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2018 DIGILAW 13 (CAL)

Sumant Yadav v. Union of India

2018-01-04

DIPANKAR DATTA, PROTIK PRAKASH BANERJEE

body2018
JUDGMENT : PROTIK PRAKASH BANERJEE, J. 1. This appeal is directed against the order dated December 4, 2017 passed by the learned Judge by which A.S.T. No. 401 of 2017 (Sumant Yadav Vs. Union of India & Ors.) was dismissed on the ground that there was a provision of an appeal before the Chief Commercial Manager or recourse by way of arbitration. 2. According to the learned Judge in the impugned order, this was a writ petition which brought before the writ Court a dispute not involving any public law element. Also, according to the learned Judge, the question as to whether cancellation of the contract along with other punitive action was correct or not required adjudication upon receiving evidence and not by way of a writ petition. These findings of the learned Judge were in the context of an impugned order dated November 27, 2017 passed by the railway authorities purportedly in terms of a bilateral contract between the writ petitioner and the railways, under which the railways claimed that they had a power in certain contingencies not only for cancellation of contract but also to debar from fresh registration over all divisions and the zonal railways for the Indian Railways for a period of five years. 3. The relevant clauses 6.8 and 7.6 of the agreement on which reliance has been placed by the railway authorities are extracted herein below for the sake of convenience: - “6.8 With a view to prevent fraud and leakage of railway revenue, the zonal railway must ensure that the cases where the lease holder applies for non loading/leave at originating station and same is granted, the originating station must convey the message to all the concerned to intermediate stations through commercial controller/ telephonically. On such days loading should not be done by the lease holder at any of the intermediate station. If it is found to have been loaded the lease SLR/VP by the leaseholder from any of the intermediate station on the days of leave/exemption/non-loading permission, his lease contract will be terminated and registration will be cancelled for forfeiting security deposit and Registration fee as per Para 4.15 of FM Circular no. 06 of 2014. (para 18.8) 7.6. If it is found to have been loaded the lease SLR/VP by the leaseholder from any of the intermediate station on the days of leave/exemption/non-loading permission, his lease contract will be terminated and registration will be cancelled for forfeiting security deposit and Registration fee as per Para 4.15 of FM Circular no. 06 of 2014. (para 18.8) 7.6. If the registration of a leaseholder is cancelled as a punitive measure, either for reasons of repeated over loading or for repeated failure to start loading after award of contract or for attempt to deliberately defraud railways or for repeated violation of any of the existing stipulations where cancellation of registration has been legislated as the penalty, then the entire registration fee would be forfeited. In addition to forfeiture of registration fee, all his existing leasing contracts being operated from that division would also be cancelled. However, contract can be cancelled/terminated by the Railways with the approval of tender accepting authority. In addition to cancellation, such a leaseholder would be debarred from fresh registration for a period of 5 years. All the Railways should be informed the name of the Firm who has been debarred fresh registration will not be done by any of the Zonal Railways/Divisions by the name of such firm/or leaseholder for a period of five (05) years. (para 4.15) 3. By the order dated November 27, 2017, the railway authorities after having made certain allegations as to what are alleged to be the breaches by the petitioner of the contingencies which, according to the railways, would trigger the operation of the said clauses extracted above, passed the order as impugned in the writ petition. 4. The punishments imposed by the railways are as follows: - “(1) Lease contract of RSLRD of 13465 UP Howrah-Malda Intercity Express Ex. HWH to MLDT which was valid from 01.02.17 to 31.01.22 cancelled with effect from 01.12.17 and security deposit is forfeited. (2) As per para 7.6 of the Agreement, your registration in Howrah Division is hereby cancelled and registration fee is forfeited. Your existing lease contracts i.e. leasing of FSLR II of 12311 up Kalka Mail valid for period from 01.12.17 and the security deposit thereof stands forfeited. (3) Your firm will be debarred from fresh registration over all Divisions and Zonal Railways over Indian Railways for a period of 05 years.” 5. Your existing lease contracts i.e. leasing of FSLR II of 12311 up Kalka Mail valid for period from 01.12.17 and the security deposit thereof stands forfeited. (3) Your firm will be debarred from fresh registration over all Divisions and Zonal Railways over Indian Railways for a period of 05 years.” 