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2020 (10) TMI 746

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....ent of Handling and Transport Contractor for food grain in FCI and alleged material etc." of the following depots/centres of Uttar Pradesh for a period of two years: Sl. No. Name of Depot/Centre Workable capacity (in M.T.) Estimated annual value of contract Earnest money @20% security amount through RTGS/NEFT Security deposit (in rupees) 1. Mirzapur 8430 50000000.00 1000000.00 5000000.00 2. Bhawanipur PEG-1 30000 60000000.00 1200000.00 6000000.00 3. Bhawanipur PEG-II 10000 10000000.00 200000.00 1000000.00 4. Tendu (Sonbhadra) 61400 9000000.00 180000.00 900000.00 3. Technical bids for these four centres were opened on 17.04.2018. Price bids of technically qualified bidders were then opened on 23.04.2018. The price bids that were received, so far as these four centres were concerned, were as follows: "PEG Bhawanipur-I Centre Serial No. Bidder Rate 1. Maa Bhawani Transport 222% ASOR 2. Iqbal Ahmad Ansari 154% ASOR 3. Suresh Singh 174% ASOR PEG Bhawanipur-II Centre Serial No. Bidder Rate 1. ....

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....ts in Vindhyanchal Division. xxx xxx xxx Tendering was done in Vindhyanchal Division on 16.04.2018, wherein low rate of tenders were received. Issued tenders are cancelled on 05.05.2018 without telling any reason and tender of centres cancelled on 16.06.2018 were re-tendered wherein rates are too high in new tenders than older one and by allotting work on higher rates work is being done. Kindly assure providing report within five days in respect of aforesaid and in respect of all points mentioned in enclosed letters." 7. 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 tender dated 01.04.2018, and 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 dated 01.06.2018, and found the latter rates to be extremely high. In his report dated 14.06.2019, he therefore ultimately concluded: "It is mentionable that cancellation of e-tendering process done earlier through Advertisement No.1.1....

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....ate to 314 percent, 341 percent, 338 percent, and 290 percent at high rate conformation of recommendation of appointment of regular contractors have been given for work of Indian Fertilizer Corporation Handling and Transport. It is mentioned that despite the high rate from determined rate regional manager neither any market survey was conducted regarding high rate nor he mentioned in his letter and he recommended the acceptance irresponsibly. Hence Sh. Madhukar Gupta State Regional Manager has not followed his duty and responsibility and he is responsible for high rate and acceptance without any reason. 5. Even corporation Headquarter did not deem fit to take any action regarding high rate from determined rate. What was examined by Headquarter it is not cleared. 6. In this regard categorically it is not possible to determine the financial loss since neither in this case, opportunity to contest has been given and nor market survey has been conducted. On the basis of that formality rate can be determined. Damage has been surely caused. But it cannot be explained. Record is sent for perusal and necessary action." 9. Given these two reports, the Special Secretary, ....

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....he prayer in the Writ Petition, set out four questions that arose before it as follows: "(a) Whether the two enquiry reports are procedurally defective inasmuch as the findings returned thereunder are based upon no material and hence perverse; (b) Whether the respondent Managing Director was justified in cancelling the written agreement with the petitioner after a lapse of a year, without putting him to notice; (c) Whether being an autonomous body, Corporation could not have been directed to take action in particular manner and Managing Director was not justified in cancelling the agreement under an executive fiat of Special Secretary; and; (d) Whether the order passed by Managing Director is vitiated for bias as he himself had been Inquiry Officer and without inviting the petitioner to explain in his defence he himself conducted the inquiry and then on the basis of report prepared by him, he proceeded to cancel the agreement." 13. The High Court concluded that since the entire proceedings were conducted behind the back of Respondent No.1, and considering that the tender notice dated 01.06.2018 had never been challenged by anybody in a court o....

