Gujarat High Court
Royal Infra Engineering Pvt Ltd vs Surat Municipal Corporation on 9 September, 2021
Author: J.B.Pardiwala
Bench: J.B.Pardiwala, Vaibhavi D. Nanavati
C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 10412 of 2018
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE J.B.PARDIWALA
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI
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1 Whether Reporters of Local Papers may be allowed to YES
see the judgment ?
2 To be referred to the Reporter or not ? YES
3 Whether their Lordships wish to see the fair copy of NO
the judgment ?
4 Whether this case involves a substantial question of NO
law as to the interpretation of the Constitution of India
or any order made thereunder ?
==========================================================
ROYAL INFRA ENGINEERING PVT LTD
Versus
SURAT MUNICIPAL CORPORATION & 1 other(s)
==========================================================
Appearance:
MR.CHIRAG K SUKHWANI(6603) for the Petitioner(s) No. 1
MR CJ VIN(978) for the Respondent(s) No. 1,2
==========================================================
CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALA
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI
Date : 09/09/2021
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1 By this writ application under Article 226 of the Constitution of India, the writ applicant has prayed for the following reliefs:
Page 1 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 "(a) This Hon'ble Court be please to admit the present petitioner
(b) This Hon'ble Court may kindly be pleased to issue an appropriate writ, order or directions to quash and set aside the order dated 30/06/2018 and Standing Committee Resolution No.714/2018 dated 31/05/2018 produced at Annexure-I.
(c) This Hon'ble Court may kindly be pleased to issue an appropriate writ, order or directions to quash and set aside the order dated 30/06/2018 and Standing Committee Resolution No.714/2018 dated 31/05/2018 at Annexure-I with respect to black listing being arbitrary, unilateral, illegal, malafide and violative of Articles-14, 19(1)(g) and 21 of the Constitution of India.
(d) Pending admission, hearing and final disposal of this petition, the respondents be restrained from implementing order dated 30/06/2018 with respect to black listing produced at Annexure-I.
(e) Pending admission, hearing and final disposal of this petition, the respondents be restrained from effecting recovery of alleged damages from other ongoing works.
(f) The Hon'ble Court may please grant any other and further relief as may be deemed fit under the facts and circumstances of the case.
(g) The Hon'ble Court may please award the cost of the petition."
2 The facts giving rise to this writ application may be summarized as under:
3 The writ applicant is a class "AA" contractor registered with the State of Gujarat. The writ applicant claims to have successfully undertaken number of projects of road construction in the State of Gujarat.
4 The respondents issued the Tender Notice No.CE/RDD/03/2016- 2017 for the construction of Carpet/Recarpet layer of various roads of width 24.0 mt. (80') and above falling in EAST ZONE (VARACHHA) of Page 2 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 Surat city by contractor's own Drum Mix Type Hot Mix Plant to be installed within Surat city limit with Sensor operator paver finisher including construction / repair of footpath, divider, water table and providing laying / fixing of pavement markings, road studs with other traffic safety measure.
5 The estimated cost of the work was to the tune of Rs.8,93,88,717.96 (Rupees Eight Crore Ninety three Lakh Eighty Eight Thousand Seven Hundred Seventeen and Ninety Six Paise only) and the writ applicant's tender cost was to the tune of Rs.4,75,01,164.72 (Rupees Four Crore Seventy Five Lakh One Thousand One Hundred Sixty Four and Seventy Two Paise only) i.e. 47.86% below the estimated cost. Having regard to the same, the Standing Committee, vide its Resolution No.1722/2016 dated 24th October 2016 awarded the contract in favour of the writ applicant. In accordance with the terms of the Tender document, the writ applicant furnished the security deposit at the rate of 2% amounting to Rs.9,51,000/- (Rupees Nine Lakh Fifty One Thousand only) by way of bank guarantee, which was valid upto 21 st November 2018.
6 The respondent No.2 issued work order in favour of the writ applicant on 29th October 2016 with the stipulated period of 12 months to be reckoned after 10 days of issuance of the work order.
7 It appears that the writ applicant commenced with the work in accordance with the terms of contract.
8 Our attention has been drawn to page : 189 of the paper book (Annexure : H), which is a document in the form of scrutiny for running bills:
Page 3 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 "SURAT MUNICIPAL CORPORATION EAST ZONE (VARACHHA) ANNEXURE - 4 (IV) SCRUTINY FOR RUNNING BILLS [1] Name of the Contractor : Royal Infra Engineering Pvt. Ltd.
Party Code : R-00622(C)
[2] Name of work : Construction of Carpet/Recarpet layer of
various roads of width 24.0 mt. (80') and
above falling in EAST ZONE (VARACHHA)
of Surat city by contractor's own Drum Mix
Type Hot Mix Plant to be installed within
Surat city limit with Sensor operator paver
finisher including construction / repair of
footpath, divider, water table and providing
laying / fixing of pavement markings, road
studs with other traffic safety measure.
[3] Sanctioning Authority : STD Comm : R. No.: 1722/2016 Dt:
24/10/2016
[4] Running Bill No: 2nd R.A.
[5] Date of Measurement: As per R.M.R. / M.B.
[6] Total Amount of work done Rs. Rs.1,09,77,074.85
[7] Excess Quantity in any item -----
[8] Reason for excess quantity and -----
its sanction for competent
authority No. & Date :
[9] Extra items if any [Give Special -----
details]:
[10] Reason for extra items its any -----
sanction for competent
authority [Give Special details]:
[11] Time limit : ........ YES
Work done within time limit
Extension of Time Limits if any. ----
[Give Special details] -----
[12] Recovery of store issued: Cement, Bags: .... M.T. Rs. NIL
Steel................. M.T. Rs. NIL
Ashphalt............ M.T. Rs...NIL
Spun Yarn......... M.T. Rs..NIL
Pig Lead........... M.T. Rs..NIL
[13] Recovery of deposits: Security deposit : Rs.. NIL
I.T. deduction : Rs.1,18,796.00
Retained from running bills : Rs.2,19,542.00
Page 4 of 41
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C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021
[14] Any other Recovery PSD-Rs.4,75,183.00, VAT - Rs.35,639.00
[15] CERTIFICATE The work is carried out according to
specifications and terms & condition of
contractor & within the sanction time limits.
Sd/-
Executive Engineer
East Zone (Varaccha)
Surat Municipal Corporation."
9 Our attention has also been drawn to page : 190 of the paper
book. The same reads thus:
"SURAT MUNICIPAL CORPORATION
EAST ZONE (VARACHHA)
M.B. No.169, PAGE NO.4910 TO 4913, BCNT-45/3004, 45/C-201/5661, 2 nd R.A. bill Name of Contractor : Roayl Infrastructure Eng. Pvt. Lted.
Name of work : Carpet/Recarpet of Roads having width 24.00 mt. & above in East (Varachha) Zone.
Sr. Item Quantity Rate Per Amount
No.
A Pro & Lay, DBM Carpet 3580.00 911.02 mt. 3261451.60
Recarpet 8340.00 911.02 mt. 7597906.80
3 Pro. & Lay Bitumen 2100.00 7.83 Sm 16443.00
painting
4 Pro & Lay Bitumen 5000.00 905.97 mt. 4529850.00
concrete
5 Applying tack coat
7.50 kg 62000.00 2.22 Sm 137640.00
5.00 kg 81000.00 2.02 Sm 163620.00
3.00 kg 14400.00 1.82 Sm 26208.00
7 Sami bitumen concrete 235.00 895.87 mt. 210529.45
8 Carting stone dust 150000.00 2.22 Sm 333000.00
10 Picking the bitumen 11500.00 6.06 Sm 69690.00
12 Pro & Apply ISI mark 7.00 2569.00 no. 17983.00
13 Raising lowaring 450.00 485.81 no. 218614.50
Page 5 of 41
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C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021
14 Carting & Conveying 1155.00 361.58 mt. 417624.90
17.1 Caotionary warning 14.00 3520.86 no. 49292.04
17.5 Pro. Supplying and 20.00 4141.00 no. 82820.00
Total Rs. 20656896.59
Less: 46.86% below as per T.C. Rs. 9679821.74
Total amount of work done Rs. 10977074.85
Less 2% R.M.D. Rs. 219541.50
Less 1st r.a. bill paid Rs. 4930000.00
Net amount payable to Contractor Rs. 5827533.35
Amount proposed for payment Rs. 5800000.00
PAYMENT SHOULD BE MADE AS UNDER
2% I.T. Rs. 118796.00
Vat Rs. (0.60%) Rs. 35639.00
Const. Cess Rs. 59398.00
Less P.S.D. (8%) Rs. 475183.00
By cheque to Contractor Rs. 5110984.00
Total Rs. 5800000.00
sd/-
No.EZ/T.C./205 Executive Engineer,
Date : 30.06.2017 East Zone (Varachha)"
10 It appears that during the period of contract, many hurdles came
in the way of the writ applicant and the writ applicant was not in a position to adhere to the time period prescribed in the contract for completion of the work. The respondents got disappointed with the performance of the writ applicant and decided to not only terminate the contract but also blacklist the writ applicant for all times to come.
