Principles of Natural Justice – audi alteram partem – Breach of – U.P. State Warehousing Corporation issued e-tender inter alia for unloading/loading of foodgrains/fertilizer bags from/into railway wagons, trucks etc.; transporting from Railway Station to Corporation godowns or vice versa – Tender cancelled – e-tender again published in the same terms, for Vindhyachal (Mirzapur) region, it was regarding appointment of Handling and Transport Contractor for food grain in FCI for four depots/centres of Uttar Pradesh for two years – Cancelled again – Another tender reissued for the same region – Respondent No.1 declared as successful bidder for the Bhawanipur-I centre – Agreement entered into between the Corporation and Respondent No.1 for execution of the work under the tender – Complaints of financial irregularities in the issuance of the e-tender – Tender cancelled – Respondent no.1 filed Writ Petition – Allowed – On appeal, held: Prayer in the Writ Petition confined itself to the cancellation of the tender – However, impugned judgment went ahead and not only set aside such cancellation vide letter dtd. 26.07.19, but also set aside the Managing Director ’s report dtd. 14.06.19, and the Special Secretary’s order of 16.07.19, which required taking disciplinary action and recovery of financial loss from those responsible – Set aside to that extent – Further, entire proceedings leading to cancellation of the tender, together with the cancellation itself, were done on an ex parte appraisal of the facts behind respondent no.1’s back – Natural justice is a flexible tool in the hands of the judiciary to reach out in fit cases to remedy injustice – In the present case, respondent no.1 was completely in the dark so far as the cancellation of the tender is concerned, the audi alteram partem rule having been breached in its entirety – Impugned judgment upheld on this ground – Tenders – Maxims – Constitution of India – Arst.226, 14. Constitution of India – Art.226 – Writ petition – Maintainability of, for enforcing contractual obligation of the State/its instrumentality – Discussed.
Disposing of the appeals, the Court
HELD: 1.1 Despite the fact that the prayer in the Writ Petition filed by Respondent No.1 was set out in the very beginning of the impugned judgment, confining itself to the cancellation of the second tender, the impugned judgment went ahead and not only set aside such cancellation vide the letter dated 26.07.2019, but also went ahead and set aside the Managing Director’s report dated 14.06.2019, and the Special Secretary’s order of 16.07.2019, which required the taking of disciplinary action and recovery of financial loss from those who are responsible. It was fairly conceded that no relief was asked qua the delinquent officers. This being the case, the impugned judgment is set aside insofar as it has quashed the Managing Director’s report dated 14.06.2019, and the order of the Special Secretary dated 16.07.2019. Any consequential action that is to be taken pursuant to these orders must follow in accordance with law. Every case in which a citizen/person knocks at the doors of the writ court for breach of his or its fundamental rights is a matter which contains a “public law element”, as opposed to a case which is concerned only with breach of contract and damages flowing therefrom. Whenever a plea of breach of natural justice is made against the State, the said plea, if found sustainable, sounds in constitutional law as arbitrary State action, which attracts the provisions of Article 14 of the Constitution of India. The present case is, therefore, a case which involves a “public law element” in that the petitioner (Respondent No.1) who knocked at the doors of the writ court alleged breach of the audi alteram partem rule, as the entire proceedings leading to cancellation of the tender, together with the cancellation itself, were done on an ex parte appraisal of the facts behind his back. [Paras 18, 23][589-FH; 590-A-B; 598-E-G] Nawabkhan Abbaskhan v. State of Gujarat (1974) 2 SCC 121 : [1974] 3 SCR 427 – relied on.
1.2 In some of the early judgments of this Court, the nonobservance of natural justice was said to be prejudice in itself to the person affected, and proof of prejudice, independent of proof of denial of natural justice, was held to be unnecessary. The only exception to this rule is where, on “admitted or indisputable” facts only one conclusion is possible, and under the law only one penalty is permissible. In such cases, a Court may not issue its writ to compel the observance of natural justice, not because it is not necessary to observe natural justice, but because Courts do not issue writs which are “futile”. Equally, the prejudice that is caused, apart from natural justice itself being denied, cannot be said to be present in a case in which there are admitted facts. What is important to note is that it is the Court or Tribunal which must determine whether or not prejudice has been caused, and not the authority on an ex parte appraisal of the facts. [Paras 28,
29 and 33][600-C-D; 601-B; 605-E-F]
S.L. Kapoor v. Jagmohan and Ors. (1980) 4 SCC 379 : [1981] 1 SCR 746; P.D. Agrawal v. State Bank of India and Ors. (2006) 8 SCC 776 : [2006[ 1 Suppl. SCR 454; K.L. Tripathi v. State Bank of India and Ors. (1984) 1 SCC 43 : [1984] 1 SCR 184; State of U.P. v. Neeraj Awasthi and Ors.(2006) 1 SCC 667 : [2005] 5 Suppl. SCR 906; Managing Director, ECIL and Ors. v. B. Karnakumar and Ors. (1993) 4 SCC 727: 1993 ( 2 ) Suppl. SCR 576; Haryana Financial Corporation and Anr. v. Kailash Chandra Ahuja (2008) 9 SCC 31 : [ 2008] 10 SCR 222 – relied on.
