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Madhya Pradesh High Court · body

2010 DIGILAW 693 (MP)

Bhupendra Singh Kushwah v. State of M. P.

2010-07-14

PIYUSH MATHUR

body2010
ORDER 1. The petitioner has challenged order dated 30.4.2010 in the present petition, whereby the Chief Engineer of Public Health Engineering Department, Gwa1ior has orderd for cancellation of the registration of the contractor as also for black listing the petitioner. 2. Shri D.S. Raghuwanshi, learned counsel appearing for the petitioner submits that the petitioner is a Class A-1 contractor, who has been registered with the Public Health Engineering Department and has been participating in various tenders for digging tube well for the Department. 3. Shri Raghuwanshi, learned counsel for the petitioner submits that a departmental enquiry was conducted against an Executive Engineer viz., Shri R.N. Karaiya wherein charges of misconduct and financial irregularities were levelled against him and while passing an adverse order against him" all those contractors, who were working with the department during the tenure of Shri R.N. Karaiya, Executive Engineer were black listed by the department and their registration as contractors was cancelled without complying with the principles of natural justice. 4. Shri Raghuwanshi submits that the registration of the contractor was cancelled on the ground that incorrect document was furnished with the department at the time of registration and when a verification was made, the document was found to be contrary to the description given in the application. Shri Raghuwanshi submits that the registration as contractor was never based on any such document and the registration could not be cancelled on the strength of the incorrectness of the description of the document, without issuing a show cause notice to the petitioner. 5. Ms. Ami Prabal, learned Dy. Shri Raghuwanshi submits that the registration as contractor was never based on any such document and the registration could not be cancelled on the strength of the incorrectness of the description of the document, without issuing a show cause notice to the petitioner. 5. Ms. Ami Prabal, learned Dy. Advocate General appearing for the State submitted that in place of filing a reply to the writ petition, she would refer to the record of the department to demonstrate that an enquiry was conducted against Shri R.N. Karaiya, Executive Engineer, wherein it was found that certain misconduct was committed by him, which goes to further demonstrate that he had un authorizedly extended a variety of benefits to the contractors working in the department and as such it was required in all fitness of things that the registration of the contractor should be cancelled and his name should be black listed and to substantiate this submission learned counsel appearing for the State read over a large number of documents to demonstrate the correctness of the aforesaid contention, but could not show any document to demonstrate that at any point of time, a show cause notice was ever issued to the petitioner before either cancelling the registration or blacklisting the petitioner. 6.Public Health Engineering is -a Department of the State of Madhya Pradesh, which is engaged in the activity of providing technical support and developing of infrastructure for providing water to the citizens and thus it performs statutory duties being a department of the State. When the State ' deals with the individuals in the matter of contract and construction, it becomes necessary for the State to act banafidely and without any bias, while complying with the mandatory provisions of law including the cardinal principle of natural justice. The Supreme Court of India while dealing with the case of black listing, has observed in the case of Erusian Equipment & Chemicals Ltd. v. State of West Bengal, a judgment reported as (1975) 1 SCC 70 in the following terms: "19, Where the State is dealing with individuals in transactions of sales and purchase of goods, the two important factors are that an individual is entitled to trade with the Government and an individual is entitled to a fair and equal treatment with others. A duty to act fairy can he interpreted as meaning a duty to observe certain aspects of rules of natural justice. A body may be under a duty to give fair consideration to the facts and to consider the representations but not to disclose to those persons details of information in its possession. Sometimes duty to act fairly can also be sustained without providing opportunity for an oral hearing. It will depend upon the nature of the interest to be affected the circumstances in which a power is exercised and the nautre of sanctions involved therein. 20. Black listing 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 black listing 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 black list." 7. In yet another case while dealing with the doctrine of arbitrariness, the Supreme Court has observed that the action of the "State" must be reasonable, fair and just even at the stage when no formal contract was entered into, which means that not only at the initial stage, but throughout the stage of entering into a contract and thereafter the State Authorities are bound to act reasonably and in a fair manner. These observations of the Supreme Court find mention in its judgment reported as (1990) 3 SCC 752 Mahabir Auto Stroes v. Indian Oil Corporation. 8. Before participating in the tender process a contractor is required to obtain registration with Public Health Engineering Department and without securing the registration with the Department, the contractor cannot even participate in the tender process, therefore, registration and cancellation of the registration acquires great importance, as it incurs civil consequences and in that situation, the principle of audi alteram partem requires to be necessarily complied with by the Department. While dealing this analogy the Supreme Court had observed in the case of Groson. Pharmaceuticals (P) Ltd. v. State of U.P., a judgment reported as (2001) 8 SCC 604 in the following terms :- "2. While dealing this analogy the Supreme Court had observed in the case of Groson. Pharmaceuticals (P) Ltd. v. State of U.P., a judgment reported as (2001) 8 SCC 604 in the following terms :- "2. It is true that an order black listing an approved contractor results in civil consequences and in such a situation in the absence of statutory rules, the only requirement of law while passing such an order was to observe the principle of audi alteram partem which is one of the facets of the principles of natural justice..........." 9. In yet another judgment, the Supreme Court while examining the extant of the power of judicial review in relation to the Government Contracts has observed that the cases involving black listing or imposition of penal consequences require a higher degree of fairness in action of the "State". The observations of the Supreme Court reported in the judgment of Jagdish Madal v. State of Orissa (2007) 14 SCC 517 are as follows: "22....... Cases involving black listing 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 ..........." 10. Therefore in view of the aforesaid fact and the legal position, it is clear that before passing any order of cancellation of registration or black listing a contractor the State Government or its Departments are necessarily required to issue a show cause notice or to provide an adequate hearing to a Contractor, in terms of the principles of natural justice. A perusal of the document annexed with the petition and the record placed for consideration of the Court on behalf of the respondents clearly demonstrate that no show cause notice was ever issued to the petitioner before ordering for cancellation of the registration and placement of the name of the petitioner in the blacklist seriously violates the cardinal principles of audi alteram partem, therefore on this gound alone, the order of cancellation of registration of contractor and order of black listing deserves to be quashed. 11. 11. While perusing the Record, this Court has found that there exits some material for the department to ascertain the correctness of the documents, on the strength of which the contractors were registered with the Department therefore even while quashing the order dated 30.4.2010 (Annexure P/ 1), this Court is of the view that the liberty should be given to the department to examine the correctness of the documents and to take an appropriate action against the erring contractor either for the purposes of cancellation of registration or for blacklisting him, therefore, the respondents are granted liberty to examine the correctness/genuineness of the documents presented by the contractor at the time of obtaining registration as also to pass a final order thereupon. 12. Therefore, the writ petition is allowed and the order passed by the Chief Engineer/Superintending Engineer on date 30.4.2010 (Annexure P/ 1) is quashed with the aforesaid liberty to the department.