Jharkhand High Court
Ms. Creative Lab vs The State Of Jharkhand on 26 July, 2022
Author: Rajesh Shankar
Bench: Rajesh Shankar
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Cont. Case (Civil) No. 548 of 2021
Ms. Creative Lab., Ambala (Haryana), through its Authorized Signatory, Sagar
..... Petitioner
Versus
1. The State of Jharkhand
2. Dr. Arun Kumar, Director, Higher, Technical Education and Skill Development
Department, Government of Jharkhand, Ranchi ..... Opposite Parties
With
W.P.(C) No. 3382 of 2021
Ms. Creative Lab., Ambala (Haryana), through its Authorized Signatory, Sagar
..... Petitioner
Versus
1. The State of Jharkhand
2. The Secretary, Higher, Technical Education and Skill Development
Department, Government of Jharkhand, Ranchi
3. The Director, Higher, Technical Education and Skill Development Department,
Government of Jharkhand, Ranchi
4. The Principal, Government Polytechnic, Ranchi ..... Respondents
-----
CORAM HON'BLE MR. JUSTICE RAJESH SHANKAR
-----
For the Petitioner: Mr. A. K. Sinha, Sr. Advocate Mr. Indrajit Sinha, Advocate For the O.Ps/State: Mr. Mohan Kumar Dubey, A.C to A.G
-----
07/26.07.2022 W.P.(C) No. 3382 of 2021 was initially filed for quashing the order as contained in memo No. 615 dated 12.08.2021 passed by the respondent No.3 whereby the petitioner was permanently blacklisted. However, during pendency of the present writ petition, the respondent No.3 vide order as contained in memo No. 24 dated 07.01.2022 amended the impugned order dated 12.08.2021 fixing the period of blacklisting as five years and thereafter vide office order as contained in memo No. 472 dated 26.04.2022, reduced it to three years mentioning inter alia that the earlier orders as contained in memo No. 615 dated 12.08.2021 as well as memo No. 24 dated 07.01.2022 were recalled vide memo No. 471 dated 26.04.2022. The petitioner has therefore also challenged the orders dated 07.01.2022 and 26.04.2022 passed by the respondent No.3.
2. Cont. Case (Civil) No. 548 of 2021 has also been filed against the opposite party No.2 for wilful disobedience and non-compliance of the order dated 27.01.2020 passed by this Court in W.P.(C) No. 01 of 2020. 2
3. Learned Sr. counsel for the petitioner submits that in spite of passing of the order dated 27.01.2020, the O.P. No.2 failed to make formal communication to all other educational institutions regarding stay of the operation of letter No. 13/19-1312 dated 24.12.2019, due to which all educational institutions were reluctant in granting fresh work to the petitioner as well as were not receiving/accepting the equipments as per earlier supply orders issued to the petitioner. Many tenders were floated by the B.I.T, Sindri in which the petitioner participated, however, in absence of a formal communication by the O.P. No.2 regarding stay of the operation of letter dated 24.12.2019, none of the bids submitted by it was considered.
4. In the said contempt case, the O.P.No.2 filed his show cause affidavit annexing an office order as contained in memo No. 615 dated 12.08.2021 again permanently debarring and blacklisting the petitioner. The O.P. No.2 also filed a supplementary show cause affidavit stating that the order dated 12.08.2021 was reviewed and vide order dated 07.01.2022, the period of blacklisting the petitioner was reduced to a period of five years. He again filed a supplementary show cause affidavit dated 28.04.2022 annexing an office order as contained in memo No. 472 dated 26.04.2022 wherein it was mentioned that the earlier orders dated 12.08.2021 & 07.01.2022 were recalled vide memo No. 471 dated 26.04.2022 and the period of blacklisting of the petitioner was further reduced to three years from the date of passing of the said order restraining it from doing any business with Government Polytechnics and Engineering Colleges of the State of Jharkhand during the said period.