11 It all started with the notice issued by the respondents to the writ applicant dated 11th September 2017. The same reads thus:
"Annexure R-1 J. M. Desai Surat Municipal Corporation Additional City Engineer East (Varachha) Zone, (Civil) Besides Saifee Society Page 6 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 Opp. Panchvati Wadi, Lambe Hanuman Road, Surat.
No.EZ/Eng./4404 Date:11/9/17 To, Royal Infra Engi. Pvt. Ltd.
Royal House, Plot no.96, Surat Ind. Society, Kiran Motors Workshop Bamroli Road, Surat.
Sub : The license-holder by carpeting /recarpeting by his own drum-mix type hot-mix plant and paver finisher to the roads having width of 24.00 mtrs. And more than it contained in the East (Varachha) Zone area, by setting / resetting the road and the items concerning to the traffic like divider, footpath, water table, the work of fitting by providing lane marking, road studs (cat eye reflector) and road signage.
Ref. :
1. The work order No.E.Z. 679, dated 29/10/2016 of hereof
2. Letter No.E.Z./Eng./5082, dated 05/12/2016 of hereof
3. Letter No.E.Z./Eng,/5110, dated 07/12/2016 of hereof
4. Letter No.E.Z./Eng./5514, dated 27/12/2016 of hereof
5. Letter No.E.Z./Eng./5860, dated 09/01/2017 of hereof
6. Letter No.E.z./Eng,/7045, dated 18/01/2017 of hereof
7. Letter No.E.Z./Eng./8148, dated 23/02/2017 of hereof
8. Letter No.E.Z./Eng./9005, dated 23/03/2017 of hereof
9. Letter No.E.Z./Eng./152, dated 06/04/2017 of hereof
10. Letter No.E.Z./Eng./339, dated 12/04/2017 of hereof
11. Letter No.E.Z./Eng./1125, dated 05/05/2017 of hereof
12. Letter No.E.Z./Eng./2604, dated 06/07/2017 of hereof
13. Letter No.E.Z./Eng./3915, dated 18/08/2017 of hereof Sir,
1. The tender of the work mentioned in the above said subject, 46.86% lower than estimated amount Rs.8,93,88,717.96 ps. that means at the cost of Rs.4,75,01,164.72 ps. came to be sanctioned by the Permanent Committee Resolution No. 1722/2017, dated 24/10/2016. In respect of which has been handed over to you vide work-order under Reference (1).
2. In the said work, showed emergency time and again to maintain the progress of the work vide notices given by letters under the Reference (2), (3), (4), (5S), (6), (8), (9), (10) and (11). Further, on 04/04/2017 and 22/04/2017, as per the discussion done in the Co-Page 7 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021
C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 ordination Meeting of the contractors and the officers of the work of carpet/re-carpet held under the Presidentship of ld. Commissioner at Central Narmad Library, for completing the said work upto 31/05/2017, showed emergency. Even though as per the terms/conditions of the tender, the period of 10 (ten) months is passed till this date in the said work, even though the work of only 24 % of the tender amount has been done by you. Looking to it, by not maintaining the necessary schedule of progress as per the memorandum of the tender, have violated the important condition of the tender.
3. Further, vide notices of hereof under Reference No.(7), (8), (9), (10), (11), (12) and (13), for fitting necessary signages and bollard for traffic safety as per tender in the said work, for lane marking as also for repairing the existing foot-path lying on the road and for the work of setting water-table as also for the work of making new foot-path on the roads done carpeting/re-carpeting, informed you time and again. But this work has not been started by you till this date also. Which is not permissible in any circumstances.
4. Further, vide notices of hereof under Reference - (12) and (13), for making manhole upto road level lying on all the roads made carpeting/re-carpeting in the said case till today as also for repairing the broken surface of the roads made carpeting/recarpeting showed emergency. You have not completed the said work till today.
Thus, as above, vide all notices of hereof under the reference showed emergency to you time and again even though you have failed to maintain the schedule of process as per the memorandum of tender. Further, as stated in para-3 and para 04, you have not completed the work of other items till today. Looking to it, it is found that you are not wanting to do this work.
By taking into consideration the above said all facts, the duty of hereof is to take on hand the severe punitive proceedings against you including to put you in the black list as per the terms/ conditions of the tender. Therefore, in pursuance of the principles of natural justice, as a last chance of making representation in person, you are informed to remain present along with all the written details before the undersigned at 12:00 hours noon on 15/09/2017. By taking this matter seriously, if any default is done, then you have nothing to say in this regard. By assuming the same, the proceedings mentioned above shall be taken on hand, which may be noted clearly.
Sd/-
Additional City Engineer (Civil) Surat Municipal Corporation"
Page 8 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 12 To the aforesaid, the writ applicant filed a detailed reply dated 17th October 2017. In the said reply, the writ applicant pointed out the following:
"i) The work order was issued during Diwali festival, therefore, the labourers had gone to their native and were not returned timely, thus, there was shortage of labourers due to which physically the work could be started only on 29/11/2016 after the labourers returned from their native.
ii) After starting the work quarry source was not decided timely and as per the new rules at the plant site CC Camera as well as Data System were brought for implementing but, the place for fixing the same was not decided timely by the Respondents which adversely affected the progress.
iii) There was no space to install the Batch Mix Plant on Amroli Sayan Road due to which 25 days were taken.
iv) The Government of India on 08/11/2016 with immediate effect discontinued the Indian currency of Rs. 500 and Rs. 1000 notes and permitted the withdrawal of Rs. 24,000/only due to which there was problem in payment to the labourers as the labourers were accepting only cash payment and sufficient cash was not available, the progress of the work was badly suffered till March2017, over and above there was financial loss by way of idle establishment.
v) The asphalt was required to be supplied by the Respondents but due to insufficient quantity of asphalt VG-30 with HPCL, the asphalt was not supplied timely by the Respondents as reported by letters dated 21/02/2017, 15/09/2017 and 03/10/2017, for want of asphalt plan machinery as well as the labourers remained idle resulting Into financial losses and the labourers left the site due to which dally wagers were required to be arranged which resulted into undue delay,
vi) The permission for work was provided between 08.00 a.m. to 12.00 p.m. and 02.00 p.m. to 05.00 p.m. and on the festivals as wall as on Sunday the work was not permitted.
vii) After the work was started the Municipal Commissioner directed to use the plastic for asphalt work on the experimental basis, the time was consumed for Implementing such directions.
viii) There was discrepancy in execution of the work by taking the level profile corrections which was sorted out by City Engineer at a Page 9 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 belated stage.
ix) As against 4800 MT for DBM profile corrections quantity of 12738 MT was ordered to be executed and accordingly it has been executed due to which more time was consumed and the directions were given to execute DBM which is mainly bitumen concrete and in case the work of bitumen concrete was provided the progress could have been achieved as in bitumen concrete work there is no need of profile correction.
x) In the beginning during day time on Varachha road because of the heavy traffic we were allowed to load the asphalt mix at night 11 o'clock and plant was stopped at 4 o'clock and though, the capacity of batch mix plant was 110 MT/hour yet the desired progress could not be achieved.
xi) During May-2017 due to heat wave the State Government directed to keep away the labourers from construction industry so that the labourers were not affected by heat wave.
xii) There was a strike between 05/12/2016 to 23/12/2016 by Quarry Association due to which the material like Kapchi, Greet, Stone Dust was not available.
xiii) The directions were given for doing the paver work on trench line for about one and half month though, it was not in the scope of Original work.
xiv) The planning of work was disturbed as the work was required to be done as per the directions of Officers of the Surat Municipal Corporation. The directions were given for shifting the machinery from one place to another place due excavation of water line, storm water drain line and gutter line. Though, the line was available for adjoining work yet the directions were given to execute the work at a distance place due to which the time was consumed in shifting the machinery resulting into less output of batch mix plant.
xv) During monsoon of 2017 the rain started on 03/06/2017 and there was heavy rain due to which the material like Kapchi, Greet, Stone Dust collected at site which got wet and as per the MORTH specifications when the temperature is below 10 decree centigrade the asphalt work is prohibited.
xvi) There were rains even after 15/09/2017 due to which the desired temperature of hot mix material was not achieved timely.
xvii) Out of 17 roads the work of 8 roads were completed, the vacant and uninterrupted line out for 2 road was not provided as the activity of Page 10 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 different departments was going on, the work of 3 road were provided to RDD Division of Surat Municipal Corporation thus, the line of for 29.40% roads was not provided by the Respondents and due to the other division works going on only 23.50% remained to be done.
xviii) There was no question of taking the penal action against the petitioner."
