Madhya Pradesh High Court
Kamtheen Security Services Indore vs The State Of Madhya Pradesh on 29 June, 2017
1
HIGH COURT OF MADHYA PRADESH PRINCIPAL SEAT
AT JABALPUR
(SINGLE BENCH : JUSTICE V.K.SHUKLA)
W.P.No.10070/2016
Kamtheen Security Services Indore
Vs.
State of Madhya Pradesh and others
-------------------------------------------------------------------------
Shri Brian D'silva, learned Senior Counsel with Shri
Amit Khatri, Advocate for the petitioner.
Ms.Surbhi Nigam, learned Deputy Govt. Advocate, for
respondent no.1/State.
Shri Kapil Duggal with Shri Siddharth Sharma,
learned counsel for respondent nos.2 to 4.
----------------------------------------------------------------------------------
ORDER
(29/6/2017 ) In the instant petition,invoking the jurisdiction under Article 226 of the Constitution of India, petitioner has challenged the order dated 17-05-2016, whereby the petitioner has been debarred from business in the respondent nos. 2 to 4 Company for a further period of 3 years from the date of the impugned order on the pretext of non compliance of the 2 conditions of the contract despite communications/letters dated 03-01-2015 and 23-01-2015 for not making timely payments to the personnel engaged.
2. Factual expose succinctly adumbrated in nutshell is that the petitioner was awarded a contract for providing work force in the respondents establishment as Date Entry Operators and other skilled and unskilled labourers as and when required for a period as stipulated in the contract dated 17-11-2014 and 03-01-2015. It is further stated that as per terms and conditions of the contract, the period of the contract was extendable on mutual consent. The petitioner was awarded a work order dated 03-01-2015 for providing twelve Data Entry Operators for a period of one year from the date of contract and the wages to be paid accordingly to the rates mentioned therein. Further another order was issued by the respondents company dated 23-01-2015 for providing three unskilled labourers for Maheshwar Hydro-Electric Project on identical terms and this is with reference to the original work order dated 17-11-2014. On the very same day, another order was issued 3 by the respondents company dated 23-01-2015 for providing one Data Entry Operator for Maheshwar Hydro-Electric Project on identical terms and this is with reference to the original work order dated 03-01-2015. According to the petitioner, there was no deficiency in compliance of the terms of both the contracts. He has further submitted that in response to certain letters issued by the respondents company, the petitioner has filed reply and there was satisfactory explanation on his part. It is further stated that by the order dated 26-11-2015, the period of the contract of the petitioner was further extended for a period of one year from 01-12-2015 on the same terms and conditions, which were enshrined in the order dated 17-11- 2014. It is contended that despite the aforesaid extension of contract, respondents company issued the impugned order dated 17-05-2016, whereby the petitioner has been debarred /blacklisted from the business for a period of three years from the date of the impugned order though the contract was not canelled as the petitioner completed the contract as per requirement of the respondents.
4
3. Per contra combating the aforesaid contention, learned counsel for the respondents submitted that the petitioner has failed to comply with the terms and conditions of the contract and despite number of letters/notices issued to him, he did not comply with the directions issued by the respondents company and therefore, impugned action was taken against the petitioner. It is further submitted that the letters which have been issued are in the shape of notice for taking impugned action of blacklisting.
4. The following submissions have been made by the learned Senior Counsel for the petitioner:
(i) No show cause notice has been issued before taking impugned action of blacklisting.
(ii) The so called letters/notices referred by the respondents can not be termed to be a show cause notice, as there is no reference to the proposed action of blacklisting against the petitioner and therefore, he had no opportunity of making representation in this regard.
5. Before proceeding further to consider the submissions of the rival parties, it is apposite to mention here that it is 5 admitted by both the parties that the contract has not been terminated and the contract of the petitioner was extended vide order dated 26-11-2015 for a further period of one year from 01-12-2015. However, the respondents have passed the impugned order debarring the petitioner from business by the impugned order during the subsistence of contract.
