Domestic Enquiry and Disciplinary Proceedings
Holding a domestic enquiry into the charges against the delinquent employee is an important and inevitable aspect of disciplinary proceedings in line with the Principles of Natural Justice. Therefore, it cannot be skipped, especially when the charges are grave in nature, warranting the maximum penalty of dismissal.
Exceptions to the Rule
However, there can be exceptions to the above rule. Under certain circumstances, the continuation of the enquiry proceedings may not be required in the interest of justice and fair play, and it could even be waived in judicial scrutiny based on the merits of the case. Such rare circumstances are:
(1) Continuation of the enquiry proceedings even after the retirement of the employee and a prolonged period of suspension.
(2) Prevalence of certain extraordinary circumstances at the material time, such as commotion due to a strike or lockout or other kinds of work stoppage, serious charges of intimidation or assault of other employees like a co-worker or officer, which require the examination of witnesses who are prevented from or threatened to do so by the charge-sheeted employee, resulting in a reasonably impossible situation to hold the enquiry in a peaceful manner.
(3) Unequivocal admission of guilt by the delinquent at the pre-enquiry stage itself.
But, you have not provided such reasons for your inability to conduct the enquiry despite the issuance of notice.
Therefore, under the limited circumstances cryptically mentioned in your post, you cannot directly terminate the charge-sheeted employee simply by skipping the phase of a domestic enquiry.
Furthermore, since he is only an outsourced employee, as the principal employer, you don't have the locus standi to initiate any disciplinary action against him. You can ask the contractor to replace him immediately with a substitute.