13 It appears that the aforesaid reply of the writ applicant did not find favour with the respondents, and ultimately, the final order came to be passed dated 30th June 2018 terminating the contract, forfeiting the security deposit, asking the writ applicant to expedite the remaining work at his own risk and cost, and in the last, blacklisting the writ applicant. The order reads thus:
"To, Royal Infra Engineering Pvt. Ltd.
Royal House, Plot No.96, Surat Industrial Society, Near Kiran Motors Workshop Bamroli Road, Surat - 395002.
Sub:Contract for Construction of Carpet/ Recarpet layer of various roads of width 24.0 mt, (80') and above falling in EAST ZONE (VARACHHA) of Surat city by Contractor's own Drum Mix Type Hot mix Plant to be installed within Surat city limit with Sensor operator paver finisher including construction/repair of footpath, divider, water table and providing laying/fixing of pavement markings, road studs with other traffic safety measures.
Dear Sir, During the period of performance, as can be seen from voluminous correspondence between the parties, as well as repeated instructions to you to improve your performance in review meetings, you have failed to perform your contractual obligations. From time to time you have under one pretext or another misrepresented the facts of your poor performance management.
As you are aware, we claimed the work under the contract was linked Page 11 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 to construction of roads for transport facilities to city of Surat, Surat Municipal Corporation has thus suffered lot of embarrassment for undue delay in the work.
In view of this conduct, Standing Committee of Surat Municipal Corporation vide Resolution No,714/2018, Dt.31-05-2018 has resolved to Terminate the contract, Forfeit the Security Deposit, Expedite the remaining work at your risk and cost and BLACK LIST the Contractor ROYAL INFRA ENGINEERING PVT. LTD.
The above action has been taken after affording number of opportunities, hearings, and discussions on various occasions to you to correct and streamline omissions and commissions on your part. The action is in complete conformity with rules of natural justice and in capacity of administrative power of the Corporation.
Royal Infra Engineering Pvt, Ltd. should take note that this action of Surat Municipal Corporation shall not prejudice just and proper settlement of the contract above named.
Contractor, Royal Infra Engineering Pvt. Ltd. is directed to attend office of Executive Engineer, East Zone (Varachha) for closure formalities of the contract.
Sd/-
M. Thennarasan Commissioner Surat Municipal Corporation"
14 In view of the aforesaid, the writ applicant had to come before this Court with the present writ application.
15 A Coordinate Bench of this Court, while issuing notice, passed the following order dated 9th June 2018:
"Heard learned counsel for the petitioner.
2 By way of this petition, the petitioner has challenged the order dated 30th June 2018, issued by Respondent No.1 as also Resolution dated 31st May 2018 passed by the Standing Committee of Respondent No.1-Corporation so far as the same is passed without affording any opportunity of being heard and contrary to the principles of natural justice when the petitioner did complete 86% of the work as Page 12 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 mentioned in paragraph 6 on oath in this petition. Learned advocate for the petitioner invited the court's attention to the averments made on oath indicating that there was no show-cause notice issued by the Corporation in respect of blacklisting the petitioner.
3 We have perused the order impugned as well as Resolution at page no.194 and 197 respectively. Learned counsel was called upon to explain the reasoning incorporated by the Standing Committee in its Resolution dated 31st May 2018 in which the Standing Committee had indicated that as per the Resolution of the Standing Committee bearing No.1540/2017 the Contractor was called upon to explain as to why his contract should not be cancelled, security deposit should not be forfeited and the remaining work should not be carried out at his risk and cost by some another contractor and why he should not be blacklisted. The learned counsel for the petitioner has disputed these observations by submitting that though these observations are made in the Resolution of the Standing Committee, in fact, there was no notice at all which would qualify to be a notice blacklisting the petitioner and hence this cannot be treated as a notice, which, unfortunately, has been relied upon by the Municipal Commissioner while passing the order impugned.
4 We are of the prima facie opinion that the statement made by the learned counsel, under the instructions, at Bar that there was no blacklisting notice, qualified to be a blacklisting notice, and when he placed reliance upon the decision of the Supreme Court in the case of Gorkha Security Services v. Government of Delhi & Ors. (2014) 9 SCC 105, let there be notice returnable on 25th July 2018. In the meanwhile and till the returnable date, the respondents are restrained from taking any coercive steps pursuant to the order and Resolution impugned in this petition against the petitioner.
Direct Service is permitted."
SUBMISSIONS ON BEHALF OF THE WRIT APPLICANT: 16 Mr. Sukhwani, the learned counsel appearing for the writ
applicant vehemently submitted that the action on the part of the respondents in blacklisting his client for all times to come is arbitrary and contrary to the "doctrine of proportionality".
17 Mr. Sukhwani would submit that despite best of the efforts put in Page 13 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 by his client, the work assigned could not be completed within the stipulated period having regard to the various difficulties and hindrances which the writ applicant had to face during the period of contract. Mr. Sukhwani pointed out that one of the biggest hurdles that came in the way of his client was demonetization which took place on 8 th November 2016.
18 According to Mr. Sukhwani, if the respondents were not satisfied with the work undertaken by his client, then at the most, the respondents could have terminated the contract, but ought not to have gone to the extent of blacklisting the writ applicant for all times to come. According to Mr. Sukhwani, the respondents were obliged to take into consideration the explanation offered by the writ applicant for delay in completion of the work of contract.
19 Mr. Sukhwani would submit that although a detailed reply was filed in response to the show cause notice, yet nothing pointed out in the reply could be said to have been taken into consideration in its true perspective. According to Mr. Sukhwani, the same is indicative of the fact that the respondents took the decision with a bias and preconceived notion.
20 In the last, Mr. Sukhwani submitted that so far as the termination of the contract is concerned, his client may consider taking appropriate legal steps before the appropriate forum in accordance with law for the purpose of claiming damages, but humbly urged before us to set aside the order of blacklisting.
21 In such circumstances referred to above, Mr. Sukhwani prays that there being merit in his writ application, the same may be allowed and Page 14 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 the impugned order of blacklisting his client may be quashed and set aside.
SUBMISSIONS ON BEHALF OF THE RESPONDENTS: 22 On the other hand, Mr. Chandresh Vin, the learned counsel
appearing for the respondents has vehemently opposed the present writ application submitting that no error, not to speak of any error of law could be said to have been committed by his client in terminating the contract and simultaneously, blacklisting the writ applicant for all times to come.
23 Mr. Vin submitted that the explanation offered by the writ applicant as regards the delay in completion of the work as well as the unsatisfactory performance is not bona fide. He would submit that the impugned action in no manner could be termed as arbitrary or smacking of any bias or personal grudge against the writ applicant.
ANALYSIS: 24 Having heard the learned counsel appearing for the parties and
having gone through the materials on record, the only question that falls for our consideration is whether the action on the part of the respondents in blacklisting the writ applicant for all times to come could be said to be in accordance with law or in other words, in accordance with the "doctrine of proportionality".
25 In Black's Law Dictionary, the meaning of the term "blacklist" is given as follows:
"Blacklist: A list of persons marked out for special avoidance, antagonism, or enmity on the part of those who prepare the list or those among whom it is intended to circulate;Page 15 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021
C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 Blacklist is a list of people, who are considered by a particular authority or group to be unacceptable and who should be avoided and not trusted. '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."
26 We must first look into the position of law on the subject. The law on the subject has been succinctly explained by the Supreme Court in the case of M/s. Kulja Industries Limited Vs. Chief General Manager, W.T. Proj., BSNL and others. reported in AIR 2014 SC 9. The Supreme Court in the said case first considered Paras-31 and 32 of the bid document, which provided the power to blacklist a defaulting contractor. In the case on hand, it is Clause- 33.0 of the bid document referred to above. In this regard, we first quote the Paras-14 and 15 respectively of the judgment:
"14. We may at the outset deal with the contention whether paras 31 and 32 of the bid document to which Mr. Rohtagi has made reference is the only source of the power to blacklist a defaulting contractor. These paras are as under:
"31. Purchaser reserves the right to disqualify the supplier for a suitable period who habitually failed to supply the equipment in time. Further, the suppliers whose equipment do not perform satisfactory in the field in accordance with the specifications may also be disqualified for a suitable period as decided by the purchaser.
32. Purchaser reserves the right to blacklist a bidder for a suitable period in case he fails to honour his bid without sufficient grounds."
15. A plain reading of the above would show that BSNL, the purchaser has reserved the right to disqualify any supplier who
(a) habitually fails to supply the equipment in time or Page 16 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021
(b) the equipment supplied by the supplier does not perform satisfactory in the field in accordance with the specifications or
(c) fails to honour his bid without sufficient grounds."
