Gujarat High Court
Ratnam Energy Private Limited Through ... vs Oil And Natural Gas Corporation Limited on 16 March, 2021
Author: Sonia Gokani
Bench: Sonia Gokani, Sangeeta K. Vishen
C/SCA/1235/2021 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 1235 of 2021
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS. JUSTICE SONIA GOKANI
and
HONOURABLE MS. JUSTICE SANGEETA K. VISHEN
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ? YES
2 To be referred to the Reporter or not ?
YES
3 Whether their Lordships wish to see the fair copy of the
judgment ? NO
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or any
NO
order made thereunder ?
==========================================================
RATNAM ENERGY PRIVATE LIMITED THROUGH DHARMESH SUDANI
Versus
OIL AND NATURAL GAS CORPORATION LIMITED
==========================================================
Appearance:
M R BHATT & CO.(5953) for the Petitioner(s) No. 1
MUNJAAL M BHATT(8283) for the Petitioner(s) No. 1
MR AJAY R MEHTA(453) for the Respondent(s) No. 1
==========================================================
CORAM: HONOURABLE MS. JUSTICE SONIA GOKANI
and
HONOURABLE MS. JUSTICE SANGEETA K. VISHEN
Date : 16/03/2021
ORAL JUDGMENT
(PER : HONOURABLE MS. JUSTICE SONIA GOKANI)
1. This is a petition under Article 226 of the Constitution of India challenging the banning order dated 14.12.2020 issued by Page 1 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT the respondent Oil and Natural Gas Corporation ('ONGC' for short).
2. At the joint request of the parties, we have taken up this matter for final hearing.
Factual Matrix:
3. The facts shorn off all the details are as follow: -
3.1. The petitioner is an Oil field Service Company engaged in the field of Exploration and Production of Oil and Gas, Minerals, Water, etc. The founder of the company is in the business since the year 1985 and the petitioner has service clients and it also provides service to the respondent. It is averred that till date, there had been no litigation faced by the petitioner, let alone facing a banning order from the clients.
3.2. The respondent is a Maharatna Central Public Sector Undertaking and the largest crude oil and natural gas company in India. The Government of India under the Administrative Control of the Ministry of Petroleum and Natural Gas, owns it. It produces the largest quantity of oil and gas i.e. around 70% of India's crude oil and around 84% of its natural gas.
3.3. The respondent floated a tender for Charter Hiring of 06 Page 2 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT Nos. of Work Over Rigs for various Assets of ONGC for a period of three years for Cat-1, 2 and 3 and five years for Cat-4 on 28.08.2019. The petitioner was desirous of bidding for Cat-1 and 2 and therefore was required to submit Bid Security as per Clause-11 of the Invitation of Bid. However, Clause-17 of the Instructions to Bidders ('ITB' for short) particularly Clause-17.2 provided that Micro and Small Enterprises ('MSEs' for short) registered with District Industry Centers or any other body specified by Ministry of Micro, Small and Medium Enterprise ('MSME' for short) or Udhyog Aadhar Memorandum are exempted from payment of Bid Security.
3.4. The petitioners are already registered with the District Industries Center, Rajkot as well as having Udhyog Aadhar Certificate certifying them as 'Small Enterprise'. The petitioner vide its communication dated 25.09.2019 requested the respondent for exemption from payment of Bid Security while annexing the relevant certificates. After seeking exemption of payment of Earnest Money Deposit (EMD for short)/ Bid Security, the petitioner submitted its bid on 21.10.2019 for Cat-
1 and 2 and also furnished the Integrity Pact.
3.5. On 21.05.2020, the respondent communicated vide e-mail to the petitioner stating therein that in the post opening of the Page 3 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT price bids of tender, the ONGC received a complaint that the petitioner furnished forged documents as in fact, the petitioner is a medium enterprise and not the small enterprise.
3.6. It was replied to by the petitioner on 27.05.2020 clarifying the position and assuring the respondent that there was no fraud perpetrated. The petitioner went to an extent of pointing out the method of calculation adopted by the respondent and urged that it was incorrect and hence, the request for reconsideration was made.
3.7. The petitioner clarified on 22.06.2020 that it continued to be a small enterprise and even as per the relevant certificates, no adverse action should be initiated against the petitioner. The petitioner also addressed a communication on 26.08.2020 requesting the Grievance Officer of MSME Council to intervene and resolve the issue. However, the officer concerned in the Grievance Cell did not take any actions but, simply referred the matter to the respondent on 27.08.2020.
3.8. A show cause notice was issued to the petitioner by the respondent on 31.08.2020 for showing cause as to why the actions for banning the petitioner be not taken on account of the forged documents tendered by the petitioner at the time of Page 4 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT bidding for Cat-1 and 2 so as not to pay the Bid Security as per Clause-11 of the Invitation to Bid. The said notice also communicated that the Inquiry Officer had been appointed to investigate into the matter.
3.9. A detailed reply was filed by the petitioner on 21.09.2020.
One of the main contentions raised by the petitioner was to an effect that all the certificates issued by the relevant authorities categorized the petitioner as a small enterprise and even the latest certificate issued by MSME on 21.08.2020 categories the petitioner as a small enterprise. It was contended before the respondent that the data once submitted on portal, the same cannot be corrected as update of data is not permissible and secondly, there is no provision of editing the data. It is also the say of the petitioner that banning per se is not an action which is permissible under the tender conditions since, the respondent is permitted either to award the contract or rescind the contract however, it has no authority to ban the petitioner. 3.10. It is the grievance on the part of the petitioner that no copy of inquiry report is given by the respondent. The entire investigation was based on some complaint received after opening the price bids. The complaint also has never been shared with the petitioner till date, therefore, its veracity also is Page 5 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT questionable and the order, according to the petitioner, is wholly nonspeaking and passed without due application of mind. 3.11. According to the petitioner, the documents could not have been forged as they are the certificates issued by the Government Authorities. The petitioner also has submitted that it is a small enterprise and therefore, the decision of the respondent is without any valid or legal basis and warrants indulgence. Moreover, the reliance placed by the respondent on Section 3 of the Integrity Pact is misplaced and misconceived as it does not apply to the petitioner. The respondent, in the instant case, according to the petitioner, has not only rejected its bid but also has banned the petitioner which is wholly arbitrary action. 3.12. It is also the say of the petitioner that as per the new Circular No. 56 of 2020 dated 26.11.2020, for all tenders to be opened till 31.12.2021, furnishing of Bid Security itself is done away with and therefore also, this action looses its effect. Prayers:
4. Therefore, the petitioner is before this Court seeking following reliefs: -
"(a) That this Hon'ble Court may be pleased to issue a writ of mandamus and/or any other appropriate writ, order or direction to quash and set aside the Page 6 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT impugned Banning Order dated 14.12.2020 issued by the Respondent, marked as Annexure-A to this petition;
(b) That pending admission, hearing and final disposal of the present petition, this Hon'ble Court be pleased to stay the operation and implementation of the impugned Banning Order dated 14.12.2020 issued by the Respondent, marked as Anenxure-A to this petition;
(c) That pending admission, hearing and final disposal of the present petition, this Hon'ble Court be pleased to direct the Respondent to consider the Petitioner's bid submitted for the subject Tender, annexed at Annexure-B;
(d) That pending admission, hearing and final disposal of the present petition, this Hon'ble Court be pleased to direct the Respondent to consider the Petitioner's bid submitted for Tender No. D16GC20004;
(e) That this Hon'ble Court may be pleased to grant ex-parte ad-interim relief in terms of Prayer (b),
(c) or (d) hereinabove;
(f) That this Hon'ble Court be pleased to award cost of the present petition to the Petitioner;
(g) Pass such other order(s) as this Hon'ble Court deems fit in the facts and circumstances of the case."
5. This Court (Coram:- Mr. R.M.Chhaya and Mr. R.P.Dholaria, JJ.) issued notice in this matter on 25.01.2021 making it returnable on 02.02.2021.
Reply of the Respondents:
6. The affidavit-in-reply has been filed by the respondent Page 7 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT through its General Manager. According to the respondent, the tender which was issued in respect of which the grievance is raised by the petitioner is not a statutory contract. Therefore, the cause is not justiciable under Article 226 of the Constitution of India. The respondent does not dispute that the tender No. ZNSAC19009 for charter hiring of 06 nos. of Work Over Rigs was floated by the respondent's Corporate Material Management Office at New Delhi. According to the respondent, the petitioner's bid dated 21.10.2019 and all correspondence as well as the order of banning dated 14.12.2020 have been issued and responded to by the Respondent's Corporate Material Management Office at New Delhi. The cause of action has arisen at Delhi only and therefore, the jurisdiction of this Court is seriously questioned. Moreover, the petitioner is a limited company and though limited company is a juristic person, it is not entitled to invoke extraordinary jurisdiction of this Court under Article 226 of the Constitution of India for infringement of any fundamental right whatsoever and therefore, the petition is untenable.
6.1. On factual matrix, it has responded that the petitioner submitted its bid for the tender on 22.10.2019 without payment of any Bid Security/ Earnest Money Deposit for Categories-1 and Page 8 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT 2 i.e. one rig in Ahmedabad and three rigs in Mehsana. The petitioner also annexed a communication dated 25.09.2019 requesting for exemption from payment of Bid Security/EMD relying on Clause-17.2 of the Instructions to Bidders claiming that it was a small enterprise as contemplated by the Micro, Small and Medium Enterprises Development Act, 2006. On the basis of certificate dated 13.05.2015 which was 4 years and 5 months old and another dated 04.08.2017 which was 2 years and 2 months old, such exemption was sought. It also submitted the certificate of genuineness of documents and it also permitted the respondent to initiate the action as deemed fit, in case, the documents/ certificates/ information submitted by the petitioner in the tender are found to be forged or false. It also submitted along with the bid, an Integrity Pact as well as the letter dated 10.10.2019 confirming the Purchases Preference Policies of MSE and the Public Procurement Policy for MSEs order 2012. 6.2. The requirement of Bid Security/ EMD amount for Cat-1 was Rs.28,03,500/- and for Cat-2 Rs.68,56,800/- thus, exemption was sought for the sum of Rs.96,60,300/-. Two communications were received by the respondent on 14.02.2020 and 25.02.2020 against the petitioner raising the clear red flag on the status of the petitioner as a small enterprise as per the Page 9 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT MSME Act and therefore, on 21.05.2020, the petitioner was called to give its explanation and justify as to how it could claim exemption under Clause 17.2 of the ITB from payment of Bid Security/EMD.
