Law Web: Whether non-observance of principles of natural justice will invalidate the proceeding?

An analysis of the aforesaid judgments thus reveals:

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

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

(3)No prejudice is caused to the person complaining of the breach of

natural justice where such person does not dispute the case against

him or it. This can happen by reason of estoppel, acquiescence,

waiver and by way of non-challenge or non-denial or admission of

facts, in cases in which the Court finds on facts that no real prejudice

can therefore be said to have been caused to the person complaining

of the breach of natural justice.

(4)In cases where facts can be stated to be admitted or indisputable,

and only one conclusion is possible, the Court does not pass futile

orders of setting aside or remand when there is, in fact, no prejudice

caused. This conclusion must be drawn by the Court on an appraisal

of the facts of a case, and not by the authority who denies natural

justice to a person.

(5)The “prejudice” exception must be more than a mere apprehension or even a reasonable suspicion of a litigant. It should exist as a matter of fact, or be based upon a definite inference of likelihood of prejudice flowing from the non-observance of natural justice.{Para 39}

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3498 OF 2020

STATE OF U.P. Vs SUDHIR KUMAR SINGH

Author: R.F. Nariman, J.

Dated: 16th October 2020.

1. Leave granted.

2. An e-tender notice was issued on 06.01.2018 by the U.P. State

Warehousing Corporation (“Corporation”) for unloading/loading of

foodgrains/fertilizer bags from/into railway wagons, trucks etc., stacking

the foodgrains/fertilizers in bags, bagging, weighment, standardisation,

cleaning of foodgrains/fertilizers etc. and transporting of

foodgrains/fertilizers etc. from Railway Station to Corporation godowns

or vice versa or transporting them from any place to any other place for

the Vindhyachal (Mirzapur) Region. Ten days later i.e. on 16.01.2018,

the said tender was cancelled by the Corporation due to “administrative

reasons”. On 01.04.2018, an e-tender was again published in the same

terms, and so far as the region Vindhyachal (Mirzapur) is concerned, it

was for the “appointment of Handling and Transport Contractor for food

grain in FCI and alleged material etc.” of the following depots/centres of

Uttar Pradesh for a period of two years:

Sl.

No.

Name of

Depot/Centre

Workable

capacity

(in M.T.)

Estimated

annual value

of contract

Earnest

money @20%

security

amount

through

RTGS/NEFT

Security

deposit (in

rupees)

1. Mirzapur 8430 50000000.00 1000000.00 5000000.00

2. Bhawanipur

PEG-1

30000 60000000.00 1200000.00 6000000.00

3. Bhawanipur

PEG-II

10000 10000000.00 200000.00 1000000.00

4. Tendu

(Sonbhadra)

61400 9000000.00 180000.00 900000.00

3. Technical bids for these four centres were opened on 17.04.2018. Price

bids of technically qualified bidders were then opened on 23.04.2018.

The price bids that were received, so far as these four centres were

concerned, were as follows:

“PEG Bhawanipur-I Centre

Serial No. Bidder Rate

1. Maa Bhawani Transport 222% ASOR

2. Iqbal Ahmad Ansari 154% ASOR

3. Suresh Singh 174% ASOR

PEG Bhawanipur-II Centre

Serial No. Bidder Rate

1. Maa Bhawani Transport 198% ASOR

2. Iqbal Ahmad Ansari 153% ASOR

3. Suresh Singh 174% ASOR

Mirzapur Centre

Serial No. Bidder Rate

1. Maa Bhawani Transport 219% ASOR

2. Iqbal Ahmad Ansari 139% ASOR

3. Suresh Singh 134% ASOR

4. Shaquil Ahmad 248% ASOR

Tendu (Sonbhadra) Centre

Serial No. Bidder Rate

1. Maa Bhawani Transport 180% ASOR

2. Dharam Raj Singh 300% ASOR

3. Sonbhadra Transport Not specified in words

and numbers

4. Manisha Engineering 225% ASOR

5. Arjun Singh 25% ASOR

(Where ASOR means Above Schedule of Rates)”

4. On 04.05.2018, the then Managing Director of the Corporation

cancelled the aforesaid tender apparently on the ground that it was

“impractical” to go ahead with such tender. As a result, on 01.06.2018,

for the same region, the aforesaid tender was reissued for the same

workable capacity and estimated annual value of the contract. It may be

added that each of these tenders were for a period of two years.

5. Sudhir Kumar Singh, Respondent No.1 in the appeals arising out of

SLP (C) No. 5136 of 2020 and SLP (C) No. 7351 of 2020, was declared

as the successful bidder for the Bhawanipur-I centre, at the rate of 341%

ASOR, the other successful tenderers for Mirzapur, Bhawanipur-II and

Tendu (Sonbhadra) being at 314%, 338% and 290% ASOR respectively.

On 13.07.2018, an agreement was entered into between the Corporation

and Respondent No.1 for execution of the work under the tender, which

began on and from that day, and continued for a period of over one year.

6. Meanwhile, on 27.05.2019, two complaints were made by one Shri

Pramod Kumar Singh of the Purvanchal Trucker Owner’s Association to

the Principal Secretary of the State of U.P. regarding financial

irregularities that occurred in the issuance of the e-tender notice dated

01.06.2018. These complaints were then forwarded by the Principal

Secretary of the State of U.P. to the Managing Director of the

Corporation by a letter dated 30.05.2019. The said letter, insofar as

Respondent No.1 is concerned, read as follows:

“Shri Pramod Kumar Singh should analyse two enclosed

complaints dated 27.05.2019 of Truck Owners

Association wherein loss of Crores to Corporation is

shown due to serious financial irregularities caused in

handling and transport contracts in Vindhyanchal

Division.

xxx xxx xxx

Tendering was done in Vindhyanchal Division on

16.04.2018, wherein low rate of tenders were received.

Issued tenders are cancelled on 05.05.2018 without

telling any reason and tender of centres cancelled on

16.06.2018 were re-tendered wherein rates are too high

in new tenders than older one and by allotting work on

higher rates work is being done.

Kindly assure providing report within five days in respect

of aforesaid and in respect of all points mentioned in

enclosed letters.”

7. As a result of this letter, the Managing Director of the Corporation held

an ex parte enquiry into the matter, and insofar as Respondent No.1 was

concerned, the Managing Director went into the cancellation of the

previous tender dated 01.04.2018, and into the comparative details of

rates received for these four centres earlier, as compared to the rates of

the same tendered quantity of the tender dated 01.06.2018, and found

the latter rates to be extremely high. In his report dated 14.06.2019, he

therefore ultimately concluded:

“It is mentionable that cancellation of e-tendering

process done earlier through Advertisement

No.1.1001.23318 dated 01.04.2018 on the ground that

received minimum rates are impractical is not

acceptable in any circumstance. In this respect, for

getting e-tendering process done the committee

constituted at Division Level considered PEG Tendu

(Sonbhadra) Centre only as impractical whereas the

Head Office accepted it as it is in respect of all centres.

As far as question of hiding of fact regarding forfeiture of

security deposit by Uday Construction or application filed

for producing the same are concerned, then in this

respect it is to be known that Uday Construction applied

only for PEG Tendu through Advertisement

No.1.1001.23318 dated 01.04.2018. Therefore, on this

ground rejection of bids received for other centres was

prima facie not justified.”

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

conducted an ex parte investigation and found in his report dated

29.06.2019 as follows:

“1. State regional manager Sh. Madhukar Gupta has

mentioned in his letter no. R.BH.N/dated 26-05-2018

forwarded to State General Manager (finance) Uttar

Pradesh State Warehousing Corporation that committee

of e-tendering has been formed only for the purpose of

formalities. It is cleared from examining the paragraph

that formality has been done in the tender. On 12-07-

2018 the state manager gave the recommendation of

acceptance and on 13-07-2018 Uttar Pradesh State

Warehousing Corporation gave acceptance. On 13-07-

2018 Sh. Madhukar Gupta State Regional Manager,

Uttar Pradesh State Warehousing Corporation

Vindhyachal gave appointment order to the concerned

contractors. Hereby uncommon vigilance has been

shown in entire procedure.

2. Regional Manager, Uttar Pradesh State Warehousing

Corporation Sh. Anuj Shukla, computer consultant was

got involved by Sh. Madhukar Gupta which is not

appropriate. It is objectionable in keeping contract work

in bid is objection.

3. Condition was kept on to participate only to the

registered contractors which is objectionable. Due to,

only participation of registered contractor, no contest

took place amongst the contractors. Because of which

rate was obtained at manifold high rate. Whereby

damaged was caused to department.

4. Regional Manager in his letter no. R.B.N/284/dated

12-07-2018 which is addressed to Managing Director

Uttar Pradesh State Warehousing Corporation Lucknow.

For determined rate to 314 percent, 341 percent, 338

percent, and 290 percent at high rate conformation of

recommendation of appointment of regular contractors

have been given for work of Indian Fertilizer Corporation

Handling and Transport. It is mentioned that despite the

high rate from determined rate regional manager neither

any market survey was conducted regarding high rate

nor he mentioned in his letter and he recommended the

acceptance irresponsibly. Hence Sh. Madhukar Gupta

State Regional Manager has not followed his duty and

responsibility and he is responsible for high rate and

acceptance without any reason.

5. Even corporation Headquarter did not deem fit to take

any action regarding high rate from determined rate.

What was examined by Headquarter it is not cleared.

6. In this regard categorically it is not possible to

determine the financial loss since neither in this case,

opportunity to contest has been given and nor market

survey has been conducted. On the basis of that

formality rate can be determined. Damage has been

surely caused. But it cannot be explained. Record is

sent for perusal and necessary action.”

9. Given these two reports, the Special Secretary, Government of U.P.

wrote a letter dated 16.07.2019 to the Managing Director, in which the

Managing Director’s report dated 14.06.2019 was referred to, and

concluded:

“In this, the role of Officer of Regional Level

(Vindhyachal Division) and accepting Officer and

erstwhile Managing Director and officers concerned with

Headquarter, also appears to be doubtful.

