M/s.Vijendra lnfo Soft Private Limited v. The State of Telangana

IN THE HIGH COURT FOR THE STATE OF TEL,A SIGANA AT HYDERABAI) HON'BLE SRI JUSTICE NAGESH BHEEMI,] 'AKA WRIT PETITION No. 26932 OF 2o25 L9.12.2025 Between: M/s Vijendra In[o Soft Private Limited, Rep. by its Direclor Sri M. Santosh Kumar And Thc Statc of Telangana Rep. by its Principal Secretary, Labour & Emplovment l)epartment, & four others Pet I oner ORDER: .Resp rndents Petitioncr states that it is a dull empanelled outsourcir-rg agency, having been empanelle I by the Respondents themselvcs after due scrutiny of Lr s eligibility, experience, lin:rncial cap:rcity and statutory ( ompliances. Petitioner's cmpanelment was elfected through proceedings dated 22.02.2O25 issued by the competent authr; it5r and the said empanelment has neither been cancelled nor suspended and continues to remzrin valid as on date. 1 \ 2 f. i. It is contended, pursuant to such valid empanelment, the 2na Respondent, ac ting as the Chairman of the District Level Outsourcing Committee, Medchal-Malkajgiri District, issued proceedings dated 21.06.2025, wherebv the outsourcing and activitlr services relating to sweeping and securiQr for 12 ESI Dispensaries in Medchal-Malkajgiri District were allotted in favour of Petitioner. The said allotment was made at the request of the 4ff Respondent, who is the user department, after evaluating the comparative merits of the eligible agencies. Petitioner states that while issuing allotment in its favour, the 2"d Respondent took into consideration that Petitioner is an experienced agency with sound hnancial capacity and the necessary infrastructure to perform the work efficiently. The earlier agency - Sth Respondent had already completed a continuous tenure of about five years, despite the fact that maximum permissible tenure under the prevailing guidelines is only three years. Petitioner asserts that no satisfactory performance report was available in favour of the Str' Respondent and that its continuation beyond the permissible period was itself irregular. On these considerations, the competent authoritSr consciously decided to allot the contract to Petitioner. I -)

1.2. It is also stated, pursuant to thr allotment proceedings dared 21.06.2025, a formal agreemenl ,ras entered into between Petitioner and the 4th Respondent on t6.O7.2025, covering all the l2 ESI Dispensaries under the jr-l isdiction of the 4tj1 Respondent. Immediately thereafter Petitioner commenced pcrformance of the contracl by er gaging the requisite manpower, dcploying personnel at al1 the < ispensaries and ensuring unintcrrupted provision of services Petitioner states that frorn Lhe clate of commencement o[ work , it has been discharging its contractual obligations diligently ar.r efficiently. There havc bccr-r no complaints, no adverse remrt ks and no allegations of cleficie ncy or irre gularity against t.h t Petitioner. Petitioner has strictly complied with the terms of th, agreement and all statutory requirements.

1.3. Whilc Petilioner was thus performing t re contract under a valid and subsisting agreement, the 2"d I espondent, acting upon a representaLion submitted by the Sth I espondent, issued proceedings dated 04.O8.2025 proposing re' llotment of the outsourcing contracL. It is stated, the said proc: :dings were issued solely on the basis of the representation of the 5th Respondent, w'iLhout relerence to Petitioner er d wrthout 4 considering the subsisting contractual arrangement. In response to the proceedings dated 04.08.2025, the 4tl, Respondent submitted a report dated 05.O8.2025 to the 2nd Respondent wherein, the 2nd Respondent was rnformed that re-allotment of contract was not possible, as a vaiid agreement dated 06.07.2025 bad already been executed in favour of Petitioner and was in force. The 4th Respondent further reported that the 5t1' Respondcnt was facing legal issues in Sangareddy District and that, in view of such circumstances, Petitioner was being continued as the outsourcing agency in Medchal- Malkajgiri District for the period from April 2025 to March 2026.

