of Crores to Corporation is shown due to serious financialirregularities caused in handling and transport contracts inVindhyanchal Division.

Axxx xxx xxx

Tendering was done in Vindhyanchal Division on 16.04.2018,wherein low rate of tenders were received. Issued tenders arecancelled on 05.05.2018 without telling any reason and tender ofcentres cancelled on 16.06.2018 were re-tendered wherein ratesBare too high in new tenders than older one and by allotting workon higher rates work is being done.

Kindly assure providing report within five days in respect ofaforesaid and in respect of all points mentioned in enclosed letters.”

7. As result of this letter, the Managing Director of theCCorporation held an ex parte enquiry into the matter, and insofar asRespondent No.1 was concerned, the Managing Director went into thecancellation of the previous tender dated 01.04.2018, and into thecomparative details of rates received for these four centres earlier, ascompared to the rates of the same tendered quantity of the tender datedD01.06.2018, and found the latter rates to be extremely high. In his reportdated 14.06.2019, he therefore ultimately concluded:

“It is mentionable that cancellation of e-tendering process doneearlier through Advertisement No.1.1001.23318 dated 01.04.2018on the ground that received minimum rates are impractical is notEacceptable in any circumstance. In this respect, for getting e-tendering process done the committee constituted at Division Levelconsidered PEG Tendu (Sonbhadra) Centre only as impracticalwhereas the Head Office accepted it as it is in respect of allcentres. As far as question of hiding of fact regarding forfeitureof security deposit by Uday Construction or application filed forFproducing the same are concerned, then in this respect it is to beknown that Uday Construction applied only for PEG Tendu throughAdvertisement No.1.1001.23318 dated 01.04.2018. Therefore, onthis ground rejection of bids received for other centres was primafacie not justified.”G8. Meanwhile, the Commissioner, Vindhyachal Mandal Mirzapur,also conducted an ex parte investigation and found in his report dated29.06.2019 as follows:

“1. State regional manager Sh. Madhukar Gupta has mentionedin his letter no. R.BH.N/dated 26-05-2018 forwarded to State

General Manager (finance) Uttar Pradesh State WarehousingCorporation that committee of e-tendering has been formed onlyfor the purpose of formalities. It is cleared from examining theparagraph that formality has been done in the tender. On 12-07-2018 the state manager gave the recommendation of acceptanceand on 13-07-2018 Uttar Pradesh State Warehousing Corporationgave acceptance. On 13-07-2018 Sh. Madhukar Gupta StateRegional Manager, Uttar Pradesh State Warehousing CorporationVindhyachal gave appointment order to the concerned contractors.Hereby uncommon vigilance has been shown in entire procedure.

2. Regional Manager, Uttar Pradesh State WarehousingCorporation Sh. Anuj Shukla, computer consultant was got involvedby Sh. Madhukar Gupta which is not appropriate. It is objectionablein keeping contract work in bid is objection.

3. Condition was kept on to participate only to the registeredcontractors which is objectionable. Due to, only participation ofregistered contractor, no contest took place amongst thecontractors. Because of which rate was obtained at manifold highrate. 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 PradeshState Warehousing Corporation Lucknow. For determined rate to314 percent, 341 percent, 338 percent, and 290 percent at highrate conformation of recommendation of appointment of regularcontractors have been given for work of Indian FertilizerCorporation Handling and Transport. It is mentioned that despitethe high rate from determined rate regional manager neither anymarket survey was conducted regarding high rate nor hementioned in his letter and he recommended the acceptanceirresponsibly. Hence Sh. Madhukar Gupta State Regional Managerhas not followed his duty and responsibility and he is responsiblefor high rate and acceptance without any reason.

5. Even corporation Headquarter did not deem fit to take anyaction regarding high rate from determined rate. What wasexamined by Headquarter it is not cleared.

6. In this regard categorically it is not possible to determine thefinancial loss since neither in this case, opportunity to contest has

been given and nor market survey has been conducted. On thebasis of that formality rate can be determined. Damage has beensurely caused. But it cannot be explained. Record is sent forperusal and necessary action.”

9. Given these two reports, the Special Secretary, Government ofBU.P. wrote letter dated 16.07.2019 to the Managing Director, in whichthe Managing Director’s report dated 14.06.2019 was referred to, andconcluded:

“In this, the role of Officer of Regional Level (VindhyachalDivision) and accepting Officer and erstwhile Managing DirectorCand officers concerned with Headquarter, also appears to bedoubtful.

So, I have been instructed to say that you by doing enquiry ofmatter at your own level, the financial loss caused to theGovernment and after evaluating the same, shall take action torecover the said amount from concerned Contractor and concernedDOfficers. The Officers/Employees against whom any previousdepartmental proceeding is pending, in respect of them by includingthese charges as additional Charge Sheet action shall be takenand against officers/employees found guilty in the matter againstwhom no proceedings are pending, proceeding shall be done byEmarking them.

The tenders of abovementioned firms which are granted contraryto rules, by cancelling them the appointment of contractors bedone through e-tendering again for handling and transport workof concerned Warehouses.F

Said proceedings be done as soon as possible and the action takenshall be informed to the Government.”

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

11. Mean while, Respondent No.1 filed Writ Petition no. 25389 of2019 in July 2019 before the High Court of Judicature at Allahabad, inwhich he challenged the “illegal and arbitrary” termination of the contractwith the Corporation after successful completion of over one year of atwo-year term, and prayed for the setting aside of the Corporation’scancellation order dated 26.07.2019 of the tender dated 01.06.2018.

12. By the judgment dated 11.12.2019 in this Writ Petition, whichis impugned in the appeals arising out of SLP (C) No. 5136 of 2020 andSLP (C) No. 7351 of 2020, the High Court, after setting out the prayer inthe Writ Petition, set out four questions that arose before it as follows:

“(a) Whether the two enquiry reports are procedurally defectiveinasmuch as the findings returned thereunder are based upon nomaterial and hence perverse;

(b) Whether the respondent Managing Director was justified incancelling the written agreement with the petitioner after lapseof year, without putting him to notice;

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

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

13. The High Court concluded that since the entire proceedingswere conducted behind the back of Respondent No.1, and consideringthat the tender notice dated 01.06.2018 had never been challenged byanybody in court of law, an ex parte appraisal of the complaints receivedwas done in hurry by the Managing Director of the Corporation andthe learned Commissioner, and was liable to be set aside on severalgrounds, the single most important one – insofar as Respondent No.1 isconcerned – being the breach of natural justice. The High Court,therefore, held:

“If the officials had cancelled the earlier tender notice in theirwisdom and the cancellation of those tender notice was never

Aquestioned, merely because those earlier tender notices werecancelled/ withdrawn, necessary presumption cannot be raisedthat the third notice inviting tender was for some extraneousconsiderations. It is true that the prices this time were taken to bevery high as against the earlier ones in the process of tender inwhich the prices were quoted very low but that does not itselfBbecome the ground to cancel the entire tender process which hadnot only been finalized but even the agreement had been enteredinto and the party under the contract was carrying out the workmaking huge investment of money. Had it been case also of thekind where the party to the contract had violated the terms andCconditions of the contract, it could have been said that the tenderwas liable to be cancelled for violation of terms and conditions ofthe tender agreement. But in the instant case no such finding hascome to be returned. The reasons for which the tender proceedingsthat had already been concluded with the execution of theagreement, has been cancelled without assigning any reason ofDwrong practice adopted by the petitioner in obtaining theagreement. Thus the petitioner cannot be said to be at fault in thematter and, therefore, in our considered opinion if the petitionerwas already working under the agreement and no charge wasthere that he violated the terms and conditions of the agreement,Ethe respondents were not justified in cancelling the agreement exparte.

xxx xxx xxx

There is no finding returned that at the stage of submission of theapplication against the notice inviting tender, the petitioner wasnot eligible or that at the time of the opening of the technical bidand financial bid the petitioner got wrongfully qualified and thatthe financial bid of the petitioner was wrongly approved and thatthe agreement entered between the petitioner and the Corporationwas void being against the law. If in all the above three stages thepetitioner cannot be held to be guilty in any manner for manipulatingthe things and obtaining the tender by hatching any conspiracy inconnivance with the officials of the Corporation, cancellation ofthe agreement suddenly by the Managing Director holding thatthe entire Notice Inviting Tender was bad, certainly required anotice and opportunity of hearing to be afforded to the petitioner

prior to passing of such an order. It is settled principle of lawthat in administrative exercise of power, the authority exercisingpower has to not only render due application of mind but also tofollow the procedure which would not render the entire actionarbitrary. It is settled legal principle that whatever is arbitrary, ishit by Article 14 of the Constitution of India and in the presentcase we find that only the procedure that was followed by therespondents in taking impugned action was not only quite ex partebut also under the executive fiats of the Special Secretary of theGovernment which was quite uncalled for.”

