Vayam Technologies Limited vs The State Of Jharkhand Through The ... on 28 June, 2018

[Cites 36, Cited by 0]

Jharkhand High Court

Vayam Technologies Limited vs The State Of Jharkhand Through The ... on 28 June, 2018

Equivalent citations: AIR 2019 (NOC) 650 (JHA), 2019 (1) AJR 79

Bench: Rajesh Shankar

                                 1

         IN THE HIGH COURT OF JHARKHAND AT RANCHI
                  W.P.(C) No. 1036 of 2018

  Vayam Technologies Limited, a company registered under the
  Companies Act, 1956 and having its office at 'Thapar House', 124
  Janpath, New Delhi-110001, through its Vice-President and authorized
  representative namely Rajesh Gupta, son of Late Anand Prakash
  Gupta, aged about 44 years, resident of 8A/77, Ground Floor, WEA,
  P.O. & P.S.-Karol Bagh, New Delhi-110005 ...     ...     Petitioner
                                  Versus
  1. The State of Jharkhand through the Principal Secretary, Urban
     Development and Housing Department, Ranchi
  2. The Director, State Urban Development Agency, Ranchi
  3. The Director, Municipal Administration, Urban Development &
     Housing Department, Government of Jharkhand, Ranchi
                                           ...   ...     Respondents
  CORAM: HON'BLE MR. JUSTICE RAJESH SHANKAR
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For the Petitioner : Mr. Navaniti Prasad Singh,Sr. Advocate Miss Aanya, Advocate For the Respondent-State : Mr. Ajit Kumar, AG Mrs. Aprajita Bhardwaj, AC to AG Mr. Mastar Akash, AC to AG

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Order No. 09 Dated: 28.06.2018 The present writ petition has been filed for quashing the order contained in memo no. 5/UD/Vividh (e-Municipality)/31/2016-05 dated 16.02.2018 (Annexure-38 to the writ petition) issued under the signature of the Director, State Urban Development Agency (SUDA) - the respondent no. 2 under the Department of Urban Development & Housing, Government of Jharkhand, Ranchi by reasons of which the contract of the petitioner dated 14.03.2016 has been terminated, the Performance Bank Guarantee (hereinafter referred to as "PBG") has been forfeited and the petitioner has been blacklisted/debarred for a period of five years from doing business with the Urban Development & Housing Department. Further prayer has been made for quashing the order contained in memo no. 5/N.V/Vividh (e-Municipality)- 31/2016/977(I) dated 15.07.2017 (Annexure-23 to the writ petition) issued under the signature of the respondent no. 2, whereby the petitioner has been debarred from participating in any tender or consulting assignment of Urban Development & Housing Department, Government of Jharkhand for five years and the same has also been 2 made as one of the grounds for termination of the contract vide order dated 16.02.2018.

2. The factual background of the case as stated in the writ petition is that the Urban Development and Housing Department (UD & HD), Government of Jharkhand under the signature of the respondent no. 3 -the Director, Municipal Administration issued notice inviting tender being NIT No. JH/UDD/SW-URBAN/RE/2015-16/3137 dated 26.08.2015 for the selection of software development agency for "Implementing State Level Software Solution at Jharkhand under e-governance in Municipalities projects" as a part of National Mission Mode Project under JnNURM including the Hardware, Software, Networking and post implementation services for Jharkhand. The specified tender fee was Rs.25,000/- and earnest money deposit was Rs.40,000,00/-. The bid of the petitioner in consortium with M/s E-Businessware (India) Pvt. Ltd. was found to be technically and financially compliant under the tender and its proposal for being engaged as System Integrator was accepted and on 18.12.2015 followed by issuance of Letter of Acceptance (LoA) in its favour. The petitioner entered the contract with the Governor of Jharkhand on 14.03.2016 and at the time entering the contract, a revised financial proposal (RPF) was made by the petitioner at the same negotiated price of Rs.18,88,55,866/- and a revised Bill of Material was submitted. The petitioner submitted PBG to the UD & HD for an amount equivalent to 10% of the total contract value i.e., Rs. 1,88,85,586/- vide BG No. 2016/94 dated 10.03.2016 drawn on a nationalized bank namely, Corporation Bank, Sarita Vihar, New Delhi Branch which was valid upto 08.03.2021. Thereafter, the petitioner started the work. It wrote to the Municipal Commissioner, Dhanbad Municipal Corporation (DMC) to provide the address, contact information and operating space till successful completion of the projects to operate GIS survey and for digitalization of old records. On 14.06.2016, the petitioner requested the Municipal Commissioner, DMC to provide copy of the existing survey data of both residential and commercial properties that has been collected directly by the DMC or through its vendor for the purpose of property/holding tax. On 3 23.06.2016, the petitioner wrote to the Managing Director, Mineral Area Development Authority (MADA) requesting allocation of operating space for installation of hardware and approval to start the site preparation work for the purpose of setting up the state service centers for the residents of Dhanbad. On 24.06.2016, the petitioner wrote to the Municipal Commissioner, DMC highlighting that the project is getting delayed due to the pending approvals from DMC. On 11.07.2016, the petitioner again wrote to the Municipal Commissioner, DMC informing that DMC, Dhanbad had requested for the delivery of DG sets immediately but the proposed DG sets with air cooled engine are not available in the market due to technology rollover. As it was noticed that the DG sets with air cooled engines mentioned in the RFP were end of line and as such to resolve this issue, the petitioner had a discussion with the City Manager, DMC and suggested a model with better technology i.e., D.G sets with water cooled engine to be delivered on the approval of the UD & HD. Accordingly, the Secretary, UD & HD was requested to grant permission to deliver all the DG sets with water cooled engines in place of air cooled engines. On 30.01.2017, the respondent no. 2 wrote to the petitioner that the replaced PBG of Rs. 1,88,85,587/- was of South Indian Bank which was not a nationalized bank and thus, the petitioner was directed to replace the PBG with that of a nationalized bank contrary to the requirement of Clause 3.4 of the RFP. On 20.02.2017, the respondent no. 2 asked the petitioner to speed up the work as only one month time was left i.e., till 13.03.2017 for the development and implementation of Phase-I, II and III modules, failing which penalty would be levied on the petitioner. The petitioner was directed to submit the PBG of nationalized bank within 3 working days as well as the updated e-Municipality software. On 02.03.2017, the respondent no. 2 again wrote to the petitioner informing that the PBG of the nationalized bank has not yet received which is against Clause 3.4 of the RFP, an integral part of the contract and further directed the petitioner to submit the PBG of the nationalized bank within 7 days. On 07.03.2017, the petitioner informed the respondent no. 2 that the PBG issued from South Indian Bank is valid till 08.03.2021 and as per 4 the RBI circular, it is open to the Government Departments to accept the guarantees from all the scheduled banks freely and requested to withdraw the letter dated 02.03.2017 by which the petitioner was directed to furnish the PBG of a nationalized bank. However, again vide letter dated 27.03.2017, the petitioner was directed to furnish the PBG from the nationalized bank. The petitioner, vide letter dated 07.04.2017 addressed to the Principal Secretary, UD & HD offered that its pending payment may be released after deducting the required amount of PBG. On 27.04.2017, the petitioner wrote to the Director, UD & HD that it will submit the PBG from the nationalized bank and further requested that the balance payment may be withheld by the department. On 03.07.2017, the petitioner informed the respondent no. 2 that it had been able to arrange funds and would be submitting fresh PBG of a nationalized bank by 14.07.2017. The respondent no. 2 vide office order dated 15.07.2017 debarred the petitioner from participating in future tender for next five years alleging that the petitioner has violated the terms of the contract. Thereafter, the petitioner submitted the revised PBG issued by the Oriental Bank of Commerce and requested the department to recall the order dated 15.07.2017. In the meantime, the Mayor, DMC made complaint against the petitioner alleging financial irregularities and a committee was constituted to inquire into the matter which reported against the petitioner. On 20.11.2017, the Municipal Commissioner, DMC issued letter to the petitioner alleging that under the contract, the petitioner was required to supply 100 GPS devices and 10 modems but only 50 GPS devices and not a single modem was supplied and in a fraudulent manner, got the payment of 100 GPS devices and 10 modems. Thereafter, an explanation was sought from the petitioner within three days as to why legal action be not taken against it for fraudulent withdrawal of money. The petitioner submitted the reply on 30.11.2017 denying the entire allegation levelled against it. However, again on 19.12.2017, the respondent no. 2 wrote letter to the petitioner alleging fraudulent practices adopted by it during the delivery and invoicing by the company. On 21.12.2017, the petitioner physically delivered 10 Nos. of Lease Line Modems to the UD & 5 HD/DMS as per the RFP/Agreement and the same was received by the DMC. On 29.12.2017, the petitioner through its Chief Operating Officer submitted its reply to the show cause notice dated 19.12.2017. Finally, the respondent no. 2 issued office order dated 16.02.2018, terminating the contract of the petitioner with forfeiture of PBG and blacklisting the petitioner for five years, which gives rise to filing of the present writ petition.

