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. 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 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 4 th Respondent, despite existence of a valid agreement and despite the absence of any allegation against the Petitioner and any wrong doing, the 3 rd Respondent issued the impugned proceedings dated 04.09.2025 cancelling Petitioner's outsourcing contract and allotting the same to the 5 th Respondent. It is contended, the said cancellation was effected unilaterally, without issuing any show-cause notice, without calling for any explanation, without assigning any reasons and without affording any opportunity of hearing. The impugned proceedings dated 04.09.2025 are in clear violation of the principles of natural justice and contrary to the express terms of the agreement dated 06.07.2025. Even assuming that the authority had the power to cancel the contract, such power could not have been exercised arbitrarily or without following a fair and reasonable procedure. 1.5. Petitioner further states that the impugned action amounts to a colourable exercise of power intended solely to favour the 5th Respondent. Even assuming that the authority had the power to cancel the contract, such power could not have been exercised arbitrarily or without following a fair and reasonable procedure. 1.5. Petitioner further states that the impugned action amounts to a colourable exercise of power intended solely to favour the 5th Respondent. This is evident from the fact that the 5 th Respondent had already overstayed the permissible tenure, had completed nearly five years of service and is facing legal disputes in another district, all of which were brought to the notice of the 2 nd Respondent by the 4 th Respondent. It is further contended that the stand taken by Respondent No.2 in subsequent pleadings that Petitioner does not possess valid empanelment is wholly false, self-contradictory and unsustainable. Petitioner was empanelled vide proceedings dated 22.02.2025 issued by Respondents themselves. It was only pursuant to such empanelment that the allotment dated 21.06.2025 was made and the agreement dated 06.07.2025 was executed. Having acted upon the empanelment, Respondents cannot now deny the same. 1.6. Petitioner asserts that there are no allegations of non-payment of GST, EPF or ESI, no findings of irregularity and 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 facilities. It is stated, the impugned proceedings are arbitrary, illegal, violative of Articles 14 and 19(1)(g) of the Constitution of India and opposed to the principles of natural justice. 2. By order dated 08.09.2025, 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 Petitioner has no locus standi to challenge the impugned proceedings. According to Respondent No.2, the Writ Petition lacks merit and is liable to be dismissed at the threshold. 3.1. It is stated, an empanelment notification was issued in 2023 in Medchal-Malkajgiri District, pursuant to which tenders were invited and scrutinised, and after due review and approval by the District Level Outsourcing Committee, a total of 52 agencies were empanelled. The said empanelment was issued under proceedings No. A/Outsourcing/Medchal/2023. 3.1. It is stated, an empanelment notification was issued in 2023 in Medchal-Malkajgiri District, pursuant to which tenders were invited and scrutinised, and after due review and approval by the District Level Outsourcing Committee, a total of 52 agencies were empanelled. The said empanelment was issued under proceedings No. A/Outsourcing/Medchal/2023. Respondent No.2 asserts that Petitioner was not included in the said empanelment list and therefore, had no entitlement to be considered for allotment of outsourcing services based on the 2023 empanelment. 3.2. Respondent No.2 contends that the District Collector, being the Chairman of the District Level Outsourcing Committee, is vested with discretionary powers under G.O.Rt.No.4459, Finance (SMPC) Department, dated 27.12.2006, and G.O.Rt.No.4271, Finance (SMPC) Department, dated 01.11.2008, to accept, reject or allot outsourcing agencies based on administrative requirements, merit, and welfare considerations. It is asserted that Petitioner cannot claim any vested or indefeasible right to continuance of a contract merely on the basis of an agreement entered into with the user department. It is further contended that upon verification and scrutiny of records, Petitioner was found to have committed irregularities, including failure to pay GST and statutory contributions towards ESI and EPF, thereby rendering Petitioner ineligible to continue as an 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 04.09.2025 were issued after verification of records and scrutiny of the applications and that the same do not suffer from any illegality or arbitrariness. It is asserted that the District Collector exercised lawful authority and discretion and that the action taken was neither mala fide nor intended to favour any particular agency. Respondent No.2 also relies upon various Government Orders, including G.O.Ms.No.13 of 2014 dated 01.07.2014, to contend that outsourcing arrangements are contractual in nature, limited in duration, and subject to review and renewal every financial year. It is also stated, this Court granted interim order on 08.09.2025 and that a vacate stay petition has been filed seeking vacation of the said interim order on the ground that continuation of the Petitioner would adversely affect employee welfare and administrative discipline. 