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2023 DIGILAW 404 (JHR)

Rustam Ali v. State of Jharkhand

2023-03-23

RAJESH SHANKAR

body2023
JUDGMENT : The present writ petition has been filed for quashing the order as contained in memo no. 02(i) dated 21.01.2020 issued by the Deputy Commissioner, Simdega (the respondent no. 5) whereby the petitioner has been blacklisted for an indefinite period and his claim for payment against supply of blankets (total 23,034 in numbers) has been refused. 2. In course of argument, learned counsel for the petitioner confines the prayer only to the extent of quashing the part of order as contained in memo no. 02(i) dated 21.01.2020 issued by the respondent no. 5 whereby the petitioner has been blacklisted. So far as the petitioner’s claim for payment against the supply of blankets is concerned, learned counsel for the petitioner submits that the petitioner will be taking other available recourses under law. 3. Learned counsel for the petitioner further submits that a short term Notice Inviting Tender (NIT) relating to financial year 2019-20 was issued by the respondent no. 5 vide memo No. 589 (ii) dated 03.09.2019 for supply of woolen blankets in Simdega District by Reverse e-auction process through NeML platform. The petitioner’s firm namely COSMOS Enterprises participated in the said tender and after fulfilling all the requirements, the said tender was awarded to it. Accordingly, work order for the aforesaid work was issued to the petitioner’s firm vide memo no. 671(ii) dated 09.10.2019 specifying the number of woolen blankets (total 23,034) to be supplied in ten respective Circles of Simdega district. The petitioner’s firm supplied the blankets as per the said work order for which all the concerned Circle Officers as well as Nazir of the Blocks/Circles of Simdega district issued quality certificates. Thereafter, the petitioner continuously approached the concerned authority for the payment of due bill but no action was taken. In the meantime, letters dated 14.12.2019 and 24.12.2019 were issued by the Assistant Director, Social Security Cell, Simdega (the respondent no. 4) to the petitioner’s firm seeking clarification as to why its security amount be not forfeited by taking appropriate legal action against it as well as it should not be put on blacklist on the ground that the blankets were not supplied as per the prescribed standard and displayed samples. The petitioner submitted explanation on 27.12.2019 stating that if any blanket was not supplied in terms with the prescribed standard, he would either replace the same or supply additional blanket. The petitioner submitted explanation on 27.12.2019 stating that if any blanket was not supplied in terms with the prescribed standard, he would either replace the same or supply additional blanket. However, the respondent authorities did not consider it and vide impugned order dated 21.01.2020, the respondent no. 5 blacklisted his firm for indefinite period as well as stopped payment of the due bills submitted against supplied woolen blankets. 4. Learned counsel for the petitioner also submits that the impugned order dated 21.01.2020 by which the petitioner’s firm has been put on blacklist is highly arbitrary and illegal primarily for the reason that the petitioner’s reply dated 27.12.2019 has not at all been considered by the respondent no. 5 while passing the said order. Moreover, the petitioner’s firm has been put on blacklist for indefinite period. 5. On the contrary, the submission of learned counsel for the respondents is that pursuant to NIT issued vide memo no. 589 (ii) dated 03.09.2019 for supply of woolen blankets in Simdega district through reverse e-auction mode on NeML platform, five tenderers/suppliers were found technically eligible for bidding and the e-auction was conducted on 25.09.2019. The said work was finally allotted to the petitioner’s firm finding its financial bid as L1. However, subsequently on the direction of the respondent no. 5 issued to all the Circle Officers of Simdega district vide letter no. 948(ii) dated 12.12.2019, 05 woolen blankets supplied by the petitioner’s firm were randomly tested by washing and drying the same whereafter their weights were found varying from 1.400 kg to 1.700 kg (average weight 1.6 kg) against the standard weight of 2.250 kg as was specified in the work order. Under the said circumstance, the petitioner’s firm was issued letters dated 14.12.2019 and 24.12.2019 seeking clarification for committing the said fault. So far as issue of blacklisting is concerned, letter dated 24.12.2019 was issued to the petitioner’s firm specifically asking to submit explanation as to why it should not be put on blacklist by taking action in accordance with law. After receipt of the petitioner’s reply dated 27.12.2019 and finding the same unsatisfactory, the impugned order as contained in memo no. 02(i) dated 21.01.2020 has been issued by the respondent no. 5. 6. Heard learned counsel for the parties and perused the materials available on record. After receipt of the petitioner’s reply dated 27.12.2019 and finding the same unsatisfactory, the impugned order as contained in memo no. 02(i) dated 21.01.2020 has been issued by the respondent no. 5. 