5. In the said order dated November 27, 2017 issued by the Assistant Commercial Manager (HG) for Senior Divisional Commercial Manager, Howrah, there is no allegation that the writ petitioner was put on notice or was given any opportunity to show cause or being heard before such an action was taken. No allegation was made that the writ petitioner was given any opportunity to defend himself. Clause 7.6 of the contract extracted above clearly show that the action of cancellation of registration and debarring the writ petitioner from fresh registration are punitive measures. Before the learned single Judge, the writ petitioner relied upon the decision in the case of Erusian Equipment and Chemicals Ltd.—v—State of West Bengal and Another, reported in AIR 1975 SC 266 in support of the proposition that such an action by an authority under Article 12 of the Constitution of India which was “State” within the meaning of that article and which had civil consequences and attached a stigma was arbitrary and in violation of the basic principles of natural justice. It was also argued, relying upon the said decision and the way that the law had changed in the constitutional history of this country, that the Government unlike a private person would not pick and choose whom to give business to and at the very least in order to sub-serve the principles of natural justice had to grant an opportunity of being heard before taking any such decision of blacklisting or debarment whether publicly or confidentially or departmentally. Such a decision of the Hon’ble Supreme Court did not find favour with the learned Single Judge. 6. Such a decision of the Hon’ble Supreme Court did not find favour with the learned Single Judge. 6. Though the law is trite that every time there is a violation of the basic principle of natural justice causing prejudice, it is arbitrary and in violation of Article 14 of the Constitution of India, and that a gross violation of the basic principles of natural justice by an authority under Article 12 by itself gives rise to a public law dispute, the learned Single Judge was pleased to record a finding that no public law element was involved in the dispute. 7. Whether the appellant had actually committed the breaches complained of by the railways–we make it clear that they did not fall for decision either before this Court or before the learned single Judge. This is because the question was not whether the writ petitioner was guilty of anything he had been accused of doing by the railways, but whether the railways had jurisdiction to impose a punishment on him without allowing him an opportunity to defend himself and without putting him on notice of the proposed punishment. 8. That such punishment was imposed upon him without giving him any opportunity of defending himself is admitted both on the face of the records as also the submission of the learned counsel appearing on behalf of the railways. Therefore, this is not a case where a disputed question of fact has arisen for which evidence is to be taken. On the other hand, the admitted facts show that there was a gross violation of the basic principles of natural justice, as demonstrated above, with all the consequences which follow such facts. 9. On behalf of the railways, it was first submitted that the writ petition itself was not maintainable and even if it was maintainable, disputed questions of facts were involved for which this Court ought not to intervene under Article 226 of the Constitution of India; a further attempt was made to persuade this Court that since there were allegations of fraud against the appellant of a particularly egregious nature, this Court ought not to intervene. 10. 10. Regarding the question of alternative remedy, since we have already held that there has been gross violation of basic principles of natural justice as above, this is one of the exceptional cases where despite the existence of an alternative remedy, the writ Court is not powerless to intervene and in fact may, in some cases such as this one, be held duty bound to intervene. We draw sustenance from the judgment in the case of Registrar of Trademarks Vs. Whirlpool Corporation reported in 1998 (8) SCC 1 . So, it would not be necessary for the appellant to either knock on the doors of an appellate authority or seek arbitration under a bilateral contract. 11. At any rate, the law is also trite that an unfair trial cannot be cured by a fair appeal. 12. So far as the question of maintainability is concerned, it is clear from the answer to the query given by Mr. Ghosh, learned counsel for the railways that this objection was actually founded more on the ground of alternative remedy than on the ground of maintainability of the writ petition. The learned counsel for the railways accepts that this Court has territorial jurisdiction over the respondents and further that the railways are both “State” within the meaning of Article 12 of the Constitution of India and “person or authority” within the meaning of Article 226 of the Constitution of India, and that the impugned action was taken pursuant to power reserved to the railways under the Railways Act, 1989 and in exercise of its statutory duties, and that it is an authority against whom writs and orders may be issued by this Court under Article 226 of the Constitution. 