4. Respondent No.5 - M/s SRR Enterprises filed a separate counter affidavit contending that Writ Petition is not maintainable and is liable to be dismissed. 4. Respondent No.5 - M/s SRR Enterprises filed a separate counter affidavit contending that Writ Petition is not maintainable and is liable to be dismissed. Respondent No.5 asserts that Petitioner approached this Court only because it was unsuccessful in securing the outsourcing contract through the proper tender process and that the writ petition is an abuse of the process of Court. It is stated, it is a duly registered and experienced outsourcing agency, having been empanelled in the year 2023 through proceedings issued after approval of the District Level Outsourcing Committee, Medchal-Malkajgiri District. Respondent No.5 has been providing outsourcing services to various Government departments for more than seven years and is duly compliant with statutory requirements including GST, EPF, ESI and Professional Tax. Respondent No.5 also claims to be an ISO-certified agency. 4.1. Respondent No.5 relies upon the dismissal of Writ Petition No.43184 of 2022 dated 05.06.2023, wherein a similar challenge by another outsourcing agency was rejected. They also places reliance on the judgment of the Hon'ble Supreme Court in Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation Limited , (2016) 16 SCC 818 , to contend that courts should not 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 financial year 2025-26 through proceedings dated 04.08.2025 issued by the competent authority. Petitioner was empanelled only on 24.03.2025 through separate proceedings and that such empanelment does not automatically confer a right to allotment or continuance. Under G.O.Ms.No.13 of 2014 dated 01.07.2014 and other relevant Government Orders, outsourcing contracts are for limited duration and subject to annual renewal at the discretion of the competent authority. 4.2. Respondent No.5 further contends that Respondents 3 and 4 had no authority to enter into or continue any agreement with Petitioner contrary to the orders of Respondent No.2, who is the District Collector and Chairman of the District Level Outsourcing Committee. It 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 04.09.2025 was illegal and without jurisdiction. Respondent No.5 further alleges collusion between Petitioner and Respondent No.4 and contends that notices were issued by higher authorities to Respondent No.4 in relation to irregularities. 5. Respondent No.5 further alleges collusion between Petitioner and Respondent No.4 and contends that notices were issued by higher authorities to Respondent No.4 in relation to irregularities. 5. In the reply, Petitioner reiterates the averments made in the affidavit filed in support of the writ petition and denies the allegations contained in the counter affidavits, except those expressly admitted. Petitioner denies the allegations made by Respondent No.2 regarding non-payment of GST, EPF or ESI contributions. It is contended, Petitioner has complied with all statutory obligations and that no notice or opportunity was ever afforded to them to explain or rectify any alleged deficiency. It is stated, vague allegations of irregularities, without notice, inquiry or supporting material, cannot form the basis for cancelling a subsisting contract. Petitioner places strong reliance on the report submitted by the 4th Respondent dated 05.08.2025, wherein it was categorically stated that re-allotment of outsourcing contract to the 5 th Respondent was not possible, as a valid agreement was already executed in favour of Petitioner. The 4 th Respondent further informed that the 5 th Respondent was facing legal disputes in Sangareddy District and that Petitioner was being continued as the outsourcing agency for the period April 2025 - March 2026. Petitioner states that the 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 unilaterally, 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 justice and contrary to the terms of the agreement dated 06.07.2025. Petitioner denies the contention of Respondent No.5 that the agreement entered into with the 4 th Respondent was only temporary or illegal. It is asserted that the agreement was executed 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 arbitrarily or to the prejudice of a contracting party without due process. 