6. Heard learned counsel for the parties and perused the materials available on record. The petitioner’s firm was issued letter dated 14.12.2019 seeking explanation within 24 hours for taking appropirate legal action as well as for forfeiture of security amount alleging that the blankets supplied by it were not in accordance with the sample and the fixed standard. The petitioner’s firm was again issued letter on 24.12.2019 seeking clarification as to why it should not be put on blacklist alleging that it supplied blankets of inferior quality which were not as per the sample and the fixed standard. It was alleged that as per the sample, the minimum weight of the blanket should have been 2.250 kg, however as per the report of the concerned circle offices, the average weight of the blanket was 1.6 kg which was quite less than the fixed standard. The petitioner submitted explanation on 27.12.2019 denying the allegation stating that as per the byelaws of handloom articles, there could be variation of weight from 10 % to 15% after washing and drying the blankets. It was further stated that earlier all the concerned Circle Offices had found the quality of the blankets as per fixed standard, however if any defect was found in any of the supplied blankets, he was ready to either exchange the same or supply additional blanket. 7. On bare perusal of the impugned order dated 21.01.2020, it appears that the respondent no.5 has not discussed the reply submitted by the petitioner and has merely observed that the reply was not found satisfactory. 8. In the case of Kulja Industries Limited Vs. Chief General Manager, Western Telecom Project Bharat Sanchar Nigam Limited & Others reported in (2014) 14 SCC 731 , the Hon’ble Supreme Court has held that blacklisting simply signifies a business decision by which the party affected by the breach decides not to enter into any contractual relationship with the party committing the breach. The freedom to contract or not to contract is unqualified in the case of private parties. However, if such decision is taken by the State or any of its instrumentalities, the same is subject to judicial review. The freedom to contract or not to contract is unqualified in the case of private parties. However, if such decision is taken by the State or any of its instrumentalities, the same is subject to judicial review. This implies that such decision will be open to scrutiny not only on the touchstone of the principles of natural justice but also on the doctrine of proportionality. A fair hearing to the party being blacklisted thus becomes an essential precondition for a proper exercise of the power and a valid order of blacklisting made pursuant thereto. Whether the order itself is reasonable, fair and proportionate to the gravity of the offence is also examinable by a writ court. It has further been held that debarment is never permanent and the period of debarment would invariably depend upon the nature of the offence committed by the erring contractor. 9. In the case of Erusian Equipment & Chemicals Ltd. v. State of West Bengal & Another reported in (1975) 1 SCC 70 , the Hon’ble Supreme Court has held that blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the government for the 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. 10. In the case of Gorkha Security Services Vs. Government (NCT of Delhi) & Others reported in (2014) 9 SCC 105 , the Hon’ble Supreme Court has held that the necessity of compliance with the principles of natural justice by giving opportunity to the person against whom action of blacklisting is sought to be taken has a valid and solid rationale behind it. Many civil and/or evil consequences follow the blacklisting. 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 a person from participating in government tenders which means precluding him from the award of government contracts. 11. In the case of UMC Technologies Private Limited Vs. Food Corporation of India & Another reported in (2021) 2 SCC 551 , the Hon’ble Supreme Court has held as under:- “13. Such an order is stigmatic in nature and debars a person from participating in government tenders which means precluding him from the award of government contracts. 11. In the case of UMC Technologies Private Limited Vs. Food Corporation of India & Another reported in (2021) 2 SCC 551 , the Hon’ble Supreme Court has held as under:- “13. At the outset, it must be noted that it is the first principle of civilised jurisprudence that a person against whom any action is sought to be taken or whose right or interests are being affected should be given a reasonable opportunity to defend himself. The basic principle of natural justice is that before adjudication starts, the authority concerned should give to the affected party a notice of the case against him so that he can defend himself. Such notice should be adequate and the grounds necessitating action and the penalty/action proposed should be mentioned specifically and unambiguously. An order travelling beyond the bounds of notice is impermissible and without jurisdiction to that extent. This Court in [Nasir Ahmad v. Custodian General, Evacuee Property, (1980) 3 SCC 1 ] has held that it is essential for the notice to specify the particular grounds on the basis of which an action is proposed to be taken so as to enable the noticee to answer the case against him. If these conditions are not satisfied, the person cannot be said to have been granted any reasonable opportunity of being heard. 