3. The learned Senior Counsel for the petitioner submits that the impugned order dated 16.02.2018 terminating the contract and blacklisting the petitioner is arbitrary and is in gross violation of the principles of natural justice as no opportunity of hearing was given to it. It is further submitted that the impugned order dated 16.02.2018 is totally based on the report of the committee which was never brought to the notice of the petitioner and the copy thereof was never served to it so as to sufficiently explain the allegations levelled against it. While assailing another order dated 15.07.2017 passed by the respondent no. 2, the learned Senior Counsel for the petitioner submits that the government authorities should not be hyper technical. The replacement of the PBG of a Scheduled Bank with the PBG of a nationalized bank would not have made any material difference to the work in question particularly when the respondents themselves had permitted the petitioner to replace the earlier PBG of a nationalized bank with PBG of a Scheduled Bank at the time of submission of RFP. It is further submitted that Clause 2.10 of the contract dated 14.03.2016 explicitly provides for 30 days' notice to cure the defect before termination of the contract which is mandatory, however, the respondents failed to serve any cure period notice to the petitioner. Moreover, when the Municipal Commissioner, DMC issued notice to the petitioner on 20.11.2017, a detailed response dated 30.11.2017 was submitted stating that there was misunderstanding between the Headquarter and the Dispatch Centre of the petitioner particularly in view of different quantities of GPS device mentioned in the BOQ vis-à-vis RFP. However, the respondent no. 2 completely ignoring the reply of the petitioner, issued subsequent notice dated 19.12.2017 adding some more irregularities. The petitioner replied the 6 said notice on 29.12.2017 denying all the irregularities alleged against it, however, the final order dated 16.02.2018 was passed without considering its explanation. It is further submitted that the final order dated 16.02.2018 is based on different and fresh heads of charges despite the fact that the respondent no. 2 was required to issue final notice of termination dated 19.12.2017 strictly in conformity with the grounds set out in the notice dated 20.11.2017. It is also submitted that on perusal of the minutes of the meeting dated 18.10.2017, the first notice dated 20.11.2017 and the second notice dated 19.12.2017, it would be apparent that the respondents had taken the conclusive decision to terminate the contract of the petitioner and the termination order dated 16.02.2018 is a mere corollary of the said decision which is impermissible in law as firstly, the issue was already prejudged and secondly, the issuance of show cause notice was only cosmetic. The petitioner having performed its part of the obligations despite total non-cooperation of the respondent authorities, the impugned order of termination and blacklisting smacks of non-application of mind, highhandedness, malafide and against the principles of natural justice and the same deserves to be quashed and set aside. It is further submitted that the impugned order has serious consequences inasmuch as if the PBG is allowed to be encased and the blacklisting order continues, it will cause unsurmountable damage to the petitioner which will have a serious negative impact on its brand value that has painstakingly been built over past 17 years. The petitioner will lose its credibility with the banks who will neither issue any new bank guarantee nor any Letter of Credit, which in turn will not only jeopardize the petitioner's capability to execute ongoing business, but would also severely diminish its ability to seek new business. Due to the order of blacklisting, the petitioner will be deprived of participating any future tender with the government entities. The petitioner's invoices for more than Rs. 6 crores are pending with the department for which the petitioner has been pursuing since January 2017. Moreover, the additional expenses to the tune of Rs. 4 to 5 crores have been made to meet all milestones of the project by July 2017 and the petitioner is about to raise new 7 invoices of expenses made since January 2017.

