Administrative actions, especially in outsourcing contracts, must observe principles of natural justice, ensuring fair procedures and justifications for cancellations.

ORDER :

Nagesh Bheemapaka, J.

Petitioner states that it is a duly empanelled outsourcing agency, having been empanelled by the Respondents themselves after due scrutiny of its eligibility, experience, financial capacity and statutory compliances. Petitioner's empanelment was effected through proceedings dated 22.02.2025 issued by the competent authority and the said empanelment has neither been cancelled nor suspended and continues to remain valid as on date.

1.1. It is contended, pursuant to such valid empanelment, the 2nd Respondent, acting as the Chairman of the District Level Outsourcing Committee, Medchal-Malkajgiri District, issued proceedings dated 21.06.2025, whereby the outsourcing and activity services relating to sweeping and security for 12 ESI Dispensaries in Medchal-Malkajgiri District were allotted in favour of Petitioner. The said allotment was made at the request of the 4th 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^nd Respondent took into consideration that Petitioner is an experienced agency with sound financial capacity and the necessary infrastructure to perform the work efficiently. The earlier agency - 5th 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 5^th Respondent and that its continuation beyond the permissible period was itself irregular. On these considerations, the competent authority consciously decided to allot the contract to Petitioner.

1.2. It is also stated, pursuant to the allotment proceedings dated 21.06.2025, a formal agreement was entered into between Petitioner and the 4^th Respondent on 06.07.2025, covering all the 12 ESI Dispensaries under the jurisdiction of the 4^th Respondent. Immediately thereafter, Petitioner commenced performance of the contract by engaging the requisite manpower, deploying personnel at all the dispensaries and ensuring uninterrupted provision of services. Petitioner states that from the date of commencement of work, it has been discharging its contractual obligations diligently and efficiently. There have been no complaints, no adverse remarks and no allegations of deficiency or irregularity against the Petitioner. Petitioner has strictly complied with the terms of the agreement and all statutory requirements.

1.3. While Petitioner was thus performing the contract under a valid and subsisting agreement, the 2^nd Respondent, acting upon a representation submitted by the 5^th Respondent, issued proceedings dated 04.08.2025 proposing re-allotment of the outsourcing contract. It is stated, the said proceedings were issued solely on the basis of the representation of the 5^th Respondent, without reference to Petitioner and without considering the subsisting contractual arrangement. In response to the proceedings dated 04.08.2025, the 4th Respondent submitted a report dated 05.08.2025 to the 2^nd Respondent wherein, the 2^nd Respondent was informed that re-allotment of contract was not possible, as a valid agreement dated 06.07.2025 had already been executed in favour of Petitioner and was in force. The 4th Respondent further reported that the 5th Respondent was facing legal issues in Sangared