5. The factual background of the case, as stated in the writ petition, is that a tender was floated for procurement of materials with respect to laboratory in Government Polytechnic, Ranchi and the petitioner was selected for the said supply work. It completed the supply as required vide e-tender notice floated by the Department of Higher, Technical Education and Skill Development, Government of Jharkhand, however, it was permanently blacklisted vide letter No. 13/19-1313 dated 24.12.2019 issued by the respondent No.3 alleging that 3 the products supplied by it were not up to mark and it also violated the other terms and conditions of the tender. Prior to issuing the said show cause notice, the respondent No.3 also issued letter No. 13/19-1312 dated 24.12.2019 to the Director/In-Charge Principal, BIT, Sindri and other educational institutions directing them not to purchase any equipment or goods from the petitioner- company and to keep the due amount of the petitioner in abeyance. Thereafter, the petitioner filed a writ petition being W.P.(C) No. 01 of 2020 before this Court challenging the order of blacklisting as well as the communication sent to BIT, Sindri and other educational institutions. This Court vide order dated 27.01.2020, quashed the order of blacklisting of the petitioner with a liberty to the respondent No.3 to take a final decision by passing an informed decision on the issue of blacklisting/debarment after issuing a specific show cause notice to the petitioner and on providing due opportunity of hearing to its representative preferably within a period of twelve weeks from the date of receipt/production of a copy of the order. The respondent No.3 was further directed to issue a specific show cause notice to the petitioner-company in relation to retaining its dues against the supply made by it and to take an informed decision after providing due opportunity of hearing to the representative of the petitioner within the aforesaid period itself, moreover, the direction issued by the respondent No.3 vide letter No. 13/19-1312 dated 24.12.2019, was subject to the final decision to be taken by the said respondent in this regard. Thereafter, the respondent No.3 issued direction to the BIT, Sindri and other institutions vide letter No. 22/2019-106 dated 05.02.2020 with respect to constitution of an enquiry committee comprising of senior teachers and to submit a report to that regard. It was also directed by the respondent No.3 that in case of any defect, the petitioner should be asked to remove the same. The Government Polytechnic, Ranchi sent letter No. 128 dated 17.02.2020 to the respondent No.3 stating that a team of three senior teachers was constituted, who submitted a report stating that nothing was found against the petitioner. However, the petitioner was issued a show cause notice vide letter No. 158 4 dated 24.02.2020 by the respondent No.3, which was replied by it vide letter dated 11.03.2020. Thereafter, the respondent No.3 instead of passing final order, kept on issuing repeated show cause notices to the petitioner vide letter No. 13/19-57 dated 19.01.2021, letter No. 165 dated 17.02.2021 and letter No. 13/19-186 dated 22.02.2021 which were duly replied by it. Thereafter, office order as contained in memo No. 615 dated 12.08.2021 was issued whereby the petitioner was permanently blacklisted. However, during pendency of the present writ petition, the respondent No.3 amended the order of permanent blacklisting vide office order as contained in memo No. 24 dated 07.01.2022 and the period of blacklisting was fixed as five years w.e.f. issuance of earlier order dated 12.08.2021. Again vide office order dated 26.04.2022, the earlier orders of blacklisting dated 12.08.2021 & 07.01.2022 were recalled and a fresh order was passed reducing the period of blacklisting for three years w.e.f. the date of passing of the said order.
6. Learned Sr. counsel for the petitioner submits that before passing the impugned orders of blacklisting, the respondent No.3 did not obtain the mandatory approval from the appropriate authority i.e. the respondent No.2. The required equipment were supplied to the Government Polytechnic, Ranchi and an enquiry report prepared on that aspect was forwarded to the respondent No.3, which was in favour of the petitioner, however, the same was discarded by the respondent No.3 while passing the impugned orders of blacklisting the petitioner without assigning any cogent reason for the same. The petitioner had filed a detailed reply to each and every show cause notice, however, none of those was discussed by the respondent No.3 in the impugned orders of blacklisting, who deliberately kept on conducting enquiry, until he procured adverse report against the petitioner. The respondent No.3 has been harassing the petitioner only in order to wage a personal vendetta against it and is being unnecessarily subjected to multiple enquiries for malafide reasons. The impugned orders of blacklisting have been passed by the respondent No.3 in haste just to save his skin when the petitioner withdrew W.P.(C) No. 1385 of 5 2021 with a liberty to file a contempt application. At no point of time, the petitioner was served with the enquiry report of each and every enquiry conducted against it. The respondents have left the supplied equipments to deteriorate for last two years so that an adverse report may be procured easily.
