Gujarat High Court
Ghanshyan Indravadan Pandya vs University Engineer on 2 April, 2018
Equivalent citations: AIR 2018 GUJARAT 176
Bench: M.R. Shah, A.Y. Kogje
C/SCA/11979/2016 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 11979 of 2016
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE M.R. SHAH Sd/
and
HONOURABLE MR.JUSTICE A.Y. KOGJE Sd/
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1 Whether Reporters of Local Papers may be allowed to see Yes
the judgment ?
2 To be referred to the Reporter or not ? Yes
3 Whether their Lordships wish to see the fair copy of the No
judgment ?
4 Whether this case involves a substantial question of law as No
to the interpretation of the Constitution of India or any
order made thereunder ?
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GHANSHYAN INDRAVADAN PANDYA
Versus
UNIVERSITY ENGINEER
=============================================
Appearance:
MR HARSHADRAY A DAVE(3461) for the PETITIONER(s) No. 1,2
MR MITUL K SHELAT(2419) for the RESPONDENT(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE M.R. SHAH
and
HONOURABLE MR.JUSTICE A.Y. KOGJE
Date : 02/04/2018
CAV JUDGMENT
(PER : HONOURABLE MR.JUSTICE M.R. SHAH) [1.0] By way of this petition under Article 226 of the Constitution of India, the petitioner contractor has prayed for an appropriate writ, direction and order quashing and setting aside the impugned letter / communication / order dated 16.06.2016 (AnnexureA to the petition) by which the petitioner is blacklisted permanently.
Page 1 of 21 C/SCA/11979/2016 CAV JUDGMENT[2.0] The facts leading to the present Special Civil Application in nutshell are as under:
[2.1] That the petitioner herein is in the business of construction as Engineers and Contractors. That the respondent University floated two tenders being (1) Tender dated 28.02.2012 in Tender Notice No.20 and (2) Tender Notice No.11. That the petitioner participated in the said tenders and was found to be successful bidder and consequently the work was awarded to the petitioner. It is the case on behalf of the petitioner that after the work orders were issued, due to defaults on the part of the respondent University and other events which were not within the control of the petitioner, the work got delayed. According to the petitioner the delay on the part of the University was brought to the notice of the respondent and the petitioner also requested the respondent to expedite the issue which is within his domain and within his scope of work. According to the petitioner nothing was fruitful and the respondent acted at its own pace, which resulted in delay. According to the petitioner, on earlier occasion the petitioner sought extension of time from the respondent University which was granted on every occasion. However, at the last occasion sought, the respondent communicated to the petitioner vide letters dated 22.05.2013 that the time for completion is not extended and the respondent is directed to terminate the contract as per Clause 3 of the tender conditions. According to the petitioner, thereafter the petitioner never received any order terminating the contract. That thereafter vide letter / communication dated 11.06.2013 the petitioner was communicated that the petitioner is blacklisted for Page 2 of 21 C/SCA/11979/2016 CAV JUDGMENT doing any work with the University. As the same was in breach of principles of natural justice, the petitioner preferred Special Civil Application No.12335/2015 and one another. That vide order dated 04.11.2015, the Division Bench of this Court disposed of the aforesaid Special Civil Application No.12335/2015 on the statement made by the learned Advocate appearing on behalf of the respondent University that a showcause notice will be issued if the respondents are interested in proceeding against the petitioner for blacklisting and after giving opportunity of hearing to the petitioner in consonance with the principles of natural justice, fresh decision in accordance with law will be taken and according to the said statement the Division Bench disposed of the said petition by observing that in that view of the matter, grievance of the petitioner does not survive and in view of such arrangement, the order of blacklisting would not survive. That thereafter the respondent issued notice dated 12.01.2016 alleging inter alia that in view of termination of four weeks as per the conditions of contract, the petitioner is liable to be blacklisted. Therefore, the petitioner was called upon to show cause why the petitioner should not be blacklisted in view of the termination of the four weeks as per the conditions of contract. That the petitioner replied to the showcause notice by reply dated 22.01.2016. From the reply it appears that it was the specific case on behalf of the petitioner that as such there is no order terminating the contract / works. It was the specific case on behalf of the petitioner that none of the contracts referred to in the notice are terminated; mere instruction to terminate the contract does not amount to termination of contract; no notice, no opportunity of hearing nor any principle of Page 3 of 21 C/SCA/11979/2016 CAV JUDGMENT natural justice has been followed by the University at any stage before the socalled termination as alleged in the notice. The petitioner also replied to the aforesaid notice on merits also. That thereafter one another notice dated 22.01.2016 was issued by the respondent University by which the petitioner was again called upon to show cause as to why the petitioner be not blacklisted. The same was responded by the petitioner vide reply dated 02/03.02.2016. That thereafter again one another notice dated 16.01.2016 was issued and served upon the petitioner asking the petitioner to assign proper reasons which was responded by the petitioner vide reply dated 20.02.2016 and also requested for personal hearing. That again the petitioner was issued a notice dated 29.02.2016, which was again responded to by the petitioner vide reply dated 06.04.2016. That thereafter vide impugned letter / communication dated 13.06.2016, the petitioner is informed that the petitioner is blacklisted permanently from doing any work with the University.