1.4. Petitioner states that despite clear report of the 4th Respondent, despite existence of a valid agreement and despite the absence of any allegation against the Petitioner and any wrong doing, the 3,d Respondent issued the impugned proceedings dated 04.Og.2025 cancelling Petitioner's outsourcing contract and allotting the same to the sth Respondent. I[ is contcnded, the said canceliation was effected unilalerally, without issuing any show-cause notice, without calling for any explanation, without assigning any reasons and without affording any opportuniqz of hearing. The impugned proceedings dated O4.O9.2O25 are in clear violation of the r ) l principles of natural jus[ice and contrary to the exl; 'ess terms of the agreement dated 06.07 .2025. Even assum i rg that the authority had the po\:er to cancel the contract, such power could not have been exercised arbitrarily or',vithol I following a fair and reasonable procedure.

1.5. Petitioner further states that the impr .gned action amounts to a colourable exercise of power inter.r ed solely to favour the 5rl'Respondent. This is evident from th,r fact that the 5e Respondent had already overstayed the pern'ri: ;ible tenure, had completed nearly five 1,ssp5 of service ancl is facing legal disputes in another district, all of which were br rught to the notice of Lhe 2"d Respondent by the 4o' Resp, ndent. It is further contended that the stand taken by Respo r lent No.2 in subsequent pleadings that Petitioner does not I rssess valid empanelment is wholly false, sell contra: ctory and unsustainable. Petitioner was empanelled, uidt proceedings dated 22.02.2025 issued by Respondents them:;r Ives. It was only pursuant to such empanelment that the al r lment dated

21.06.2025 r'vas made and the agreement dated 0€,. )7 .2025 was executed- Having acted upon the empanelment-, RespondentE- cannot now deny the same. 6

1.6. Petitioner asserts that there are no allegations of non-payment of GST, EPF or ESI, no findings of irregularity arrd no material placed on record to justify the abrupt cancellation of the contract. The impugned action, if allowed to stand, would cause irreparable hardship not only to Petitioner but also to the employees engaged by it for servicing the 12 ESI Dispensaries and would adversely affect the functioning of public health faciiities. It is statcd, the impugned proceedings are arbitrary, illegal, violative of Articlcs 14 and t9(t)(g) of the Constitution of India and opposed to the principles of natural justice.

2. By order dzrted O8.O9.2O25, interim stay of impugned proceedings was granted.

3. Respondent No.2 - District Collector, Medchal- Malkajgiri District filed the counter denying all the allegations made by the Petitioner, except those specifically admitted. It is contended that Writ Petition is not maintainable either in law or on facts and Pelitioner has no loans standi to challenge the impugned proceedings. According to Respondent No.2, the Writ Petition lacks merit and rs liable to be dismissed at the threshold.

3.1. It is stated, an empanelment notification was -}. issued in 2023 in Me dchal- Malkaj giri District, pursuant to I / i\ 7 which tenders were invited and scrutinised, anc after due review and approval by the District Level ( utsourcing Commiltee, a total of 52 agencies were empanel|:, .. The said empanelment was issued under proceec ings No. A/ Outsourcing/ Medchal/ 2023 - Respondent No.2 e sserts that Petitioner was not included in the said empanelnr nt list and therefore, had no entitlement to be considered for i llotment of outsourcing scr-vices based on the 2023 empanelme-r

3.2. Respondent No.2 contends that l e District Collector, being the Chairman of the District Level ( utsourcing Committee, is vested with discretionary po\r' rrs under G.O.Rt.No.4459, Finance (SMPC) Departmr:r t,

27.1,2.2006, and G.O.Rt.No.427l, Finance (SMPC) t epartment, dated 01.1 1.2008, to accept, reject or allot outsourr i rg agencies based on administrative requircments, merit, l rd welfare considerations- It is asserted that Petitidner canno claim any vested or indefeasible right to continuance of a corl -:rct merely on the basis of an agreement entered into ui l the user department. It is further contended that upon ver.l catron and scrutiny of records, Petitioner was found to havr: committed irregularities, including failure to pay GST ar: < statutory contributions towards trSI and EPF, thereltr' rcndering 8 Petitioner ineligible to continue as arr outsourcing agency. Respondent No.2 asserts that these deficiencies directly affect the welfare of employees engaged through the outsourcing agency and that the impugned proceedings were passed in the interest of protecting such employees.