4. Per contra, the learned Advocate-General appearing for the respondents submits that the petitioner requested the respondent no. 2 vide letter dated 27.07.2016 for replacement of earlier submitted PBG of the Corporation Bank (nationalized bank) with PBG of South Indian Bank and the same was permitted. Subsequently, it was found that South Indian Bank was not a nationalized bank and the petitioner had violated sub-clause (A) of Clause 1 of the contract agreement read with Clause No. 3.4 of the RFP and as such the petitioner was directed to re-submit the PBG of a nationalized bank. It is further submitted that respondent no. 2 vide letter no. 250 dated 20.02.2017 intimated the petitioner regarding slow progress of the work with a direction to complete the work as per agreement and to submit the PBG of a nationalized bank. The petitioner vide letter no. 31 dated 22.02.2017 requested to reconsider the same and allow it to continue with same PBG of South Indian Bank. So far as the delay of the project is concerned, the petitioner has stated that it has completed phase 1 module and only phase 2 and 3 are pending but during review of the project by the Technical Personnel, it was found that the execution of Phase 1 module was not as per contract agreement. It is also submitted that the respondent no. 2, vide letter no. 280 dated 02.03.2017 again directed the petitioner to submit the PBG of the nationalized bank in place of South Indian Bank with a further remark that software developed by the petitioner does not comply the requirement of sub-clause (A) of Clause 1 of the contract agreement. The petitioner has also not adhered to the timeline of the project. A review meeting was held on 26.04.2017 under the Chairmanship of the respondent no. 2 in presence of the petitioner's representative, wherein the petitioner was asked to submit the PBG of the nationalized bank. Moreover, the completion date of the e-municipality project was 13.03.2017, but the petitioner had not even developed a single software module as per the scope of work of the project. Finally, it was instructed by the respondent no. 2 to complete the development of software modules at the earliest failing which the department would be forced to take action against the petitioner as 8 per the penalty clauses of the contract. In spite of the repeated requests, the petitioner failed to submit the PBG of the nationalized bank. Thereafter, vide order contained in memo no. 977(I) dated 15.07.2017, the department decided to debar the petitioner from participating in any Tender or consulting assignment of the Urban Development & Housing Department for the next five years. Only after the order of debarment, the petitioner submitted the PBG of a nationalized bank i.e., Oriental Bank of Commerce on 17.07.2017 which shows the petitioner's carelessness and casual attitude towards the project and to comply the stipulated norms of the contract agreement for six months. A review meeting was held on 07.08.2017 under the Chairmanship of the respondent no. 2 in presence of petitioner. As per the information provided by the technical team, not even single software was completed and delivered to the department. The respondent no. 2 raised concern towards the status of the project and delivery, but the petitioner consistently ignored the terms of the contract agreement. The petitioner was not showing any urgency towards completion of the project. Again, a review meeting was held on 14.10.2017 under the chairmanship of the respondent no. 2 in the presence of the petitioner's representative, wherein the technical team informed that two of the software of phase 1 module were in ok state; the beta version of the said software could be released but on reviewing rest of the software modules including the GIS part, it was found that those were still in development phase. It was a matter of concern as the project development and delivery of phase 2 and Phase 3 modules were in pending stage and GIS part was also incomplete. It is further submitted that in an enquiry conducted for scrutinizing the work, it was found that the petitioner had raised the bills by committing forgery and thus the UD & HD requested the Cabinet Secretariat and Vigilance Department for getting the matter investigated through Anti-Corruption Bureau (ACB) vide letter no. 1034 dated 20.02.2018. It is further submitted that the petitioner has not fulfilled the terms and conditions of the contract agreement and, therefore, the respondent no. 2 passed order dated 16.02.2018 for termination of contract and forfeiture of PBG as the petitioner 9 adopted fraudulent practices in execution of the work. The impugned order dated 16.02.2018 has been passed after following the principles of natural justice. So far as office order dated 15.07.2017 debarring the petitioner from participating in any tender assignment of the UD & HD, Government of Jharkhand for next 5 years is concerned, as many as four letters were already issued to the petitioner informing it to submit PBG of a nationalized bank, which the petitioner failed to do and, therefore, there was no need of issuance of any show cause notice to the petitioner.

5. Heard the learned counsel for the parties and perused the materials available on record. The respondents have raised preliminary objection to the maintainability of the present writ petition which arises out of a contractual dispute.

6. In the case of "Joshi Technologies International Inc. Vs. Union of India & Ors., reported in (2015) 7 SCC 728, it is held as under:-

69. The position thus summarised in the aforesaid principles has to be understood in the context of discussion that preceded which we have pointed out above. As per this, no doubt, there is no absolute bar to the maintainability of the writ petition even in contractual matters or where there are disputed questions of fact or even when monetary claim is raised. At the same time, discretion lies with the High Court which under certain circumstances, it can refuse to exercise. It also follows that under the following circumstances, "normally", the Court would not exercise such a discretion:

69.1. The Court may not examine the issue unless the action has some public law character attached to it.

69.2. Whenever a particular mode of settlement of dispute is provided in the contract, the High Court would refuse to exercise its discretion under Article 226 of the Constitution and relegate the party to the said mode of settlement, particularly when settlement of disputes is to be resorted to through the means of arbitration.

69.3. If there are very serious disputed questions of fact which are of complex nature and require oral evidence for their determination.

69.4. Money claims per se particularly arising out of contractual obligations are normally not to be 10 entertained except in exceptional circumstances.

70. Further, the legal position which emerges from various judgments of this Court dealing with different situations/aspects relating to contracts entered into by the State/public authority with private parties, can be summarised as under:

70.1. At the stage of entering into a contract, the State acts purely in its executive capacity and is bound by the obligations of fairness.

70.2. State in its executive capacity, even in the contractual field, is under obligation to act fairly and cannot practise some discrimination.

70.3. Even in cases where question is of choice or consideration of competing claims before entering into the field of contract, facts have to be investigated and found before the question of a violation of Article 14 of the Constitution could arise. If those facts are disputed and require assessment of evidence the correctness of which can only be tested satisfactorily by taking detailed evidence, involving examination and cross-examination of witnesses, the case could not be conveniently or satisfactorily decided in proceedings under Article 226 of the Constitution. In such cases the Court can direct the aggrieved party to resort to alternate remedy of civil suit, etc. 70.4. Writ jurisdiction of the High Court under Article 226 of the Constitution was not intended to facilitate avoidance of obligation voluntarily incurred.