[2.2] Feeling aggrieved and dissatisfied with the impugned communication informing the petitioner that the petitioner has been blacklisted, the petitioner has preferred the present Special Civil Application under Article 226 of the Constitution of India.
[3.0] Shri Harshadray Dave, learned Advocate has appeared on behalf of the petitioner and Shri Mitul Shelat, learned Advocate has appeared on behalf of the respondent University.
[4.0] Shri Dave, learned Advocate appearing on behalf of the petitioner has vehemently submitted that the impugned Page 4 of 21 C/SCA/11979/2016 CAV JUDGMENT communication by which the petitioner is communicated that the petitioner is blacklisted is absolutely illegal, most arbitrary and nonspeaking, nonreasoned order and in breach of principles of natural justice. It is further submitted by Shri Dave, learned Advocate appearing on behalf of the petitioner that as per Clause 3 of the conditions of contract, the contractor can be put under abeyance only and only if the conditions stipulated in Clause 3 of the conditions of contract are fulfilled and/or satisfied viz. (1) that the contractor has neglected to work or has failed to proceed with the work in due diligence or in violation of conditions of contract; (2) that a notice has been issued by the Engineer to take corrective measures within 10 days from the date of such notice and the contractor has failed to take such corrective measures; (3) that the Engineer upon such default shall terminate the contract; (4) that the liquidated damages are determined, outstanding payment is forfeited, plants, equipment and material are withheld by the University to meet with the liquidated damages. It is submitted that in the present case none of the above prerequisites are present. It is submitted that therefore as none of the prerequisites mentioned in Clause 3 of the conditions of contract are present, the impugned communication of blacklisting is absolutely illegal and without jurisdiction and therefore, the same deserves to be quashed and set aside.
[4.1] It is further submitted by Shri Dave, learned Advocate appearing on behalf of the petitioner that in the present case as such there are no specific orders terminating the contracts which are referred to in the impugned order. It is submitted that unless Page 5 of 21 C/SCA/11979/2016 CAV JUDGMENT and until works / contracts are terminated and that too after following the procedure as required under the conditions of contract, there may not be any order of blacklisting and/or putting the contractor under abeyance. It is submitted that in the present case none of the contracts referred to in the notices are terminated by the University at any stage. It is submitted that letters referred to by the respondent only speaks that the respondent was instructed by the University to terminate the contract. It is submitted that mere instruction to terminate the contract does not amount to termination of contract. It is submitted that even otherwise before the socalled termination as alleged, no notice, no opportunity of hearing nor any principles of natural justice have been followed. It is sumbitted that therefore the impugned order of blacklisting is wholly without jurisdiction.
[4.2] It is further submitted that even otherwise none of the conditions as mentioned in Clause 3 of conditions of contract are fulfilled and/or satisfied. It is submitted that in the present case neither the petitioner - contractor has neglected to work or has failed to proceed with the work in due diligence or has violated the conditions of contract. It is submitted that as such right from very beginning there was a delay on the part of the University due to which there was delay in proceeding further with the work. It is submitted that delay in proceeding further with the work was not attributable to the petitioner - contractor. It is further submitted by Shri Dave, learned Advocate appearing on behalf of the petitioner that even before the contractor can be put under abeyance, the procedure as required under Clause 3 of the conditions of contract Page 6 of 21 C/SCA/11979/2016 CAV JUDGMENT is required to be followed and only thereafter the contractor can be put under abeyance. It is submitted that in the present case no such notice as required to be issued as per Clause 3 of the conditions of contract has been issued. It is submitted that therefore there is no occasion and/or reason to blacklist the petitioner - contractor.