3.3. Respondent No_2 further contends that the impugned proceedings dated 04.O9.2025 wcre issued after verification ol records and scrutiny of the applications and that the same do not suffer from any iltegality or arbitrariness. It is asserted that the Drstrict Collcctor exercised lawful authority alrd discretion and that the action taken uras neither mala fide nor intended to favour any particular agency. Respondent No.2 also relies upon various Governmen t Orders, including G.O.Ms.No. 13 of 2014 dated 01.07.2014, to contend that outsourcing arrangements are con Lractual in nature, limited in duration, and subject [o review and renewal every hnancial year. It is also stated, this Court granted interim order on O8.O9.2O25 and that a vacate srav petition has been filed seeking vacation of the said interim order on the ground that continuation of the Petitioner would aclversely affect employee welfare and administrative disciplinc 9 11

4. Respondent No.5 - M/s SRR Enterprt es hled a separate counte.r affidavit contending that Writ Pe i ,ion is not maintainable and is liable to be dismissed. Respt,r dent No.5 asserts tha[ Petitioner approached this Court onir because it was unsuccessful in securing the outsourcing contr: :t through the proper tender process and that the writ petitioll I ; an abuse of the process of Court. It is stated, it is a duly rc1; stered and expcrienccd outsourcing agency, having becn empzlll year 2023 through proceedings issued after apprr 'Iled in the val of the District Level Outsourcing Committee, Medchii -Malkajgiri District. Respondent No.5 has treen providing c utsourcing services to various Government departments for nore than seven years and is duly compliant with statutory rl luirements including GST, EPF, ESI and Professional Tax. Resp:; 'rde nt No.5 also claims to be an ISO certified agency.

4.1. Respondent No.S relies upon thc dism I sal of Writ Petition No.43 i84 of 2022 dated 05.06.2023, whert i -r a srmilar challenge by another outsourcing agency was rL-t :ted. They also places reliance on the judgment of the Hon lrl : Supreme Court in Afcons Infrd.structure Limited a. Nagput Vletro Rail Corporation Limitedl, to contend that courts r hould not '(2016) 16 SCC 818 l0 interfere in tender and contractual matters unless mala fides, perversity or arbitrariness is established. It is contended further, it was granted license for providing outsourcing services for the finalcial year 2025-26 through procecdings dated O4.O4.2O25 issued by the competcnt authority. Petitioner was empanelled only on 24.O3.2O25 through separate proceedings and that such empanelment does not automatically confer a right to allotment or continuancc. Undcr (i.O.Ms.No. 13 of 2014 dated O1.07.2014 and other rclevant Governmcnt Orders, outsourcing contracts are for limited duration and subject to annual renewal at the discretion of the competen( authority.

4.2. Respondent No.S further contends that Respondents 3 and 4 had no authoriS, to entcr into or continue any agreement with Petitioner contrary to the orders of Respondent No.2, who is lhc District Collcctor and Chairman of the District Level Outsourcing Committce. [t is alleged that the agreement entered into by Petitioner with Respondent No.4 was only temporary and subject to orders of Respondent No.2 and that continuation of Petitioner's services despite the proceedings dated 04.08.2025 and O4.O9.2O25 vr.as illegal and without jurisdiction. Respondent No.5 further allegcs collusion betu,een Petitioner and Respondent No.4 and contcnds that notices were 7 issued by higher authorities to Respondent No.4 ir relation to irregularities