7. Per-contra, learned counsel for the respondents submits that the impugned orders of blacklisting the petitioner are justified looking to the nature of fraud committed by it. The respondent No.3 while passing the impugned orders of blacklisting had granted ample opportunity of hearing to the petitioner. By way of specific show cause notice as contained in letter No. 158 dated 24.02.2020, the petitioner was sought clarification on six specific points which was replied by it, however, the same was not found specific to the allegation and as such again vide specific show cause notice as contained in letter No. 57 dated 19.01.2021, the petitioner‟s authorized representative was asked to appear on the scheduled date i.e. 25.01.2021 to explain the allegations levelled in the show cause notice, who appeared on the said date, however, failed to produce any substantive clarification/document on several points. Thereafter, final show cause notice was issued vide letter No. 186 dated 22.02.2021 and the petitioner‟s reply sent vide Ref. No. CL/997/2021 dated 05.03.2021 was considered. Accordingly, the impugned order dated 12.08.2021 was passed. The petitioner in order to procure the certificate of supplied instruments, illegally manipulated the certification sheet and on the basis of the same, fraudulently extracted the public money. In fact, the petitioner had filed manipulated and false documents in W.P.(C) No. 01 of 2020. The report dated 24.02.2019 regarding receiving/ installation/demonstration of equipments supplied by the petitioner to the Government Polytechnic, Ranchi, Jharkhand was a manufactured document. The remarks of verification of supplied items in receiving/installation/demo report related to P.O No. 981 dated 22.01.2019 was illegally changed by adding „OK‟ at Sl. Nos. 12 to 40 and the date of signature with remarks for items as mentioned at Sl. Nos. 1 to 13 was also changed from 14.03.2019 to 24.02.2019 making overwriting. Moreover, the petitioner wilfully 6 affixed the duplicate seal of the Government Polytechnic, Ranchi on fabricated and manufactured report whereas no such approval was given to the petitioner for testing of the functioning of goods supplied in original report dated 14.03.2019, rather in the said report, it was stated that several parts were found missing on physical verification. In another receiving/installation/demo report relating to P.O No. 981 dated 22.01.2019, the remarks of experiments related items mentioned at Sl. Nos. 5 to 24 was illegally added as „OK‟ and the date of issuance i.e. 24.02.2019 was also added deliberately to mislead and show that the demonstration was conducted prior to releasing the payment as mentioned in paragraph 26 of W.P.(C) No. 01/2020. The authorized signatory of the petitioner as well as the proprietor of M/s Scientico Instruments (second successful technically qualified bidder in the bid relating to the present case) was the same person i.e. Sagar Sharma, however, he had filed affidavit in W.P.(C) No. 01 of 2020 in the name of „Sagar‟ and thus he tried to hide his true identity. During enquiry, several adverse evidences were found which confirmed the fraudulent conduct of the petitioner and as such the impugned order of permanently blacklisting the petitioner-company was passed which was subsequently reduced to three years.
8. Heard learned counsel for the parties and perused the relevant materials available on record. The petitioner is aggrieved with the order of blacklisting passed by the respondent No.3. Initially, the petitioner was permanently blacklisted vide the impugned order dated 12.08.2021. However, the said order was modified twice during pendency of the present writ petition and the period of blacklisting was firstly fixed as five years vide the impugned order dated 07.01.2022 which was again reduced to three years vide the impugned order dated 26.04.2022.
9. The thrust of the argument of learned Sr. counsel for the petitioner is that the impugned orders of blacklisting have been passed in the teeth of the direction issued by this court in W.P.(C) No. 1 of 2020 wherein it was specifically held that a fresh decision would be taken after issuing specific show cause 7 notice and providing due opportunity of hearing to the petitioner that too, within a period of twelve weeks. It has been contended that the impugned orders are mere eye wash to somehow punish the petitioner. In fact, the respondents did not comply the order dated 27.01.2020 passed by this Court in W.P.(C) No. 01 of 2020 in its letter and spirit.