So, I have been instructed to say that you by doing

enquiry of matter at your own level, the financial loss

caused to the Government and after evaluating the

same, shall take action to recover the said amount from

concerned Contractor and concerned Officers. The

Officers/Employees against whom any previous

departmental proceeding is pending, in respect of them

by including these charges as additional Charge Sheet

action shall be taken and against officers/employees

found guilty in the matter against whom no proceedings

are pending, proceeding shall be done by marking them.

The tenders of abovementioned firms which are granted

contrary to rules, by cancelling them the appointment of

contractors be done through e-tendering again for

handling and transport work of concerned Warehouses.

Said proceedings be done as soon as possible and the

action taken shall be informed to the Government.”

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

26.07.2019, and disciplinary proceedings were taken against certain

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

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

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

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

this amount being the financial loss suffered by the Corporation.

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

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

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

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

term, and prayed for the setting aside of the Corporation’s cancellation

order dated 26.07.2019 of the tender dated 01.06.2018.

12. By the judgment dated 11.12.2019 in this Writ Petition, which is

impugned in the appeals arising out of SLP (C) No. 5136 of 2020 and

SLP (C) No. 7351 of 2020, the High Court, after setting out the prayer in

the Writ Petition, set out four questions that arose before it as follows:

“(a) Whether the two enquiry reports are procedurally

defective inasmuch as the findings returned thereunder

are based upon no material and hence perverse;

(b) Whether the respondent Managing Director was

justified in cancelling the written agreement with the

petitioner after a lapse of a year, without putting him to

notice;

could not have been directed to take action in particular

manner and Managing Director was not justified in

cancelling the agreement under an executive fiat of

Special Secretary; and;

(d) Whether the order passed by Managing Director is

vitiated for bias as he himself had been Inquiry Officer

and without inviting the petitioner to explain in his

defence he himself conducted the inquiry and then on

the basis of report prepared by him, he proceeded to

cancel the agreement.”

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

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

the tender notice dated 01.06.2018 had never been challenged by

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

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

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

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

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

High Court, therefore, held:

“If the officials had cancelled the earlier tender notice in

their wisdom and the cancellation of those tender notice

was never questioned, merely because those earlier

tender notices were cancelled/ withdrawn, a necessary

presumption cannot be raised that the third notice

inviting tender was for some extraneous considerations.

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

high as against the earlier ones in the process of tender

in which the prices were quoted very low but that does

not itself become the ground to cancel the entire tender

process which had not only been finalized but even the

agreement had been entered into and the party under

the contract was carrying out the work making huge

investment of money. Had it been a case also of the kind

where the party to the contract had violated the terms

and conditions of the contract, it could have been said

that the tender was liable to be cancelled for violation of

terms and conditions of the tender agreement. But in the

instant case no such finding has come to be returned.

The reasons for which the tender proceedings that had

already been concluded with the execution of the

agreement, has been cancelled without assigning any

reason of wrong practice adopted by the petitioner in

obtaining the agreement. Thus the petitioner cannot be

said to be at fault in the matter and, therefore, in our

considered opinion if the petitioner was already working

under the agreement and no charge was there that he

violated the terms and conditions of the agreement, the

respondents were not justified in cancelling the

agreement ex parte.

xxx xxx xxx

There is no finding returned that at the stage of

submission of the application against the notice inviting

tender, the petitioner was not eligible or that at the time

of the opening of the technical bid and financial bid the

petitioner got wrongfully qualified and that the financial

bid of the petitioner was wrongly approved and that the

agreement entered between the petitioner and the

Corporation was void being against the law. If in all the

above three stages the petitioner cannot be held to be

guilty in any manner for manipulating the things and

obtaining the tender by hatching any conspiracy in

connivance with the officials of the Corporation,

cancellation of the agreement suddenly by the Managing

Director holding that the entire Notice Inviting Tender

was bad, certainly required a notice and opportunity of

hearing to be afforded to the petitioner prior to passing of

such an order. It is a settled principle of law that in

administrative exercise of power, the authority exercising

power has to not only render due application of mind but

also to follow the procedure which would not render the

entire action arbitrary. It is settled legal principle that

whatever is arbitrary, is hit by Article 14 of the

Constitution of India and in the present case we find that

only the procedure that was followed by the respondents

in taking impugned action was not only quite ex parte

but also under the executive fiats of the Special

Secretary of the Government which was quite uncalled

for.”

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

“Order impugned is basically based on the enquiry

report prepared by the Managing Director himself and

that the enquiry was conducted in the ex parte manner

and the Managing Director failed to offer any opportunity

of hearing to the petitioner before passing the order

impugned which has the effect of terminating the

agreement for no justifiable reason to hold that the

petitioner was at fault at any point of time. Element of

bias therefore, under the circumstances at the end of

Managing Director, cannot be ruled out. The order

impugned, therefore, terminating the agreement dated

26.7.2019 cannot be sustained in law.

Thus, for the forgoing discussions writ petition succeeds

and is allowed. The order dated 26.7.2019 (Annexure-

13) to the writ petition and the enquiry report dated

14.6.2019 submitted by the Managing Director as well

as the order passed by the Special Secretary dated

16.7.2019 are also hereby quashed.

The consequential action if taken pursuant to the

impugned order is also quashed. The consequences to

follow, however, there will be no order as to costs.”

15. Dr. Abhishek Manu Singhvi, learned Senior Advocate appearing on

behalf of the Corporation, first adverted to the prayer in the Writ Petition

filed by Respondent No.1, and argued that the High Court had gone way

beyond what was asked for. According to him, the Writ Petition only

prayed for a quashing of the cancellation order dated 26.07.2019 of the

second tender. The High Court went way beyond, and not only quashed

the aforesaid cancellation, but also quashed the enquiry report of the

Managing Director dated 14.06.2019, as well as the order passed by the

Special Secretary dated 16.07.2019, and the consequential action taken,

namely, the departmental proceedings against the delinquent officers,

which was never the subject matter of challenge in the Writ Petition. He

went on to argue, based upon the comparison between the rates that

were received in the earlier tender dated 01.04.2018 that was cancelled,

and the rates in the 01.06.2018 tender, that the disparity was so great as

to make it clear that the contracts for these four centres ought not to

have been entered into at these rates at all. He argued that the High

Court ought to have appreciated the huge financial loss that was caused

as a result of awarding the contract at these rates, and ought not to have

interfered with the cancellation of the tender, as it could not be

characterised as arbitrary, given the huge increase in rates in such a

short period for the same works. Further, he argued that the case law on

natural justice showed that it was not an inflexible straitjacket, but had to

be used wisely and well, and cited a number of judgments of this Court

for the proposition that even though natural justice may be breached in

the facts of a given case, if otherwise such breach does not result in

prejudice, it would be a mere exercise in futility to set aside the order

and remand it to the authorities to pass an order after hearing the

affected party. He also argued that as of today, the two year term of the

contract is over, and this very contractor, i.e. Respondent No.1, is doing

the same work awarded at Mirzapur on 21.03.2020 at rates (139%

ASOR) which are much lower than the rates tendered for previously, as

is the successful tenderer Tilotama Devi on and from 31.09.2019 so far

as Bhawanipur-II is concerned, which was awarded at 221% ASOR. Dr.

Singhvi also argued that the writ court ought not to have interfered in

contractual matters, and ought to have left Respondent No.1 to

approach a civil court to file a suit for appropriate reliefs.

16. Shri Tushar Mehta, learned Solicitor General appearing on behalf of the

State of U.P., argued that he had a limited role, and confined his

arguments to the setting aside of the letter dated 16.07.2019 of the

Special Secretary to take departmental action. He argued that this letter

could not have been set aside by the High Court, as no such prayer or

argument was made before it by the writ petitioner.

17. Shri Rakesh Dwivedi, learned Senior Advocate appearing on behalf of

Respondent No.1, argued that the High Court judgment ought not to be

interfered with, inasmuch as his client had pumped in a lot of money, and

had worked the contract for a period of over one year successfully and

without any complaint whatsoever from the Corporation. He reiterated

the fact that nobody had challenged the award of the tender to his client,

and that the cancellation of the tender was done behind his client’s back.

Had the authorities bothered to give his client a hearing, his client could

have pointed out that in other nearby divisions, tenders were awarded at

roughly the same rates, all of which contracts had been worked out, and

none of which have been cancelled. Thus, he argued that his client

suffered serious prejudice, in that he was able to work his contract for

only one out of the two years that was awarded to him. He further

argued that had a hearing been given, his client would also have

demonstrated that the rates that were awarded could not be

characterised as unreasonable, given the magnitude of the contract in

his favour. He also argued that the award of tender at a lower rate at

Mirzapur, which is currently being processed through his client, is not

comparable with the tender that was awarded to his client for

Bhawanipur I, because, inter alia, there was a huge difference between

the volume of work awarded in the two contracts. He argued that it is idle

to say that no prejudice has been caused, inasmuch as he has not been

able to work the contract for one year, the contract period now being

over, and that if the contract with his client is set aside, his client is

debarred from bidding for a period of three years for any other contract

with the Corporation. He further argued, in support of the impugned High

Court judgment, that the action of termination by the Corporation was

without an independent application of mind, and was purely at the

instruction of the Special Secretary of the Government of U.P. dated

16.07.2019. He also fairly argued that his statement may be recorded

that his client is not going to claim damages for the period of the

agreement post cancellation, and that in fairness, the earnest money

deposit and security deposit made by his client ought to be returned by

the Corporation.

18. Having heard learned counsel for all the parties, one thing becomes

clear. Despite the fact that the prayer in the Writ Petition filed by

Respondent No.1 was set out in the very beginning of the impugned

judgment, confining itself to the cancellation of the second tender, the

impugned judgment went ahead and not only set aside such cancellation

vide the letter dated 26.07.2019, but also went ahead and set aside the

Managing Director’s report dated 14.06.2019, and the Special

Secretary’s order of 16.07.2019, which required the taking of disciplinary

action and recovery of financial loss from those who are responsible.