1.3 Under the broad rubric of the Court not passing futile orders as the case is based on “admitted” facts, being admitted by reason of estoppel, acquiescence, non-challenge or non-denial, the following judgments of this Court are all illustrations of a breach of the audi alteram partem rule being established on the facts of the case, but with no prejudice caused to the person alleging breach of natural justice, as the case was one on admitted facts. [Para 38][618-B-C]
Punjab and Sind Bank and Ors. v. Sakattar
Singh (2001) 1 SCC 214: 2000 ( 3 ) Suppl. JT 450; Karnataka SRTC and Anr. v. S.G. Kotturappa and Anr. (2005) 3 SCC 409 : [ 2005] 2 SCR 520; Viveka Nand Sethi v. Chairman, J&K Bank Ltd. and Ors. (2005)
5 SCC 337 : [2005] 3 SCR 1095; Mohd. Sartaj and Anr. v. State of U.P. and Ors. (2006) 2 SCC 315: [ 2006]
1 SCR 377; Punjab National Bank and Ors. v. Manjeet Singh and Anr. (2006) 8 SCC 647 : 2006 (6 ) Suppl. SCR 825; Ashok Kumar Sonkar v. Union of India and Ors. (2007) 4 SCC 54 : [2007] 3 SCR 95; State of Manipur and Ors. v. Y. Token Singh and Ors. (2007) 5 SCC 65: [2007] 2 SCR 965; Secretary, A.P. Social Welfare Residential Educational Institutions v. Pindiga Sridhar and Ors. (2007) 13 SCC 352 : [2007] 4 SCR 145; Peethani Suryanarayana and Anr. v. Repaka Venkata Ramana Kishore and Ors. (2009) 11 SCC 308 : [2009] 2 SCR 48; Municipal Committee, Hoshiapur v. Punjab State Electricity Board and Ors. (2010) 13 SCC 216 : [2010] 13 SCR 658; Union of India and Anr. v. Raghuwar Pal Singh (2018) 15 SCC 463 : [2018]
4 SCR 1012 – referred to.
1.4 (1) Natural justice is a flexible tool in the hands of the judiciary to reach out in fit cases to remedy injustice. The breach of the audi alteram partem rule cannot by itself, without more, lead to the conclusion that prejudice is thereby caused.
(2) Where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, except in the case of a mandatory provision of law which is conceived not only in individual interest, but also in public interest.
(3) No prejudice is caused to the person complaining of the breach of natural justice where such person does not dispute the case against him or it. This can happen by reason of estoppel, acquiescence, waiver and by way of non-challenge or non-denial or admission of facts, in cases in which the Court finds on facts that no real prejudice can therefore be said to have been caused to the person complaining of the breach of natural justice.
(4) In cases where facts can be stated to be admitted or indisputable, and only one conclusion is possible, the Court does not pass futile orders of setting aside or remand when there is, in fact, no prejudice caused. This conclusion must be drawn by the Court on an appraisal of the facts of a case, and not by the authority who denies natural justice to a person.
