Madras High Court
M/S.P.Rayin vs The Executive Officer on 30 June, 2022
Author: C.Saravanan
Bench: C.Saravanan
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 30.06.2022
CORAM:
THE HON'BLE MR.JUSTICE C.SARAVANAN
W.P.Nos.1064 & 1070 of 2021
and M.P.Nos.1177, 1178, 1179, 1180,1181, 1185, 1186,
1189, 1190& 1191 of 2021
M/s.P.Rayin
Contractor,
S/o.Abdul Rahman,
11/375, Chungam,
Cherambadi – 643 205,
The Nilgiris District. ... Petitioner in W.P.No.1064 of 2021
M/s.P.Rayin Construction Company (P) Ltd.,
Represented by its Managing Director P.Rahim,
Having Office at
278A, Cherambadi Bazar,
Cherambadi – 643 205.
The Nilgiris District. ... Petitioner in W.P.No.1070 of 2021
vs
1. The Executive Officer,
Devarsholai (Theervunilai) Town Panchayat,
Devarsholai, Gudalur Taluk,
The Nilgiris District.
2. C.K.Rajan,
3. Hitech Builders,
Erumad, Pandalur Taluk,
The Nilgiris District.
4. Marbasil Constructions,
Ayyankolly, Pandalur Taluk,
The Nilgiris District. ... Respondents in both W.Ps.
https://www.mhc.tn.gov.in/judis
COMMON PRAYER: Writ Petition filed under Article 226 of the Constitution of
India, praying for Writ of Certiorarified Mandamus calling for the records of the
impugned letter in Na.Ka.510/2020 dated 11.01.2021 issued by the 1st respondent
blacklisting the petitioner and quash the same and consequenlty, direct the 1 st
respondent to proceed with the tenders called for vide Na.Ka.No.503/2020-A1 dated
23.12.2020 and Na.Ka.No.510/2020-A1 dated 24.12.2020 of the 1st respondent and
open the price bids submitted by the bidders including the petitioner herein in the
presence of an Advocate Commissioner appointed by this Court within a time frame
fixed by this Court.
For the petitioner in both W.Ps. : Mr.P.Wilson
Senior Counsel
For the respondents in both W.Ps. : Mr.K.V.Sanjeev Kumar
Special Govt. Pleader for R1
: Mr.S.Giritharan for R2
: Mr.P.PRakash Paul for R3 & R4
COMMON ORDER
By this common order both the writ petitions are disposed of.
2.In these writ petitions, the petitioner has challenged the impugned order of the 1st respondent, blacklisting the petitioner as a contractor on the ground that the 2nd respondent had sent a letter stating that the petitioner did not have any lease arrangement/ agreement with the 2nd respondent for leasing the machinery meant for laying the road. It is submitted that the letter was dated 11.01.2021 and on the same date https://www.mhc.tn.gov.in/judis without issuing notice to the petitioner, the impugned order has been passed, thereby blacklisting the petitioner, for rejecting the petitioner's bid in the tender.
3.The learned Senior counsel for the respondent has relied on the following three cases.
(a)Ragunath Thakur Vs State of Bihar and others reported in (1989) 1 SCC 229
(b) M/s.Erusian Equipment & Chemicals Ltd.,Vs State of West Bengal reported in 1975 (1) SCC 70
(c) UMC Technologies Private Limited Vs Food Corporation of India and another reported in (2021) 2 SCC 551
4.The private respondent/ 2nd respondent in the respective writ petition confirms that the letter dated 11.01.2021 was sent by the 2nd respondent to the effect that there is no arrangement for leasing the petitioner for laying road purposes. The private respondents 3 and 4 claim that they are the successful bidder as the petitioner was disqualified by the impugned order and that work order was issued to them on 13.01.2021. It is therefore submitted that the interim protection granted by this Court is to be vacated and therefore, the 1st respondent should be directed to permit the private respondents 3 and 4 to proceed with the work order.
5. The official respondent namely the 1st respondent, the Executive Officer of the Panchayat has filed a detailed counter. It is stated that a letter from the 2 nd respondent https://www.mhc.tn.gov.in/judis was received against the petitioner on 09.11.2021 and 11.01.2021 confirming that there was no agreement between the petitioner and the 2nd respondent. The petitioner was therefore, blacklisted vide impugned orders. At the same time, in para 14, the 1 st respondent have stated that if a new tender notification is issued and subject to the condition set out in the same, the respective petitioners may submit their tender and there is no bar for the same. In the same paragraph, it is also stated that the tender which is the subject matter of these writ petitions were cancelled due to administrative reasons and no tender has been floated thereafter.
