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2021 DIGILAW 1577 (ALL)

Arinem Consultancy Services Pvt. Ltd. v. State of U. P.

2021-12-16

RAMESH SINHA, VIVEK VARMA

body2021
JUDGMENT : 1. Heard Sri J.N. Mathur, learned Senior Advocate, assisted by Sri Mudit Agarwal, learned counsel for the petitioner, Sri V.P. Nag, learned Standing Counsel for respondent No. 1, and Sri Santosh Kumar Singh, learned Advocate, who has put in appearance and filed his power on behalf of respondent Nos. 2 to 5. 2. The petitioner has filed the present writ petition seeking a writ of certiorari quashing the impugned order dated 22.11.2021 passed by respondent No. 3 whereby the petitioner company has been debarred (blacklisted) from taking any work in future and a penalty of Rs. 36,750/- has also been imposed. 3. It is stated that the petitioner is a company incorporated in the year 2006 and is one of the leading consultants in providing the consultancy services in the field of architecture, interior, infrastructure, engineering and management. It has been working on various prestigious projects in India and abroad for Central Government, State Governments, Public Sector Undertakings and Private Organisations. The petitioner was selected in the bid and on 14.8.2018 an agreement was entered into between the petitioner and the State Urban Development Agency (SUDA) for the work of preparation of Detailed Project Reports (DPRs) and providing Project Management Consultancy (PMC) services for projects under Beneficiary Led Construction (BLC) in the Meerut Cluster under the Pradhanmantri Awas Yojna (Urban). The Project Director, District Urban Development Agency (DUDA) vide letter dated 27.10.2018 appointed the petitioner as the PMC for 5 blocks of district Hapur comprising 909 beneficiaries in place of earlier agency. According to the petitioner, finding the work satisfactory, SUDA from time to time issued various work orders awarding more and more work of preparing the DPR and PMC work to the petitioner for the BLC in district Hapur (under Meerut Cluster) totaling to work of 5808 beneficiaries under BLC. It is submitted that as per the procedure prescribed by SUDA, the inquiry team alongwith the petitioner conducted door to door survey and prepared a list of accepted beneficiaries, which was approved under the signatures of the Project Officer, DUDA, Executive Officer, CLTC, Engineer and representative of the petitioner. On the basis of the said list, it is submitted, the petitioner prepared the DPR of each of the dwelling unit and submitted the same for approval. All the 21 DPRs for district Hapur were accepted and approved by the DUDA and ultimately by SUDA. On the basis of the said list, it is submitted, the petitioner prepared the DPR of each of the dwelling unit and submitted the same for approval. All the 21 DPRs for district Hapur were accepted and approved by the DUDA and ultimately by SUDA. After the approval of the DPR, petitioner started the PMC work, during which it was found that large number of accepted beneficiaries had informed incorrect facts, therefore, the petitioner prepared list of total 1127 rejected beneficiaries, which was again approved by the inspection team. After the approval of rejected beneficiaries, the petitioner prepared the revised DPR, which was also approved by SUDA and DUDA. It is further stated that the list of rejected beneficiaries was submitted before the Project Officer, DUDA, who forwarded it to the Executive Officer, who invited objections on the same by giving wide publicity to the list of the rejected beneficiaries. Since no objections were received, the list of rejected beneficiaries prepared by the petitioner was approved by the respondents. However, according to the petitioner, all of a sudden it received the impugned order dated 22.11.2021 passed by respondent No. 3 debarring it from any further work in future and imposed the penalty. 4. Learned Senior Counsel appearing for the petitioner submits that no show-cause notice was ever issued to the petitioner nor any explanation was sought from the petitioner at any point of time nor was any allegation of deficiency in service ever levelled upon the petitioner in respect of the issue in question, on the basis of which the debarment has been done. Thus, the impugned order of blacklisting has been passed in violation of the principles of natural justice. 5. Learned counsel for the respondent Nos. 2 to 5 Sri Santosh Kumar Singh could not establish before this Court that any notice or opportunity was given to the petitioner prior to passing the order of blacklisting dated 22.11.2021. 6. The observance of the principles of natural justice in the matter of blacklisting has been considered by the Hon'ble Apex Court in the case of UMC Technologies Private Limited v. Food Corporation of India and another, (2021) 2 SCC 551 . In the said case, the Hon'ble Apex Court has held as under: ''16. 6. The observance of the principles of natural justice in the matter of blacklisting has been considered by the Hon'ble Apex Court in the case of UMC Technologies Private Limited v. Food Corporation of India and another, (2021) 2 SCC 551 . In the said case, the Hon'ble Apex Court has held as under: ''16. The severity of the effects of blacklisting and the resultant need for strict observance of the principles of natural justice before passing an order of blacklisting were highlighted by this Court in Erusian Equipment & Chemicals Ltd. v. State of W.B., [ (1975) 1 SCC 70 ] in the following terms: (SCC pp. 74-75, paras 12, 15 & 20) ''12. ... 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. When the State acts to the prejudice of a person it has to be supported by legality. * * * 15. ... 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''. * * * 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.'' 17. Similarly, this Court in Raghunath Thakur v. State of Bihar, [(1989) 1 SCC 229], struck down an order of blacklisting for future contracts on the ground of non-observance of the principles of natural justice. The relevant extract of the judgement in that case is as follows: (SCC p.230, Para 4) ''4. ... [I]t is an implied principle of the rule of law that any order having civil consequences should be passed only after following the principles of natural justice. The relevant extract of the judgement in that case is as follows: (SCC p.230, Para 4) ''4. ... [I]t is an implied principle of the rule of law that any order having civil consequences 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. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order.'' 18. This Court in Gorkha Security Services v. State (NCT of Delhi), [ (2014) 9 SCC 105 ] has described blacklisting as being equivalent to the civil death of a person because blacklisting is stigmatic in nature and debars a person from participating in Government tenders thereby precluding him from the award of Government contracts. It has been held thus: (SCC p. 115, Para 16) ''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. 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.'' 19. In light of the above decisions, it is clear that a prior show-cause notice granting a reasonable opportunity of being heard is an essential element of all administrative decision-making and particularly so in decisions pertaining to blacklisting which entail grave consequences for the entity being blacklisted. In these cases, furnishing of a valid show-cause notice is critical and a failure to do so would be fatal to any order of blacklisting pursuant thereto.'' 7. In these cases, furnishing of a valid show-cause notice is critical and a failure to do so would be fatal to any order of blacklisting pursuant thereto.'' 7. It transpires from the record as well as from the arguments advanced on behalf of the parties that admittedly neither any show-cause notice was issued nor any opportunity was afforded to the petitioner before passing the impugned order. Hence, following the law laid down by the Hon'ble Apex Court in UMC Technologies Private Limited (supra), we are of the view that the impugned order cannot be sustained and is liable to be set aside on the ground of violation of principles of natural justice alone. 8. In view of the above, the impugned order dated 22.11.2021 passed by respondent No. 3 is set aside. However, it will be open to the authorities concerned to pass a fresh order after giving due notice and opportunity to the petitioner in accordance with law. 9. Accordingly, the writ petition stands allowed.