State of U.P. v. Sudhir Kumar Singh and Ors.

The Corporation ended a transport contract after more than a year without hearing the successful bidder. The Supreme Court agreed with the High Court and set the termination aside.

• Core rule: audi alteram partem (hear the other side) is vital.
• Twist: A mere technical breach is not enough; there must be real prejudice.
• Result: Writ under Article 226 lies where State action in contracts is arbitrary.

1. Was the ex parte enquiry by the Managing Director against natural justice?
2. Could the Managing Director cancel the contract after a year without notice?
3. Is a writ under Article 226 maintainable to check arbitrary State action in contracts?

Natural justice demands a fair chance to be heard. However, setting aside an action needs more than a technical lapse—there must be actual prejudice or a clear likelihood of it.

• Audi alteram partem is flexible but meaningful.
• The “prejudice test” filters mere suspicion from real harm.
• State bodies must act fairly, even in contractual matters.

The Supreme Court upheld the High Court. The termination could not stand because:

• The bidder was not heard; the audi alteram partem rule was wholly ignored.
• The tender process had concluded with a signed agreement and long performance.
• There was actual prejudice—the contractor lost a running contract without any opportunity to reply.

The Court clarified that Article 226 can be used against arbitrary State action in contracts.

Breach of hearing right does not automatically vitiate action. Courts ask:

1. Was the person kept in the dark about the action?
2. Did this likely cause or actually cause prejudice?

Here, both conditions were met. Hence, the termination was set aside.

• Reaffirms fair hearing in public contracts.
• Gives a clear, student-friendly prejudice test.
• Keeps Article 226 open against arbitrary State behaviour even in contract matters.

• No person should be condemned unheard in public law contracts.
• Show real harm or a strong likelihood of harm.
• Writs can correct arbitrariness even after contract execution.

Mnemonic: “HEAR-HARM-HALT”

1. HEAR the person — give notice and hearing.
2. HARM must be real — prove prejudice.
3. HALT arbitrary termination — Article 226 applies.

Audi alteram partem

Hear the other side — basic fairness rule.

Ex parte

Proceeding done without hearing the affected party.

Prejudice test

Proof of real harm or clear likelihood of harm from the breach.