70.5. Writ petition was not maintainable to avoid contractual obligation. Occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of contract which the parties had accepted with open eyes. It cannot ever be that a licensee can work out the licence if he finds it profitable to do so: and he can challenge the conditions under which he agreed to take the licence, if he finds it commercially inexpedient to conduct his business.

70.6. Ordinarily, where a breach of contract is complained of, the party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed.

Otherwise, the party may sue for damages.

70.7. Writ can be issued where there is executive action unsupported by law or even in respect of a corporation there is denial of equality before law or equal protection of law or if it can be shown that 11 action of the public authorities was without giving any hearing and violation of principles of natural justice after holding that action could not have been taken without observing principles of natural justice.

70.8. If the contract between private party and the State/instrumentality and/or agency of the State is under the realm of a private law and there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court under Article 226 of the Constitution of India and invoking its extraordinary jurisdiction.

70.9. The distinction between public law and private law element in the contract with the State is getting blurred. However, it has not been totally obliterated and where the matter falls purely in private field of contract, this Court has maintained the position that writ petition is not maintainable. The dichotomy between public law and private law rights and remedies would depend on the factual matrix of each case and the distinction between the public law remedies and private law field, cannot be demarcated with precision. In fact, each case has to be examined, on its facts whether the contractual relations between the parties bear insignia of public element. Once on the facts of a particular case it is found that nature of the activity or controversy involves public law element, then the matter can be examined by the High Court in writ petitions under Article 226 of the Constitution of India to see whether action of the State and/or instrumentality or agency of the State is fair, just and equitable or that relevant factors are taken into consideration and irrelevant factors have not gone into the decision-making process or that the decision is not arbitrary.

70.10. Mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirements of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness.

70.11. The scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes.

71. Keeping in mind the aforesaid principles and after considering the arguments of the respective parties, we are of the view that on the facts of the present 12 case, it is not a fit case where the High Court should have exercised discretionary jurisdiction under Article 226 of the Constitution. First, the matter is in the realm of pure contract. It is not a case where any statutory contract is awarded.

7. In the case of "Jagdish Mandal Vs. State of Orissa & Ors.", reported in (2007) 14 SCC 517, it is held as under:

22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made "lawfully"

and not to check whether choice or decision is "sound". When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions:

(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone;

OR Whether the process adopted or decision made is so arbitrary and irrational that the court can say: "the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached";

(ii) Whether public interest is affected.

If the answers are in the negative, there should be no interference under Article 226. Cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action.

8. The petitioner has relied on the judgment of the Hon'ble Supreme Court in the case of "ABL International Ltd. & Anr. Vs. Export Credit Guarantee Corpn. of India Ltd. & Ors.", reported in (2004) 3 SCC 553, wherein it is held as under:

27. From the above discussion of ours, the following legal principles emerge as to the maintainability of a writ petition:

(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable.

(b) Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.

(c) A writ petition involving a consequential relief of monetary claim is also maintainable.

9. In the case of "Baburam Prakash Chandra Maheshwari Vs. Antarim Zila Parishad", reported in (1969) 1 SCR 518 it is held as under:

"3............There are at least two well-recognised exceptions to the doctrine with regard to the exhaustion of statutory remedies. In the first place, it is well-settled that where proceedings are taken before a Tribunal under a provision of law, which is ultra vires it is open to a party aggrieved thereby to move the High Court under Article 226 for issuing appropriate writs for quashing them on the ground that they are incompetent, without his being obliged to wait until those proceedings run their full course. -- (See the decisions of this Court in Carl Still G.m.b.H. v. State Bihar. and Bengal Immunity Co. Ltd. v. State of Bihar. In the second place, the doctrine has no application in a case where the impugned order has been made in violation of the principles of natural justice (See State of Uttar Pradesh v. Mohammad Nooh)."

10. It would thus emerge that merely because a writ petition 14 involves contractual dispute, does not ipso facto limit the power of judicial review of the writ court. Though the decision of the State being a contracting party is normally not amenable to judicial review, the writ court has the power to look into the decision making process and if it is found that the same suffers from arbitrariness, irrationality, unreasonableness, bias and mala fides, the power of judicial review can be exercised with great caution in larger public interest. Like other bodies, the State or its instrumentalities are free to enter into commercial transaction with others, however, the State does not stand on the same footing. Since in the contract entered into by the State either involves expenditure from the State exchequer or augmentation of public revenue, the State is required to act fairly and reasonably. However, if the dispute involved in the matter is so complex which can only be determined after elaborate factual adjudication, the writ petition should not be entertained. Each and every case is to be dealt with on its own facts. If the materials on record are clearly evincible, the writ court may exercise the power of judicial review.

11. Having taken into consideration the above judicial pronouncements, it is appropriate to look into the decision making process of the respondent authorities to find out as to whether the same suffers from any infirmity.

Order of Blacklisting

12. The petitioner was awarded the work of "Implementing State Level Software Solution" in Jharkhand under e-governance in Municipalities projects as a part of National Mission Mode Project under JnNuRM including the hardware, software, networking and post Implementation service for Jharkhand. It appears from the record that during the execution of the work, vide impugned order dated 15.07.2017, the petitioner was debarred from participating in any tender or consulting assignment of the UD & HD, Government of Jharkhand for five years alleging that in spite of repeated directions, it failed to furnish PBG of a nationalized bank which was the mandatory requirement as per the contract agreement.

13. So far as challenge to the impugned order dated 15.07.2017 is concerned, the learned Senior Counsel for the petitioner 15 has submitted before this Court that the condition to furnish the PBG of a nationalized bank was not a mandatory requirement and as such the same was required to be ignored by the respondents.

14. In the case of "Poddar Steel Corpn. Vs. Ganesh Engineering Works & Ors.", reported in (1991) 3 SCC 273, it is held as under:

"6. ........The requirements in a tender notice can be classified into two categories -- those which lay down the essential conditions of eligibility and the others which are merely ancillary or subsidiary with the main object to be achieved by the condition. In the first case the authority issuing the tender may be required to enforce them rigidly. In the other cases it must be open to the authority to deviate from and not to insist upon the strict literal compliance of the condition in appropriate cases......"