Shri Rakesh Dwivedi also fairly conceded that his client had not asked

for any relief qua the delinquent officers. This being the case, we set

aside the impugned judgment insofar as it has quashed the Managing

Director’s report dated 14.06.2019, and the order of the Special

Secretary dated 16.07.2019. Any consequential action that is to be taken

pursuant to these orders must follow in accordance with law.

19. Dr. Singhvi’s preliminary objection as to Respondent No.1 having to

approach a civil court, and not a writ court, for actions that pertain to

breach of contract, need not detain us. In ABL International Ltd. and

Anr. v. Export Credit Guarantee Corporation of India Ltd. and Ors.

(2004) 3 SCC 553, this Court held that it was no longer res integra that a

writ petition under Article 226 of the Constitution is maintainable at the

instance of an aggrieved party to enforce a contractual obligation of the

State or its instrumentality when the State acts in an arbitrary manner, as

follows:

“8. As could be seen from the arguments addressed in

this appeal and as also from the divergent views of the

two courts below, one of the questions that falls for our

consideration is whether a writ petition under Article 226

of the Constitution of India is maintainable to enforce a

contractual obligation of the State or its instrumentality,

by an aggrieved party.

9. In our opinion this question is no more res integra and

is settled by a large number of judicial pronouncements

of this Court. In K.N. Guruswamy v. State of

Mysore [(1955) 1 SCR 305] this Court held:

“20. The next question is whether the appellant can

complain of this by way of a writ. In our opinion, he could

have done so in an ordinary case. The appellant is

interested in these contracts and has a right under the

laws of the State to receive the same treatment and be

given the same chance as anybody else. …

We would therefore in the ordinary course have given

the appellant the writ he seeks. But, owing to the time

which this matter has taken to reach us (a consequence

for which the appellant is in no way to blame, for he has

done all he could to have an early hearing), there is

barely a fortnight of the contract left to go…A writ would

therefore be ineffective and as it is not our practice to

issue meaningless writs we must dismiss this appeal

and leave the appellant content with an enunciation of

the law.”

10. It is clear from the above observations of this Court

in the said case, though a writ was not issued on the

facts of that case, this Court has held that on a given set

of facts if a State acts in an arbitrary manner even in a

matter of contract, an aggrieved party can approach the

court by way of writ under Article 226 of the Constitution

and the court depending on facts of the said case is

empowered to grant the relief. This judgment in K.N.

Guruswamy v. State of Mysore was followed

subsequently by this Court in the case of D.F.O. v. Ram

Sanehi Singh [(1971) 3 SCC 864] wherein this Court

held:

“By that order he has deprived the respondent of a

valuable right. We are unable to hold that merely

because the source of the right which the respondent

claims was initially in a contract, for obtaining relief

against any arbitrary and unlawful action on the part of a

public authority he must resort to a suit and not to a

petition by way of a writ. In view of the judgment of this

Court in K.N. Guruswamy case there can be no doubt

that the petition was maintainable, even if the right to

relief arose out of an alleged breach of contract, where

the action challenged was of a public authority invested

with statutory power.”

11. In the case of Gujarat State Financial

Corpn. v. Lotus Hotels (P) Ltd. [(1983) 3 SCC 379] this

Court following an earlier judgment in Ramana Dayaram

Shetty v. International Airport Authority of India [(1979) 3

SCC 489] held:

The instrumentality of the State which would be ‘other

authority’ under Article 12 cannot commit breach of a

solemn undertaking to the prejudice of the other party

which acted on that undertaking or promise and put itself

in a disadvantageous position. The appellant

Corporation, created under the State Financial

Corporations Act, falls within the expression of ‘other

authority’ in Article 12 and if it backs out from such a

promise, it cannot be said that the only remedy for the

aggrieved party would be suing for damages for breach

and that it could not compel the Corporation for specific

performance of the contract under Article 226.

12. The learned counsel appearing for the first

respondent, however, submitted that this Court has

taken a different view in the case of LIC of

India v. Escorts Ltd. [(1986) 1 SCC 264] wherein this

Court held: (SCC p. 344, para 102)

“If the action of the State is related to contractual

obligations or obligations arising out of the tort, the court

may not ordinarily examine it unless the action has

some public law character attached to it. Broadly

speaking, the court will examine actions of State if they

pertain to the public law domain and refrain from

examining them if they pertain to the private law field.

The difficulty will lie in demarcating the frontier between

the public law domain and the private law field. It is

impossible to draw the line with precision and we do not

want to attempt it. The question must be decided in each

case with reference to the particular action, the activity

in which the State or the instrumentality of the State is

engaged when performing the action, the public law or

private law character of the action and a host of other

relevant circumstances. When the State or an

instrumentality of the State ventures into the corporate

world and purchases the shares of a company, it

assumes to itself the ordinary role of a shareholder, and

dons the robes of a shareholder, with all the rights

available to such a shareholder. There is no reason why

the State as a shareholder should be expected to state

its reasons when it seeks to change the management,

by a resolution of the company, like any other

shareholder.”

13. We do not think this Court in the above case has, in

any manner, departed from the view expressed in the

earlier judgments in the case cited hereinabove. This

Court in the case of LIC of India proceeded on the facts

of that case and held that a relief by way of a writ

petition may not ordinarily be an appropriate remedy.

This judgment does not lay down that as a rule in

matters of contract the court's jurisdiction under Article

226 of the Constitution is ousted. On the contrary, the

use of the words “court may not ordinarily examine it

unless the action has some public law character

attached to it” itself indicates that in a given case, on the

existence of the required factual matrix a remedy under

Article 226 of the Constitution will be available. The

learned counsel then relied on another judgment of this

Court in the case of State of U.P. v. Bridge & Roof Co.

(India) Ltd. [(1996) 6 SCC 22] wherein this Court held:

Further, the contract in question contains a clause

providing inter alia for settlement of disputes by

reference to arbitration. The arbitrators can decide both

questions of fact as well as questions of law. When the

contract itself provides for a mode of settlement of

disputes arising from the contract, there is no reason

why the parties should not follow and adopt that remedy

and invoke the extraordinary jurisdiction of the High

Court under Article 226. The existence of an effective

alternative remedy — in this case, provided in the

contract itself — is a good ground for the court to decline

to exercise its extraordinary jurisdiction under Article

226.

14. This judgment again, in our opinion, does not help

the first respondent in the argument advanced on its

behalf that in contractual matters remedy under Article

226 of the Constitution does not lie. It is seen from the

above extract that in that case because of an arbitration

clause in the contract, the Court refused to invoke the

remedy under Article 226 of the Constitution. We have

specifically inquired from the parties to the present

appeal before us and we have been told that there is no

such arbitration clause in the contract in question. It is

well known that if the parties to a dispute had agreed to

settle their dispute by arbitration and if there is an

agreement in that regard, the courts will not permit

recourse to any other remedy without invoking the

remedy by way of arbitration, unless of course both the

parties to the dispute agree on another mode of dispute

resolution. Since that is not the case in the instant

appeal, the observations of this Court in the said case

of Bridge & Roof Co. [(1996) 6 SCC 22] are of no

assistance to the first respondent in its contention that in

contractual matters, writ petition is not maintainable.”

20. This principle has been consistently upheld by this Court in Noble

Resources v. State of Orissa and Anr. (2006) 10 SCC 236 (at

paragraph 15); Food Corp. of India and Anr. v. SEIL Ltd. and Ors.

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

Ispat Ltd. and Ors. (2010) 11 SCC 186 (at paragraph 28); and Surya

Constructions v. State of U.P. and Ors. (2019) 16 SCC 794 (at

paragraph 3).

21. The judgments cited by Dr. Singhvi do not in any manner detract from

the aforesaid principle. Radhakrishna Agarwal and Ors. v. State of

Bihar and Ors. (1977) 3 SCC 457 was a judgment in which a writ

petition against the State Government’s revision of the rates of royalty

payable to it under a lease, and the cancellation of the said lease, was

held to be governed by contract between the parties, no

unreasonableness being made out by way of State action so as to attract

the provisions of Article 14 of the Constitution of India. The broad

proposition that all such questions are to be settled by civil courts, and

not by writ petitions, has been expressly dissented from, as “much water

has flown” since this judgment, which was delivered during the

emergency when the fundamental rights of persons were suspended.

Thus, in Verigamto Naveen v. Govt. of A.P. and Ors. (2001) 8 SCC

344, this Court stated:

“21. On the question that the relief as sought for and

granted by the High Court arises purely in the

contractual field and, therefore, the High Court ought not

to have exercised its power under Article 226 of the

Constitution placed very heavy reliance on the decision

of the Andhra Pradesh High Court in Y.S. Raja

Reddy v. A.P. Mining Corpn. Ltd. [(1988) 2 An LT 722]

and the decisions of this Court in Har Shankar v. Dy.

Excise & Taxation Commr. [(1975) 1 SCC 737],

Radhakrishna Agarwal v. State of Bihar [(1977) 3 SCC

457], Ramlal & Sons v. State of Rajasthan [(1976) 1

SCC 112], Shiv Shankar Dal Mills v. State of

Haryana [(1980) 2 SCC 437], Ramana Dayaram

Shetty v. International Airport Authority of India [(1979) 3

SCC 489] and Basheshar Nath v. CIT [AIR 1959 SC

149]. Though there is one set of cases rendered by this

Court of the type arising in Radhakrishna Agarwal

case [(1977) 3 SCC 457] much water has flown in the

stream of judicial review in contractual field. In cases

where the decision-making authority exceeded its

statutory power or committed breach of rules or

principles of natural justice in exercise of such power or

its decision is perverse or passed an irrational order, this

Court has interceded even after the contract was

entered into between the parties and the Government

and its agencies. We may advert to three decisions of

this Court in Dwarkadas Marfatia & Sons v. Board of

Trustees of the Port of Bombay [(1989) 3 SCC

293], Mahabir Auto Stores v. Indian Oil Corpn. [(1990) 3

SCC 752] and Shrilekha Vidyarthi (Kumari) v. State of

U.P. [(1991) 1 SCC 212]. Where the breach of contract

involves breach of statutory obligation when the order

complained of was made in exercise of statutory power

by a statutory authority, though cause of action arises

out of or pertains to contract, brings it within the sphere

of public law because the power exercised is apart from

contract. The freedom of the Government to enter into

business with anybody it likes is subject to the condition

of reasonableness and fair play as well as public

interest. After entering into a contract, in cancelling the

contract which is subject to terms of the statutory

provisions, as in the present case, it cannot be said that

the matter falls purely in a contractual field. Therefore,

we do not think it would be appropriate to suggest that

the case on hand is a matter arising purely out of a

contract and, therefore, interference under Article 226 of

the Constitution is not called for. This contention also

stands rejected.”

