Summary
The Court maintained the setting aside of the warehousing tender cancellation because the contractor had suffered actual prejudice from the absence of a hearing. Breach of natural justice does not automatically invalidate every decision; prejudice must be assessed in context. The High Court nevertheless exceeded the relief sought by also quashing inquiry reports and disciplinary directions, which were restored without deciding individual culpability.
Issues
- Whether the contractual dispute was amenable to writ review.
- Whether cancellation without hearing caused prejudice warranting interference.
- Whether the High Court could quash the inquiry reports and disciplinary directions beyond the challenge to cancellation.
Provisions considered
- Articles 14 and 226, Constitution of IndiaApplied public law review to arbitrary State action and breach of natural justice in the contractual setting. (¶¶ 19, 20, 21, 22, 23, 24, 25)
Held
- A State contract does not exclude writ jurisdiction where the challenge has a public law element involving arbitrariness or breach of natural justice. The cancellation challenged here attracted that jurisdiction. (¶¶ 19, 20, 21, 22, 23, 24, 25)
- Breach of the hearing rule does not itself establish prejudice. Infraction of statutory provisions embodying natural justice generally requires prejudice, except mandatory provisions serving public as well as individual interests. Admission, non-denial, waiver, acquiescence or estoppel may exclude prejudice on the facts. (¶ 39)
- Where admitted or indisputable facts admit only one conclusion, a court may decline a futile remand. That assessment belongs to the court, rather than the authority predicting for itself that a hearing would be useless. Prejudice must exist or be definitely inferred as likely, rather than rest on mere apprehension or reasonable suspicion. (¶¶ 33, 39)
- Actual prejudice was established: cancellation deprived the contractor of the remaining contractual period and entailed exclusion from future tenders. The proposed explanation concerning rates in neighbouring regions could not be dismissed as futile. The decision rested on natural justice without requiring adjudication of the other challenges. (¶¶ 40, 41)
- The High Court exceeded the relief sought in quashing the Managing Director’s report, the Special Secretary’s report and the disciplinary directions. Restoring those matters permits lawful consequential action without predetermining guilt. (¶¶ 43, 45)
- The contractor undertook not to claim damages for the post-cancellation period. Earnest money and security were to be refunded within eight weeks, other things being equal. A request for unpaid work must be heard and decided by a reasoned order. Corresponding consequential relief extended to Dharam Raj Singh in the Tendu region. (¶¶ 42, 44)
Result
Appeals partly allowed. Setting aside of the tender cancellation maintained; the High Court’s further interference with the reports and disciplinary directions reversed. Refund and unpaid-work directions issued subject to the stated conditions and undertaking.