5.2. Petitioner further states that the impugned action is a colourable exercise of power intended to favour the 5 th Respondent, who had already completed more than the maximum permissible tenure and whose performance was under dispute in another district. 5.2. Petitioner further states that the impugned action is a colourable exercise of power intended to favour the 5 th Respondent, who had already completed more than the maximum permissible tenure and whose performance was under dispute in another district. It is asserted that balance of convenience lies in its favour, as it is already providing services and abrupt cancellation would cause irreparable hardship not only to the Petitioner but also to the employees engaged by it and to the functioning of the ESI Dispensaries. 5.3. Petitioner states that this Court, after considering the prima facie case, was pleased to grant interim suspension of the impugned proceedings dated 04.09.2025 on 08.09.2025 permitting Petitioner to continue to perform the contract. It is contended that no valid or compelling grounds have been made out by the Respondents for vacating the said interim order. 6. Heard Sri Raja Sripathi Rao, leaned Senior Counsel on behalf of Sri Sri T. Saichand, learned counsel for petitioner, learned Government Pleader for Labour on behalf of Respondents 1 to 3, learned Government Pleader for Medical & Health on behalf of Respondent No.4 and Sri Ravi Krishna, learned counsel for the 5 th respondent. 7. On perusal of the material, it is evident that the core issue that arises for consideration is whether the action of Respondents in cancelling the allotment and contract granted in favour of Petitioner through proceedings dated 04.09.2025, without issuance of notice or affording an opportunity of hearing, is legally sustainable. 8. At the outset, it is not in dispute that Petitioner was empanelled through proceedings dated 22.02.2025. It is also not in serious dispute that pursuant to such empanelment, the 2 nd Respondent issued proceedings dated 21.06.2025 allotting outsourcing and activity services relating to 12 ESI Dispensaries in Medchal-Malkajgiri District in favour of Petitioner and that a formal agreement dated 06.07.2025 was executed between Petitioner and the 4 th Respondent. The material on record further shows that Petitioner commenced performance of contract and was providing services to all the 12 dispensaries. Respondents contend that Petitioner was not part of 2023 empanelment proceedings, therefore, lacked eligibility. However, this Court notes that Petitioner's empanelment dated 22.02.2025 has not been cancelled or set aside by any competent authority. The material on record further shows that Petitioner commenced performance of contract and was providing services to all the 12 dispensaries. Respondents contend that Petitioner was not part of 2023 empanelment proceedings, therefore, lacked eligibility. However, this Court notes that Petitioner's empanelment dated 22.02.2025 has not been cancelled or set aside by any competent authority. Once the Respondents themselves have empanelled Petitioner and acted upon such empanelment 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 least without following due process of law. 9. Respondents have also placed reliance on the discretionary powers of the District Collector under G.O.Rt.No.4459 dated 27.12.2006 and G.O.Rt.No.4271 dated 01.11.2008. There is no quarrel with the proposition that the District Collector, as Chairman of the District Level Outsourcing Committee, is vested with administrative discretion in matters of outsourcing. However, such discretion is not absolute or unbridled. Even administrative discretion must be exercised fairly, reasonably and in conformity with the principles of natural justice, particularly when civil consequences ensue. In the present case, the impugned proceedings dated 04.09.2025 resulted in cancellation of a subsisting contract and re-allotment of the work to another agency. Such action, undoubtedly, visits Petitioner with civil and financial consequences. The record does not disclose issuance of any show-cause notice to Petitioner prior to cancellation, nor does it indicate that Petitioner was afforded any opportunity to explain the alleged irregularities relating to payment of GST, EPF or ESI. The impugned proceedings also do not assign any specific reasons or findings against the Petitioner's performance. 