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2013 DIGILAW 1239 (PAT)

Kems Services Private Limited v. State of Bihar

2013-10-22

NAVIN SINHA, SHAILESH KUMAR SINHA

body2013
ORDER We have heard learned Senior Council Shri Tara Kant Jha for the appellant and learned A.C. to SC 5 for the State. 2. The present appeal arises from order dated 26.7.2013 disposing CWJC No. 6067 of 2013. The learned Single Judge directed the order for blacklisting to operate as one of suspension pending resolution of the dispute with regard to non-completion of works pending before the Bihar Public Works Construction Disputes Arbitration Tribunal (hereinafter referred to as ‘the Tribunal’) in Reference Case No. 26 of 2013 preferred by the Appellant. 3. Learned Senior Council for the appellant submitted that Bihar Contractor Registration Rules, 2007 (hereinafter called the Rules) in Rule 11 provides for blacklisting by the Registration Authority. Appeal lies by the aggrieved against the order before the Commissioner-cum-Secretary. In the present case, the order for blacklisting dated 20.12.2011 was originally passed under the pen of the Engineer-in-Chief (Central) after a decision had been taken at the highest level depriving the appellant of the substantive right of appeal provided under the Rules. This aspect has been noticed while disposing CWJC No. 789 of 2012 remanding the matter for fresh decision. 4. The next submission by the learned Senior Counsel was that in CWJC No. 789 of 2012 the Court held that the order for blacklisting suffered from procedural infirmity in the decision making process. The Engineer-in-Chief (Central) did not apply his independent mind and acted mechanically at the behest of the recommendation made by the Chief Engineer. Directions were given to the Engineer-in-Chief (Central) to consider matters by independent application of mind with reference to the stand taken by the petitioner in his reply to the show cause notice. The fresh order for blacklisting dated 13.3.2013 has not been passed by the Engineer-in-Chief (Central) as directed by the Court, but by the Engineer-in-Chief (North). Furthermore it is not based on independent application of mind displaying due consideration of the cause shown in defense. It is a verbatim reproduction of the earlier order for blacklisting minus only the paragraph with regard to the recommendation of the Chief Engineer. 5. Blacklisting has serious consequence for the appellant as it affects business prospects and reputation far beyond the immediate authority ordering blacklisting. It is violative of the Constitutional rights of the appellant under Article 14 of the Constitution. 5. Blacklisting has serious consequence for the appellant as it affects business prospects and reputation far beyond the immediate authority ordering blacklisting. It is violative of the Constitutional rights of the appellant under Article 14 of the Constitution. The fact that the appellant may have disputed the foundational facts for blacklisting before the Tribunal, cannot be a justification to uphold an arbitrary order and direct it to be treated as one of suspension if the initial order itself suffered from arbitrariness and gross infirmity in the decision making process. 6. Learned Counsel for the State submits that in accordance with the directions of the Court, fresh orders have been passed for blacklisting after considering the cause shown. The principles of natural justice have been complied. The issues raised before the Tribunal are disputed questions of fact and at this stage cannot work to the advantage of the appellant for claiming that the order for blacklisting/suspension is bad even prior to the outcome of the matter before the Tribunal. The appeal is therefore premature as much shall depend on the findings of the Tribunal. 7. An order for blacklisting of a contractor/company has been held to be a serious matter. No one can claim that the government must do business with him. Government has the freedom to choose with whom it shall enter into business relations. But the power is not to be exercised by the government arbitrarily, but only in accordance with law. Such order has consequences far beyond the immediate authority ordering blacklisting and generally affects the business reputation which may keep away intending parties also. The harm done is both direct and indirect and may not be fully retrievable at times. It affects not only the right to business but also affects the right to livelihood of those working, not only for themselves but also their family and several others connected with the organization. Such order therefore affects fundamental rights under Articles 19 (1) (g) and 21 of the Constitution Utmost caution is therefore required to be exercised in passing orders for blacklisting. In (1975) 1 SCC 70 (Erusian Equipment & Chemicals Ltd. Vs. State of W.B) it has been observed as follows :– “15. The blacklisting order does not pertain to any particular contract. The blacklisting order involves civil consequences. It casts a slur. In (1975) 1 SCC 70 (Erusian Equipment & Chemicals Ltd. Vs. State of W.B) it has been observed as follows :– “15. The blacklisting order does not pertain to any particular contract. The blacklisting order involves civil consequences. It casts a slur. It creates a barrier between the persons blacklisted and the Government in the matter of transactions. The blacklists are “instruments of coercion”. 