[4.3] It is further submitted by Shri Dave, learned Advocate appearing on behalf of the petitioner that even otherwise the impugned order of blacklisting the petitioner permanently is a non speaking and nonreasoned order. It is submitted that detailed replies were given by the petitioner to the showcause notices, however the same has not been dealt with and/or considered at all and the impugned order has been passed permanently blacklisting the petitioner which deserves to be quashed and set aside as the same is arbitrary and in breach of principles of natural justice.
[4.4] It is further submitted that even otherwise the impugned order of blacklisting, permanently blacklisting the petitioner is most arbitrary and violative of Article 19(1)(g) of the Constitution of India. It is submitted by Shri Dave, learned Advocate appearing on behalf of the petitioner that therefore the respondent has exceeded its jurisdiction while blacklisting the petitioner from business with the University for all times to come, whereas the provision provides that the contractor shall be put under abeyance for a maximum period of 3 years.
Making above submissions and relying upon the decisions of the Hon'ble Supreme Court in the case of Kulja Industries Ltd. vs. Western Telecom Project BSNL reported in (2014) 14 SCC 731 Page 7 of 21 C/SCA/11979/2016 CAV JUDGMENT and Gorkha Security Services vs. Govt. (NCT of Delhi) reported in (2014) 9 SCC 105, it is requested to allow the present petition.
[5.0] Present petition is vehemently opposed by Shri Shelat, learned Advocate appearing on behalf of the respondent University.
[5.1] It is submitted by Shri Shelat, learned Advocate appearing on behalf of the respondent that in the present case as the petitioner failed to complete the four works for which the contracts were awarded to it and therefore, after issuing various showcause notices and despite the same when the petitioner contractor failed to complete the works and University was constrained to terminate the contract / works. Thereafter, when the petitioner has been put under abeyance / blacklisted, the same is absolutely just and proper and in consonance with the terms and conditions of the contract more particularly Clause 3 of the tender conditions.
[5.2] It is further submitted by Shri Shelat, learned Advocate appearing on behalf of the respondent that the impugned order has been passed after giving fullest opportunity and after issuing various showcause notices and after considering the replies filed by the petitioner. It is submitted that therefore the impugned order of blacklisting cannot be said to be arbitrary and/or in violation of principles of natural justice as alleged.
[6.0] Now, so far as the submission on behalf of the petitioner that in the present case as four contracts which are referred to in the showcause notices and the impugned order are not terminated and as such no written order has been passed terminating the Page 8 of 21 C/SCA/11979/2016 CAV JUDGMENT contracts / works and therefore, Clause 3 of the tender conditions shall not be attracted is concerned, it is vehemently submitted by Shri Shelat, learned Advocate appearing on behalf of the respondent that as such the termination of the contract / works has been challenged by the very petitioner before the Civil Court which is pending. It is submitted that in the civil suit the petitioner has challenged the termination of the contracts / works and therefore, it will not be proper on the part of the petitioner to contend that the contracts / works are not terminated.
[6.1] Now, so far as the submission on behalf of the petitioner that the respondent has no authority and/or jurisdiction to blacklist the petitioner contractor inasmuch as even as per Clause 3 the contractor can be put under abeyance is concerned, it is vehemently submitted by Shri Shelat, learned Advocate appearing on behalf of the respondent that power to award the contract includes power to blacklist. In support of his above submissions, Shri Shelat, learned Advocate appearing on behalf of the respondent has heavily relied upon the decision of the Hon'ble Supreme Court in the case of M/s. Patel Engineering Ltd. vs. Union of India and Anr. reported in AIR 2012 SC 2342.
Making above submissions and relying upon the decision of the Hon'ble Supreme Court in the case of M/s. Patel Engineering Ltd. (Supra) and the decision of the Hon'ble Supreme Court in the case of Jagdish Mandal vs. State of Orissa and Others reported in (2007) 14 SCC 517, it is requested to dismiss the present petition.
Page 9 of 21 C/SCA/11979/2016 CAV JUDGMENT[7.0] Heard learned Advocates appearing for respective parties at length.
