Andhra Pradesh High Court - Amravati

Max Detective And Guarding ... vs The State Of Andhra Pradesh on 29 September, 2021

       THE HON'BLE SRI JUSTICE R.RAGHUNANDAN RAO

              WRIT PETITION No.10847 OF 2021

ORDER:-

       The petitioner which is in the business of providing

Security Guards and Security Supervisors had been appointed

as the agency to supply Security Guards and Security

Supervisors to the 3rd respondent temple, for the period

01.09.2019 to 31.08.2020. When the contract period was

expiring on 31.08.2020, the Executive Officer of the 3rd

respondent had sent proposals dated 19.08.2020, to extend the

contract period, for a further period of one year from 01.09.2020

to 31.08.2021 after the approval of the Trust Board of the 3 rd

respondent by its resolution dated 30.07.2020. While the

contract was in force, there was an unfortunate theft of the

three lion statues fixed on the Ratham of the deity. The said

theft came to light on 15.09.2019.

2. As no orders were passed on the above proposal for

extension of the services, the 3rd respondent had issued a fresh

e-procurement tender notification, for supply of Security Guards

and Security Supervisors for the period 01.11.2020 to

31.03.2022. The petitioner had participated in the said tender

and had been declared as the lowest tenderer. Thereafter, the 3rd

respondent had forwarded the bid of the petitioner to the 2nd

respondent for approval of the bid. The 2nd respondent instead

of approving the bid had passed the impugned order

Rc.No.B2/COE-12026(51)8/2021, dated 09.05.2021, rejecting

the proposal of the 3rd respondent to approve the tender in

favour of the petitioner. The 2nd respondent had, by way of the

same order, directed blacklisting of the petitioner and called for

fresh tenders for supply of Security Guards and Security

Supervisors. Aggrieved by the said order dated 09.05.2021, the

petitioner has approached this Court, by way of the present writ

petition. As the 3rd respondent had issued consequential tender

notification dated 20.05.2021 calling for fresh bids, the

petitioner has challenged both, the order dated 09.05.2021 as

well as the consequential rejection order dated 18.05.2021 and

fresh tender notification dated 20.05.2021.

3. The primary contention of the petitioner is that the

impugned order, which is a composite order of rejection of the

bid of the petitioner, black listing of the petitioner and directions

for fresh notification requires to be set aside, on the ground that

the blacklisting of the petitioner has been done without notice to

the petitioner and without an opportunity being given to the

petitioner to place its objections to such a proposal. The

petitioner relies upon the judgment of the Hon'ble Supreme

Court in UMC Technologies Private Limited vs. Food

Corporation of India and another1.

4. The respondents 2 and 3 have filed their counter

affidavits. It is the case of the 2nd respondent that after receiving

the proposal of the 3rd respondent, the award of fresh contract

to the petitioner, a committee had been constituted to go into

this said issue. This committee held a meeting on 07.05.2021,

wherein all the issues were considered and a report was given to

(2021) 2 SCC 551

the 2nd respondent. On the basis of the said report, the 2nd

respondent issued the impugned proceedings dated 09.05.2021

on the ground that the petitioner had failed to discharge its

services as per legitimate expectations during the previous term

as the theft of three silver lions on the sacred Ratham of the

deity, which had occurred due to the negligence and failure on

the part of the petitioner, had hurt the sentiments of lakhs of

devotees of the Deity and damaged the reputation of the 3rd

respondent Devasthanam.

5. It is the further case of the 2nd respondent that

since the 3rd respondent had not yet issued any specific order

placing the petitioner in the black list, the petitioner cannot

challenge the order of the 2nd respondent and the only remedy

available to the petitioner would be to challenge the rejection

order, issued by the 3rd respondent. The 2nd respondent relies

upon the tender condition, which stipulates that the competent

authority can either confirm or reject the tender for appropriate

reasons and no notice to the highest bidder is mandatory before

rejection of the tender.

6. The 3rd respondent took the stand that even though

it had recommended the case of the petitioner to the 2nd

respondent, the petitioner has no vested right to be given the

contract and in any event the petitioner, on account of the theft

of the silver lions cannot complain against the action taken by

the respondents 2 and 3. The 2nd respondent would rely upon a

judgment of the Hon'ble Supreme Court in Jagadish Mandal vs.

State of Orissa2 to contend that principles of equity and

natural justice stand at a distance in commercial transactions

and there is no requirement of issuance of a notice, before

taking a decision of rejection of the bid of the petitioner.