6.3. The petitioner vide its communication dated 27.05.2020, in response to the said letter, stated that as per the definition, the companies engaged in providing services and having gross investment in equipment above Rs. 2 crores and up to Rs. 5 crores are treated as medium enterprise and covered under MSME. Their investment in equipment which are used in service is less than Rs. 5 crores and hence, they are medium enterprises. It is, therefore, contended by the respondent that when the petitioner was neither micro nor small enterprise, it was not entitled to any sort of exemption available to the small enterprises. The false and forged documents are violative of Clause-40.1 of the ITB and also Section 2(1) read with Section 3(1) of the Integrity Pact. Clause-40.1 provides that any bidder if submits any false or forged certificate or information, it will be for the ONGC to initiate action against such person or a company.
6.4. It is the say of the respondent that after admitting on 27.05.2020 that it was a medium enterprise, two e-mails dated Page 10 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT 22.06.2020 and 26.08.2020 have been addressed by the petitioner for correcting its stand that it was a small enterprise. These two communications, according to the respondent, are attempts and efforts to cover up and avoid inquiry process. Subsequently, the office of Development Commissioner of Micro, Small and Medium Enterprise vide its communication dated 29.08.2020 addressed to the respondent unequivocally stated that respondent should take appropriate action against the petitioner.
6.5. Therefore, a show cause notice was issued on 31.08.2020 as to why the business be not banned on account of such action for claiming MSE benefits. The reply was tendered on 21.09.2020 which requested for virtual meeting to be arranged due to pandemic on account of COVID-19 virus and on 05.10.2020, the chance of oral hearing was given. Mr. Dharmesh Sudani and Mr. Kirti Marviya attended the online hearing. Based on all the evidences, the Inquiry Officer passed the banning order on 14.12.2020 and blacklisted the petitioner for the period of two years from the date of the order.
6.6. Thus, according to the respondent - ONGC, on its own admission, when the petitioner is a medium enterprise and it clearly avoided to pay EMD worth Rs. 96.60 lakhs (round of), the Page 11 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT respondent is entitled to initiate the action after affording the opportunity to the parties and accordingly, the action of banning has been taken.
Rejoinder Affidavit:
7. The affidavit-in-rejoinder has been filed by the petitioner denying all the contents of the reply. The main grievance on the part of the petitioner is that the respondent did not serve the copy of inquiry report and thereby violated the principle of natural justice and hence, the Court was needed to be approached. The issue of lack of territorial jurisdiction of the Court, according to the petitioner, is unwarranted since it has not approached this Court because it is located in Rajkot, however, as per Section 20 of the Code of Civil Procedure, the petition can be filed either as per the place of business or as per the cause of action, in whole or part, arisen. Though the tender has been floated by the respondent at New Delhi, the petitioner had preferred bid for Cat-1 and 2 which located at Ahmedabad and Mehsana respectively and therefore, the impugned order banning and restricting the petitioner to perform work at Ahmedabad and Mehsana which fall within the territory of the Court, can be challenged before this Court. The petition is filed on behalf of the Private Limited Company through its authorized Page 12 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT signatory and who admittedly is granted fundamental right under the Constitution of India including the right to approach this Court under Article 226 of the Constitution of India. 7.1. The total amount of EMD was Rs.50,89,100/- being small enterprise. It is incorrect to say that the falsehood has been pleaded by the respondent for an amount of Rs. 1 crore. The petitioner has also not been provided a copy of the letters dated 14.02.2020 and 25.02.2020 raising red flags. It is also the say of the petitioner that relying on Clause-52 of ITB, the petitioner was called upon to provide the justification, in fact, there is no clause provided under the tender document such as Clause-52. 7.2. Heavy reliance is placed on the inquiry report which has not been supplied to the petitioner. The petitioner, therefore, has heavily relied on the decision rendered by the Apex Court in case of UMC Technologies Pvt. Ltd. vs Food Corporation of India and Another [ 2020 SCC OnLine SC 934].
7.3. It is also the grievance of the petitioner that the respondent has not given any reasons before banning the petitioner and for the first time, they replied to the petitioner and came out with a new ground for banning that the petitioner has submitted old, outdated un-updated certificates obtained from the authorities Page 13 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT in the years 2015 and 2017.
8. The sur-rejoinder is also filed, the details of which may not be necessary to be reproduced. In gist, it is contended that the decision of UMC Technologies (supra) would have no applicability considering the factual matrix of the instant case. Oral Submissions:
9. The Court has extensively heard learned senior advocate Mr. Manish Bhatt assisted by learned advocate Mr. Munjal Bhatt for the petitioners who along the line of the memo of petition, made out essentially three grounds, (i) the absence of any right of the respondent to initiate the actions of banning the petitioner, (ii) serious breach of principle of natural justice, and
(iii) complete misinterpretation of the entire material, leading to the serious consequences of blacklisting the petitioner. 9.1. He emphasized reiteratively that in absence of any challenge to the certificate issued by MSME, the petitioner continued to be a small enterprise till today. On the strength of such vital, relevant and robust material, no adverse action could have been taken against the petitioner.
10. The crux of the submissions of learned advocate Mr. Ajay Page 14 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT Mehta appearing for the respondent - ONGC is three folds, (i) lack of jurisdiction of this Court under Article 226 of the Constitution of India for no cause of action having arisen within its jurisdiction, (ii) the petitioner being a limited company cannot come before this Court invoking the plea of infringement of fundamental rights for approaching this Court under Article 226 of the Constitution of India, and (iii) the serious questions of forgery and the falsehood for seeking exemption from payment of EMD would entitle the respondent to initiate the actions under Clause-40.1 of the ITB read with Section 2(1) and Section 3(1) of the Integrity Pact.
10.1. He also has denied of not having availed the opportunity of hearing, on the contrary, he emphasized that after availing sufficient opportunities to the parties, the decision is taken, no interference is desirable under Article 226 of the Constitution of India.
Findings:
11. Having thus heard both the sides extensively and also having closely perused the material on record, for the reasons to be followed hereinafter, the petition deserves to be allowed.
12. We shall be focusing in this endeavour essentially on the Page 15 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT four issues which have been raised by the parties (i) maintainability of the petition under Article 226 of the Constitution of India, (ii) the jurisdictional issue, (iii) the violation of principle of natural justice, and (iv) the merit of the matter.
Maintainability:
13. Taking firstly the aspect of maintainability of the petition under Article 226 of the Constitution, the contention is raised by the respondent that no right much less the fundamental right of the petitioner under Articles 14 and 19(1)(g) of the constitution of India is violated. There is no question of invocation of extraordinary jurisdiction, according to the respondent, under Article 226 of the Constitution of India and therefore, the petition for the issues raised squarely fall under the realm of law of contract and not in the realm of public dispute or the public law. The dispute is with regard to the tender issued by the respondent. There is no statutory contract nor the contract entered into by and between the parties and therefore also, the invocation of extraordinary powers is undesirable. It is also contended further that the petitioner - Ratna Energy Private Limited is a limited company and which is though a juristic person, it cannot invoke extraordinary jurisdiction since there Page 16 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT would be no infringement of any fundamental right of such company.
13.1. Taking firstly the issue of limited company being a juristic person and yet, having no right to approach this Court under Article 226 of the Constitution of India, we could notice that by way of draft amendment, the petitioner no.2 who is the Managing Director of the petitioner no.1 - Company, is already impleaded as a party petitioner. It has also been pleaded rightly that he is a citizen of India, guaranteed fundamental rights enshrined under Part III of the Constitution of India and the petitioner no.1 company being a private limited company, any loss of business caused to the same would be naturally prejudicial to all its shareholders, thus, the petitioner no.2 having been joined as the party, this ground of the respondent that the petition cannot be sustainable since the petitioner is a limited company and is before this Court under Article 226 of the Constitution of India, will hold no ground. According to the respondent, no copy has been served upon the respondent of a draft amendment filed and therefore, the incorporated company is not standing on its own to maintain the writ petition for which he has relied on the decision of the Apex Court rendered in case of Divisional Forest Officer vs. Bishwanath Tea Co. Ltd, Page 17 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT reported in AIR 1981 SC 1368 wherein it is observed as under:
"Art. 226 confers extraordinary jurisdiction on the High Court to issue high prerogative writs for enforcement of the fundamental rights or for any other purpose. Undoubtedly, the respondent contended that its fundamental right under Art. 19(1)
(g) to carry on trade has been violated. The High Court overlooked the well-settled legal position that a juristic person such as a Corporation is not entitled to any of the freedoms guaranteed by Art. 19. The respondent was the sole petitioner in the High Court.