At the outset it is required to be noted that by way of this petition under Article 226 of the Constitution of India, the petitioner has challenged the impugned decision / communication by which the petitioner contractor is blacklisted permanently from entering into any contractual relationship with the respondent University. Therefore, the short question which is posed for consideration of this Court is whether in the facts and circumstances of the case the respondent is justified in blacklisting the petitioner permanently?
[7.1] At the outset it is required to be noted that the petitioner has been blacklisted on the premise / ground that four works / contracts which were awarded to the petitioner has been terminated by the respondent and therefore, as per Clause 3 of the tender conditions the petitioner contractor is liable to be put under abeyance / blacklisted.
[7.2] While considering the aforesaid issue, few decisions of the Hon'ble Supreme Court on blacklisting are required to be referred to and considered. In the case of M/s. Patel Engineering Ltd. (Supra), the Hon'ble Supreme Court had an occasion to consider the decision of the Hon'ble Supreme Court in the case of M/s. Erusian Equipment and Chemicals Limited vs. Union of India and Others reported in (1975)1 SCC 70 and also the decision of the Hon'ble Supreme Court in the case of Jagdish Mandal (Supra) as well as another decision in the case of Union of India and Page 10 of 21 C/SCA/11979/2016 CAV JUDGMENT Another vs. Jesus Sales Corporation reported in (1996) 4 SCC
69. In paras 11, 12, 18 to 21, 25 and 26, the Hon'ble Supreme Court has observed and held as under:
"11. The concept of Blacklisting is explained by this Court in M/s. Erusian Equipment & Chemicals Limited v. Union of India and others, (1975) 1 SCC 70 : (AIR 1975 SC 266), as under:
"Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains."
The nature of the authority of State to blacklist persons was considered by this Court in the abovementioned case[1] and took note of the constitutional provision (Article 298)2, which authorises both the Union of India and the States to make contracts for any purpose and to carry on any trade or business. It also authorises the acquisition, holding and disposal of property. This Court also took note of the fact that the right to make a contract includes the right not to make a contract. By definition, the said right is inherent in every person capable of entering into a contract. However, such a right either to enter or not to enter into a contract with any person is subject to a constitutional obligation to obey the command of Article 14. Though nobody has any right to compel State to enter into a contract, everybody has a right to be treated equally when State seeks to establish contractual relationships3.
The effect of excluding a person from entering into a contractual relationship with State would be to deprive such person to be treated equally with those, who are also engaged in similar activity.
1 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 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."
Page 11 of 21 C/SCA/11979/2016 CAV JUDGMENT2. Article 298. Power to carry on trade, etc. The executive power of the Union and of each State shall extend to the carrying on of any trade or business and to the acquisition, holding and disposal of property and the making of contracts for any purpose:
Provided that
(a) the said executive power of the Union shall, in so far as such trade or business or such purpose is not one with respect to which Parliament may make laws, be subject in each State to legislation by the State; and
(b) the said executive power of each State shall, in so far as such trade or business or such purpose is not one with respect to which the State Legislature may make laws, be subject to legislation by Parliament.
3. 17. The Government is a Government of laws and not of men. It is true that neither the petitioner nor the respondent has any right to enter into a contract but they are entitled to equal treatment with others who offer tender or quotations for the purchase of the goods. This privilege arises because it is the Government which is trading with the public and the democratic form of Government demands equality and absence of arbitrariness and discrimination in such transactions. Hohfeld treats privileges as a form of liberty as opposed to a duty. The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with any one but if it does so, it must do so fairly without discrimination and without unfair procedure. Reputation is a part of a person's character and personality. Blacklisting tarnishes one's reputation.
12. It follows from the above Judgment that the decision of State or its instrumentalities not to deal with certain persons or class of persons on account of the undesirability of entering into contractual relationship with such persons is called blacklisting. State can decline to enter into a contractual relationship with a person or a class of persons for a legitimate purpose. The authority of State to blacklist a person is a necessary concomitant to the executive power of the State to carry on the trade or the business and making of contracts for any purpose, etc. There need not be any statutory grant of such power. The only legal limitation upon the exercise of such an authority is that State is to act fairly and rationally without in any way being arbitrary - thereby such a decision can be taken for some legitimate purpose. What is the legitimate purpose that is sought to be achieved by the State in a given case can vary depending upon various factors.