10. Learned Sr. counsel for the petitioner puts reliance on a recent judgment of this Court rendered in the case of Lava International Limited, Noida, Uttar Pradesh Vs. The State of Jharkhand & Ors. reported in 2022 (2) JLJR 583 wherein while referring several judgments of the Hon‟ble Supreme Court as well as this Court, it has been held as under:-
"15. In the case of UMC Technologies Private Limited Vs. Food Corporation of India & Another reported in (2021)2 SCC 551, the Hon'ble Supreme Court has held as under:-
"13. At the outset, it must be noted that it is the first principle of civilised jurisprudence that a person against whom any action is sought to be taken or whose right or interests are being affected should be given a reasonable opportunity to defend himself. The basic principle of natural justice is that before adjudication starts, the authority concerned should give to the affected party a notice of the case against him so that he can defend himself. Such notice should be adequate and the grounds necessitating action and the penalty/action proposed should be mentioned specifically and unambiguously. An order travelling beyond the bounds of notice is impermissible and without jurisdiction to that extent. This Court in [Nasir Ahmad v. Custodian General, Evacuee Property, (1980) 3 SCC 1] has held that it is essential for the notice to specify the particular grounds on the basis of which an action is proposed to be taken so as to enable the noticee to answer the case against him.
If these conditions are not satisfied, the person cannot be said to have been granted any reasonable opportunity of being heard.
14. Specifically, in the context of blacklisting of a person or an entity by the State or a State Corporation, the requirement of a valid, particularised and unambiguous show-cause notice is particularly crucial due to the severe consequences of blacklisting and the stigmatisation that accrues to the person/entity being blacklisted. Here, it may be gainful to describe the concept of blacklisting and the graveness of the consequences occasioned by it. Blacklisting has the effect of denying a person or an entity the privileged 8 opportunity of entering into government contracts. This privilege arises because it is the State who is the counterparty in government contracts and as such, every eligible person is to be afforded an equal opportunity to participate in such contracts, without arbitrariness and discrimination. Not only does blacklisting take away this privilege, it also tarnishes the blacklisted person's reputation and brings the person's character into question.
Blacklisting also has long-lasting civil consequences for the future business prospects of the blacklisted person."
16. In the case of Vetindia Pharmaceuticals Ltd. Vs. State of Uttar Pradesh & Another, reported in (2021)1 SCC 804, the Hon'ble Supreme Court has held as under:-
"8. There is no dispute that the injection was not supplied to the respondents by the appellant. Yet the show-cause notice dated 21-10- 2008 referred to further action in terms of the tender for supplying misbranded medicine to the appellant. Furthermore, the show-cause notice did not state that action by blacklisting was to be taken, or was under
contemplation. It only mentioned appropriate action in accordance with the rules of the tender. The fact that the terms of the tender may have provided for blacklisting is irrelevant in the facts of the case. In the absence of any supply by the appellant, the order of blacklisting dated 8-9-2009 invoking Clauses 8.12 and 8.23 of the tender is a fundamental flaw, vitiating the impugned order on the face of it reflecting non-application of mind to the issues involved. Even after the appellant brought this fact to the attention of the respondents, they refused to pay any heed to it. Further, it specifies no duration for the same.
11. If the respondents had expressed their mind in the show-cause notice to blacklist, the appellant could have filed an appropriate response to the same. The insistence of the respondents to support the impugned order [Vetindia Pharmaceuticals Ltd.
v. State of U.P., 2019 SCC On Line All 6734] by reference to the terms of the tender cannot cure the illegality in the absence of the appellant being a successful tenderer and supplier. We therefore hold that the order of blacklisting dated 8-9-2009 stands vitiated from the very inception on more than one ground and merits interference."