It is a company incorporated under the Companies Act. The fundamental right claimed under Art. 19 (1)
(g) is to practise any profession or carry on any occupation, trade or business. The respondent (company) contended that it had a right to carry on its trade or business of cultivating and raising a tea garden and as part of it to cut timber and remove the same from the leased area without the payment of royalty and that insistence upon payment of royalty unsupported by law is an unreasonable restriction denying the fundamental right guaranteed to the respondent. Art. 19 (1) (g) guarantees the fundamental freedom to a citizen. The respondent not being a citizen was not entitled to complain of breach or violation of fundamental right under Art. 19 (1) (g). [See State Trading Corporation of India Ltd. v. The Commercial Tax Officer, Vishakhapatnam and Tata Engineering and Locomotive Co. v. State of Bihar .] However, the shareholders of a company can complain of infringement of their fundamental rights [See Bennett Coleman & Co. and others v. Union of India and others]. Such is not the case pleaded. Therefore the writ petition on the allegation of infringement of fundamental right under Art. 19 (1)
(g) at the instance of respondent company alone was not maintainable."
13.2. This decision for the ratio would be binding this court, however, it would have no applicability in the present case, as mentioned above, due to impleadment of petitioner no.2. Page 18 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022
C/SCA/1235/2021 JUDGMENT 13.3. So far as the objection raising the question of dispute being contract and therefore, in the realm of the private dispute and not the public law, this Court is of the opinion that it is not the question of the controversy of the non-grant of the contract which is sought to be raised before this Court. The Court essentially is addressing the issue of banning the petitioner company from participating into any of the bids on the basis of the company having been blacklisted by the order of the respondent authority.
13.4. This issue will be further elaborated at the time of discussing the issue of breach of principle of natural justice while passing the order. Suffice to say that had it been a question of specific performance of contract or breach thereof with disputed question of facts, the writ petition may not have been entertained, however, that not being the issue and essentially, the question concerns banning of the petitioner, this contention of maintainability of the respondent merits no acceptance.
Issue of Jurisdiction:
14. This takes us to the second and vital ground raised of Page 19 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT jurisdiction of this Court. It is strenuously urged for and on behalf of the respondent that no cause of action has arisen wholly or in part within the territorial jurisdiction of this Court, therefore, this Court cannot entertain this. Learned Counsel Mr. Mehta has sought to rely on the decision of Oil and Natural Gas Commission vs. Utpal Kumar Basu, reported in 1994 (4) SCC 711 and that of M/s. Kusum Ingots and Alloys Ltd. vs. Union of India and Another reported in 2004 (6) SCC 254. 14.1. Before adverting to the facts in the instant case, the law on the subject deserves close examination. In case of Utpal Kumar (supra), the questions which the Hon'ble Supreme Court addressed was of the jurisdiction of the High Court to entertain, hear and decide the petition where in case of ONGC itself, the advertisement was issued in all leading newspapers of the Country including in West Bengal calling for tenders for setting up of a Kerosene Recovery Processing Unit at the Hazira Complex in Gujarat. The tender notice was issued from New Delhi and were to be communicated at New Delhi. The NICCO having its registered office in Calcutta became aware of the tender notice printed in the 'Times of India' newspaper circulated within the jurisdiction of the Calcutta High Court, it offered its bid and respond to the tender notice which were scrutinized at Page 20 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT Delhi. Its bid was rejected on the ground that it did not fulfill the requisite criteria stipulated in the tender. The recommendations made by EIL were considered by the tender committee which was satisfied by NICCO's criteria, therefore, the meeting was held at New Delhi by the EIL with various bidders including NICCO. After the said meeting, EIL once again reiterated its earlier view that NICCO lacked the experience criteria. The Tender Committee re-examined the view of EIL and agreed with the same and thus, NICCO was not shortlisted by the Tender Committee. The NICCO represented the Tender Committee as well as the EIL however, they saw no reason to depart from their earlier view and thereafter the final decision was taken by Steering Committee at New Delhi and pursuant to the same, the contract was awarded to another company M/s CIMMCO Ltd. 14.2. The NICCO filed writ petition in the High Court of Calcutta where the M/s CIMMCO Ltd. was not made a party and NICCO prayed that ONGC be restrained from awarding the contract to any other party and if awarded, to cancel the same. The High Court had intervened and gave certain directions to the respondents to consider the offer of the petitioner along with the others and disposed of the same.
14.3. The ONGC moved under Article 136 of the Page 21 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT
Constitution of India where at the hearing of the appeal, the Court confined itself to the preliminary objection of ONGC that the High Court of Calcutta had no jurisdiction to entertain, hear and dispose of the writ petition in the manner it did as the averments in the writ petition, even if assumed to be correct, did not disclose that even a part of the cause of action for institution of the said writ petition, had not arisen within the jurisdiction of the Calcutta High Court.
14.4. The Apex Court held that if the part of cause of action has arisen within the territorial jurisdiction of the Court, it can confer the jurisdiction on the High Court and the cause of action means the bundle of facts which the petitioner needs to prove, if traversed, to entitle it to a judgment in its favour by the Court and therefore, in determining the objection of lack of territorial jurisdiction, the Court must take all the facts pleaded in support of the cause of action into consideration albeit without embarking upon an enquiry as to the correctness or otherwise of the said facts. In other words, the question whether the High Court had territorial jurisdiction to entertain the writ petition requires to be addressed in the writ petition, the truth or otherwise whereof being immaterial. Thus, the question of territorial jurisdiction must be decided on the facts pleaded in Page 22 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT the petition and averments in the petition should be sufficient in law to establish part of cause of action.
14.5. The Apex Court held that merely because the petitioner had read the advertisement at Calcutta and submitted its offer from Calcutta and made representation from Calcutta would not constitute facts forming an integral part of the cause of action. The Court, therefore, held that, the part of cause of action did not arise within the jurisdiction of Calcutta High Court.
"5.Clause (1) of Article 226 begins with a non obstante clause notwithstanding anything in Article 32 - and provides that every High Court shall have power "throughout the territories in relation to which it exercises jurisdiction", to issue to any person or authority, including in appropriate cases, any Government, "within those territories" directions, orders or writs, for the enforcement of any of the rights conferred by Part III or for any other purpose. Under clause (2) of Article 226 the High Court may 717 exercise its power conferred by clause (1) if the cause of action, wholly or in part, had arisen within the territory over which it exercises Jurisdiction, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories. On a plain reading of the aforesaid two clauses of Article 226 of the Constitution it becomes clear that a High Court can exercise the power to issue directions, orders or writs for the enforcement of any of the fundamental rights conferred by Part III of the Constitution or for any other purpose if the cause of action, wholly or impart, had arisen within the territories in relation to which it exercises jurisdiction, notwithstanding that the seat of the Government or authority or the residence Page 23 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT of the person against whom the direction, order or writ 'is issued is not within the said territories. In order to confer jurisdiction on the High Court of Calcutta, NICCO must show that at least a part of the cause of action had arisen within the territorial jurisdiction of that Court, That is at best its case in the writ petition.
6. It is well settled that the expression "cause of action" means that bundle of facts which the petitioner must prove, if traversed, to entitle him to a judgment in his favour by the Court. In Chand Kour v. Partab Singh' Lord Watson said:
"... the cause of action has no relation whatever to the defence which may be set up by the defendant, nor does it depend upon the character of the relief prayed for by the plaintiff. It refers entirely to the ground set forth in the plaint as the cause of action, or, in other words, to the media upon which the plaintiff asks the Court to arrive at a conclusion in his favour."
Therefore, in determining the objection of lack of territorial jurisdiction the court must take all the facts pleaded in support of the cause of action into consideration albeit without embarking upon an enquiry as to the correctness or otherwise of the said facts. In other words the question whether a High Court has territorial jurisdiction to entertain a writ petition must be answered on the basis of the averments made in the petition, the truth or otherwise whereof being immaterial. To put it differently, the question of territorial jurisdiction must be decided on the facts pleaded in the petition. Therefore, the question whether in the instant case the Calcutta High Court had jurisdiction to entertain and decide the writ petition in question even on the facts alleged must depend upon whether the averments made in paragraphs 5, 7, 18, 22, 26 and 43 are sufficient in law to establish that a part of the cause of action had arisen within the jurisdiction of the Calcutta High Court.
7. The learned counsel for ONGC contended that Page 24 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT on these averments no part of the cause of action had arisen within the jurisdiction of the Calcutta High Court and hence the writ petition filed by NICCO and another was not entertainable by that High Court. He submitted that ONGC had decided to set up a Kerosene Recovery Processing Unit at Hazira in Gujarat. EIL was appointed by ONGC as its consultant. In that capacity, EIL issued the advertisement from New Delhi calling for tenders and this advertisement was 1 ILR (1889) 16 Cal 98,102:
15 IA 156 718 printed and published in all the leading newspapers of the country including the Times of India in circulation in West Bengal. The tenders or bids were to be forwarded to EIL at New Delhi. EIL was expected to scrutinise the tenders and make its recommendations to the Tender Committee constituted by ONGC. The final decision was, however, to be taken by the Steering Committee at New Delhi presided over by the Chairman, ONGC.