6. The learned counsel for the 1st respondent has brought to the attention of this Court to Appendix XVI from the Engineers Manual for Urban Local Bodies in Tamil Nadu.
7. I have considered the argument advanced by the learned counsel for the petitioner and the learned counsel for 1st and 2nd respondents and the successful bidders namely the 3rd and 4th respondents pursuant to the blacklisting of the petitioner impugned orders dated 11.01.2021.
8.The decision cited by the learned Senior Counsel for the petitioner make it very clear that before blacklisting the contractor, the contractor should be given an opportunity of explaining why the proposed action should not be taken against him. https://www.mhc.tn.gov.in/judis
9.The Appendix XVI from the Tamil Nadu Engineers Manual in Section VII Standard IV of the Engineers Manual clearly state that after giving show cause notice of 15 days and recording the finding, the existing Authority, with the approval of the next higher Authority may blacklist a contractor in view of the following reasons:
“VIII.4 BLACK-LISTING:-
After giving Show Cause Notice of 15 days and recording findings, the Enlisting Authority with the approval of the next higher authority may blacklist a contractor due to any of the following reasons:-
(i) There are sufficient and strong reasons to believe that the contractor or his employee has been guilty of malpractices such as bribery, corruption, fraud, vitiating fair under process including substitution of or interpolation in tenders, pilfering or unauthorized use or disposal of Govt. materials issued for specific works etc.,
(ii) The contractor continuously refuses to pay Govt. dues without showing adequate reasons and where the registering authority is satisfied that no reasonable dispute attracting reference to Settlement Committee or Court of Law exists for the Contractor's action.
(iii) Where a contractor or his partner or his representative has been convicted by a Court of Law for offences involving moral turpitude in relation to the business dealings or where security considerations including suspected disloyalty to the State so warrant.
(iv) If the contractor or his partner or his employee is found guilty of misbehaviour with any of the official of State Government connected with the execution of work directly or indirectly.
https://www.mhc.tn.gov.in/judis
(v) If a registered contractor, being non-tenderer for work, submits applications giving his offer after receipt/ opening of tenders received after due process.
Note-1 If a contractor after having tendered for a work or after negotiations gives applications voluntarily vitiating the fair tendering process, it shall also tantamount to malpractice.
Note-2A A register containing the reasons for blacklisting the contractor as also the names of all the partners of the contractor and the allied concerns coming within the effective influence of the blacklisted contractor will be maintained.
Note-3 A Register of black listed contractors will be maintained in RPWA 111 which will not only include contractors enlisted with the Enlisting Authority but also black listed contractors of all Engineering Departments, Zones, Circles, Divisions, Other State Governments, M.E.S. Railways, Posts & Telecommunication, CPWD etc., Note-4 A Black listed contractors (i) shall not be entitled for enlistment in any engineering department, (ii) shall not be awarded any work in future, (iii) his enlistment shall stand cancelled immediately and his enlistment security shall stand forfeited.” The procedure contemplated in the aforesaid Tamil Nadu Engineers Manual has not been followed.
10.The Hon'ble Supreme Court in Ragunath Thakur Vs State of Bihar and others in (1989) 1 SCC 229 has clearly held that, “ 4......it is an implied principle of rule of law that any order having civil consequences should be passed only after following principles of natural justice. It has to be realised that blacklisting any person in respect of business ventures https://www.mhc.tn.gov.in/judis has civil consequence for the future business of the person concerned in any event. Even if the rules did not express so, it is an elementary principle of natural justice that parties affected by an order should have a right of being heard and making representations against the order....”
