Patna HC Sets Aside FCI's Contract Termination Order for Withholding Enquiry Report from Contractor

The Patna High Court quashed FCI's termination of a handling-cum-transportation contract, holding that relying on an undisclosed enquiry report without supplying it to the contractor violated natural justice.

A Division Bench of the Patna High Court, comprising Acting Chief Justice Sudhir Singh and Justice Rajesh Kumar Verma, on 20 July 2026 set aside an order issued by the Food Corporation of India terminating the contract of a handling-cum-transportation agent, forfeiting his security deposit and debarring him from FCI tenders for two years. The court found that the FCI had relied upon an enquiry report in its show cause notice and in the final termination order, yet never supplied a copy of that report to the contractor. That omission, the bench held, denied the petitioner an effective opportunity to rebut the findings and violated the principles of natural justice. The matter has been remitted to the competent authority for a fresh decision after furnishing the report and holding a personal hearing.

The Dispute Before the Court

Ankush Agarwal, a resident of Ujiyarpur in Samastipur district, participated in a Notice Inviting Tender dated 04 November 2024 floated by the Regional Office of the Food Corporation of India, Patna. He was declared successful in both the technical and financial bids, and an agreement was executed on 06 July 2024 appointing him as Handling-cum-Transportation Agent at PWS Daraunda for a period of two years, running from 08 July 2024 to 07 July 2026.

FCI authorities issued a series of notices during the contract period alleging inadequate deployment of labour, delay in unloading and transporting food grains, and violations of the provisions of the Model Tender Form. Agarwal submitted replies to each notice, attributing the delays to poor approach roads, inadequate infrastructure at the PWS Godown, delayed opening of the godown, and absence of advance intimation about the arrival of rakes.

On 26 December 2025, the Regional Manager at the Regional Office, Patna, passed order No. RO BR-16.00110/11/2024. The order cancelled the agreement with immediate effect, directed that work for the remaining period be completed at Agarwal's cost by appointing another contractor, forfeited his entire security deposit and debarred him from participating in any FCI tender for two years. Agarwal's security deposit of Rs. 26,66,100, a bank guarantee of Rs. 53,32,400, withheld bills of approximately Rs. 6,00,000, and an additional recovery of Rs. 3,87,000 were all implicated in the reliefs he sought before the court.

The Natural Justice Question

Senior Advocate P.K. Shahi, appearing for Agarwal, concentrated the challenge on a single procedural failing. The show cause notice dated 14 November 2025 specifically referred to an enquiry report concerning alleged operational lapses and abnormal demurrage charges. The notice stated that the enquiry report was enclosed. Agarwal's case was that no such report was ever actually furnished to him, yet the competent authority went on to rely upon the report while passing the impugned termination order.

The argument was that issuing show cause notices — however many — could not substitute for providing the very document the authority intended to act upon. Without the enquiry report, Agarwal had no way to challenge or explain the specific findings recorded in it before adverse civil consequences were imposed on him.

Advocate Sanjay Kumar for FCI and Advocate Brajesh Verma contended that the enquiry report was merely an internal fact-finding document prepared for administrative purposes. FCI's position was that the impugned order rested not on the report alone but on contemporaneous operational records, repeated notices, demurrage imposition and Agarwal's admitted defaults. FCI maintained that adequate opportunity had been given through the show cause notices, so there was no breach of natural justice.

How the Bench Reasoned

The Division Bench framed the issue narrowly: whether the termination, forfeiture and debarment order was vitiated because the enquiry report relied upon by FCI was never supplied to Agarwal before the order was passed.

The bench noted a significant gap in FCI's response. The respondents had not produced any material to show that a copy of the enquiry report was ever furnished to Agarwal before the impugned order was issued. The show cause notice of 14 November 2025 itself referred to the report and stated it was enclosed, yet FCI could not demonstrate actual furnishing.

The court rejected FCI's characterisation of the report as a purely internal document, insulated from the right-to-copy requirement. The bench observed that once the respondents chose to rely upon the enquiry report while initiating the proposed action, and the competent authority took the same into consideration while passing the impugned order, fairness required that the petitioner be given a copy. Merely issuing show cause notices on the basis of allegations could not substitute for providing the foundational material the authority actually used to arrive at its conclusions.

The bench drew directly on the Constitution Bench decision of the Supreme Court in Managing Director, ECIL v. B. Karunakar, reported in (1993) 4 SCC 727. That judgment held that where a disciplinary or competent authority relies upon an enquiry report before imposing civil consequences, the person concerned is entitled to receive a copy before the final decision is taken so as to enable an effective representation. The bench quoted the Supreme Court's reasoning: “the principles of natural justice require that the employee should have a fair opportunity to meet, explain and controvert it before he is condemned.”

The bench applied this principle to the contractual context before it. The enquiry report, having been specifically referred to in the show cause notice and relied upon by the competent authority, constituted material that influenced the decision. Its non-supply was not an inconsequential procedural irregularity. The petitioner was entitled to know the contents of the report to effectively answer the allegations before any adverse action affecting his contractual rights and producing civil consequences was taken against him.

On FCI's argument that the order rested on a broader evidentiary base beyond just the report, the bench held that this did not cure the defect. The report had been specifically identified as a basis for the proposed action in the very show cause notice; treating it as peripheral after the fact was not open to FCI.

Outcome

The bench allowed the writ petition and set aside order dated 26 December 2025. The matter was remitted to the concerned authority with three directions: first, to furnish a copy of the enquiry report to Agarwal; second, to afford him an opportunity of personal hearing thereafter; and third, to pass a fresh, reasoned order in accordance with law. All pending applications were disposed of along with the main petition.