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.... void being against the law. If in all the above three stages the petitioner cannot be held to be guilty in any manner for manipulating the things and obtaining the tender by hatching any conspiracy in connivance with the officials of the Corporation, cancellation of the agreement suddenly by the Managing Director holding that the entire Notice Inviting Tender was bad, certainly required a notice and opportunity of hearing to be afforded to the petitioner prior to passing of such an order. It is a settled principle of law that in administrative exercise of power, the authority exercising power has to not only render due application of mind but also to follow the procedure which would not render the entire action arbitrary. It is settled legal principle that whatever is arbitrary, is hit by Article 14 of the Constitution of India and in the present case we find that only the procedure that was followed by the respondents in taking impugned action was not only quite ex parte but also under the executive fiats of the Special Secretary of the Government which was quite uncalled for." 14. Having so held, the High Court then concluded: "Order impugned is basically based on th....

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....t could not be characterised as arbitrary, given the huge increase in rates in such a short period for the same works. Further, he argued that the case law on natural justice showed that it was not an inflexible straitjacket, but had to be used wisely and well, and cited a number of judgments of this Court for the proposition that even though natural justice may be breached in the facts of a given case, if otherwise such breach does not result in prejudice, it would be a mere exercise in futility to set aside the order and remand it to the authorities to pass an order after hearing the affected party. He also argued that as of today, the two year term of the contract is over, and this very contractor, i.e. Respondent No.1, is doing the same work awarded at Mirzapur on 21.03.2020 at rates (139% ASOR) which are much lower than the rates tendered for previously, as is the successful tenderer Tilotama Devi on and from 31.09.2019 so far as Bhawanipur-II is concerned, which was awarded at 221% ASOR. Dr. Singhvi also argued that the writ court ought not to have interfered in contractual matters, and ought to have left Respondent No.1 to approach a civil court to file a suit for appropriat....

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....nstruction of the Special Secretary of the Government of U.P. dated 16.07.2019. He also fairly argued that his statement may be recorded that his client is not going to claim damages for the period of the agreement post cancellation, and that in fairness, the earnest money deposit and security deposit made by his client ought to be returned by the Corporation. 18. Having heard learned counsel for all the parties, one thing becomes clear. Despite the fact that the prayer in the Writ Petition filed by Respondent No.1 was set out in the very beginning of the impugned judgment, confining itself to the cancellation of the second tender, the impugned judgment went ahead and not only set aside such cancellation vide the letter dated 26.07.2019, but also went ahead and set aside the Managing Director's report dated 14.06.2019, and the Special Secretary's order of 16.07.2019, which required the taking of disciplinary action and recovery of financial loss from those who are responsible. Shri Rakesh Dwivedi also fairly conceded that his client had not asked for any relief qua the delinquent officers. This being the case, we set aside the impugned judgment insofar as it has quashed the Mana....

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....on a given set of facts if a State acts in an arbitrary manner even in a matter of contract, an aggrieved party can approach the court by way of writ under Article 226 of the Constitution and the court depending on facts of the said case is empowered to grant the relief. This judgment in K.N. Guruswamy v. State of Mysore was followed subsequently by this Court in the case of D.F.O. v. Ram Sanehi Singh [(1971) 3 SCC 864] wherein this Court held: "By that order he has deprived the respondent of a valuable right. We are unable to hold that merely because the source of the right which the respondent claims was initially in a contract, for obtaining relief against any arbitrary and unlawful action on the part of a public authority he must resort to a suit and not to a petition by way of a writ. In view of the judgment of this Court in K.N. Guruswamy case there can be no doubt that the petition was maintainable, even if the right to relief arose out of an alleged breach of contract, where the action challenged was of a public authority invested with statutory power." 11. In the case of Gujarat State Financial Corpn. v. Lotus Hotels (P) Ltd. [(1983) 3 SCC 379] this Court....