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

“Order impugned is basically based on the enquiry report preparedby the Managing Director himself and that the enquiry wasconducted in the ex parte manner and the Managing Directorfailed to offer any opportunity of hearing to the petitioner beforepassing the order impugned which has the effect of terminatingthe agreement for no justifiable reason to hold that the petitionerwas at fault at any point of time. Element of bias therefore, underthe circumstances at the end of Managing Director, cannot beruled out. The order impugned, therefore, terminating theagreement dated 26.7.2019 cannot be sustained in law.Thus, for the forgoing discussions writ petition succeeds and isallowed. The order dated 26.7.2019 (Annexure-13) to the writpetition and the enquiry report dated 14.6.2019 submitted by theManaging Director as well as the order passed by the SpecialSecretary dated 16.7.2019 are also hereby quashed.

The consequential action if taken pursuant to the impugned orderis also quashed. The consequences to follow, however, there willbe no order as to costs.”

15. Dr. Abhishek Manu Singhvi, learned Senior Advocate appearingon behalf of the Corporation, first adverted to the prayer in the WritPetition filed by Respondent No.1, and argued that the High Court hadgone way beyond what was asked for. According to him, the Writ Petitiononly prayed for quashing of the cancellation order dated 26.07.2019 ofthe second tender. The High Court went way beyond, and not only quashedthe aforesaid cancellation, but also quashed the enquiry report of theManaging Director dated 14.06.2019, as well as the order passed by the

ASpecial 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. Hewent on to argue, based upon the comparison between the rates thatwere 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 asBto make it clear that the contracts for these four centres ought not tohave been entered into at these rates at all. He argued that the HighCourt ought to have appreciated the huge financial loss that was causedas result of awarding the contract at these rates, and ought not to haveinterfered with the cancellation of the tender, as it could not beCcharacterised as arbitrary, given the huge increase in rates in such ashort period for the same works. Further, he argued that the case law onnatural justice showed that it was not an inflexible straitjacket, but had tobe used wisely and well, and cited number of judgments of this Courtfor the proposition that even though natural justice may be breached inthe facts of given case, if otherwise such breach does not result inDprejudice, it would be mere exercise in futility to set aside the orderand remand it to the authorities to pass an order after hearing the affectedparty. He also argued that as of today, the two year term of the contractis over, and this very contractor, i.e. Respondent No.1, is doing the samework awarded at Mirzapur on 21.03.2020 at rates (139% ASOR) whichEare much lower than the rates tendered for previously, as is the successfultenderer Tilotama Devi on and from 31.09.2019 so far as Bhawanipur-II is concerned, which was awarded at 221% ASOR. Dr. Singhvi alsoargued that the writ court ought not to have interfered in contractualmatters, and ought to have left Respondent No.1 to approach civilcourt to file suit for appropriate reliefs.F

16. Shri Tushar Mehta, learned Solicitor General appearing onbehalf of the State of U.P., argued that he had limited role, and confinedhis arguments to the setting aside of the letter dated 16.07.2019 of theSpecial Secretary to take departmental action. He argued that this lettercould not have been set aside by the High Court, as no such prayer orGargument was made before it by the writ petitioner.

17. Shri Rakesh Dwivedi, learned Senior Advocate appearing onbehalf of Respondent No.1, argued that the High Court judgment oughtnot to be interfered with, inasmuch as his client had pumped in lot ofmoney, and had worked the contract for period of over one yearH

successfully and without any complaint whatsoever from the Corporation.He reiterated the fact that nobody had challenged the award of thetender to his client, and that the cancellation of the tender was donebehind his client’s back. Had the authorities bothered to give his client ahearing, his client could have pointed out that in other nearby divisions,tenders were awarded at roughly the same rates, all of which contractshad been worked out, and none of which have been cancelled. Thus, heargued that his client suffered serious prejudice, in that he was able towork his contract for only one out of the two years that was awarded tohim. He further argued that had hearing been given, his client wouldalso have demonstrated that the rates that were awarded could not becharacterised as unreasonable, given the magnitude of the contract inhis favour. He also argued that the award of tender at lower rate atMirzapur, which is currently being processed through his client, is notcomparable with the tender that was awarded to his client for BhawanipurI, because, inter alia, there was huge difference between the volumeof work awarded in the two contracts. He argued that it is idle to saythat no prejudice has been caused, inasmuch as he has not been able towork the contract for one year, the contract period now being over, andthat if the contract with his client is set aside, his client is debarred frombidding for period of three years for any other contract with theCorporation. He further argued, in support of the impugned High Courtjudgment, that the action of termination by the Corporation was withoutan independent application of mind, and was purely at the instruction ofthe Special Secretary of the Government of U.P. dated 16.07.2019. Healso fairly argued that his statement may be recorded that his client isnot going to claim damages for the period of the agreement postcancellation, and that in fairness, the earnest money deposit and securitydeposit made by his client ought to be returned by the Corporation.

18. Having heard learned counsel for all the parties, one thingbecomes clear. Despite the fact that the prayer in the Writ Petition filedby Respondent No.1 was set out in the very beginning of the impugnedjudgment, confining itself to the cancellation of the second tender, theimpugned judgment went ahead and not only set aside such cancellationvide the letter dated 26.07.2019, but also went ahead and set aside theManaging Director’s report dated 14.06.2019, and the Special Secretary’sorder of 16.07.2019, which required the taking of disciplinary action andrecovery of financial loss from those who are responsible. Shri Rakesh

ABC

ADwivedi also fairly conceded that his client had not asked for any reliefqua the delinquent officers. This being the case, we set aside the impugnedjudgment insofar as it has quashed the Managing Director’s report dated14.06.2019, and the order of the Special Secretary dated 16.07.2019.Any consequential action that is to be taken pursuant to these ordersmust follow in accordance with law.B

19. Dr. Singhvi’s preliminary objection as to Respondent No.1having to approach civil court, and not writ court, for actions thatpertain to breach of contract, need not detain us. In ABL InternationalLtd. and Anr. v. Export Credit Guarantee Corporation of IndiaLtd. and Ors. (2004) 3 SCC 553, this Court held that it was no longerCres integra that writ petition under Article 226 of the Constitution ismaintainable at the instance of an aggrieved party to enforce contractualobligation of the State or its instrumentality when the State acts in anarbitrary manner, as follows:“8. As could be seen from the arguments addressed in this appealDand as also from the divergent views of the two courts below, oneof the questions that falls for our consideration is whether writpetition under Article 226 of the Constitution of India is maintainableto enforce contractual obligation of the State or its instrumentality,by an aggrieved party.

E9. In our opinion this question is no more res integra and is settledby large number of judicial pronouncements of this Court.In K.N. Guruswamy v. State of Mysore [(1955) 1 SCR 305] thisCourt held:

“20. The next question is whether the appellant can complainFof this by way of writ. In our opinion, he could have doneso in an ordinary case. The appellant is interested in thesecontracts and has right under the laws of the State to receivethe same treatment and be given the same chance as anybodyelse. …

GWe would therefore in the ordinary course have given theappellant the writ he seeks. But, owing to the time which thismatter has taken to reach us (a consequence for which theappellant is in no way to blame, for he has done all he couldto have an early hearing), there is barely fortnight of thecontract left to go…A writ would therefore be ineffective andH

as it is not our practice to issue meaningless writs we mustdismiss this appeal and leave the appellant content with anenunciation of the law.”

10. It is clear from the above observations of this Court in thesaid case, though writ was not issued on the facts of that case,this Court has held that on given set of facts if State acts in anarbitrary manner even in matter of contract, an aggrieved partycan approach the court by way of writ under Article 226 of theConstitution and the court depending on facts of the said case isempowered to grant the relief. This judgment in K.N.Guruswamy v. State of Mysore was followed subsequently bythis Court in the case of D.F.O. v. Ram Sanehi Singh [(1971) 3SCC 864] wherein this Court held:

“By that order he has deprived the respondent of valuableright. We are unable to hold that merely because the sourceof the right which the respondent claims was initially in acontract, for obtaining relief against any arbitrary andunlawful action on the part of public authority he mustresort to suit and not to petition by way of writ. In viewof the judgment of this Court in K.N. Guruswamy case therecan be no doubt that the petition was maintainable, even ifthe right to relief arose out of an alleged breach of contract,where the action challenged was of public authority investedwith statutory power.”

