M/S.Vijendra Info Soft Private Limited vs. The State Of Telangana

Held

The Court held that the impugned proceedings dated September 4, 2025, were unsustainable in law due to procedural infirmity, specifically the violation of the principles of natural justice and the absence of recorded reasons. The cancellation of the Petitioner's outsourcing contract, which was granted pursuant to valid empanelment, allotment, and a formal agreement, was effected unilaterally without issuing notice, affording an opportunity of hearing, or assigning reasons. The Court reasoned that having empanelled the Petitioner and acted upon that empanelment by allotting work and executing an agreement, the Respondents could not have cancelled it without following due process. The impugned proceedings also failed to reflect consideration of the report submitted by the 4th Respondent and did not disclose any cogent justification for the abrupt cancellation. The Court relied on the principles from Escorts Ltd. v. Commissioner of Central Excise, Delhi-I, to emphasize that while administrative discretion in contracts exists, it must be exercised fairly, reasonably, and in accordance with law, and interference under Article 226 is warranted where actions are arbitrary or violate natural justice. The ratio is that a subsisting contract cannot be unilaterally cancelled without adhering to principles of natural justice, even in contractual matters.

Facts

M/s. Vijendra Info Soft Private Limited (Petitioner), an empanelled outsourcing agency, was allotted the contract for sweeping and security services for 12 ESI Dispensaries in Medchal Malkajgiri District on June 21, 2025, by the District Level Outsourcing Committee (DLOC), represented by its Chairman (2nd Respondent). A formal agreement was executed with the Joint Director (Medical), Insurance Medical Services (4th Respondent) on July 6, 2025. The Petitioner commenced work and claims to have performed diligently without any complaints. Subsequently, the 2nd Respondent, acting on a representation from M/s. SRR Enterprises (5th Respondent), issued proceedings on September 4, 2025, cancelling the Petitioner's contract and re-allotting it to the 5th Respondent. The Petitioner contends this cancellation was unilateral, without notice, explanation, or hearing, violating principles of natural justice and the subsisting agreement.

Key Issues

1. Whether the impugned proceedings dated September 4, 2025, issued by the 2nd Respondent, cancelling the Petitioner's outsourcing contract and re-allotting it to the 5th Respondent, are illegal, arbitrary, unconstitutional, and violative of the principles of natural justice, particularly in light of the subsisting agreement dated July 6, 2025, and the absence of a show-cause notice or hearing to the Petitioner? (Question of law and mixed fact and law, turning on principles of natural justice and contractual law). Petitioner's arguments: The cancellation was arbitrary and violated natural justice as it was done unilaterally without notice, explanation, or hearing. The Petitioner had a valid and subsisting agreement, and the cancellation was based solely on the representation of the 5th Respondent, ignoring the 4th Respondent's report that re-allotment was not possible. The Petitioner relies on the principles laid down in Escorts Ltd. v. Commissioner of Central Excise, Delhi-I, arguing that contractual discretion must be exercised fairly and reasonably, and interference under Article 226 is permissible for arbitrary actions or violations of natural justice. Respondents' arguments: The judgment does not explicitly record arguments from the State of Telangana (Respondents 1-3) or the 5th Respondent regarding the cancellation. However, it notes the Petitioner's contention that the contract was subject to orders of the 2nd Respondent, which the Court considered.