Adherence to natural justice and supply of adverse inquiry reports are mandatory before cancelling government contracts.

The petitioner, a pharmaceutical firm, was awarded a tender on 25.11.2024 to supply diagnostic materials to respondent no. 5.

Although the original deadline was 10.12.2024, an extension was granted until 15.12.2024, or the date materials were supplied and a Consignee Receipt and Acceptance Certificate (CRAC) was generated.

Despite the CRAC acknowledging satisfactory service, the respondents failed to release the payment of ₹1,60,47,000/-.

Instead, the respondents constituted an enquiry committee which, in a report dated 13.02.2025, alleged that the petitioner suppressed information regarding pending CBI/STF corruption cases and supplied substandard goods.

Consequently, the purchase order was cancelled on 04.03.2025, and steps were initiated for blacklisting.

The petitioner challenged these orders, alleging a violation of natural justice as specific defects were not disclosed and adequate time to reply was denied.

Whether the issuance of the Consignee Receipt and Acceptance Certificate (CRAC) validates the satisfactory supply of goods and mandates timely payment under GeM guidelines.

Whether the enquiry process and the subsequent cancellation order complied with the principles of natural justice and the Rule of Law.

The Court relied on the doctrine of *Audi Alteram Partem*, emphasizing that notice must be precise, unambiguous, and provide adequate time for representation, as established in *Uma Nath Pandey v. State of U.P.*.

This principle was reinforced by *Gorkha Security Services v. Govt. (NCT of Delhi)*, *Daffodills Pharmaceuticals Ltd. v. State of U.P.*, and *UMC Technologies (P) Ltd. v. Food Corpn. of India*, which mandate fairness when administrative actions involve civil consequences like blacklisting.

Additionally, the Court applied the Ministry of Finance Office Memorandum dated 03.07.2020, which mandates payment within 10 days of CRAC generation on the GeM portal.

The Court observed that the respondents acted arbitrarily by relying on contradictory enquiry reports; the first report (16.01.2025) found the quantity adequate, while the second (24.01.2025) alleged substandard quality without laboratory validation.

The Court found that the show-cause notice was deficient because it failed to provide item-wise defects, batch numbers, or supporting lab reports, effectively denying the petitioner a meaningful opportunity to rebut allegations.

Furthermore, the Court noted that the extension of time and the generation of the CRAC created a legal expectation of payment under the GeM framework.

The Court determined that the enquiry was ex-parte and violated the "no man shall be a judge in his own cause" principle, as the petitioner had previously complained against the very officials conducting the probe.

The Court held that any administrative action causing serious civil consequences must strictly adhere to natural justice.

The matter was remanded to Respondent No. 1 to constitute a fresh, independent enquiry committee headed by an Additional Secretary within two weeks.

The petitioner must be served a fresh show-cause notice with all supporting documents and granted a reasonable opportunity to respond.

Pending the fresh enquiry, the petitioner is permitted to participate in future tender proceedings.