11. In the case of Gujarat State Financial Corpn. v. LotusHotels (P) Ltd. [(1983) 3 SCC 379] this Court following an earlierjudgment in Ramana Dayaram Shetty v. International AirportAuthority of India [(1979) 3 SCC 489] held:

The instrumentality of the State which would be ‘otherauthority’ under Article 12 cannot commit breach of solemnundertaking to the prejudice of the other party which actedon that undertaking or promise and put itself in adisadvantageous position. The appellant Corporation, createdunder the State Financial Corporations Act, falls within theexpression of ‘other authority’ in Article 12 and if it backsout from such promise, it cannot be said that the only remedyfor the aggrieved party would be suing for damages for

ABC

breach and that it could not compel the Corporation forspecific performance of the contract under Article 226.

12. The learned counsel appearing for the first respondent,however, submitted that this Court has taken different view inthe 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 obligationsor obligations arising out of the tort, the court may notordinarily examine it unless the action has some public lawcharacter attached to it. Broadly speaking, the court willexamine actions of State if they pertain to the public lawdomain and refrain from examining them if they pertain tothe private law field. The difficulty will lie in demarcating thefrontier between the public law domain and the private lawfield. It is impossible to draw the line with precision and wedo not want to attempt it. The question must be decided ineach case with reference to the particular action, the activityin which the State or the instrumentality of the State is engagedwhen performing the action, the public law or private lawcharacter of the action and host of other relevantcircumstances. When the State or an instrumentality of theState ventures into the corporate world and purchases theshares of company, it assumes to itself the ordinary role ofa shareholder, and dons the robes of shareholder, with allthe rights available to such shareholder. There is no reasonwhy the State as shareholder should be expected to state itsreasons when it seeks to change the management, by aresolution 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 thecase cited hereinabove. This Court in the case of LIC ofIndia proceeded on the facts of that case and held that relief byway of writ petition may not ordinarily be an appropriate remedy.This judgment does not lay down that as rule in matters ofcontract the court’s jurisdiction under Article 226 of the Constitutionis ousted. On the contrary, the use of the words “court may notordinarily examine it unless the action has some public law characterattached to it” itself indicates that in given case, on the existence

of the required factual matrix remedy under Article 226 of theConstitution will be available. The learned counsel then relied onanother judgment of this Court in the case of State ofU.P. v. Bridge & Roof Co. (India) Ltd. [(1996) 6 SCC 22]wherein this Court held:

Further, the contract in question contains clause providinginter alia for settlement of disputes by reference to arbitration.The arbitrators can decide both questions of fact as well asquestions of law. When the contract itself provides for modeof settlement of disputes arising from the contract, there is noreason why the parties should not follow and adopt thatremedy and invoke the extraordinary jurisdiction of the HighCourt under Article 226. The existence of an effectivealternative remedy — in this case, provided in the contractitself — is good ground for the court to decline to exerciseits extraordinary jurisdiction under Article 226.14. This judgment again, in our opinion, does not help the firstrespondent in the argument advanced on its behalf that incontractual matters remedy under Article 226 of the Constitutiondoes not lie. It is seen from the above extract that in that casebecause of an arbitration clause in the contract, the Court refusedto invoke the remedy under Article 226 of the Constitution. Wehave specifically inquired from the parties to the present appealbefore us and we have been told that there is no such arbitrationclause in the contract in question. It is well known that if theparties to dispute had agreed to settle their dispute by arbitrationand if there is an agreement in that regard, the courts will notpermit recourse to any other remedy without invoking the remedyby way of arbitration, unless of course both the parties to thedispute agree on another mode of dispute resolution. Since that isnot the case in the instant appeal, the observations of this Court inthe said case of Bridge & Roof Co. [(1996) 6 SCC 22] are of noassistance to the first respondent in its contention that in contractualmatters, writ petition is not maintainable.”

20. This principle has been consistently upheld by this Court inNoble Resources v. State of Orissa and Anr. (2006) 10 SCC 236 (atparagraph 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

DEF

[2020] 13 S.C.R.

AIspat Ltd. and Ors. (2010) 11 SCC 186 (at paragraph 28); and SuryaConstructions v. State of U.P. and Ors. (2019) 16 SCC 794 (atparagraph 3).

21. The judgments cited by Dr. Singhvi do not in any mannerdetract from the aforesaid principle. Radhakrishna Agarwal and Ors.Bv. State of Bihar and Ors. (1977) 3 SCC 457 was judgment in whicha writ petition against the State Government’s revision of the rates ofroyalty payable to it under lease, and the cancellation of the said lease,was held to be governed by contract between the parties, nounreasonableness being made out by way of State action so as to attractthe provisions of Article 14 of the Constitution of India. The broadCproposition that all such questions are to be settled by civil courts, andnot by writ petitions, has been expressly dissented from, as “much waterhas flown” since this judgment, which was delivered during theemergency when the fundamental rights of persons were suspended.Thus, in Verigamto Naveen v. Govt. of A.P. and Ors. (2001) 8 SCCD344, this Court stated:

“21. On the question that the relief as sought for and granted bythe High Court arises purely in the contractual field and, therefore,the High Court ought not to have exercised its power under Article226 of the Constitution placed very heavy reliance on the decisionEof the Andhra Pradesh High Court in Y.S. Raja Reddy v. A.P.Mining Corpn. Ltd. [(1988) 2 An LT 722] and the decisions ofthis Court in Har Shankar v. Dy. Excise & TaxationCommr. [(1975) 1 SCC 737], Radhakrishna Agarwal v. Stateof Bihar [(1977) 3 SCC 457], Ramlal & Sons v. State ofRajasthan [(1976) 1 SCC 112], Shiv Shankar Dal Mills v. StateFof Haryana [(1980) 2 SCC 437], Ramana DayaramShetty v. International Airport Authority of India [(1979) 3 SCC489] and Basheshar Nath v. CIT [AIR 1959 SC 149]. Thoughthere is one set of cases rendered by this Court of the type arisingin Radhakrishna Agarwal case [(1977) 3 SCC 457] much waterGhas flown in the stream of judicial review in contractual field.Incases where the decision-making authority exceeded its statutorypower or committed breach of rules or principles of natural justicein exercise of such power or its decision is perverse or passed anirrational order, this Court has interceded even after the contractwas entered into between the parties and the Government and its

agencies. We may advert to three decisions of this Courtin Dwarkadas Marfatia & Sons v. Board of Trustees of thePort of Bombay [(1989) 3 SCC 293], Mahabir AutoStores v. Indian Oil Corpn. [(1990) 3 SCC 752] and ShrilekhaVidyarthi (Kumari) v. State of U.P. [(1991) 1 SCC 212]. Wherethe breach of contract involves breach of statutory obligation whenthe order complained of was made in exercise of statutory powerby statutory authority, though cause of action arises out of orpertains to contract, brings it within the sphere of public law becausethe power exercised is apart from contract. The freedom of theGovernment to enter into business with anybody it likes is subjectto the condition of reasonableness and fair play as well as publicinterest. After entering into contract, in cancelling the contractwhich is subject to terms of the statutory provisions, as in thepresent case, it cannot be said that the matter falls purely in acontractual field. Therefore, we do not think it would be appropriateto suggest that the case on hand is matter arising purely out of acontract and, therefore, interference under Article 226 of theConstitution is not called for. This contention also stands rejected.”

(emphasis supplied)

22. In Rishi Kiran Logistics v. Board of Trustees of KandlaPort and Ors. (2015) 13 SCC 233, this Court held that writ petitionunder Article 226, being public law remedy, “public law element”should be present on facts before Article 226 can be invoked – seeparagraphs 37 and 38. The law on this subject has been laid downexhaustively in Joshi Technologies International Inc. v. Union ofIndia and Ors. (2015) 7 SCC 728, this Court stating:

“69. The position thus summarised in the aforesaid principles hasto be understood in the context of discussion that preceded whichwe have pointed out above. As per this, no doubt, there is noabsolute bar to the maintainability of the writ petition even incontractual matters or where there are disputed questions of factor even when monetary claim is raised. At the same time,discretion lies with the High Court which under certaincircumstances, it can refuse to exercise. It also follows that underthe following circumstances, “normally”, the Court would notexercise such discretion:

ABC

69.1. The Court may not examine the issue unless the action hassome public law character attached to it.

69.2. Whenever particular mode of settlement of dispute isprovided in the contract, the High Court would refuse to exerciseits discretion under Article 226 of the Constitution and relegateBthe party to the said mode of settlement, particularly whensettlement of disputes is to be resorted to through the means ofarbitration.

69.3. If there are very serious disputed questions of fact whichare of complex nature and require oral evidence for theirdetermination.