17. In the case of Kulja Industries Limited Vs. Chief General Manager, Western Telecom Project Bharat Sanchar Nigam Limited and Others, reported in (2014)14 SCC 731, the Hon'ble Supreme Court has 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 9 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 W.B. [(1975) 1 SCC 70] where this Court declared that blacklisting has the effect of preventing a person from entering into lawful relationship with the Government for purposes of gains and that the authority passing any such order was required to give a fair hearing before passing an order blacklisting a certain entity. This Court observed:
(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. [1994 Supp (2) SCC 699]; Patel Engg. Ltd. v. Union of India [(2012) 11 SCC 257];
B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd. [(2006) 11 SCC 548]; Joseph Vilangandan v.
Executive Engineer (PWD) [(1978) 3 SCC 36] among others have followed the ratio of that decision and applied the principle of audi alteram partem to the process that may eventually culminate in the blacklisting of a contractor.
19. Even the second facet of the scrutiny which the blacklisting order must suffer is no longer res integra. The decisions of this Court in Radha Krishna Agarwal v. State of Bihar [(1977) 3 SCC 457]; E.P. Royappa v. State of T.N. [(1974) 4 SCC 3]; Maneka Gandhi v. Union of India [(1978) 1 SCC 248] ; Ajay 10 Hasia v. Khalid Mujib Sehravardi [(1981) 1 SCC 722] ; Ramana Dayaram Shetty v. International Airport Authority of India [(1979) 3 SCC 489] and Dwarkadas Marfatia and Sons v. Port of Bombay [(1989) 3 SCC 293] 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. [(1990) 3 SCC 752] should, in our view, suffice: (SCC pp. 760- 61, para 12) "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 [(1977) 3 SCC 457 ] . ... 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 11 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."
18. In the case of Erusian Equipment & Chemicals Ltd. Vs. State of West Bengal and Another, reported in (1975)1 SCC 70, the Hon'ble Supreme Court has held thus:-
"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.
18. Exclusion of a member of the public from dealing with a State in sales transactions has the effect of preventing him from purchasing and doing a lawful trade in the goods in discriminating against him in favour of other people. The State can impose reasonable conditions regarding rejection and acceptance of bids or qualifications of bidders. Just as exclusion of the lowest tender will be arbitrary, similarly exclusion of a person who offers the highest price from participating at a public auction would also have the same aspect of arbitrariness.
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."
19. In the case of Gorkha Security Services Vs. Government (NCT of Delhi) & Others reported in (2014)9 SCC 105, the Hon'ble Supreme Court has 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 12 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. 22. The High Court has simply stated that the purpose of show-cause notice is primarily to enable the noticee to meet the grounds on which the action is proposed against him. No doubt, the High Court is justified to this extent. However, it is equally important to mention as to what would be the consequence if the noticee does not satisfactorily meet the grounds on which an action is proposed. To put it otherwise, we are of the opinion that in order to fulfil the requirements of principles of natural justice, a show-cause notice should meet the following two requirements viz: (i) The material/grounds to be stated which according to the department necessitates an action; (ii) Particular penalty/action which is proposed to be taken. It is this second requirement which the High Court has failed to omit. We may hasten to add that even if it is not specifically mentioned in the show-cause notice but it can clearly and safely be discerned from the reading thereof, that would be sufficient to meet this requirement."
20. Learned senior counsel for the petitioner has also put reliance on the judgment of this Court rendered in the case of Ankush Agrawal Vs. Food Corporation of India & Others [W.P.(C) No. 2254 of 2018], wherein after having gone through the judgments of the Hon'ble Supreme Court, the law of blacklisting has been summarized in the following manner:-
"24. In the aforesaid judgments, the Hon'ble Supreme Court held that when a contract is entered between two private parties, in case of any breach of contract by one party, the other party has every right to blacklist the defaulter and such right is unqualified. However, in a situation where an order of blacklisting has been passed by the State or its instrumentalities, 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 principle of natural justice, doctrine of proportionality, reasonableness and fairness. The order of blacklisting 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, prior to taking such a harsh 13 decision, the person concerned should be given an opportunity to represent his case before he is put on the blacklist. The show cause must not be a mere formality, rather the same should specifically mention the grounds which necessitates the action and also the proposed action by the department so that the person aggrieved may explain the circumstances properly.
