Case Note & Summary
The case involves appeals by the State of Uttar Pradesh against a High Court judgment that set aside the cancellation of a contract awarded to Sudhir Kumar Singh by the U.P. State Warehousing Corporation. The Corporation had issued an e-tender on 01.06.2018 for handling and transport of foodgrains in the Vindhyachal Region. Sudhir Kumar Singh was declared the successful bidder for the Bhawanipur-I centre at a rate of 341% ASOR, and an agreement was executed on 13.07.2018. The work continued for over a year. However, complaints were made by the Purvanchal Trucker Owner's Association alleging financial irregularities in the tender process. The Managing Director conducted an ex parte inquiry and found that the earlier tender dated 01.04.2018 had been cancelled on impractical grounds, and the new tender rates were excessively high. The Commissioner also conducted an investigation and found irregularities. Based on these reports, the Special Secretary directed the Managing Director to cancel the tenders and recover losses. Consequently, the Corporation cancelled the tender on 26.07.2019 without giving any notice to the contractor. Sudhir Kumar Singh filed a writ petition challenging the cancellation. The High Court set aside the cancellation order, holding that it violated principles of natural justice as the contractor was not heard. The Supreme Court, while granting leave, examined the issues. The Court noted that the cancellation was based on ex parte inquiries and the contractor was not given an opportunity to be heard. The Court held that the principles of natural justice require that a person whose contractual rights are affected must be given a hearing before an adverse order is passed. The Court also observed that the Managing Director acted as both inquiry officer and decision-maker, which could raise concerns of bias. However, the primary ground for setting aside the cancellation was the violation of natural justice. The Supreme Court dismissed the appeals, upholding the High Court's decision to quash the cancellation order. The Court directed that the contractor be given a hearing before any further action is taken.
Headnote
A) Administrative Law - Natural Justice - Right to be Heard - Cancellation of Contract - The court considered whether the Managing Director of the Corporation could cancel a contract awarded through a tender process after one year of execution without giving the contractor an opportunity of hearing - Held that the cancellation order was vitiated for violation of principles of natural justice as the contractor was not put to notice before the impugned order was passed (Paras 12-15). B) Contract Law - Tender Process - Cancellation of Tender - Financial Irregularities - The court examined whether the cancellation of the tender dated 01.06.2018 was justified on grounds of financial irregularities and high rates - Held that the Managing Director's report and the Commissioner's report indicated irregularities, but the contractor was not heard before cancellation (Paras 7-10). C) Administrative Law - Bias - Inquiry Officer - The court considered whether the Managing Director was biased as he himself conducted the inquiry and passed the cancellation order - Held that the Managing Director acted as both inquiry officer and decision-maker, which could raise issues of bias, but the main violation was lack of hearing (Paras 12-15).
Issue of Consideration
Whether the cancellation of a contract awarded through a tender process, after one year of execution, without affording the contractor an opportunity of hearing, is valid in law.
Final Decision
The Supreme Court dismissed the appeals, upholding the High Court's judgment that set aside the cancellation order. The Court held that the cancellation violated principles of natural justice as the contractor was not given a hearing before the impugned order was passed.
Law Points
- Natural justice
- Right to be heard
- Cancellation of contract
- Tender process
- Financial irregularities
- Administrative law
- Judicial review