69.4. Money claims per se particularly arising out of contractualobligations are normally not to be entertained except in exceptionalcircumstances.

70. Further, the legal position which emerges from variousjudgments of this Court dealing with different situations/aspectsrelating to contracts entered into by the State/public authority withprivate parties, can be summarised as under:

70.1. At the stage of entering into contract, the State acts purelyin 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 somediscriminations.

70.3. Even in cases where question is of choice or considerationof competing claims before entering into the field of contract,Ffacts have to be investigated and found before the question of aviolation of Article 14 of the Constitution could arise. If thosefacts are disputed and require assessment of evidence thecorrectness of which can only be tested satisfactorily by takingdetailed evidence, involving examination and cross-examinationof witnesses, the case could not be conveniently or satisfactorilyGdecided in proceedings under Article 226 of the Constitution. Insuch cases the Court can direct the aggrieved party to resort toalternate remedy of civil suit, etc.

70.4. Writ jurisdiction of the High Court under Article 226 of theConstitution was not intended to facilitate avoidance of obligationHvoluntarily incurred.

70.5. Writ petition was not maintainable to avoid contractualobligation. Occurrence of commercial difficulty, inconvenienceor hardship in performance of the conditions agreed to in thecontract can provide no justification in not complying with theterms of contract which the parties had accepted with open eyes.It cannot ever be that licensee can work out the licence if hefinds it profitable to do so: and he can challenge the conditionsunder which he agreed to take the licence, if he finds itcommercially inexpedient to conduct his business.

70.6. Ordinarily, where breach of contract is complained of,the party complaining of such breach may sue for specificperformance of the contract, if contract is capable of beingspecifically performed. Otherwise, the party may sue for damages.

70.7. Writ can be issued where there is executive actionunsupported by law or even in respect of corporation there isdenial of equality before law or equal protection of law or if it canbe shown that action of the public authorities was without givingany hearing and violation of principles of natural justice after holdingthat action could not have been taken without observing principlesof 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 aprivate law and there is no element of public law, the normal coursefor the aggrieved party, is to invoke the remedies provided underordinary civil law rather than approaching the High Court underArticle 226 of the Constitution of India and invoking itsextraordinary jurisdiction.

70.9. The distinction between public law and private law elementin the contract with the State is getting blurred. However, it hasnot been totally obliterated and where the matter falls purely inprivate field of contract, this Court has maintained the positionthat writ petition is not maintainable. The dichotomy between publiclaw and private law rights and remedies would depend on thefactual matrix of each case and the distinction between the publiclaw remedies and private law field, cannot be demarcated withprecision. In fact, each case has to be examined, on its factswhether the contractual relations between the parties bear insignia

Aof public element. Once on the facts of particular case it isfound that nature of the activity or controversy involves publiclaw element, then the matter can be examined by the High Courtin writ petitions under Article 226 of the Constitution of India tosee whether action of the State and/or instrumentality or agencyof the State is fair, just and equitable or that relevant factors areBtaken into consideration and irrelevant factors have not gone intothe decision-making process or that the decision is not arbitrary.

70.10. Mere reasonable or legitimate expectation of citizen, insuch situation, may not by itself be distinct enforceable right,but failure to consider and give due weight to it may render theCdecision arbitrary, and this is how the requirements of dueconsideration of legitimate expectation forms part of the principleof non-arbitrariness.

70.11. The scope of judicial review in respect of disputes fallingwithin the domain of contractual obligations may be more limitedDand in doubtful cases the parties may be relegated to adjudicationof their rights by resort to remedies provided for adjudication ofpurely contractual disputes.”

23. It may be added that every case in which citizen/personknocks at the doors of the writ court for breach of his or its fundamentalErights is matter which contains “public law element”, as opposed toa case which is concerned only with breach of contract and damagesflowing therefrom. Whenever plea of breach of natural justice is madeagainst the State, the said plea, if found sustainable, sounds inconstitutional law as arbitrary State action, which attracts the provisionsof Article 14 of the Constitution of India – see Nawabkhan AbbaskhanFv. State of Gujarat (1974) 2 SCC 121 at paragraph 7. The present caseis, therefore, case which involves “public law element” in that thepetitioner (Respondent No.1 before us) who knocked at the doors of thewrit court alleged breachofthe audi alteram partem rule, as the entireproceedings leading to cancellation of the tender, together with theGcancellation itself, were done on an ex parte appraisal of the facts behindhis back.

24. The other judgments cited by Dr. Singhvi in his WrittenSubmissions are distinguishable on facts, as all of them deal with eitherPublic-Interest Litigations or tender applicants who have been turned

down, who approach the writ court under Article 226 and ask for stayorders against proposed project, which may then be considerablydelayed and escalate cost, this being contrary to public interest. It is inthese situations that observations have been made that before entertainingsuch writ petitions and passing interim orders, the writ court must bevery careful to weigh conflicting public interests, and should interveneonly when there is an overwhelming public interest in entertaining thewrit petition. This is what was held in Raunaq International Ltd. v.I.V.R. Construction Ltd. and Ors. (1999) 1 SCC 492 at paragraphs11 to 13, 24 and 25. To similar effect is the judgment in Jagdish Mandalv. 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 dealswith writ court not interfering in the award of tender, having regardto 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), andRajasthan State Housing Board and Anr. v. G.S. Investments andAnr. (2007) 1 SCC 477 (at paragraph 10).

26. Both the learned Senior Advocates locked horns on the audialteram partem part of natural justice. Dr. Singhvi argued that it is notan inflexible tool in the hands of the Court, but must yield when no prejudiceis 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 beadded or subtracted by Respondent No.1. Shri Dwivedi, on the otherhand, argued that this is case of complete lack of natural justice, allorders having been passed behind the back of his client, as result ofwhich his client has been severely prejudiced.

27. Natural justice is at least as old as the first man created onearth – 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 man didwrong, there is requirement of logic that we should allow theputative agent to correct misinterpretations or disavow the intentionimputed to him or otherwise disown the action. God needed toask Adam ‘Hast thou eaten of the tree whereof I commandedthee that thou shouldest not eat?’ Because it was essential that

AAdam should not be blamed or punished unless he had done exactlythat deed. If the serpent had planted the evidence, or if he hadbeguiled Adam into eating it under the misapprehension that itcame from another, non-forbidden tree, then Adam had not sinnedand should not have been expelled from Eden. Only if the accusedadmits the charge, or, faced with the accusation, cannot explainBhis behaviour convincingly in any other way, are we logically entitledto conclude that he did indeed do it.”

28. In some of the early judgments of this Court, the non-observance of natural justice was said to be prejudice in itself to theperson affected, and proof of prejudice, independent of proof of denialCof natural justice, was held to be unnecessary. The only exception to thisrule is where, on “admitted or indisputable” facts only one conclusion ispossible, 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 becauseDCourts 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 “seachange”, as follows:

E“39. Decision of this Court in S.L. Kapoor v. Jagmohan [(1980)4 SCC 379] whereupon Mr Rao placed strong reliance to contendthat non-observance of principle of natural justice itself causesprejudice or the same should not be read “as it causes difficulty ofprejudice”, cannot be said to be applicable in the instant case.The principles of natural justice, as noticed hereinbefore, haveFundergone sea change.In view of the decisions of this Courtin State Bank of Patiala v. S.K. Sharma [(1996) 3 SCC 364]and Rajendra Singh v. State of M.P. [(1996) 5 SCC 460] theprinciple of law is that some real prejudice must have been causedto the complainant. The Court has shifted from its earlier conceptGthat even small violation shall result in the order being rendereda nullity. To the principle/doctrine of audi alteram partem, cleardistinction has been laid down between the cases where therewas no hearing at all and the cases where there was mere technicalinfringement of the principle. The Court applies the principles ofnatural justice having regard to the fact situation obtaining in eachH

case. It is not applied in vacuum without reference to the relevantfacts and circumstances of the case. It is no unruly horse. It cannotbe put in straitjacket formula.”