(emphasis supplied)

22. In Rishi Kiran Logistics v. Board of Trustees of Kandla Port and

Ors. (2015) 13 SCC 233, this Court held that a writ petition under Article

226, being a public law remedy, a “public law element” should be present

on facts before Article 226 can be invoked – see paragraphs 37 and 38.

The law on this subject has been laid down exhaustively in Joshi

Technologies International Inc. v. Union of India and Ors. (2015) 7

SCC 728, this Court stating:

“69. The position thus summarised in the aforesaid

principles has to be understood in the context of

discussion that preceded which we have pointed out

above. As per this, no doubt, there is no absolute bar to

the maintainability of the writ petition even in contractual

matters or where there are disputed questions of fact or

even when monetary claim is raised. At the same time,

discretion lies with the High Court which under certain

circumstances, it can refuse to exercise. It also follows

that under the following circumstances, “normally”, the

Court would not exercise such a discretion:

69.1. The Court may not examine the issue unless the

action has some public law character attached to it.

69.2. Whenever a particular mode of settlement of

dispute is provided in the contract, the High Court would

refuse to exercise its discretion under Article 226 of the

Constitution and relegate the party to the said mode of

settlement, particularly when settlement of disputes is to

be resorted to through the means of arbitration.

69.3. If there are very serious disputed questions of fact

which are of complex nature and require oral evidence

for their determination.

69.4. Money claims per se particularly arising out of

contractual obligations are normally not to be

entertained except in exceptional circumstances.

70. Further, the legal position which emerges from

various judgments of this Court dealing with different

situations/aspects relating to contracts entered into by

the State/public authority with private parties, can be

summarised as under:

70.1. At the stage of entering into a contract, the State

acts purely in its executive capacity and is bound by the

obligations of fairness.

70.2. State in its executive capacity, even in the

contractual field, is under obligation to act fairly and

cannot practise some discriminations.

70.3. Even in cases where question is of choice or

consideration of competing claims before entering into

the field of contract, facts have to be investigated and

found before the question of a violation of Article 14 of

the Constitution could arise. If those facts are disputed

and require assessment of evidence the correctness of

which can only be tested satisfactorily by taking detailed

evidence, involving examination and cross-examination

of witnesses, the case could not be conveniently or

satisfactorily decided in proceedings under Article 226 of

the Constitution. In such cases the Court can direct the

aggrieved party to resort to alternate remedy of civil suit,

etc.

70.4. Writ jurisdiction of the High Court under Article 226

of the Constitution was not intended to facilitate

avoidance of obligation voluntarily incurred.

70.5. Writ petition was not maintainable to avoid

contractual obligation. Occurrence of commercial

difficulty, inconvenience or hardship in performance of

the conditions agreed to in the contract can provide no

justification in not complying with the terms of contract

which the parties had accepted with open eyes. It cannot

ever be that a licensee can work out the licence if he

finds it profitable to do so: and he can challenge the

conditions under which he agreed to take the licence, if

he finds it commercially inexpedient to conduct his

business.

70.6. Ordinarily, where a breach of contract is

complained of, the party complaining of such breach

may sue for specific performance of the contract, if

contract is capable of being specifically performed.

Otherwise, the party may sue for damages.

70.7. Writ can be issued where there is executive action

unsupported by law or even in respect of a corporation

there is denial of equality before law or equal protection

of law or if it can be shown that action of the public

authorities was without giving any hearing and violation

of principles of natural justice after holding that action

could not have been taken without observing principles

of natural justice.

70.8. If the contract between private party and the

State/instrumentality and/or agency of the State is under

the realm of a private law and there is no element of

public law, the normal course for the aggrieved party, is

to invoke the remedies provided under ordinary civil law

rather than approaching the High Court under Article 226

of the Constitution of India and invoking its extraordinary

jurisdiction.

70.9. The distinction between public law and private law

element in the contract with the State is getting blurred.

However, it has not been totally obliterated and where

the matter falls purely in private field of contract, this

Court has maintained the position that writ petition is not

maintainable. The dichotomy between public law and

private law rights and remedies would depend on the

factual matrix of each case and the distinction between

the public law remedies and private law field, cannot be

demarcated with precision. In fact, each case has to be

examined, on its facts whether the contractual relations

between the parties bear insignia of public element.

Once on the facts of a particular case it is found that

nature of the activity or controversy involves public law

element, then the matter can be examined by the High

Court in writ petitions under Article 226 of the

Constitution of India to see whether action of the State

and/or instrumentality or agency of the State is fair, just

and equitable or that relevant factors are taken into

consideration and irrelevant factors have not gone into

the decision-making process or that the decision is not

arbitrary.

70.10. Mere reasonable or legitimate expectation of a

citizen, in such a situation, may not by itself be a distinct

enforceable right, but failure to consider and give due

weight to it may render the decision arbitrary, and this is

how the requirements of due consideration of a

legitimate expectation forms part of the principle of nonarbitrariness.

70.11. The scope of judicial review in respect of disputes

falling within the domain of contractual obligations may

be more limited and in doubtful cases the parties may be

relegated to adjudication of their rights by resort to

remedies provided for adjudication of purely contractual

disputes.”

23. It may be added that every case in which a citizen/person knocks at the

doors of the writ court for breach of his or its fundamental rights is a

matter which contains a “public law element”, as opposed to a case

which is concerned only with breach of contract and damages flowing

therefrom. Whenever a plea of breach of natural justice is made against

the State, the said plea, if found sustainable, sounds in constitutional law

as arbitrary State action, which attracts the provisions of Article 14 of the

Constitution of India – see Nawabkhan Abbaskhan v. State of Gujarat

(1974) 2 SCC 121 at paragraph 7. The present case is, therefore, a case

which involves a “public law element” in that the petitioner (Respondent

No.1 before us) who knocked at the doors of the writ court alleged

breach of the audi alteram partem rule, as the entire proceedings leading

to cancellation of the tender, together with the cancellation itself, were

done on an ex parte appraisal of the facts behind his back.

24. The other judgments cited by Dr. Singhvi in his Written Submissions are

distinguishable on facts, as all of them deal with either Public-Interest

Litigations or tender applicants who have been turned down, who

approach the writ court under Article 226 and ask for stay orders against

a proposed project, which may then be considerably delayed and

escalate cost, this being contrary to public interest. It is in these

situations that observations have been made that before entertaining

such writ petitions and passing interim orders, the writ court must be

very careful to weigh conflicting public interests, and should intervene

only when there is an overwhelming public interest in entertaining the

writ petition. This is what was held in Raunaq International Ltd. v. I.V.R.

Construction Ltd. and Ors. (1999) 1 SCC 492 at paragraphs 11 to 13,

24 and 25. To similar effect is the judgment in Jagdish Mandal v. State

of Orissa and Ors. (2007) 14 SCC 517 at paragraph 22.

25. Likewise, this Court’s judgment in Michigan Rubber (India) Ltd. v.

State of Karnataka and Ors. (2012) 8 SCC 216 again deals with a writ

court not interfering in the award of a tender, having regard to the public

interest, which is paramount – see paragraphs 23 and 24. To the same

effect are the judgments of this Court in Tata Cellular v. Union of India

(1994) 6 SCC 651 (at paragraphs 70 and 71), and Rajasthan State

Housing Board and Anr. v. G.S. Investments and Anr. (2007) 1 SCC

477 (at paragraph 10).

26. Both the learned Senior Advocates locked horns on the audi alteram

partem part of natural justice. Dr. Singhvi argued that it is not an

inflexible tool in the hands of the Court, but must yield when no prejudice

is caused, and where it would be an idle formality to set aside an order,

as all the facts on record are admitted facts, to which nothing can be

added or subtracted by Respondent No.1. Shri Dwivedi, on the other

hand, argued that this is a case of a complete lack of natural justice, all

orders having been passed behind the back of his client, as a result of

which his client has been severely prejudiced.

27. Natural justice is at least as old as the first man created on earth – the

biblical ‘Adam’. J.R. Lucas in his book ‘On Justice’ states (at page 86):

“Hence, when we are judging deeds, and may find that a

man did wrong, there is a requirement of logic that we

should allow the putative agent to correct

misinterpretations or disavow the intention imputed to

him or otherwise disown the action. God needed to ask

Adam ‘Hast thou eaten of the tree whereof I commanded

thee that thou shouldest not eat?’ Because it was

essential that Adam should not be blamed or punished

unless he had done exactly that deed. If the serpent had

planted the evidence, or if he had beguiled Adam into

eating it under the misapprehension that it came from

another, non-forbidden tree, then Adam had not sinned

and should not have been expelled from Eden. Only if

the accused admits the charge, or, faced with the

accusation, cannot explain his behaviour convincingly in

any other way, are we logically entitled to conclude that

he did indeed do it.”

28. In some of the early judgments of this Court, the non-observance of

natural justice was said to be prejudice in itself to the person affected,

and proof of prejudice, independent of proof of denial of natural justice,

was held to be unnecessary. The only exception to this rule is where, on

“admitted or indisputable” facts only one conclusion is possible, and

under the law only one penalty is permissible. In such cases, a Court

may not issue its writ to compel the observance of natural justice, not

because it is not necessary to observe natural justice, but because

Courts do not issue writs which are “futile” – see S.L. Kapoor v.