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....ove case has, in any manner, departed from the view expressed in the earlier judgments in the case cited hereinabove. This Court in the case of LIC of India proceeded on the facts of that case and held that a relief by way of a writ petition may not ordinarily be an appropriate remedy. This judgment does not lay down that as a rule in matters of contract the court's jurisdiction under Article 226 of the Constitution is ousted. On the contrary, the use of the words "court may not ordinarily examine it unless the action has some public law character attached to it" itself indicates that in a given case, on the existence of the required factual matrix a remedy under Article 226 of the Constitution will be available. The learned counsel then relied on another judgment of this Court in the case of State of U.P. v. Bridge & Roof Co. (India) Ltd. [(1996) 6 SCC 22] wherein this Court held: Further, the contract in question contains a clause providing inter alia for settlement of disputes by reference to arbitration. The arbitrators can decide both questions of fact as well as questions of law. When the contract itself provides for a mode of settlement of disputes arising from ....

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....of State action so as to attract the provisions of Article 14 of the Constitution of India. The broad proposition that all such questions are to be settled by civil courts, and not by writ petitions, has been expressly dissented from, as "much water has flown" since this judgment, which was delivered during the emergency when the fundamental rights of persons were suspended. Thus, in Verigamto Naveen v. Govt. of A.P. and Ors. (2001) 8 SCC 344, this Court stated: "21. On the question that the relief as sought for and granted by the High Court arises purely in the contractual field and, therefore, the High Court ought not to have exercised its power under Article 226 of the Constitution placed very heavy reliance on the decision of the Andhra Pradesh High Court in Y.S. Raja Reddy v. A.P. Mining Corpn. Ltd. [(1988) 2 An LT 722] and the decisions of this Court in Har Shankar v. Dy. Excise & Taxation Commr. [(1975) 1 SCC 737], Radhakrishna Agarwal v. State of Bihar [(1977) 3 SCC 457], Ramlal & Sons v. State of Rajasthan [(1976) 1 SCC 112], Shiv Shankar Dal Mills v. State of Haryana [(1980) 2 SCC 437], Ramana Dayaram Shetty v. International Airport Authority of India [(1979) 3 S....

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....iscussion that preceded which we have pointed out above. As per this, no doubt, there is no absolute bar to the maintainability of the writ petition even in contractual matters or where there are disputed questions of fact or even when monetary claim is raised. At the same time, discretion lies with the High Court which under certain circumstances, it can refuse to exercise. It also follows that under the following circumstances, "normally", the Court would not exercise such a discretion: 69.1. The Court may not examine the issue unless the action has some public law character attached to it. 69.2. Whenever a particular mode of settlement of dispute is provided in the contract, the High Court would refuse to exercise its discretion under Article 226 of the Constitution and relegate the party to the said mode of settlement, particularly when settlement of disputes is to be resorted to through the means of arbitration. 69.3. If there are very serious disputed questions of fact which are of complex nature and require oral evidence for their determination. 69.4. Money claims per se particularly arising out of contractual obligations are normally not ....

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....ation there is denial of equality before law or equal protection of law or if it can be shown that action of the public authorities was without giving any hearing and violation of principles of natural justice after holding that action could not have been taken without observing principles of natural justice. 70.8. If the contract between private party and the State/instrumentality and/or agency of the State is under the realm of a private law and there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court under Article 226 of the Constitution of India and invoking its extraordinary jurisdiction. 70.9. The distinction between public law and private law element in the contract with the State is getting blurred. However, it has not been totally obliterated and where the matter falls purely in private field of contract, this Court has maintained the position that writ petition is not maintainable. The dichotomy between public law and private law rights and remedies would depend on the factual matrix of each case and the distinction between the public l....

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.... other judgments cited by Dr. Singhvi in his Written Submissions are distinguishable on facts, as all of them deal with either Public-Interest Litigations or tender applicants who have been turned down, who approach the writ court under Article 226 and ask for stay orders against a proposed project, which may then be considerably delayed and escalate cost, this being contrary to public interest. It is in these situations that observations have been made that before entertaining such writ petitions and passing interim orders, the writ court must be very careful to weigh conflicting public interests, and should intervene only when there is an overwhelming public interest in entertaining the writ petition. This is what was held in Raunaq International Ltd. v. I.V.R. Construction Ltd. and Ors. (1999) 1 SCC 492 at paragraphs 11 to 13, 24 and 25. To similar effect is the judgment in Jagdish Mandal v. State of Orissa and Ors. (2007) 14 SCC 517 at paragraph 22. 25. Likewise, this Court's judgment in Michigan Rubber (India) Ltd. v. State of Karnataka and Ors. (2012) 8 SCC 216 again deals with a writ court not interfering in the award of a tender, having regard to the public interest, which ....

