Jharkhand High Court
Webel Technology Limited Having Its ... vs The State Of Jharkhand on 5 February, 2018
Author: Rongon Mukhopadhyay
Bench: Rongon Mukhopadhyay
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W. P. (S) No. 5001 of 2009
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Webel Technology Limited having its registered office at Plot No. 5, Block - B.P., Sector-V, Salt Lake City, Kolkata-700091 through its Manager (P & A) namely Partha Sarathi Chatterjee son of Late Baran Kumar Chatterjee, resident of Malancha-Mahinagar, PS Sonarpur, PO Malancha, Kolkata-145 (West Bengal) ... ... Petitioner Versus
1.The State of Jharkhand
2.The Chief Secretary, Govt. of Jharkhand, Ranchi
3.The Principal Secretary, Department of Information Technology, Govt. of Jharkhand, Ranchi
4.The Under Secretary, Department of Information Technology, Govt. of Jharkhand, Ranchi ... ... Respondents
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CORAM:HON'BLE MR. JUSTICE RONGON MUKHOPADHYAY
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For the Petitioner : Mr. Abhay Kumar Singh, Senior Advocate For the Respondents : Mr. Ajit Kumar, AAG
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C. A. V. Order 05.02.2018 Heard Mr. Abhay Kumar Singh, learned senior counsel for the petitioner and Mr. Ajit Kumar, learned AAG for the respondents-State.
2. In this writ application, the petitioner has prayed for quashing of the order as contained in Memo No. 645 dated 10.07.2009 issued under the signature of the Under Secretary, Information Technology Department, Government of Jharkhand whereby and whereunder the petitioner - company has been black listed.
3. The factual aspects of the case briefly stated reveals that an agreement was entered into between the petitioner - company and the Department of Information Technology, Government of Jharkhand dated 02.04.2003 for execution of future literacy programme in 500 selected government schools under the government over a period of 5 years. It is the case of the petitioner that the Information Technology Department was not willing to provide the list of schools unless the petitioner agreed to the changes in the terms and conditions -2- of the agreement dated 02.04.2003 and accepted execution of a new agreement replacing the original agreement. Since it is the case of the petitioner that it was prevented from performing its reciprocal promise, it had no other option but to invoke the arbitration clause by filing an application under Section 11 (6) of the Arbitration and Conciliation Act, 1996 for appointment of Arbitrator. The said application bearing A.A. No. 17 of 2004 was allowed and Hon'ble Justice Sateshwar Roy (retired) was appointed an Arbitrator for deciding the dispute between the parties. The order of appointment for an Arbitrator was challenged in this Court in W.P.(C) No. 1777 of 2005 which however was dismissed. It was also challenged before the Hon'ble Supreme Court in S.L.P. No. 14655 of 2005 which also was dismissed on 08.05.2006. The arbitration proceeding finally concluded with an Award being passed by the sole Arbitrator on 23.07.2009. In the meantime, a decision was taken by the government to black list the petitioner with immediate effect vide Memo No. 1656 dated 26.10.2006. The said order was challenged by the petitioner in W.P.(C) No. 352 of 2008 in which vide order dated 16.07.2008, the impugned order was quashed with a liberty to the respondents that if they intend to take any action with the petitioner - company they may do so after complying with the principles of natural justice. The appeal preferred against the Award dated 23.07.2007 was also dismissed vide judgment dated 16.06.2009. Immediately thereafter a show-cause notice was issued to the petitioner as to why it should not be blacklisted to which a reply was filed. Ultimately vide impugned order dated 10.07.2009, the petitioner - company was black listed by the Government of Jharkhand and the Department of Information Technology with a further direction that it shall not be eligible to participate in any tendering process involving any project of the Government of Jharkand or any of its agencies.