5. In the reply, petitioner reiterates r1t ar.erments m:rdc in the affidavit hled in support of the writ re tilion zrncl clenies the aliegations contained in the counter affi I rvits, except lhr.rse expressly admitted. petitioner denies the a es rtions madc by Rcsponderrt No_2 regarding non-payment of GS.. EpF or IiSI c.rrtributions. [t is contended, petitioner has com I iecl u,ith all stiltuton,obligations and that no notice or opportur ry \\.as evcr aflirrded ro rhcm to explain or rectify any alleged clr I ciency. Il_ is stirtcd, vaglrc allegations of irregularities, without nt icc, inquiry or supporting material, cannot form the basis for zrncelring a subsisting contract. petitioner places strong reht rce on the by the 4th Respondent datecl )S.Og.2O2S, reJrort submitted r,r,h t: rcin it u,as categorically stated that re irl otment of orrtsourcing contract to the Srh Respondent was not rossjble, as a virlid a€areenre,L was already executed in favour,r pctitioner, Thc 4tlt Respondent further informed that the 5rl. lespondent was facing k'gal disputes in Sangareddy Distnr: and that Pctitioner was being continued as the outsourcinil agency for the period Apr-il 202.5 - March 2026. petitioner star,s that tl,re t2 impugned proceedings do not even advert to or deal with the said report.

5. 1. It is further contended that the impugned proceedings dated 04.09.2025 cancelling Petitioner's contract were issued unilatera-lly, without issuing any show-cause notice, without assigning reasons and without affording an opportunity of hearing. Such action, according to Petitioner, is in gross violation of the principles of natural justrce and contrary lo the terms of the agreement dated 06.07.2025. Petitioncr denies the contention of Respondent No.5 that the agrecmcnt entered into with the 4h Respondent was only temporary or illegal. It is asserted that the agreement u.as execuLed pursuant to a valid allotment made by the competent authority and continued to remain in force as on the date of cancellation. Petitioner submits that even assuming that the District Collector has supervisory . or discretionary powers, the same cannot be exercised arbitrariiy or to the prejudice o[ a contracting party without due process.

5.2. Petitioner further states that the impugned action is a colourable exercise of pou,er intended to favour the 5th Respondent, who had aiready completed more than the maximum permissible tenure and rvhose performance was ..--:trijitlE;.E: Y l3 under dispute in another district. It is asserted tLz t balance of convenience iics in its favour, as it is already provu and abrupt cancellalion would cause irreparable t onll, 16 the Petitioner but also to the employees er ing services ardship not gaged bl,it and to the functioning of the ESI Dispensaries.

5.3. Petitioner states that this Court, after. considering thc prima facie case, was pleased to grant interim sr. the impugneti proccedings dated 04.O9. 2025 on permitting Per.itioner to continue to perform the crr contendecl that no valid or compelling grounds hav,: out by the Respondents for vacating the said interir 6. Heard Sri Raja Sripathi Rao, lealed Serr on behalf of Sri Sri T. Saichand, learned counsel fcr learned Ciovernment pleader for Labour on RespondenLs I to 3, learned Government pleader lor Health on behalf of Respondent No.4 and Sri Rar learned counsel for the 5d, respondent. spension of )a.o9.2025 rtract. It is been made >rder. rr Counsel petitioner, behalf of Medical & i Krishna,

7. On perusal of the material, it is evicler core issue that arises for consideration is whether tlt Respondents in cancelling the allotment and contrac;_ favour of Petitioner through proceedings dated t,. - that the : ac,tion of lranted in .o9'2025, l4 without issuance of notice or affording an opportunity of hearing, is Iegally sustainable.

