Reddy Enterprises vs. The State Of Ap

Held

The Court found that the impugned Memo terminating the petitioner's service was unsustainable as no notice was issued, contrary to the explicit condition in the agreement (Condition No. 8) requiring one month's notice for discontinuation. However, the Court noted that the petitioner had not assailed the impugned proceedings at an appropriate time, and by virtue of this delay, the respondent authorities had already allotted the contract to third parties. Therefore, passing any order directly concerning the impugned proceedings would affect the rights of these third parties. The Court directed that the petitioner is at liberty to make a fresh representation to the 2nd respondent for allotment of contract work for the next period after the completion of the existing contract given to third parties, within two weeks. The 2nd respondent shall consider this representation and pass appropriate orders, taking assurances from the petitioner to clear dues, within two weeks thereafter. Until this process is completed, the 2nd respondent shall not appoint any third party pursuant to the termination of the existing contract.

Facts

The petitioner, a proprietary concern registered under GST, provided outsourcing manpower supply services to the Andhra Pradesh State Beverages Corporation Limited (2nd respondent). The contract, initially effective from 01.06.2020 and renewed until 31.05.2022, was terminated abruptly by the 2nd respondent via a Memo dated 23.05.2022, with immediate effect. The petitioner claims this termination was illegal and arbitrary, violating principles of natural justice as no one-month notice was provided as stipulated in the agreement. The 2nd respondent contended that the termination was due to the petitioner's default in remitting statutory payments like Employees' Provident Funds (EPF) and Goods and Services Tax (GST), despite notices. The petitioner, in a subsequent representation, acknowledged some belated payments and interest, stating a portion had been paid, and cited a government circular regarding non-imposition of damages for belated EPF/ESI remittances during the pandemic.

Key Issues

1. Whether the termination of the petitioner's contract by the 2nd respondent, vide Memo dated 23.05.2022, was illegal and arbitrary for being issued without the stipulated one month's notice, thereby breaching the principles of natural justice and the terms of the agreement? Petitioner's arguments: The termination order was passed without issuing any show cause notice or providing an opportunity of being heard. The agreement explicitly requires one month's prior notice for discontinuation, which was not given. The petitioner sought an extension of one year to clear financial dues and statutory payments, assuring future compliance, but this representation was not considered. The termination was therefore illegal and arbitrary. Revenue/State's arguments: The petitioner failed to pay statutory amounts to various departments and did not adhere to notices. Consequently, the termination order was justified and sustainable. The petitioner's conduct warranted no indulgence, and the writ petition should be dismissed.