15. From the facts of the present case, it transpires that initially, the petitioner had submitted the PBG of the nationalized bank, however, subsequently with the permission of the respondent no. 2, the same was substituted by the PBG of a scheduled Bank which was also accepted by the respondents. However, subsequently the respondents turned round by saying that furnishing of PBG of a nationalized bank is a mandatory requirement to be followed by the petitioner. If the respondents had objected to it at the initial stage, the said situation of substitution of PBG would not have arisen. The respondents cannot be allowed to blow hot and cold in the same breath. In the case of "State of Bihar & Ors. Vs. Kalyanpur Cement Limited" reported in (2010) 3 SCC 274, the Hon'ble Supreme Court has held that the respondents should avoid the unnecessary technicalities when these cannot be shown to be necessary to the fulfillment of the purpose of the law.

16. The entire circumstances show that the parties had not treated furnishing of PBG of a nationalized bank as a mandatory requirement so as to have direct bearing on the execution of the work from which the respondents could not have deviated.

17. The learned Advocate-General has submitted that furnishing of the PBG of the nationalized bank was the mandatory requirement of the agreement and thus the said condition was 16 required to be strictly adhered to. The learned Advocate-General has put reliance on the judgment of the Hon'ble Supreme court rendered in the case of "Central Coalfields Limited & Anr. Vs. SLL-SML (Joint Venture Consortium) & Ors." reported in (2016)8 SCC 622, wherein the CCL had not relaxed or deviated from the requirement of furnishing the Bank Guarantee in a particular format, the Hon'ble Supreme Court held as under:

48. Therefore, whether a term of NIT is essential or not is a decision taken by the employer which should be respected. Even if the term is essential, the employer has the inherent authority to deviate from it provided the deviation is made applicable to all bidders and potential bidders as held in Ramana Dayaram Shetty. However, if the term is held by the employer to be ancillary or subsidiary, even that decision should be respected. The lawfulness of that decision can be questioned on very limited grounds, as mentioned in the various decisions discussed above, but the soundness of the decision cannot be questioned, otherwise this Court would be taking over the function of the tender issuing authority, which it cannot.

18. In the aforesaid judgment, the Hon'ble Supreme Court has held that it is upon the employer to treat any condition as essential or to deviate from it. In the present case, the conduct of the respondents by readily allowing the petitioner to replace the PBG of a nationalized bank with that of a scheduled bank itself shows that they had not treated the condition to submit the PBG of a nationalized bank as a mandatory condition, thus the judgment cited by the learned Advocate-General will not be applicable in the fact situation of the present case.

19. It is next contended on behalf of the petitioner that the order of blacklisting dated 15.07.2017 also suffers from the violation of principles of natural justice since no notice to show cause was issued to the petitioner before passing the said order.

20. In the case of "S.L. Kapoor Vs. Jagmohan & Ors.", reported in (1980) 4 SCC 379, it is held as under:

16. .......In our view, the requirements of natural justice are met only if opportunity to represent is given in view of proposed action. The demands of natural justice are not met even if the very person proceeded against has furnished the information on 17 which the action is based, if it is furnished in a casual way or for some other purpose. We do not suggest that the opportunity need be a "double opportunity"

that is, one opportunity on the factual allegations and another on the proposed penalty. Both may be rolled into one. But the person proceeded against must know that he is being required to meet the allegations which might lead to a certain action being taken against him. If that is made known the requirements are met. We disagree with the finding of the High Court that the Committee had the opportunity to meet the allegations contained in the order of supersession.

17. Linked with this question is the question whether the failure to observe natural justice does at all matter if the observance of natural justice would have made no difference, the admitted or indisputable facts speaking for themselves. Where on the admitted or indisputable facts only one conclusion is possible and under the law only one penalty is permissible, the court may not issue its writ to compel the observance of natural justice, not because it approves the non- observance of natural justice but because courts do not issue futile writs. But it will be a pernicious principle to apply in other situations where conclusions are controversial, however, slightly, and penalties are discretionary.

21. In the aforesaid case, the Hon'ble Supreme Court has held that the requirement of observance of the principles of natural justice can be said to have done only when the defaulting party is provided with the grounds on which the action is based and also be informed the proposed action giving him the opportunity to explain his case. In the case in hand, the respondents contention is that the petitioner was repeatedly noticed to furnish the PBG of a nationalized bank and only when it failed to comply the direction, the impugned order of blacklisting dated 15.07.2017 was passed. However, on perusal of the record, it appears that no show cause notice was given to the petitioner intimating it about the proposed action of debarment. The respondents have also failed to show before this Court that the debarment could have been the only penal action for the said default committed by the petitioner so as not to inform the proposed action to the petitioner. Thus, I find that the impugned order dated 15.07.2017 passed by the respondents is in violation of the settled legal proposition on this issue.

22. Moreover, in the minutes of the review meeting contained in memo dated 18.10.2017, the respondents had commented "earlier the department took action against them and debarred them for the next five years but even after such steps taken against them, they are not showing any urgency towards the completion of project". The said comment of the respondents itself reflects that the impugned action of the respondents in debarring the petitioner was taken merely to put pressure upon it to complete the work in time.

23. Subsequently also, the respondent no. 2 vide the impugned order dated 16.02.2018, while taking decision for termination of the contract with forfeiture of PBG, also passed the order of blacklisting the petitioner for a period of five years.

24. In the case of "Kulja Industries Ltd. Vs. Chief General Manager, Western Telecom Project BSNL & Ors." reported in (2014) 14 SCC 731, the Hon'ble Supreme Court held as under:

17. That apart, the power to blacklist a contractor whether the contract be for supply of material or equipment or for the execution of any other work whatsoever is in our opinion inherent in the party allotting the contract. There is no need for any such power being specifically conferred by statute or reserved by contractor. That is because "blacklisting"

simply signifies a business decision by which the party affected by the breach decides not to enter into any contractual relationship with the party committing the breach. Between two private parties the right to take any such decision is absolute and untrammelled by any constraints whatsoever. The freedom to contract or not to contract is unqualified in the case of private parties. But any such decision is subject to judicial review when the same is taken by the State or any of its instrumentalities. This implies that any such decision will be open to scrutiny not only on the touchstone of the principles of natural justice but also on the doctrine of proportionality. A fair hearing to the party being blacklisted thus becomes an essential precondition for a proper exercise of the power and a valid order of blacklisting made pursuant thereto. The order itself being reasonable, fair and proportionate to the gravity of the offence is similarly examinable by a writ court.