11.The Hon'ble Supreme Court in M/s.Erusian Equipment & Chemicals Ltd.,Vs State of West Bengal in 1975 (1) SCC 70, in para 15 has held as follows:
“15. The balcklisting order does not pertain to any particular contract. The blacklisting order involves civil consequences. It casts a slur. It creates a barrier between the persons blacklisted and the Government in the matter of transactions. The black lists are “instruments of coercion”
16. In passing an order of blacklisting the Government department acts under what is described as a standardised code. This is a code for internal instruction. The Government departments make regular purchases. They maintain list of approved suppliers after taking into account the financial standard of the firm, their capacity and their past performance. The removal from the list is made for various reasons. The grounds on which blacklisting may be ordered are if the proprietor of the firm is convicted by court of law or security considerations to warrant or if there is trong justification for believing that the proprietor or employee of the firm has been guilty of malpractices such as bribery, corruption, fraud, or if the firm continuously refuses to return Government dues or if the firm employs a Government servant, dismissed or removed on account of corruption in a position where he could corruput Government servants. The petitioner was blacklisted on the ground of justification for believing that the firm has been guilty of malpractices such as bribery, corruption, fraud. The petitioners were blacklisted on the ground that there were proceedings pending against the petitioners for alleged violation of provisions under the Foreign Exchange Regulations Act.
17. The Government is a Government of lawas and not of men. It is true that neither the petitioner nor the respondent https://www.mhc.tn.gov.in/judis has any right to enter into a contract but they are entitled to equal treatment with others who offer tender or quotations for the purchase of the goods. This privilege arises because it is the Government which is trading with the public and the democratic form of Government demands equality and absence of arbitrariness and discrimination in such transactions. Hohfeld treats privileges as a form of liberty as opposed to a duty. The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with any one but if it does so, it must do so fairly without discrimination and without unfair procedure. Reputation is a part of a person's character and personality. Blacklisting tarnishes one's reputation.
18. Exclusion of a member of a public from dealing with a State in sales transactions has the effect of preventing him from purchasing and doing a lawful trade in the goods in discriminating against him in favour of other people. The State can impose reasonable conditions regarding rejection and acceptance of bids or qualifications of bidders. Just as exclusion of the lowest tender will be arbitrary, similarly exclusion of a person who offers the highest price form participating at a public auction would also have the same aspect of arbitrariness.
19.Where the State is dealing with individuals in transactions of sales and purchase of goods, the two important factors are that an individual is entitled to trade with the Government and an individual is entitled to a fair and equal treatment with others. A duty to act fairly can be interpreted as meaning a duty to observe certain aspects of rules of natural justice. A body may be under a duty to give fair consideration to the facts and to consider the representations but not to disclose to those persons details of information in its possession. Sometimes duty to act fairly can also be sustained without providing opportunity for an oral hearing. It will depend upon the nature of the interest to be affected, the circumstances in which a power is exercised and the nature of sanctions involved therein.
https://www.mhc.tn.gov.in/judis
20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for 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.”
12.The judgment of the Hon'ble Supreme Court recently in UMC Technologies Private Limited Vs Food Corporation of India and another reported in (2021) 2 SCC 551 in para 19 reads as follows”-
“19. In the light of the above decisions, it is clear that a prior show-cause notice granting a reasonable opportunity of being heard is an essential element of all administrative decision-making and particularly so in decisions pertaining to blacklisting which entail grave consequences for the entity being blacklisted. In these case, furnishing of a valid show-cause notice is critical and a failure to do so would be fatal to any order of blacklisting pursuant thereto.”
13.Therefore, the impugned order which has been passed is liable to be quashed. Liberty is given to the official respondent to take action against the petitioner in case any of violation after complying with contemplated the procedure prescribed in VIII (4) of the aforesaid Tamil Nadu Engineers Manual as extracted above.
14. The 1st respondent is directed to float a fresh tender as expeditiously as possible and the right of the petitioner to participate shall be subject to any order that be https://www.mhc.tn.gov.in/judis passed for blacklisting of the petitioner in accordance with Tamil Nadu Engineers Manual.
15. With the above observations and directions, these Writ Petitions are disposed of. No costs. Consequently, connected miscellaneous petitions are closed.
30.06.2022 Index: Yes/no Speaking/non-speaking gba To The Executive Officer, Devarsholai (Theervunilai) Town Panchayat, Devarsholai, Gudalur Taluk, The Nilgiris District.
https://www.mhc.tn.gov.in/judis C.SARAVANAN, J.
gba W.P.Nos.1064 & 1070 of 2021 and M.P.Nos.1177, 1178, 1179, 1180, https://www.mhc.tn.gov.in/judis 1181, 1185, 1186, 1189, 1190& 1191 of 2021 30.06.2022 https://www.mhc.tn.gov.in/judis