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2018 DIGILAW 611 (ALL)

VEDANT ENTERPRISES v. STATE OF U. P.

2018-03-14

BALA KRISHNA NARAYANA, IRSHAD ALI

body2018
JUDGMENT By the Court.—Heard Sri H.N. Singh, learned Senior Advocate assisted by Sri P.K. Bhardwaja, learned counsel for the petitioners and learned Standing counsel for the State. 2. This writ petition has been filed by the petitioners with prayer to issue a writ, order or direction in the nature of certiorari quashing the impugned order dated 24.2.2018 passed by Regional Food Controller, Meerut Region, Meerut (Annexure-5 to the writ petition). 3. It has been contended by learned counsel for the petitioner that by the impugned order dated 24.2.2018, extreme penalty of black listing has been imposed on the petitioner’s firm, but the respondent No. 2 before passing the impugned order had neither issued any show-cause notice to the petitioner nor afforded him any opportunity of hearing. He next submitted that the order of black listing being stigmatic in nature and debarring a person black listed from participating in Government tenders has to be proceeded by show-cause notice. Since in the present case, the impugned order of black listing has been passed in gross violation of principles of natural justice, the same cannot be sustained and is liable to be set aside. In support of his aforesaid contention he has placed reliance upon the judgement of the Apex Court in the case of Gorakha Security Services v. Government (NCT of Delhi) and others, (2014) 9 SCC 105 . 4. We have heard learned counsel for the parties present and perused the impugned order, other material brought on record as well as law report cited by learned counsel for the petitioner in support of his argument. 5. The Apex Court in case Gorakha Security Services v. Government (NCT of Delhi) and others (supra) in paragraphs 16, 17 and 19 which are being quoted hereinbelow : “16). It is a common case of the parties that the blacklisting has to be preceded by a show-cause notice. Law in this regard is firmly grounded and does not even demand much amplification. The necessity of compliance with the principles of natural justice by giving the opportunity to the person against whom action of blacklisting is sought to be taken has a valid and solid rationale behind it. With blacklisting many civil and/or evil consequences follow. It is described as "civil death" of a person who is foisted with the order of blacklisting. The necessity of compliance with the principles of natural justice by giving the opportunity to the person against whom action of blacklisting is sought to be taken has a valid and solid rationale behind it. With blacklisting many civil and/or evil consequences follow. It is described as "civil death" of a person who is foisted with the order of blacklisting. Such an order is stigmatic in nature and debars such a person from participating in Government Tenders which means precluding him from the award of Government contracts. (17). Way back in the year 1975, this Court in the case of M/s. Erusian Equipment & Chemicals Ltd. v. State of West Bengal and another; (1975) 1 SCC 70 , highlighted the necessity of giving an opportunity to such a person by serving a show-cause notice thereby giving him opportunity to meet the allegations which were in the mind of the authority contemplating blacklisting of such a person. This is clear from the reading of Para Nos. 12 and 20 of the said judgment. Necessitating this requirement, the Court observed thus: “12. Under Article 298 of the Constitution the executive power of the Union and the State shall extend to the carrying on of any trade and to the acquisition, holding and disposal of property and the making of contracts for any purpose. The State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. The order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of blacklisting. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of blacklisting. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality. 20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist". (19). Recently, in the case of Patel Engineering Ltd. v. Union of India and another; (2012) 11 SCC 257 , speaking through one of us (Jasti Chelameswar, J.) this Court emphatically reiterated the principle by explaining the same in the following manner: "13. The concept of "blacklisting" is explained by this Court in Erusian Equipment & Chemicals Ltd. v. State of W.B. as under: "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." 15. It follows from the above judgment in Erusian Equipment case that the decision of the State or its instrumentalities not to deal with certain persons or class of persons on account of the undesirability of entering into the contractual relationship with such persons is called blacklisting. The State can decline to enter into a contractual relationship with a person or a class of persons for a legitimate purpose. The authority of the State to blacklist a person is a necessary concomitant to the executive power of the State to carry on the trade or the business and making of contracts for any purpose, etc. There need not be any statutory grant of such power. The only legal limitation upon the exercise of such an authority is that the State is to act fairly and rationally without in any way being arbitrary—thereby such a decision can be taken for some legitimate purpose. There need not be any statutory grant of such power. The only legal limitation upon the exercise of such an authority is that the State is to act fairly and rationally without in any way being arbitrary—thereby such a decision can be taken for some legitimate purpose. What is the legitimate purpose that is sought to be achieved by the State in a given case can vary depending upon various factors.” 5. Thus, what follows from the reading of the aforesaid law report is that when it comes to the action of black listing, it is mandatory for the authority proposing to black list a person to put such person to notice of contemplated action and give him an opportunity to show-cause as to why such extreme action be not taken. 6. Undisputedly, in the present case, the impugned order has been passed by the respondent No. 2 without observing the rule of Audi Alteram Partem and hence, the same is sustainable in the eye of law and liable to be quashed. 7. The writ petition succeeds and is accordingly allowed. The impugned order dated 24.2.2018 passed by respondent No. 2 (Annexure-5) is hereby quashed. 8. This order shall not preclude the respondent No. 2 from passing a fresh order against the petitioner after issuing show-cause notice to the petitioner and affording it opportunity of hearing to him.