Gujarat High Court
Maru vs State on 27 December, 2011
Author: Abhilasha Kumari
Bench: Abhilasha Kumari
Gujarat High Court Case Information System
Print
SCA/12760/2011 16/ 16 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 12760 of 2011
For
Approval and Signature:
HON'BLE
SMT. JUSTICE ABHILASHA KUMARI
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1
Whether
Reporters of Local Papers may be allowed to see the judgment ? Yes
2
To be
referred to the Reporter or not ? Yes
3
Whether
their Lordships wish to see the fair copy of the judgment ? No
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ? No
5
Whether
it is to be circulated to the civil judge ? No
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MARU
TRADERS - Petitioner
Versus
STATE
OF GUJARAT & 1 - Respondents
=========================================================
Appearance
:
MR
MB GANDHI ,
MR CHINMAY M GANDHI for Petitioner
MR BIPIN BHATT, ASSTT.
GOVERNMENT PLEADER for Respondent No.1
MS SEJAL K MANDAVIA for
Respondent
No.2
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CORAM
:
HON'BLE
SMT. JUSTICE ABHILASHA KUMARI
Date
: 27/12/2011
C.A.V.
JUDGMENT
Rule.
Mr.Bipin Bhatt, learned Assistant Government Pleader, and Ms.Sejal K.Mandavia, learned advocate, waive service of notice of Rule for respondents Nos.1 and 2, respectively.
The challenge in this petition is to the order dated 01.08.2011, passed by respondent No.2, whereby the petitioner has been blacklisted.
The brief facts of the case are as follows:-
The petitioner is a Government Contractor and is doing business in the name and style of Maru Traders, at Surat. According to the petitioner, it has successfully executed several contracts given by the District Panchayat, Surat, without any default. The District Education Committee of the District Panchayat, Surat, published a tender for providing 7123 school-bags. As per the tender, the school-bags were to be supplied to Umarpada, Mangrol, Mandvi, and Mahuva, between 16.06.2011 and 18.06.2011. The petitioner filled in the tender form. Pursuant to the price offered by the petitioner, his tender was accepted and a Work Order was issued to him, on 20.05.2011. As per the contract, the price of each school-bag was fixed at Rs.40.50 ps. The goods were to be supplied by 10.06.2011.
As per the applicable terms and conditions, the petitioner deposited an amount of Rs.15,000/- as Security Deposit. Over and above, Rs.400/- were deposited for the purpose of stamps and Rs.100/- towards the Agreement. Apart from the Work Order dated 20.05.2011, for supply of 7123 school-bags, the petitioner was also given another Work Order dated 02.06.2011, for supply of an additional number of 80 school-bags on, or before, 05.06.2011. Accordingly, the petitioner entered into a contract with respondent No.2 for supply of the above number of school-bags. It is the case of the petitioner that for the purpose of compliance of the contract, the petitioner contacted one Mr.Pankaj Jain as well as M/s.Bhagwati Sales Corporation, and deposited Rs.12,600/- in the accounts of the said parties, on 03.06.2011 and on 11.06.2011. The goods were to be brought from Delhi to Ahmedabad and from Ahmedabad to Surat. The Work Order regarding 80 school-bags was fulfilled by the petitioner. However, as regards the contract for supply of 7123 school-bags, the petitioner could supply only 850 bags against the same and the balance 6273 bags could not be supplied, as they did not arrive in time. On 15.06.2011, the District Primary Education Officer, District Panchayat, Surat (respondent No.2) passed an order of cancellation of the Work Order with immediate effect on the ground that the entire number of school-bags were not supplied on 10.06.2011, and only 850 school-bags were supplied upto 14.06.2011. On 20.06.2011, the petitioner gave in writing to the concerned respondent that, owing to circumstances beyond his control, the entire quantity of school-bags could not be provided, and the respondent could purchase the goods from the open market, appropriating loss, if any, from the Security Deposit of the petitioner. It is the case of the petitioner that respondent No.2 purchased the remaining 6273 school-bags from the open market at Rs.40.50 ps., which is the same price that is quoted by the petitioner, therefore, no loss has been caused. By impugned order dated 01.08.2011, the petitioner has been informed that by supplying only 850 school-bags out of 7123 bags as per the Contract, conditions Nos.4, 5, and 6 of the Undertaking had been violated due to which the District Panchayat, Surat, suffered loss of prestige. By the said order, the payment of 850 school-bags already supplied by the petitioner and the Security Deposit made by him stood forfeited, for breach of clause-2 of the Tender Manual, Condition No.2 of the Conditions of Tender, and clause-4, 5 and 6 of the Undertaking given by the petitioner. Further, the petitioner has been ordered to be blacklisted. Aggrieved by the said order, the petitioner has approached this Court by way of the present petition.
