In the case of State of UP Vs Sudhir Kumar Singh & Ors [Civil Appeal No. 3498 of 2020] Supreme Court held that 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.

An e-tender notice was issued 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 the said tender was cancelled by the Corporation due to administrative reasons. 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.” Price bids of technically qualified bidders were then opened. Then the Managing Director of the Corporation cancelled the aforesaid tender apparently on the ground that it was ‘impractical’ to go ahead with such tender. The tender was reissued for the same workable capacity and estimated annual value of the contract.

Sudhir Kumar Singh, Respondent no 1 was declared as the successful bidder for the Bhawanipur centre. An agreement was entered into between the Corporation and Respondent for execution of the work under the tender, which began on and from that day, and continued for a period of over one year. Meanwhile, 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. 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 tenderand 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, and found the latter rates to be extremely high. Pursuant to this letter, the aforesaid tenders were then cancelled on and disciplinary proceedings were taken against certain employees of the Corporation.

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. The High Court concluded that since the entire proceedings were conducted behind the back of Respondent No.1, and considering that the tender notice 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.

Court observed that, “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. 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. 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.”

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