10. This Court also finds significance in the report submitted by the 4 th Respondent dated 05.08.2025, wherein it 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 report further referred to legal issues faced by the 5 th Respondent in Sangareddy District. The impugned proceedings do not reflect any consideration of this report or any reasons for disagreeing with the same. 11. While Respondent No.5 relied upon the judgment of the Hon'ble Supreme Court in Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation Limited and dismissal of Writ Petition No.43184 of 2022, this Court is of the view that principles laid down therein do not oust judicial review altogether. 11. While Respondent No.5 relied upon the judgment of the Hon'ble Supreme Court in Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation Limited and dismissal of Writ Petition No.43184 of 2022, this Court is of the view that principles laid down therein do not oust judicial review altogether. Interference may still be warranted where the decision-making process is shown to be arbitrary, unreasonable or violative of principles of natural justice. In the present case, the challenge is not merely to the merits of allotment but to the procedure adopted in cancelling a concluded contract. The contention that the agreement entered into by Petitioner with the 4th Respondent was only temporary and subject to orders of the 2 nd Respondent also cannot, by itself, justify unilateral cancellation without notice. Even if the contract was subject to review or annual renewal, existence of such a condition does not dispense with the requirement of adherence to fair procedure, especially when no emergent circumstances or public interest considerations are demonstrated on record. 12. This Court has also considered the reliance placed on the principles governing judicial review in contractual matters as enunciated by the Hon'ble Supreme Court in the judgment reported in Escorts Ltd. vs. Commissioner of Central Excise, Delhi – II, (2004) 8 SCC 335 . The said decision clarifies that while the State and its instrumentalities are entitled to exercise discretion in matters relating to contracts and administrative decisions, such discretion is circumscribed by the requirement that it must be exercised fairly, reasonably and in accordance with law. The Supreme Court has expressly held that interference under Article 226 is permissible where the action of the authority is arbitrary, irrational, actuated by extraneous considerations or in violation of the principles of natural justice. Thus, the judgment does not grant immunity to administrative actions merely because they arise in the realm of contracts, but preserves the power of constitutional courts to examine the decision-making process where fundamental procedural safeguards are breached. 13. When the above principles are applied to the facts of the present case, this Court finds that the impugned proceedings dated 04.09.2025 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. 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, without issuance of any notice, without 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 reinforces petitioner's contention that arbitrary exercise of contractual power, divorced from natural justice, warrants interference under Article 226 of the Constitution. 14. 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 with transparency, fairness and due consideration of all relevant factors. In view of the above discussion, this Court is of the prima facie view that the impugned proceedings dated 04.09.2025 suffer from procedural infirmity, particularly on account of violation of the principles of natural justice and absence of recorded reasons, and therefore, warrant judicial scrutiny under Article 226 of the Constitution. 15. In the light of the foregoing discussion, this Court is of the view that the impugned proceedings dated 04.09.2025 is unsustainable in law. Cancellation of Petitioner's outsourcing contract, which was granted pursuant to valid empanelment, allotment dated 21.06.2025 and agreement dated 06.07.2025, was effected unilaterally, without issuance of notice, without affording an opportunity of hearing and without assigning reasons, thereby violating the principles of natural justice. Having empanelled Petitioner and acted upon such empanelment by allotting the work and permitting execution of a formal agreement, Respondents could not have cancelled the same without following due process of law. The impugned proceedings also do not reflect consideration of the report submitted by the 4 th Respondent dated 05.08.2025 and fail to disclose any cogent justification for the abrupt cancellation. 16. Accordingly, the Writ Petition is allowed and the impugned proceedings dated 04.09.2025 is set aside. Respondents are directed to permit Petitioner to continue to perform the outsourcing services in terms of the agreement dated 06.07.2025, in accordance with law. No costs. 17. Pending miscellaneous Applications, if any, shall stand closed.