8. At the outset, it is not in dispute that Petitioner u,as empanelled through proceedings dated 22.O2.2O25. It is also not in serious dispute that pursuant to such empanelment, the 2"d Respondent issued proceedings dated 21.06.2025 allottrng outsourcing and activity services relating to 12 trSI Dispensaries in Medchal-Malkajgiri District in favour o[ Petitior-rer ernd thai a formal agreement dated 06.07.2025 was executed bctween Petitioner and the 4h Respondent. The material on rccord further shows that Petitioner commenced performance of conlract and was providing services to ali the i2 dispensarics. Respondents contend that Petitioner was not part of 2023 empanelment proceedings, therefore, lacked eligibility. However, this Court notes that Petitioner's empanelment claled

22.02.2025 has not been cancelled or se[ aside by any competent authority. Once the Respondents themselvcs have empanelled Petitioner and acted upon such empanclment by allotting work and permitting execution of an agreement, it is not open to them to subsequently deny the very existence or validity of such empanelment, at ieast without foilowing due process of law. Y l5

9. Respondents have also placed relie.r ce on the discretronary powers of the District Colle,r tor under G.O.Rt.No.4459 dated 27.t2.2006 and G.O.Rt.No. 1277 dated 0l . I 1.2OO8. There is no quarrel with the proposi -r )n that the District Collector, as Chairman of the District Level r )utsourcing in matters rbsolute or : exercised incipies of ; ensue. In )4.O9.2025 lract and Committee, is vested with administrative discretio n of outsourcing. However, such discretion is not unbridled. Er.cn administrative discretion must l fairly, rcasonablv and in conformity with the 1r naLural justice, particularly when civil consequenc3 the present ctrse, the impugned proceedings dated resulted in cancellation of a subsisting cor re allotmenL ol the work to another agency undoubtedll,, visits Petitioner with consequcnces. 'lhc record does not disclose issurr show causc notice to pclitioner prior Lo cancellation, St ch action, anrl financial Lce of any eor does it indrcate that Petitioner was afforded any opportunitl to explain the allegcd irregularities relating to payment of GST, I PF or ESI. The impugned proceedings also do not assign E.r y specilic reasons or findings against the petitioner,s performan 10. This Court also finds signihcance in submitted by the 4d, Respondent dated 05.0g.2025, :e. he report wherein it l6 was categorically stated that re-allotment was not possible in view of the subsisting agreement dated 06.07.2025 and that Petitioner was continuing to render services. The said rcport further referred to legal issues faced by the Sth Respondent in Sangareddy District. The impugned proceedings do not reflcct any consideration of this report or any reasons for disagreeing with the same. 1 I . While Respondent No.S rclied upon rhe judgment o[ thc Hon'blc Supreme Court in AJcons Infrastructure Linited u. Nagpur Metro Rail Corporation Limited ancl dismissal ol Writ Petition No.43I84 of 2022, this Court is of the view [hat principles laid down therein do not oust judicial review altogether. Interference may still be r,r,arranted where thc decision-making process is shown to be arbitrary, unrcasonablc or violative of principles of natural justice. In the prcsent case, the challenge is not merely to the merits of allotment but to thc procedure adopted in cancelling a concluded contract. Thc contention that the agreement entered into by Petitioner with the 4th Respondent was only temporary and subject to orders of the 2"d Respondent also cannot, by itself, justify unilateral cancellation without noticc. Even if the contract was subject to review or annual renewal, existence of such a condition does noL - 7 17 dispense with the requirement of adherence to fa i procedure, especially when no emergent circumstances or p_ tlic interest considcrzrtions are tlemonstruted on record. 12 This Court has also considered the reJ ance placed on the principles governing judicial review in (:ontractual m:ttters as enunciated by the Hon,ble Supreme I rurt in the judgmcnt rcl)orted in Escorts Ltd.. us Comnt ssioner of Central Excise, Delhi - Ip. The said decision : arilies that $,hile the State and its instrumentalities are entitle ( to exercise discrction in mattcrs relating to contracts and a,l ninistratrve decisions, su<:ir dis<:retion is circumscribed by the . equirement that it mlrst be cxercised fairly, reasonably and rr accordance with law. The Supreme Court has expresslr. held that intcrference under Article 226 is permissible where t re action of the authority is arbitrary, irrational, actuated b) 3xtraneous considerations or in violation of the principles of na;.r ral justice. Thus, thc juclgmcnt does not grant immunity to ac r iinistrative aclions merell because they errise in the realm of cc r trar:ts, but preserves the power of constitutional courts to t.; amine the decision-makir rg process rvhere fundamental procedural safeguards are breached. : (2OO4) 8 SCC 335 1 3. When the above principles are applied to the facts of the present case, this Court finds that the impugned proceedings dated 04.O9 .2025 cannot be insulated from judicial scrutiny. Petitioner was not an unsuccessful bidder challenging a tender outcome, but a contracting party in whose favour an allotment had already been made and an agreement dated