Jagmohan and Ors. (1980) 4 SCC 379 at paragraph 24. In P.D.

Agrawal v. State Bank of India and Ors. (2006) 8 SCC 776, however,

the Court observed that this statement of the law has undergone a “sea

change”, as follows:

“39. Decision of this Court in S.L. Kapoor v. Jagmohan

[(1980) 4 SCC 379] whereupon Mr Rao placed strong

reliance to contend that non-observance of principle of

natural justice itself causes prejudice or the same should

not be read “as it causes difficulty of prejudice”, cannot

be said to be applicable in the instant case. The

principles of natural justice, as noticed hereinbefore,

have undergone a sea change. In view of the decisions

of this Court in State Bank of Patiala v. S.K.

Sharma [(1996) 3 SCC 364] and Rajendra

Singh v. State of M.P. [(1996) 5 SCC 460] the principle of

law is that some real prejudice must have been caused

to the complainant. The Court has shifted from its earlier

concept that even a small violation shall result in the

order being rendered a nullity. To the principle/doctrine

of audi alteram partem, a clear distinction has been laid

down between the cases where there was no hearing at

all and the cases where there was mere technical

infringement of the principle. The Court applies the

principles of natural justice having regard to the fact

situation obtaining in each case. It is not applied in a

vacuum without reference to the relevant facts and

circumstances of the case. It is no unruly horse. It

cannot be put in a straitjacket formula.”

(emphasis supplied)

29. Equally, the prejudice that is caused, apart from natural justice itself

being denied, cannot be said to be present in a case in which there are

admitted facts. Thus, in K.L. Tripathi v. State Bank of India and Ors.

(1984) 1 SCC 43, the Court held:

“29. We are of the opinion that Mr Garg is right that the

rules of natural justice as we have set out hereinbefore

implied an opportunity to the delinquent officer to give

evidence in respect of the charges or to deny the

charges against him. Secondly, he submitted that even if

the rules had no statutory force and even if the party had

bound himself by the contract, as he had accepted the

Staff Rule, there cannot be any contract with a Statutory

Corporation which is violative of the principles of natural

justice in matters of domestic enquiry involving

termination of service of an employee. We are in

agreement with the basic submission of Mr Garg in this

respect, but we find that the relevant rules which we

have set out hereinbefore have been complied with even

if the rules are read that requirements of natural justice

were implied in the said rules or even if such basic

principles of natural justice were implied, there has been

no violation of the principles of natural justice in respect

of the order passed in this case. In respect of an order

involving adverse or penal consequences against an

officer or an employee of Statutory Corporations like the

State Bank of India, there must be an investigation into

the charges consistent with the requirements of the

situation in accordance with the principles of natural

justice as far as these were applicable to a particular

situation. So whether a particular principle of natural

justice has been violated or not has to be judged in the

background of the nature of charges, the nature of the

investigation conducted in the background of any

statutory or relevant rules governing such enquiries.

Here the infraction of the natural justice complained of

was that he was not given an opportunity to rebut the

materials gathered in his absence. As has been

observed in On Justice by J.R. Lucas, the principles of

natural justice basically, if we may say so, emanate from

the actual phrase “audi alteram partem” which was first

formulated by St. Augustine (De Duabus Animabus, XIV,

22 J.P. Migne, PL. 42, 110).

xxx xxx xxx

32. The basic concept is fair play in action

administrative, judicial or quasi-judicial. The concept of

fair play in action must depend upon the particular lis, if

there be any, between the parties. If the credibility of a

person who has testified or given some information is in

doubt, or if the version or the statement of the person

who has testified, is, in dispute, right of crossexamination

must inevitably form part of fair play in

action but where there is no lis regarding the facts but

certain explanation of the circumstances there is no

requirement of cross-examination to be fulfilled to justify

fair play in action. When on the question of facts there

was no dispute, no real prejudice has been caused to a

party aggrieved by an order, by absence of any formal

opportunity of cross-examination per se does not

invalidate or vitiate the decision arrived at fairly. This is

more so when the party against whom an order has

been passed does not dispute the facts and does not

demand to test the veracity of the version or the

credibility of the statement.

33. The party who does not want to controvert the

veracity of the evidence from record or testimony

gathered behind his back cannot expect to succeed in

any subsequent demand that there was no opportunity

of cross-examination specially when it was not asked for

and there was no dispute about the veracity of the

statements. Where there is no dispute as to the facts, or

the weight to be attached on disputed facts but only an

explanation of the acts, absence of opportunity to crossexamination

does not create any prejudice in such

cases.”

(emphasis supplied)

30. Likewise, in State of U.P. v. Neeraj Awasthi and Ors. (2006) 1 SCC

667, this Court held that where, on undisputed facts, a retrenchment

would be valid in law, the principles of natural justice would not be

attracted, unless there is some stigma or punitive measure which would

be attached, which would then cause prejudice, as follows:

“47. If the employees are workmen within the purview of

the U.P. Industrial Disputes Act, they are protected

thereunder. Rules 42 and 43 of the U.P. Industrial

Disputes Rules provide that before effecting any

retrenchment in terms of the provisions of Section 6-N of

the U.P. Industrial Disputes Act, the employees

concerned would be entitled to a notice of one month or

in lieu thereof pay for one month and 15 days' wages for

each completed year of service by way of compensation.

If such a retrenchment is effected under the Industrial

Disputes Act, the question of complying with the

principles of natural justice would not arise. The principle

of natural justice would be attracted only when the

services of some persons are terminated by way of a

punitive measure or thereby a stigma is attached.

48. In Viveka Nand Sethi v. Chairman, J&K Bank

Ltd. [(2005) 5 SCC 337] it was held: (SCC p. 345, para

22)

“22. The principle of natural justice, it is trite, is no unruly

horse. When facts are admitted, an enquiry would be an

empty formality. Even the principle of estoppel will apply.

[See Gurjeewan Garewal (Dr.) v. Dr. Sumitra

Dash [(2004) 5 SCC 263].] The principles of natural

justice are required to be complied with having regard to

the fact situation obtaining therein. It cannot be put in a

straitjacket formula. It cannot be applied in a vacuum

without reference to the relevant facts and

circumstances of the case.”

49. The High Court, therefore, must be held to have

erred in law in holding that the principles of natural

justice were required to be complied with.”

31. In the five-Judge Bench decision in Managing Director, ECIL and Ors.

v. B. Karnakumar and Ors. (1993) 4 SCC 727, this Court, after

discussing the constitutional requirement of a report being furnished

under Article 311(2), held thus:

“30. Hence the incidental questions raised above may

be answered as follows:

xxx xxx xxx

[v] The next question to be answered is what is the effect

on the order of punishment when the report of the

enquiry officer is not furnished to the employee and what

relief should be granted to him in such cases. The

answer to this question has to be relative to the

punishment awarded. When the employee is dismissed

or removed from service and the inquiry is set aside

because the report is not furnished to him, in some

cases the non-furnishing of the report may have

prejudiced him gravely while in other cases it may have

made no difference to the ultimate punishment awarded

to him. Hence to direct reinstatement of the employee

with back-wages in all cases is to reduce the rules of

justice to a mechanical ritual. The theory of reasonable

opportunity and the principles of natural justice have

been evolved to uphold the rule of law and to assist the

individual to vindicate his just rights. They are not

incantations to be invoked nor rites to be performed on

all and sundry occasions. Whether in fact, prejudice has

been caused to the employee or not on account of the

denial to him of the report, has to be considered on the

facts and circumstances of each case. Where, therefore,

even after the furnishing of the report, no different

consequence would have followed, it would be a

perversion of justice to permit the employee to resume

duty and to get all the consequential benefits. It amounts

to rewarding the dishonest and the guilty and thus to

stretching the concept of justice to illogical and

exasperating limits. It amounts to an “unnatural

expansion of natural justice” which in itself is antithetical

to justice.

31. Hence, in all cases where the enquiry officer's report

is not furnished to the delinquent employee in the

disciplinary proceedings, the Courts and Tribunals

should cause the copy of the report to be furnished to

the aggrieved employee if he has not already secured it

before coming to the Court/Tribunal and give the

employee an opportunity to show how his or her case

was prejudiced because of the non-supply of the report.

If after hearing the parties, the Court/Tribunal comes to

the conclusion that the non-supply of the report would

have made no difference to the ultimate findings and the

punishment given, the Court/Tribunal should not

interfere with the order of punishment. The

Court/Tribunal should not mechanically set aside the

order of punishment on the ground that the report was

not furnished as is regrettably being done at present.

The courts should avoid resorting to short cuts. Since it

is the Courts/Tribunals which will apply their judicial mind

to the question and give their reasons for setting aside

or not setting aside the order of punishment, (and not

any internal appellate or revisional authority), there

would be neither a breach of the principles of natural

justice nor a denial of the reasonable opportunity. It is

only if the Court/Tribunal finds that the furnishing of the

report would have made a difference to the result in the

case that it should set aside the order of punishment.”

(emphasis supplied)

32. B. Karunakar (supra) was followed by this Court in Haryana Financial

Corporation and Anr. v. Kailash Chandra Ahuja (2008) 9 SCC 31, as

follows:

“21. From the ratio laid down in B. Karunakar [(1993) 4

SCC 727] it is explicitly clear that the doctrine of natural

justice requires supply of a copy of the inquiry officer's

report to the delinquent if such inquiry officer is other

than the disciplinary authority. It is also clear that nonsupply

of report of the inquiry officer is in the breach of

natural justice. But it is equally clear that failure to supply

a report of the inquiry officer to the delinquent employee

would not ipso facto result in the proceedings being

declared null and void and the order of punishment non

est and ineffective. It is for the delinquent employee to

plead and prove that non-supply of such report had

caused prejudice and resulted in miscarriage of justice.

If he is unable to satisfy the court on that point, the order

of punishment cannot automatically be set aside.”