27 From the aforesaid, it is evident that the B.S.N.L. had reserved its right to blacklist a bidder for a suitable period only in three situations as referred to in Para-14. In the case on hand, such power under Clause- 33.0 could be exercised in two contingencies - (1) in case of cancellation of the purchase order on account of delay in execution of the order or non-execution of the order and/or annulment of the award due to non- submission of the performance security; and (2) failure to honour the commitments under "warantee and guarantee" requirements. The Supreme Court, thereafter, proceeded to explain in Para-17 how the power to blacklist the contractor should be exercised. The Supreme Court has observed that such power is inherent in the party allotting the contract. There need not to be any specific conferment of such power by statute or reserved by contractor. We quote Para-17 which reads as under:-
"17. That apart the power to blacklist a contractor whether the contract be for supply of material or equipment or for the execution of any other work whatsoever is in our opinion inherent in the party allotting the contract. There is no need for any such power being specifically conferred by statute or reserved by contractor. That is because 'blacklisting' simply signifies a business decision by which the party affected by the breach decides not to enter into any contractual relationship with the party committing the breach. Between two private parties the right to take any such decision is absolute and untrammelled by any constraints whatsoever. The freedom to contract or not to contract is unqualified in the case of private parties. But any such decision is subject to judicial review when the same is taken by the State or any of its instrumentalities. This implies that any such decision will be open to scrutiny not only on the touchstone of the principles of natural justice but also on the doctrine of proportionality. A fair hearing to the party being blacklisted thus becomes an essential pre-condition for a proper exercise of the power and a valid order of blacklisting Page 17 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 made pursuant thereto. The order itself being reasonable, fair and proportionate to the gravity of the offence is similarly examinable by a writ Court. The legal position on the subject is settled by a long line of decisions rendered by this Court starting with Erusian Equipment & Chemicals Ltd. v. State of West Bengal and Anr. (1975) 1 SCC 70 where this Court declared that blacklisting has the effect of preventing a person from entering into lawful relationship with the Government for purposes of gains and that the Authority passing any such order was required to give a fair hearing before passing an order blacklisting a certain entity. This Court observed:
"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."
28 In Paras-18, 19 and 20 respectively, the Supreme Court considered few of its earlier decisions and also, the legal position governing blacklisting of the suppliers in the U.S.A. and U.K. We quote the same as under:-
"18. Subsequent decisions of this Court in M/s Southern Painters v. Fertilizers & Chemicals Travancore Ltd. and Anr. AIR 1994 SC 1277; Patel Engineering Ltd. Union of India (2012) 11 SCC 257; B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd. & Ors. (2006) 11 SCC 548; Joseph Vilangandan v. The Executive Engineer, (PWD) Ernakulam & Ors. (1978) 3 SCC 36 among others have followed the ratio of that decision and applied the principle of audi alteram partem to the process that may eventually culminate in the blacklisting of a contractor.
19. Even the second facet of the scrutiny which the blacklisting order must suffer is no longer res integra. The decisions of this Court in Radha krishna Agarwal and Ors. v. State of Bihar & Ors. (1977) 3 SCC 457; E.P. Royappa v. State of Tamil Nadu and Anr. (1974) 4 SCC 3; Maneka Gandhi v. Union of India and Anr. (1978) 1 SCC 248; Ajay Hasia and Ors. v. Khalid Mujib Sehravardi and Ors., (1981) 1 SCC 722; R.D. Shetty v. International Airport Authority of India and Ors., (1979) 3 SCC 489 and Dwarkadas Marfatia and sons v. Board of Trustees of the Port of Bombay (1989) 3 SCC 751 have ruled against arbitrariness and discrimination in every matter that is subject to judicial review Page 18 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 before a Writ Court exercising powers under Article 226 or Article 32 of the Constitution. It is also well settled that even though the right of the writ petitioner is in the nature of a contractual right, the manner, the method and the motive behind the decision of the authority whether or not to enter into a contract is subject to judicial review on the touchstone of fairness, relevance, natural justice, non-discrimination, equality and proportionality. All these considerations that go to determine whether the action is sustainable in law have been sanctified by judicial pronouncements of this Court and are of seminal importance in a system that is committed to the rule of law. We do not consider it necessary to burden this judgment by a copious reference to the decisions on the subject. A reference to the following passage from the decision of this Court in M/s Mahabir Auto Stores & Ors. v. Indian Oil Corporation Ltd., (1990) 3 SCC 752 should, in our view, suffice:
"11. It is well settled that every action of the State or an instrumentality of the State in exercise of its executive power, must be informed by reason. In appropriate cases, actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution. Reliance in this connection may be placed on the observations of this Court in Miss Radha Krishna Agarwal and Ors. v. State of Bihar and Ors., [1977] 3 SCR 249 ...... In case any right conferred on the citizens which is sought to be interfered, such action is subject to Article 14 of the Constitution, and must be reasonable and can be taken only upon lawful and relevant grounds of public interest. Where there is arbitrariness in State action of this type of entering or not entering into contracts, Article 14 springs up and judicial review strikes such an action down. Every action of the State executive authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public authority, in such monopoly or semi-monopoly dealings, it should meet the test of Article 14 of the Constitution. If a Governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable....... It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like the present one. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and non-discrimination in the type of the transactions and nature of the dealing as in the present case."Page 19 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021
C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021
20. The legal position governing blacklisting of suppliers in USA and UK is no different. In USA instead of using the expression 'Blacklisting' the term "debarring" is used by the Statutes and the Courts. The Federal Government considers 'suspension and debarment' as a powerful tool for protecting taxpayer resources and maintaining integrity of the processes for federal acquisitions. Comprehensive guidelines are, therefore, issued by the government for protecting public interest from those contractors and recipients who are non-responsible, lack business integrity or engage in dishonest or illegal conduct or are otherwise unable to perform satisfactorily. These guidelines prescribe the following among other grounds for debarment:
a) Conviction of or civil judgment for --
(1) Commission of fraud or a criminal offense in connection with obtaining, attempting to obtain, or performing a public or private agreement or transaction;
(2) Violation of Federal or State antitrust statutes, including those proscribing price fixing between competitors, allocation of customers between competitors, and bid rigging; (3) Commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion, receiving stolen property, making false claims, or obstruction of justice; or (4) Commission of any other offense indicating a lack of business integrity or business honesty that seriously and directly affects your present responsibility;
(b) Violation of the terms of a public agreement or transaction so serious as to affect the integrity of an agency program, such as--
(1) A willful failure to perform in accordance with the terms of one or more public agreements or transactions; (2) A history of failure to perform or of unsatisfactory performance of one or more public agreements or transactions; or (3) A willful violation of a statutory or regulatory provision or requirement applicable to a public agreement or transaction;
(c) xxxx
(d) Any other cause of so serious or compelling a nature that it affects your present responsibility."
29 In Para-21, the Supreme Court has provided guidelines that may influence the decision of the authority concerned. We quote Para-21 as under:-
Page 20 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 "21. The guidelines also stipulate the factors that may influence the debarring official's decision which include the following:
a) The actual or potential harm or impact that results or may result from the wrongdoing.
b) The frequency of incidents and/or duration of the wrongdoing.
c) Whether there is a pattern or prior history of wrongdoing.
d) Whether contractor has been excluded or disqualified by an agency of the Federal Government or have not been allowed to participate in State or local contracts or assistance agreements on a basis of conduct similar to one or more of the causes for debarment specified in this part.
(e) Whether and to what extent did the contractor plan, initiate or carry out the wrongdoing.
(f) Whether the contractor has accepted responsibility for the wrongdoing and recognized the seriousness of the misconduct.
(g) Whether the contractor has paid or agreed to pay all criminal, civil and administrative liabilities for the improper activity, including any investigative or administrative costs incurred by the government, and have made or agreed to make full restitution.
((h) Whether contractor has cooperated fully with the government agencies during the investigation and any court or administrative action.
(i) Whether the wrongdoing was pervasive within the contractor's organization.
(j) The kind of positions held by the individuals involved in the wrongdoing.
(k) Whether the contractor has taken appropriate corrective action or remedial measures, such as establishing ethics training and implementing programs to prevent recurrence.
(l) Whether the contractor fully investigated the circumstances surrounding the cause for debarment and, if so, made the result of the investigation available to the debarring official."
30 The Supreme Court in the case of VET India Pharamaceuticals Page 21 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 Limited Vs. State of Uttar Pradesh & Another reported in (2021) 1 SCC 804 observed that an order of blacklisting operates to the prejudice of a commercial person not only "in praesenti", but also puts a taint, which attaches far beyond and may well spell the death knell of the organisation/institution for all times to come described as a civil death.