13. The submission that disputed questions of facts are concerned has already been dealt with, while we have held that such question does not arise, in the facts of the case and the appeal is being heard on a limited point. 14. Mr. Ghosh relies, on instructions, upon a so-called letter which is not dated and which is purported to have been signed by one Samir Ghosh, alleged to be an agent of M/s Siwalay Enterprise. In the said undated letter, many allegations have been made which would amount to admissions as against the interest of such M/s Siwalay Enterprise. 14. Mr. Ghosh relies, on instructions, upon a so-called letter which is not dated and which is purported to have been signed by one Samir Ghosh, alleged to be an agent of M/s Siwalay Enterprise. In the said undated letter, many allegations have been made which would amount to admissions as against the interest of such M/s Siwalay Enterprise. It is needless to mention that M/s Siwalay Enterprise has been described as a sole proprietorship concern of the appellant/writ petitioner. 15. Even though Mr. Ghosh tried to impress upon us that this particular undated letter signed by Samir Ghosh was in response to a notice issued by the railways to give a writ petitioner an opportunity to show cause why punishment ought not to be imposed on M/s Siwalay Enterprise, he fairly submits that there is no written note in the records of the railways which he can produce in support of his contention that any such notice to show cause was sent to the writ petitioner nor any office copy of any such notice nor even any document showing sending of such notice to show cause. On being pressed, he took instructions from the representative of his client present in Court and submitted, rather weakly, that the notice which was issued to the agent was oral. 16. Interestingly, the impugned order dated November 27, 2017 does not reflect even that such an oral notice had been issued. 17. We are afraid that the railways which ought to have the custody and possession of the office copy of the said notice, and the records containing such office notes and endorsements of such a notice to show cause having been prepared and sent to the writ petitioner and the proof of sending it, being unable to produce such records, leaves us with no option but to draw adverse inference against the railways that had the said documents been produced, they would not have supported the version of the railways. 18. Accordingly, the said letter alleged to be written by Samir Ghosh in response to the invisible and unavailable notice to show cause whose existence cannot be established even prima facie, cannot be looked into at this stage by us, but of course the railways would have the right as and when a properly constituted proceeding is initiated to rely upon such letter in accordance with law. 19. 19. The only question of law which remains is whether the action of the respondent railways in terminating a contract as also debarring the writ petitioner from entering into any contract with any railway division or any zonal railways within the meaning of the Railways Act, 1989 is a contractual action or whether it can independently be challenged under Article 226 of Constitution of India as involving a public law dispute. 20. In support of the contention that this is a case of breach of contract and therefore not amenable to writ jurisdiction, the respondent relied upon a decision of C. K. Achutan Vs. State of Kerala & Others reported in AIR 1959 SC 490 . In this judgment of the Hon’ble Supreme Court (Bench strength 5), the Hon’ble Supreme Court was pleased to hold in the peculiar fact situation of that case where the writ petitioner had moved the Hon’ble Supreme Court under Article 32 that his contract had been cancelled, and that it was not done in accordance with the manner mentioned in the conditions of the contract. In such factual matrix, the Hon'ble Supreme Court was pleased to hold in paragraphs 8 and 9 of the said report, as follows: “8. The gist of the present matter is the breach, if any, of the contract said to have been given to the petitioner which has been cancelled either for good or for bad reasons. There is no discrimination, because it is perfectly open to the Government, even as it is to a private party, to choose a person to their liking, to fulfil contracts which they wish to be performed. When one person is chosen rather than another, the aggrieved party cannot claim the protection of Art. 14, because the choice of the person to fulfil a particular contract must be left to the Government. Similarly, a contract which is held from Government stands on no different footing from a contract held from a private party. The breach of the contract, if any, may entitle the person aggrieved to sue for damages or inappropriate cases, even specific performance, but he cannot complain that there has been a deprivation of the right to practise any profession or to carry on any occupation, trade or business, such as is contemplated by Art. 19(1)(g). The breach of the contract, if any, may entitle the person aggrieved to sue for damages or inappropriate cases, even specific performance, but he cannot complain that there has been a deprivation of the right to practise any profession or to carry on any occupation, trade or business, such as is contemplated by Art. 19(1)(g). Nor has been shown how Art. 31 of the Constitution may be invoked to prevent cancellation of a contract in exercise of powers conferred by one of the terms of the contract itself. 