4. It has been stated by Mr. Abhay Kumar Singh, learned senior counsel for the petitioner that the punch-line is that the order is motivated because of Arbitration Award which shows the mala-fide nature of the respondents. He submits that the allegations are not -3- supported by facts. He however submits that there is no charge of fraud, but the impugned order has given a finding in that respect. Learned senior counsel submits that the charge no. 2 affects the representation of the petitioner - company and whether the author of the impugned order could have framed the charge or could have decided the issue of fraud. He submits with respect to the questions formulated by stating that only a Court could have conducted an inquiry and come to a finding. He submits that the charge could have been proved by an ordinary Civil Court and only then the said charge could have been included in the show-cause notice. Stating further Mr. Singh submits that no rule of blacklisting in the Information & Technology Department has been formulated and in fact it is an unguided and unbridled power being exercised by the department which is violative of Article 14 and 21 of the Constitution of India and the same is discriminatory as well as arbitrary. Learned senior counsel submits that an approach to judicial review has been laid down in the case of "Union of India v. Madras Bar Assn." reported in (2010) 11 SCC 1. He has also referred to D. E. Smith's judicial review by stating that public law has rapidly advanced to "culture of authority" to a "culture of justification". Learned senior counsel has referred to the impugned order dated 28.10.2009 as well as the earlier order of blacklisting dated 10.07.2009 and the show-cause as also the termination clause in the agreement. He submits that the first termination order was only on performance and there was no charge of fraud or of authorities being misled by the petitioner - company. It has been stated that in the counter affidavit, fraud and deceit has been alleged for which attention of the court was drawn to paragraph no. 24 and 32 of the counter affidavit. Learned senior counsel submits that no admission has been made by the petitioner regarding its blacklisting by other instrumentalities of the State Government as has been noted in the impugned order dated 28.10.2009. He has referred in this connection to the case of "Karan Singh (Dr.) v. State of J&K" reported in (2004) 5 SCC 698. Referring to the third charge of immoral act against the petitioner while elaborating his argument learned senior -4- counsel has stated that morality is a subjective opinion which varies from person to person. Immoral act may not be an illegal act for which reference has been made to the case of "R.K. Garg v. Union of India"
reported in (1981) 4 SCC 675 and he has thus submitted that such finding is therefore bad in law. As regards charge no. 2, learned senior counsel submits that irresponsibility and a careless and negligent act can never be inferred or constituted to be fraud. With respect to the purported lopsided agreement mentioned in the impugned order, he submits that the agreement was entered into after a thorough negotiation between the parties and therefore, such question or such inference should not have been drawn by the concerned authority. Although there is no charge of misleading the government, but finding has been given that the petitioner company had misled the government which is totally contrary to the factual aspects. He has further submitted that there is no finding that the Board of Directors have approved the revised agreement and only on the basis of pleadings, the order has been passed, although there is no evidence to that effect. It has been submitted by the learned senior counsel for the petitioner - company that the sum and substance of both the impugned orders are same. He further submits that there is a presumption of innocence till proved guilty and only on pleadings no action can be taken. Learned senior counsel also submits that the presumption is perverse as there is no material or substance to prove fraud. He has referred to the judgment in the case of "Svenska Handelsbanken v. Indian Charge Chrome" reported in (1994) 1 SCC
502. Reference has also been made to certain paragraphs of Kerr on 'Fraud and Mistakes'. He further submits that general allegations cannot amount to fraud moreso when the particulars are missing for which he has referred to the judgment in the case of "A.C. Ananthaswamy v. Boraiah" reported in (2004) 8 SCC 588. The order impugned reveals a negligent act, but the same has not been proved for which reliance has been placed in the case of "State of Maharashtra v. Reshma Ramesh Meher" reported in (2008) 8 SCC 664. He submits that inference cannot be drawn without any material in -5- support of misconception or fraud or misleading the department. It has been stated that fraud is akin to a criminal charge and reference has been made to the case of "R.K. Jain v. Union of India" reported in (1993) 4 SCC 119. He also submits that the impugned order does not contain valid reasons and the same should be struck down and in support of his contentions, reliance has been placed in the case of "L. Chandra Kumar v. Union of India" reported in (1997) 3 SCC 261.
Further pertinent question has been raised by the learned senior counsel for the petitioner as to whether the State was put to any possible loss and the same has been sought to be answered in the negative by submitting that the State authorities have changed their stance time and again. It has been submitted that misconduct is a conduct which transgresses some rules for which reference has been made to the judgment in the case of "M.M. Malhotra v. Union of India" reported in (2005) 8 SCC 351. He has also submitted that blacklisting the petitioner - company for an indefinite period is impermissible in law but that precisely has been done in the impugned order dated 10.07.2009. Reference in this connection has been made to the judgment in the case of "Kulja Industries Ltd. v. Western Telecom Project BSNL" reported in (2014) 14 SCC 731. Placing reliance to the judgment in the case of "Delhi Transport Corporation Vs. D.T.C. Mazdoor Congress & Others" reported in (1991) Suppl. 1 SCC 600, he submits that assuming there are no rules, the department cannot exercise its powers arbitrarily.