(emphasis supplied)

29. Equally, the prejudice that is caused, apart from natural justiceitself being denied, cannot be said to be present in case in which thereare admitted facts. Thus, in K.L. Tripathi v. State Bank of India andOrs. (1984) 1 SCC 43, the Court held:

“29. We are of the opinion that Mr Garg is right that the rules ofnatural justice as we have set out hereinbefore implied anopportunity to the delinquent officer to give evidence in respect ofthe charges or to deny the charges against him. Secondly, hesubmitted that even if the rules had no statutory force and even ifthe party had bound himself by the contract, as he had acceptedthe Staff Rule, there cannot be any contract with StatutoryCorporation which is violative of the principles of natural justicein matters of domestic enquiry involving termination of service ofan employee. We are in agreement with the basic submission ofMr Garg in this respect, but we find that the relevant rules whichwe have set out hereinbefore have been complied with even ifthe rules are read that requirements of natural justice were impliedin the said rules or even if such basic principles of natural justicewere implied, there has been no violation of the principles of naturaljustice in respect of the order passed in this case. In respect of anorder involving adverse or penal consequences against an officeror an employee of Statutory Corporations like the State Bank ofIndia, there must be an investigation into the charges consistentwith the requirements of the situation in accordance with theprinciples of natural justice as far as these were applicable to aparticular situation. So whether particular principle of naturaljustice has been violated or not has to be judged in the backgroundof the nature of charges, the nature of the investigation conductedin the background of any statutory or relevant rules governingsuch enquiries. Here the infraction of the natural justice complainedof was that he was not given an opportunity to rebut the materialsgathered in his absence. As has been observed in On Justice byJ.R. Lucas, the principles of natural justice basically, if we maysay so, emanate from the actual phrase “audi alteram

partem” which was first formulated by St. Augustine (De DuabusAnimabus, XIV, 22 J.P. Migne, PL. 42, 110).

xxx xxx xxx

32. The basic concept is fair play in action administrative, judicialor quasi-judicial. The concept of fair play in action must dependBupon the particular lis, if there be any, between the parties. If thecredibility of person who has testified or given some informationis in doubt, or if the version or the statement of the person whohas testified, is, in dispute, right of cross-examination must inevitablyform part of fair play in action but where there is no lis regardingCthe facts but certain explanation of the circumstances there is norequirement of cross-examination to be fulfilled to justify fair playin action. When on the question of facts there was no dispute, noreal prejudice has been caused to party aggrieved by an order,-by absence of any formal opportunity of crossexamination perse does not invalidate or vitiate the decision arrived at fairly. ThisDis more so when the party against whom an order has been passeddoes not dispute the facts and does not demand to test the veracityof the version or the credibility of the statement.33. The party who does not want to controvert the veracity ofthe evidence from record or testimony gathered behind his backEcannot expect to succeed in any subsequent demand that therewas no opportunity of cross-examination specially when it wasnot asked for and there was no dispute about the veracity of thestatements. Where there is no dispute as to the facts, or the weightto be attached on disputed facts but only an explanation of theFacts, absence of opportunity to cross-examination does not createany 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, retrenchmentGwould be valid in law, the principles of natural justice would not beattracted, unless there is some stigma or punitive measure which wouldbe attached, which would then cause prejudice, as follows:

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

42 and 43 of the U.P. Industrial Disputes Rules provide that beforeeffecting any retrenchment in terms of the provisions of Section6-N of the U.P. Industrial Disputes Act, the employees concernedwould be entitled to notice of one month or in lieu thereof payfor one month and 15 days’ wages for each completed year ofservice by way of compensation. If such retrenchment iseffected under the Industrial Disputes Act, the question ofcomplying with the principles of natural justice would not arise.The principle of natural justice would be attracted only when theservices of some persons are terminated by way of punitivemeasure or thereby 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 unrulyhorse. When facts are admitted, an enquiry would be an emptyformality. 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 requiredto be complied with having regard to the fact situationobtaining therein. It cannot be put in straitjacket formula.It cannot be applied in vacuum without reference to therelevant facts and circumstances of the case.”

49. The High Court, therefore, must be held to have erred in lawin holding that the principles of natural justice were required to becomplied with.”

31. In the five-Judge Bench decision in Managing Director,ECIL and Ors. v. B. Karnakumar and Ors. (1993) 4 SCC 727, thisCourt, after discussing the constitutional requirement of report beingfurnished under Article 311(2), held thus:

“30. Hence the incidental questions raised above may be answeredas follows:

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[v] The next question to be answered is what is the effect on theorder of punishment when the report of the enquiry officer is notfurnished to the employee and what relief should be granted tohim in such cases. The answer to this question has to be relative

Ato the punishment awarded. When the employee is dismissed orremoved from service and the inquiry is set aside because thereport is not furnished to him, in some cases the non-furnishing ofthe report may have prejudiced him gravely while in other cases itmay have made no difference to the ultimate punishment awardedto him. Hence to direct reinstatement of the employee with back-Bwages in all cases is to reduce the rules of justice to mechanicalritual. The theory of reasonable opportunity and the principles ofnatural justice have been evolved to uphold the rule of law and toassist the individual to vindicate his just rights. They are notincantations to be invoked nor rites to be performed on all andCsundry occasions. Whether in fact, prejudice has been caused tothe employee or not on account of the denial to him of the report,has to be considered on the facts and circumstances of each case.Where, therefore, even after the furnishing of the report, nodifferent consequence would have followed, it would be aperversion of justice to permit the employee to resume duty andDto get all the consequential benefits.It amounts to rewarding thedishonest and the guilty and thus to stretching the concept of justiceto illogical and exasperating limits. It amounts to an “unnaturalexpansion of natural justice” which in itself is antithetical to justice.

31. Hence, in all cases where the enquiry officer’s report is notEfurnished to the delinquent employee in the disciplinaryproceedings, the Courts and Tribunals should cause the copy ofthe report to be furnished to the aggrieved employee if he has notalready secured it before coming to the Court/Tribunal and givethe employee an opportunity to show how his or her case wasFprejudiced because of the non-supply of the report. If after hearingthe parties, the Court/Tribunal comes to the conclusion that thenon-supply of the report would have made no difference to theultimate findings and the punishment given, the Court/Tribunalshould not interfere with the order of punishment.The Court/Tribunal should not mechanically set aside the order of punishmentGon the ground that the report was not furnished as is regrettablybeing done at present. The courts should avoid resorting to shortcuts. Since it is the Courts/Tribunals which will apply their judicialmind to the question and give their reasons for setting aside or notsetting aside the order of punishment, (and not any internal appellate

or revisional authority), there would be neither breach of theprinciples of natural justice nor denial of the reasonableopportunity. It is only if the Court/Tribunal finds that the furnishingof the report would have made difference to the result in thecase that it should set aside the order of punishment.”

(emphasis supplied)

32. B. Karunakar (supra) was followed by this Court in HaryanaFinancial Corporation and Anr. v. Kailash Chandra Ahuja (2008) 9SCC 31, as follows:

“21. From the ratio laid down in B. Karunakar [(1993) 4 SCC727] it is explicitly clear that the doctrine of natural justice requiressupply of copy of the inquiry officer’s report to the delinquent ifsuch inquiry officer is other than the disciplinary authority. It isalso clear that non-supply of report of the inquiry officer is in thebreach of natural justice. But it is equally clear that failure tosupply report of the inquiry officer to the delinquent employeewould not ipso facto result in the proceedings being declared nulland void and the order of punishment non est and ineffective. Itis for the delinquent employee to plead and prove that non-supplyof such report had caused prejudice and resulted in miscarriageof justice. If he is unable to satisfy the court on that point, theorder of punishment cannot automatically be set aside.”

(emphasis in original)

33. What is important to note is that it is the Court or Tribunalwhich must determine whether or not prejudice has been caused, andnot the authority on an ex parte appraisal of the facts. This has beenwell-explained in later judgment, namely Dharampal Satyapal Ltd.v. Dy. Comm. Of Central Excise, Gauhati and Ors. (2015) 8 SCC519, in which, after setting out number of judgments, this Courtconcluded:

“38. But that is not the end of the matter. While the law on theprinciple of audi alteram partem has progressed in the mannermentioned above, at the same time, the courts have also repeatedlyremarked that the principles of natural justice are very flexibleprinciples. They cannot be applied in any straitjacket formula. Itall depends upon the kind of functions performed and to the extent

Ato which person is likely to be affected. For this reason, certainexceptions to the aforesaid principles have been invoked undercertain circumstances. For example, the courts have held that itwould be sufficient to allow person to make representationand oral hearing may not be necessary in all cases, though insome matters, depending upon the nature of the case, not onlyBfull-fledged oral hearing but even cross-examination of witnessesis treated as necessary concomitant of the principles of naturaljustice. Likewise, in service matters relating to major punishmentby way of disciplinary action, the requirement is very strict andfull-fledged opportunity is envisaged under the statutory rules asCwell. On the other hand, in those cases where there is an admissionof charge, even when no such formal inquiry is held, the punishmentbased on such admission is upheld. It is for this reason, in certaincircumstances, even post-decisional hearing is held to bepermissible. Further, the courts have held that under certaincircumstances principles of natural justice may even be excludedDby reason of diverse factors like time, place, the apprehendeddanger and so on.39. We are not concerned with these aspects in the present caseas the issue relates to giving of notice before taking action. Whileemphasising that the principles of natural justice cannot be appliedEin straitjacket formula, the aforesaid instances are given. We havehighlighted the jurisprudential basis of adhering to the principlesof natural justice which are grounded on the doctrine of proceduralfairness, accuracy of outcome leading to general social goals,etc. Nevertheless, there may be situations wherein for someFreason—perhaps because the evidence against the individual isthought to be utterly compelling—it is felt that fair hearing “wouldmake no difference”—meaning that hearing would not changethe ultimate conclusion reached by the decision-maker—then nolegal duty to supply hearing arises. Such an approach wasendorsed by Lord Wilberforce in Malloch v. AberdeenGCorpn. [(1971) 1 WLR 1578], who said that: (WLR p. 1595)

“… breach of procedure … cannot give [rise to] remedyin the courts, unless behind it there is something of substancewhich has been lost by the failure. The court does not act invain.”

