Analysing the Recent Supreme Court Ruling Regarding the Principles of Natural Justice

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Introduction
The principle of natural justice is derived from the word ‘Jus Natural’ of the Roman law and it is closely related to common law and moral principles but is not codified or derived from any statute or constitution. The three pillars on which the principles of natural justice rest are adequate notice, fair hearing, and absence of bias. Fundamentally, principles of natural justice are based on the Latin phrase known as “Audi Alteram Partem” (Audiatur Et Altera Pars) which means “hear the other side too”. The concept of audi alteram partem operates on the principle that every person must get an opportunity of being heard and representing his side before any orders are passed against him in any Court of Law.

Principles of natural justice are the very basic foundation of the Indian legal system /judiciary and act as the torchbearer /guardian of justice. The Hon’ble Supreme Court recently looked into determining inter alia, the parameters for the application of principles of natural justice in the case of State of Uttar Pradesh v. Mr. Sudhir Kumar Singh and Others[1] where Hon’ble Supreme Court held that unless prejudice is caused, mere violation of principles of natural justice cannot be a ground to invalidate proceedings. Further, 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.

In India, the principles of natural justice find refuge in Article 14 & Article 21 of the Constitution of India. Article 14 guarantees equality before the law to all the citizens of India and Article 21 ensures the right to life and liberty to all the persons in India.

Facts of the Case

1. An e-tender notice was issued on January 06, 2018, by the U.P. State Warehousing Corporation (“Corporation”) being the Appellant for unloading/loading of food grains/fertilizer bags from/into railway wagons, trucks, etc., stacking the food grains/fertilizers in bags, bagging, weighing, standardization, cleaning of food grains/fertilizers, etc. and transporting of food grains/fertilizers, etc. from Railway Station to Corporation go-downs or vice versa or transporting them from any place to any other place for the Vindhyachal (Mirzapur) Region.

2. On January 16, 2018, the said tender was cancelled by the Corporation due to “administrative reasons”. On April 01, 2018, an e-tender was again published on 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 depots/centres of Uttar Pradesh for two years. Technical bids for four centres were opened on April 17, 2018, and price bids of technically qualified bidders were then opened on April 23, 2018.

3. On May 04, 2018, the then Managing Director of the Appellant Corporation cancelled the said tender on the ground that it was “impractical” to go ahead with such tender. As a result, on June 01, 2018, for the same region, the said tender was reissued for the same workable capacity and estimated annual value of the contract for two years.

4. Accordingly, Mr. Sudhir Kumar Singh i.e., Respondent No. 1 submitted his bid and was declared as the successful bidder for the Bhawanipur-I centre, at the rate of 341% ASOR, a tender was allotted in his favour. Thereafter, on July 13, 2018, an agreement was entered into between the Corporation and Respondent No.1 for the execution of the work under the tender, which began on and from that day, and continued for over one year.

5. Meanwhile, in May 2019, complaints were made by one Shri Pramod Kumar Singh of the Purvanchal Trucker Owner’s Association to the Principal Secretary of Appellant Government. The said complaints were forwarded to the Managing Director of the Corporation with directions to submit a report within five days. The Managing Director conducted an ex-parte inquiry insofar as Respondent No.1 was concerned. Further, the Commissioner, Vindhyachal Mandal Mirzapur, also conducted an ex-parte investigation and both submitted reports based on which the Special Secretary, Government of U.P /Appellant observed that the role of Officer of Regional Level (Vindhyachal Division) and accepting Officer and erstwhile Managing Director and officers concerned with Headquarter, was doubtful. Thus, the tenders were cancelled on July 26, 2019. Further, disciplinary action was taken against these concerned officers.

6. Respondent No.1 filed a Writ Petition before the Hon’ble Allahabad High Court, challenging 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 July 26, 2019, of the tender dated June 01, 2018.

7. The Hon’ble Allahabad High Court held that the Order impugned was based on the inquiry report prepared by the Managing Director himself and that the inquiry was conducted in an ex-parte manner and no opportunity of hearing was given to Respondent No.1 before passing the order impugned, which had the effect of terminating the agreement for no justifiable reason. The element of bias, therefore, under the circumstances at the end of Managing Director, could not be ruled out. The order impugned, therefore, terminating the agreement dated July 26, 2019, could not be sustained in law. The High Court quashed the order dated July 26, 2019, and the inquiry report dated June 14, 2019, submitted by the Managing Director as well as the order passed by the Special Secretary dated July 26, 2019.

8. Aggrieved by the said order of Hon’ble Allahabad High Court the Appellant Corporation filed an appeal before the Hon’ble Supreme Court.

Relevant Submissions Made by the Appellant Before the Hon’ble Supreme Court

The Hon’ble Allahabad High Court ought to have appreciated the huge financial loss caused by awarding the contract at such rates and ought not to have interfered with the cancellation of the tender as the same could not be characterized as arbitrary owing to the huge increase in rates in such a short period for the same works. Thus, there was no prejudice caused.

The reliance was also placed on Judgement of Rishi Kiran Logistics v. Board of Trustees of Kandla Port and Ors,[2] wherein the Supreme Court held that a writ petition under Article 226 of the Constitution of India, being a public law remedy, a “public law element” should be present on facts before Article 226 of the Constitution of India can be invoked.

Relevant Submissions Made by the Respondent No. 1 Before the Hon’ble Supreme Court

1. The cancellation of the tender was done behind his back and had an opportunity of hearing been given to the Respondent No.1, it 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 had been cancelled.

2. Further, in counter to the arguments, reliance was placed on the judgement of Nawabkhan Abbaskhan v. State of Gujarat wherein it was held 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.

3. Therefore, the instant case involved a “public law element” as Respondent No. 1 had knocked at the doors of the writ court on the ground of breach of the audi alteram partem rule, as the entire proceedings leading to the cancellation of the tender, together with the cancellation itself, were done on an ex parte appraisal of the facts, behind his back.

The Hon’ble Supreme Courts Observed and Held as Follows

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 the 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. This can happen because 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 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.

6. Based on the aforementioned observations, however, the Hon’ble Supreme Court noted that the Respondent No.1 had been kept 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. Accordingly upheld the judgement of the Hon’ble Allahabad High Court.

Conclusion & Key Implications

Given the aforestated, it is clear that the courts are adopting a more cautious yet liberal approach towards the implementation of the principles of natural justice ensuring that the provisions of the law are not misused /abused. The Hon’ble Supreme Court has therefore held that in cases that involve a “public law element” and a breach of the audi alteram partem rule, the writ jurisdiction can be invoked.

[1] SLP (C) No. 7351 of 2020.

[2] (2015) 13 SCC 233.


This Article is written by Amit Vyas, Founder Associate, Sneha Nanandkar, Senior Associate and Aditya Vyas, Associate at VERTICES PARTNERS. 


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