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....its writ to compel the observance of natural justice, not because it is not necessary to observe natural justice, but because Courts do not issue writs which are "futile" - see S.L. Kapoor v. Jagmohan and Ors. (1980) 4 SCC 379 at paragraph 24. In P.D. Agrawal v. State Bank of India and Ors. (2006) 8 SCC 776, however, the Court observed that this statement of the law has undergone a "sea change", as follows: "39. Decision of this Court in S.L. Kapoor v. Jagmohan [(1980) 4 SCC 379] whereupon Mr Rao placed strong reliance to contend that non-observance of principle of natural justice itself causes prejudice or the same should not be read "as it causes difficulty of prejudice", cannot be said to be applicable in the instant case. The principles of natural justice, as noticed hereinbefore, have undergone a sea change. In view of the decisions of this Court in State Bank of Patiala v. S.K. Sharma [(1996) 3 SCC 364] and Rajendra Singh v. State of M.P. [(1996) 5 SCC 460] the principle of law is that some real prejudice must have been caused to the complainant. The Court has shifted from its earlier concept that even a small violation shall result in the order being rendered a null....

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....atutory or relevant rules governing such enquiries. Here the infraction of the natural justice complained of was that he was not given an opportunity to rebut the materials gathered in his absence. As has been observed in On Justice by J.R. Lucas, the principles of natural justice basically, if we may say so, emanate from the actual phrase "audi alteram partem" which was first formulated by St. Augustine (De Duabus Animabus, XIV, 22 J.P. Migne, PL. 42, 110). xxx xxx xxx 32. The basic concept is fair play in action administrative, judicial or quasi-judicial. The concept of fair play in action must depend upon the particular lis, if there be any, between the parties. If the credibility of a person who has testified or given some information is in doubt, or if the version or the statement of the person who has testified, is, in dispute, right of cross-examination must inevitably form part of fair play in action but where there is no lis regarding the facts but certain explanation of the circumstances there is no requirement of cross-examination to be fulfilled to justify fair play in action. When on the question of facts there was no dispute, no real prejudice has be....

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....ee Gurjeewan Garewal (Dr.) v. Dr. Sumitra Dash [(2004) 5 SCC 263].] The principles of natural justice are required to be complied with having regard to the fact situation obtaining therein. It cannot be put in a straitjacket formula. It cannot be applied in a vacuum without reference to the relevant facts and circumstances of the case." 49. The High Court, therefore, must be held to have erred in law in holding that the principles of natural justice were required to be complied with." 31. In the five-Judge Bench decision in Managing Director, ECIL and Ors. v. B. Karnakumar and Ors. (1993) 4 SCC 727, this Court, after discussing the constitutional requirement of a report being furnished under Article 311(2), held thus: "30. Hence the incidental questions raised above may be answered as follows: xxx xxx xxx [v] The next question to be answered is what is the effect on the order of punishment when the report of the enquiry officer is not furnished to the employee and what relief should be granted to him in such cases. The answer to this question has to be relative to the punishment awarded. When the employee is dismissed or removed from service a....

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....l appellate or revisional authority), there would be neither a breach of the principles of natural justice nor a denial of the reasonable opportunity. It is only if the Court/Tribunal finds that the furnishing of the report would have made a difference to the result in the case that it should set aside the order of punishment." (emphasis supplied) 32. B. Karunakar (supra) was followed by this Court in Haryana Financial Corporation and Anr. v. Kailash Chandra Ahuja (2008) 9 SCC 31, as follows: "21. From the ratio laid down in B. Karunakar [(1993) 4 SCC 727] it is explicitly clear that the doctrine of natural justice requires supply of a copy of the inquiry officer's report to the delinquent if such inquiry officer is other than the disciplinary authority. It is also clear that non-supply of report of the inquiry officer is in the breach of natural justice. But it is equally clear that failure to supply a report of the inquiry officer to the delinquent employee would not ipso facto result in the proceedings being declared null and void and the order of punishment non est and ineffective. It is for the delinquent employee to plead and prove that non-supply of such r....