Accordingly, the tender of NICCO was examined by EIL at New Delhi and it recommended its rejection on the ground that NICCO did not satisfy the experience criteria requisite for the grant of contract. On the first occasion, the Tender Committee did not agree with the said recommendation and directed the EIL to call NICCO at the clarificatory meeting proposed to be held in New Delhi. In obedience to the said direction, EIL invited NICCO along with the other bidders, but once again recommended its rejection on the ground that it did not satisfy the experience criteria. The Tender Committee which met in New Delhi reviewed its earlier decision and accepted the recommendation of EIL which was also accepted by the Steering Committee at New Delhi on 27-1-1993. It was at this point of time that the decision to award the contract to CIMMCO was taken at New Delhi. Counsel for ONGC, therefore, contended that all these events took place outside the jurisdiction of the Calcutta High Court and merely because NICCO had read the advertisement in the Times of India in circulation in West Bengal and had forwarded its tender from its registered office in Calcutta and followed it up by a revised offer, it cannot be said that any part of the cause of action had arisen within the jurisdiction of the Calcutta High Court for the simple reason that if Page 25 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT these facts were to give a cause of action, every tenderer would sue ONGC in the local court from where he forwarded the tender and that would make ONGC run about from court to court all over the country. Counsel further submitted that nor can the fact that NLCCO sent representations including fax messages from its registered office to ONGC at Calcutta to which ONGC showed the courtesy of replying confer jurisdiction. In support of this contention, he placed strong reliance on the decision in State of Rajasthan v. Swaika Properties2. Learned counsel for CIMMCO buttressed these submissions by inviting our attention to certain other decisions of this Court, namely, Election Commission v. Saka Venkata Subba Rao3, R. Bejal v. Triveni Structurals Ltd .4, Subodh Kumar Gupta v. Shrikant Gupta' and certain decisions of different High Courts. On the other hand, counsel for NICCO, while reiterating that the averments made in paragraphs 5, 7, 18, 22 and 26 constituted an integral part of the cause of action, submitted that by the introduction of clause (2) in Article 226 of the Constitution, the Legislature intended,to widen the High Court's Jurisdiction and thereby extend its beneficent reach even to cases where a part of the cause of action arose within its territorial Jurisdiction. In the alternative, he submitted that even if this Court comes to the conclusion that the High Court 2 (1985) 3 SCC 217 3 1953 SCR 1144: AIR 1953 SC 210 4 1987 Supp SCC 279 5 (1993) 4 SCC 1 719 of Calcutta lacked jurisdiction, this Court sitting in appeal should not interfere with the verdict of the High Court as ONGC had neither alleged nor showed that there had been a failure of justice. In this connection, he placed reliance on the spirit of Section 21 of the Code of Civil Procedure. He, therefore, contended that this Court should examine the appeal on merits and not confine itself to the question of territorial jurisdiction. Lastly, he submitted that on merits NICCO had made out a good case for the grant of relief sought by it.
8.From the facts pleaded in the writ petition, it is clear that NICCO invoked the jurisdiction of the Calcutta High Court on the plea that a part of the Page 26 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT cause of action had arisen within its territorial jurisdiction. According to NICCO, it became aware of the contract proposed to be given by ONGC on reading the advertisement which appeared in the Times of India at Calcutta. In response thereto, it submitted its bid or tender from its Calcutta office and revised the rates subsequently. When it learnt that it was considered ineligible it sent representations, including fax messages, to EIL, ONGC, etc., at New Delhi, demanding justice. As stated earlier, the Steering Committee finally rejected the offer of NICCO and awarded the contract to CIMMCO at New Delhi on 27-1-1993. Therefore, broadly speaking, NICCO claims that a part of the cause of action arose within the jurisdiction of the Calcutta High Court because it became aware of the advertisement in Calcutta, it submitted its bid or tender from Calcutta and made representations demanding justice from Calcutta on learning about the rejection of its offer. The advertisement itself mentioned that the tenders should be submitted to EIL at New Delhi; that those would be scrutinised at New Delhi and that a final decision whether or not to award the contract to the tenderer would be taken at New Delhi. Of course, the execution of the contract work was to be carried out at Hazira in Gujarat. Therefore, merely because it read the advertisement at Calcutta and submitted the offer from Calcutta and made representations from Calcutta would not, in our opinion, constitute facts forming an integral part of the cause of action. So also the mere fact that it sent fax messages from Calcutta and received a reply thereto at Calcutta would not constitute an integral part of the cause of action. Besides the fax message of 15-1-1993, cannot be construed as conveying rejection of the offer as that fact occurred on 27-1-1993. We are, therefore, of the opinion that even if the averments in the writ petition are taken as true, it cannot be said that a part of the cause of action arose within the jurisdiction of the Calcutta High Court. "
14.6. In yet another decision in case of M/s. Kusum Page 27 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT Ingots (supra) the Apex Court was considering whether the seat of the Parliament or the Legislature of a State would be a relevant factor for determining the territorial jurisdiction of a High Court to entertain a writ petition under Article 226 of the Constitution of India.
14.7. The appellant was a company registered under the Indian Companies Act having its registered office at Mumbai which obtained a loan from the Bhopal Branch of State Bank of India. A notice was issued for repayment of the said loan from Bhopal in terms of the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Questioning the vires of the said Act, the writ petition was filed before Delhi High Court by the appellant which was dismissed on the ground of lack of territorial jurisdiction.
14.8. It was urged before the Apex Court on behalf of the appellant that as the constitutionality of a parliamentary act was questioned, the High Court of Delhi had the requisite jurisdiction to entertain the writ petition. According to the respondent, no cause of action since arose within the territorial jurisdiction of the Delhi High Court and therefore, the petition would not be maintainable.Page 28 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022
C/SCA/1235/2021 JUDGMENT 14.9. The Apex Court considering various judgments on this subject held that the facts pleaded in the writ petition must have nexus on the basis whereof the prayer can be granted.
Those facts which have nothing to do with the prayers cannot be said to give rise to a cause of action which would confer the jurisdiction on the Court. The Court held that even if a small part of cause of action would arise within the territorial jurisdiction of the High Court, the same by itself, may not be considered to be determinative factor for compelling the High Court to decide the matter on merit. In appropriate cases, the Court may refuse to exercise its discretionary jurisdiction by invoking the doctrine of forum conveniens.
"Cause of Action:
Cause of action implies a right to sue. The material facts which are imperative for the suitor to allege and prove constitutes the cause of action. Cause of action is not defined in any statute. It has, however, been judicially interpreted inter alia to mean that every fact which would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the Court. Negatively put, it would mean that everything which, if not proved, gives the defendant an immediate right to judgment, would be part of cause of action. Its importance is beyond any doubt. For every action, there has to be a cause of action, if not, the plaint or the writ petition, as the case may be, shall be rejected summarily.
Clause (2) of Article 226 of the Constitution of India reads thus:Page 29 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022
C/SCA/1235/2021 JUDGMENT "(2) The power conferred by clause (1) to issue directions, orders or writs to any Government, authority or person may also be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause of action, wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories."
Section 20(c) of the Code of Civil Procedure reads as under:
"20 OTHER SUITS TO BE INSTITUTED WHERE DEFENDANT RESIDE OR CAUSE OF ACTION ARISES.
Subject to the limitation aforesaid, every suit shall be instituted in a court within the local limits of whose jurisdiction -
(c) the cause of action, wholly or in part, arises."
Although in view of Section 141 of the Code of Civil Procedure the provisions thereof would not apply to a writ proceedings, the phraseology used in Section 20(c) of the Code of Civil Procedure and Clause (2) of Article 226, being in pari materia, the decisions of this Court rendered on interpretation of Section 20(c) of CPC shall apply to the writ proceedings also. Before proceeding to discuss the matter further it may be pointed out that the entire bundle of facts pleaded need not constitute a cause of action as what is necessary to be proved before the petitioner can obtain a decree is the material facts. The expression material facts is also known as integral facts. Keeping in view the expressions used is Clause (2) of Article 226 of the Constitution of India, indisputably even if a small fraction of cause of action accrues within the jurisdiction of the Court, the Court will have jurisdiction in the matter.
In Mussummat Chand Kour v. Partap Singh (15 IA Page 30 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT
156), it was held:
"... the cause of action has no relation whatever to the defence which may be set up by the defendant, nor does it depend upon the character of the relief prayed for by the plaintiff. It refers entirely to the ground set forth in the plaint as the cause of action, or, in other words, to the media upon which the plaintiff asks the court to arrive at a conclusion in his favour."
This Court in Oil & Natural Gas Commission v. Utpal Kumar Basu and Ors. (1994 (4) SCC 711) held that the question as to whether the court has a territorial jurisdiction to entertain a writ petition, must be arrived at on the basis of averments made in the petition, the truth or otherwise thereof being immaterial.
This Court in Oil and Natural Gas Commission's case (supra) held that all necessary facts must form an integral part of the cause of action. It was observed:
"So also the mere fact that it sent fax messages from Calcutta and received a reply thereto at Calcutta would not constitute an integral part of the cause of action..."
In State of Rajasthan and Ors. v. M/s. Swaika Properties and Anr. [1985 (3) SCC 217], this Court opined that mere service of a notice would not give rise to any cause of action unless service of notice was integral part of the cause of action. The said decision has also been noticed in Oil and Natural Gas Commission (supra). This Court held:
"The answer to the question whether service of notice is an integral part of the cause of action within the meaning of Art. 226(2) of the Constitution must depend upon the nature of the impugned order giving rise to a cause of action."
In Aligarh Muslim University and Another Vs. Vinay Engineering Enterprises (P) Ltd. and Another [(1994) 4 SCC 710] this Court lamented:
Page 31 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022
C/SCA/1235/2021 JUDGMENT "2. We are surprised, not a little, that the High Court of Calcutta should have exercised jurisdiction in a case where it had absolutely no jurisdiction. The contracts in question were executed at Aligarh, the construction work was to be carried out at Aligarh, even the contracts provided that in the event of dispute the Aligarh Court alone will have jurisdiction. The arbitrator was from Aligarh and was to function there. Merely because the respondent was a Calcutta- based firm, the High Court of Calcutta seems to have exercised jurisdiction where it had none by adopting a queer line of reasoning. We are constrained to say that this is case of abuse of jurisdiction and we feel that the respondent deliberately moved the Calcutta High Court ignoring the fact that no part of the cause of action had arisen within the jurisdiction of that Court. It clearly shows that the litigation filed in the Calcutta High Court was thoroughly unsustainable." In Union of India and Others Vs. Adani Exports Ltd. and Another [(2002) 1 SCC 567] it was held that in order to confer jurisdiction on a High Court to entertain a writ petition it must disclose that the integral facts pleaded in support of the cause of action do constitute a cause so as to empower the court to decide the dispute and the entire or a part of it arose within its jurisdiction. Recently, in National Textile Corpn. Ltd. and Ors. vs. M/s Haribox Swalram and Ors. [JT 2004 (4) SC 508], a Division Bench of this Court held :
"As discussed earlier, the mere fact that the writ petitioner carries on business at Calcutta or that the reply to the correspondence made by it was received at Calcutta is not an integral part of the cause of action and, therefore, the Calcutta High Court had no jurisdiction to entertain the writ petitioner and the view to the contrary taken by the Division Bench cannot be sustained. In view of the above finding, the writ petition is liable to be dismissed..."