9. The main contention of the petitioner before us was thus under Art. 10(1) of the Constitution, and he claimed equal opportunity of employment under the State. To begin with, a contract for the supply of goods is not a contract of employment in the sense in which that word has been used in the Article. The petitioner was not be employed as a servant to fetch milk on behalf of the institution, but was a contractor for supplying the articles on payment of price. He claimed to have been given a contract for supply of milk, and did not claim to be an employee of the State. Article 16(1) of the Constitution, both in its terms and in the collocation of the words, indicates that it is confined to “employment” by the State, and has reference to employment in service rather than as contractors. Of course, there may be cases in which the contract may include within itself an element of service. In the present case, however, such a consideration does not arise, and it is therefore not necessary for us to examine whether those cases are covered by the said Article. But it is clear that every person whose offer to perform a contract of supply is refused or whose contract for such supply is breached cannot be said to have been denied equal opportunity of employment, and it is to this matter that this case is confined.” 21. The factual matrix of the present case is not the same. We have already held that we are not going to interfere with the punishment of cancellation of the contract itself. The factual matrix of the present case is not the same. We have already held that we are not going to interfere with the punishment of cancellation of the contract itself. The Hon’ble Supreme Court in the case referred to above had not been called upon to deal with the effect of a bar to fresh registration and a bar to entering into a contract with a person on the basis of grave allegations having civil consequences and a stigma without giving him an opportunity of defending himself. The Hon’ble Supreme Court was only deciding the case before it on the facts as were presented before it which were wholly different from the facts of the present case as indicated above. It is trite that a decision is only an authority for what it actually decides and not a proposition that may seem to flow logically from it and that a little difference in facts can make a lot of difference in the value of a case as a precedent as were, in effect, held in the case of Quinn—v—Leathem reported in (1901) AC 495 : (1903) AER 1, which has been followed in India in several cases including Bhavnagar University—v—Palitana Sugar Mill Pvt. Ltd. and Others reported in AIR 2003 SC 511 and before that in Mafatlal Industries Ltd and Others—v— Union of India and Others reported in (1997) 5 SCC 536 . Therefore, this case is not an authority for the proposition canvassed by Mr. Ghosh and does not stand in the way of this Court either entertaining or allowing the appeal, id est., the grievance agitated in the writ petition to the extent of punishment no. 3 which was imposed without granting the writ petitioner any opportunity of defending himself. After all, even God gave an opportunity to Adam to defend himself in the Garden of Eden before imposing a punishment on him, and the Railways cannot be held to be higher than God Almighty. 22. 3 which was imposed without granting the writ petitioner any opportunity of defending himself. After all, even God gave an opportunity to Adam to defend himself in the Garden of Eden before imposing a punishment on him, and the Railways cannot be held to be higher than God Almighty. 22. Even otherwise, this is not a case merely of the State choosing to enter into a contract with one person over another, but a case of the State having awarded a contract to one party, and then admittedly imposing punishments on him of being ineligible for fresh registration for any new contract without giving him an opportunity of being heard, thus showing an animus sufficiently hostile to merit being called an executive action rather than a merely contractual one or choosing who will perform a contract for it. 23. It is perhaps no longer the law of the land that no writ petition lies against the State when it acts in its contractual capacity when the writ jurisdiction under Article 226 is concerned. It has been appositely held by the Hon'ble Supreme Court that “Applicability of