(emphasis in original)

33. What is important to note is that it is the Court or Tribunal which must

determine whether or not prejudice has been caused, and not the

authority on an ex parte appraisal of the facts. This has been wellexplained

in a later judgment, namely Dharampal Satyapal Ltd. v. Dy.

Comm. Of Central Excise, Gauhati and Ors. (2015) 8 SCC 519, in

which, after setting out a number of judgments, this Court concluded:

“38. But that is not the end of the matter. While the law

on the principle of audi alteram partem has progressed

in the manner mentioned above, at the same time, the

courts have also repeatedly remarked that the principles

of natural justice are very flexible principles. They cannot

be applied in any straitjacket formula. It all depends

upon the kind of functions performed and to the extent to

which a person is likely to be affected. For this reason,

certain exceptions to the aforesaid principles have been

invoked under certain circumstances. For example, the

courts have held that it would be sufficient to allow a

person to make a representation and oral hearing may

not be necessary in all cases, though in some matters,

depending upon the nature of the case, not only full-

fledged oral hearing but even cross-examination of

witnesses is treated as a necessary concomitant of the

principles of natural justice. Likewise, in service matters

relating to major punishment by way of disciplinary

action, the requirement is very strict and full-fledged

opportunity is envisaged under the statutory rules as

well. On the other hand, in those cases where there is

an admission of charge, even when no such formal

inquiry is held, the punishment based on such admission

is upheld. It is for this reason, in certain circumstances,

even post-decisional hearing is held to be permissible.

Further, the courts have held that under certain

circumstances principles of natural justice may even be

excluded by reason of diverse factors like time, place,

the apprehended danger and so on.

39. We are not concerned with these aspects in the

present case as the issue relates to giving of notice

before taking action. While emphasising that the

principles of natural justice cannot be applied in

straitjacket formula, the aforesaid instances are given.

We have highlighted the jurisprudential basis of adhering

to the principles of natural justice which are grounded on

the doctrine of procedural fairness, accuracy of outcome

leading to general social goals, etc. Nevertheless, there

may be situations wherein for some reason—perhaps

because the evidence against the individual is thought to

be utterly compelling—it is felt that a fair hearing “would

make no difference”—meaning that a hearing would not

change the ultimate conclusion reached by the decisionmaker—

then no legal duty to supply a hearing arises.

Such an approach was endorsed by Lord Wilberforce

in Malloch v. Aberdeen Corpn. [(1971) 1 WLR 1578],

who said that: (WLR p. 1595)

“… A breach of procedure … cannot give [rise to] a

remedy in the courts, unless behind it there is something

of substance which has been lost by the failure. The

court does not act in vain.”

Relying on these comments, Brandon L.J. opined

in Cinnamond v. British Airports Authority [(1980) 1 WLR

582] that: (WLR p. 593)

“… no one can complain of not being given an

opportunity to make representations if such an

opportunity would have availed him nothing.”

In such situations, fair procedures appear to serve no

purpose since the “right” result can be secured without

according such treatment to the individual.

40. In this behalf, we need to notice one other exception

which has been carved out to the aforesaid principle by

the courts. Even if it is found by the court that there is a

violation of principles of natural justice, the courts have

held that it may not be necessary to strike down the

action and refer the matter back to the authorities to take

fresh decision after complying with the procedural

requirement in those cases where non-grant of hearing

has not caused any prejudice to the person against

whom the action is taken. Therefore, every violation of a

facet of natural justice may not lead to the conclusion

that the order passed is always null and void. The

validity of the order has to be decided on the touchstone

of “prejudice”. The ultimate test is always the same viz.

the test of prejudice or the test of fair hearing.

xxx xxx xxx

42. So far so good. However, an important question

posed by Mr Sorabjee is as to whether it is open to the

authority, which has to take a decision, to dispense with

the requirement of the principles of natural justice on the

ground that affording such an opportunity will not make

any difference? To put it otherwise, can the

administrative authority dispense with the requirement of

issuing notice by itself deciding that no prejudice will be

caused to the person against whom the action is

contemplated? Answer has to be in the negative. It is not

permissible for the authority to jump over the compliance

of the principles of natural justice on the ground that

even if hearing had been provided it would have served

no useful purpose. The opportunity of hearing will serve

the purpose or not has to be considered at a later stage

and such things cannot be presumed by the authority.

This was so held by the English Court way back in the

year 1943 in General Medical

Council v. Spackman [1943 AC 627]. This Court also

spoke in the same language in Board of High School

and Intermediate Education v. Chitra Srivastava [(1970)

1 SCC 121], as is apparent from the following words:

(SCC p. 123, para 7)

“7. The learned counsel for the appellant, Mr C.B.

Agarwala, contends that the facts are not in dispute and

it is further clear that no useful purpose would have

been served if the Board had served a show-cause

notice on the petitioner. He says that in view of these

circumstances it was not necessary for the Board to

have issued a show-cause notice. We are unable to

accept this contention. Whether a duty arises in a

particular case to issue a show-cause notice before

inflicting a penalty does not depend on the authority's

satisfaction that the person to be penalised has no

defence but on the nature of the order proposed to be

passed.”

43. In view of the aforesaid enunciation of law, Mr

Sorabjee may also be right in his submission that it was

not open for the authority to dispense with the

requirement of principles of natural justice on the

presumption that no prejudice is going to be caused to

the appellant since the judgment in R.C.

Tobacco [(2005) 7 SCC 725] had closed all the windows

for the appellant.

44. At the same time, it cannot be denied that as far as

courts are concerned, they are empowered to consider

as to whether any purpose would be served in

remanding the case keeping in mind whether any

prejudice is caused to the person against whom the

action is taken. This was so clarified in ECIL itself in the

following words: (SCC p. 758, para 31)

“31. Hence, in all cases where the enquiry officer's

report is not furnished to the delinquent employee in the

disciplinary proceedings, the courts and tribunals should

cause the copy of the report to be furnished to the

aggrieved employee if he has not already secured it

before coming to the court/tribunal and given the

employee an opportunity to show how his or her case

was prejudiced because of the non-supply of the report.

If after hearing the parties, the court/tribunal comes to

the conclusion that the non-supply of the report would

have made no difference to the ultimate findings and the

punishment given, the court/tribunal should not interfere

with the order of punishment. The court/tribunal should

not mechanically set aside the order of punishment on

the ground that the report was not furnished as is

regrettably being done at present. The courts should

avoid resorting to short cuts. Since it is the

courts/tribunals which will apply their judicial mind to the

question and give their reasons for setting aside or not

setting aside the order of punishment, (and not any

internal appellate or revisional authority), there would be

neither a breach of the principles of natural justice nor a

denial of the reasonable opportunity. It is only if the

court/tribunal finds that the furnishing of the report would

have made a difference to the result in the case that it

should set aside the order of punishment.”

45. Keeping in view the aforesaid principles in mind,

even when we find that there is an infraction of principles

of natural justice, we have to address a further question

as to whether any purpose would be served in remitting

the case to the authority to make fresh demand of

amount recoverable, only after issuing notice to show

cause to the appellant. In the facts of the present case,

we find that such an exercise would be totally futile

having regard to the law laid down by this Court in R.C.

Tobacco [(2005) 7 SCC 725] .”

(emphasis supplied)

34. In State Bank of Patiala and Ors. v. S.K. Sharma (1996) 3 SCC 364,

a Division Bench of this Court distinguished between “adequate

opportunity” and “no opportunity at all”, and held that the “prejudice”

exception operates more especially in the latter case. This judgment also

speaks of procedural and substantive provisions of law which embody

the principles of natural justice which, when infracted, must lead to

prejudice being caused to the litigant in order to afford him relief, as

follows:

“32. Now, coming back to the illustration given by us in

the preceding para, would setting aside the punishment

and the entire enquiry on the ground of aforesaid

violation of sub-clause (iii) be in the interests of

justice or would it be its negation? In our respectful

opinion, it would be the latter. Justice means justice

between both the parties. The interests of justice equally

demand that the guilty should be punished and that

technicalities and irregularities which do not occasion

failure of justice are not allowed to defeat the ends of

justice. Principles of natural justice are but the means to

achieve the ends of justice. They cannot be perverted to

achieve the very opposite end. That would be a counterproductive

exercise.

33. We may summarise the principles emerging from the

above discussion. (These are by no means intended to

be exhaustive and are evolved keeping in view the

context of disciplinary enquiries and orders of

punishment imposed by an employer upon the

employee):

(1) An order passed imposing a punishment on an

employee consequent upon a disciplinary/departmental

enquiry in violation of the rules/regulations/statutory

provisions governing such enquiries should not be set

aside automatically. The Court or the Tribunal should

enquire whether (a) the provision violated is of a

substantive nature or (b) whether it is procedural in

character.

(2) A substantive provision has normally to be complied

with as explained hereinbefore and the theory of

substantial compliance or the test of prejudice would not

be applicable in such a case.

(3) In the case of violation of a procedural provision, the

position is this: procedural provisions are generally

meant for affording a reasonable and adequate

opportunity to the delinquent officer/employee. They are,

generally speaking, conceived in his interest. Violation of

any and every procedural provision cannot be said to

automatically vitiate the enquiry held or order passed.

Except cases falling under — “no notice”, “no

opportunity” and “no hearing” categories, the complaint

of violation of procedural provision should be examined

from the point of view of prejudice, viz., whether such

violation has prejudiced the delinquent officer/employee

in defending himself properly and effectively. If it is found

that he has been so prejudiced, appropriate orders have

to be made to repair and remedy the prejudice including

setting aside the enquiry and/or the order of punishment.

If no prejudice is established to have resulted therefrom,

it is obvious, no interference is called for. In this

connection, it may be remembered that there may be

certain procedural provisions which are of a fundamental

character, whose violation is by itself proof of prejudice.