18. The next question that is required to be considered is whether the 2nd respondent is justified in blacklisting the petitioner in the facts and circumstances of the case. The necessary facts are already mentioned and they are not in dispute. Failure of the petitioner to conclude the contract by executing the necessary documents, admittedly, resulted in a legal wrong. Whether the 2nd respondent should have been satisfied with the forfeiture of the bid security Page 12 of 21 C/SCA/11979/2016 CAV JUDGMENT amount or should have gone further to also blacklist the petitioner after forfeiting the bid security, is a matter requiring examination. In other words, the issue is one of the proportionality of the action taken by the 2nd respondent.
19. The reason given by the 2nd respondent in its showcause notice dated 24022011 for proposing to blacklist the petitioner is as follows:
"It needs to be appreciated that the projects being undertaking by NHAI are of huge magnitude and both in terms of manpower and finance besides being of utmost National importance, striking at the root of economic development and prosperity and general public and a nation as a whole, the NHAI cannot afford to deal with entities who fail to perform their obligations as in your case."
And in the impugned order dated 24022011, the 2nd respondent gave the following reasons:
"It is to be noted that your act of nonacceptance of LOA has resulted in huge financial loss to the tune of Rs.3077 crores, as assessed over the life of the concession period, in terms of lower premium, apart from cost of the time and effort, to NHAI. It is further noted that this is the first case where a bidder has not accepted the LOA, and warrants exemplary action, to curb any practice of 'pooling', and 'malafide' in future.
After considering all material facts, and your reply in response to the Show Cause Notice, NHAI is of the considered view that no justifiable grounds have been made out in support of your action of nonacceptance of LOA. Keeping in view the conduct of the addressees, NHAI find that they are not reliable and trustworthy and have caused huge financial loss to NHAI."
20. The learned counsel for the petitioner argued that Clause 4 of the bid document stipulates blacklisting to be one of the actions that can be taken against a bidder or contractor, if the 2nd respondent comes to the conclusion that such a person is guilty of any one of the unacceptable practices, referred to earlier. Imposing the same penalty on a person, who is not guilty of any one of the unacceptable practices, though such a person is guilty of dereliction of some legal obligation, would amount to imposition of a punishment, which is disproportionate to the dereliction. In support of the submission, the learned counsel relied upon the Judgment of this Court in Teri Oat Estates (P) Ltd. v. U.T.Chandigarh and others, (2004) 2 SCC 130.
Page 13 of 21 C/SCA/11979/2016 CAV JUDGMENT21. It was a case, where allotment of a piece of land, made under the Capital of Punjab (Development and Regulation) Act, 1952 and the Rules made thereunder, was cancelled on the ground that the allottee did not make the payment of the requisite instalments agreed upon. One of the submissions made by the allottee (appellant before this Court) was that the action of the Chandigarh administration, seeking to evict the appellant and resume the land, lacked proportionality in the background of the specific facts of that case. This Court explained the doctrine of proportionality at paras 45 and 46, as follows:
"45. The said doctrine originated as far back as in the 19th century in Russia and was later adopted by Germany, France and other European countries as has been noticed by this Court in Om Kumar v. Union of India.
46. By proportionality, it is meant that the question whether while regulating exercise of fundamental rights, the appropriate or least restrictive choice of measures has been made by the legislature or the administrator so as to achieve the object of the legislation or the purpose of the administrative order, as the case may be. Under the principle, the court will see that the legislature and the administrative authority "maintain a proper balance between the adverse effects which the legislation or the administrative order may have on the rights, liberties or interests of persons keeping in mind the purpose which they were intended to serve".