(5) The “prejudice” exception must be more than a mere apprehension or even a reasonable suspicion of a litigant. It should exist as a matter of fact, or be based upon a definite inference of likelihood of prejudice flowing from the non-observance of natural justice. [Para 39][618-H; 619-A-E]
1.5 Judged by the touchstone of these tests, it is clear that Respondent No.1 has been completely in the dark so far as the cancellation of the award of tender in his favour is concerned, the audi alteram partem rule having been breached in its entirety. Prejudice has indeed been caused to respondent no.1, not only from the fact that one year of the contract period has been taken away, but also that, if the impugned High Court judgment is to be set aside today, he will be debarred from bidding for any of the Corporation’s tenders for a period of three years. Undoubtedly, prima facie, the rates at which contracts have been awarded pursuant to the tender dated 01.06.2018 are way above the rates that were awarded of the same division, and for exactly the same amount of work awarded vide the earlier tender advertisement dated 01.04.2018. The argument that in the neighbouring regions the rates tendered were also high, and nothing has yet been done to nullify these tenders and the financial loss caused, does carry some weight. That a huge financial loss to the Corporation has also taken place is something for the Corporation to probe, and take remedial action against the persons responsible. The impugned judgment of the High Court is therefore, upheld on the ground that natural justice has indeed been breached in the facts of the present case, not being a case of admitted facts leading to the grant of a futile writ, and that prejudice has indeed been caused to Respondent No.1. In view of this finding, there is no need to examine the other contentions raised by the parties. [Paras 40, 41][619-F-H; 620-A-C]
1.6 The submission that as respondent no.1 is working for the Corporation in another subsequent tender, he is not going to claim damages for the lost period post cancellation of the tender is reiterated. This being the case, and other things being equal, the earnest money deposit and security deposit made by him is ordered to be returned by the Corporation within a period of eight weeks from today. He may also request the Corporation to pay any amount that remained unpaid for work actually done, which the Corporation will, after a hearing, either allow or reject for reasons to be stated. The appeals arising out of SLP (C) 5136 of 2020 and SLP (C) 7351 of 2020 are thus partially allowed, and the impugned judgment of the High Court of Judicature at Allahabad dated 11.12.2019 is set aside only to the extent indicated. [Paras 42, 43][620-C-E]
1.7 Insofar as the appeal arising out of SLP (C) No. 7364 of 2020 is concerned, the facts therein are distinct from the other two connected appeals before this Court only to the extent that Respondent No.1 therein, M/s Dharam Raj Singh, was the successful bidder for the Tendu (Sonbhadra) region, which award of tender was also cancelled by the Corporation’s order dated 26.07.2019. The judgment impugned in this appeal, dated 07.01.2020 of the High Court of Judicature of Allahabad (Lucknow Bench), allowed M/s Dharam Raj Singh’s writ petition challenging the cancellation order, stating that it was to be governed by the judgment of the High Court of Judicature at Allahabad dated 11.12.2019. As a result, the judgment in the two connected appeals, and all consequential reliefs granted, will apply on all fours to this appeal also. [Para 44][620-F-G] ABL International Ltd. and Anr. v. Export Credit Guarantee Corporation of India Ltd. and Ors. [2004]
3 SCC 553; Food Corp. of India and Anr. v. SEIL Ltd. and Ors.(2008) 3 SCC 440 : [2008] 1 SCR 663; Central Bank of India v. Devi Ispat Ltd. and Ors. (2010)
11 SCC 186 : [2010] 9 SCR 417; Surya Constructions v. State of U.P. and Ors. (2019) 16 SCC 794; Verigamto Naveen v. Govt. of A.P. and Ors. (2001) 8 SCC 344 : 2001 ( 3 ) Suppl. SCR 112; Rishi Kiran Logistics v. Board of Trustees of Kandla Port and Ors. (2015) 13 SCC 233 : [2014] 5 SCR 411; Joshi Technologies International Inc. v. Union of India and Ors. (2015) 7 SCC 728 : [2015] 6 SCR 1042; Dharampal Satyapal Ltd. v. Dy. Comm. Of Central Excise, Gauhati and Ors. (2015) 8 SCC 519 : [2015] 6 SCR 437; State Bank of Patiala and Ors. v. S.K. Sharma (1996) 3 SCC 364 : 1996 ( 3 ) SCR 972; M.C. Mehta v. Union of India and Ors. (1999) 6 SCC 237 : [1999] 3 SCR 1173; Aligarh Muslim University and Ors. v. Mansoor Ali Khan (2000)
7 SCC 529; 2000 ( 2 ) Suppl. SCR 684; Union of India and Ors. v. Alok Kumar (2010) 5 SCC 349 : [2010] 5 SCR 35 – relied on.
Raunaq International Ltd. v. I.V.R. Construction Ltd. and Ors. (1999) 1 SCC 492: [1998] 3 Suppl. SCR 421; Jagdish Mandal v. State of Orissa and Ors. (2007) 14 SCC 517; Michigan Rubber (India) Ltd. v.State of Karnataka and Ors. (2012) 8 SCC 216 :[ 2012] 8 SCR 128; Tata Cellular v. Union of India (1994) 6 SCC
651 : [1994] 2 Suppl. SCR 122; Rajasthan State Housing Board and Anr. v. G.S. Investments and Anr. (2007) 1 SCC 477 : [2006] 7 Suppl. SCR 868 – distinguished.
Noble Resources v. State of Orissa and Anr. (2006) 10 SCC 236 : [ 2006] 6 Suppl. SCR 53; Radhakrishna Agarwal and Ors. v. State of Bihar and Ors. (1977) 3 SCC 457 : [1977] 3 SCR 249 – referred to.
On Justice- Book by J.R. Lucas (Page 86) – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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