18. The legal position on the subject is settled by a long line of decisions rendered by this Court starting with Erusian Equipment & Chemicals Ltd. v. State of 19 W.B. where this Court declared that blacklisting has the effect of preventing a person from entering into lawful relationship with the Government for purposes of gains and that the authority passing any such order was required to give a fair hearing before passing an order blacklisting a certain entity. This Court observed:

(SCC p. 75, para 20) "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." Subsequent decisions of this Court in Southern Painters v. Fertilizers & Chemicals Travancore Ltd.4; Patel Engg. Ltd. v. Union of India5; B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd.6; Joseph Vilangandan v. Executive Engineer (PWD) among others have followed the ratio of that decision and applied the principle of audialterampartem to the process that may eventually culminate in the blacklisting of a contractor.

19. Even the second facet of the scrutiny which the blacklisting order must suffer is no longer res integra. The decisions of this Court in Radha Krishna Agarwal v. State of Bihar; E.P. Royappa v. State of T.N.; Maneka Gandhi v. Union of India; Ajay Hasia v. Khalid MujibSehravardi; RamanaDayaramShetty v.

International Airport Authority of India and Dwarka Das Marfatia and Sons v. Port of Bombay have ruled against arbitrariness and discrimination in every matter that is subject to judicial review before a writ court exercising powers under Article 226 or Article 32 of the Constitution.

20. It is also well settled that even though the right of the writ petitioner is in the nature of a contractual right, the manner, the method and the motive behind the decision of the authority whether or not to enter into a contract is subject to judicial review on the touchstone of fairness, relevance, natural justice, non- discrimination, equality and proportionality. All these considerations that go to determine whether the action is sustainable in law have been sanctified by judicial pronouncements of this Court and are of seminal importance in a system that is committed to the rule of law. We do not consider it necessary to burden this judgment by a copious reference to the decisions on the subject. A reference to the following passage from the decision of this Court in Mahabir Auto Stores v. Indian Oil Corpn.should, in our view, suffice: (SCC pp. 760-61, para 12) 20 "12. It is well settled that every action of the State or an instrumentality of the State in exercise of its executive power, must be informed by reason. In appropriate cases, actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution. Reliance in this connection may be placed on the observations of this Court in Radha Krishna Agarwal v. State of Bihar. ... In case any right conferred on the citizens which is sought to be interfered, such action is subject to Article 14 of the Constitution, and must be reasonable and can be taken only upon lawful and relevant grounds of public interest. Where there is arbitrariness in State action of this type of entering or not entering into contracts, Article 14 springs up and judicial review strikes such an action down. Every action of the State executive authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public authority, in such monopoly or semi-monopoly dealings, it should meet the test of Article 14 of the Constitution. If a governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable. ... It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like the present one. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and non-discrimination in the type of the transactions and nature of the dealing as in the present case."

25. In the case of "Gorkha Security Services Vs. Govt. (NCT of Delhi)", reported in (2014) 9 SCC 105, the Hon'ble Supreme Court held as under:

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.

17. Way back in the year 1975, this Court in Erusian Equipment & Chemicals Ltd. v. State of W.B., 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 paras 12 and 20 of the said judgment.

Necessitating this requirement, the Court observed thus: (SCC pp. 74-75) "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. When the State acts to the prejudice of a person it has to be supported by legality.

* * *

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."

18. Again, in Raghunath Thakur v. State of Bihar the aforesaid principle was reiterated in the following manner: (SCC p. 230, para 4) "4. Indisputably, no notice had been given to the appellant of the proposal of blacklisting the appellant. It was contended on behalf of 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 22 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 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."

19. Recently, in Patel Engg. Ltd. v. Union of India speaking through one of us (Justice Chelameswar, J.) this Court emphatically reiterated the principle by explaining the same in the following manner: (SCC pp. 262-63, paras 13-15) "13. The concept of 'blacklisting' is explained by this Court in Erusian Equipment & Chemicals Ltd. v. State of W.B. as under: (SCC p. 75, para 20) '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.'

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 23 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. The effect of excluding a person from entering into a contractual relationship with the State would be to deprive such person to be treated equally with those, who are also engaged in similar activity.

15. It follows from the above judgment in Erusian Equipment case that the decision of the State or its instrumentalities not to deal with certain persons or class of persons on account of the undesirability of entering into the contractual relationship with such persons is called blacklisting. The State can decline to enter into a contractual relationship with a person or a class of persons for a legitimate purpose. The authority of the 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 the 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."

20. 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 Engg.

26. In the aforesaid judgments, the Hon'ble Supreme Court has held that when a contract is entered between two private parties, then in case of any breach by one party, the other party has every right to blacklist the defaulter and such right is unqualified. However, if an order of blacklisting is passed by the State or its instrumentalities, then such order is within the realm of power of judicial review of the Writ Court and the same has to be tested in the touchstone of the principles of natural justice, doctrine of proportionality, reasonableness and fairness. The order of blacklisting 24 has the effect of depriving a person of equality of opportunity in the matter of public contract. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the government/government agencies for the purposes of gains. Thus, before taking such a harsh decision, the person concerned should be given an opportunity to represent his case before he is put on the blacklist. The show cause notice should not be a mere formality, rather the same should specifically mention the grounds according to which the department necessitates the proposed action so that the person aggrieved may explain the circumstances properly.

27. On perusal of the impugned order dated 16.02.2018, it appears that while passing order of blacklisting, no cogent or strong reason has been assigned, rather the same has been passed referring the earlier order dated 15.07.2017. The order cancelling the awarded work is one aspect and the order of blacklisting is another. The order of cancellation of contract is passed merely on violation of any mandatory terms and conditions of the contract, however, the order of blacklisting debars any person from dealing with the government instrumentality for the period mentioned in the order. Thus, before passing the order of blacklisting, it is sine-qua-non to hear the alleged delinquent so as to satisfy as to whether the default is intentional or has been caused under the situation beyond one's control. It is a settled law that the State or its instrumentalities while dealing with any private individual should exercise the said discretion in fair and equitable manner. In the case of "Jagdish Mandal" (supra) as has been cited on behalf of the respondents, the Hon'ble Supreme Court has held that the cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action.

28. For the aforesaid reasons, I am of the view that the decision making process of the respondents in blacklisting the petitioner vide impugned order dated 16.02.2018 is also vitiated in law 25 as the same has been passed without providing any opportunity of hearing by issuing specific show cause notice to the petitioner for the proposed action of blacklisting so as to enable it to explain the reasons of alleged default.