The Court may not insist on proof of prejudice in such

cases. As explained in the body of the judgment, take a

case where there is a provision expressly providing that

after the evidence of the employer/government is over,

the employee shall be given an opportunity to lead

defence in his evidence, and in a given case, the enquiry

officer does not give that opportunity in spite of the

delinquent officer/employee asking for it. The prejudice

is self-evident. No proof of prejudice as such need be

called for in such a case. To repeat, the test is one of

prejudice, i.e., whether the person has received a fair

hearing considering all things. Now, this very aspect

can also be looked at from the point of view of directory

and mandatory provisions, if one is so inclined. The

principle stated under (4) hereinbelow is only another

way of looking at the same aspect as is dealt with herein

and not a different or distinct principle.

(4)(a) In the case of a procedural provision which is not

of a mandatory character, the complaint of violation has

to be examined from the standpoint of substantial

compliance. Be that as it may, the order passed in

violation of such a provision can be set aside only where

such violation has occasioned prejudice to the

delinquent employee.

(b) In the case of violation of a procedural provision,

which is of a mandatory character, it has to be

ascertained whether the provision is conceived in the

interest of the person proceeded against or in public

interest. If it is found to be the former, then it must be

seen whether the delinquent officer has waived the said

requirement, either expressly or by his conduct. If he is

found to have waived it, then the order of punishment

cannot be set aside on the ground of the said violation.

If, on the other hand, it is found that the delinquent

officer/employee has not waived it or that the provision

could not be waived by him, then the Court or Tribunal

should make appropriate directions (include the setting

aside of the order of punishment), keeping in mind the

approach adopted by the Constitution Bench in B.

Karunakar [(1993) 4 SCC 727]. The ultimate test is

always the same, viz., test of prejudice or the test of fair

hearing, as it may be called.

(5) Where the enquiry is not governed by any

rules/regulations/statutory provisions and the only

obligation is to observe the principles of natural justice

— or, for that matter, wherever such principles are held

to be implied by the very nature and impact of the

order/action — the Court or the Tribunal should make a

distinction between a total violation of natural justice

(rule of audi alteram partem) and violation of a facet of

the said rule, as explained in the body of the judgment.

In other words, a distinction must be made between “no

opportunity” and no adequate opportunity, i.e., between

“no notice”/“no hearing” and “no fair hearing”. (a) In the

case of former, the order passed would undoubtedly be

invalid (one may call it ‘void’ or a nullity if one chooses

to). In such cases, normally, liberty will be reserved for

the Authority to take proceedings afresh according to

law, i.e., in accordance with the said rule (audi alteram

partem). (b) But in the latter case, the effect of violation

(of a facet of the rule of audi alteram partem) has to be

examined from the standpoint of prejudice; in other

words, what the Court or Tribunal has to see is whether

in the totality of the circumstances, the delinquent

officer/employee did or did not have a fair hearing and

the orders to be made shall depend upon the answer to

the said query. [It is made clear that this principle (No. 5)

does not apply in the case of rule against bias, the test

in which behalf are laid down elsewhere.]

(6) While applying the rule of audi alteram partem (the

primary principle of natural justice) the

Court/Tribunal/Authority must always bear in mind the

ultimate and overriding objective underlying the said

rule, viz., to ensure a fair hearing and to ensure that

there is no failure of justice. It is this objective which

should guide them in applying the rule to varying

situations that arise before them.

(7) There may be situations where the interests of State

or public interest may call for a curtailing of the rule of

audi alteram partem. In such situations, the Court may

have to balance public/State interest with the

requirement of natural justice and arrive at an

appropriate decision.”

35. In M.C. Mehta v. Union of India and Ors. (1999) 6 SCC 237, the

expression “admitted and indisputable facts” laid down in Jagmohan

(supra), as also the interesting divergence of legal opinion on whether it

is necessary to show “slight proof” or “real likelihood” of prejudice, or the

fact that it is an “open and shut case”, were all discussed in great detail

as follows:

“16. Courts are not infrequently faced with a dilemma

between breach of the rules of natural justice and the

Court's discretion to refuse relief even though the rules

of natural justice have been breached, on the ground

that no real prejudice is caused to the affected party.

xxx xxx xxx

22. Before we go into the final aspects of this contention,

we would like to state that cases relating to breach of

natural justice do also occur where all facts are not

admitted or are not all beyond dispute. In the context of

those cases there is a considerable case-law and

literature as to whether relief can be refused even if the

court thinks that the case of the applicant is not one of

“real substance” or that there is no substantial possibility

of his success or that the result will not be different, even

if natural justice is followed. See Malloch v. Aberdeen

Corpn. [(1971) 1 WLR 1578] (per Lord Reid and Lord

Wilberforce), Glynn v. Keele University [(1971) 1 WLR

487], Cinnamond v. British Airports Authority [(1980) 1

WLR 582] and other cases where such a view has been

held. The latest addition to this view is R. v. Ealing

Magistrates' court, ex p Fannaran [(1996) 8 Admn LR

351, 358] (Admn LR at p. 358) (see de Smith, Suppl. p.

89) (1998) where Straughton, L.J. held that there must

be “demonstrable beyond doubt” that the result would

have been different. Lord Woolf

in Lloyd v. McMahon [(1987) 2 WLR 821, 862] (WLR at

p. 862) has also not disfavoured refusal of discretion in

certain cases of breach of natural justice. The New

Zealand Court in McCarthy v. Grant [1959 NZLR 1014]

however goes halfway when it says that (as in the case

of bias), it is sufficient for the applicant to show that there

is “real likelihood — not certainty — of prejudice”. On the

other hand, Garner Administrative Law (8th Edn., 1996,

pp. 271-72) says that slight proof that the result would

have been different is sufficient. On the other side of the

argument, we have apart from Ridge v. Baldwin [1964

AC 40], Megarry, J. in John v. Rees [(1969) 2 WLR

1294] stating that there are always “open and shut

cases” and no absolute rule of proof of prejudice can be

laid down. Merits are not for the court but for the

authority to consider. Ackner, J. has said that the

“useless formality theory” is a dangerous one and,

however inconvenient, natural justice must be followed.

His Lordship observed that “convenience and justice are

often not on speaking terms”. More recently Lord

Bingham has deprecated the “useless formality” theory

in R. v. Chief Constable of the Thames Valley Police

Forces, ex p Cotton [1990 IRLR 344] by giving six

reasons. (See also his article “Should Public Law

Remedies be Discretionary?” 1991 PL, p. 64.) A detailed

and emphatic criticism of the “useless formality theory”

has been made much earlier in “Natural Justice,

Substance or Shadow” by Prof. D.H. Clark of Canada

(see 1975 PL, pp. 27-63) contending

that Malloch [(1971) 1 WLR 1578] and Glynn [(1971) 1

WLR 487] were wrongly decided. Foulkes

(Administrative Law, 8th Edn., 1996, p. 323), Craig

(Administrative Law, 3rd Edn., p. 596) and others say

that the court cannot prejudge what is to be decided by

the decision-making authority de Smith (5th Edn., 1994,

paras 10.031 to 10.036) says courts have not yet

committed themselves to any one view though discretion

is always with the court. Wade (Administrative Law, 5th

Edn., 1994, pp. 526-30) says that while futile writs may

not be issued, a distinction has to be made according to

the nature of the decision. Thus, in relation to cases

other than those relating to admitted or indisputable

facts, there is a considerable divergence of opinion

whether the applicant can be compelled to prove that the

outcome will be in his favour or he has to prove a case

of substance or if he can prove a “real likelihood” of

success or if he is entitled to relief even if there is some

remote chance of success. We may, however, point out

that even in cases where the facts are not all admitted or

beyond dispute, there is a considerable unanimity that

the courts can, in exercise of their “discretion”, refuse

certiorari, prohibition, mandamus or injunction even

though natural justice is not followed. We may also state

that there is yet another line of cases as in State Bank of

Patiala v. S.K. Sharma [(1996) 3 SCC 364], Rajendra

Singh v. State of M.P. [(1996) 5 SCC 460] that even in

relation to statutory provisions requiring notice, a

distinction is to be made between cases where the

provision is intended for individual benefit and where a

provision is intended to protect public interest. In the

former case, it can be waived while in the case of the

latter, it cannot be waived.

23. We do not propose to express any opinion on the

correctness or otherwise of the “useless formality” theory

and leave the matter for decision in an appropriate case,

inasmuch as, in the case before us, “admitted and

indisputable” facts show that grant of a writ will be in

vain as pointed out by Chinnappa Reddy, J.”

36. In Aligarh Muslim University and Ors. v. Mansoor Ali Khan (2000) 7

SCC 529, the aforesaid authorities were relied upon, and the answer

given was that there is no absolute rule, and prejudice must be shown

depending on the facts of each case, as follows:

“24. The principle that in addition to breach of natural

justice, prejudice must also be proved has been

developed in several cases. In K.L. Tripathi v. State

Bank of India [(1984) 1 SCC 43] Sabyasachi Mukharji, J.

(as he then was) also laid down the principle that not

mere violation of natural justice but de facto prejudice

(other than non-issue of notice) had to be proved. It was

observed, quoting Wade's Administrative Law (5th Edn.,

pp. 472-75), as follows: (SCC p. 58, para 31)

“[I]t is not possible to lay down rigid rules as to when the

principles of natural justice are to apply, nor as to their

scope and extent. … There must also have been some

real prejudice to the complainant; there is no such thing

as a merely technical infringement of natural justice. The

requirements of natural justice must depend on the facts

and circumstances of the case, the nature of the inquiry,

the rules under which the tribunal is acting, the subjectmatter

to be dealt with, and so forth.”

Since then, this Court has consistently applied the

principle of prejudice in several cases. The above ruling

and various other rulings taking the same view have

been exhaustively referred to in State Bank of

Patiala v. S.K. Sharma [(1996) 3 SCC 364]. In that case,

the principle of “prejudice” has been further elaborated.

