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State of U.P. v. Sudhir Kumar Singh & Ors.

Civil Appeal · 2020 INSC 603Decided 16 Oct 2020
Civil Appeal No. 3498 of 2020
Justice Rohinton Fali Nariman · Justice Navin Sinha · Justice K.M. Joseph

Background

The U.P. State Warehousing Corporation invited tenders for handling and transporting foodgrains/fertilizers at several depots. After bids were opened and a contractor (Respondent No.1) was awarded the contract for certain centres, the Corporation later cancelled the award without giving the contractor a hearing or an opportunity to respond, citing administrative reasons. The contractor challenged the cancellation before the Allahabad High Court, which ruled in his favour on the ground that the cancellation violated principles of natural justice (no notice or hearing was given before cancelling). The State and Corporation appealed to the Supreme Court, along with a connected appeal involving a similarly-cancelled tender for another depot.

Decision Breakdown

The Supreme Court undertook a detailed review of when a breach of natural justice (failure to give notice or a hearing) should actually result in an order being struck down, versus when courts should refuse relief because the outcome would have been the same anyway ("no prejudice" cases). It laid down that natural justice violations do not automatically invalidate a decision: the person affected must show real prejudice was caused, except where facts are genuinely disputed or no hearing at all was given on a matter of real consequence. Applying this, the Court found that since the cancellation here was not based on admitted or undisputed facts, and the contractor had suffered genuine prejudice (loss of a year's work and a three-year debarment from future tenders), the breach of natural justice was real and the High Court's ruling in his favour was upheld. The Court partially allowed the related appeal for the earnest money/security deposit issue, ordering refunds, and extended the same reasoning to the connected appeal involving another contractor.

Lesson Learnt

When a government body cancels an existing contract or benefit without giving the affected party a chance to be heard, the cancellation can be struck down for breaching natural justice, but only if the affected party can show the lack of a hearing actually caused them real harm, not merely as a technical formality.

Official source (sci.gov.in)View Judgment (PDF)

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