25. On perusal of the impugned order dated 26.04.2018, it appears that the order of termination of contract coupled with the debarment of the petitioner has been passed without describing any cogent or strong reason for the same. The order cancelling the awarded work is one aspect while the order of blacklisting is another. The order of termination of contract is passed merely for violation of any mandatory terms and conditions of the contract, however, the order of blacklisting debars any person from dealing with the government instrumentality within the time frame mentioned in the order. Thus, before passing the order of blacklisting, it is a sine-qua-non to hear the alleged delinquent to make sure so as to satisfy as to whether the default is intentional or has been caused under the situation beyond one's control. In the present case, the respondent-FCI has not called upon the petitioner to explain the circumstances under which the delay was caused before passing the order of debarment. The impugned order has been passed merely on the ground that in case of default, the respondent-FCI has the discretion to pass any such order. It is a settled position of law that the State or its instrumentality while dealing with any private individual has to exercise the said discretion in a fair and equitable manner.
26. For the aforesaid reason, I am of the view that the decision making process of the respondent-FCI in blacklisting the petitioner is vitiated as the same has been passed in violation of the principles of natural justice i.e., without affording any opportunity to the petitioner to explain the reasons of alleged default."
21. Law laid down in the aforesaid cases is summarized as under:-
"(i) The power to blacklist is inherent in the party allotting the contract which is unqualified. There is no need for any such power being specifically conferred by the statute or reserved by contractor because the blacklisting is merely a business decision not to enter into contractual relationship with the party committing the breach. However, such decision is open to scrutiny on the touchstone of fairness, relevance, natural justice, non-
discrimination, equality, reasonableness and proportionality.
(ii) A person has no right to enter into a contract but is entitled to equal treatment. The Government 14 which is trading with the public and the democratic form of Government demands equality and absence of arbitrariness and discrimination in such transactions.
(iii) Blacklisting has long-lasting civil consequences for the future business prospects of the blacklisted person. It also tarnishes the blacklisted person's reputation and brings the person's character into question. In the matter of blacklisting a valid, particularised and unambiguous show-cause notice should be served stating the grounds on which the action is proposed to be taken as well as the proposed action so as to enable the notice to answer the case.
(iv) In order to fulfil the requirement of principle of natural justice, a show cause notice should meet two requirements i.e. the materials/grounds to be stated which according to the department necessitates an action and particular penalty which is proposed to be taken."
11. Reverting back to the present case. Earlier when the petitioner had moved this Court against the order of permanent blacklisting by filing a writ petition being W.P.(C) No. 01 of 2020, the same was disposed of vide order dated 27.01.2020 with the following orders:-
"15. Under the aforesaid facts and circumstances, the present writ petition is disposed of by passing the following orders:
(i) Letter No. 13/19-1313 dated 24.12.2019 (Annexure-6 to the writ petition) issued by the respondent no.2 blacklisting/debarring the petitioner/company is hereby quashed and set aside. The respondent no.2 shall take a final decision by passing an informed order on the issue of blacklisting/debarment of the petitioner-company after issuing a specific show cause notice to it and on providing due opportunity of hearing to the representative of the petitioner-company, preferably within a period of twelve weeks from the date of receipt/production of a copy of this order.
(ii) The respondent no.2 is also decided to issue a specific show cause notice to the petitioner-company in relation to retaining the dues of the petitioner-company against the supply made by it and to take an informed decision after providing due opportunity of hearing to the representative of the petitioner-
company within the aforesaid period itself. The direction issued by the respondent no.2 vide letter no. 13/19-1312 dated 24.12.2019 15 (Annexure-7 to the writ petition) shall be subject to the final decision to be taken by the respondent no.2 in this regard."