The facts pleaded in the writ petition must have a nexus on the basis whereof a prayer can be granted. Those facts which have nothing to do with the prayer Page 32 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT made therein cannot be said to give rise to a cause of action which would confer jurisdiction on the court. Passing of a legislation by itself in our opinion do not confer any such right to file a writ petition unless a cause of action arises therefor.
A distinction between a legislation and executive action should be borne in mind while determining the said question.
A parliamentary legislation when receives the assent of the President of India and published in an Official Gazette, unless specifically excluded, will apply to the entire territory of India. If passing of a legislation gives rise to a cause of action, a writ petition questioning the constitutionality thereof can be filed in any High Court of the country. It is not so done because a cause of action will arise only when the provisions of the Act or some of them which were implemented shall give rise to civil or evil consequences to the petitioner. A writ court, it is well settled would not determine a constitutional question in vacuum.
The court must have the requisite territorial jurisdiction. An order passed on writ petition questioning the constitutionality of a Parliamentary Act whether interim or final keeping in view the provisions contained in Clause (2) of Article 226 of the Constitution of India, will have effect throughout the territory of India subject of course to the applicability of the Act.
Situs of office of the Respondents - whether relevant? A writ petition, however, questioning the constitutionality of a Parliamentary Act shall not be maintainable in the High Court of Delhi only because the seat of the Union of India is in Delhi. (See Abdul Kafi Khan Vs. Union of India and Others, AIR 1979 Cal 354) Learned counsel for the appellant in support Page 33 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT of his argument would contend that situs of framing law or rule would give jurisdiction to Delhi High Court and in support of the said contention relied upon the decisions of this Court in Nasiruddin vs. State Transport Appellate Tribunal (AIR 1976 SC 331) and U.P. Rashtriya Chini Mill Adhikari Parishad, Lucknow vs. State of U.P. and others (1995) 4 SCC
738. So far as the decision of this Court in Nasiruddin vs. State Transport Appellate Tribunal (supra) is concerned it is not an authority for the proposition that the situs of legislature of a State or the authority in power to make subordinate legislation or issue a notification would confer power or jurisdiction on the High Court or a bench of the High Court to entertain petition under Article 226 of the Constitution. In fact this Court while construing the provisions of United Provinces High Courts (Amalgamation) Order, 1948 stated the law thus:
"The conclusion as well as the reasoning of the High Court is incorrect. It is unsound because the expression "cause of action" in an application under Article 226 would be as the expression is understood and if the cause of action arose because of the appellate order or the revisional order which came to be passed at Lucknow then Lucknow would have jurisdiction though the original order was passed at a place outside the areas in Oudh. It may be that the original order was in favour of the person applying for a writ. In such case an adverse appellate order might be the cause of action. The expression "cause of action" is well-known. If the cause of action arises wholly or in part at a place within the specified Oudh areas, the Lucknow Bench will have jurisdiction. If the cause of action arises wholly within the specified Oudh areas, it is indisputable that the Lucknow Bench would have exclusive jurisdiction in such a matter. If the cause of action arises in part within the specified areas in Oudh it would be open to the litigant who is the dominus litis to have his forum conveniens. The litigant has the right to go to a Court where part of his cause of action arises. In such cases, it is incorrect to say that the litigant chooses any particular Court. The choice is by reason of the Page 34 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT jurisdiction of the Court being attracted by part of cause of action arising within the jurisdiction of the Court. Similarly, if the cause of action can be said to have arisen partly within specified areas in arisen in Oudh and partly outside the specified Oudh areas, the litigant will have the choice to institute proceedings either at Allahabad or Lucknow. The Court will find out in each case whether the jurisdiction of the Court is rightly attracted by the alleged cause of action".
The said decision is an authority for the proposition that the place from where an appellate order or a revisional order is passed may give rise to a part of cause of action although the original order was at a place outside the said area. When a part of the cause of action arises within one or the other High Court, it will be for the petitioner to choose his forum. The view taken by this Court in U.P. Rashtriya Chini Mill Adhikari Parishad, Lucknow (supra) that situs of issue of an order or notification by the Government would come within the meaning of expression 'cases arising' in clause 14 of the (Amalgamation) Order is not a correct view of law for the reason hereafter stated and to that extent the said decision is overruled. In fact, a legislation, it is trite, is not confined to a statute enacted by the Parliament or Legislature of a State, which would include delegated legislation and subordinate legislation or an executive order made by the Union of India, State or any other statutory authority. In a case where the field is not covered by any statutory rule, executive instruction issued in this behalf shall also come with within the purview thereof. situs of office of the Parliament, Legislature of a State or authorities empowered to make subordinate legislation would not by itself constitute any cause of action or cases arising. In other words, framing of a statute, statutory rule or issue of an executive order or instruction would not confer jurisdiction upon a court only because of the situs of the office of the maker thereof.
Page 35 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022
C/SCA/1235/2021 JUDGMENT When an order, however, is passed by a Court or Tribunal or an executive authority whether under provisions of a statute or otherwise, a part of cause of action arises at that place. Even in a given case, when the original authority is constituted at one place and the appellate authority is constituted at another, a writ petition would be maintainable at both the places. In other words as order of the appellate authority constitutes a part of cause of action, a writ petition would be maintainable in the High Court within whose jurisdiction it is situate having regard to the fact that the order of the appellate authority is also required to be set aside and as the order of the original authority merges with that of the appellate authority.
Lt. Col. Khajoor Singh Vs. The Union of India and Another [(1961) 2 SCR 828] whereupon the learned counsel appearing on behalf of the appellant placed strong reliance was rendered at a point of time when clause (2) of Article 226 had not been inserted. In that case the Court held that the jurisdiction of the High Court under Article 226 of the Constitution of India, properly construed, depends not on the residence or location of the person affected by the order but of the person or authority passing the order and the place where the order has effect. In the latter sense, namely, the office of the authority who is to implement the order would attract the territorial jurisdiction of the Court was considered having regard to Section 20(c) of the Code of Civil Procedure as Article 226 of the Constitution thence stood stating :
"...The concept of cause of action cannot in our opinion be introduced in Art. 226, for by doing so we shall be doing away with the express provision contained therein which requires that the person or authority to whom the writ is to be issued should be resident in or located within the territories over which the High Court has jurisdiction. It is true that this may result in some inconvenience to person residing far away from New Delhi who are aggrieved by some order of the Government of India as such, and that may be a reason for making a suitable constitutional Page 36 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT amendment in Art. 226. But the argument of inconvenience, in our opinion, cannot affect the plain language of Art. 226, nor can the concept of the place of cause of action be introduced into it for that would do away with the two limitations on the powers of the High Court contained in it."
In view of clause 2 of Article 226 of the Constitution of India now if a part of cause of action arises outside the jurisdiction of the High Court, it would have jurisdiction to issue a writ. The decision in Khajoor Singh (supra) has, thus, no application.
Forum Conveniens We must, however, remind ourselves that even if a small part of cause of action arises within the territorial jurisdiction of the High Court, the same by itself may not be considered to be a determinative factor compelling the High Court to decide the matter on merit. In appropriate cases, the Court may refuse to exercise its discretionary jurisdiction by invoking the doctrine of forum conveniens. (See Bhagar Singh Bagga v. Dewan Jagbir Sawhany, AIR 1941 Cal; Mandal Jalan v. Madanlal, (1945) 49 CWN 357; Bharat Coking Coal Limited v. M/s Jharia Talkies & Cold Storage Pvt. Ltd. (1997) CWN 122; S.S.Jain & Co. & Anr. v. Union of India & Ors. (1994) CHN 445; M/s. New Horizon Ltd. v. Union of India, AIR 1994 Delhi 126) Conclusion For the aforementioned reasons, there is no merit in this appeal which is dismissed accordingly. No costs. "
14.10. It was noticed that in the above decision, the emphasis is on Clause-2 of the Article 226 of the Constitution of India which specifies that the power conferred by clause (1) to issue directions, orders or writs to any Government, authority or person may also be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause Page 37 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT of action, wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories.
The Court has clearly held that in view of Clause-2 of Article 226 of the Constitution of India, even if the small part of cause of action arises within the jurisdiction of High Court, it would have a jurisdiction to issue a writ. The Apex Court however added that when a small part of cause of action arises within the territorial jurisdiction of the High Court, the High Court may not be compelled to decide the matter on merits. In appropriate case the Court may refuse to exercise discretionary jurisdiction.
14.11. While considering the merits along with the issue of breach of principles of natural justice, further amplification of issue as to how the cause of action has arisen within the territorial jurisdiction of this Court would be feasible. It is not a small part of cause of action which has arisen which may be the reason for the Court to refuse to exercise the discretionary jurisdiction for invoking extraordinary powers. The present case in no manner can be equated with the case of Utpal Kumar (supra) where the advertisement was in all leading English newspapers and since the NICO, based at West Bengal had applied for contract and the challenge raised in writ petition Page 38 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT before Calcutta High Court was of awarding the contract to the third party, which in the instant case is not the case. Here are robust facts which clearly lead to grant jurisdiction to this Court and therefore, this decision shall not help the case of the respondent. Once the cause of action arises in part within the specified areas in the State of Gujarat, litigant being the dominus litis can choose its forum convenience.
