Construction Guild v. Oil and Natural Gas Corporation Ltd.
2018-01-19
MANOJIT BHUYAN
body2018
DigiLaw.ai
JUDGMENT : MANOJIT BHUYAN, J. 1. Heard Mr. R. Singha, learned counsel for the petitioner as well as Mr. G.N Sahewalla, learned senior counsel representing all the respondents, assisted by Mr. B.K Das, Advocate. 2. The petitioner no. 1 M/s. Construction Guild is a proprietorship concern, with the petitioner no. 2 as its proprietor. It is registered with the Oil and Natural Gas Corporation Limited (in short, ONGC) to carry out contract works, which has been so doing for the last fifteen years. Cause of action arose with the issuance of the ONGC letter dated 23.10.2017 whereby M/s. Construction Guild with its allied concerns, partners or associates, all Directors and all proprietors involved in any capacity was put on holiday for a period of two years with effect from the date of issue of the banning order, which is 23.10.2017 It was made clear that during this period neither any tender enquiry will be issued by ONGC against any type of tender nor any offer of the contractor will be considered by ONGC against any on-going tenders where contract between ONGC and the contractor has not been concluded. This order of blacklisting for a period of two years was issued on the grounds narrated in the aforesaid letter dated 23.10.2017 Shortly put, the petitioner M/s. Construction Guild had participated in seven tenders floated by ONGC wherein it had submitted turnover statements with balance-sheet issued by a Chartered Accountant, namely, M/s. S. Kumar Agarwal & Associates, Sivasagar for the year 2013-2014. The said seven tenders were divided into two groups - Part-A and B. Part-A contained three civil works under the Civil Housing Division, ONGC, Assam Asset whereas Part-B contained four tenders under Civil Works Engineering Services, ONGC, Assam Asset. As per the documents submitted by M/s. Construction Guild, it was noticed that the annual turnover of the said contractor/bidder for the year 2013-2014 was Rs. 4,13,41,367.00/- in respect of the three tenders invited by the Civil Housing Division. However, in respect of the four tenders invited by Civil Works, M/s. Construction Guild had submitted document showing annual turnover for the same year 2013-2014 at Rs. 7,13,41,367.00/- Both documents were issued by the same Chartered Accountant i.e M/s. S. Kumar Agarwal & Associates, Sivasagar.
4,13,41,367.00/- in respect of the three tenders invited by the Civil Housing Division. However, in respect of the four tenders invited by Civil Works, M/s. Construction Guild had submitted document showing annual turnover for the same year 2013-2014 at Rs. 7,13,41,367.00/- Both documents were issued by the same Chartered Accountant i.e M/s. S. Kumar Agarwal & Associates, Sivasagar. Noticing the apparent mismatch in the annual turnover figure for the same year i.e 2013-2014, the ONGC had carried out a verification exercise to ascertain the authenticity of both the turnover certificates. In the process, the Chartered Accountant M/s. S. Kumar Agarwal & Associates, Sivasagar issued a letter dated 19.09.2015 informing ONGC that the certificate of gross annual turnover for Rs. 7,13,41,367.00 was not prepared by them. It had only issued certificate of gross annual turnover for Rs. 4,13,41,367.00/- to the proprietor of M/s. Construction Guild. On the basis of the materials received, ONGC nominated an Independent Officer on 06.01.2017 to conduct an enquiry by following the principles of natural justice. Pending completion of the enquiry, business dealing with M/s. Construction Guild was ordered to be kept in abeyance. Enquiry Report dated 31.01.2017 was submitted by the Enquiry Officer with recommendation that M/s. Construction Guild be put on holiday for two years. It is seen that the Enquiry Report was prepared having regard to materials on record, the show cause notice dated 25.04.2017 issued to the petitioner and the response/reply dated 08.05.2017 so received from the petitioner. 3. The challenge made to the order dated 23.10.2017 is primarily on the ground that the same was issued without affording opportunity of personal hearing to the petitioner. It is submitted that although show-cause notice was issued, to which the petitioner duly replied, it was imperative that the petitioner should have been afforded personal hearing on the matter in consonance with the principles of natural justice. In this respect, both parties placed reliance on the law laid down by the Supreme Court in respect of the procedure to be followed leading to blacklisting.