6. Upon perusal of the record, it is evident that no show cause notice has been issued to the petitioner before passing the order impugned for blacklisting. However, learned counsel for the respondents submitted that the letters/notices issued by the respondents have to be treated as show cause notice proposing an action for blacklisting. To buttress his submissions, he has taken this court to Annexures R-19, R-23 and R-24. All these letters are identically worded. From reading the aforesaid notices and considering the tenor of the same, it is crystal clear that in the notices, nothing is mentioned about the proposed action of the blacklisting. It is relevant to reproduce the operative part of the so called letter, which is reproduced as under :
6
" You are advised to make payment to the Data- Entry Operator deployed against subject orders within 7 days positively and submit details of the same. Please take notice that in case of non- compliance of above instructions , shall have serious consequences, which may include termination of contract and forfeiture of security deposit and other legal action deemed fit as per law. This will be without prejudice to any other penal action for breach of contract and non- compliance of law in vogue."
Thus from the aforesaid factual matrix, it is clear that the mandatory requirement to give a show cause notice before blacklisting has not been complied with.
7. Before proceedings further in the matter, it is condign to survey the legal authorities on the issue that whether the order of blacklisting can be passed without issuance of show cause notice and if show cause notice is given that whether the action of blacklisting could be taken without specifically proposing/contemplating action of blacklisting in the show cause notice.
7
8. The Apex Court in the case of Erusian Equipment & Chemicals Ltd. Vs. State of W.P. (1977)1 SCC 70, highlighted the necessity of giving an opportunity.
"Way back in the year 1975, this court in the case of M/s. Erusian Equipment & Chemicals Ltd. v. State of West Bengal & Anr.; (1975) 1 SCC 70, highlighted the necessity of giving an opportunity to such a person by serving a show cause notice thereby giving him opportunity to meet the allegations which were in the mind of the authority contemplating blacklisting of such a person. This is clear from the reading of Para Nos. 12 and 20 of the said judgment. Necessitating this requirement, the court observed thus:
"12. Under Article 298 of the Constitution the executive power of the Union and the State shall extend to the carrying on of any trade and to the acquisition, holding and disposal of property and the making of contracts for any purpose. The State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks 8 of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. The order of 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.
Again, in Raghunath Thakur v. State of Bihar and Ors.; (1989) 1 SCC 229 the aforesaid principle was reiterated in the following manner:-
"4. Indisputably, no notice had been given to the appellant of the proposal of blacklisting the appellant. It was contended on behalf of 9 the State Government that there was no requirement in the rule of giving any prior notice before blacklisting any person. Insofar as the contention that there is no requirement specifically of giving any notice is concerned, the respondent is right. But it is an implied principle of the rule of law that any order having civil consequence should be passed only after following the principles of natural justice. It has to be realised that 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. In that view of the matter, the last portion of the order insofar as it directs blacklisting of the appellant in respect of future contracts, cannot be sustained in law. In the premises, that portion of the order directing that the appellant be placed in the blacklist in respect of future contracts under the Collector is set aside. So far as the cancellation of the bid of 10 the appellant is concerned, that is not affected. This order will, however, not prevent the State Government or the appropriate authorities from taking any future steps for blacklisting the appellant if the Government is so entitled to do in accordance with law i.e. after giving the appellant due notice and an opportunity of making representation. After hearing the appellant, the State Government will be at liberty to pass any order in accordance with law indicating the reasons therefor. We, however, make it quite clear that we are not expressing any opinion on the correctness or otherwise of the allegations made against the appellant. The appeal is thus disposed of."
In the case of Patel Engineering Ltd. v. Union of India and Anr.; (2012) 11 SCC 257 speaking through one of us (Justice Chelameswar, J.) this Court emphatically reiterated the principle by explaining the same in the following manner:
"13. The concept of "blacklisting" is explained by this Court in Erusian Equipment & Chemicals Ltd. v. State of W.B. as under:
"20. Blacklisting has the effect of preventing a person from the privilege and advantage of 11 entering into lawful relationship with the Government for purposes of gains."