Relying on these comments, Brandon L.J. opinedin Cinnamond v. British Airports Authority [(1980) 1 WLR 582]that: (WLR p. 593)

“… no one can complain of not being given an opportunityto make representations if such an opportunity would haveavailed him nothing.”

In such situations, fair procedures appear to serve no purposesince the “right” result can be secured without according suchtreatment to the individual.

40. In this behalf, we need to notice one other exception whichhas been carved out to the aforesaid principle by the courts. Evenif it is found by the court that there is violation of principles ofnatural justice, the courts have held that it may not be necessaryto strike down the action and refer the matter back to the authoritiesto take fresh decision after complying with the proceduralrequirement in those cases where non-grant of hearing has notcaused any prejudice to the person against whom the action istaken. Therefore, every violation of facet of natural justice maynot lead to the conclusion that the order passed is always null andvoid. The validity of the order has to be decided on the touchstoneof “prejudice”. The ultimate test is always the same viz. the testof prejudice or the test of fair hearing.

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42. So far so good. However, an important question posed by MrSorabjee is as to whether it is open to the authority, which has totake decision, to dispense with the requirement of the principlesof natural justice on the ground that affording such an opportunitywill not make any difference? To put it otherwise, can theadministrative authority dispense with the requirement of issuingnotice by itself deciding that no prejudice will be caused to theperson against whom the action is contemplated? Answer has tobe in the negative. It is not permissible for the authority to jumpover the compliance of the principles of natural justice on theground that even if hearing had been provided it would have servedno useful purpose. The opportunity of hearing will serve thepurpose or not has to be considered at later stage and suchthings cannot be presumed by the authority.This was so held by

the English Court way back in the year 1943 in General MedicalCouncil v. Spackman [1943 AC 627]. This Court also spoke inthe same language in Board of High School and IntermediateEducation v. Chitra Srivastava [(1970) 1 SCC 121], as isapparent 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 furtherclear that no useful purpose would have been served if theBoard had served show-cause notice on the petitioner. Hesays that in view of these circumstances it was not necessaryfor the Board to have issued show-cause notice. We areunable to accept this contention. Whether duty arises in aparticular case to issue show-cause notice before inflictinga penalty does not depend on the authority’s satisfaction thatthe person to be penalised has no defence but on the natureof the order proposed to be passed.”

43.In view of the aforesaid enunciation of law, Mr Sorabjee mayalso be right in his submission that it was not open for the authorityto dispense with the requirement of principles of natural justice onthe presumption that no prejudice is going to be caused to theappellant 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 areconcerned, they are empowered to consider as to whether anypurpose would be served in remanding the case keeping in mindwhether any prejudice is caused to the person against whom theaction is taken. This was so clarified in ECIL itself in the followingwords: (SCC p. 758, para 31)

“31. Hence, in all cases where the enquiry officer’s report isnot furnished to the delinquent employee in the disciplinaryproceedings, the courts and tribunals should cause the copyof the report to be furnished to the aggrieved employee if hehas not already secured it before coming to the court/tribunaland given the employee an opportunity to show how his orher case was prejudiced because of the non-supply of thereport. If after hearing the parties, the court/tribunal comesto the conclusion that the non-supply of the report would havemade no difference to the ultimate findings and the punishment

given, the court/tribunal should not interfere with the orderof punishment. The court/tribunal should not mechanicallyset aside the order of punishment on the ground that the reportwas not furnished as is regrettably being done at present.The courts should avoid resorting to short cuts. Since it is thecourts/tribunals which will apply their judicial mind to thequestion and give their reasons for setting aside or not settingaside the order of punishment, (and not any internal appellateor revisional authority), there would be neither breach ofthe principles of natural justice nor denial of the reasonableopportunity. It is only if the court/tribunal finds that thefurnishing of the report would have made difference to theresult in the case that it should set aside the order ofpunishment.”

45. Keeping in view the aforesaid principles in mind, even whenwe find that there is an infraction of principles of natural justice,we have to address further question as to whether any purposewould be served in remitting the case to the authority to makefresh demand of amount recoverable, only after issuing notice toshow cause to the appellant. In the facts of the present case, wefind that such an exercise would be totally futile having regard tothe law laid down by this Court in R.C. Tobacco [(2005) 7 SCC725] .”

(emphasis supplied)

34. In State Bank of Patiala and Ors. v. S.K. Sharma (1996) 3SCC 364, Division Bench of this Court distinguished between “adequateopportunity” and “no opportunity at all”, and held that the “prejudice”exception operates more especially in the latter case. This judgmentalso speaks of procedural and substantive provisions of law which embodythe principles of natural justice which, when infracted, must lead toprejudice being caused to the litigant in order to afford him relief, asfollows:

“32. Now, coming back to the illustration given by us in thepreceding para, would setting aside the punishment and the entireenquiry on the ground of aforesaid violation of sub-clause (iii) bein the interests of justice or would it be its negation? In ourrespectful opinion, it would be the latter. Justice means justicebetween both the parties. The interests of justice equally demand

that the guilty should be punished and that technicalities andirregularities which do not occasion failure of justice are not allowedto defeat the ends of justice. Principles of natural justice are butthe means to achieve the ends of justice. They cannot be pervertedto achieve the very opposite end. That would be counter-productive exercise.

33. We may summarise the principles emerging from the abovediscussion. (These are by no means intended to be exhaustiveand are evolved keeping in view the context of disciplinary enquiriesand orders of punishment imposed by an employer upon theemployee):

(1) An order passed imposing punishment on an employeeconsequent upon disciplinary/departmental enquiry in violationof the rules/regulations/statutory provisions governing suchenquiries should not be set aside automatically. The Court or theTribunal should enquire whether (a) the provision violated is of asubstantive nature or (b) whether it is procedural in character.

(2) substantive provision has normally to be complied with asexplained hereinbefore and the theory of substantial complianceor the test of prejudice would not be applicable in such case.

(3) In the case of violation of procedural provision, the positionis this: procedural provisions are generally meant for affording areasonable 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 toautomatically vitiate the enquiry held or order passed. Except casesfalling under — “no notice”, “no opportunity” and “no hearing”categories, the complaint of violation of procedural provision shouldbe examined from the point of view of prejudice, viz., whethersuch violation has prejudiced the delinquent officer/employee indefending himself properly and effectively. If it is found that hehas been so prejudiced, appropriate orders have to be made torepair and remedy the prejudice including setting aside the enquiryand/or the order of punishment. If no prejudice is established tohave resulted therefrom, it is obvious, no interference is calledfor. In this connection, it may be remembered that there may becertain procedural provisions which are of fundamentalcharacter, whose violation is by itself proof of prejudice. The Courtmay not insist on proof of prejudice in such cases. As explained inthe body of the judgment, take case where there is provisionexpressly providing that after the evidence of the employer/government is over, the employee shall be given an opportunity tolead defence in his evidence, and in given case, the enquiryofficer does not give that opportunity in spite of the delinquentofficer/employee asking for it. The prejudice is self-evident. Noproof of prejudice as such need be called for in such case. Torepeat, the test is one of prejudice, i.e., whether the person hasreceived fair hearing considering all things. Now, this very aspectcan also be looked at from the point of view of directory andmandatory provisions, if one is so inclined. The principle statedunder (4) hereinbelow is only another way of looking at the sameaspect as is dealt with herein and not different or distinct principle.

(4) (a) In the case of procedural provision which is not of amandatory character, the complaint of violation has to be examinedfrom the standpoint of substantial compliance. Be that as it may,the order passed in violation of such provision can be set asideonly where such violation has occasioned prejudice to thedelinquent employee.