12. After passing the said order, the respondent No.3 served three show cause notices to the petitioner i.e. letter No. 158 dated 24.02.2020, letter No. 57 dated 19.01.2021 and letter No. 165 dated 17.02.2021 which were replied by the petitioner. Another show cause notice i.e. the final one was served to the petitioner vide letter No. 186 dated 22.02.2021 seeking explanation on the allegations levelled in the same and asking the petitioner as to why it should not again be put on blacklist for violating the conditions of the tender. The said show cause notice was also replied by the petitioner denying the allegations levelled against it. Thereafter, the respondent No.3 passed the impugned order dated 12.08.2021.
13. This Court is not entering into the merit of the allegations and counter allegations made by the respondents and the petitioner against each other, rather is confining itself to see as to whether there is any procedural irregularity in the impugned orders requiring interference under the extraordinary writ jurisdiction of this Court.
14. I have perused the impugned order dated 12.08.2021 wherein the respondent No.3 has observed that the petitioner has committed deliberate and gross breach in due performance and observance of the terms and conditions governing the agreement and as such the clarifications/justifications given by the petitioner have been rejected. Having observed so, the respondent No.3 restored the earlier order of permanent blacklisting. This Court is of the view that since the earlier order of blacklisting was already set aside by this Court vide order dated 27.01.2020 passed in W.P.(C) No. 01/2020, the respondent No.3 has committed gross error in restoring the earlier order of blacklisting. In the said order passed by this Court, it was specifically held that the order of blacklisting dated 24.12.2019 did not mention the period for which the petitioner was blacklisted and the same was found in contravention of the ratio laid down by the Hon‟ble Supreme Court in the case of Kulja Industries Ltd. 16 Vs. Chief General Manager, Western Telecom Project BSNL & Anr. reported in (2014) 14 SCC 731. The respondent No.3 did not bother to read the judgment rendered by this Court so as to comply the same in its letter and spirit which indicates serious laches on his part. Subsequent to filing of the present writ petition, the respondent No.3 tried to rectify the earlier order by fixing the period of blacklisting as five years and thereafter reducing it to three years. However, the said order also does not appear to be in conformity with the law laid down by the Hon‟ble Supreme Court in the cases of UMC Technologies Private Limited Vs. Food Corporation of India & Anr. reported in (2021)2 SCC 551 and Gorkha Security Services Vs. Government (NCT of Delhi) & Ors. reported in (2014) 9 SCC 105 wherein it has been held that the show cause notice should not only specify the allegations levelled against the delinquent, rather it should also specify the proposed punishment which will be imposed upon it, if the charges are proved. Moreover, it has not been stated in the impugned order dated 12.08.2021 as to how the respondent No.3 determined the period of punishment. The respondents have failed to show before this Court that for the alleged violation, only one punishment could have been imposed upon the petitioner. On the contrary, it appears from the conduct of the respondent No.3 that the period of blacklisting was fixed by him at his own whims and fancies. Thus, by not serving any specific show cause notice specifying the period of punishment of blacklisting the petitioner and by not giving an opportunity to defend the alleged violation as well as the period of punishment, the petitioner has been put to serious prejudice. The said action of the respondents, particularly of the respondent No.3, does not seem to be fair and impartial, rather the impugned orders appears to have been passed with a preconceived notion. Otherwise also, it has been observed by the respondent No.3 in the last blacklisting order dated 26.04.2022 that the order of debarment has been passed for the purpose of preventing the petitioner from dealing with other institutions in any manner 17 throughout the State. Thus, the intention of banning the petitioner-company also does not appear to be justified and legal.
15. In view of the aforesaid factual and legal position, the impugned orders as contained in memo No. 615 dated 12.08.2021, memo No. 24 dated 07.01.2022 as well as memo No. 472 dated 26.04.2022 are hereby quashed/set aside.
16. The present writ petition is accordingly disposed of.
17. Consequently, I.A. No. 5056/2022 filed in W.P.(C) No. 3382/2021 also stands disposed of.
18. So far as the contempt proceeding against the O.P.No.2 is concerned, since he has already retired from service as has been informed by learned counsel for the opposite parties and has also sought unconditional apology, this Court does not intend to proceed further in the contempt matter.
19. The contempt proceeding as against the O.P.No.2 is dropped.
20. The present contempt application stands disposed of.
Satish/AFR (RAJESH SHANKAR, J)