31 Such observations of the Supreme Court would fairly describe the effect of the impugned order on the writ-applicant. The Supreme Court in M/s. Kulja Industries Limited (Supra) has made it explicitly clear that although the authority to blacklist the contractor or the power to blacklist the contractor is inherent in the party allotting the contract, yet such decision is subject to the judicial review when the same is taken by the State or any of its instrumentalities. It necessarily implies that any such decision would be open to scrutiny not only on the touchstone of the principles of natural justice, but also on the doctrine of proportionality.
32 The concept of Blacklisting has also been explained by the Supreme Court in M/s. Erusian Equipment & Chemicals Limited v. Union of India and others,(1975) 1 SCC 70, as under:
"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."
33 We may also look into an order passed by the Supreme Court in the case of M/s. Patel Engineering Limited Vs. Union of India & Anr.; Special Leave Petition (C) No.23059 of 2011; decided on 11 th May 2012. We quote relevant observations:-
"The nature of the authority of State to blacklist persons was Page 22 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 considered by this Court in the abovementioned case and took note of the constitutional provision (Article 298), which authorises both the Union of India and the States to make contracts for any purpose and to carry on any trade or business. It also authorises the acquisition, holding and disposal of property. This Court also took note of the fact that the right to make a contract includes the right not to make a contract. By definition, the said right is inherent in every person capable of entering into a contract. However, such a right either to enter or not to enter into a contract with any person is subject to a constitutional obligation to obey the command of Article 14. Though nobody has any right to compel State to enter into a contract, everybody has a right to be treated equally when State seeks to establish contractual relationships. The effect of excluding a person from entering into a contractual relationship with State would be to deprive such person to be treated equally with those, who are also engaged in similar activity.
It follows from the above Judgment that the decision of State or its instrumentalities not to deal with certain persons or class of persons on account of the undesirability of entering into contractual relationship with such persons is called blacklisting. State can decline to enter into a contractual relationship with a person or a class of persons for a legitimate purpose. The authority of State to blacklist a person is a necessary concomitant to the executive power of the State to carry on the trade or the business and making of contracts for any purpose, etc. There need not be any statutory grant of such power. The only legal limitation upon the exercise of such an authority is that State is to act fairly and rationally without in any way being arbitrary - thereby such a decision can be taken for some legitimate purpose. What is the legitimate purpose that is sought to be achieved by the State in a given case can vary depending upon various factors."
34 It has been argued on behalf of the Corporation that the principles of natural justice have been fully complied with as a show cause notice was issued to the writ applicant and therefore an opportunity could be said to have been given to the writ applicant to put forward their case before the final decision was taken. However, we need to address ourselves on the doctrine of proportionality as also the contents of the show cause notice. In other words, whether the facts and circumstances of the present case warranted the action on the part of the Corporation in blacklisting the writ applicant for all times to come and what exactly has been imputed in the show cause notice.
Page 23 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 DOCTRINE OF PROPORTIONALITY: 35 The question whether a punitive measure is disproportionate must
also be viewed in the context of the standards set by the Corporation themselves. It is well settled that the High Court while exercising power of judicial review would be reluctant to substitute its own opinion on the quantum of penalty or punishment imposed. However, if the High Court finds the punishment as imposed shockingly disproportionate the interference with the same would be warranted. The Supreme Court in M/s. Kulja Industries Limited (Supra) considered a situation where a contractor had fradulently withdrawn a large sums of money in collusion with the officials of the B.S.N.L. On the same being discovered the Contractor had been blacklisted. Such are not the nature of the allegations in the present case.
36 Having regard to the quick development of administrative law and the need to control the misuse of discretion granted to the exercising authority, the courts have evolved various doctrines and principles that enable them to interfere in an administrative discretion when it is found or noticed to be irrational, unreasonable or entails abuse of power. One such principle is the "Doctrine of proportionality". The doctrine of proportionality entails that an administrative decision, which is taken through the exercise of discretionary powers, must be in the extent to the consequences that follow from implementing such decisions.
37 The "Doctrine of proportionality" is a European origin. It is imbibed in the "European Droit Administratif" and is one of the most important legal principles in the "European Administrative Law". In Britain, the "Principle of Proportionality" has, for so long, been treated Page 24 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 as a part of the Wednesbury's principle 2 of unreasonableness which postulated the basic standard of reasonableness that ought to be followed by a public body in its decisions. It stated that if a choice is so unreasonable to the point that no sensible expert could ever take those actions or employ the methods adopted, then such activities are subject to be liable and quashed through judicial review.
38 Although the "Doctrine of Proportionality" has been dealt with as a part of the Wednesbury's principle, the Courts have adopted a different position when it comes to the judicial intervention in terms of judicial review. It has been held that the principle entails the reasonableness test with a heightened scrutiny. In other words, to apply this doctrine, not only the decisions have to be within the limits of reasonableness, but only, there has to be a balance between the advantage and disadvantage in the outcome that has been achieved through the administrative action. Therefore, the extent of judicial review is more intense and greater on account of "proportionality" test than the 'reasonableness' test. Furthermore, the court while applying the rule of proportionality will think about the public and individual interest in the matter which is not done while applying the Wednesbury's principle of unreasonableness.
39 In Gohil Vishvaraj Hanubhai and Ors. v. State of Gujarat and Ors [(2017)13 SCC 621], it is held in paragraphs 24 to 27 thus:
"24. We are left with the third question--whether the magnitude of the impugned action is so disproportionate to the mischief sought to be addressed by the respondents that the cancellation of the entire examination process affecting lakhs of candidates cannot be justified on the basis of the doctrine of proportionality.
25. The doctrine of proportionality, its origin and its application both in the context of legislative and administrative action was considered in Page 25 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 some detail by this Court in Om Kumar and Ors. v.Union of India, (2001) 2 SCC 386 : 2001 SCC (L&S) 1039]. This Court drew a distinction between administrative action which affects fundamental freedoms [See: Om Kumar v.Union of India, (2001) 2 SCC 386 at pp.
407-08, paras 52 to 54 : 2001 SCC (L&S) 1039] under Articles 19(1) and 21 and administrative action which is violative of Article 14 of the Constitution of India. This Court held that in the context of the violation of fundamental freedoms: (Om Kumar case [See: Om Kumar v.Union of India, (2001) 2 SCC 386 at pp. 407-08, paras 52 to 54 :
2001 SCC (L&S) 1039] , SCC p. 408, para 54) "54. ... the proportionality of administrative action affecting the freedoms under Article 19(1) or Article 21 has been tested by the courts as a primary reviewing authority and not on the basis of Wednesbury [Associated Provincial Picture Houses Ltd. v.
Wednesbury Corpn., (1948) 1 KB 223 (CA)] principles. It may be that the courts did not call this proportionality but it really was."
This Court, thereafter took note of the fact that the Supreme Court of Israel recognised proportionality as a separate ground in administrative law to be different from unreasonableness.
26. It is nobody's case before us that the impugned action is violative of any of the fundamental freedoms of the appellants. We are called upon to examine the proportionality of the administrative action only on the ground of violation of Article 14. It is therefore necessary to examine the principles laid down by this Court in this regard.
27. This Court posed the question in Om Kumar case [Om Kumar v. Union of India, (2001) 2 SCC 386 : 2001 SCC (L&S) 1039] : (SCC p. 409, para 61) "61. When does the court apply, under Article 14, the proportionality test as a primary reviewing authority and when does the court apply the Wednesbury [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] rule as a secondary reviewing authority? From the earlier review of basic principles, the answer becomes simple. In fact, we have further guidance in this behalf."
and concluded: (SCC pp. 410-11, paras 66-68) "66. It is clear from the above discussion that in India where administrative action is challenged under Article 14 as being discriminatory, equals are treated unequally or unequals are treated equally, the question is for the constitutional courts as primary reviewing courts to consider correctness of the level of discrimination applied and whether it is excessive and whether it Page 26 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 has a nexus with the objective intended to be achieved by the administrator. Here the court deals with the merits of the balancing action of the administrator and is, in essence, applying "proportionality" and is a primary reviewing authority.
67. But where an administrative action is challenged as "arbitrary" under Article 14 on the basis of E.P. Royappa v. State of T.N. [E.P. Royappa v.State of T.N., (1974) 4 SCC 3 : 1974 SCC (L&S) 165] (as in cases where punishments in disciplinary cases are challenged), the question will be whether the administrative order is "rational" or "reasonable" and the test then is the Wednesbury [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] test. The courts would then be confined only to a secondary role and will only have to see whether the administrator has done well in his primary role, whether he has acted illegally or has omitted relevant factors from consideration or has taken irrelevant factors into consideration or whether his view is one which no reasonable person could have taken. If his action does not satisfy these rules, it is to be treated as arbitrary. [In G.B. Mahajan v. Jalgaon Municipal Council [G.B. Mahajan v. Jalgaon Municipal Council, (1991) 3 SCC 91] (SCC at p. 111).] Venkatachaliah, J. (as he then was) pointed out that "reasonableness" of the administrator under Article 14 in the context of administrative law has to be judged from the standpoint of Wednesbury [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] rules.