5. He submits that the rules were never formulated and even if rules are assumed to be prevalent whether it has scrupulously been followed. He submits that if the rules are there it has to pass the test of fairness, reasonableness and justness. He has referred to the judgment in the case of "E.P. Royappa v. State of T.N." reported in (1974) 4 SCC 3 and in the case of "U.P. Coop. Cane Unions Federations v. West U.P. Sugar Mills Assn" reported in (2004) 5 SCC 430. He concludes his submissions by stating that the action of the State authorities is arbitrary and an illogical exercise of powers and the impugned order having been passed beyond the pleadings without there being any -6- proof whatsoever deserves to be quashed and set aside.
6. Mr. Ajit Kumar, learned AAG has opposed the prayer made by the petitioner and as at the initial stage prayed that since an arbitration appeal is pending, this case be tagged along with the said case, as any finding given in the present case will cause serious prejudice to the department in the Arbitration Appeal. He further submits that so far as the termination clause in the agreement is concerned, it can be interpreted in many ways. Learned senior counsel further submits that issues were framed in the Arbitral proceedings. It has been stated that the orders of blacklisting passed by the authorities against the petitioner - company, all having a common thread and therefore it cannot be said that the impugned order was passed beyond the purview of the concerned authority. Learned senior counsel submits that the parallel proceedings cannot be permitted to go on for which he has referred to the judgment in the case of "Ram Sumer Puri Mahant v. State of U.P." reported in (1985) 1 SCC 427. Learned A.A.G. has also put reliance in the case of "Kulja Industries Ltd. v. Western Telecom Project BSNL" reported in (2014) 14 SCC 731. It has further been stated that there was an immoral act on the part of the officials of the petitioner - company and misconduct and fraud committed upon the department. As although in principle they had agreed to revise the agreement, but bided their time and ultimately invoked the Arbitration Clause. Learned AAG submits that the conduct of the petitioner - company was a deliberate attempt made to invoke the Arbitration Clause as the petitioner - company was never interested in getting the agreement revised as has been agreed upon in principle. It has thus been submitted that no interference is necessitated by this Court in the impugned order dated 10.07.2009 in the facts and circumstances of the case.
7. While considering the preliminary objection raised by the learned AAG that any order passed in this case would prejudice the government is not at all convincing as the arbitration proceeding is for compensation whereas the present writ application is against the order -7- of blacklisting. Although the foundational dispute is with respect to the agreement, but the prayer in both the proceedings are different and cannot have any bearing whatsoever on either of the applications if decided separately. The decision in either of the cases is mutually exclusive and therefore, the preliminary objection raised by the learned AAG is hereby rejected.
8. As regards the merit of the present writ application is concerned, it would be vital to refer to the impugned order dated 10.07.2009. A finding has been recorded in the impugned order that on scrutiny of the terms of the agreement, it was found that the same was lopsided in favour of the company and it was decided to get the terms of the agreement revised. Allegations of misleading the government has been made as it had been alleged that the petitioner - company was only biding time and keeping the State Government in dark. It has also been taken note of in the impugned order about an immoral act by the officials of the company as bills have been raised with respect to consuming cigarettes and liquor on their visit to Ranchi, although it has been noted that the said bills were not pressed. The pith and substance of the impugned order would reveal making allegations against the petitioner - company of deliberate fraud, misconduct and committing an immoral act. Whether the said charges are tenable or could have been decided by the authorities has to be looked into before coming to a final conclusion.
9. In D. Smith's judicial review, it was noted with respect to legitimacy of interference in policy decisions and whether they are rationally aimed. The relevant paragraph is quoted hereinunder:
"The constitutional status of the judiciary should not, however, excuse the courts from any scrutiny of policy decisions. Courts are able, and indeed obliged, to require that decisions, even in the realm of high policy are within the scope of the relevant power or duty, and arrived at by the standards or procedural fairness. The courts display reserve in impinging upon the substance of policy decisions, but even here they may legitimately intervene if the decision is devoid of reason and not properly justified. Judges always possess the capacity to probe the evidence and assess whether the reasons and motives for decision are ationally related to their aims. As will be shown in the Chapters -8- that follow, public law has rapidly advanced recently from a "culture of authority" to a "culture of justification".
Thus even where the courts recognize their lack of relative constitutional capacity to make the primary decision of policy, they should nevertheless not easily relinquish their secondary function of probing the quality of the reasonings and ensuing that assertions are properly justified."