Mr.M.B.Gandhi, learned advocate for the petitioner, has submitted that the impugned order is erroneous and illegal, as respondent No.2 has not granted any opportunity of hearing to the petitioner before blacklisting it. No notice has been sent and neither has any explanation been called for from the petitioner before passing the said order. It is contended that blacklisting the petitioner would result in permanent civil consequences, as the future work, as also the reputation of the petitioner, would suffer.
It is further submitted that the petitioner has executed several contracts with the District Panchayat in the past and there has never been any default earlier. For reasons beyond the control of the petitioner, the goods did not arrive in time from the supplier in Delhi, in spite of the petitioner having made the payment. The petitioner has himself intimated the concerned respondent by letter dated 20.06.2011 that they could purchase the goods from the open market and the loss, if any, could be made good from the amount of Deposit made by the petitioner. It is submitted that the goods have been purchased by the District Panchayat at the same rate, as was offered by the petitioner, therefore, no monetary loss has been caused to respondent No.2. The order of blacklisting is, therefore, uncalled for and unreasonable.
It is contended that not only has the Security Deposit of the petitioner been forfeited and the petitioner blacklisted, but the payment due to him for 850 bags already supplied has also been forfeited by respondent No.2, which is extremely harsh and unreasonable. The concerned respondent ought to have taken into consideration that the petitioner was in no way responsible for the delay that was caused by the supplier. The impugned order having been passed in violation of the principles of natural justice, deserves to be quashed and set aside.
In support of the above submissions, the learned advocate for the petitioner has placed reliance upon the following judgments:
(a) Raghunath Thakur v. State of Bihar and others - AIR 1989 SC 620
(b) M/s.Erusian Equipment and Chemicals Ltd. v. State of West Bengal and another -
AIR 1975 SC 266
(c) Gronsons Pharmaceuticals (P) Ltd. And another v. State of Uttar Pradesh and others - AIR 2001 SC 3707
(d) Electrosteel Infrastructure Services v. Gujarat Urban Development Co. Ltd. (GUDCL) and Anr. - 2008(1) GLH 253
(e) East India Transformer and Switchgear Pvt. Ltd. v. Gujarat Electricity Board and Another - 1999(2) GLH 777
(f) Union of India and another v. G. Ganayutham (Dead) by LRs. - AIR 1997 SC 3387
(g) Union of India v. Rampur Distillery & Chemical Co. Ltd. - AIR 1973 SC 1098
(h) M.N.Gangappa (dead) by his legal representatives v. A.N.Setty & Co. and another - AIR 1972 SC 696
(i) M/s.Kamil & Bros. v. Central Dairy Farm & Anr. - AIR 2008 ALLAHABAD 33
(j) Ghaziabad Development Authority v. Union of India and another - AIR 2000 SC 2003
(k) Surjit Kaur v. Naurata Singh and another - AIR 2000 SC 2927
(l) Thiriveedhi Channaiah v. Gudipudi Venkata Subba Rao (D) by LRs. And Ors. - AIR 2007 SC 2439 Mr.Bipin Bhatt, learned Assistant Government Pleader for respondent No.1 - State of Gujarat, has submitted that the said respondent does not have any particular role to play in the matter, therefore no submissions are required to be advanced.
The petition has been opposed by Ms.Sejal K.Mandavia, learned advocate for the District Primary Education Officer (respondent No.2). At the outset, it is submitted by Ms.Mandavia that the petition may not be entertained as it arises from a contractual agreement between the District Panchayat and the petitioner, and it deserves dismissal on this ground alone. In support of this contention, the learned advocate for respondent No.2 has placed reliance upon the judgment of Supreme Court in Godavari Sugar Mills Limited v. State of Maharashtra And Others - (2011)2 SCC 439.
On merits, it is contended by the learned advocate for respondent No.2 that in the Work Order for supply of 7123 school-bags, it has been clearly stipulated that the petitioner is to supply the said number of school-bags, by 10.06.2011. The petitioner has entered into an agreement with respondent No.2 to supply the school-bags on or before the stipulated date. However, in breach of the agreement, the petitioner has only supplied 850 school-bags and that too, on 14.06.2011, after the stipulated date. The action of respondent No.2 of blacklisting the petitioner is, therefore, justified.
It is further contended that the petitioner had more than 16 days to fulfill the contract. It is only on the basis of the contract that the function of "Shala Praveshotsav" was organized, wherein the school-bags were to be distributed to the students. Failure on the part of the petitioner to provide the school-bags has caused loss of prestige to respondent No.2. As per conditions of the tender, the District Panchayat is entitled to cancel the contract on breach of the conditions. The District Panchayat had to procure the remaining number of school-bags from the open-market, at the last moment. Looking to the above facts, the action of respondent No.2 is justified.