14. Specifically, in the context of blacklisting of a person or an entity by the State or a State Corporation, the requirement of a valid, particularised and unambiguous show-cause notice is particularly crucial due to the severe consequences of blacklisting and the stigmatisation that accrues to the person/entity being blacklisted. Here, it may be gainful to describe the concept of blacklisting and the graveness of the consequences occasioned by it. Blacklisting has the effect of denying a person or an entity the privileged opportunity of entering into government contracts. This privilege arises because it is the State who is the counterparty in government contracts and as such, every eligible person is to be afforded an equal opportunity to participate in such contracts, without arbitrariness and discrimination. Not only does blacklisting take away this privilege, it also tarnishes the blacklisted person's reputation and brings the person's character into question. This privilege arises because it is the State who is the counterparty in government contracts and as such, every eligible person is to be afforded an equal opportunity to participate in such contracts, without arbitrariness and discrimination. Not only does blacklisting take away this privilege, it also tarnishes the blacklisted person's reputation and brings the person's character into question. Blacklisting also has long-lasting civil consequences for the future business prospects of the blacklisted person. 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. 21. Thus, from the above discussion, a clear legal position emerges that for a show-cause notice to constitute the valid basis of a blacklisting order, such notice must spell out clearly, or its contents be such that it can be clearly inferred therefrom, that there is intention on the part of the issuer of the notice to blacklist the noticee. Such a clear notice is essential for ensuring that the person against whom the penalty of blacklisting is intended to be imposed, has an adequate, informed and meaningful opportunity to show cause against his possible blacklisting. 25. The mere existence of a clause in the bid document, which mentions blacklisting as a bar against eligibility, cannot satisfy the mandatory requirement of a clear mention of the proposed action in the show-cause notice. The Corporation's notice is completely silent about blacklisting and as such, it could not have led the appellant to infer that such an action could be taken by the Corporation in pursuance of this notice. Had the Corporation expressed its mind in the show-cause notice to blacklist, the appellant could have filed a suitable reply for the same. Therefore, we are of the opinion that the show-cause notice dated 10-4-2018 does not fulfil the requirements of a valid show-cause notice for blacklisting. In our view, the order of blacklisting the appellant clearly traversed beyond the bounds of the show-cause notice which is impermissible in law. As a result, the consequent blacklisting order dated 9-1-2019 cannot be sustained.” 12. Therefore, we are of the opinion that the show-cause notice dated 10-4-2018 does not fulfil the requirements of a valid show-cause notice for blacklisting. In our view, the order of blacklisting the appellant clearly traversed beyond the bounds of the show-cause notice which is impermissible in law. As a result, the consequent blacklisting order dated 9-1-2019 cannot be sustained.” 12. Thus, it is well settled that where an order of blacklisting has been passed by the State or its instrumentalities, then such order is within the realm of power of judicial review of the Writ Court and the same has to be tested in the touchstone of the principles of natural justice, doctrine of proportionality, reasonableness and fairness. The order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the government/its agencies for the purposes of gains. Hence, before taking such a harsh decision, the person concerned should be given an opportunity to represent his case before he is put on the blacklist. The show cause notice must not be mere formality, rather the same should specifically mention the grounds according to which the department necessitates the action and also the proposed action so that the person aggrieved may properly explain the circumstances. 13. The purpose of serving the show cause notice before passing the order of blacklisting is to give sufficient opportunity to explain the charges levelled in the said show cause notice and if any reply is filed, the same will be duly considered before passing the order. If the reply submitted by the defaulter is not considered while passing the final order, the very purpose of serving the show cause notice will frustrate. 14. In the present case, the impugned order cannot be said to have passed the yardstick of fair play since the explanation submitted by the petitioner has not at all been discussed while passing the same, rather the respondent no. 5 has outrightly rejected it by stating that the same has not been found satisfactory. Thus, the impugned order is liable to be vitiated having been passed in violation of the principles of natural justice. 5 has outrightly rejected it by stating that the same has not been found satisfactory. Thus, the impugned order is liable to be vitiated having been passed in violation of the principles of natural justice. Moreover, the order of blacklisting is for an indefinite period which is in the teeth of the proposition laid down in the case of Kulja Industries Limited (supra). 15. Under the said circumstance, the order as contained in memo no. 02(i) dated 21.01.2020 issued by the respondent no. 5, so far as the same relates to putting the petitioner’s firm on the blacklist, is hereby set aside. 16. The writ petition is allowed in part. The petitioner is however at liberty to take other available recourses under law claiming his payment against the concerned supply. 17. I.A. No. 7491 of 2022 also stands disposed of.