10. In the case of "Union of India v. Madras Bar Assn." (supra) wherein it was held that the decision which is to be taken should contain the following:
(i) inform the parties about the reasons for the decisions;
(ii) to demonstrate fairness and correctness of the decision and absence of arbitrariness; and
(iii) ensure that justice is not only done, but also seen to be done.
11. Therefore, the impugned order has to be put under a scrutiny to ensure that the same has been passed taking into consideration the factors which necessitated the decision so taken.
12. It is the case of the respondent-authorities that there was a deliberate attempt on the part of the petitioner - company to delay the signing of the revised agreement. This finding seems not to be based on any solid foundation, but appears to be on account of the petitioner
- company invoking the arbitration clause. The authorities have repeatedly stated about the petitioner - company agreeing on principle to the revised agreement, but as has been stated, the Board of Directors of the Company had never approved the revised agreement. Therefore, there is total absence of any finding save and except what has been surmised about the deliberate delay on the part of the petitioner - company in signing the revised agreement. The said finding has rightly been construed by the learned senior counsel for the petitioner - company to be an aspersion of fraud and misleading upon the petitioner - company by the State. Kerr on the law of Fraud and Mistake had opined that "a man who alleges fraud must clearly and distinguishably prove the fraud he alleges". Indeed it seems that even in a civil action, a higher standard of proof is required than that required for proving ordinary matters. He also goes on to add that the law in no -9- case presumes fraud. The presumption is always in favour of innocence and not of guilt. In no doubtful matter does the court lean to the conclusion of fraud. Fraud is not to be assumed on doubtful evidence. The facts constituting fraud must be clearly and conclusively established. Circumstances of mere suspicion will not warrant the conclusion of fraud. The proof must be such as to create belief and not merely a suspicion. If the case made out is consistent with fair dealing and honesty, the charge of fraud fails. But if suspicion is aroused and no inquiries are made for fear of learning the truth, fraud may be presumed.
13. Therefore it appears that there is merely a presumptive evidence on the part of the authorities to assume that fraud has been committed and the State Government was misled by the petitioner - company by delaying the signing of the revised agreement paving its way for invoking the arbitration clause.
14. In the case of "Svenska Handelsbanken v. Indian Charge Chrome" reported in (1994) 1 SCC 502, it was held that pleadings make only allegations or averments of facts and mere pleadings do not make a strong case of prima-facie fraud. The material and evidence has to show prima-facie fraud.
15. In the judgment in the case of "Bishundeo Narain and another v. Seogeni Rai and others" reported in AIR (1951) SC 280, it was held as follows:
25. "It is also to be observed that no proper particulars have been furnished. Now if there is one rule which is better established than any other, it is that in cases of fraud, undue influence and coercion, the parties pleading it must set forth full particulars and the case can only be decided on the particulars as laid. There can be no departure from them in evidence. General allegations are insufficient even to amount to an averment of fraud of which any Ct. ought to take notice, however strong the language in which they are couched may be and the same applies to undue influence and coercion. See O. 6, R. 4, Civil P. C.
27. We will deal with the case of coercion first. It will be seen that the pltfs'. case regarding that is grounded on the single allegation that their father was threatened with death. When all the verbiage is cleared away, that remains as the only foundation.
The rest and in particular the facts set out in paras. 8 to 12 about the ferocious appearance of Firangi Rai and his allegedly high handed and criminal activities and his character, are only there to -10- lend colour to the genuineness of the belief said to have been engendered in Ghughuli Rai's mind that the threat of death adiministered to him was real and imminent. But as regards the threat itself, there is not a single particular. We do not know the nature of the threat. We do not know the date, time and place in which it was administered. We do not know the circumstances. We do not even know who did the threatening. Now when a Ct. is asked to find that a person was threatened with death, it is necessary to know these particulars, otherwise, it is impossible to reach a proper conclusion."