Cancellation of tender with forfeiture of Bank Guarantee

29. So far as the challenge to the decision of cancellation of tender with forfeiture of PBG is concerned, much stress has been given by the learned Senior Counsel for the petitioner to the non- compliance of the procedure prescribed in Clause 2.10.1 of General Terms and Conditions of the Contract dealing with default and termination. Clause 2.10 is quoted hereinbelow for better appreciation:

2.10 Default and Termination 2.10.1 By the Client -

(a) UD&HD may, without prejudice to any other remedy for breach of contract, by written notice of default, sent to the S.I, terminate the Contact:

i. if the S.I fails to deliver either the whole or part of the "Services" within the time period(s) specified in the Contract or any extension thereof granted by UD&HD.

ii. If the S.I fails to perform any other obligation(s) and, iii. If the S.I, in either of the above circumstances, does not cure its failure within a period of 30 days (or such longer period as UD&HD may authorize in writing) after receipt of the default notice from UD&HD.

iv. If the S.I becomes insolvent or bankrupt.

v. On a notice period of 60 days.

(b) All data/reports collected by the S.I shall be returned in its original form upon such terminations.

SI shall not have any right on this database, which is proprietary to UD&HD.

30. The aforesaid provision provides that the termination of contract shall be made if the S.I fails to deliver the services within the 26 time period or the S.I fails to perform any other obligation(s). However, the termination shall only be made if even after the cure period notice of 30 days, the S.I fails to cure the default. From the language of Clause 2.10.1, it transpires that the parties had agreed that even in case of any default, the S.I shall be given an opportunity to cure the default and if the S.I fails to cure the default even after 30 days, then only the order of termination is to be passed. Thus, the manner of passing the order of termination has itself been manifested in the agreement. It has been held by the Hon'ble Supreme Court in the case of "Hukam Chand Shyam Lal Vs. Union of India & Ors.", reported in (1976) 2 SCC 128 that where a power is required to be exercised by an authority in a certain way, it should be exercised in that manner or not at all, and all other modes of performance are necessarily forbidden.

31. In the present case, in course of execution of work, the Mayor, DMC had written a letter to the Principal Secretary, UD & HD vide letter no. 267 dated 19.06.2017 stating that the amount paid to the petitioner for its work was more than required and some of the works have also not been done by the petitioner as well as the equipment i.e., computers etc. are not of good quality. The UD & HD constituted a committee to enquire the work of the petitioner. The said committee submitted its report vide letter no. 1740 dated 14.10.2017 to the Principal Secretary, UD & HD, Jharkhand, Ranchi mentioning that the petitioner had not installed the software and had also raised bill without supplying the materials and received the payment after approval of the DMC. Thereafter, the respondent no. 2, on direction of the competent authority vide letter no. 2019 dated 19.12.2017, issued show cause notice to the petitioner which was replied by it point-wise on 29.12.2017.

32. The allegations and the respective reply given by the petitioner are reproduced as under:

Sl. Allegation levelled by the Reply given by the petitioner No. respondent

1. Petitioner has raised the bill The invoicing for the undelivered 10 against supply of 10 modems modems happened because of lack of proper coordination and 27 whereas no (zero) modem have communication between the project been supplied and installed at office in Ranchi which was DMC. responsible for effecting the deliveries, and the invoicing section in our HQ in Delhi. It was further informed that they have already delivered 10 modems to DMC.

2. Petitioner has raised the bill The discrepancy has arisen due to against 100 GPS tracking devices lack of proper communication and but only 50 nos. of GPS tracking coordination between the devices were found at DMC in the procurement and invoicing sections packets. in Delhi Officer as the delivery of the items was done from Ranchi office whereas the invoicing was done from Delhi office. As soon as the discrepancies noticed a letter of undertaking was given on 03.11.2017 to allow the petitioner to deliver remaining 50 GPS devices at the earliest.

3. Petitioner raised the bill without The Audio-Video Conferencing was installation and commissioning of not installed as they have not been video conferencing devices and provided required space and internet server and no post-installation connection which is the requirement services for smooth functioning of for the Video Conference equipment the server was provided by to work. However, on 22.11.2017 petitioner side which includes DB, the Audio and Video Conferencing LDAP and Web content filtering equipment has been installed. So far services. the post installation support 30 Help Desk and Data Entry operators on 01.03.2017 hoping to Go-Live on 14.03.2017 s per letters to UD&HD with the Project Status Updates. It is further stated that they are providing Help Desk Support for the hardware that was installed and commissioned at all the DMC and MADA locations in Dhanbad. They have already deployed the Database (DB), LDAP and Web content Filtering (CMS).

4. It was also revealed that the UPS UPS installed are one of the best (10 KVA) provided by petitioners and reputed brands and meet the is of the inferior quality as that of RFP specifications and these UPS mentioned in the RFP document. have been running for over 14 months without a single failure.

33. It would appear from record that no cure period notice was issued to the petitioner in pursuance of the irregularities pointed out by the Committee as has been mandated under Clause 2.10.1. Further, on perusal of the impugned order dated 16.02.2018, it would be evident that the respondent no. 2 did not consider the reply of the petitioner that immediately after having the knowledge of the alleged irregularities, the same were removed. The respondent no. 2 also did 28 not record any finding as to whether for installation of Audio Video Conferencing device, the petitioner was provided the appropriate space as well as the internet connection. It has also not been recorded in the impugned order as to what was the RFP specification for installing the UPS. The respondent no. 2 while passing the impugned order has heavily relied upon the report of the Committee according to which the petitioner had committed forgery. Thus, the respondent no. 2 appears to be predetermined to take the impugned actions on the allegations levelled against the petitioner and the show cause was served to it merely to complete the procedural formality. It further appears that no reason has been assigned in the impugned order while rejecting the point-wise explanation submitted by the petitioner.

34. In the case of "Oryx Fisheries (P) Ltd. Vs. Union of India & Ors.", reported in (2010) 13 SCC 427, it is held as under:

32. Therefore, while issuing a show-cause notice, the authorities must take care to manifestly keep an open mind as they are to act fairly in adjudging the guilt or otherwise of the person proceeded against and specially when he has the power to take a punitive step against the person after giving him a show-cause notice.