The same principle has been reiterated again

in Rajendra Singh v. State of M.P. [(1996) 5 SCC 460]

25. The “useless formality” theory, it must be noted, is an

exception. Apart from the class of cases of “admitted or

indisputable facts leading only to one conclusion”

referred to above, there has been considerable debate

on the application of that theory in other cases. The

divergent views expressed in regard to this theory have

been elaborately considered by this Court in M.C.

Mehta referred to above. This Court surveyed the views

expressed in various judgments in England by Lord

Reid, Lord Wilberforce, Lord Woolf, Lord Bingham,

Megarry, J. and Straughton, L.J. etc. in various cases

and also views expressed by leading writers like Profs.

Garner, Craig, de Smith, Wade, D.H. Clark etc. Some of

them have said that orders passed in violation must

always be quashed for otherwise the court will be

prejudging the issue. Some others have said that there

is no such absolute rule and prejudice must be shown.

Yet, some others have applied via media rules. We do

not think it necessary in this case to go deeper into

these issues. In the ultimate analysis, it may depend on

the facts of a particular case.”

37. In Union of India and Ors. v. Alok Kumar (2010) 5 SCC 349, this

Court, after eschewing a hyper-technical approach, held that prejudice

must not merely be the apprehension of a litigant, but should be a

definite inference of the likelihood of prejudice flowing from the refusal to

follow natural justice, as follows:

“83. Earlier, in some of the cases, this Court had taken

the view that breach of principles of natural justice was

in itself a prejudice and no other “de facto” prejudice

needs to be proved. In regard to statutory rules, the

prominent view was that the violation of mandatory

statutory rules would tantamount to prejudice but where

the rule is merely directory the element of de facto

prejudice needs to be pleaded and shown. With the

development of law, rigidity in these rules is somewhat

relaxed. The instance of de facto prejudice has been

accepted as an essential feature where there is violation

of the non-mandatory rules or violation of natural justice

as it is understood in its common parlance. Taking an

instance, in a departmental enquiry where the

department relies upon a large number of documents

majority of which are furnished and an opportunity is

granted to the delinquent officer to defend himself except

that some copies of formal documents had not been

furnished to the delinquent. In that event the onus is

upon the employee to show that non-furnishing of these

formal documents have resulted in de facto prejudice

and he has been put to a disadvantage as a result

thereof.

xxx xxx xxx

87. In ECIL v. B. Karunakar [(1993) 4 SCC 727] this

Court noticed the existing law and said that the theory of

reasonable opportunity and the principles of natural

justice have been evolved to uphold the rule of law and

to assist the individual to vindicate his just rights. They

are neither incantations to be invoked nor rites to be

performed on all and sundry occasions. Whether, in fact,

prejudice has been caused to the employee or not on

account of denial of report to him, has to be considered

on the facts and circumstances of each case. The Court

has clarified even the stage to which the departmental

proceedings ought to be reverted in the event the order

of punishment is set aside for these reasons.

88. It will be useful to refer to the judgment of this Court

in Haryana Financial Corpn. v. Kailash Chandra

Ahuja [(2008) 9 SCC 31] at pp. 38-39 where the Court

held as under: (SCC para 21)

“21. From the ratio laid down in B. Karunakar it is

explicitly clear that the doctrine of natural justice

requires supply of a copy of the enquiry officer's report

to the delinquent if such enquiry officer is other than the

disciplinary authority. It is also clear that non-supply of

report of the enquiry officer is in breach of natural

justice. But it is equally clear that failure to supply a

report of the enquiry officer to the delinquent employee

would not ipso facto result in the proceedings being

declared null and void and the order of punishment non

est and ineffective. It is for the delinquent employee to

plead and prove that non-supply of such report had

caused prejudice and resulted in miscarriage of justice.

If he is unable to satisfy the court on that point, the order

of punishment cannot automatically be set aside.”

89. The well-established canons controlling the field of

bias in service jurisprudence can reasonably be

extended to the element of prejudice as well in such

matters. Prejudice de facto should not be based on a

mere apprehension or even on a reasonable suspicion.

It is important that the element of prejudice should exist

as a matter of fact or there should be such definite

inference of likelihood of prejudice flowing from such

default which relates to statutory violations. It will not be

permissible to set aside the departmental enquiries in

any of these classes merely on the basis of

apprehended prejudice.”

38. Under the broad rubric of the Court not passing futile orders as the

case is based on “admitted” facts, being admitted by reason of estoppel,

acquiescence, non-challenge or non-denial, the following judgments of

this Court are all illustrations of a breach of the audi alteram partem rule

being established on the facts of the case, but with no prejudice caused

to the person alleging breach of natural justice, as the case was one on

admitted facts:

(i) Punjab and Sind Bank and Ors. v. Sakattar Singh (2001) 1 SCC

214 (see paragraphs 1, 4 and 5);

(ii) Karnataka SRTC and Anr. v. S.G. Kotturappa and Anr. (2005) 3

SCC 409 (see paragraph 24);

(iii) Viveka Nand Sethi v. Chairman, J&K Bank Ltd. and Ors. (2005)

5 SCC 337 (see paragraphs 21, 22 and 26);

(iv) Mohd. Sartaj and Anr. v. State of U.P. and Ors. (2006) 2 SCC

315 (see paragraph 18);

(v) Punjab National Bank and Ors. v. Manjeet Singh and Anr.

(2006) 8 SCC 647 (see paragraphs 17 and 19);

(vi) Ashok Kumar Sonkar v. Union of India and Ors. (2007) 4 SCC

54 (see paragraphs 26 to 32);

(vii) State of Manipur and Ors. v. Y. Token Singh and Ors. (2007) 5

SCC 65 (see paragraphs 21 and 22);

(viii) Secretary, A.P. Social Welfare Residential Educational

Institutions v. Pindiga Sridhar and Ors. (2007) 13 SCC 352 (see

paragraph 7)

(ix) Peethani Suryanarayana and Anr. v. Repaka Venkata Ramana

Kishore and Ors. (2009) 11 SCC 308 (see paragraph 18);

(x) Municipal Committee, Hoshiapur v. Punjab State Electricity

Board and Ors. (2010) 13 SCC 216 (see paragraphs 31 to 36,

and paragraphs 44 and 45);

(xi) Union of India and Anr. v. Raghuwar Pal Singh (2018) 15 SCC

463 (see paragraph 20).

39. An analysis of the aforesaid judgments thus reveals:

(3)No prejudice is caused to the person complaining of the breach of

natural justice where such person does not dispute the case against

him or it. This can happen by reason of estoppel, acquiescence,

waiver and by way of non-challenge or non-denial or admission of

facts, in cases in which the Court finds on facts that no real prejudice

can therefore be said to have been caused to the person complaining

of the breach of natural justice.

(4)In cases where facts can be stated to be admitted or indisputable,

and only one conclusion is possible, the Court does not pass futile

orders of setting aside or remand when there is, in fact, no prejudice

caused. This conclusion must be drawn by the Court on an appraisal

of the facts of a case, and not by the authority who denies natural

justice to a person.

40. Judged by the touchstone of these tests, it is clear that Respondent

No.1 has been completely in the dark so far as the cancellation of the

award of tender in his favour is concerned, the audi alteram partem rule

having been breached in its entirety. As has been correctly argued by

Shri Rakesh Dwivedi, prejudice has indeed been caused to his client, not

only from the fact that one year of the contract period has been taken

away, but also that, if the impugned High Court judgment is to be set

aside today, his client will be debarred from bidding for any of the

Corporation’s tenders for a period of three years. Undoubtedly, prima

facie, the rates at which contracts have been awarded pursuant to the

tender dated 01.06.2018 are way above the rates that were awarded of

the same division, and for exactly the same amount of work awarded

vide the earlier tender advertisement dated 01.04.2018. Shri Dwivedi’s

argument that in the neighbouring regions the rates tendered were also

high, and nothing has yet been done to nullify these tenders and the

financial loss caused, does carry some weight. That a huge financial loss

to the Corporation has also taken place is something for the Corporation

to probe, and take remedial action against the persons responsible.

41. We, therefore, uphold the impugned judgment of the High Court on the

ground that natural justice has indeed been breached in the facts of the

present case, not being a case of admitted facts leading to the grant of a

futile writ, and that prejudice has indeed been caused to Respondent

No.1. In view of this finding, there is no need to examine the other

contentions raised by the parties before us.

42. We reiterate the submission of Shri Dwivedi that as his client is working

for the Corporation in another subsequent tender, he is not going to

claim damages for the lost period post cancellation of the tender. This

being the case, and other things being equal, the earnest money deposit

and security deposit made by his client is ordered to be returned by the

Corporation within a period of eight weeks from today. Shri Dwivedi’s

client may also request the Corporation to pay any amount that

remained unpaid for work actually done, which the Corporation will, after

a hearing, either allow or reject for reasons to be stated.

43. The appeals arising out of SLP (C) 5136 of 2020 and SLP (C) 7351 of

2020 are thus partially allowed, and the impugned judgment of the High

Court of Judicature at Allahabad dated 11.12.2019 is set aside only to

the extent indicated by us above.

44. Insofar as the appeal arising out of SLP (C) No. 7364 of 2020 is

concerned, the facts therein are distinct from the other two connected

appeals before us only to the extent that Respondent No.1 therein, M/s

Dharam Raj Singh, was the successful bidder for the Tendu (Sonbhadra)

region, which award of tender was also cancelled by the Corporation’s

order dated 26.07.2019. The judgment impugned in this appeal, dated

07.01.2020 of the High Court of Judicature of Allahabad (Lucknow

Bench), allowed M/s Dharam Raj Singh’s writ petition challenging the

cancellation order, stating that it was to be governed by the judgment of

the High Court of Judicature at Allahabad dated 11.12.2019. As a result,

our judgment in the two connected appeals, and all consequential reliefs

granted, will apply on all fours to this appeal also.

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

………………………………..J.

(R.F. Nariman)

………………………………..J.

(Navin Sinha)

………………………………..J.

(K.M. Joseph)

New Delhi;

16th October 2020.

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Saturday 17 October 2020

Whether non-observance of principles of natural justice will invalidate the proceeding?

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