15. We notice that in the matter on hand, a tender was floated by the respondent for Charter Higher of 06 nos. of Work Over Rigs for various assets of the ONGC for a period of three years for Cat-1, 2 and 3 and five years for Cat-4 on 28.08.2019. The bid on the part of the petitioner was for categories 1 and 2 where one Rig was in the Ahmedabad and three Rigs were in the Mehsana. The petitioner submitted his bid for tender on 21.10.2019 without any payment of EMD and requested for the payment of EMD relying on Clause 17.2 of the Instructions of Bidders (ITB) claiming to be a small enterprise as contemplated by Mirco, Small and Medium Enterprises Development Act, 2006 (MSME Act) as the exemption from payment of bid security is available to micro and small enterprise and not to medium enterprise. The EMD of Rs. 96,60,300/- has not been paid to the respondent as per the tender document at the time of Page 39 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT submission of the bid on 10.10.2019. It also confirmed the genuineness of the document, certificates and information supplied to the respondent.
15.1. Had it ended at that stage, then also, possibly the respondent could not have questioned since the bid is in relation to the contract work at Ahmedabad and Mehsana, where one Rig is in Ahmedabad and three Rigs in Mehsana. Assuming that this entire aspect is in the realm of contract and place of work would have no relevance till the completion of process and, correspondence was at Delhi, the respondent could have raised this dispute till that stage. However, what happened subsequently would allow this Court to exercise territorial jurisdiction. On 14.02.2020 and 25.02.2020, the respondent received letters against the petitioner raising a clear red flag by raising the question against the petitioner's status of being a small enterprise as per the MSME Act and the respondent addressed a communication on 21.05.2020 to the petitioner seeking explanation and justification as to how it claimed exemption under Clause 17.2 of the ITB. The petitioner admitted on 27.05.2020 in its reply that its investment and equipment used in service is less than 5 crores and hence, it is a medium enterprise company, however, quickly thereafter, the petitioner Page 40 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT vide its emailS dated 22.06.2020 and 26.08.2020 sought to change its stand by claiming that it was a small enterprise and by then, the respondent decided to issue the show cause notice on 31.08.2020, proposing banning of the business on account of the submission of false information and 'forged' documents claiming MES benefits. Eventually, by order dated 14.12.2020, the respondent banned the petitioner and blacklisted it for the period of two years from the date of order. All subsequent events happened, once the respondents received two complaints, where part of cause of action surely is within the jurisdiction of this Court.
16. This decision obviously and invariably would have a lasting effect on the business and this banning order and blacklisting also would have its echo in the business conducted anywhere in the entire country, so far as the ONGC is concerned. Moreover, the petitioner is operating from District Rajkot, in the State of Gujarat. Not only the correspondence of show cause notice and its reply is within the jurisdiction of this Court, the office of petitioner is at Rajkot and it conducts for all its business purpose from Rajkot Office. This order of banning served upon the petitioner company at Rajkot would have material bearing on its future business. Not a small part but a substantial part of Page 41 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT cause of action has arisen within the jurisdiction of this Court. Therefore, the contention on the part of the respondent of this Court having no jurisdiction to entertain this petition would, in no manner, merit acceptance and such contention, in fact, deserves rejection. Respondents have sought to draw from the ratio laid down in case of Utpal Kumar (supra) which for the reasons stated hereinabove will not be applicable. Issue of breach of principles of natural justice:
17. It leads this Court to the vital question of violation of principles of natural justice while passing the order of banning.
18. The genesis of the dispute is the communication from ONGC to the petitioner dated 21.05.2020. The e-mail indicates that against the tender no. ZNSAC19009 for charter hiring of 06 nos. of Work Over Rigs, the two complaints/representations have been received by the ONGC against the petitioner alleging that the petitioner has submitted fraudulent documents for claiming MSME benefits. The gist of the representations has been given which is as follows: -
"(1) As per Government Directives in services sector, there are three Categories of as per follow:
Service sector:Page 42 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022
C/SCA/1235/2021 JUDGMENT
Manufacturing Sector
Enterprises Investment in plant and
machinery
Micro Does not exceed 25 lakh rupees
Enterprises
Small More than 25 lakh rupees but does
Enterprises not exceed 5 crore rupees
Medium More than 5 crore rupees but does
Enterprises not exceed 10 crore rupees
Service Sector
Enterprise Investment in plant and
machinery
Micro Does not exceed 10 lakh rupees
Enterprises
Small More than 10 lakh rupees but does
Enterprises not exceed 2 crore rupees
Medium More than 2 crore rupees but does
Enterprises not exceed 5 crore rupees
(2) In the balance sheet as of M/s REPL the total investment in last two years is as under:
Particulars 31.03.2019 31.03.2018
Non-current Rs. Rs.
Assets: 7,85,40,434.00 8,29,89,896.00
Fixed Assets:
(3) M/s. Ratnam has obtained MSME registration through fraud documents."
18.1. It is alleged that since the petitioner is having investment exceeding Rs. 26.95 crores as per the balance sheet of the year 2018-19 and it being medium enterprise, it is not eligible for MSME benefits as per rules. It is also further alleged Page 43 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT that the petitioner has obtained MSME registration through fraudulent documents. Hence, the petitioner has been asked to clarify the stand along with the documentary evidences to substantiate the claim of MSME benefit. The reply was to be tendered by 27.05.2020.
18.2. The reply dated 27.05.2020 conveys clearly and unequivocally that the company has been engaged in providing services and having gross investment in equipment used directly for service contract above Rs. 2 crores and up to Rs. 5 crores are treated as medium enterprise and covered under the MSME. It further reveals that the investment of the petitioner in equipment which are used in services are of less than Rs. 5 corres and hence, the petitioner is medium sized enterprise. It further says that the respondent has considered the wrong figure of the entire fixed asset investment, while deciding MSME status. The figure may also include many assets like land and building, furniture and fixture, vehicles etc. It clarified further that the total investment of Rs. 26.95 crores which covers all assets including debtors, cash balance, bank balances and advances along with the fixed assets. Therefore, emphasis was that there is no fraudulent manner of obtaining MSME registration and further request was made to evaluate the matter positively and Page 44 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT grant a clean chit.
18.3. It is apparently clear from these correspondences that the letters/representations received by the ONGC in the form of the complaint have not been shared with the petitioner. It is also not in dispute that the reply to the same on 27.05.2020 speaks of the petitioner having called its company as a medium enterprise. It is explained that there was a misunderstanding of the investment required for the small enterprise in manufacturing sector and therefore, erroneously, the petitioner called itself as a medium enterprise. It was clarified subsequently that value of various assets was not to be taken into consideration for calculating investment and request was also made for referring to the schedules and fixed assets in the audit account.
18.4. The respondent stuck to the said communication of 27.05.2020 by emphasizing that the petitioner itself has admitted the unit to be medium enterprise and not small enterprise. One can notice that on 22.06.2020, it has been emphasized that the category is of a small enterprise under the MSME Act of the petitioner and there is a valid Udhyog Aadhar Certificate having small unit category issued by MSME Page 45 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT department. With the further emphasis that there has been never any fraudulent practice adopted by the petitioner, request was made to also grant an opportunity of personal hearing before any decision is taken. In subsequent communication dated 26.08.2020 also, it further reiterates that the petitioner is a small enterprise with MSME. It is a service provider in the field of Oil and Gas exploration and production as well as other exploration industry and it is serving ONGC, Vedanta Limited, EOGEPL, Singareni Collieries Company Ltd. etc and they have the history of honest business with many government enterprise. It refuted once again of having been involved in any fraudulent activities.
18.5. The office of Development Commission (Micro, Small and Medium Enterprise) addressed a letter to ONGC on 27.08.2020. This is a monitoring authority under the MSME Act. It has not questioned the registration nor has it taken any action for recalling or canceling the registration issued to the petitioner as small enterprise. This communication deserves reproduction which is thus: "I have been directed to inform that you are requested to kindly look into the matter and redress the grievance of the MSE as deemed appropriate under the purview of Public Procurement Policy. Action taken in this regard may Page 46 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT directly communicated to the unit with a copy to this office." After receipt of this communication from the office of Development Commission, the Ministry of Micro, Small and Medium Enterprise, Government of India, a show cause notice came to be issued on 31.08.2020 by the respondent where the reference is made of the non-payment of EMD and the correspondence that had been entered into, to allege that ONGC verified the authenticity of all documents, certificates and information submitted by the bidder against the tender and it has the power, at any stage of tendering process of contract/ PO execution to reject the bid of the bidder or to cancel or terminate the contract and forfeit the EMD if it is established that the bidder has submitted the forged documents or certificates or information. The bidder is also required to give an undertaking on its company's letter head duly signed by the signatory of the bid that all information, certificates and the documents against the tender are genuine and in case of any false or forged document, the action can be initiated by the ONGC. It further reminded the petitioner that the Integrity Pact as per ONGC Tender Formate is signed by the petitioner and it appears that the firm has submitted the false information/ document against the said tender in violation of Clause-52 of ITB of tender documents and this action on the part of the petitioner has also Page 47 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT put the reliability and creditability of it into question and thereby committed transgression of provision of Integrity Pact. In the above background, the petitioner has been issued the notice to show cause as to why the ONGC should not ban the business dealing with the firm on account of such submission of the false information/ documents. The reply was to be tendered within 15 days.
18.6. It appears that the only clause which has been referred to is Clause No. 52 which is non-existent in the ITB. 18.7. The petitioner responded that there is no ITB Clause- 52 and there is no provision on the UM Portal to update the data. It also emphasized that there is a difference between a forged document and unacceptable document by relying on the FAQs issued by the Ministry. It also enclosed the acknowledgment issued by the District Industries Centre, Government of Gujarat categorizing the petitioner enterprise a small enterprise. It also tendered the certificate issued by the Chartered Accountant certifying the investment of the petitioner below Rs. 2 crores.The notification issued by the Ministry of Small Scale Industries as to how the investment in plant and machinery is to be calculated, is also relied on. Notification Page 48 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT issued subsequently on 26.06.2020 by the Ministry of Micro, Small and Medium Enterprise retrospectively revising the investment to Rs. 10 crores also is heavily depended upon.
