In Brief
A contractor (Respondent No. 1) secured a tender for food grain handling at Bhawanipur-I Centre from the U.P. State Warehousing Corporation at 341% above scheduled rates. After working the contract successfully for over one year, the Corporation cancelled the tender and the contract without notice, based on an ex parte enquiry comparing rates with an earlier (cancelled) tender. The High Court quashed the cancellation order as a breach of natural justice. The Supreme Court upheld this, holding that writ jurisdiction applies to arbitrary state action in contracts, and that the complete breach of audi alteram partem (no hearing whatsoever) caused demonstrable prejudice. The Court partially allowed the appeal, restoring the contractor's rights but setting aside the quashing of disciplinary proceedings against Corporation officers.
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