In Tata Cellular v. Union of India [Tata Cellular v. Union of India, (1994) 6 SCC 651] (SCC at pp. 679-80), Indian Express Newspapers (Bombay) (P) Ltd. v. Union of India [Indian Express Newspapers (Bombay) (P) Ltd.v.Union of India, (1985) 1 SCC 641 : 1985 SCC (Tax) 121] (SCC at pp. 691), Supreme Court Employees' Welfare Assn. v. Union of India [Supreme Court Employees' Welfare Assn. v. Union of India, (1989) 4 SCC 187 :
1989 SCC (L&S) 569] (SCC at p. 241) and U.P. Financial Corpn. v. Gem Cap (India) (P) Ltd. [U.P. Financial Corpn. v. Gem Cap (India) (P) Ltd., (1993) 2 SCC 299] (SCC at p. 307), while judging whether the administrative action is "arbitrary" under Article 14 (i.e. otherwise then being discriminatory), this Court has confined itself to a Wednesbury [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] review always.
68. Thus, when administrative action is attacked as discriminatory under Article 14, the principle of primary review is for the courts by applying proportionality. However, where Page 27 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 administrative action is questioned as "arbitrary" under Article 14, the principle of secondary review based on Wednesbury [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] principles applies."
40 In Modern Dental College and Research Centre vs. State of M.P [(2016)7 SCC 353], it is held in paragraphs 63 to 65 thus:
"63. In this direction, the next question that arises is as to what criteria is to be adopted for a proper balance between the two facets viz. the rights and limitations imposed upon it by a statute. Here comes the concept of "proportionality", which is a proper criterion. To put it pithily, when a law limits a constitutional right, such a limitation is constitutional if it is proportional. The law imposing restrictions will be treated as proportional if it is meant to achieve a proper purpose, and if the measures taken to achieve such a purpose are rationally connected to the purpose, and such measures are necessary. This essence of doctrine of proportionality is beautifully captured by Dickson, C.J. of Canada in R. v. Oakes [R. v. Oakes, (1986) 1 SCR 103 (Can SC)] , in the following words (at p. 138):
"To establish that a limit is reasonable and demonstrably justified in a free and democratic society, two central criteria must be satisfied. First, the objective, which the measures, responsible for a limit on a Charter right or freedom are designed to serve, must be "of" sufficient importance to warrant overriding a constitutional protected right or freedom ... Second... the party invoking Section 1 must show that the means chosen are reasonable and demonstrably justified. This involves "a form of proportionality test..." Although the nature of the proportionality test will vary depending on the circumstances, in each case courts will be required to balance the interests of society with those of individuals and groups. There are, in my view, three important components of a proportionality test. First, the measures adopted must be.... rationally connected to the objective. Second, the means ... should impair "as little as possible" the right or freedom in question ... Third, there must be a proportionality between the effects of the measures which are responsible for limiting the Charter right or freedom, and the objective which has been identified as of "sufficient importance". The more severe the deleterious effects of a measure, the more important the objective must be if the measure is to be reasonable and demonstrably justified in a free and democratic society."
64. The exercise which, therefore, is to be taken is to find out as to whether the limitation of constitutional rights is for a purpose that is reasonable and necessary in a democratic society and such an exercise involves the weighing up of competitive values, and ultimately an Page 28 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 assessment based on proportionality i.e. balancing of different interests.
65. We may unhesitatingly remark that this doctrine of proportionality, explained hereinabove in brief, is enshrined in Article 19 itself when we read clause (1) along with clause (6) thereof. While defining as to what constitutes a reasonable restriction, this Court in a plethora of judgments has held that the expression "reasonable restriction" seeks to strike a balance between the freedom guaranteed by any of the sub- clauses of clause (1) of Article 19 and the social control permitted by any of the clauses (2) to (6). It is held that the expression "reasonable" connotes that the limitation imposed on a person in the enjoyment of the right should not be arbitrary or of an excessive nature beyond what is required in the interests of public. Further, in order to be reasonable, the restriction must have a reasonable relation to the object which the legislation seeks to achieve, and must not go in excess of that object (see P. P. Enterprises v. Union of India [P. P. Enterprises v. Union of India, (1982) 2 SCC 33 : 1982 SCC (Cri) 341]). At the same time, reasonableness of a restriction has to be determined in an objective manner and from the standpoint of the interests of the general public and not from the point of view of the persons upon whom the restrictions are imposed or upon abstract considerations (see Mohd. Hanif Quareshi v. State of Bihar [Mohd. Hanif Quareshi v. State of Bihar, AIR 1958 SC 731 : 1959 SCR 629]). In M.R.F. Ltd. v. State of Kerala[ M.R.F. Ltd. v. State of Kerala, (1998) 8 SCC 227 : 1999 SCC (L&S) 1] , this Court held that in examining the reasonableness of a statutory provision one has to keep in mind the following factors:
(1) The directive principles of State policy.
(2) Restrictions must not be arbitrary or of an excessive nature so as to go beyond the requirement of the interest of the general public.
(3) In order to judge the reasonableness of the restrictions, no abstract or general pattern or a fixed principle can be laid down so as to be of universal application and the same will vary from case to case as also with regard to changing conditions, values of human life, social philosophy of the Constitution, prevailing conditions and the surrounding circumstances.
(4) A just balance has to be struck between the restrictions imposed and the social control envisaged by Article 19(6).
(5) Prevailing social values as also social needs which are intended to be satisfied by the restrictions. (6) There must be a direct and proximate nexus or reasonable connection between the restrictions imposed and the object sought to be achieved. If there is a direct nexus between the restrictions, and the object of Page 29 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 the Act, then a strong presumption in favour of the constitutionality of the Act will naturally arise."
41 So much so, the principle was considered by the House of Lords in R v Secretary of State for the Home Department, ex parte Daly [(2001) 3 All ER 433]. Paragraphs 26 to 28 reads thus:
26. The explanation of the Master of the Rolls in the first sentence of the cited passage requires clarification. It is couched in language reminiscent of the traditional Wednesbury ground of review (Associated Provincial Picture Houses Ltd v Wednesbury Corporation[1948] 1 KB
223), and in particular the adaptation of that test in terms of heightened scrutiny in cases involving fundamental rights as formulated in R v Ministry of Defence, Ex p Smith [1996] QB 517, 554E-G per Sir Thomas Bingham MR. There is a material difference between the Wednesbury and Smith grounds of review and the approach of proportionality applicable in respect of review where convention rights are at stake.
27. The contours of the principle of proportionality are familiar. In de Freitas v. Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing [1999] 1 AC 69 the Privy Council adopted a three stage test. Lord Clyde observed, at p 80, that in determining whether a limitation (by an act, rule or decision) is arbitrary or excessive the court should ask itself:
"whether: (i) the legislative objective is sufficiently important to justify limiting a fundamental right; (ii) the measures designed to meet the legislative objective are rationally connected to it; and (iii) the means used to impair the right or freedom are no more than is necessary to accomplish the objective."
Clearly, these criteria are more precise and more sophisticated than the traditional grounds of review. What is the difference for the disposal of concrete cases? Academic public lawyers have in remarkably similar terms elucidated the difference between the traditional grounds of review and the proportionality approach: see Professor Jeffrey Jowell QC, "Beyond the Rule of Law: Towards Constitutional Judicial Review"
[2000] PL 671; Craig, Administrative Law, 4th ed (1999), 561-563; Professor David Feldman, "Proportionality and the Human Rights Act 1998", essay in The Principle of Proportionality in the Laws of Europe (1999), pp 117, 127 et seq. The starting point is that there is an overlap between the traditional grounds of review and the approach of proportionality. Most cases would be decided in the same way whichever approach is adopted. But the intensity of review is somewhat greater under the proportionality approach. Making due allowance for Page 30 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 important structural differences between various convention rights, which I do not propose to discuss, a few generalisations are perhaps permissible. I would mention three concrete differences without suggesting that my statement is exhaustive. First, the doctrine of proportionality may require the reviewing court to assess the balance which the decision maker has struck, not merely whether it is within the range of rational or reasonable decisions. Secondly, the proportionality test may go further than the traditional grounds of review inasmuch as it may require attention to be directed to the relative weight accorded to interests and considerations. Thirdly, even the heightened scrutiny test developed in R v Ministry of Defence, Ex p Smith [1996] QB 517, 554 is not necessarily appropriate to the protection of human rights. It will be recalled that in Smith the Court of Appeal reluctantly felt compelled to reject a limitation on homosexuals in the army. The challenge based on article 8 of the Convention for the Protection of Human Rights and Fundamental Freedoms (the right to respect for private and family life) foundered on the threshold required even by the anxious scrutiny test. The European Court of Human Rights came to the opposite conclusion: Smith and Grady v United Kingdom (1999) 29 EHRR 493. The court concluded, at p 543, para 138:
"the threshold at which the High Court and the Court of Appeal could find the Ministry of Defence policy irrational was placed so high that it effectively excluded any consideration by the domestic courts of the question of whether the interference with the applicants' rights answered a pressing social need or was proportionate to the national security and public order aims pursued, principles which lie at the heart of the court's analysis of complaints under article 8 of the Convention." In other words, the intensity of the review, in similar cases, is guaranteed by the twin requirements that the limitation of the right was necessary in a democratic society, in the sense of meeting a pressing social need, and the question whether the interference was really proportionate to the legitimate aim being pursued.