25. We cannot say the reasoning adopted by the 2nd respondent either irrational or perverse. The dereliction, such as the one indulged in by the petitioner, if not handled firmly, is likely to result in recurrence of such activity not only on the part of the petitioner, but others also, who deal with public bodies, such as the 2nd respondent giving scope for unwholesome practices. No doubt, the fact that the petitioner is blacklisted (for some period) by the 2nd respondent is likely to have some adverse effect on its business prospects, but, as pointed out by this Court in Jagdish Mandal v. State of Orissa and others, (2007) 14 SCC 517:
"Power of judicial review will not be invoked to protect private interest at the cost of public interest, or to decide contractual disputes." The prejudice to the commercial interests of the petitioner, as pointed out by the High Court, is brought about by his own making. Therefore, it cannot be said that the impugned decision of R2 lacks proportionality.Page 14 of 21 C/SCA/11979/2016 CAV JUDGMENT
26. Coming to the submission that R2 ought to have given an oral hearing before the impugned order was taken, we agree with the conclusion of the High Court that there is no inviolable rule that a personal hearing of the affected party must precede every decision of the State. This Court in Union of Indian and another v. Jesus Sales Corporation, (1996) 4 SCC 69, held so even in the context of a quasijudicial decision. We cannot, therefore, take a different opinion in the context of a commercial decision of State. The petitioner was given a reasonable opportunity to explain its case before the impugned decision was taken."
[7.3] In the case of Gorkha Security Services (Supra), while emphasizing the need for issuing the proper showcause notice and explaining in detail the purpose of proper showcause notice, the Hon'ble Supreme Court has observed and held that the fundamental purpose behind the service of showcause notice is to make the the noticee understand the precise case set up against him which he has to meet. It is further observed that 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. It is further submitted that another requirement is the nature of action which is proposed to be taken for such a breach. It is further observed that, 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. It is further observed that when it comes to black listing, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action. It is further submitted by the authority that even if it is accepted that showcause notice should have contained the proposed action of blacklisting, no prejudice was caused to the appellant inasmuch as necessary details mentioned in defaults / Page 15 of 21 C/SCA/11979/2016 CAV JUDGMENT breaches committed by the appellant were given in the showcause notice and the appellant has given its reply thereto and that even if the action of blacklisting was not proposed in the showcause notice, the reply of the appellant would have remained the same and therefore, no prejudice was caused to the contractor firm, the Hon'ble Supreme Court negatived the same and has observed and held that the extreme nature of such a harsh penalty like blacklisting with severe consequences itself amounts to causing prejudice to the contractor firm. It is observed that had the action of blacklisting the contractor firm specifically proposed in the show cause notice, the contractor firm could have mentioned as to why such extreme penalty is not justified or even pleaded that the Department not to blacklist the firm or do it for a lesser period. Therefore, it is observed and held that it is not at all acceptable that nonmentioning of the proposed blacklisting in the showcause notice caused any prejudice to the contractor firm.
[7.4] Applying the law laid down by the Hon'ble Supreme Court in the aforesaid decisions to the facts of the case on hand and the impugned communication it appears that the impugned communication blacklisting the petitioner permanently is a non speaking and nonreasoned order and therefore, the same can be said to be in violation of principles of natural justice.
[7.5] There is a serious dispute whether the condition precedent for taking the action of abeyance as per Clause 3 of the tender conditions are satisfied or not. There is a dispute whether in fact the contracts / works are terminated as alleged in the showcause Page 16 of 21 C/SCA/11979/2016 CAV JUDGMENT notices and as stated in the impugned order / communication. In the reply to the showcause notice, from the very beginning it is the case on behalf of the petitioner that as such except the communications proposing to terminate the contracts / works, thereafter there is no order in writing terminating the contracts / works. However, it is the case on behalf of the respondent University that as the termination of the contracts / works is a subject matter of civil suit and therefore, even the petitioner also understood that the works / contracts are terminated. To test the above submission as such the copy of the averments in the plaint are required to be considered, however neither of the Advocates have placed on record the copy of the plaint. It might be that in the suit the plaintiff might have stated that the alleged termination is not an order of termination in the eye of law. Be that as it may, the fact remains that in the suit the action of the respondent University allegedly terminating the contracts / works is to be tested and considered by the Civil Court. In the civil suit the Court either may set aside the alleged termination of the contracts or even may confirm it. Be that as it may, keeping the said question open to be considered by the Civil Court whether the alleged termination of the contracts is valid or not, the impugned order / communication blacklisting the petitioner permanently is required to be tested on the touchstone of reasonableness and whether the same can be said to be a reasoned and/or speaking order dealing with the reply / replies to the showcause notice issued upon the petitioner or not, more particularly when the petitioner has been blacklisted permanently.