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.” In (1989) 1 SCC 229 ( Raghunath Thakur Vs. State of Bihar) it was observed :– “4….. 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….” 8. But, the power to blacklist being there and also incorporated in the Rules, judicial review shall have to be restricted to errors in the decision making process. In exercise of powers for judicial review we cannot substitute our opinion for that of the authority to hold whether blacklisting was justified or not. The Court cannot enter into reassessment of facts by sitting as an appellate authority to re-decide if the blacklisting ought to have been ordered or not. In exercise of powers for judicial review we cannot substitute our opinion for that of the authority to hold whether blacklisting was justified or not. The Court cannot enter into reassessment of facts by sitting as an appellate authority to re-decide if the blacklisting ought to have been ordered or not. Only in the event that an order for blacklisting turns out to completely uncalled for or shocking to the conscience of the Court in the peculiar facts of a case may, the Court interfere on merits. 9. Natural justice is a word of very wide connotation. It cannot be put in any straight jacket formula. Its applicability shall depend on facts of each case. It cannot mean only fulfillment of the formality for giving of a show cause notice and acceptance of a reply. The final order must display complete application of mind to the grounds mentioned in the show cause notice, the defence taken in reply, followed by at least a brief analysis of the defence supported by reasons why it was not acceptable. To hold that the cause shown can be cursorily rejected in one line by saying that it was not satisfactory or acceptable in our opinion shall be vesting completely arbitrary and uncanalised powers in the authority. In a given situation if the authority concerned finds the cause shown to be difficult to deal and reject, it shall be very convenient for him not to discuss the matter and reject it by simply stating that it was not acceptable. The giving of reasons in such a situation is an absolute imperative and a facet of natural justice. Reasons have been held to be the heart and soul of an order giving insight to the mind of the maker of the order, and that he considered all relevant aspect and eschewed irrelevant aspects. 10. The distinction between an administrative order and quasi-judicial order has been obliterated with time. An order passed after giving of a show cause notice has trappings of a quasi-judicial. The importance of giving reasons has been explained in (2010) 9 SCC 496 (Kranti Associates (P) Ltd. Vs. Masood Ahmed Khan)holding as follows :– “47. Summarising the above discussion, this Court holds: (a) In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. The importance of giving reasons has been explained in (2010) 9 SCC 496 (Kranti Associates (P) Ltd. Vs. Masood Ahmed Khan)holding as follows :– “47. Summarising the above discussion, this Court holds: (a) In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. (b) A quasi-judicial authority must record reasons in support of its conclusions. (c) Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well. (d) Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. (e) Reasons reassure that discretion has been exercised by the decision-maker on relevant grounds and by disregarding extraneous considerations. (f) Reasons have virtually become as indispensable a component of a decision-making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies. (g) Reasons facilitate the process of judicial review by superior courts. (h) The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the lifeblood of judicial decision-making justifying the principle that reason is the soul of justice. (i) Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants’ faith in the justice delivery system. (j) Insistence on reason is a requirement for both judicial accountability and transparency. (k) If a judge or a quasi-judicial authority is not candid enough about his/her decision-making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism. (l) Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or “rubber-stamp reasons” is not to be equated with a valid decision-making process. (m) It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision-making not only makes the judges and decision-makers less prone to errors but also makes them subject to broader scrutiny. A pretence of reasons or “rubber-stamp reasons” is not to be equated with a valid decision-making process. (m) It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision-making not only makes the judges and decision-makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor.) (n) Since the requirement to record reasons emanates from the broad doctrine of fairness in decision-making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See Ruiz Torija Vs. Spain EHRR, and Anya v. University of Oxford, wherein the Court referred to Article 6 of the European Convention of Human Rights which requires, “adequate and intelligent reasons must be given for judicial decisions”. (o) In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of “due process”. 