16. Therefore, general allegations in absence of any particulars cannot amount to fraud.
17. Kerr on Fraud and Mistakes with respect to the pleadings has constructed the factors which are necessary for impeaching transactions on the ground of fraud being the following:
"(a) Any charge of fraud or misrepresentation must be pleaded with the utmost particularity (b); it will not be inferred from the circumstances pleaded, at all events if those circumstances be consistent with innocence (c). A general charge of fraud, however, strong, without alleging specific facts, is not sufficient to sustain the action. It must be shown in what the fraud consists, and how it has been effected. The fraud alleged must be set forth specifically in particular and in detail, so that the person against whom it is charged may have the opportunity of knowing what he has to meet, and of shaping his defence accordingly (d). A charge of fraud must be proved as laid, and where one kind of fraud has been charged another kind of fraud cannot be substituted for it (e). Where, accordingly, on appeal, charges of fraud failed, the appellant was not allowed to contend, for the first time, that the pleading and evidence disclosed a case of negligence (f). The Court cannot rectify a document in the absence either of a claim for rectification, supported by the necessary allegations of fact, or of a specific plea of fraud (g).
Fraud is a conclusion of law; and it is wholly immaterial and insufficient to allege that an instrument has been obtained by fraud, unless the things done constituting the fraud are stated on the face of the statement of claim (h). It is not enough in a statement of claim to refer to particulars of fraud previously furnished to the defendant. Such particulars must be stated on the face of the pleading (l). But although particulars of fraud must be specially pleaded, otherwise evidence in proof of them will not be admissible (m), yet where the party is unable to plead except in general terms, he may be entitled to discovery before giving particulars so as to enable him to plead in detail (n), and in such a case the defendant's application for particulars may be ordered to stand over until the defence has been put in (o)."
-11-18. At the cost of repetition it is once again indicated that the authorities had not come out with any conclusive finding and concrete proof which would show that the petitioner - company had committed fraud upon the State Government. Mere inference cannot be permitted to be drawn on the ground that there was a deliberate delay on the part of the petitioner - company in signing the revised agreement.
19. Since the issue with respect to fraud as submitted by the learned counsel for the petitioner has been decided as indicated above, other judgments cited with respect to this issue is not being gone into by this Court. So far as the allegations of raising bills for taking liquors and cigarettes are concerned, the said bills were not pressed. The immoral acts as alleged has to be seen in the context of the facts and circumstances of the case. Morality is essentially a subjective value which may have utilised into some well accepted norms of social behaviour. An act may be an immoral act for someone, but not for others. The immoral act as alleged by the respondents cannot be said to be one of the justifiable ground for blacklisting the petitioner moreso, when the bills which were raised on cigarettes and liquor for the official visit in Ranchi of the office bearers have not been pressed. As regards the acceptance of the petitioner - company that it has been blacklisted by the instrumentalities of the State Government, reference may be made to the case of "Karan Singh (Dr.) v. State of J&K"
reported in (2004) 5 SCC 698, wherein reference was made to the case of "Bharat Singh v. Bhagirathi" reported in AIR 1966 SC 405, in which it was held that admissions have to be cleared if they are to be used against the person making them. Admissions are subjective evidence by themselves in view of Section 17 and 21 of the Indian Evidence Act, though they are not conclusive proofs of the matter admitted. The respondent-authority in both the orders blacklisting the petitioner have basically concentrated on the same reasonings, although in the earlier order the show-cause submitted by the petitioner - company was not taken into consideration. This would also show non-application of mind on the part of the concerned authority. The State authorities at the time of entering into an agreement had entered into a dialogue and -12- subsequently necessity was felt to revise the agreement. It cannot be inferred by the authorities concerned that the act of the petitioner in invoking the arbitration clause by delaying signing of the revised agreement is a deliberate act. In fact the impugned order seems to be based on presumptions and assumptions without there being any valid proof with respect to the charges which have been alleged against the petitioner - company. It seems from a perusal of the impugned order dated 28.10.2009 as well as from the order dated 10.07.2009, that the respondent-authorities had approached the issue with a biased frame of mind may be on account of the Award having been passed in favour of the petitioner. The absence of proper consideration of the show- cause submitted by the petitioner - company and basing the order on surmises without there being any justifiable reasons, the impugned order dated 28.10.2009 becomes unsustainable in the eye of the law.
20. Accordingly, this writ application is allowed. The impugned order dated 28.10.2009 passed by the Under Secretary, Department of Information Technology, Government of Jharkhand by which the petitioner - company has been blacklisted is hereby quashed and set aside and the matter is remanded back to the concerned authority to pass a fresh order in accordance with law after giving an opportunity of hearing to the petitioner and on consideration of the show-cause submitted by the petitioner - company as also on the basis of the observations made by this Court in this writ application.
(Rongon Mukhopadhyay, J) R. Shekhar Cp 2