19. It is thus quite clear from the entire gamut of facts that the petitioner is though expected to meet with the allegations of having tendered the forged documents and yet, the very edifice on which this inquiry was initiated, being the complaints have not been furnished to the Petitioners. It is an irony that the basis for issuance of show cause notice which eventually culminated into passing of banning order, has not been provided to the petitioner. The very representations/complaints which are the genesis of the proceedings were neither shown nor furnished nor shared during the entire proceedings with the petitioner. It is insufficient to make a reference of the same in the first communication in which the reply of the petitioner has been sought. So much so that the copy of inquiry report also has not been supplied to the petitioner and for the first time, at the time of filing the sur-rejoinder before this Court, the same has been placed on record. The inquiry report which is otherwise a conclusive base for banning the order ought to have been provided to the petitioner before any further action was taken on strength thereof. This undoubtedly and unfailingly can be Page 49 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT termed as the action wholly in breach of principles of natural justice. The person cannot be condemned unheard and any insufficient supply of the material or non-supply of the material surely and undoubtedly and seriously would jeopardize the right of the person to defend himself. Therefore, to say that the entire procedure in no manner has prejudiced the petitioner, is an unsustainable proposition.
19.1. We failed to grasp as continually the documents were termed and labelled as forged. We had pertinently queried to the learned empaneled counsel Mr. Ajay Mehta of ONGC as to in what manner the documents are labelled to be forged documents. At the best, they can be said to be incorrect presentation of the documents. They, by no stretch of imagination, can be said to be the forged documents. Even if the respondent - ONGC has any objection to the manner in which the Ministry of Micro, Small and Medium Enterprise issues such certificate, it has no independent powers to adjudge any limit and label any enterprise as small or medium. Mr. Mehta had fairly submitted in an answer to our query that ONGC has no power to issue any such certificate or evaluate the certificate once the certificate is issued by the Ministry of MSME or on the basis of the documents, independently arrive at any decision for Page 50 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT terming the enterprise as micro, small or medium. This would mean that it needs to accept the decision of MSME in respect of labelling any enterprise in any of these three categories and if anything objectionable in that regard is noticed by it, it can bring to its attention. Here, it did that and then, relying on the communication of MSME, it has termed it as fraudulent action without cancelling or questioning the certification of the enterprise issued by MSME.
19.2. Moreover, non-existence of Clause-52 of ITB also would make it extremely difficult for the party who is expected to reply diligently and sparingly. This also is another facet of breach of principle of natural justice. The MSME department which is issuing and monitoring this very subject, till date, when has not canceled the registration of the petitioner, by no stretch of imagination, it can be said that the documents which have been produced for terming the enterprise as a small enterprise are forged documents. What possibly the respondent meant was although in its reply on 27.05.2020, the petitioner admitted of it being a medium sized industry and yet, it has chosen not to produce the correct documentation before the MSME and that led the MSME to issue a certificate to the petitioner being small scale industry, whereas, in fact, it is a medium sized industry. Page 51 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022
C/SCA/1235/2021 JUDGMENT This appears to be on the strength of the communication on 27.05.2020 which has been explained in the quick succession of two e-mails by the petitioner and also followed by the certificate of Chartered Accountant of the petitioner who has certified that the investment of the petitioner is below 2 crores, this stringent stand of the respondents has emerged .
19.3. The notification issued by the Ministry of MSME also says as to how the investment in the plant and machinery is to be calculated i.e. by returning of value and original tax. In the first response given to the Respondents, according to the petitioner, there was a misunderstanding on the part of the petitioner with regard to the investment required for small enterprise in manufacturing sector and therefore, it called itself as a medium enterprise, however, the petitioner clarified soon thereafter that the value of various assets were not to be taken into consideration for calculating the investment. It also made a request to refer to the schedule and fixed assets in his audit account.
20. This issue of admission of the Petitioner and change of stand soon thereafter, can be also looked at from another angle. Had the petitioner called itself a small enterprise by disclosing in Page 52 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT its e-mail or through its own audit and the certificate of its Chartered Accountant on its own, without any valid Udhyog Aadhar Certificate issued by MSME depicting the petitioner as the small unit category, would the respondent - ONGC accept the same without a murmur! The answer obviously shall be in negation, it could not have accepted it by any angles. Such self declaration has no basis and this by no stretch can be termed as the authentic declaration for the purpose of final certification. We, in fact, also have pertinently questioned the respondent's side in this regard and learned counsel had agreed that apart from not having any authority to evaluate the certification issued by the MSME, it has no independent authority or set-up to evaluate the petitioner's enterprise either as micro, small or medium. It has to essentially depend on the MSME. At the best, it could have referred the entire matter to MSME for it to inquire into the same and re-look at it afresh.
20.1. Even if, as mentioned hereinabove, there is a communication from the officer of the Development Commissioner addressing to the respondent - ONGC to address the grievance of the petitioner and to look into the matter and redress the grievance of the MSE as deemed proper under the purview of Public Procurement Policy and to intimate the action Page 53 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT that may be taken in this regard directly to the office of the Development Commissioner,that by itself would not in any manner authorize the respondent - ONGC to adjudicate this matter independently as it has no authority to delegate powers as such powers are required to be exercised statutorily by the Ministry of Micro, Small and Medium Enterprise for adjudging any enterprise under the banner of Micro, Small or Medium Enterprise. The Joint Officer of Development Commissioner also could not have delegated such powers in absence of any such express authority under the statute or the rules. 20.2. The reference to the notification issued by the Ministry of Small Scale Industries as to how the investment in plant and machinery for the purpose of classification as a micro, small and medium enterprise is to be calculated, requires a little detailed discussion. Paragraph-2 of the said notification clarifies that for ascertaining the investment in plant and machinery for classification of enterprise, the documents which are to be relied upon are as follows: (i) copy of invoice of the purchase of plant and machinery, or (ii) gross block for investment in the plant and machinery as reflected in the audited accounts, or (iii) the certificate issued by the Chartered Accountant regarding the purchase price of plant and machinery. The Ministry has further Page 54 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT clarified that for investments in plant and machinery, the purchase value of the plant and machinery is to be reckoned and not the book value (purchase value - depreciation). From this notification also, neither MSME nor the respondent is in any manner able to point out as to how the petitioner does not fit into the certification of small enterprise.
21. Subsequent notification on 26.06.2020 issued by the very ministry retrospectively revised the investment to Rs. 10 crores. This notification has been issued in exercise of powers conferred by sub-section (1) read with sub-section (9) of Section 7 and sub- section (2) read with sub-section (3) of Section 8 of the MSME(D) Act, 2006. This was issued in supersession of the notifications of Government of India and the Ministry of Micro, Small and Medium Enterprise dated 01.06.2020, 30.06.2017, 01.11.2013 and 05.10.2006. This retrospectively revised the investment to Rs. 10 crores. Moreover, for facilitation and grievance redressal of enterprise, MSME including the Development Institute is specified to act as a Single Window System. For facilitating the registration process and further handholding of the enterprise in all possible manner, the District Industries Centre is also to act as a Single Window System. In case of any discrepancy or complaint, the General Manager of District Industries Centre of Page 55 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT the concerned district is empowered to undertake an inquiry for verification of details of the Udhyog Registration submitted by the enterprise and thereafter, forward the matter with necessary remarks to the Director or Commissioner or Industry Secretary of the concerned State who after issuing notice and giving the opportunity to present the case, based on the findings, may amend the details or recommend to the Ministry for cancellation of Udhyog Registration Certificate.
21.1. There appears to be a complete and total absence of any such move on the part of the ONGC to approach any such Single Window Grievance Redressal Forum. There does not appear to be any testimonial indicating anything contrary to question the certification of the petitioner being a small enterprise. Respondent therefore lacks legal authority to adjudge the petitioner as medium enterprise in the manner it has done in the instant case.
22. Adverting to the facts elaborately once again, the petitioner, in the instant case, bid for Rig Cat-1 and 2 who was to deposit, the total EMD amounting to Rs. 50,89,100/- (round of). The amount of the EMD varies as, according to the respondent, it is Rs. 1 crore whereas version put forth by the Page 56 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT petitioner states Rs.50.89 lakhs.
22.1. Be that as it may, the respondent had alleged the forgery to have been played by the petitioner. Reference in the show cause notice is of Clause-52 of the ITB which is not existing. In the banning order passed by the respondent, the reference is of Clause-40 of the ITB and Section 3 of the Integrity Pact. This change on the part of the respondent without intimating the petitioner, also is impermissible and is clearly violative of the principles of natural justice. Inadvert reference of another clause which may not need an over emphasis however, considering a peculiar circumstance where the clause referred for initiating the proceedings when has no existence, the capability of a party to meet with the challenge surely would materially get compromised and thus, such wrong quoting simply cannot be disregarded. Ambiguity of provision and absence of adequate material in the notice would surely affect right of reasonable opportunity. Proceeding initiated culminated into serious consequences and hence, strict adherence to the principles of natural justice was inevitable.