11. If the Rules provided for passing of an order for blacklisting by the Registering authority and appeal lay before the Commissioner-cum- Secretary, the passing of an order at the highest level, a finding recorded in CWJC No. 789 of 2012 not challenged by the respondents, defeats and deprives the substantive right of appeal. The right of appeal was not an empty formality but a substantive opportunity for the appellant for convincing the appellate authority that the order for blacklisting was not justified. In our opinion the order for blacklisting is vitiated on this ground alone. In (2009) 7 SCC 69 (CIT Vs. Greenworld Corpn) it has been observed :– “55. When a statute provides for different hierarchies providing for forums in relation to passing of an order as also appellate or original order, by no stretch of imagination a higher authority can interfere with the independence which is the basic feature of any statutory scheme involving adjudicatory process.” 12. In CWJC No. 789 of 2012 noticing the infirmity in the earlier order of blacklisting dated 20.12.2011 directions were given specifically to the Engineer-in-Chief (Central) for deciding afresh by independent application of mind and considering the cause shown. The fresh order for blacklisting dated 13.3.2013 has not been passed by the Engineer-in-Chief (Central) but by the Engineer-in-Chief (North). In CWJC No. 789 of 2012 noticing the infirmity in the earlier order of blacklisting dated 20.12.2011 directions were given specifically to the Engineer-in-Chief (Central) for deciding afresh by independent application of mind and considering the cause shown. The fresh order for blacklisting dated 13.3.2013 has not been passed by the Engineer-in-Chief (Central) but by the Engineer-in-Chief (North). In our opinion, the order dated 13.3.2013 is without jurisdiction as being by an authority contrary to the direction of the Court given to a specified designated authority. It does not contain any discussion how and why the Engineer-in-Chief (North) was also competent to pass the order. Any order by an authority different from that to whom direction was given by the Court, in our opinion, is a nullity. 13. The respondents alleged non-performance of contract in the show cause notice. The appellant in reply asserted delay was attributable to non-performance of obligations by the respondents. We are not concerned with whether the defense is acceptable or not. The question is for the manner in which the defense has been considered. 14. In fairness to the respondents, we shall also deal with the order dated 13.3.2013 on merits. We have gone through the earlier order for blacklisting dated 20.12.2011 and the subsequent order dated 13.3.2013. The earlier order dated 20.12.2011 in first six paragraphs contains recitation of facts and concludes in paragraph 7 for blacklisting relying on the recommendation of the Chief Engineer. The second order dated 13.3.2013 likewise contains recitation of facts till paragraph 7. Paragraph 7 of the earlier order is replaced by paragraph 8 by deleting only the recommendation of the Chief Engineer for blacklisting. It states that the cause shown by the appellant after consideration was not found satisfactory and acceptable and therefore rejected. In CWJC No. 789 of 2012 the direction was for independent application of mind and consideration of the cause shown. The word „consideration? in our opinion, displays a process of application of mind by noticing and dealing with relevant facts which included both pros and cons. There is no whisper in paragraph 8 of the order with regard to the nature of the cause shown by the appellant let alone any brief discussion after a short analysis why the cause shown was not acceptable. There is no whisper in paragraph 8 of the order with regard to the nature of the cause shown by the appellant let alone any brief discussion after a short analysis why the cause shown was not acceptable. We are therefore of the opinion that the order dated 13.3.2013 disclosing no reasons is completely arbitrary and contrary to Article 14 of the Constitution affecting the fundamental rights of the appellant. 14. In our opinion, if the order for blacklisting itself is vitiated on account of error in the decision making process, notwithstanding the liberty granted to the respondents by the Court on the earlier occasion to comply with law, the fact that the appellant may have gone before the Tribunal is of no relevance at this stage. The adjudication by the Tribunal may have relevance for remedy to the aggrieved under the realm of a contractual relationship for damages etc. 15. In conclusion, we are of the opinion that the order of the learned Single Judge directing the order for blacking listing to be treated as suspension pending adjudication in Reference Case No. 26 of 2013 by the Tribunal is not sustainable. The orders for blacklisting dated 13.3.2013 and the order under appeal dated 26.7.2013 are both set aside. The appeal is allowed.