33. The principle that justice must not only be done but it must eminently appear to be done as well is equally applicable to quasi-judicial proceeding if such a proceeding has to inspire confidence in the mind of those who are subject to it.

35. Thus, the cardinal principle of natural justice is that while issuing the show cause notice, the authority should keep its mind open and is not supposed to be biased with any earlier enquiry, otherwise the whole purpose of serving show cause notice gets frustrated.

36. In the case of "Mahindra & Mahindra Ltd. Vs. Union of India & Ors.", reported in (1979) 2 SCC 529, it is held as follows:

"24. .......It is now settled law that where an authority makes an order in exercise of a quasi-judicial function, it must record its reasons in support of the order it makes. Every quasi-judicial order must be supported by reasons........."

37. In the case of "Union of India Vs. Mohan Lal Capoor & Ors.", reported in (1973) 2 SCC 836, it is held as under:

28........Reasons are the links between the materials on which certain conclusions are based and the actual conclusions. They disclose how the mind is applied to the subject-matter for a decision whether it is purely administrative or quasi-judicial. They should reveal a rational nexus between the facts considered and the conclusions reached. Only in this way can opinions or decisions recorded be shown to be manifestly just and reasonable. We think that it is not enough to say that preference should be given because a certain kind of process was gone through by the Selection Committee. This is all that the supposed statement of reason's amounts to. We, therefore, think that the mandatory provisions of Regulation 5(5) were not complied with. We think that reliance was rightly placed by respondents on two decisions of this Court relating to the effect of non-compliance with such mandatory provisions. These were: Associated Electrical Industries (India) Pvt. Ltd, Calcutta v.

Workmen; and Collector of Monghyr v. Keshav Prasad Goenka.

38. In the case of "Uma Charan Vs. State of M.P. & Anr.", reported in (1981) 4 SCC 102, it is held as under:

"8. ...........Reasons are the links between the materials on which certain conclusions are based and the actual conclusions. They disclose how the mind is applied to the subject-matter for a decision whether it is purely administrative or quasi-judicial. They should reveal a rational nexus between the facts considered and the conclusions reached. Only in this way can opinions or decisions recorded be shown to be manifestly just and reasonable. We think that it is not enough to say that preference should be given because a certain kind of process was gone through by the Selection Committee. This is all that the supposed statement of reasons amounts to. We, therefore, think that the mandatory provisions of Regulation 5(5) were not complied with."

39. The learned Advocate-General has also submitted before this Court that the respondents are ready to hear the matter again after giving a reasonable opportunity of hearing to the petitioner. The learned Senior Counsel for the petitioner has strongly opposed the said argument of the learned Advocate-General and has submitted that post decisional opportunity of hearing would not serve the purpose of compliance of the principles of natural justice.

40. The Hon'ble Supreme Court in the case of "H.L. Trehan & Ors. Vs. Union of India & Anr.", reported in (1989) 1 SCC 764, it is held as under:

12. It is, however, contended on behalf of CORIL that after the impugned circular was issued, an opportunity of hearing was given to the employees with regard to the alterations made in the conditions of their service by the impugned circular. In our opinion, the post-

decisional opportunity of hearing does not sub-serve the rules of natural justice. The authority who embarks upon a post-decisional hearing will naturally proceed with a closed mind and there is hardly any chance of getting a proper consideration of the representation at such a post-decisional opportunity. In this connection, we may refer to a recent decision of this Court in K.I. Shephard v. Union of India. What happened in that case was that the Hindustan Commercial Bank, the Bank of Cochin Ltd. and Lakshmi Commercial Bank, which were private banks, were amalgamated with Punjab National Bank, Canara Bank and State Bank of India respectively in terms of separate schemes drawn under Section 45 of the Banking Regulation Act, 1949. Pursuant to the schemes, certain employees of the first mentioned three banks were excluded from employment and their services were not taken over by the respective transferee banks. Such exclusion was made without giving the employees, whose services were terminated, an opportunity of being heard. Ranganath Misra, J. speaking for the court observed as follows:

(SCC pp. 448-49, para 16) "We may now point out that the learned Single Judge for the Kerala High Court had proposed a post- amalgamation hearing to meet the situation but that has been vacated by the Division Bench. For the reasons we have indicated, there is no justification to think of a post-decisional hearing. On the other hand the normal rule should apply. It was also contended on behalf of the respondents that the excluded employees could not represent and their case could be examined. We do not think that would meet the ends of justice. They have already been thrown out of employment and having been deprived of livelihood they must be facing serious difficulties. There is no justification to throw them out of employment and then give them an opportunity of representation when the requirement is that they should have the opportunity referred to above as a condition precedent to action. It is common experience that once a decision has been taken, there is a tendency to uphold it and a representation may not really yield any fruitful purpose."

41. In the aforesaid case, the Hon'ble Supreme Court has held that a post-decisional hearing will naturally proceed with a closed mind and there is hardly any chance of getting a proper consideration of the representation at such a post-decisional opportunity. It is common experience that, once a decision has been taken, there is a tendency to uphold it and a representation may not really yield any fruitful purpose.

42. Although, the respondents have alleged delayed execution of the awarded work by the petitioner, the impugned order of termination dated 16.02.2018 has not been passed for such allegation, thus there is no need for this Court to go into the specific details of such allegation. Since no cure period notice was issued to the petitioner giving it an opportunity to meet the deficiencies alleged by the respondents as has been mandated under Clause 2.10.1 of the agreement and the reply of the petitioner to the effect that all the deficiencies had been removed immediately after receipt of the show cause notice, has been overlooked by the respondent no. 2 while passing the impugned order dated 16.02.2018, I am of the considered view that the decision making process of the respondents suffers from arbitrariness and unreasonableness.

43. Considering the aforesaid facts and circumstances, the order contained in memo no. 5/UD/Vividh (e-Municipality)/31/2016-05 dated 16.02.2018 and the order contained in memo no. 5/N.V/Vividh (e-Municipality)-31/2016/977(I) dated 15.07.2017 issued by the respondent no. 2 under the Department of Urban Development & Housing Department, Government of Jharkhand, Ranchi are quashed.

44. Since, the date of completion of the project has already elapsed, no specific direction can be issued in this regard. It is for the parties to agree with the fresh timeline and other conditions for completion of the project having regard to the quantum of work to be executed.

45. The writ petition is accordingly disposed of with aforesaid observations.

(Rajesh Shankar, J.) Manish/A.F.R.

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