Page 17 of 21 C/SCA/11979/2016 CAV JUDGMENT[7.6] At this stage the decision of the Hon'ble Supreme Court in the case of Kulja Industries Ltd. (Supra) is required to be referred to and considered. In the said decision the Hon'ble Supreme Court has observed and held that the freedom to contract or not to contract is unqualified in the case of private parties. But if such decision is subjected to judicial review, when the same is taken by the State or any of its instrumentalities. It is observed that this implies that any such decision will be open to scrutiny not only on the touchstone of the principles of natural justice but also on the doctrine of proportionality. It is further observed that the order itself being reasonable, fair and proportionate to the gravity of the offence is similarly examinable by a writ Court. In the said decision it is also further observed that the "debarment" is never permanent and the period of debarment would invariably depend upon the nature of offence committed by the erring contractor. It is further observed that even tough the right of the writ petitioner is in the nature of a contractual right, the manner, method and the motive behind the decision of the authority whether or not to enter into a contract is subject to judicial review on the touchstone of fairness, reasonableness, natural justice, nondiscrimination, equality and proportionality. It is further observed by the Hon'ble Supreme Court that a remand back to the competent authority is more appropriate option than an order by which it may itself determine the period for which the contractor would remain blacklisted as the blacklisting is in the nature of penalty, the quantum whereof is a matter that rests primarily with the authority competent to impose the same and consequently because while determining the period for which the blacklisting should be effective, the Corporation may Page 18 of 21 C/SCA/11979/2016 CAV JUDGMENT for the sake of objectivity and transparency formulate broad guidelines to be followed in such cases. It is further observed that different periods of debarment depending upon the gravity of the offences, violations and breaches may be prescribed by such guidelines. It is further observed that it may not be possible to exhaustively enumerate all types of offences and acts of misdemeanour, or violations of contractual obligations by a contractor, the Corporation may do so as far as possible to reduce if not totally eliminate arbitrariness in the exercise of power vested in it and inspire confidence in the fairness of the order which the competent authority may against a defaulting contractor. In catena of decisions the Hon'ble Supreme Court as well as this Court has observed and held that any decision shall reflect the due application of mind inasmuch as proper reasons are required to be given dealing with the reply to the showcause notice. If the reasons are given, in that case, if the said decision is challenged, the Court may consider what was weighed with the authority in passing the order.
[7.7] Applying the law laid down by the Hon'ble Supreme Court in the aforesaid decisions to the facts of the case on hand and considering the impugned order passed by the authority permanently blacklisting the petitioner, it appears that the impugned order is a nonspeaking and nonreasoned order. As observed by the Hon'ble Supreme Court in the aforesaid decision a contractor invariably may not be debarred permanently. Period of debarment may vary from the default committeed. There must reflect application of mind why the petitioner was required to be Page 19 of 21 C/SCA/11979/2016 CAV JUDGMENT debarred permanently. What was weighed with the authority in debarring the petitioner permanently is not forthcoming from the impugned order. The impugned order does not reflect the reasons dealing with the reply to the showcause notice given by the petitioner. Under the circumstances, the impugned order as such can be said to be against the principles of natural justice and the same deserves to be quashed and set aside. However, at the same time the matter is to be remanded back to appropriate authority for passing fresh order in accordance with law and on merits and after dealing with the reply to the showcause notice given by the petitioner and thereafter to pass a speaking and reasoned order.
[8.0] In view of the above and for the reasons stated above, the petition succeeds. Impugned order debarring the petitioner permanently is hereby quashed and set aside. The matter is remanded to the appropriate authority to pass appropriate order in accordance with law and on merits and after considering the reply to the showcause notice given by the petitioner and thereafter to pass a speaking and reasoned order. Rule is made absolute accordingly to the aforesaid extent. No costs.
Sd/ (M.R. SHAH, J.) Sd/ (A.Y. KOGJE, J.) FURTHER ORDER After the aforesaid order was pronounced, learned Advocate appearing on behalf of the respondent has requested to stay the present judgment and order.
Page 20 of 21 C/SCA/11979/2016 CAV JUDGMENTHowever, for the reasons stated hereinabove, the order debarring the petitioner permanently is held to be bad in law and in breach of principles of natural justice and therefore, the prayer to stay the present order is rejected.
Sd/ (M.R. SHAH, J.) Sd/ (A.Y. KOGJE, J.) Ajay** Page 21 of 21