M/S. Bharathi Human Capital Resources (Opc) PVT.LTD. vs. The State Of Telangana

Held

The Court held that the impugned proceedings dated May 30, 2025, issued by the District Collector/Chairman, were arbitrary and violative of the principles of natural justice. The Court found that the petitioner had already been renewed through proceedings dated April 26, 2025, with the approval of the District Collector, and had continued to perform services and comply with statutory obligations. The subsequent decision to displace the petitioner and allot services to the 5th respondent without issuing notice, affording an opportunity of hearing, and recording cogent reasons, fell foul of the standards of fairness and reasonableness. The Court noted that the petitioner's conduct in continuing services and making payments for April and May 2025, even after the formal contract expiry, reflected bona fides that ought to have been considered. The Court concluded that the decision-making process suffered from arbitrariness and violation of natural justice. The Court set aside the impugned proceedings and directed respondents 1 to 4 to continue the petitioner as the outsourcing agency for 2025-2026, subject to applicable contractual conditions and statutory requirements. The Court clarified that this order does not preclude future action in accordance with law after due notice and following natural justice principles if genuine deficiencies are established.

Facts

The petitioner, M/s. Bharathi Human Capital Resources (OPC) Pvt. Ltd., an empanelled outsourcing agency, had been providing manpower services to ESI Dispensaries in Sangareddy District since 2023. Their contract was renewed for 2024-2025, and they assert to have discharged their duties diligently with no complaints. They applied for renewal for 2025-2026, supported by a satisfactory service certificate from the Joint Director (Medical) and a recommendation letter from the same authority suggesting continuation for three years due to administrative benefits. The District Employment Officer, Sangareddy, had issued proceedings on April 26, 2025, indicating renewal for 2025-2026, subject to terms. However, the District Collector/Chairman, District Level Outsourcing Committee, Sangareddy, issued impugned proceedings on May 30, 2025, allotting the outsourcing contract for 2025-2026 to M/s SRR Enterprises, the 5th respondent, without notice to the petitioner. The petitioner continued services and paid salaries/contributions for April and May 2025 after the formal contract expiry.

Key Issues

1. Whether the action of the 2nd respondent (District Collector/Chairman) in issuing proceedings dated May 30, 2025, allotting outsourcing services to the 5th respondent, M/s SRR Enterprises, is illegal, arbitrary, and violative of the principles of natural justice and Articles 14 and 21 of the Constitution of India, despite the petitioner having received a renewal recommendation and prior renewal proceedings? Petitioner's arguments: The petitioner contended that the impugned proceedings were issued without notice or an opportunity of hearing, violating the principles of natural justice. They argued that the action was arbitrary and discriminatory, violating Articles 14 and 21 of the Constitution. They relied on their satisfactory service record, the renewal proceedings dated April 26, 2025, and the recommendation letter from the Joint Director (Medical) as creating a legitimate expectation. They also cited G.O.Rt.No.3969 dated 09.07.2007, which contemplates a minimum engagement period of three years for outsourcing agencies. Respondents' arguments: The respondents argued that the State and its instrumentalities possess a certain degree of discretion in matters relating to award, renewal, or termination of contracts. However, the judgment does not explicitly detail the respondents' specific counter-arguments regarding the procedural fairness or the validity of the petitioner's claims, beyond the general assertion of discretion.