In this respect, both parties placed reliance on the law laid down by the Supreme Court in respect of the procedure to be followed leading to blacklisting. Reliance has been placed chronologically in the case of (i) Erusian Equipment & Chemicals Ltd. v. State of West Bengal; reported in (1975) 1 SCC 70 ; (ii) Raghunath Thakur v. State of Bihar; reported in (1989) 1 SCC 229; (iii) Patel Engineering Limited v. Union of India, reported in (2012) 11 SCC 257 ; and (iv) Gorkha Security Services v. Government (NCT of Delhi), reported in (2014) 9 SCC 105 . 4. Whether there is the requirement of affording opportunity of personal hearing in a case of blacklisting is the issue for determination, on the touchstone of the law of the land in this regard. 5. Two cases were decided by common order in Erusian Equipment (supra). The cause of action in the writ petition before the Supreme Court filed by M/s. Erusian Equipment & Chemicals Ltd. was with regard to the resolution taken by the Sales Committee of the State of West Bengal not to deal with the firm till the firm was cleared of charges of malpractices. In the said case, the State alleged that M/s. Erusian Equipment & Chemicals Ltd. were guilty of mis-declaration of goods in their export transactions. The Sales Committee came to learn about the same from a secret letter received from the Collector of Customs, Calcutta that the said firm was involved in malpractices and their case was under investigation. In the other case, i.e Civil Appeal filed by the Union of India, the respondent therein i.e one A.K Mithiborwala was put on the blacklist as report was received against the said person regarding shortage of timber. In both the cases it appears that the period of blacklisting was not limited to time, as in the instant case where the petitioners have been put on holiday for a period of two years w.e.f 23.10.2017 In the said Erusian Equipment (supra), the Supreme Court observed that the Government cannot choose to exclude persons by discrimination. The order of blacklisting tanta-mounts to depriving a person of equality of opportunity in the matter of public contract. In case the State acts to the prejudice of a person, such action has to been supported by legality. Indeed, blacklisting tarnishes one's reputation.
The order of blacklisting tanta-mounts to depriving a person of equality of opportunity in the matter of public contract. In case the State acts to the prejudice of a person, such action has to been supported by legality. Indeed, blacklisting tarnishes one's reputation. The law laid down in Erusian Equipment (supra), as to the procedure required to be adhered to before a person is put to blacklist, can be had from paragraph 20 thereof, which is reproduced hereunder: “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. 6. Objective satisfaction of the authority concerned with opportunity to the aggrieved person to represent his case before being put on blacklist are the only requirements. Although at paragraph 21 in Erusian Equipment (supra) a direction was made to the authorities to give opportunity to the petitioners therein to represent their case and also to hear them as to whether their name should be put on the blacklist or not, the said observation was rendered on the distinct facts of the case. In so far as the salutary requirements and/or the procedure to be followed in case of blacklisting, the same has been conclusively laid down in paragraph 20, as extracted above. 7. In Raghunath Thakur (supra), no notice had been given to the appellant therein regarding the proposal to blacklist him. It was in this context, the Supreme Court observed that it is an implied principle of rule of law that principles of natural justice must precede any order having civil consequences, as in the case of blacklisting. In this view of the matter, the Supreme Court interfered in that portion of the order whereby the appellant therein was directed to be placed in the blacklist in respect of future contracts.