28. The differences in approach between the traditional grounds of review and the proportionality approach may therefore sometimes yield different results. It is therefore important that cases involving convention rights must be analysed in the correct way. This does not mean that there has been a shift to merits review. On the contrary, as Professor Jowell [2000] PL 671, 681 has pointed out the respective roles of judges and administrators are fundamentally distinct and will remain so. To this extent the general tenor of the observations in Mahmood [2001] 1 WLR 840 are correct. And Laws LJ rightly emphasised in Mahmood, at p 847, para 18, "that the intensity of review in a public law case will depend on the subject matter in hand".
That is so even in cases involving Convention rights. In law context is everything."
Page 31 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 42 Bearing in mind the aforesaid principles of law, we now proceed to consider whether the decision on the part of the respondents to blacklist the writ applicant for all times to come could be said to be just, proper and reasonable?
43 We are of the view that the detailed explanation offered by the writ applicant vide its letter dated 17th October 2017 addressed to the Surat Municipal Corporation was not taken into consideration in its true perspective. The writ applicant had to say many things as regards the delay in completion of the work of contract. The writ applicant pointed out that during the period of contract, he had to face difficulties on account of demonetization, procuring labour on account of demonetization, heavy traffic during the day time at the main junctions, the city of Surat was hit by heat wave in May 2017 and on account of which, he had to take care of his labourers, there was strike at the end of the quarry association as a result the materials / goods could not be procured in time, etc. 44 The aforesaid is evident from the following:
"Name of work : Construction of Carpet / Recarpet layer of various roads of width 24.0 mt. (80') and above falling in EAST ZONE (VARACHHA) of Surat city by Contractor's own Drum Mix Tyre Hot Mix Plant to be installed within Surat city limit with Sensor operator paver finisher including construction / repair of footpath, divider, water table and providing laying / fixing of pavement markings, road studs with other traffic safety measures.
Sr. Name of work Present position of work No. 1 Carpeting / Recarpeting of 24.00 mt. Work physically completed,
T P Road from WDS to Railway except Asphalt painting work boundry in T P Scheme No.8 Page 32 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 (Umarwada).
2 Carpeting / Recarpeting of 60.00 mt. Except Asphalt painting and Canal Road from BRTS junction to lane marking Sania Hemad naka.
3 Carpeting / Recarpeting of 36.00 mt. Whatever the land given to us T P Road from 45.00 mt. Junction to we did the work. But in the Utran boundry in T P Scheme No.18, remaining length the work 24 (Mota Varachha). could not be done due to hindrance (electrical) line, strom water manhole shifting and remaining metal grouting work) 4 Recarpeting of Surat Kamrej road The whole work was not given from Nana Varachha flyover to to us. Trench line work is Sarthan Rajhans tower executed as per the directive of officers.
5 Carpeting / Recarpeting of 30.00 mt. Road is handed over to R.D.D. Road from Jawaharnagar Vasahat to department of S.M.C. Kalakunj Society in T P Scheme No.16 (Kapodara) 6 Recarpeting of Varachha main road Road is handed over to R.D.D. from Vaishali junction to Hirabag. department of S.M.C. 7 Recarpeting of 24.00 mt. road from The work is physically Varachhamain road to Sarasvati completed. Except Asphalt School in T P Scheme No.4 painting and lane marking.
(Aswanikumar - Navagam) 8 Recarpeting of 24.00 mt. Road from The work is physically Varachha main road to Umiya chowk completed. Except Asphalt in T P Scheme No.4 (Aswanikumar - painting and lane marking. Navagam) 9 Carpeting / Recarpeting of 30.00 mt. No clear site is made available Road from Sarthan naka to Khadi to us.
bridge (Vrajbhumi road) in T P Scheme No.21 (Sarthana - Simada) 10 Carpeting / Recarpeting of 30.00 mt. No clear site is made available Road from Khadi bridge to Simada to us.
gam in T P Scheme No.21 9Sarthana
- Simada) 11 Recarpeting of 45.00 mt. Road from The work is awaited.
Surat Kamrej road to Savji Korat bridge in T P Scheme No.21 (Sarthana - Simada) 12 Carpeting of 24.00 mt. Road from The work is physically Page 33 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 Utran canal to Tapi river via Abrama completed.
road in T P Scheme No.24 (Mota Varachha) 13 Carpeting of 24.00 mt. Road from The work is physically 36.00 mt. T P road to Kosad boundry completed. Except Asphalt via Maharaja farm in T P Scheme painting and lane marking. No.24 (Mota Varachha) 14 Recarpeting of 24.00 mt. Road from The road is handed over to Varachha main road, central ware R.D.D. department of S.M.C. house to Lambe Hanuman Road in T P Scheme No.4 (Aswanikumar -
Navagam) 15 Carpeting of 24.00 mt. Road from The work is awaited.
Bhagwan Chowk to Pasodara
Kathodara road via V T Nagar in T P
Scheme No.21 (Sarthana - Simada).
16 Carpeting of 24.00 mt. Road from The work is awaited.
Shyamdham mandir to Valak Canal
road in T P Scheme No.22 (Sarthana
- Valak).
17 Carpeting of 24.00 mt. Road from The work is awaited.
Harekrishna campus to Khadsad
boundry in T P Scheme No.21
(Sarthana - Simada)
For Royal Infra Engineering Pvt. Ltd.
Director"
45 Over and above the aforesaid, there is a certificate also annexed at
page : 189 of the paper book issued by the Corporation stating that the work has been undertaken in accordance with the specifications and terms and conditions of the contract.
46 We may also look into the averments made in para 7 of the sur- rejoinder filed on behalf of the respondents, wherein a fair idea or rather the break-up of the work undertaken by the writ applicant has been given. We quote as under:
Page 34 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 "...I say that the work awarded to the petitioner is divided into four parts: (1) Road work; petitioner has executed 85.5% of this work, (2) Footpath, kerb and divider; petitioner has executed 7.83% of this work, (3) Pavement marking and installation of Cat eye; petitioner has executed 20.70% of this work, (4) Road signages; petitioner has executed 14.78% of this work. I say that against the tender cost of Rs.4,75,01,164.72 petitioner has executed work of Rs.2,60,16,848.54, that is 54.77% of total work. Petitioner had not maintained the momentum of work and lagging behind the scheduled time..."
47 It may be true, as pointed out by the Surat Municipal Corporation, that the writ applicant, at the end of the day, was not able to successfully undertake the contract work in accordance with the terms and conditions of the contract, however, the same by itself does not warrant the action of blacklisting for all times to come.
48 Having regard to the aforesaid, could it be said that the conduct of the writ applicant was lacking transparency and discipline, leading to suppression of a material aspect and thereby indulging himself in some immoral activities disabling the authority to take a decision applying the principles of fair play and justice.
49 There may be circumstances in which one of the contracting parties may be justified in backing out the other. There could be unforeseen circumstances/Supervening circumstances/several other situations, which the contracting parties may not be able to comprehend and the ground realities may be found otherwise than what was meant and understood by the contracting parties. There may be a mutual mistake or mistake on the side of one party on the basis of some wrong Page 35 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 understanding of the ground realities. In our opinion, no such circumstances exists in the case on hand justifying an order of blacklisting.
50 We are of the view that mere delay in execution of the order or non-execution of the order without anything more, by itself, may not be sufficient to entail the consequences of being blacklisted and that too, for all times to come. Even in a case of delay in execution of the order or non-execution of the order or failure to honour the commitments, the Corporation as a State within Article 12 of the Constitution is obliged to consider the circumstances that might have led to such delay or failure. We do not say for a moment that the Corporation cannot be said to have been prejudiced in any manner, but, at the same time, without considering the explanation offered, it was not proper on the part of the Corporation to straightway blacklist a Contractor for all times to come.