7. Sri V.Venu Gopala Rao, learned counsel for the

petitioner while reiterating the contention of the petitioner that

an order of black listing could not have been given without an

opportunity being given to the petitioner would supplement the

said contentions. He contends that a perusal of the contract

between the petitioner and the 3rd respondent for the period

dated 01.09.2019 to 31.08.2020 would show that the contract is

a contract for supply of security guards and security supervisors

and that the petitioner is not giving a service of securing the

temple and its properties. He submits that the scope of the

contract is only to supply man power to the temple authorities,

who would thereafter employ these persons in such a manner, is

deemed fit by the temple authorities. He would further submit

that apart from the man power supplied by the petitioner, the

temple also utilizes the services of the State police as well as

permanent employees of the temple itself to undertake the

protection of the temple and its properties. He would submit

that the respondents apart from dilating on an emotive issue

have not set out as to how the petitioner had failed in its duties

or was negligent in executing the contract.

8. Sri V.Venu Gopala Rao, learned counsel for the

petitioner, on the facts of the case, would also submit that the

(2007) 14 SCC 517

theft of the three silver lions on the sacred Ratham of the deity

had agreed at a place which was outside the area in which the

man power supplied by the petitioner were guarding. He would

submit that the Ratham had been placed at a place where none

of the persons supplied by the petitioner were deployed. As

such, no negligence can be attributed to the petitioner or the

security guards and security supervisors deployed by the

petitioner.

9. Heard Sri V.Venu Gopala Rao, learned counsel for

the petitioner, learned Government Pleader for Endowments for

respondent No.2 and Sri K.Madhava Reddy, learned standing

counsel for respondent No.3.

10. A perusal of the work order given by the temple on

31.08.2019 to the petitioner would show that the tender was for

providing of security guards and security supervisors for the

period 01.09.2019 to 31.08.2020. The duty chart attached to

this work order sets out the number of security guards and

security supervisors that are required for three shifts a day at

the various points set out in the duty chart. It is clear that the

scope of the contract between the petitioner and the 3rd

respondent is only for supply of security guards and supervisors

who would be deployed by the Temple authorities, without any

further reference to the Petitioner, and it is not a service of

integrated security for the temple and other assets of the

temple. In the circumstances, black listing the petitioner or

rejecting the further tender of the petitioner on the ground of

negligence on the part of the petitioner, is not based on any

reason borne out by the record and is arbitrary.

11. The settled principle of law, as enunciated by the

Hon'ble Supreme Court in Jagadish Mandal's case (2nd supra),

has been that equity and principles of natural justice do not

enter commercial transactions even if the same are being carried

out by a State authority. However, when an instrumentality of

the State or an Authority of the State, in the course of even

commercial transactions or contracts, acts in derogation of the

principles of fair play, writ petitions are maintainable in such a

situation. In the present case, even though the petitioner would

not be entitled to a show cause notice as far as rejection of its

tender is concerned, it would still be entitled to challenge the

same if the action of the 2nd respondent is arbitrary, unfair or

violates Article 14 of the Constitution. It is trite to state that it is

not the decision per se, which is the object of judicial review,

but the process in which such a decision is taken. In the

present case, the 2nd respondent held the petitioner responsible

for security lapses due to which the silver lions were stolen and

rejected the bid of the petitioner. This is clearly arbitrary as the

petitioner was only a supplier of manpower and had no role in

securing the premises of the Temple nor was the petitioner in

charge of the security in the Temple.

12. Apart from the above, the question of black listing

the petitioner, without an opportunity being given to the

petitioner would also require to be addressed. As the order was

a composite order. The Hon'ble Supreme Court in

UMC Technologies' case (1 supra) had considered a similar

situation and had held, after reviewing the law on this aspect,

and had held as follows:

13. At the outset, it must be noted that it is the first principle of civilized 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 [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. Blacklisting also has long-lasting civil consequences for the future business prospects of the blacklisted person.

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. [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.

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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".

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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."

15. In the present case as well, the appellant has submitted that serious prejudice has been caused to it due to the Corporation's order of blacklisting as several other government corporations have now

terminated their contracts with the appellant and/or prevented the appellant from participating in future tenders even though the impugned blacklisting order was, in fact, limited to the Corporation's Madhya Pradesh regional office. This domino effect, which can effectively lead to the civil death of a person, shows that the consequences of blacklisting travel far beyond the dealings of the blacklisted person with one particular government corporation and in view thereof, this Court has consistently prescribed strict adherence to principles of natural justice whenever an entity is sought to be blacklisted.

17. Similarly, this Court in Raghunath Thakur v. State of Bihar [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 judgment 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 realized 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) [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.

13. In the present case, no such notice has been given

to the petitioner prior to the order of black listing and the order

of blacklisting and the order of rejection of the bid of the

Petitioner contained in the impugned order Rc.No.B2/COE-

12026(51)8/2021, dated 09.05.2021, passed by the 2nd

respondent would have to be set aside. Consequently, the

direction for issue of a fresh notice inviting bids for the supply of

man power would not arise.

14. As the order of blacklisting is being set aside on the

ground of violation of principles of natural justice, it would be

appropriate to leave it open to the respondents to decide on the

future course of action, subject to the requirement of adherence