In this view of the matter, the Supreme Court interfered in that portion of the order whereby the appellant therein was directed to be placed in the blacklist in respect of future contracts. It was made clear that if any future steps are taken for blacklisting the appellant therein, the same must be done after giving due notice and an opportunity of making representation and it is only after hearing the appellant, the State Government would be at liberty to pass any order in accordance with law and by indicating the reasons therefore. This decision of the Supreme Court is a reiteration of the law laid down in Erusian Equipment (supra). 8. In Patel Engineering (supra), the Supreme Court, on consideration of various earlier decision and following the decision in Erusian Equipment (supra), propounded the law on the question as to whether oral hearing was a requirement before passing order of blacklisting. In this context paragraph 38, being directly on this point, the same is extracted hereunder: “38. Coming to the submission that R-2 ought to have given an oral hearing before the impugned order was taken, we agree with the conclusion of the High Court that there is no inviolable rule that a personal hearing of the affected party must precede every decision of the State. This Court in Union of India v. Jesus Sales Corpn. held so even in the context of a quasi-judicial decision. We cannot, therefore take a different opinion in the context of a commercial decision of the State. The petitioner was given a reasonable opportunity to explain its case before the impugned decision was taken. 9. In Gorkha Security Services (supra), the Supreme Court extracted paragraphs 12 and 20 of Erusian Equipment (supra); paragraph 4 of Raghunath Thakur (supra); paragraphs 13 and 14 of Patel Engineering (supra) and held at paragraph 20 that there was no dispute with regard to the requirement of serving show-cause notice. Once this is done and an opportunity to reply to the show-cause notice is given, it is not necessary to give an oral hearing. 10. From the various pronouncements above, the Supreme Court have consistently held that issuance of show-cause notice, opportunity to reply or make representation and an objective satisfaction reached by the concerned authority would fulfill the fundamentals of fair play while blacklisting a person.
10. From the various pronouncements above, the Supreme Court have consistently held that issuance of show-cause notice, opportunity to reply or make representation and an objective satisfaction reached by the concerned authority would fulfill the fundamentals of fair play while blacklisting a person. It is not fundamental that an oral or personal hearing must be afforded. Nor personal/oral hearing can be read into the procedure. In Union of India v. Jesus Sales Corpn., reported in (1996) 4 SCC 69 , the Supreme Court held that when principles of natural justice require an opportunity to be heard before an adverse order is passed, it does not in all circumstances mean a personal hearing. The requirement is complied with by affording an opportunity to the person concerned to present his case before such quasi-judicial authority who is expected to apply its judicial mind to the issues involved. This case was referred to and relied upon in Patel Engineering (supra). 11. In the instant case, there is no dispute that the order placing the petitioner on a two year holiday by order dated 23.10.2017 was preceded by serving show-cause notice dated 25.04.2017, to which the petitioner replied on 08.05.2017 The final decision to put the petitioner on a holiday for two years was based on an objective satisfaction reached by the ONGC Limited. To verify the authenticity of both the Turnover Certificates submitted by the petitioner, the ONGC obtained necessary explanation from the Chartered Accountant M/s. S. Kumar Agarwal & Associates, Sivasagar. Pursuant thereto, an Independent Officer was nominated by ONGC on 06.01.2017, whereafter the Enquiry Officer issued show-cause notice to the petitioner on 25.04.2017 The petitioner made reply on 08.05.2017 and Enquiry Report was submitted on 31.07.2017 The impugned order placing the petitioner on a two year holiday of any commercial activities with ONGC was issued on 23.10.2017 12. Tested in the light of the law laid down by the Supreme Court in the decisions referred to above and the clear facts appearing in the case, this Court does not find any illegality or irrationality in the conclusion reached by the respondent ONGC. There is no violation of the principles of natural justice in not affording opportunity of oral/personal hearing to the petitioner. The fundamentals of fair play by serving show-cause notice with opportunity to make representation was duly complied with.
There is no violation of the principles of natural justice in not affording opportunity of oral/personal hearing to the petitioner. The fundamentals of fair play by serving show-cause notice with opportunity to make representation was duly complied with. No ground, either in facts or in law, has been made out by the petitioner warranting interference of this Court to the order dated 23.10.2017 The order placing the petitioner on holiday is a time bound holiday spanning two years and not in perpetuity. 13. In view of the above, I find no merit in the writ petition and the same stands dismissed, however without any order as to cost.