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....e cannot be applied in straitjacket formula, the aforesaid instances are given. We have highlighted the jurisprudential basis of adhering to the principles of natural justice which are grounded on the doctrine of procedural fairness, accuracy of outcome leading to general social goals, etc. Nevertheless, there may be situations wherein for some reason-perhaps because the evidence against the individual is thought to be utterly compelling-it is felt that a fair hearing "would make no difference"-meaning that a hearing would not change the ultimate conclusion reached by the decisionmaker-then no legal duty to supply a hearing arises. Such an approach was endorsed by Lord Wilberforce in Malloch v. Aberdeen Corpn. [(1971) 1 WLR 1578], who said that: (WLR p. 1595) "... A breach of procedure ... cannot give [rise to] a remedy in the courts, unless behind it there is something of substance which has been lost by the failure. The court does not act in vain." Relying on these comments, Brandon L.J. opined in Cinnamond v. British Airports Authority [(1980) 1 WLR 582] that: (WLR p. 593) "... no one can complain of not being given an opportunity to make representatio....

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.... in dispute and it is further clear that no useful purpose would have been served if the Board had served a show-cause notice on the petitioner. He says that in view of these circumstances it was not necessary for the Board to have issued a show-cause notice. We are unable to accept this contention. Whether a duty arises in a particular case to issue a show-cause notice before inflicting a penalty does not depend on the authority's satisfaction that the person to be penalised has no defence but on the nature of the order proposed to be passed." 43. In view of the aforesaid enunciation of law, Mr Sorabjee may also be right in his submission that it was not open for the authority to dispense with the requirement of principles of natural justice on the presumption that no prejudice is going to be caused to the appellant since the judgment in R.C. Tobacco [(2005) 7 SCC 725] had closed all the windows for the appellant. 44. At the same time, it cannot be denied that as far as courts are concerned, they are empowered to consider as to whether any purpose would be served in remanding the case keeping in mind whether any prejudice is caused to the person against whom ....

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....s of procedural and substantive provisions of law which embody the principles of natural justice which, when infracted, must lead to prejudice being caused to the litigant in order to afford him relief, as follows: "32. Now, coming back to the illustration given by us in the preceding para, would setting aside the punishment and the entire enquiry on the ground of aforesaid violation of sub-clause (iii) be in the interests of justice or would it be its negation? In our respectful opinion, it would be the latter. Justice means justice between both the parties. The interests of justice equally demand that the guilty should be punished and that technicalities and irregularities which do not occasion failure of justice are not allowed to defeat the ends of justice. Principles of natural justice are but the means to achieve the ends of justice. They cannot be perverted to achieve the very opposite end. That would be a counterproductive exercise. 33. We may summarise the principles emerging from the above discussion. (These are by no means intended to be exhaustive and are evolved keeping in view the context of disciplinary enquiries and orders of punishment imposed by ....

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....received a fair hearing considering all things. Now, this very aspect can also be looked at from the point of view of directory and mandatory provisions, if one is so inclined. The principle stated under (4) hereinbelow is only another way of looking at the same aspect as is dealt with herein and not a different or distinct principle. (4)(a) In the case of a procedural provision which is not of a mandatory character, the complaint of violation has to be examined from the standpoint of substantial compliance. Be that as it may, the order passed in violation of such a provision can be set aside only where such violation has occasioned prejudice to the delinquent employee. (b) In the case of violation of a procedural provision, which is of a mandatory character, it has to be ascertained whether the provision is conceived in the interest of the person proceeded against or in public interest. If it is found to be the former, then it must be seen whether the delinquent officer has waived the said requirement, either expressly or by his conduct. If he is found to have waived it, then the order of punishment cannot be set aside on the ground of the said violation. If, on ....