(b) In the case of violation of procedural provision, which is ofa mandatory character, it has to be ascertained whether theprovision is conceived in the interest of the person proceededagainst or in public interest. If it is found to be the former, then itmust be seen whether the delinquent officer has waived the saidrequirement, either expressly or by his conduct. If he is found tohave waived it, then the order of punishment cannot be set asideon the ground of the said violation. If, on the other hand, it is foundthat the delinquent officer/employee has not waived it or that theprovision could not be waived by him, then the Court or Tribunalshould make appropriate directions (include the setting aside ofthe order of punishment), keeping in mind the approach adoptedby the Constitution Bench in B. Karunakar [(1993) 4 SCC 727].The ultimate test is always the same, viz., test of prejudice or thetest 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 theprinciples of natural justice — or, for that matter, wherever such

Aprinciples are held to be implied by the very nature and impact ofthe order/action — the Court or the Tribunal should make adistinction between total violation of natural justice (rule of audialteram partem) and violation of facet of the said rule, asexplained in the body of the judgment. In other words, distinctionmust be made between “no opportunity” andBno adequate opportunity, i.e., between “no notice”/”no hearing”and “no fair hearing”. (a) In the case of former, the order passedwould undoubtedly be invalid (one may call it ‘void’ or nullity ifone chooses to). In such cases, normally, liberty will be reservedfor the Authority to take proceedings afresh according to law, i.e.,Cin accordance with the said rule (audi alteram partem). (b) But inthe latter case, the effect of violation (of facet of the rule ofaudi alteram partem) has to be examined from the standpoint ofprejudice; in other words, what the Court or Tribunal has to see iswhether in the totality of the circumstances, the delinquent officer/employee did or did not have fair hearing and the orders to beDmade shall depend upon the answer to the said query. [It is madeclear that this principle (No. 5) does not apply in the case of ruleagainst bias, the test in which behalf are laid down elsewhere.](6) While applying the rule of audi alteram partem (the primaryprinciple of natural justice) the Court/Tribunal/Authority mustEalways bear in mind the ultimate and overriding objectiveunderlying the said rule, viz., to ensure fair hearing and to ensurethat there is no failure of justice. It is this objective which shouldguide them in applying the rule to varying situations that arisebefore them.F(7) There may be situations where the interests of State or publicinterest may call for curtailing of the rule of audi alteram partem.In such situations, the Court may have to balance public/Stateinterest with the requirement of natural justice and arrive at anappropriate decision.”

G35. In M.C. Mehta v. Union of India and Ors. (1999) 6 SCC237, the expression “admitted and indisputable facts” laid down inJagmohan (supra), as also the interesting divergence of legal opinionon whether it is necessary to show “slight proof” or “real likelihood” ofprejudice, or the fact that it is an “open and shut case”, were all discussedHin great detail as follows:

“16. Courts are not infrequently faced with dilemma betweenbreach of the rules of natural justice and the Court’s discretion torefuse relief even though the rules of natural justice have beenbreached, on the ground that no real prejudice is caused to theaffected party.

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22. Before we go into the final aspects of this contention, wewould like to state that cases relating to breach of natural justicedo also occur where all facts are not admitted or are not all beyonddispute. In the context of those cases there is considerable case-law and literature as to whether relief can be refused even if thecourt thinks that the case of the applicant is not one of “realsubstance” or that there is no substantial possibility of his successor that the result will not be different, even if natural justice isfollowed. See Malloch v. Aberdeen Corpn. [(1971) 1 WLR 1578](per Lord Reid and Lord Wilberforce), Glynn v. KeeleUniversity [(1971) 1 WLR 487], Cinnamond v. British AirportsAuthority [(1980) 1 WLR 582] and other cases where such aview has been held. The latest addition to this view is R. v. EalingMagistrates’ 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 “demonstrablebeyond doubt” that the result would have been different. LordWoolf in Lloyd v. McMahon [(1987) 2 WLR 821, 862] (WLR atp. 862) has also not disfavoured refusal of discretion in certaincases of breach of natural justice. The New Zealand Courtin McCarthy v. Grant [1959 NZLR 1014] however goes halfwaywhen it says that (as in the case of bias), it is sufficient for theapplicant to show that there is “real likelihood — not certainty —of prejudice”. On the other hand, Garner AdministrativeLaw (8th Edn., 1996, pp. 271-72) says that slight proof that theresult would have been different is sufficient. On the other side ofthe argument, we have apart from Ridge v. Baldwin [1964 AC40], Megarry, J. in John v. Rees [(1969) 2 WLR 1294] statingthat there are always “open and shut cases” and no absolute ruleof proof of prejudice can be laid down. Merits are not for thecourt but for the authority to consider. Ackner, J. has said that the“useless formality theory” is dangerous one and, however

inconvenient, natural justice must be followed. His Lordshipobserved that “convenience and justice are often not on speakingterms”. More recently Lord Bingham has deprecated the “uselessformality” theory in R. v. Chief Constable of the Thames ValleyPolice Forces, ex p Cotton [1990 IRLR 344] by giving sixreasons. (See also his article “Should Public Law Remedies beDiscretionary?” 1991 PL, p. 64.) detailed and emphatic criticismof the “useless formality theory” has been made much earlier in“Natural Justice, Substance or Shadow” by Prof. D.H. Clark ofCanada (see 1975 PL, pp. 27-63) contending that Malloch [(1971)1 WLR 1578] and Glynn [(1971) 1 WLR 487] were wronglydecided. Foulkes (Administrative Law, 8th Edn., 1996, p. 323),Craig (Administrative Law, 3rd Edn., p. 596) and others say thatthe 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 viewthough discretion is always with the court. Wade (AdministrativeLaw, 5th Edn., 1994, pp. 526-30) says that while futile writs maynot be issued, distinction has to be made according to the natureof the decision. Thus, in relation to cases other than those relatingto admitted or indisputable facts, there is considerable divergenceof opinion whether the applicant can be compelled to prove thatthe outcome will be in his favour or he has to prove case ofsubstance or if he can prove “real likelihood” of success or if heis entitled to relief even if there is some remote chance of success.We may, however, point out that even in cases where the factsare not all admitted or beyond dispute, there is considerableunanimity that the courts can, in exercise of their “discretion”,refuse certiorari, prohibition, mandamus or injunction even thoughnatural justice is not followed. We may also state that there is yetanother line of cases as in State Bank of Patiala v. S.K.Sharma [(1996) 3 SCC 364], Rajendra Singh v. State ofM.P. [(1996) 5 SCC 460] that even in relation to statutoryprovisions requiring notice, distinction is to be made betweencases where the provision is intended for individual benefit andwhere provision is intended to protect public interest. In theformer case, it can be waived while in the case of the latter, itcannot be waived.

23. We do not propose to express any opinion on the correctnessor otherwise of the “useless formality” theory and leave the matterfor decision in an appropriate case, inasmuch as, in the case beforeus, “admitted and indisputable” facts show that grant of writwill be in vain as pointed out by Chinnappa Reddy, J.”

36. In Aligarh Muslim University and Ors. v. Mansoor AliKhan (2000) 7 SCC 529,the aforesaid authorities were relied upon, andthe answer given was that there is no absolute rule, and prejudice mustbe 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 theprinciple that not mere violation of natural justice but de factoprejudice (other than non-issue of notice) had to be proved. Itwas 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 theprinciples of natural justice are to apply, nor as to their scopeand extent. … There must also have been some real prejudice tothe complainant; there is no such thing as merely technicalinfringement of natural justice. The requirements of naturaljustice must depend on the facts and circumstances of thecase, the nature of the inquiry, the rules under which thetribunal is acting, the subject-matter to be dealt with, and soforth.”

Since then, this Court has consistently applied the principle ofprejudice in several cases. The above ruling and various otherrulings taking the same view have been exhaustively referred toin State Bank of Patiala v. S.K. Sharma [(1996) 3 SCC 364]. Inthat case, the principle of “prejudice” has been further elaborated.The same principle has been reiterated again in RajendraSingh v. State of M.P. [(1996) 5 SCC 460]

25. The “useless formality” theory, it must be noted, is an exception.Apart from the class of cases of “admitted or indisputable factsleading only to one conclusion” referred to above, there has beenconsiderable debate on the application of that theory in other cases.

AThe divergent views expressed in regard to this theory have beenelaborately considered by this Court in M.C. Mehta referred toabove. This Court surveyed the views expressed in variousjudgments in England by Lord Reid, Lord Wilberforce, Lord Woolf,Lord Bingham, Megarry, J. and Straughton, L.J. etc. in variouscases and also views expressed by leading writers like Profs.BGarner, Craig, de Smith, Wade, D.H. Clark etc. Some of themhave said that orders passed in violation must always be quashedfor otherwise the court will be prejudging the issue. Some othershave said that there is no such absolute rule and prejudice mustbe shown. Yet, some others have applied via media rules. We doCnot think it necessary in this case to go deeper into these issues.In the ultimate analysis, it may depend on the facts of particularcase.”

