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Unless Prejudice Is Caused, Principles of Natural Justice Does Not Invalidate Proceedings: SC

State of U.P vs Sudhir Kumar Singh and ors, Civil Appeal no. 3498 of 2020 (arising out of SLP (c) no. 5136 of 2020) with Civil Appeal no. 3499 of 2020 (arising out of SLP (c) no. 7351 of 2020) and Civil Appeal no. 3500 of 2020 (arising out of SLP (c) no. 7364 of 2020), October 16, 2020.

The present case was decided by the Supreme Court Bench comprising Hon’ble Justice R.F. Nariman, Hon’ble Justice Navin Sinha, and Hon’ble Justice K.M. Joseph.

The matter is an appeal against the impugned order of the High Court of Allahabad which has held the termination of the agreement of tender was unsustainable in law. The agreement of tender which was issued on 1.04.2018 was terminated on 26.7.2019 by the Managing director of U.P. State Warehousing Corporation based on the letter which is issued by the Special Secretary, Government of U.P. on 16.07.2019 to the Managing director of the U.P. State Warehousing Corporation. The letter was issued on the basis of the reports which were submitted by the Managing director of the above corporation and the Commissioner, Vindhyachal Mandal Mirzapur, based on an inquiry which was conducted ex parte, where the respondent has not been given an opportunity of being heard.

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.”(Para 14)

As against the High Court Judgment, the parties have approached the Hon’ble Supreme Court of India. The contention of the learned counsel appearing on behalf of the Corporation is that in the Writ Petition which has been filed by the respondent, the High Court has gone beyond what has been prayed in the writ petition and not only has quashed the termination of the agreement but also quashed the enquiry report of the Managing director and as well as the order of the Special Secretary. The contention of the learned Counsel appearing on behalf of the state of the U.P has been that letter dated 16.07.2019 by the Special Secretary could not have been set aside by the high court as no prayer has been made regarding the letter in the Writ Petition before the High Court.

The contention of the Counsel on behalf of the Respondent has been that, his client has successfully worked towards the contract for a period of one year and the cancellation of the tender was done behind the client’s back, and was not given an opportunity of being heard.

Regarding the question as to whether any prejudice has been caused to the respondent, the court has considered the following judgments Dharampal Satyapal Ltd. v. Dy. Comm. Of Central Excise, Gauhati and Ors. (2015) 8 SCC 519, State Bank of Patiala and Ors. v. S.K. Sharma (1996) 3 SCC 364, M.C. Mehta v. Union of India and Ors. (1999) 6 SCC 23, Aligarh Muslim University and Ors. v. Mansoor Ali Khan (2000) 7 SCC 529 and Union of India and Ors. v. Alok Kumar (2010) 5 SCC 349.

The Supreme Court observed that,

(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)

The Supreme Court held that,

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. (Para 41)

Lalitha Sarvani. A

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