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....re may be situations where the interests of State or public interest may call for a curtailing of the rule of audi alteram partem. In such situations, the Court may have to balance public/State interest with the requirement of natural justice and arrive at an appropriate decision." 35. In M.C. Mehta v. Union of India and Ors. (1999) 6 SCC 237, the expression "admitted and indisputable facts" laid down in Jagmohan (supra), as also the interesting divergence of legal opinion on whether it is necessary to show "slight proof" or "real likelihood" of prejudice, or the fact that it is an "open and shut case", were all discussed in great detail as follows: "16. Courts are not infrequently faced with a dilemma between breach of the rules of natural justice and the Court's discretion to refuse relief even though the rules of natural justice have been breached, on the ground that no real prejudice is caused to the affected party. xxx xxx xxx 22. Before we go into the final aspects of this contention, we would like to state that cases relating to breach of natural justice do also occur where all facts are not admitted or are not all beyond dispute. In the con....

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....7-63) contending that Malloch [(1971) 1 WLR 1578] and Glynn [(1971) 1 WLR 487] were wrongly decided. Foulkes (Administrative Law, 8th Edn., 1996, p. 323), Craig (Administrative Law, 3rd Edn., p. 596) and others say that the court cannot prejudge what is to be decided by the decision-making authority de Smith (5th Edn., 1994, paras 10.031 to 10.036) says courts have not yet committed themselves to any one view though discretion is always with the court. Wade (Administrative Law, 5^th Edn., 1994, pp. 526-30) says that while futile writs may not be issued, a distinction has to be made according to the nature of the decision. Thus, in relation to cases other than those relating to admitted or indisputable facts, there is a considerable divergence of opinion whether the applicant can be compelled to prove that the outcome will be in his favour or he has to prove a case of substance or if he can prove a "real likelihood" of success or if he is entitled to relief even if there is some remote chance of success. We may, however, point out that even in cases where the facts are not all admitted or beyond dispute, there is a considerable unanimity that the courts can, in exercise of their "di....

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....in State Bank of Patiala v. S.K. Sharma [(1996) 3 SCC 364]. In that case, the principle of "prejudice" has been further elaborated. The same principle has been reiterated again in Rajendra Singh v. State of M.P. [(1996) 5 SCC 460] 25. The "useless formality" theory, it must be noted, is an exception. Apart from the class of cases of "admitted or indisputable facts leading only to one conclusion" referred to above, there has been considerable debate on the application of that theory in other cases. The divergent views expressed in regard to this theory have been elaborately considered by this Court in M.C. Mehta referred to above. This Court surveyed the views expressed in various judgments in England by Lord Reid, Lord Wilberforce, Lord Woolf, Lord Bingham, Megarry, J. and Straughton, L.J. etc. in various cases and also views expressed by leading writers like Profs. Garner, Craig, de Smith, Wade, D.H. Clark etc. Some of them have said that orders passed in violation must always be quashed for otherwise the court will be prejudging the issue. Some others have said that there is no such absolute rule and prejudice must be shown. Yet, some others have applied via media rules.....

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....ide for these reasons. 88. It will be useful to refer to the judgment of this Court in Haryana Financial Corpn. v. Kailash Chandra Ahuja [(2008) 9 SCC 31] at pp. 38-39 where the Court held as under: (SCC para 21) "21. From the ratio laid down in B. Karunakar it is explicitly clear that the doctrine of natural justice requires supply of a copy of the enquiry officer's report to the delinquent if such enquiry officer is other than the disciplinary authority. It is also clear that non-supply of report of the enquiry officer is in breach of natural justice. But it is equally clear that failure to supply a report of the enquiry officer to the delinquent employee would not ipso facto result in the proceedings being declared null and void and the order of punishment non est and ineffective. It is for the delinquent employee to plead and prove that non-supply of such report had caused prejudice and resulted in miscarriage of justice. If he is unable to satisfy the court on that point, the order of punishment cannot automatically be set aside." 89. The well-established canons controlling the field of bias in service jurisprudence can reasonably be extended to ....

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.... 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 c....