Article 14 to all executive actions of the State being settled and for the same reason its applicability at the threshold to the making of a contract in exercise of the executive power being beyond dispute, can it be said that the State can thereafter cast off its personality and exercise unbridled power unfettered by the requirements of Article 14 in the sphere of contractual matters and claim to be governed therein only by private law principles applicable to private individuals whose rights flow only from the terms of the contract without anything more? We have no hesitation in saying that the personality of the State, requiring regulation of its conduct in all spheres by requirements of Article 14, does not undergo such a radical change after the making of a contract merely because some contractual rights accrue to the other party in addition. It is not as if the requirements of Article 14 and contractual obligations are alien concepts, which cannot co-exist” in the case of Kumari Shrilekha Vidyarthi and Others—v—State of U.P. and Others reported in AIR 1991 SC 537 . We hasten to add that we are not relying upon a decision of Bench Strength 2 in preference to a decision of Bench Strength 5. We hasten to add that we are not relying upon a decision of Bench Strength 2 in preference to a decision of Bench Strength 5. It is only that the decision of the Larger Bench is not applicable to the facts of this case and can be and has been distinguished as above. 24. So far as the distinction drawn by the learned single Judge on facts with Erusian Equipment (supra) on the ground that in Erusian Equipment (supra) the punitive action was black-listing though confidential and departmental, which was permanent and in this present case, it is a bar to registration only for a period of five years albeit without granting any opportunity of defending himself being granted to the petitioner, is concerned, with great respect to His Lordship, we must hold that it is a distinction without a difference in the facts of the case. The judgment of the learned single Judge does not address the question of the gravity of the civil consequences suffered by the writ petitioner in both the cases and the bar to fresh registration which ensues on the basis of allegations against which the writ petitioner was never given any opportunity to defend himself. 25. No useful purpose will be served by remanding the matter back to the learned single Judge for a decision on the matter since we have already decided the question of violation of natural justice as above. 26. Accordingly, this appeal succeeds to the extent of quashing of the impugned order dated November 27, 2017 so far as punishment no. 3 extracted above is concerned and also to the extent of setting aside the order passed by the learned single Judge. 27. We make it clear that we do not propose to interfere with that part of the order dated November 27, 2017 which cancels the contract of lease between the parties and forfeiture which are incorporated in punishment nos. (1) and (2) of the said order. This is because this would require sifting of evidence and taking of evidence which we are not inclined to do in this jurisdiction. 28. Liberty is reserved to the writ petitioner to take appropriate steps in respect of such penalty as incorporated in punishment nos. (1) and 2 of the said order as aforesaid, as may be advised. 29. This is because this would require sifting of evidence and taking of evidence which we are not inclined to do in this jurisdiction. 28. Liberty is reserved to the writ petitioner to take appropriate steps in respect of such penalty as incorporated in punishment nos. (1) and 2 of the said order as aforesaid, as may be advised. 29. We think, the interests of justice would be best served if the matter is disposed of by granting liberty to the respondent railway authorities to proceed afresh in accordance with law against the writ petitioner after giving him due notice and reasonable opportunity of defence; liberty is also granted to the writ petitioner to proceed in accordance with law as he may be advised in respect of the punishment which has not been interfered with by this Court as indicated above. We make it clear that we have not gone into the merits of the case and rival allegations and that all the points in respect of the merits of the case shall remain to be agitated including whatever amount has been forfeited. 30. It is made clear that setting aside of punishment no. 3 will not by itself restore the registration or enable the writ petitioner to apply for fresh contract and forfeiture of registration fee shall abide by the result of the decision to be given in the fresh proceedings to be initiated in terms of this order. 31. The appeal is disposed of. In the instant case, there shall be no order as to costs. 32. In view of the aforesaid order, nothing survives for decision on C.A.N. 11856 of 2017 and the same stands disposed of too. 33. Urgent photostat certified copy of this order, if applied for, be given to the parties as expeditiously as possible.