06.07.2025 had been executed and acted upon. The unilateral cancellation of such a subsisting contract, withou[ issuancc o[ any notice, u.ithout affording an opportunity of explanation, and without recording any reasons, directly offends the standards of fairness and procedural propriety emphasized by the Hon'ble Supreme Court in the judgment in .Escorts Ltd.,s case (supra) Therefore, far from assisting respondents, the said judgment reinforccs petitioner's contention that arbitrary exercise of contractual power, divorced from natural justice, warrants interference under Article 226 ol thre Constitution. ),4. This Court is also conscious of the fact that outsourcing contracts involve engagement of a large number of employees and have a direct bearing on the functioning of public health institutions. Any administrative decision affecting such arrangements must therefore be taken vvith transparency, l9 fairness and due consideration of all relevant facrc r ;. In vierv of the above discussion, this Court is of the pima Jt the impugned proceedings dated 04.Og.2O2S rie view that suffer from procedural infirmity, particularly on account of vrc ation of the principles of natural justice and absence of reco:.r ed reasons, and Lherefore, warrant judicial scrutiny under Arti,: e 226 of th,e Cons titution.

15. ln the light of the foregoir-rg discussior , this Court is o[ the vicu that the impugned procecclings date,]

04.o9.2025 is unsustainable in law, Cancellatton of peti[ioner s, )utsourcing contrac[, whrch was granted pursu.rnt to valid en panelmen t, allotment dated 21 .06.2025 and agrecment dated )6.O7.2025, was effected unrlaterally, without issuance of no: affording an opportunity of hearing and withor,r reasons, thcrebl, violating the principlcs of nat, Having empanelled petitioner and acted l empanelment b1. allotting the nork and permitting e a formal agrecment, Respondents could not have r.a same without follorving due process of law. Th: procecdings also do nol. reflect consideration o1 submitted by the 4* Respondent dared OS.Og.2O2r; :e, without assigning -al justi<;e. )on such xecution of rcelled the impugncd lhe report and fail to disclose any cogent justification lbr the abrup[ cance I ation. I I I 20 \ 6

16. Accordingly, the Writ Petition is allowed and the impugned proceedings dated 04.O9 .2025 is set aside. Respondents are directed to permit Petitioner to continue to perform the outsourcing serviccs in terms of the agreement dated 06.O7.2025, in accordancc with lau'. No costs. 17 . Pending misce llaneous Applications, if any, shall stand closed. ) SD/.P. PONNA KRISHNA STANT REGISTRAR //TRUE COPY// ECTION OFFICER To,

1. The Principal Secretary Labour and Employment Department State of Telangana, Secretariat, Hyderabad.

2. The District Collector, /Chairman District Level Outsourcing Committee Medchal Malkajgiri District. \

3. The District convener, Drstrict Employment officer District Level outsourcing Committee Medchal Malkajgiri District-

4. The Joint Director (Medical), lnsurance Medical Services Nacharam, Hyderabad.

5. One CC to SRl. T SAI CHAND' Advocate [OPUC] 6. Two CCs to GP FOR LABOUR ,High Court for the State of Telangana at Hyderabad . [OUT]

7. Two CCs to GP FOR MEDICAL & HEALTH, High Court for the State of Telangana at Hyderabad. [OUTI

8. One CC to SRI RAVI KRISHNA, Advocate [OPUC] 9. Two CD CoPies DAN GJP YY N HIGH COURT DATED:1911212025 ORDER WP.No.26932 ot 2025 23 ;i: 6g ALLOWING THE WRIT PETITION WITHOUT COSTS ."tdp kwB!,.