14. The nature of the authority of the State to blacklist the persons was considered by this Court in the abovementioned case and took note of the constitutional provision (Article 298), which authorises both the Union of India and the States to make contracts for any purpose and to carry on any trade or business. It also authorises the acquisition, holding and disposal of property. This Court also took note of the fact that the right to make a contract includes the right not to make a contract. By definition, the said right is inherent in every person capable of entering into a contract. However, such a right either to enter or not to enter into a contract with any person is subject to a constitutional obligation to obey the command of Article 14. Though nobody has any right to compel the State to enter into a contract, everybody has a right to be treated equally when the State seeks to establish contractual relationships.
9. In the case of Gorkha Security Services Vs. Government(NCT of Delhi) and others, (2014)9 SCC 105, the 12 Apex Court after taking into consideration the previous judgment held as under :
"Thus, there is no dispute about the requirement of serving show cause notice. We may also hasten to add that once the show cause notice is given and opportunity to reply to the show cause notice is afforded, it is not even necessary to give an oral hearing. The High Court has rightly repudiated the appellant's attempt in finding foul with the impugned order on this ground. Such a contention was specifically repelled in Patel Engineering (supra).
Contents of show-cause notice.-
The Central issue, however, pertains to the requirement of stating the action which is proposed to be taken. The fundamental purpose behind the serving of Show Cause Notice is to make the noticee understand the precise case set up against him which he has to meet. This would require the statement of imputations detailing out the alleged breaches and defaults he has committed, so that he gets an opportunity to rebut the same. Another requirement, according to us, is the nature of action which is proposed to be taken for such a breach. That should also be stated so that the noticee is able to point out that proposed action is not warranted in the given case, even if the defaults/ breaches complained of are not satisfactorily explained. When it comes to black 13 listing, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action."
10. A Coordinate Bench of this court in the case of Amit Mishra Vs. General Manager (Transport), M.P. State Civil Supplies Corporation Ltd. Bhopal and others 2008(4) MPLJ 542, held that the order of blacklisting passed without giving show cause is violative of principles of natural judtice.
11. Another issue which has cropped up for consideration in the present case is whether the so called letters can be held to be a show cause notice before taking action of the blacklisting. In the case of Gorkha Security Services (supra) this court has taken into consideration and held that the fundamental purpose behind the servicing of show cause notice is to make the noticee understand the precise case set up against him which he has to meet. This would require the statement of imputations detailing out the alleged breaches and defaults he has committed, so that he gets an opportunity to rebut the same .
In para-27, the Apex Court has as under :
"27. We are, therefore, of the opinion that it was incumbent on the part of the Department to state in the 14 show cause notice that the competent authority intended to impose such a penalty of blacklisting, so as to provide adequate and meaningful opportunity to the appellant to show cause against the same. However, we may also add that even if it is not mentioned specifically but from the reading of the show cause notice, it can be clearly inferred that such an action was proposed, that would fulfill this requirement. In the present case, however, reading of the show cause notice does not suggest that noticee could find out that such an action could also be taken. We say so for the reasons that are recorded hereinafter"
12. From the aforesaid enunciation of law it is held that a show cause notice before passing the order of blacklisting is mandatory and also that the show cause notice must mention about the proposed action of blacklisting detailing out the alleged breaches and defaults he has committed, so that he gets an opportunity to rebut the same. A proper show cause notice before a penal action like blacklisting which carries serious civil consequences is must and mandatory. In the factual matrix of the present case and the legal proposition of law laid down by the Apex Court, it is evincible that no show cause notice was issued to the petitioner before passing the impugned order of blacklisting and the letters so called 15 notices cannot be held to be a show cause notice as required under law. Hence the present petition is allowed. The order of blacklisting dated 17-05-2016 is quashed. No orders as to cost.
(V.K.Shukla ) JUDGE hsp 16 HIGH COURT OF MADHYA PRADESH PRINCIPAL SEAT AT JABALPUR W.P.No.10070/2016 Kamtheen Security Services Indore Vs. State of Madhya Pradesh and others ORDER POST FOR : 29-06-2017 (Vijay Kumar Shukla) Judge 28-06-2017