37. In Union of India and Ors. v. Alok Kumar (2010) 5 SCC349, this Court, after eschewing hyper-technical approach, held thatDprejudice must not merely be the apprehension of litigant, but shouldbe definite inference of the likelihood of prejudice flowing from therefusal to follow natural justice, as follows:

“83. Earlier, in some of the cases, this Court had taken the viewthat breach of principles of natural justice was in itself prejudiceEand no other “de facto” prejudice needs to be proved. In regardto statutory rules, the prominent view was that the violation ofmandatory statutory rules would tantamount to prejudice but wherethe rule is merely directory the element of de facto prejudice needsto be pleaded and shown. With the development of law, rigidity inthese rules is somewhat relaxed. The instance of de facto prejudiceFhas been accepted as an essential feature where there is violationof the non-mandatory rules or violation of natural justice as it isunderstood in its common parlance. Taking an instance, in adepartmental enquiry where the department relies upon largenumber of documents majority of which are furnished and anGopportunity is granted to the delinquent officer to defend himselfexcept that some copies of formal documents had not beenfurnished to the delinquent. In that event the onus is upon theemployee to show that non-furnishing of these formal documentshave resulted in de facto prejudice and he has been put to adisadvantage as result thereof.H

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87. In ECIL v. B. Karunakar [(1993) 4 SCC 727] this Courtnoticed the existing law and said that the theory of reasonableopportunity and the principles of natural justice have been evolvedto uphold the rule of law and to assist the individual to vindicatehis just rights. They are neither incantations to be invoked norrites to be performed on all and sundry occasions. Whether, infact, prejudice has been caused to the employee or not on accountof denial of report to him, has to be considered on the facts andcircumstances of each case. The Court has clarified even thestage to which the departmental proceedings ought to be revertedin the event the order of punishment is set aside for these reasons.

88. It will be useful to refer to the judgment of this Courtin Haryana Financial Corpn. v. Kailash ChandraAhuja [(2008) 9 SCC 31] at pp. 38-39 where the Court held asunder: (SCC para 21)

“21. From the ratio laid down in B. Karunakar it is explicitlyclear that the doctrine of natural justice requires supply of acopy of the enquiry officer’s report to the delinquent if suchenquiry officer is other than the disciplinary authority. It isalso clear that non-supply of report of the enquiry officer isin breach of natural justice. But it is equally clear that failureto supply report of the enquiry officer to the delinquentemployee would not ipso facto result in the proceedings beingdeclared null and void and the order of punishment non estand ineffective. It is for the delinquent employee to pleadand prove that non-supply of such report had caused prejudiceand resulted in miscarriage of justice. If he is unable to satisfythe court on that point, the order of punishmentcannot automatically be set aside.”

89. The well-established canons controlling the field of bias inservice jurisprudence can reasonably be extended to the elementof prejudice as well in such matters. Prejudice de facto should notbe based on mere apprehension or even on reasonablesuspicion. It is important that the element of prejudice should existas matter of fact or there should be such definite inference oflikelihood of prejudice flowing from such default which relates to

Astatutory violations. It will not be permissible to set aside thedepartmental enquiries in any of these classes merely on the basisof apprehended prejudice.”

38. Under the broad rubric of the Court not passing futile ordersas the case is based on “admitted” facts, being admitted by reason ofBestoppel, acquiescence, non-challenge or non-denial, the followingjudgments of this Court are all illustrations of breach of the audi alterampartem rule being established on the facts of the case, but with noprejudice caused to the person alleging breach of natural justice, as thecase was one on admitted facts:

(i)Punjab and Sind Bank and Ors. v. Sakattar Singh(2001) 1 SCC 214 (see paragraphs 1, 4 and 5);

(ii)Karnataka SRTC and Anr. v. S.G. Kotturappa and Anr.(2005) 3 SCC 409 (see paragraph 24);

(iii)Viveka Nand Sethi v. Chairman, J&K Bank Ltd. andOrs. (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 andAnr. (2006) 8 SCC 647 (see paragraphs 17 and 19);

(vi)Ashok Kumar Sonkar v. Union of India and Ors. (2007)E4 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 EducationalInstitutions v. Pindiga Sridhar and Ors. (2007) 13 SCC352 (see paragraph 7)F

(ix)Peethani Suryanarayana and Anr. v. Repaka VenkataRamana Kishore and Ors. (2009) 11 SCC 308 (seeparagraph 18);

(x)Municipal Committee, Hoshiapur v.Punjab StateElectricity Board and Ors. (2010) 13 SCC 216 (seeGparagraphs 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 flexible tool in the hands of the judiciary toHreach out in fit cases to remedy injustice. The breach of the audi

alteram partem rule cannot by itself, without more, lead to theconclusion that prejudice is thereby caused.

(2) Where procedural and/or substantive provisions of law embodythe principles of natural justice, their infraction per se does notlead to invalidity of the orders passed. Here again, prejudice mustbe caused to the litigant, except in the case of mandatory provisionof law which is conceived not only in individual interest, but alsoin public interest.

(3) No prejudice is caused to the person complaining of the breachof natural justice where such person does not dispute the caseagainst him or it. This can happen by reason of estoppel,acquiescence, waiver and by way of non-challenge or non-denialor admission of facts, in cases in which the Court finds on factsthat no real prejudice can therefore be said to have been causedto 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 futileorders of setting aside or remand when there is, in fact, no prejudicecaused. This conclusion must be drawn by the Court on anappraisal of the facts of case, and not by the authority whodenies natural justice to person.

(5) The “prejudice” exception must be more than mereapprehension or even reasonable suspicion of litigant. It shouldexist as matter of fact, or be based upon definite inference oflikelihood of prejudice flowing from the non-observance of naturaljustice.

40. Judged by the touchstone of these tests, it is clear thatRespondent No.1 has been completely in the dark so far as thecancellation of the award of tender in his favour is concerned, the audialteram partem rule having been breached in its entirety. As has beencorrectly argued by Shri Rakesh Dwivedi, prejudice has indeed beencaused to his client, not only from the fact that one year of the contractperiod has been taken away, but also that, if the impugned High Courtjudgment is to be set aside today, his client will be debarred from biddingfor any of the Corporation’s tenders for period of three years.Undoubtedly, prima facie, the rates at which contracts have beenawarded pursuant to the tender dated 01.06.2018 are way above therates that were awarded of the same division, and for exactly the sameamount of work awarded vide the earlier tender advertisement dated01.04.2018. Shri Dwivedi’s argument that in the neighbouring regions

Athe rates tendered were also high, and nothing has yet been done tonullify these tenders and the financial loss caused, does carry someweight. That huge financial loss to the Corporation has also takenplace is something for the Corporation to probe, and take remedial actionagainst the persons responsible.

41. We, therefore, uphold the impugned judgment of the HighBCourt on the ground that natural justice has indeed been breached in thefacts of the present case, not being case of admitted facts leading tothe grant of futile writ, and that prejudice has indeed been caused toRespondent No.1. In view of this finding, there is no need to examinethe other contentions raised by the parties before us.

C42. We reiterate the submission of Shri Dwivedi that as his clientis working for the Corporation in another subsequent tender, he is notgoing to claim damages for the lost period post cancellation of the tender.This being the case, and other things being equal, the earnest moneydeposit and security deposit made by his client is ordered to be returnedby the Corporation within period of eight weeks from today. ShriDDwivedi’s client may also request the Corporation to pay any amountthat remained unpaid for work actually done, which the Corporation will,after 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 ofEthe High Court of Judicature at Allahabad dated 11.12.2019 is set asideonly to the extent indicated by us above.

44. Insofar as the appeal arising out of SLP (C) No. 7364 of 2020is concerned, the facts therein are distinct from the other two connectedappeals before us only to the extent that Respondent No.1 therein, M/sDharam Raj Singh, was the successful bidder for the Tendu (Sonbhadra)Fregion, which award of tender was also cancelled by the Corporation’sorder dated 26.07.2019. The judgment impugned in this appeal, dated07.01.2020 of the High Court of Judicature of Allahabad (LucknowBench), allowed M/s Dharam Raj Singh’s writ petition challenging thecancellation order, stating that it was to be governed by the judgment ofGthe High Court of Judicature at Allahabad dated 11.12.2019. As result,our judgment in the two connected appeals, and all consequential reliefsgranted, will apply on all fours to this appeal also.

45. With these observations, these appeals are disposed of.

HDivya Pandey