23. Reference shall be made, at this stage, of the decision rendered in case of UMC Technologies Private Limited vs. Page 57 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT Food Corporation of India and Another [2020 SCC OnLine SC 934], where the Food Corporation of India terminated the contract of service and blacklisted the appellant from participating in any future tenders of the corporation for the period of five years. The corporation had issued a bid document inviting the bid of appointing recruitment agency to conduct the process of hiring the watchmen for the corporation office. The appellant submitted its bid and was declared as successful bidder and after competing the formalities, it was appointed for a period of two years. There were certain handwritten documents found by the Special Task Force of Bhopal Police which appeared to be the question papers related to the examination conducted by the appellant for eligible aspirants for the post of watchman. 23.1. The charge-sheet came to be filed by the police against certain persons after having found prima facie that the examination conducted was in complete violation of the protocols to be observed on the ground that it was a sole responsibility of the appellant to prepare and distribute the question papers as well as conduct the examination in a highly confidential manner. 23.2. The corporation alleged the abject failure and clear negligence in ensuring smooth conduct of the examination and Page 58 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT issued a notice of show cause. This was replied to denying any negligence or leak of question papers from its end, however, the appellant submitted an observation report-cum-reply which compared the seized documents with the original question papers and contended that there were many dissimilarities between the two.
23.3. The corporation concluded that the shortcomings and negligence on the part of the appellant stood established beyond reasonable doubt and proceeded to terminate the contract entered into with the appellant and also blacklisted the appellant. This was challenged before the High Court which dismissed the petition and therefore, the challenge was made before the Apex Court.
23.4. The Apex Court held and observed that the first principle of civilised jurisprudence is that a person against whom any action is sought to be taken or whose right or interests are being affected should be given a reasonable opportunity to defend, the notice of the case against him be served so that he can defend himself. Such notice should be adequate and the grounds necessitating action and the penalty/action proposed should be mentioned specifically and Page 59 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT unambiguously. An order travelling beyond the bounds of notice is impermissible and without jurisdiction to that extent. In the context of blacklisting of a person or an entity by the State or a State Corporation, the Court held that blacklisting has the effect of denying a person or an entity the privileged opportunity of entering into government contracts. Since it has an effect of depriving the person of equality and opportunity in the matter of public contract and it involves serious other consequences, the basic rule is that there has to be a strict adherence to the principle of natural justice.
"13. At the outset, it must be noted that it is the first principle of civilised jurisprudence that a person against whom any action is sought to be taken or whose right or interests are being affected should be given a reasonable opportunity to defend himself. The basic principle of natural justice is that before adjudication starts, the authority concerned should give to the affected party a notice of the case against him so that he can defend himself. Such notice should be adequate and the grounds necessitating action and the penalty/action proposed should be mentioned specifically and unambiguously. An order travelling beyond the bounds of notice is impermissible and without jurisdiction to that extent. This Court in Nasir Ahmad v. Assistant Custodian General, Evacuee Property, Lucknow and Anr.,1 has held that it is essential for the notice to specify the particular grounds on the basis of which an action is proposed to be taken so as to enable the noticee to answer the case against him. If these conditions are not satisfied, the person cannot be said to have been granted any reasonable opportunity of being heard.Page 60 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022
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14. Specifically, in the context of blacklisting of a person or an entity by the state or a state corporation, the requirement of a valid, particularized and unambiguous show cause notice is particularly crucial due to the severe consequences of blacklisting and the stigmatization that accrues to the person/entity being blacklisted. Here, it may be gainful to describe the concept of blacklisting and the graveness of the consequences occasioned by it. Blacklisting has the effect of denying a person or an entity the privileged opportunity of entering into government contracts. This privilege arises because it is the State who is the counter-party in government contracts and as such, every eligible person is to be afforded an equal opportunity to participate in such contracts, without arbitrariness and discrimination. Not only does blacklisting takes away this privilege, it also tarnishes the blacklisted person's reputation and brings the person's character into question. Blacklisting also has long-lasting civil consequences for the future business prospects of the blacklisted person.
15. In the present case as well, the appellant has submitted that serious prejudice has been caused to it due to the Corporation's order of blacklisting as several other government corporations have now terminated their contracts with the appellant and/or prevented the appellant from participating in future tenders even though the impugned blacklisting order was, in fact, limited to the Corporation's Madhya Pradesh regional office. This domino effect, which can effectively lead to the civil death of a person, shows that the consequences of blacklisting travel far beyond the dealings of the blacklisted person with one particular government corporation and in view thereof, this Court has consistently prescribed strict adherence to principles of natural justice whenever an entity is sought to be blacklisted.
16. The severity of the effects of blacklisting and the resultant need for strict observance of the principles of natural justice before passing an order of blacklisting were highlighted by this Court in Page 61 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT Erusian Equipment & Chemicals Ltd. v. State of West Bengal2 in the following terms:
"12. ... The order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of blacklisting. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality.
XXX XXX XXX
15. ... 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. XXX XXX XXX
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."
17. Similarly, this Court in Raghunath Thakur v. State of Bihar, struck down an order of blacklisting for future contracts on the ground of non-observance of the principles of natural justice. The relevant extract of the judgment in that case is as follows:
"4. ... [I]t is an implied principle of the rule of law that any order having civil consequences should be passed only after following the principles of natural justice. It has to be Page 62 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT realised that blacklisting any person in respect of business ventures has civil consequence for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order."
18. This Court in Gorkha Security Services v. Government (NCT of Delhi) and Ors.4 has described blacklisting as being equivalent to the civil death of a person because blacklisting is stigmatic in nature and debars a person from participating in government tenders thereby precluding him from the award of government contracts. It has been held thus:
"16. It is a common case of the parties that the blacklisting has to be preceded by a show- cause notice. Law in this regard is firmly grounded and does not even demand much amplification. The necessity of compliance with the principles of natural justice by giving the opportunity to the person against whom action of blacklisting is sought to be taken has a valid and solid rationale behind it. 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."
19. In 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 cases, 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. Page 63 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022
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24. A plain reading of the notice makes it clear that the action of blacklisting was neither expressly proposed nor could it have been inferred from the language employed by the Corporation in its show cause notice. After listing 12 clauses of the "Instruction to Bidders", which were part of the Corporation's Bid Document dated 25.11.2016, the notice merely contains a vague statement that in light of the alleged leakage of question papers by the appellant, an appropriate decision will be taken by the Corporation. In fact, Clause 10 of the same Instruction to Bidders section of the Bid Document, which the Corporation has argued to be the source of its power to blacklist the appellant, is not even mentioned in the show cause notice. While the notice clarified that the 12 clauses specified in the notice were only indicative and not exhaustive, there was nothing in the notice which could have given the appellant the impression that the action of blacklisting was being proposed. This is especially true since the appellant was under the belief that the Corporation was not even empowered to take such an action against it and since the only clause which mentioned blacklisting was not referred to by the Corporation in its show cause notice. While the following paragraphs deal with whether or not the appellant's said belief was well-founded, there can be no question that it was incumbent on the part of the Corporation to clarify in the show cause notice that it intended to blacklist the appellant, so as to provide adequate and meaningful opportunity to the appellant to show cause against the same.
25. The mere existence of a clause in the Bid Document, which mentions blacklisting as a bar against eligibility, cannot satisfy the mandatory requirement of a clear mention of the proposed action in the show cause notice. The Corporation's notice is completely silent about blacklisting and as such, it could not have led the appellant to infer that such an action could be taken by the Corporation in pursuance of this notice. Had the Corporation expressed its mind in the show cause notice to black Page 64 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT list, the appellant could have filed a suitable reply for the same. Therefore, we are of the opinion that the show cause notice dated 10.04.2018 does not fulfil the requirements of a valid show cause notice for blacklisting. In our view, the order of blacklisting the appellant clearly traversed beyond the bounds of the show cause notice which is impermissible in law. As a result, the consequent blacklisting order dated 09.01.2019 cannot be sustained."
24. In the matter on hand, the reading of the show cause notice makes it abundantly clear that the only reference which has been made is of Clause-52 of the ITB. As discussed above, Clause-52 does not exist and clearly the reference in the banning order is of Clause-40.
24.1. The notice contains the reply of the respondent where it has termed itself as medium sized enterprise without making the reference of subsequent e-mails. It also refers to the documents as the forged documents. All in all, there is of course a reference of banning of the business but, this is all based on account of the alleged false information/documents in the bid, the order is clearly traveling beyond the bounds of the notice which is impermissible and is also therefore without jurisdiction. Under the tender, one does not find any power given to the ONGC to issue banning order and it has the power to reject the bid. Of course, under the Integrity Pact, it has power to initiate appropriate actions. Even the fresh registration of 26.06.2020 Page 65 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT categorizes the petitioner as a small enterprise. Assuming that it has the power to ban the enterprise and blacklist the same for a restricted period, it has no business to keep the cards close to its heart and in absolute violation of principles of natural justice, adjudge the issue. Respondent would be surely obligated to follow the principles of natural justice by providing the material which it seeks to rely upon before such a harsh action is contemplated. As noted above, neither the communications which are believed by the respondents for issuing show cause notice nor the copy of any other material is furnished to the petitioner for it to meet with the action of the respondent. Severity of banning order when demands strict observance of principles of natural justice, the least the respondent could have done was to share the base documents and subsequently, the banning order.
25. Resultantly, the petition deserves to be allowed for having made serious breach of the principles of natural justice. The impugned banning order dated 14.12.2020 issued by the respondent consequently is quashed and set aside. So far as the request to consider the bid submitted for the subject tender by the petitioner, consequently, the same would need to be regarded if the banning order dated 14.12.2020 was the only ground of Page 66 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022 C/SCA/1235/2021 JUDGMENT rejection and if the process is not already over. Rights of the parties to initiate consequent proceedings of damage etc. in relation to the said tender would also be open, as provided under the law, if the process is already completed.
26. This may not also preclude the respondent - ONGC in taking recourse to paragraph-9 of the notification dated 26.06.2020 issued by MSME of making a request to the Ministry of Micro, Small and Medium Enterprise of scrutinizing documentary evidence adduced by the petitioner, at the time of registration and decide in accordance with law.
27. Petition is accordingly disposed of.
(SONIA GOKANI, J) (SANGEETA K. VISHEN,J) Bhoomi Page 67 of 67 Downloaded on : Thu Jan 13 08:31:11 IST 2022