The learned advocate for respondent No.2 has further contended that the said respondent has power to cancel the contract and blacklist the petitioner. The petitioner has knowingly entered into the contract and was well-aware that he had to supply 7123 school-bags by 10.06.2011, therefore, there was no need to give notice before cancellation of the contract for breach of conditions, and blacklisting.
On the strength of the above submissions, it is prayed that the petition be dismissed.
I have heard the learned counsel for the respective parties, perused the averments made in the petition and contents of the documents on record.
As regards the objection raised by the learned advocate for respondent No.2 to the maintainability of the petition, it is relevant to notice that the prayers made by the petitioner are for quashing and setting aside the impugned order. The petitioner does not seek to challenge, enforce or modify any of the conditions of the contract. The main ground on which the impugned order of blacklisting has been challenged is violation of the principles of natural justice, with emphasis on the aspect that the blacklisting of the petitioner is permanent, as no period of time has been specified. In light of the above, the preliminary objection raised by the learned advocate for respondent No.2 regarding maintainability of the petition does not carry weight. Besides, respondent No.2 is `State' within the meaning of Article 12 of the Constitution, and amenable to the writ jurisdiction of this Court.
In Godavari Sugar Mills Limited v. State of Maharashtra And Others, relied upon by the learned advocate for respondent No.2, the Supreme Court has held that issuance of a Writ of Mandamus would not normally be entertained for the purpose of ordering refund of money, the return of which the petitioner claims a right, and the aggrieved party seeking such refund should approach civil Court for claiming the said amount. The principle of law enunciated by the Supreme Court is not disputed on the facts of that case. However, it is not applicable to the facts of the present case, as the petitioner herein not made a monetary claim.
In Electrosteel Infrastructure Services v. Gujarat Urban Development Co. Ltd. (GUDCL) and Anr. (supra), the Court dealt with a similar preliminary objection and held that the petition is maintainable as the challenge under Article 226 of the Constitution of India was to the order of blacklisting the petitioner for ever, and not to the breach of conditions of contract. A similar situation arises in the present case. In the view of this Court, the present petition is maintainable, as it does not involve a monetary claim or seek enforcement of a contract, but challenges the impugned order on the ground of violation of the principles of natural justice.
Coming to the main ground of challenge in the petition, it has not been denied by respondent No.2 that no notice has been issued to the petitioner before blacklisting it permanently. In fact, a stand has been taken in the affidavit-in-reply filed on behalf of respondent No.2, that there was no requirement of issuance of such notice before passing the order of blacklisting. It is also not disputed that the blacklisting of the petitioner is permanent, and not for any particular period of time.
Whether the petitioner could have been blacklisted permanently without issuance of notice, is the core issue to be decided in the petition. To make the legal position clear in this regard, reference may fruitfully be made to certain judgments cited by the learned advocate for the petitioner.
In Raghunath Thakur v. State of Bihar and others (supra), where the Supreme Court was dealing with a case of blacklisting, it has been held as below:
"4. Indisputably, no notice had been given to the appellant of the proposal of black-listing the appellant. It was contended on behalf of the State Government that there was no requirement in the rule of giving any prior notice before black-listing any person. In so far as the contention that there is no requirement specifically of giving any notice is concerned, the respondent is right. But it is an implied principle of the rule of law that any order having civil consequence should be passed only after following the principles of natural justice. It has to be realised that black-listing any person in respect of business ventures has civil consequence for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order. In that view of the matter, the last portion of the order in so far as it directs black-listing of the appellant in respect of future contracts, cannot be sustained in law. In the premises, that portion of the order directing that the appellant be placed in the black-list in respect of future contracts under the Collector is set aside. So far as the cancellation of the bid of the appellant is concerned, that is not affected. This order will, however, not prevent the State Government or the appropriate authorities from taking any future steps for blacklisting the appellant if the Government is so entitled to do so in accordance with law, i.e. giving the appellant due notice and an opportunity of making representation. After hearing the appellant, the State Government will be at liberty to pass any order in accordance with law indicating the reasons therefor. We, however, make it quite clear that we are not expressing any opinion on the correctness or otherwise of the allegations made against the appellant. The appeal is thus disposed of."
(emphasis supplied) In M/s.Erusian Equipment and Chemicals Ltd. v. State of West Bengal and another (supra), the Supreme Court has held that:-
"12.