51 There is one more aspect of the matter we need to consider. We take notice of the fact that no reasons have been assigned in the impugned order. It may be true that the Corporation issued a show cause notice to the writ applicant levelling certain allegations and in response to the same, the writ applicant filed his reply explaining that what has been alleged in the show cause notice is not true. However, ultimately, when the final order came to be passed, nothing has been stated therein as to why the explanation offered by the writ applicant was not found to be satisfactory or appealing. We do not say for a moment that the Corporation was expected to assign reasons in details, but, at the same time, the order should reflect something to indicate that the Corporation did take into consideration the explanation offered by Page 36 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 the writ applicant which was not found to be satisfactory. At least, it was expected by the Corporation to assign some reasons in brief.
52 In the aforesaid context, it is relevant to note that the Supreme Court in a decision reported in S. N. Mukherjee vs. Union of India [AIR 1990 SC 1984] observed that in view of the expanding horizon of the principles of natural justice, the requirement to record reasons can be regarded as one of the principles of natural justice which govern the exercise of power by the administrative authorities. The rules of natural justice are not embodied rules. The extent of their application depends upon the particular statutory framework whereunder the jurisdiction has been conferred on the administrative authority.
53 We may refer to and rely upon a decision of the Delhi High Court in the case of M/s. Johnson and Johnson Pvt Ltd vs. All India Institute of Medical Sciences, New Delhi [Writ Petition (Civil) No.5989 of 2021 decided on 25th August 2021], wherein the Delhi High Court, while dealing with the very same subject matter of blacklisting, observed as under:
"26. The recording of such reasons is imperative not only when the administrative authority discharges quasi-judicial function but also it is a pure administrative function and the decision is visited by civil or evil consequences as far as affected party is concerned (See Ramesh B. Desai v. Union of India, AIR 1988 Delhi 288). So far as cases of blacklisting are concerned, this requirement will, all the more, be imperative having regard to the spirit of the judgments of the Supreme Court in the cases of M/s. Erusion Equipment (supra) and M/s. Star Enterprises (supra).
EXTENT OF REQUIREMENT TO GIVE REASONS:
27. Having said that it has now become an obligation to give reasons in support of an administrative order, we may hasten to add that what is needed is not a detailed or elaborate judgment, but a brief and pithy Page 37 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 statement of reasons for the decision. The administrative authorities, after all, are not discharging the judicial function like that of a Court and, therefore, not required to write an order in the manner in which normally a judgment is written by a court of law. The reasons given by an authority need be no more than a concise statement of the way in which it arrives at the decision. Way back in the year 1996 the Supreme Court pointed out in M.P. Industries' case (supra) that "when we insisted upon reasons, we do not prescribe any particular form or scale of the reasons. The extent and the nature of the reasons depend upon each case." What is essential is that the order must be a speaking order and must state the elements which had led to the decision and tell its own story and one is able to infer as to why the order was made. De Smith, Woolf and Jowell point out that the reasons must "meet the substance of the principle arguments that the tribunal was required to consider. In short, the reasons must show that the decision maker successfully came to grips with the main contention advanced by the parties, and must tell the parties in broad terms why they lost, or as the case may be one". Reasons are links between materials on which certain conclusions are based and the actual conclusion drawn. They would disclose how the mind is applied to the subject matter; whether done relevantly or rationally. Therefore, it would be sufficient if reasons indicate application of mind is discernible and mental process leading from the dispute to its solution is found in the order."
54 The Delhi High Court proceeded further to observe in para 37 of its judgement as under:
"37. Now, insofar as the established position of law in respect of blacklisting is concerned, mere breach of a contract is not sufficient to merit an order of blacklisting. A Coordinate Bench of this Court had eloquently explained this legal position in the following extracts of its decision in Coastal Marine Construction and Engineering Limited Vs. Indian Oil Corporation Ltd. 2019 SCC Online Del 6542:
"35. It is now well settled that blacklisting a person visits him with serious adverse consequences. In Erusian Equipment & Chemicals Ltd v. State of West Bengal : (1975) 1 SCC 70, the Supreme Court had observed as under:--
"The blacklisting 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 Page 38 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 and the Government in the matter of transactions. The blacklists are "instruments of coercion"."
36. The Supreme Court in Gorkha Security Services v. Government (NCT of Delhi): 2014 SCC OnLine SC 599 had made the following observation:
"With blacklisting many civil and/or evil consequences follow.
It is described as "civil death" of a person who is foisted with the order of blacklisting. Such an order is stigmatic in nature and debars such a person from participating in government tenders which means precluding him from the award of government contracts."
55 As observed by the Supreme Court in Erusian Equipment & Chemicals Ltd. (supra), an order of blacklisting casts a slur on the party being blacklisted and is stigmatic. Given the nature of such an order and the import thereof, it would be unreasonable and arbitrary to visit every contractor who is in breach of his contractual obligations with such consequences.
56 In Sarku Engineering Services SDN BHD vs. Union of India and another [2016 SCC OnLine Bom 5233], a Division Bench of the Bombay High Court considered the case of a contractor (the petitioner therein) who had been blacklisted on the allegation that it was responsible for major delay in execution of a contract entered into with the Oil and Natural Gas Corporation Limited (respondent no. 2 therein). The contractor disputed the allegation that it was in breach of its obligations; however, the Oil and Natural Gas Corporation Limited found the performance of the petitioner therein to be unsatisfactory and, therefore, decided to avoid future dealings with the said petitioner. The question whether the petitioner therein was, in fact, responsible for the delay was a disputed question that was pending adjudication by an arbitral Page 39 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 Tribunal. In the aforesaid context, the Bombay High Court had observed as under:
"58. We hasten to add that there could be a situation wherein the inherent power of blacklisting or placing the contractor on Holiday-list can be exercised and the stipulations or the terms of the contract may not restrict or fetter exercise of such power. Equally, the mere pendency of legal proceedings cannot be a absolute bar for invoking this inherent power or exercising it. However, there have to be strong, independent and overwhelming materials to resort to this power given the drastic consequences that an order of blacklisting has on a contractor. The power to blacklist cannot be resorted to when the grounds for the same are only breach or violation of a term or condition of a particular contract and when legal redress is available to both parties. Else, for every breach or violation, though there are legal modes of redress and which compensate the party like respondent No. 2, it would resort to blacklisting and by sometimes abandoning or scuttling the pending legal proceedings."
57 Plainly, if a contractor is to be visited with the punitive measure of blacklisting on account of an allegation that he has committed a breach of a contract, the nature of his conduct must be so deviant or aberrant so as to warrant such a punitive measure. A mere allegation of breach of contractual obligations that is disputed, per se, does not invite any such punitive action.
58 In M/s. Johnson and Johnson (supra), the Court observed in para 38 as under:
"Essentially, what makes a decision to blacklist serious are the consequences that are borne from it, for the person in respect of whom it is passed. Not only does such a blacklisting order significantly dent the reputation and goodwill that the company enjoys in the market and may have spent years cultivating, it also deprives them from a level playing field in respect of future business opportunities. As was aptly put by the Supreme Court in Erusian Equipment & Chemicals Ltd. Vs. State of W.B. (1975) 1 SCC 70, blacklisting is an 'instrument of coercion' which has the effect of creating a disability. Usually, when participating in a tender, the bidder is required to furnish a statement undertaking that it has not been blacklisted by any institution so far Page 40 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021 C/SCA/10412/2018 JUDGMENT DATED: 09/09/2021 and, if that is not the case, provide information of such blacklisting. This serves as a record of the bidder's previous experience which gives the purchaser a fair picture of the bidder and the conduct expected from it. Therefore, while the debarment itself may not be permanent and may only remain effective for a limited, pre-determined period, its negative effect continues to plague the business of the debarred entity for a long period of time. As a result, it is viewed as a punishment so grave, that it must follow in the wake of an action that is equally grave."
59 Thus, having regard to the aforesaid discussion, we have reached to the conclusion that the decision of the Corporation to blacklist the writ applicant does not appear to be just, proper or reasonable, applying the doctrine of proportionality, as discussed above.
60 In the result, this writ application succeeds and is hereby allowed. The impugned order dated 30th June 2018 and the Resolution passed by the Standing Committee No.714/2018 dated 31st May 2018 at Annexure : I to the extent of blacklisting the writ applicant is concerned, is hereby quashed and set aside.
61 We clarify that we have confined our adjudication only to the extent of the order of blacklisting. We leave it open for both the parties to avail appropriate legal remedy before the appropriate forum in accordance with law if there are any other further claims against each other.
(J. B. PARDIWALA, J) (VAIBHAVI D. NANAVATI,J) CHANDRESH Page 41 of 41 Downloaded on : Sat Oct 09 09:51:38 IST 2021