Under Article 298 of the Constitution the Executive power of the Union and the State shall extend to the carrying on of any trade and the acquisition, holding and disposal of property and the making of contracts for any purpose. The State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. The order of black-listing has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of black-listing. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality.
13. But for the order of blacklisting, the petitioner would have been entitled to participate in the purchase of cinchona. Similarly the respondent in the appeal would also have been entitled but for the order of blacklisting to tender competitive rates.
14. The State can enter into contract with any person it chooses. No person has a fundamental right to insist that the Government must enter into a contract with him. A citizen has a right to earn livelihood and to pursue any trade. A citizen has a right to claim equal treatment to enter into a contract which may be proper, necessary and essential to his lawful calling.
15. The blacklisting order does not pertain to any particular contract. The blacklisting order involves civil consequences. It casts a slur. It created a barrier between the persons blacklisted and the Government in the matter of transactions. The blacklists are "instruments of coercion".
...
... ...
20. Blacklisting has the effect of preventing a person from privilege and advantage of entering into lawful relationship with the Government for the purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist."
(emphasis supplied) In Gronsons Pharmaceuticals (P) Ltd. And another v. State of Uttar Pradesh and others (supra), it has been held as under:
"2. ...... It is true that an order blacklisting an approved contractor results in civil consequences and in such a situation in the absence of statutory rules, the only requirement of law while passing such an order was to observe the principle of audi alterem partem which is one of the facets of the principles of natural justice....."
(emphasis supplied) In East India Transformer and Switchgear Pvt. Ltd. v. Gujarat Electricity Board and Another (supra), a Division Bench of this Court held that before delisting or blacklisting, the principles of natural justice are required to be complied with.
The case of Union of India and another v. G.Ganayutham (Dead) by LRs. (supra) has been cited by the learned advocate for the petitioner in support of the contention that the security deposit made by the petitioner is not entitled to be forfeited on the ground of default, when no loss has been caused as a consequence of such default.
Reliance placed on M.N.Gangappa (dead) by his legal representatives v. A.N.Setty & Co. and another (supra) by the learned advocate for the petitioner is to make good the submission that damages can be calculated only on the basis of difference in rates and when no pecuniary loss has been caused to the District Panchayat on account of purchase of remaining number of school-bags from the open market, there is no justification for forfeiture of the Security Deposit, even though the petitioner had offered to make good the loss, if any, from the same.
The other judgments cited by the learned advocate for the petitioner are mainly on the ground of damages on account of breach of contract and may not be strictly relevant to the aspect of violation of the principles of natural justice. Therefore, they need not be discussed in detail.
The settled principles of law, emerging from a scrutiny of the abovereferred to judgments can be summed up as follows:
The order of blacklisting has civil consequences as it has the effect of preventing the blacklisted person from entering into lawful contracts with the Government or any local authority. There can be no doubt that an order of blacklisting would exclude the blacklisted person from participating in Government contracts, thereby depriving such person, an opportunity of gain in business. Apart from monetary losses that would result due to blacklisting, the blacklisted person would also face a loss of reputation and prestige which would affect his other business dealings.
An order of blacklisting that is permanent in nature, as in the present case, would undoubtedly have an adverse effect upon the future business prospects of the blacklisted person and would undermine his capacity to compete in Government contracts, thereby causing monetary losses. All the above would result in civil consequences to the blacklisted person.
It is a fundamental principle of law that any order that entails civil consequences should be passed only after following the principles of natural justice and the rule of audi alterem partem. Before passing an order of blacklisting, the person concerned should be provided an adequate and reasonable opportunity of hearing and rendering an explanation. The principles of natural justice, being elementary and fundamental principles of law, would have to be followed even when there is no express requirement of giving prior notice.
Examining the present case in light of the above principles, it is undisputed that no notice has been issued to the petitioner, nor has an opportunity of hearing been provided to it, before passing the impugned order of permanent blacklisting. The contention that no specific notice is required to be issued in view of the condition of the Work Order that required number of school-bags were to be supplied by the stipulated date cannot be sustained, in view of the settled legal position. The action of respondent No.2 in blacklisting the petitioner for all times to come, without issuing prior notice to it or granting an opportunity of hearing is clearly in breach of the principles of natural justice apart from being gravely prejudicial to the petitioner. The said order, therefore, cannot be permitted to stand. The order dated 01.08.2011, passed by respondent No.2, is hereby quashed and set aside. However, respondent No.2 is not precluded from taking action, in accordance with law.
For reasons stated hereinabove, the petition is partly-allowed. Rule is made absolute, accordingly. There shall be no orders as to costs.
(Smt. Abhilasha Kumari, J.) (sunil) Top